Hammerson halts work after loss

The retail-led client said construction had stalled on its £600m Sevenstone scheme in Sheffield, its £800m Eastgate Quarters in Leeds and its £100m Watermark WestQuay project in Southampton.

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

The news came as the developer announced a rights issue on Monday to raise £584m to control its borrowings and debt. 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.

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

There was also speculation this week that rival commercial property giant British Land was preparing to announce a rights issue worth about £500m.

Peter Cunningham, director of the Construction Clients’ Group, said: “It is just yet another sign of the downturn that key client organisations like Hammerson and British Land are having to take the action they are taking.

“But there is a positive side. They have breathing space to consider how they will procure in the future and that will have a positive impact when the market comes back.”

Graham Watts, chief executive of the Construction Industry Council, said Hammerson's move was “unsurprising” and urged the government to take further action to increase bank lending.