London landlord Shaftesbury is aiming to raise almost £300m in an equity issue, as it seeks to weather the storm coronavirus has brought to its West End portfolio.
The company, which owns 16 acres of London’s West End including shops, bars, offices and housing, said on Thursday that the money raised would help to pay off lenders and strengthen its balance sheet, ahead of what is expected to be a hard winter.
“The reality is that things are getting worse around here in the West End,” said Brian Bickell, Shaftesbury chief executive. “We were feeling optimistic in September: footfall was coming back and offices were filling up. Since then we’ve had one thing after another that’s made it slide back.”
The virus has hollowed out much of central London, with popular tourist areas such as the West End particularly hard hit. As of a month ago, Shaftesbury had collected just 41 per cent of the rent it was owed for the six months to September 30, with the majority of the 611 shops, restaurants and bars on its estate forced to close for much of the period.
Visitor numbers to the West End had been rising through the summer, as coronavirus cases fell and lockdown measures eased. But the increase in restrictions in recent weeks — and the possibility of more to come — is likely to mean a tough Christmas period for businesses and landlords in the area.
“There just isn’t enough footfall to keep some businesses going through the Christmas period, which is so important. Some businesses here make a third of their profits in two months,” said Mr Bickell.
The fundraising will take place via a firm placing, raising £148.6m, and a placing and open offer raising £148.4m. JPMorgan and Liberum are acting as joint underwriters. The new shares will have an issue price of £4, compared with Wednesday’s closing price of £5.01.
Shares in Shaftesbury fell 18 per cent in early trading.
Capital & Counties, or Capco, which owns neighbouring Covent Garden and which paid £436m for a 26 per cent stake in Shaftesbury in May, will buy a further £65m worth of shares as part of the placing.
The investment is “consistent with Capco’s strategy to invest in attractive opportunities on or near the Covent Garden estate”, said the company. Capco shares fell 9 per cent to £1.04 on Thursday morning.
Norges Bank, which also owns more than 25 per cent of Shaftesbury shares, will contribute £77m of the equity raise.
Mike Prew, an analyst at Jefferies, said the share placing would provide Shaftesbury with “insulation” against a second wave of coronavirus.
“We’re pre-empting problems [such as] losing tenants or getting close to our covenants . . . We’re trying not to be an Intu [which collapsed into administration earlier this year after breaching covenants with lenders],” said Mr Bickell.
Countrywide, the estate agent, also announced plans to recapitalise on Thursday via a £90m investment from private equity group Alchemy Partners, as it seeks to pay off its debts and avoid breaching loan covenants next year.
Alchemy, which specialises in distressed assets, would hold between 50.1 and 67.7 per cent of Countrywide’s share capital if the equity raising is approved.