Capital Shopping Centres will be valued at 830m pounds: Company openly disputes the basis of property valuation used

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The Independent Online
CAPITAL Shopping Centres priced its stock market flotation yesterday on the basis of property valuations it openly disputes.

The retail property interests of Donald Gordon's insurance empire Transatlantic will float with a value of pounds 830m after a placing and open offer of 91 million shares at 230p.

But Brian Jolly, chief executive, made clear his dissatisfaction with current valuation methods. He said they failed to recognise the long- term value of immature and fast- growing businesses such as shopping centres.

'We believe the open market value does not take full account of the significant growth in income which (the directors) expect from the three recently completed regional shopping centres and would certainly not be sellers at the value set out in the property valuers' report.'

He said 85 per cent of CSC's assets, valued by DTZ Debenham Thorpe at pounds 748.5m, was represented by three shopping centres, all built since 1990 and all between two and five years away from reaching their full income potential.

Rents at CSC's largest centres at Thurrock, Bromley and Watford are tied to tenants' turnover, which can benefit from rising numbers of shoppers for 10 years after opening.

Following the placing and offer, which will raise pounds 200m, Transatlantic will hold between 73 and 75 per cent of CSC. Some pounds 108.5m will be used to pay off a loan from the parent company, which will also hold pounds 100m of convertible bonds paying a 6 per cent coupon.

The issue gives shareholders a chance to invest in the market's only pure retail property company. As well as complete ownership of the Lakeside centre at Thurrock, Essex, CSC has stakes in six other regional centres.

Retail property has provided higher returns over the past 15 years than other sectors of the property market and is expected to be the fastest growing area in the short term as the economy recovers.

For the nine months to December 1994 a 5p dividend will be paid, equivalent to a notional 6.5p full- year payout, offering a gross yield of 3.5 per cent.