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Land Securities plans rights issue

Land Securities, Britain's largest real estate company, joined the scramble for capital among debt-starved property investors with a 756 million pounds rights issue on Thursday.

Land Securities (LAND.L: Quote, Profile, Research), a major landlord to the government, is selling 291 million shares at 270 pence as part of a multi-pronged plan to prop up its ailing balance sheet.

The 5-for-8 rights issue follows the sale of more than 3.4 billion pounds of assets since April, the mothballing of several large development projects and a 10 percent cull in its workforce.

The real estate investment trust will also cut its dividend payout pool to 212 million pounds from 307 million pounds, in line with weaker tenant demand for offices and shops.

Land Securities it expected to declare a 7 pence per share dividend in the quarter to March 31, and in every quarter thereafter until March 2010.

The rights issue offer price, at a 51 percent discount to the closing price on February 18, is fully underwritten by Citi, JP Morgan Securities and by UBS.

Citi, JPMorgan Cazenove and UBS are acting as joint bookrunners and BNP Paribas, HSBC and RBS Hoare Govett are acting as co-lead managers.

Albright Investments, a wholly-owned subsidiary of Peel Holdings, which holds approximately 5.8 percent of Land Securities, will take up its full rights entitlement.

SECTOR SCRAMBLE

News of the proposed issue follows similar plans announced last week by rival FTSE 100 property companies British Land (BLND.L: Quote, Profile, Research) and Hammerson (HMSO.L: Quote, Profile, Research), who hope to raise a combined 1.3 billion pounds of fresh equity to reduce debt and finance new acquisitions.

Many property firms are struggling to stave off breaches of loan terms tied to billions of pounds of debt as a correction in commercial property prices shows few signs of slowing.

Average values have sunk by almost 40 percent since the end of the debt-fuelled real estate boom in summer 2007.

While the rights issue is fully underwritten, Land Securities said it would still not prevent a short-term slip into its second most restrictive financing regime, which could obstruct plans to use some of the proceeds to seed a warchest for future opportunistic spending and development.

Reflecting continued carnage in the real estate investment market, Land Securities said an informal portfolio valuation at January 31 showed the value of its assets had fallen a further 20 percent since September 30 to just under 10 billion pounds.

If formally audited, such a decline would push the company's loan-to-value ratio to 77.3 percent versus an 80 percent limit on its Initial Tier 3 borrowing facility.

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters).

Source: http://uk.reuters.com/

Print   2009-02-19