Everything Must Go: The Great £3.5B Fund Sell-Off
In a real estate downturn, distressed sales from lenders grab a lot of the limelight. But open-ended funds have been ahead of banks in becoming motivated sellers and putting assets on the market.
Funds with assets totalling £3.5B, either entirely invested in the UK or with significant UK portfolios, have publicly announced over the past 12 months that they are liquidating their portfolios. Several more are not liquidating entirely but selling assets piecemeal to raise cash.
In most cases, investors in the funds, both individuals and institutions, have been pulling their money, leaving managers to decide that the best way to repay fund unit holders is to sell off portfolios.
Bisnow looked at four of the biggest funds that have hoisted the for-sale sign over their assets and what’s on the block.
Credit Suisse Real Estate Fund International
UBS, which bought fellow Swiss bank Credit Suisse last year, said last week that it was liquidating the $2B (£1.5B) Credit Suisse Real Estate Fund International to repay investor redemptions. The fund’s portfolio is 82% offices, with 21% of the portfolio in the U.S. and 12% in the UK.
The UK portfolio totals eight offices, CoStar reported. The largest is the Monument Building in the City of London, a 94K SF building where tenants include Booking.com and UnderwriteMe Technology Solutions. The Credit Suisse fund bought the building from Skanska for £118M.
Other assets include Earl Place, a 94K SF office on Appold Street in the City, which was last valued at £62M, CoStar reported.
Lothbury Property Trust
The £849M Lothbury Property Trust said in June that it would liquidate its assets to repay investors.
The trust received £170M of redemption requests in the first quarter of 2023, then £500M more in the second quarter. Lothbury embarked on an effort to repay those redemptions and reopen the fund, selling its largest assets, including the £146M Tera 40 industrial estate near London.
Some fund investors proposed that it should merge with another fund, putting forward a combination with UBS’ open-ended Triton fund. But the deal did not meet the 75% shareholder vote threshold needed to make it happen.
Its largest asset is The Clarendon, a 227K SF shopping centre in Oxford, where Lothbury has been given planning permission for a redevelopment that includes lab space, offices, student accommodation, shops and restaurants. Lothbury puts a value of £50M on the scheme.
Despite selling Tera 40, a slew of the Lothbury fund’s largest assets are in the industrial sector. Meteor Park in Birmingham totals more than 250K SF across four buildings and is valued at £37M-plus.
Primary Park in Aylesford, Kent, also an industrial asset, totals 231K SF. Lothbury has owned it for 20 years. Tenants include Tesco, Kent Police Authority and Chubb Fire. It is valued at more than £36M.
Balanced Commercial Property Trust
Balanced Commercial Property Trust has a portfolio value of £928M. Managed by Columbia Threadneedle, it is undertaking a strategic review that could result in it selling its assets piecemeal or as a portfolio. It has received offers from investors for the whole company and will announce the results of the review this quarter.
The listed company launched the review because its shares are trading at about a 25% discount to its net asset value.
Asif Aziz’s Criterion Capital was keen to buy the company’s largest asset, the St Christopher’s Place retail and mixed-use estate just off Oxford Street, for about £200M.
Other large assets owned by the trust include Sears Retail Park in Solihull and Newbury Retail Park in Berkshire, both of which are valued at between £50M and £70M.
Thirty-five percent of the company’s assets are in the retail sector, and 20% are in offices. The trust aims to reduce that latter figure, and it has sold three offices, two in London and one in Manchester, for £61M since the end of the first half.
M&G Property Portfolio
As recently as 2019, the M&G Property Portfolio had assets valued at £2B. But that dropped to £565M when M&G announced the fund would liquidate its assets last October.
Since then, it has sold another £210M of assets, including its largest, the Parc Trostre retail park in Wales. That sold for almost £100M less than the fund paid in 2014. It is in talks to sell the Fremlin Walk shopping centre in Maidstone, Kent, to Mike Ashley’s Frasers for £25M, £85M less than it paid for the centre in 2014.
Its largest remaining asset is the Portland and Riding Estate on the corner of Great Portland Street and Riding House Street in the West End of London. In an interim report, M&G put the value between £30M and £50M. The fund bought the building for £50M in 2018 from Great Portland Estates, a 3.9% yield.
The property includes offices totalling 18K SF let in their entirety to a not-for-profit organisation until May 2027 at a rent of £1.2M a year, seven retail units totalling 11K SF let at combined rents of £500K a year, and six vacant residential apartments and two flats let on assured shorthold tenancies.
The second-largest office in the portfolio is 3 Temple Quay in Bristol, valued at around £30M. The building was refurbished in 2016. Tenants include insurance broker Brunel Professional.
