Property fund turmoil continues as three more firms cut value

Around £5bn of commercial property could be put up for sale as post-EU referendum turmoil prompts managers to revalue portfolios

Shopping centres, office blocks and warehouses worth up to £5bn could be put up for sale as the turmoil in the UK commercial property sector prompted by the Brexit vote forces fund managers to revalue their portfolios or temporarily prevent investors withdrawing their savings.
With the pound under pressure on the foreign exchange markets, fund managers Legal & General, Foreign & Colonial and Dutch-owned Kames cut the value of their property funds on Thursday. L&G cut the value of its £2.3bn fund by 10% – following a 5% cut last week – while F&C and Kanes both cut by 5%.
The moves followed Aberdeen Fund Management, which on Wednesday announced it was halting trading in its property fund for 24 hours and devaluing it by 17% - thought to be the biggest adjustment ever made by a property fund . Aberdeen has since extended the trading ban until Monday.
Others have suspend dealings for longer, starting with Standard Life’s decision on Monday to halt trading in its £2.9bn commercial property fund, leading to a cascade effect with Aviva, Prudential’s M&G, Henderson, Columbia Threadneedle and Canada Life following suit – taking the total value of property funds suspended to £18bn.
Mike Prew, equity analyst at Jefferies, said buildings could be sold to find the cash to repay investors in the funds: “We estimate that £3bn to £5bn of assets could be put up for sale but it’s a trading vacuum and what sells is likely to get a hefty Brexit discount.
“Buildings are now being readied for sale but keys to cash can typically take three to six months.”

One of the factors weighing on sentiment is uncertainty about the role of London as a financial centre outside the EU. George Osborne, the chancellor, met the heads of major international banks including Goldman Sachs and Morgan Stanley on Thursday to discuss ways to keep the City as a major trading centre. “We are determined to work together,” they said in a joint statement,
Ratings agency Fitch cited “deterioration in market confidence for London City offices following the UK vote to leave the EU”, as it downgraded a complex bond – known as Ulysses – secured against the City Point skyscraper building in the City.
The property fund sector has been a focus since the Brexit vote and was highlighted in the Bank of England’s assessment of risks to markets, published on Tuesday. Threadneedle Street cited these open-ended commercial property funds – which offer almost instant access to cash – as having the potential to exacerbate problems in the market.
The turmoil has coincided with pressure on the pound, which has been trading at 31-year lows and on Thursday remained below $1.30 – well off the $1.50 it reached when the polls closed on 23 June .
However, the London stock market has steadied, with the FTSE 100 gaining more than 1% to 6,533 and the FTSE 250 – regarded as a better barometer for the UK economy and at one point off this week 10% since the referendum – rallying by 1% on Thursday to 15,898.
Yields on UK government bonds – known as gilts – which have halved to 0.7% since the referendum are also being watched as investors seek safe havens and brace for a cut to interest rates as soon as next Thursday. Analysts at Barclays struck a cautious note as they lowered the forecast for UK growth in 2017 to minus 0.4%. “We believe investors should position for a less benign economic and financial environment than is priced into global risk assets,” the Barclays analysts said.

Jason Hollands, managing director of Tilney Bestinvest, said: “Dealing in the property funds could be suspended, possibly, for the remainder of the year.”
He said the revaluations were pre-emptive moves. “Actual commercial property transaction volumes could remain low for some months as deals go back to investment committees and businesses await greater line of sight on who will lead the negotiations between the UK and EU over Brexit and their opening stances,” said Hollands.
Great Portland, which develops and invests in offices, retail space and housing in the West End and other parts of central London, echoed this sentiment, warning it expected London’s commercial property markets to weaken during the uncertainty.

https://www.theguardian.com/business/2016/jul/07/property-fund-turmoil-continues-as-legal-and-general-foreign-and-colonial-reveal-cut-in-value


If we are going to do it, hanging it out is just making everything worse.

so..london property prices are headed to the basement....

this is a problem how? exactly?

Stop it Lord Foul... you are confusing the idiot lefties here...

Lord Foul wrote:so..london property prices are headed to the basement....

this is a problem how? exactly?

It's you that doesn't understand Tommy.   In theory property dropping in price is a good thing.  However, what has been underpinning the 'so called' recovery from recession?   House prices.   If house prices drop at the moment we stand a good chance of going back into recession.   You really don't understand finance do you.

Explain your hypothesis to us then sassy...!?

Lord Foul wrote:so..london property prices are headed to the basement....

this is a problem how? exactly?

Typical RW skims over the key details

UK commercial property

Not housing, just the places Business operate.
As there is a significant decrease in the amount of Businesses that wish to operate there in the future.

Commercial and residential property prices have been over inflated for years by speculation.

The speculators are now leaving the market.

Of course the price will drop and yes potentially a property bubble bursting will send shockwaves throughout the economy.

But we were heading for a recession anyway.

And living on a false economy in the meantime.

We genuinely need to start being more productive in the long term - let's use our technology, innovation and resources to start manufacturing.

Use our creativity to start providing services to the world.

And not send those jobs overseas to make a slightly larger profit margin.

Great Britain is still a great global brand.

I think it would be great if house prices dropped. They'd have to drop by a long way to make a difference though.

Fuzzy Zack wrote:Commercial and residential property prices have been over inflated for years by speculation.

The speculators are now leaving the market.

Of course the price will drop and yes potentially a property bubble bursting will send shockwaves throughout the economy.

But we were heading for a recession anyway.

And living on a false economy in the meantime.

We genuinely need to start being more productive in the long term - let's use our technology, innovation and resources to start manufacturing.

Use our creativity to start providing services to the world.

And not send those jobs overseas to make a slightly larger profit margin.

Great Britain is still a great global brand.

Sensible post from a sensible level-headed non-panic person

Fuzzy Zack wrote:Commercial and residential property prices have been over inflated for years by speculation.

The speculators are now leaving the market.

Of course the price will drop and yes potentially a property bubble bursting will send shockwaves throughout the economy.

But we were heading for a recession anyway.

And living on a false economy in the meantime.

We genuinely need to start being more productive in the long term - let's use our technology, innovation and resources to start manufacturing.

Use our creativity to start providing services to the world.

And not send those jobs overseas to make a slightly larger profit margin.

Great Britain is still a great global brand.

I also love this post.

Everyone is too busy wanting BREXIT to fail and finding a fault everywhere.

I hear from top London Stockbrokers (via a reliable source) that there's simply nothing to worry about.

Some like to spread Doom and Gloom, see what it's like after a few months.

eddie wrote:

Fuzzy Zack wrote:Commercial and residential property prices have been over inflated for years by speculation.

The speculators are now leaving the market.

Of course the price will drop and yes potentially a property bubble bursting will send shockwaves throughout the economy.

But we were heading for a recession anyway.

And living on a false economy in the meantime.

We genuinely need to start being more productive in the long term - let's use our technology, innovation and resources to start manufacturing.

Use our creativity to start providing services to the world.

And not send those jobs overseas to make a slightly larger profit margin.

Great Britain is still a great global brand.

Sensible post from a sensible level-headed non-panic person

Thank you.

And yes, if stockbrokers were worried, it would be priced into the market already.

We will eventually adapt and sooner than a lot of people think. And in 10 years time, people will look back and leaving will seem to have been the right thing to do. Just like staying outside the Euro.

Raggamuffin wrote:

Fuzzy Zack wrote:Commercial and residential property prices have been over inflated for years by speculation.

The speculators are now leaving the market.

Of course the price will drop and yes potentially a property bubble bursting will send shockwaves throughout the economy.

But we were heading for a recession anyway.

And living on a false economy in the meantime.

We genuinely need to start being more productive in the long term - let's use our technology, innovation and resources to start manufacturing.

Use our creativity to start providing services to the world.

And not send those jobs overseas to make a slightly larger profit margin.

Great Britain is still a great global brand.

I also love this post.

Fuzzy Zack wrote:

eddie wrote:

Fuzzy Zack wrote:Commercial and residential property prices have been over inflated for years by speculation.

The speculators are now leaving the market.

Of course the price will drop and yes potentially a property bubble bursting will send shockwaves throughout the economy.

But we were heading for a recession anyway.

And living on a false economy in the meantime.

We genuinely need to start being more productive in the long term - let's use our technology, innovation and resources to start manufacturing.

Use our creativity to start providing services to the world.

And not send those jobs overseas to make a slightly larger profit margin.

Great Britain is still a great global brand.

Sensible post from a sensible level-headed non-panic person

Thank you.

And yes, if stockbrokers were worried, it would be priced into the market already.

We will eventually adapt and sooner than a lot of people think. And in 10 years time, people will look back and leaving will seem to have been the right thing to do. Just like staying outside the Euro.

People that panic will only see negatives. And you're right. I'd bet in less than 10 years we will wonder what all the fuss was about and other countries will have followed suit.