Great Portland Estates is raising £166m of new equity from a rights issue to bolster its spending power.
The REIT said today it was selling 131.7m shares at 133p each, which after costs of £9m, would give it £166m of new money. This will increase its capacity to purchase to £640m.
The rights issue, which enables shareholders to buy eight new shares for 11 existing ones, is fully underwritten by Credit Suisse and JP Morgan. The issue price of 133p a share equates to a discount of 40% to the theoretical ex-rights price (TERP), which is in line with the pricing of the rights issues carried out by the other large REITs, Hammerson, British Land, Land Securities, Segro and Liberty International, earlier this year.
Great Portland’s chief executive Toby Courtauld said the rights issue ‘substantially increases the resources we will have available to take advantage of attractive investment opportunities which are emerging as a result of the downturn in the market which is now seeing some property sold at distreesed prices way below the market value. We will look to invest in fundamentally cheap property assets in our core central London markets whilst maintaining our rigorous and disciplined investment approach'.
News of the rights issue coincided with Great Portland’s annual results for the year to 31 March. These revealed that the company’s portfolio dropped by 28% in value to £1.13bn. This led to a 45.8% fall in the net asset value to 329p a share.
Great Portland also announced the sale of a Mayfair office building for £45m. Bond Street House at 15/16 New Bond Street was bought by an ‘institutional Luxembourg Sicav fund’, advised by Munich-based iii investments, at an initial yield of 5.8%.
The impact on the commercial markets and investors must again be a very positive one when someone of Great Portlands position in the market comes out and makes a move tp purchase when others have held back because of the uncertainty in the markets.The opportunity to purchase at distressed sale prices is very attractive but it takes real character in these times to go out and follow it through.
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