Johannesburg - Real estate Investment trust Liberty International announced on Wednesday that it is placing up to 56.1 million new ordinary shares, representing up to 9.9% of the group's issued ordinary share capital.
The proceeds of the placing will enable the group to resume investment in, and so enhance returns from, its prime UK regional shopping centres and Central London assets, it said.
The placing is being conducted through an accelerated book-building process to be carried out by Merrill Lynch International.
The book will open with immediate effect and the timing of the closing of the book, pricing and allocations is at the discretion of Liberty International and Merrill Lynch although the book-building is expected to close not later than 4.30 pm (London time) today.
Details of the placing price will be announced soon after the close of the book-building process.
Except for pre-existing commitments, Liberty International's investment plans were placed on hold approximately twelve months ago as a result of the exceptional turmoil in financial and property markets at that time, it said.
Strategic placement
The company said the placing addresses the group's investment requirements beyond the net £592m capital raised in April 2009, the purpose of which was to provide funds for already committed capital expenditure, debt repayment and covenant cures on non-recourse debt facilities for the period to December 2010.
Approximately half of the proceeds of this placing are expected to fund identified active management initiatives across the group's 14 UK regional shopping centres which were valued at £4.4bn at 30 June 2009.
These initiatives, which are not individually of significant size, but cover most of the group's centres, are expected to deliver rental and capital value enhancement over the coming years.
In addition, the group has plans to implement a number of larger strategic projects at selected centres, subject to gaining the appropriate planning approvals.
Liberty International intends to use the other half of the proceeds of the placing to fund capital expenditure, including tactical acquisitions, to further the Group's objectives for its prime Central London assets in Covent Garden and to fund Earls Court & Olympia through to securing planning consent.
The company said the placing is expected to restore positive momentum to the overall business, the focus of which has recently been primarily on balance sheet and liability management and provide funds to improve the competitive position of its prime UK regional shopping centres through active asset management initiatives in the short-term and more substantial enhancement and expansion projects in the medium-term.
It will also position the group to further consolidate and develop its holdings in the prime Covent Garden estate in Central London and enable the Group to actively pursue the development potential of Earls Court & Olympia.
Substantial disposals
The programme of disposals of non-core UK assets embarked upon when Liberty International became a REIT in January 2007 is largely complete, it said and it considers that it is not in the interests of shareholders to embark on a further programme of substantial disposals at the current time, although this position is kept under regular review.
The group said following the capital raising in April this year, the Group had a total cash balance of £568m and net external debt of £3.390bn at 30 June 2009, representing a debt to assets ratio of 56%.
Net assets per share (diluted, adjusted) were 448 pence at 30 June 2009.
Looking ahead, the group said it has a high quality and defensive business, with 14 UK regional shopping centres (including 9 of the UK's top 30) and prime central London assets including the Covent Garden Estate and Earls Court & Olympia.
The Board believes it is well positioned for recovery as the property market improves, with prime assets and large scale destinations expected to outperform secondary assets and inferior locations.
Due to recent adverse market conditions, the supply of new retail space in the UK has been sharply curbed which should be beneficial to the group.
"As stated in the Interim Report, tenant failures in the three quarters to 30 June 2009 amounting to over £30m of CSC's passing rent will adversely impact underlying earnings, despite the positive progress on re-lettings .... As was also stated, earnings per share will be negatively impacted in the short-term due to the impact of cash balances earning a low return pending the most effective deployment, and also due to the Group being overhedged with regard to interest rate risk."
"Nevertheless, with the benefit of further capital and stability returning to the UK market, the group will have the opportunity to implement a number of active asset management initiatives within its existing business to enhance returns to shareholders," it concluded.
- I-Net Bridge