Retail-led developer reveals loss of £1.6bn in 2008 and postpones construction on all major schemes

Property developer Hammerson has announced a rights issue to raise £584m in order to control its borrowings and debt.

The news came as the company revealed a £1.6bn pre-tax loss in 2008, and ruled out starting construction of its major developments in the present economic climate.

Hammerson, one of the construction industry's largest private clients, will issue 405 million new shares later this month. It will ask its shareholders to buy seven new shares for every five existing shares they own at a price of £1.50 per share. At the close of the markets on Friday, Hammerson's share price was £3.97.

Since June last year, Hammerson has sold £783m of assets to help repay debts of £3.3bn, but the firm admits it could breach its covenants if the market value of its portfolio continues to decline.

John Nelson, Hammerson's chairman, said: “Against this background, the directors have concluded that it is in shareholders' best interests for Hammerson's capital base to be increased substantially through a rights issue.”

In its annual results for the year ending December 2008, Hammerson revealed it made a loss of £1.8bn during the year because of the plummeting value of its property portfolio.

Hammerson added that it did not intend to start construction on its major developments in Sevenstone, Sheffield, in Eastgate Quarter, Leeds, and in Southampton in the present economic climate. The company said it would “progress the planning and design stages so that the schemes could be advanced in the future”.

Construction will continue only on its £260m Union Square project in Aberdeen, expected to complete at the end of 2009.

Rival commercial property giant British Land is also expected to announce a rights issue worth about £500m later this week, according to weekend newspaper reports.