Aberdeen Asset Management attracted a swarm of investor interest this week as it put the largest assets in its £2.7bn UK Property Fund up for sale.
Discussions are ongoing on around £500m of its assets, indicating a sustained demand for UK real estate following the vote to leave the European Union, prompting a run on redemptions from a series of open-ended real estate retail funds, including Aberdeen’s.
A source close to Aberdeen said: “There is a fundamental mismatch between assets and the daily liquidity of investors being able to leave but, as you see, you can get liquidity a lot quicker than you think for assets like this.”
Blackstone is in talks to buy at least £135m of assets, including seven multilet industrial estates in the North and Midlands and two distribution warehouses – the 432,000 sq ft BT National Distribution Centre at Magna Park in Lutterworth, Leicestershire, valued at close to £50m, and a 331,000 sq ft Morrisons unit in Swan Valley, Northampton, valued at close to £30m.
A deal has also been agreed with Brockton Capital to sell 10 Hammersmith Grove, W6, for around £92m – a yield of close to 5.75%. The 110,000 sq ft building is let to tenants including Fox International and tobacco company Philip Morris.
Aberdeen is also understood to be close to agreeing a deal to sell the fund’s largest asset, 355 Oxford Street, W1, which has been put up for sale for £145m – a 3% yield.
Aberdeen could halt the sales process depending on how many disposals are achieved and considering daily flows in and out of the fund.
Aberdeen reopened its fund for trading on 13 July, having been closed for redemptions for one week. Unit holders can now sell their units in the fund at a 17% discount to net asset value.
This discount reflects a 7% “fair value adjustment” to the value of its property and incorporates advice from its valuer, CBRE, which has indicated that if Aberdeen needs to sell property within a week that it should expect to receive a 25% discount to book value.
The big sell off: how major funds are gaining liquidity
Henderson’s £3.9bn UK Property PAIF
- Closed for redemptions
- 5% “fair value” price adjustment applied to assets
Assets for sale: Coutts HQ, 440 Strand, WC2, £220m, 3.75% yield, being sold through JLL
Ryder Court, St James’s, SW1, £82m, being sold by Colliers International
The Henderson UK Property PAIF, which is managed by TH Real Estate, cut the price of its UK property fund by 5% due to uncertain property valuations on 27 June, the second working day after the vote. The Coutts headquarters at 440 Strand is one of the largest assets to be held by a UK open-ended real estate fund and is being sold by Michael Elliot. Potential buyers were invited to presentations this week.
Standard Life’s £2.7bn UK Real Estate PAIF
- Closed for redemptions
- 5% “fair value” price adjustment applied to property
Asset for sale: 48-54 Charlotte Street, W1, £26m, through JLL
Standard Life was one of the first fund managers to suspend trading, shutting its doors on 4 July after receiving a flood of redemption requests following the result of the EU referendum. At the time it said the suspension would “end as soon as practicable” and be reviewed “at least every 28 days”. It has instructed JLL to sell 48-54 Charlotte Street, W1, for £26m to raise cash for redemptions.
Legal & General’s £2.5bn UK Property Fund
- Open for redemptions
- 15% reduction in value of property and same reduction on redemption price
Asset for sale: Deutsche Bank’s office at Garden House, EC2, £34m, through JLL
Legal & General was able to avoid halting redemptions on its retail funds due to a relatively strong cash position, with more than 20% of the fund’s net asset value in liquid assets. However, it has not been immune to redemptions, applying a 15% adjustment to the fund’s assets. JLL has been instructed to sell Garden House, EC2, for £34m – a net initial yield of 4.75%. L&G said it had a “pipeline of sales initiatives” which will further increase its cash position.
