UK commercial property has long been a popular sector for investors. But how is it responding in the wake of the global Coronavirus crisis? Julian Broom, our Chief Investment Officer, provides an update:

Market volatility over the last few weeks has created increased pressure on all asset classes. The turbulence has also affected the UK commercial property sector, as a result of the funds being unable to provide accurate valuations of their assets.

Fund management groups have stepped in to protect investor interests. This is a very sensible step, given the circumstances. The rationale is due to the fact that commercial property valuers have declared something called ‘material uncertainty’ concerning the value of the properties held in the funds. Material uncertainty is a technical tool used by RICS registered valuers. It can apply where there is considerable uncertainty due to unforeseen financial, macro-economic, legal, political or natural events, such as we are seeing with the current Coronavirus crisis.

Consequently, a number of funds have now suspended dealing on their mainstream UK commercial property funds. The table below identifies which funds are currently affected:

Fund Status
M&G Property portfolio Suspended
Threadneedle UK Property Authorised Trust Suspended
Standard Life UK Real Estate Suspended
BMO UK Property Suspended
Aviva Property Trust Suspended
Legal & General UK Property Suspended
Aberdeen UK Property Suspended
Janus Henderson UK Property Paif Suspended


Do note that the M&G fund had already been suspended in December 2019, citing the retail downturn and Brexit issues.

If you are invested in these funds it will not be possible to access capital or sell stock until the suspensions are removed. Regular reviews are being undertaken as to when the suspensions will be lifted; usually these happen every 28 days but we are expecting a much more frequent check as global events progress.

However, it seems likely that the suspensions will remain until Coronavirus restrictions in the UK start to lift. We are starting to see some sort of timetable come to light with the steps which China has been taking this week, which should hopefully offer something of a framework – all being well.

On the upside, income payments from these funds will be maintained for those with income units. If you hold a fund using accumulation units any cash will be reinvested and this will be reflected in a higher unit price.

To discuss any aspect of your investment portfolio please contact your nearest office. We are here to help; do follow us on LinkedIn to keep up-to-date with the latest information.

Julian Broom
Chief Investment Officer
julian.broom@thefrygroup.co.uk

This entry was posted on Thursday, 26th March 2020 at 12:32 pm and is filed under Financial Planning, Investments, News. You can follow any responses to this entry through the RSS 2.0 feed.

Tags: investment, portfolio planning, uk commercial property