Argosy Property plans to raise about $87 million through a rights issue to pay down debt giving it resources to buy more properties should opportunities arise.
Argosy is offering one new share for every seven held, at 89 cents per new share, in an offer fully underwritten by First NZ Capital.
The shares had been trading at 98 cents, and fell to 96 cents after after the announcement of the capital raising.
Chief executive Peter Mence says the capital raising will give the company balance sheet flexibility.
He says the move will bring debt levels down to 35% from the present gearing of 40%, though this is still 10% below its bank covenant.
Argosy is taking the relatively unusual step of ensuring all its shareholders benefit from the rights issue.
Shareholders in rights issues normally have two options; they can take up their rights and buy the new shares or they can sell their rights on the stock market.
If they do nothing, they get nothing, and the percentage of the company they own will fall.
However, in this case, if shareholders do nothing, Argosy will sell the rights to the new shares to which they are entitled to institutional investors through an auction process.
Those shareholders will then receive the proceeds of that auction. An analyst at Forsyth Barr, Jeremy Simpson, estimates the rights will be worth about 6 cents per share.