Indirect investment market: Jones Lang LaSalle market commentary

UK market overview

Average secondary market pricing across all UK sectors continued to improve in February, moving closer towards net asset value by a further 0.21%, to an average 0.76% discount to NAV, writes Ashley Marks. The improved pricing was driven by both the balanced and office sectors, which remained constrained due to demand outstripping supply.

Balanced funds

Average pricing across the balanced funds moved upward from a 2.50% premium to NAV in January to a 2.79% premium in February. Investors continue to increase their pricing offers to tempt sellers, who remain reluctant due to lack of re-investment opportunities. While primary queues remain, large sellers are likely to seek pricing above offer price to make deals look attractive.

Retail funds

During February, pricing remained largely unchanged for both the shopping centre and retail warehouse sectors. Demand is still strong for the Standard Life Shopping Centre fund and Lend Lease Retail Partnership, but buyers are reluctant to go into premium territory to attract sellers. Furthermore, both these funds will be approaching investors shortly to discuss extension options, which is likely to cause secondary market trading to stagnate.

Industrial funds

Industrial pricing remained flat in February,  not due to lack of interest, but lack of supply. Sellers remain nearly non-existent. Rockspring’s The Industrial Trust is  marketing its remaining assets, as it is winding down, which once sold will further reduce industrial sector investors’ options.

Office funds

Trading in CLOF and WELPUT remained thin due to investors weighing up restructuring proposals for both funds. This, coupled with the approaching liquidity windows, gives investors much to consider. During February, pricing for CLOF improved from a 3.5% discount to a 2.0% discount to NAV. But a gap remains between potential buyers and potential sellers, with the latter seeking to trade at NAV or better.

Continental Europe

JLLCF has completed the sale of Project Carnaby, a portfolio of nine European funds with a net asset value of more than €90m. The sale has confirmed that investors are seeking opportunities to deploy capital, either in individual deals or within a portfolio.