As companies seek to strengthen their capital position, a number of UK listed property groups have announced capital raisings over the past weeks but fears are growing in the market over shareholders' ability to support these initiatives. Liberty International, the largest shopping centre owner in the UK, announced at the end of February that it planned to raise at least £350 mln (EUR 396 mln) of additional equity and to dispose of properties in return for an extension of its loans.
As companies seek to strengthen their capital position, a number of UK listed property groups have announced capital raisings over the past weeks but fears are growing in the market over shareholders' ability to support these initiatives. Liberty International, the largest shopping centre owner in the UK, announced at the end of February that it planned to raise at least £350 mln (EUR 396 mln) of additional equity and to dispose of properties in return for an extension of its loans.
Patrick Burgess, chairman of Liberty International, said the company has come to terms with its lenders on 'important changes' to £360 mln of corporate debt on the promise it would raise 'no less' than £350 mln.
‘The changes are contingent on the group raising not less than £350 mln of additional equity. Given current market conditions, the board’s intention would be to raise a greater sum through a combination of asset disposals and new capital,’ he said. The company reported a pre-tax loss of £2.66 bn for the full year as a result of a 23% drop in the value of its property portfolio.
Liberty is the latest UK company to seek cash to boost its balance sheets and avoid breaching loan to value (LTV) covenants on the back of falling property values. Land Securities recently announced plans to raise net proceeds of £755.7 mln through a discounted rights issue. Segro and Brixton also unveiled plans to raise capital, while Hammerson raised £584 mln and British Land a further £740 mln.
‘These companies are coming to the market to raise enough capital to go through the crisis,’ says Anne Breen, head of property research at UK fund manager and investor Standard Life Investments. ‘But there are concerns that those companies that take similar action at a later stage will be penalised, and will struggle to raise equity,’ she adds.
According to research carried out by Standard Life, there is about £23 bn of debt that needs to be refinanced this year. 'It's clear that investors won't be able to refinance this entire amount,' she concludes.
