Shaftesbury Capital PLC (LSE:SHB) shares leapt 10% after it announced the sale of a 25% stake in its Covent Garden estate to Norway's sovereign wealth fund, Norges Bank.
The FTSE 250-listed property developer will receive cash proceeds of £570 million, with the deal giving a £2.7 billion value to the Covent Garden market and surrounding streets, including Seven Dials, which is in line with its valuation at the end of December.
Norges Bank has been Shaftesbury's largest shareholder for many years, with its stake currently at 25.2%.
Shaftesbury CEO Ian Hawksworth called the deal a "long-term, strategic partnership", and said the investment by a major global investor "demonstrates the quality of our portfolio" and "brings together two long-term investors who have a shared confidence in and ambitions for the growth prospects of the Covent Garden estate and the West End".
The company has earmarked the proceeds for acquisitions, reinvestment, and debt reduction, with its EPRA loan-to-value ratio is set to fall from 27% to 16%, and post-transaction, the group will have access to £1.1 billion of liquidity.
The deal will also be earnings enhancing for Shaftesbury from the reduction in finance costs resulting from lower net debt.
Shaftesbury Capital will retain 75% ownership and full management control of the estate, which comprises 220 buildings, 850 units, and 1.40 million sq ft of space.
The estate generated £104 million in annualised gross income last year, with an estimated rental value (ERV) of £134 million and a net initial yield of 3.6%.