Three of the UK’s biggest REITs are raising over £1.1bn of cheap money on the bond markets. Last week Capital Shopping Centres announced a £300m, six-year convertible bond issue, which may be extended by £50m, while Hammerson closed a seven-year senior, unsecured corporate bond, raising €500m.
British Land closed a £400m five-year convertible issue earlier this month. Hammerson’s was priced at 145 basis points over the swap rate, paying a 2.75% coupon.
British Land’s coupon is 1.5%, with a 693p conversion price, a 31.25% premium above the average share price from launch to pricing. CSC’s money is likely to be more expensive, with an expected 1.75%-2.25% coupon and 30-35% conversion price above the share price at issue.
Espirito Santo Investment Bank said the issues “continued the real estate sector’s trend for diversifying funding sources away from secured bank debt”.
CSC will use the capital to refinance debt drawn under the company’s five-year revolving credit facility, which carries a 175bps margin over Libor.
The UK’s biggest shopping centre owner, where deal-maker John Whittaker is now deputy chairman, is considering selling up to 25% stakes in some malls to provide further funding. Hammerson said the issue would give it £2.8bn to fund growth in prime malls, retail parks and outlet villages.