A £2.9bn shopping centre investment fund managed by Capital & Regional is to raise £300m through a deeply discounted rights issue to prevent a breach of a key debt covenant.
The Mall shopping centre fund, one of the UK’s largest retail property investors, has sent out details for the rescue equity raising to its unit holders, which is expected to be offered at a discount to unit price of about 50%, subject to take-up.
The equity issue is to be fully underwritten by Norwich Union, whose Morley Fund Management is the largest shareholder and fund manager for the Mall.
The sharp drop in the value of the property held by the Mall fund has meant that it is now barely 1% away from breaching a 60% loan-tovalue limit on a £300m debt facility. At 31 March, the Royal Bank of Scotland facility stood at 58.8%.
This is the first capital-raising in the real estate sector since the onset of the downturn in the commercial property market last year, but analysts expect more to follow as companies look to bail out heavily geared property investment vehicles.