What’s the cost of having to raise money quickly by selling London real estate?
Almost 15% based on the sale of two properties on Oxford Street, the U.K.’s busiest shopping thoroughfare, since Britain voted to leave the European Union.
Bloomberg News reports that Aberdeen Asset Management’s U.K. Property Fund accepted a 15% price cut to sell a building on the street leased in part to pharmacy Boots on Friday, according to a person familiar with the matter.
British Land Co. sold a department store leased to Debenhams after the referendum without taking a discount, said Fergus Keane, a senior director at broker Cushman & Wakefield who wasn’t involved in the sale.
The contrasting outcomes show the discounts that property funds may face as they rush to sell properties to return cash to investors spooked by Brexit. The managers of seven funds overseeing about $23.8bn of property suspended trading after the Brexit vote prompted a slew of investors to ask for their money back.
Offering daily liquidity on funds which hold illiquid assets creates a “vicious circle” when redemptions surge and will lead to discounted asset sales, Jefferies analyst Mike Prew wrote in a July 7 note.
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