Jones Lang LaSalle market commentary
UK market overview
In March, the Jones Lang LaSalle Balanced Fund Index rose for the ﬁrst time in over a year, by a relatively substantial 0.58%, resulting in a -3.88% 12-month return, writes Ashley Marks. This falls to -5.52% when secondary market pricing is included.
Secondary pricing improved, with BlackRock UKPF’s and Threadneedle’s PUTs now only just below NAV. Hermes PUT and Lothbury PUT continue to trade at 2-3% premiums to NAV. Pricing for most other balanced funds remained around bid price (around -2%). The biggest pricing movement was in UBS Triton. Quoted (albeit non transacted) discounts of around 20% earlier this year have moved closer to -2% to -7%, after capital values fell more than 15% over the past two quarters.
Pricing remained largely unchanged, with Henderson Shopping Centre Fund, Standard Life Shopping Centre Fund and Lend Lease Retail Partnership at around 5% to 8% discounts. Increased demand for LLRP has not had a big impact on pricing, as buyers are still unwilling to pay more than other purchasers over the past six months.
Retail warehouse pricing improved slightly, with demand for units in Henderson Retail Warehouse Fund leading to deals improving to a sub-10% discount to NAV (transactions in the month earlier were closer to -12%).
Hercules Unit Trust pricing also improved slightly to between a 10% and 11% discount, as many investors see these funds as similar. Pricing for Standard Life Retail Park Trust remained at a around an 8% discount.
Pricing improved last month, driven largely by L&G IPIF’s movement to around -4.5%, from more than -6% last month. The market has priced-in anticipated improvements in distributions after a big swap was unwound.
SWIP’s AIPUT remains in demand owing to its high-quality assets, but vendors are scarce. Ashtenne is still at around a 50% discount and the market for Falcon and The Industrial Trust remains inactive.
Interest is still limited to Henderson CLOF and WELPUT, with buyers of the latter paying 3-4% discounts. The most aggressive volume vendors are seeking a 2% discount and others NAV or even a premium, if they are to sell in advance of the liquidity window in 2014.
HCLOF’s proposed extension is still in negotiation and, until the situation is clearer, secondary market demand is likely to be muted. Quoted pricing remains at 3-5% discounts. The few buyers of APIA are seeking discounts in excess of 50%.
Unite is still trading at just below NAV (around -1%). A planned equity raising may move quoted pricing above NAV, but concerns about capital growth may limit actual deals at this level from UK market participants. A few L&G Leisure Fund buyers are considering a premium of around 1.5%, but most investors are content to stay in the fund. L&G’s equity raising is rumoured to be progressing well.
US and European buyers are increasingly active, seeking opportunities in all risk proﬁles, performing and non-performing. Transparency and assisting purchasers’ due diligence remain critical to success, but a growing number of fund managers support structured disposals triggered by investors. This continuing trend bodes well for the European secondary market’s future.