Capital & Regional shares on slippery slope after cash call

SHARES in shopping centre owner Capital & Regional plunged yesterday as it became the latest commercial property giant to see its portfolio mauled by the industry downturn.

Investors were also rocked by the group's plans to raise almost 70 million in a heavily discounted share placing.

Capital, whose sprawling assets include major stakes in shopping centres and retail parks in Falkirk, Paisley and Aberdeen as well as the Xscape leisure complex at Braehead, said the total value of property under management had sunk to 3.2 billion in June from 5.3bn a year earlier.

Over the same period, the company's net assets – a key industry measure – dropped from 493m to just 51m.

It posted a first-half loss of 135m, although the figure was less than the 201m shortfall recorded a year earlier and 2008 full-year losses of 502m.

Shares in the self-styled "co-investing property asset manager" hit a 20-year low, closing down 56 per cent at 43.25p, giving the business a market value of about 31m.

Capital, which manages a string of specialist funds, said new shares were being offered to investors at 24p, a 75.5 per cent discount to the closing price on Wednesday.

As part of the placing, South Africa-based property and asset manager Parkdev has agreed to invest 23.2m of the 69.2m being raised, giving it a 25 per cent stake in Capital. The net proceeds of the share issue will be used to pay down the debt on the group's revolving credit facility and meet other working capital requirements.

Chief executive Hugh Scott-Barrett said the move put the company on a "firm financial footing", providing "flexibility as the markets turn".

Chairman Tom Chandos added: "The actions taken since the beginning of the year, including the refinancing of the Junction and X-Leisure funds and culminating in the capital raising and related renegotiation of credit facilities, significantly strengthen the financial position of the group."

Britain's big listed property companies have been buffeted by the recessionary squall, seeing the values of their vast retail and office empires crumble.

In recent weeks, however, there have been signs that the flagging property sector is on the mend. Land Securities, Liberty International and Hammerson have all pointed to an upturn in investor sentiment. Earlier this week, British Land reported a smaller-than-expected 9 per cent slide in first-quarter net asset values.

Capital's Scott-Barrett said sentiment was improving in the commercial property market. He noted that consumers had remained "resilient" in the face of the economic downturn with higher footfall at many shopping centres.

The group's shopping centre and retail park funds include complexes in Falkirk and Aberdeen, both branded The Mall.

Its X-Leisure fund encompasses three Xscape facilities – including Braehead, a joint venture with Liberty subsidiary Capital Shopping Centres that includes an indoor ski slope – and a number of other properties across the UK, which include Fountain Park in Edinburgh.