Land Securities unveils EUR 860m cash call, resets dividend

Land Securities, the largest real estate investment trust (REIT) in the UK, revealed its plans on Thursday to raise net proceeds of £755.7 mln (EUR 860 mln) through a discounted rights issue.

The property giant said the operation would involve some 290 million new ordinary shares in a fully underwritten 5-for-8 rights issue at a price of 270 pence per share - less than half Wednesday's close of 568 pence. The capital raising proposal will be put to shareholders on 9 March 2009.

Land Securities also announced it was resetting its dividend payout at 7 pence per share for this year and next. On an annualised basis, this would represent a dividend of 28 pence per share, equivalent to £212 mln, compared top the current level of £307 mln.

Commenting on the capital raising, Francis Salway, Group CEO 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 appropriately 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.'

The widely anticipated cash call comes days after British Land and Hammerson, two other major UK REITs, rolled out their own initiatives. Last week, Hammerson said it was seeking to raise net proceeds of £584 mln in a fully underwritten 7-for-5 rights issue to reduce its debts and cut its gearing level. British Land later announced plans to raise £740 mln net of expenses in a 2-for-3 rights issue.

Market watchers have for some time expected UK REITs to fund raise to protect their balance sheets, and the advice has been that companies should act fast to ensure they don't find themselves at the end of the queue. The share prices of industrial property REITs, Segro and Brixton, were hammered earlier in the week before they acknowledged equity raisings were one of the several proposals they were considering.