Development Securities plans to raise £94m

Development Securities, the property developer and investor, will raise £94m ($144m) in a fully underwritten placing and rights issue to take advantage of opportunities during the next uncertain stages of the property cycle.

The company wants additional funds to exploit what it sees as a lack of equity and debt available for new development in the UK, particularly in more risky areas where banks are unwilling to lend.

The company has already spent more than two-thirds of the £94m raised for a similar strategy in July last year, and expects to have invested the rest by the end of next quarter.

Michael Marx, chief executive, said that the money raised would be used to make deals at the “coal face” of the property market, where the returns could be much higher and where few rivals were active.

He said: “There is a capital starvation that is most acute at the development end, which we can almost be alone in looking to fill.”

Development Securities typically brings in other equity partners to help fund its schemes, but acknowledged that there was a need for it to provide a higher level of equity than before because of continuing economic uncertainty.

The company said the recent growth in property values may be levelling off, but there were opportunities to acquire projects needing capital. The company will place 4.1m shares, or about 5 per cent of existing issued share capital, and issue about 36m new shares, or 43.7 per cent of existing share capital, at 250p per share, representing an 8 per cent discount to Wednesday’s closing price of 271p.

Shares closed down 15.75p at 258.25p on Thursday.

The rights issue has been underwritten by Collins Stewart and Barclays Capital, who are also joint book runners. Rothschild is a financial adviser.

David Jenkins, chairman, said: “We continue to be well placed to take advantage of the dislocation in the UK property market caused by the difficulties that the market is ­experiencing in obtaining access to capital, both equity and debt.

“The recent precipitous fall in loan origination from those banks that have traditionally worked within our industry is unlikely to be reversed soon since the overall exposure of the banking sector to commercial property remains at record levels.”