(Bloomberg) -- After two dismal years for publicly listed property companies, the over-subscribed rights issue by warehouse landlord Segro Plc points to pockets of optimism emerging. 

Europe’s largest real estate investment trust has raised more than £900 million ($1.1 billion), exceeding its initial target of £800 million, according to a statement Wednesday. The UK based landlord issued new shares at a price of 820 pence apiece, reflecting a 3.4% discount to its closing price before the capital raise was announced. 

“We appreciate the support from our investor base for this equity placing and the confidence it demonstrates in our business,” Segro Chief Executive Officer David Sleath said in the statement. “In addition to the profitable growth opportunities within our development pipeline, we expect further exciting opportunities to emerge in the coming months which this additional capital will help us to deliver.”

Property stocks fells sharply following Russia’s invasion of Ukraine and the unprecedented hiking cycle unleashed by central banks as they sought to combat runaway inflation. Investors fled the sector, anticipating that rising rates would cause values to fall sharply, with the FTSE 350 REIT index down more than 37% since the start of 2022. 

Read more: Battered by Shocks, Europe’s REITs Face Death by Private Markets

While asset values have since fallen, they’ve declined less sharply than many anticipated, setting up the potential for a bounce back with growing confidence that rate cuts are on the horizon. Still, most REITs continue to trade at wide discounts to their asset values, particularly those investing in office properties. 

The new shares represent about 9% of Segro’s existing issued share capital before the placing, meaning holders will be diluted by about 8.3%. Warehouse rents have continued to rise as demand for distribution space exceeds demand, helping offset the impact of rising interest rates on valuations. The correction caused by rate hikes has also damped new construction levels, setting up the conditions for further rental growth in the medium term. 

©2024 Bloomberg L.P.