While “green” may be the “in word” for most developers, for Prudential it is very much out.
The institution’s giant Green Park landholding near Reading has been one of the best barometers of the UK property market over the past 10 years.
We have seen a couple of ups – not least its spectacular 1m sq ft prelet to Cisco in the heady dot.com boom days – but plenty of downs – particularly since the technology party ended.
Now, after seemingly losing the one prelet to emerge in the past five years, to Yell, and stop-start attempts to turn to residential, the Pru has decided to disinvest from one of its best-known, but troubled, assets (p39).
Its timing is crucial. The Pru receives significant rent from Cisco, even though it never occupied all of its space. Yet during the investment boom – when that income would have been valued at its highest – Pru did not decide to sell. So, its decision to offer a 50% stake in the development now must be driven by other pressures – the credit crunch strikes again.
As EG reported on 11 August, the institutions have become increasingly absent from investment sales. Most claimed they were simply being “slightly more cautious” or “biding their time”. That situation has now clearly moved on the institutions now appear to be established as sellers, because of low opportunity for growth, decreasing asset allocation and a slowdown in income from the man on the street.
Valuers are increasingly accepting that they will have to be more pessimistic fund managers, such as Legal & General’s Mark Creedy, are braced for weaker performance (p40) and private investors such as Glenn Maud (p43) are struggling to perform on deals because of rising debt costs.
It may be short-lived, but all investors now seem to realise that the “blip” is more of a “downturn”.
