London & Stamford raising £226 million

By Sinead Cruise and Daisy Ku

LONDON (Reuters) - Property investor London & Stamford Properties (LSP.L) is raising 226 million pounds in the biggest share placement on London's junior board this year to gain an edge over bargain-hunting rivals.

The company has attracted some $1 billion (617 million pounds) worth of interest from institutional investors, or three times the shares on offer, in a deal fully underwritten by KBC Peel Hunt, sources familiar with the matter said.

"The fundraising, which has been heavily oversubscribed, is essential to maintain London & Stamford's acquisition capability, enabling us to continue to create value for our shareholders through the acquisition of high quality assets on attractive terms," Chairman Raymond Mould said.

The secondary fundraising is the second largest on AIM following publishing firm Mecom Group's (MEC.L) 570 million pound deal in April 2007.

Under the placing and open offer, shareholders of LSP have until July 24 to clawback up to 142.5 million new shares in issuance.

LSP, listed on London Stock Exchange's (LSE.L) Alternative Investment Market (AIM) in November 2007, would become the fourth biggest by market value on AIM after the fundraising.

To reflect the increased size, the company is mulling a move to the main market of the London bourse and whether to become a real estate investment trust (REIT) to save tax.

FIREPOWER

LSP was one of the first companies launched to exploit what has become a record slump in British commercial property values since June 2007. It was followed by Max Property Group (MAXP.L), which floated in May after raising 220 million pounds.

A number of other firms including NewRiver Retail have suspended IPO plans amid choppy investor sentiment.

LSP has bought more than 750 million pounds of British real estate since its flotation, including a 50 percent stake in the Meadowhall Shopping centre in Sheffield in joint venture with GreenPark, formerly Cavendish Limited.

The company is paying a 2.8 percent in total fees to offer 215 million new shares at 105 pence each, representing an 11.6 percent discount to Thursday's close.

It is also the first property firm, in this cycle, to raise funds above its net asset value, at a 2.6 percent premium.

With 87.4 million pounds of the original equity raised at IPO still unspent, unutilised banking facilities of 150 million pounds and net proceeds from this issue of 220 million, LSP's firepower before any investment from its Gulf co-investment partner stands at about 460 million pounds, said Michael Burt, an analyst at Noble Group.

"Investing in long-let prime assets at net yields of 7-8 percent remains a no-brainer based on the 10-12 percent income returns the company can generate before allowing for any medium-term contraction in property yields," Burt said.