Berkeley to raise £50m to buy land

Published 01st Mar 2009

Berkeley to raise £50m to buy land

Berkeley Group will raise £50m from investors to help build up a £300m war chest to buy land at knockdown prices as cash-hungry housebuilders withdraw from the market or become insolvent.

The London and south-east-based housebuilder said that the £50m placing, underwritten by UBS, would allow it to make purchases without going into debt.

Tony Pidgley, chief executive, is known for his sharp sense of market timing. He called the top and bottom of the late 1980s and early 1990s housing boom and bust, and started a move out of volume housebuilding in 2005.

The placing is equivalent to 5 per cent of existing share capital, and management said it would also abandon plans to return £3 a share to investors by 2014 as the money would be better invested in land. Shares rose 48½p to close at 895p.

“They are positioning themselves to buy land at attractive prices in a market where the competition is saddled by debt,” said Jon Bell of Shore Capital. “They have a competitive advantage and should be able to capitalise on quite an interesting opportunity.”

In an interim management statement, the company also said that sales reservations were running about 55 per cent below average.

But Rob Perrins, finance director, said Berkeley’s £236m of net cash meant it was able to wait for the market to recover and rent out property rather than sell at distressed prices, as more indebted housebuilders have done. “We’re not going to drop the prices,” he said. “Everyone who’s selling is a forced seller and we are not a forced seller.”

He also said the company would be able to maintain its average operating profit margins of 17-19 per cent. Other housebuilders’ margins have plunged as they push through discounts to encourage sales.

Source: ' FT '

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