Land Securities announces £755.7m rights issue

Land Securities, owner of The Strand, located in Bootle, Liverpool, St John's and Clayton Square shopping centres in Liverpool city centre, has launched a £755.7m rights issue today.

Land Securities, the largest listed property company in the UK, had announced earlier in the week it was considering the merits of a rights issue.

The company said the rights issue will strengthen its balance sheet and will raise the new equity by offering its shareholders 290.8m new shares at 270p each on the basis of five new ones for every eight held.

Francis Salway, group chief executive, announced on the London Stock Exchange: "We have a good track record of creating value for shareholders through the property cycle and have decided to seek further capital at this stage to ensure that the company's balance sheet is appropriately structured. This will help protect the business against the downside risk of further falls in property values and thereafter position the business to exploit attractive market opportunities. At a time of raising fresh capital, the board has determined that it would be prudent to reset its current dividend to a level that we believe is sustainable and provides the potential for future growth."

The price of the new shares is more than half Land Securities' share price of 568p at the close of trading yesterday. Any shares that are not bought by shareholders will be taken up by underwriters, UBS, Citi and JP Morgan Cazenove.

Salway added: "Whilst the company is maintaining a strong focus on the business actions which are within its control, a number of factors affecting the market in which Land Securities operates are beyond the company's control. The pace of valuation decline has, in recent months, exceeded the pace at which assets can be sold to counteract the impact of falling values on the Group's balance sheet position, and this represents an ongoing risk."

Land Securities said that between 1 October 2008 and 31 January this year its portfolio plunged in value by 20.1% to £9.97bn. The valuation was affected not just by a continuing rise in yields but also by a 5.4% drop in rental values.

It also said it will cut its dividend by 31% to 28p a share for the full year.

The rights issue is subject to approval by shareholders at a general meeting to be held on 9 March.