Unlike larger rivals such as Hammerson, British Land and Brixton Estates - which have all launched speculative rights issues recently - Burford's issue is tied to a specific deal. It is paying pounds 68.1m for a portfolio of 11 properties in Glasgow, Leeds, Leicester, Exeter and Mayfair, London, from Provident Mutual.
The properties, three-quarters of which are offices and the remainder industrial and retail, generate pounds 6.1m of rental income, putting the purchase on a 9 per cent yield. But Nigel Wray, Burford's chairman, is confident that this can be increased to 10 per cent within five years.
The three-for-five rights issue is priced at 62p a share, a 16 per cent discount to the opening price of 74p but an 18 per cent premium to its last net asset value of 52.5p at the end of December. The acquisition will increase asset value to 55.5p and the shares climbed 1.5p to 75.5p.
The remainder of the purchase will be financed by debt, which means that Burford's gearing will rise from 62 to 65 per cent. Mr Wray and his fellow directors are selling enough nil- paid rights to enable them to take up 1.1 million shares, leaving Mr Wray with a 12.7 per cent stake.
Burford's strategy is to purchase property where income can be increased by upgrading the buildings or managing them more effectively.Reuse content