Property giant to tap investors for £600m

Published on Monday 9 February 2009 20:57

PROPERTY heavyweight Hammerson, whose UK-wide portfolio includes retail parks in Aberdeen, Falkirk and Kirkcaldy, is to seek almost £600 million from investors as it looks to ride out a deep industry slump.

Unveiling annual losses of just over 1.6 billion, the group yesterday outlined plans to raise 584.2m through a rights issue.

While the offer is fully underwritten, it still requires the consent of shareholders at a general meeting later this month.

The company said the rights issue followed thwarted attempts to offload some properties to raise new funds, which had left its financial covenants vulnerable to being breached.

Aaron Guy, of Collins Stewart, said the rights issue would take away some of the downside risk, helping investor confidence.

Hammerson's move came as speculation grew that British Land will launch a rights issue of its own alongside Thursday's results.

Hammerson, whose 6.5bn of assets include Brent Cross shopping centre in London and Birmingham's Bullring, posted a 33 per cent fall in adjusted net asset value – a key industry performance measure – to 1,036p in the year to 31 December.

The group is the first major UK property business to concede it needs to raise additional cash from shareholders after the credit crisis cut off the sector's traditional sources of debt funding.

Chairman John Nelson said he had seen a "marked deterioration" in property markets since the summer.

"The unprecedented conditions in financial markets worldwide and restricted availability of capital led to a sharp decline in real estate investment activity and values during 2008, particularly in the last few months of the year," he added.

Despite the slide in values, rental income has held up well, with like-for-like growth of 3.7 per cent in 2008.

The firm completed four major developments in 2008, including the Cabot Circus development in Bristol and High Cross in Leicester.

A fifth scheme, 60 Threadneedle Street, in the City of London, was completed in January – leaving just one major development, Union Square in Aberdeen, and some smaller retail parks in the pipeline.

Nelson said: "In the current economic climate, Hammerson does not intend to start construction of any major development projects, although it is continuing to progress the planning and design stages so that the schemes could be advanced in the future."

An extension of the Fife Central Retail Park in Kirkcaldy, which will increase available space by 11,000sq m to 28,000sq m, is due for completion in June. Hammerson said five of the six units had been pre-let.

The annual pre-tax loss of 1.61bn compares to a profit of 110.4m a year earlier. The new shares, which are being sold on a seven-for-five basis, are being offered at a 62 per cent discount to Friday's closing price.