Landmark buildings such as the head office of Coutts, the bank used by the Queen, are being prepared for sale as property funds look for ways to raise billions of pounds to meet the demands of investors who want their money back after the UK voted to leave to the EU.
Estimates that up to £5bn of warehouses, office blocks and shopping centres could be put on the market were made last week and Richard Sharp, a Bank of England policymaker, told MPs on the Treasury select committee that funds were starting to consider selling properties.
Seven UK commercial property funds have taken steps to either suspend dealing or cut valuations in response to the 23 June referendum, which has sparked fears that commercial property will be a less attractive investment. The Financial Conduct Authority, the City regulator, last week warned funds not to race into fire sales to ensure that some investors were not financially penalised by the offloading of property.
Henderson Global Investors would not comment on reports that TH Real Estate, which manages its property fund, was preparing to sell 440 The Strand, in London, the distinctive office of Coutts, the private banking arm of Royal Bank of Scotland. Henderson is among the funds to have suspended dealings and the Coutts office was bought in 2014 for £175m, according to reports.
Aberdeen Asset Management, which aims to resume dealings in its property fund on Wednesday after cutting its value by 17%, said it was looking at the sale of a number of properties.
Gerry Ferguson, head of Aberdeen’s UK property pooled funds, said: “Following a period of higher than normal redemptions from the fund after the EU referendum result and the suspension of other funds’ trading, the fund is now seeking to rebuild its liquidity position. A limited number of properties are being marketed and we will seek the highest prices achievable for our investors as is our normal practice.”
No details were given but a BT office in Leicestershire was among the properties Aberdeen was said to be considering selling along with an office development in Hammersmith.
However, some big commercial property deals have been announced since the referendum result. Last week British Land announced it had sold the Oxford Street branch of Debenhams for £400m to an unnamed private investor. It did not given details of any profit made from the sale of the seven-storey flagship department-store building.
The Bank of England has been on alert for problems in the commercial property sector and has already outlined possible risks from the kind of funds that are being suspended. These so-called open ended funds allow instant access to funds but are based on assets – property – that are difficult to sell.
The Bank’s half-yearly assessment of risks to the financial system, published last week, showed that there had been sharp slowdown in activity in commercial property between January and June when prices were flat. Foreign investors, who have fuelled the market since the financial crisis when it was dominated by UK banks, had cut their investments in the first quarter of 2016.
The FCA had told the Bank of England about the possibility of suspension of funds following the referendum and its new chief executive, Andrew Bailey, said last week the structure of these funds might need to be changed.
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