Workspace in rights issue to bolster financial position

Workspace has became the first real estate investment trust (REIT) in the UK to announce a rights issue to ease its debt burden. The provider of rental space to small and medium sized businesses said it aimed to raise £87.2 mln (EUR 94 mln) in a fully underwritten 5-for-1 rights offer to shareholders.

Workspace chairman Tony Hales said: 'This transaction ensures that the company has secured financing with maturities extending to November 2012. In the context of the current financial climate, where the perceived outlook for property values has been gloomy, obtaining capital and bank financing has been very tough. We can now focus all of our efforts on the operational performance and cash generation of the business in this challenging economic environment.'

In an interim statement, the company said it total rent roll for the last three months of December 2008 remained stable at £52.5 mln (EUR 57 mln). But the value of its property portfolio fell 15% in the last quarter of the year to £740 .3 mln. Workspace said this reflected the wider decline in property values across the UK, and further declines are expected during 2009.

Market watchers expect several other UK REITs to turn undertake rights issues to stabilise their balance sheets.