Regional REIT shares plummet as property trust weighs raising cash from investors at ‘material discount’

Regional REIT shares fell by more than a third on Tuesday after the London-listed property investor flagged a potential equity fundraising in an effort to fund its debts.

Commercial property investor FTSE All-Share, which mainly owns offices outside London, told shareholders on Tuesday it could choose to raise around £75m from investors at a “significant discount” to its current share price.

Regional REIT Stocks They were down 31.8 per cent to 13.7p in early trading, taking losses over the past year to almost 75 per cent.

It also has a 73.5 percent discount to net asset value, according to data from the Association of Investment Companies, compared with an average discount to net asset value of 24.6 percent in the property investment trust sector. UK commercial.

The investment trust has previously said it was exploring refinancing options, including both debt and equity, given its exposure to £50m of retail bonds maturing in August.

The regional REITs shed assets worth £26.1 million in 2023, partly to reduce their debts.

But analysts at Peel Hunt estimate the trust will need to have more than £175m of disposals – around a quarter of its total portfolio – to reduce its loan-to-value (LTV) ratio below its 40 per cent target. percent from its current level. 55 percent LTV.

Peel Hunt said: ‘While progress is being made, in our view such a number of sales appears unlikely in the short term.

‘New debt is likely to be expensive but, more importantly, it does not reduce LTV.

“We believe the optimal long-term solution is a significant disposal program combined with new capital.”

It follows a torrid 2023, which the chief executive of its asset manager London and Scottish Property Investment Management, Stephen Inglis, described as “one of the most challenging years for REITs in recent memory”.

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London-listed real estate investment trusts are struggling under the weight of low assets, weak share prices and high discounts, prompting a pick-up in M&A activity since 2019.

The regional REIT was forced to cut its dividend last year when its portfolio valuation fell from £790m to £701m, and its annualized gross income fell from just under £72m to around £68m.

Inglis said last month: ‘LTV remains a key focus of the Board and management has a plan to reduce LTV to the long-term target of 40 per cent through selective sales and debt repayment.

‘Senior debt is 100 percent fixed, exchanged or capped and will not exceed 3.5 percent.

“The company is actively exploring a range of refinancing options for the retail bond given its near-term maturity date.”