Leading property firms reported to be planning £1bn cash call

Published on Sunday 8 February 2009 20:29

TWO of the UK's biggest property companies are this week expected to announce plans to raise more than £1 billion from investors.

Hammerson is understood to be planning a 600 million rights issue, while British Land is expected to unveil a 500m cash call when it reports its third-quarter results on Thursday.

Other property companies are expected to be forced to follow suit after steep falls in the value of commercial property has left them close to breaching their banking covenants.

Hammerson's cash call is expected to be pitched at a 50 per cent discount to the group's closing share price of 397p on Friday.

The rights issue is being underwritten by its advisers Citigroup and Deutsche Bank, and it is thought to have the support of its institutional shareholders.

The group's gearing had increased from 57 per cent in December 2007 to 77 per cent at the half year.

But analysts think it has since soared even higher to 110 per cent, pushing it closer to its covenants, which are thought to range from 150 per cent to 175 per cent.

Group chairman John Nelson is expected to argue that the group's problems have been caused by the credit crunch and that the associated fall in commercial property prices, rather than any issues with its portfolio, which contains high-quality assets.

Meanwhile, British Land, which was run until late last year by Stephen Hester, now chief executive of Royal Bank of Scotland, is also expected to use its results to announce a series of disposals.

They are likely to include the sale of half of its stake in Sheffield's Meadowhall shopping centre to a joint venture between property investors London & Stamford and an Abu Dhabi investment group.

British Land is also understood to be negotiating the sale of its Broadgate development in London to property investment firm Delancey.

Neither Hammerson nor British Land could be contacted yesterday to make a comment on reports of the cash call moves.