Bottom Line: Flotation looks like one to shop for

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The Independent Online
IT IS NOW clear why Donny Gordon was so pleased to have patched up TransAtlantic's tiff with Sun Alliance over their Watford shopping centre venture, even if the company's claim that it struck a smart deal has yet to convince the market.

Although it seems that the flotation of Capital & Counties' shopping centres would have gone ahead regardless, the inclusion of the Harlequin centre in Watford means the proposed April offer can be sold less as the flotation of Thurrock's Lakeside centre and more as the launch of a properly spread investment company.

Capital Shopping Centres will certainly be a substantial business, the sixth-largest quoted property company and the only one to offer a focused retail investment. This is arguably the most attractive segment of the property investment market.

From TransAtlantic's point of view, the sale of 25 per cent of the enlarged equity for about pounds 150m takes a capital-draining business off its hands while leaving it with a substantial stake in some of the country's fastest-growing, most modern retail sites.

For new investors the attractions will depend on how much of a premium Mr Gordon and his advisers think they can wring out of a stock market in the midst of a love affair with the sector.

The market is currently prepared to pay 17 per cent more than the intrinsic worth of property assets and there is little reason to expect Capital Shopping Centres to float for anything less.

Given the quality of the assets that is not unreasonable. With three of its seven centres having been built in the past three years the portfolio is far from mature.

The sites are also big, which has historically attracted decent anchor tenants and so reduced the level of voids or unrented space.

As the property results season gets under way, investors will gain a better idea of what is happening to property values and a sense of the price at which the float will be pitched.

If Mr Gordon is not too greedy, he will really have something to smile about.