Real Estate Capital UK commentary
UK REITs continued to drift sideways in June and early July, as did the wider stockmarket. Some smaller companies raised capital towards the end of the period. Food and value retail specialist NewRiver Retail announced a £40m placing at 252p a share to help fund its £68m purchase of four malls, while serviced office provider Workspace is raising £63m via a one-for-four rights issue at 23p a share, to fund acquisitions.
British Land is planning a £301m US private-placement bond issue, with seven to 15 years’ maturity, at an expected cost of 150bps over LIBOR. This is becoming a popular way for UK property companies to diversify their funding. IPD’s All-Property Index showed just 0.2% capital growth in June, taking the Q2 2011 growth rate to 0.4% – the lowest rate for two years. Total returns of 0.7% were driven almost entirely by income return, at 0.6%.
Retail and industrial rents fell 0.1% and 0.2% respectively, but office rents rose 0.4%. However, outside London, growth is largely flat or negative, due to uncertainty over the macro-economic outlook and the secondary market.