UK - Land Securities today announced it is holding a rights issue to raise around £755.7m (€854.9m) from shareholders, making this the latest in a series of property giants proposing fundraising to strengthen their balance sheets.
The rights issue, which is subject to shareholders' approval at a meeting on 9 March, is designed to raise cash proceeds by issuing nearly 291m new shares at discounted prices. Land Securities hopes this will protect the company from the economic downturn and provide flexibility so it can respond quickly to what it describes as "timely and well-priced opportunities".
Francis Salway, group chief executive, said: "We have a good track record of creating value for shareholders through the property cycle and have decided to seek further capital at this stage to ensure that the company's balance sheet is properly structured."
"This will help protect the business against the downside risk of further falls in property values and thereafter position the business to exploit attractive market opportunities," he added.
The value of Land Securities' property portfolio has declined by 20.1% in the four months since 30 September 30 2008, as it stood at approximately £9.9bn on 31 January 2009.
The rights issue is also expected to reduce financing risks for debt facilities maturing in the firm's 2010/11 financial year and help deliver pipeline development projects.
The new shares will be offered to shareholders on the basis of five new ordinary shares for every eight existing ones and will be priced at 270p - a 51.0% discount on yesterday's shares closing price.
Land Securities has sold over £3.4bn of assets, deferred potential development projects to reduce short-term costs and reduced its employees by over 10% since market conditions deteriorated in 2007. It has also arranged £1.7bn of new debt facilities and extended £800m of existing ones.
The recent sale of Trillium and the volatile market conditions have prompted Land Securities to adjust the dividend level to 7 pence a share by 31 March 2009 and maintain the same quarterly payment to be distributed over the coming financial year ending 31 March 2010. This represents an annual dividend equivalent to £212m, compared to the current level of £307m.
"At a time of raising fresh capital, the Board has determined that it would be prudent to reset its current dividend to a level that we believe is sustainable and provides potential for future growth," said Salway.
UBS Investment Bank, JP Morgan Cazenove and Citigroup are acting as joint sponsors for the rights issue.
Land Securities' decision comes only days after British Land announced plans to raise £740m through new shares and Hammerson launched a £584m rights issue.
Liberty International, the firm specialising in UK regional shopping centres, admitted today it is also considering alternatives ways of raising capital, while earlier this week, rival industrial property firms Brixton and Segro announced they were considering rights issues to provide more financial flexibility.
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