Indirect investment market: Jones Lang LaSalle market commentary

UK market overview

The Jones Lang LaSalle Balanced Fund Index fell again in June, by 0.52% – its greatest fall since July 2009, writes Ashley Marks.

The index is marginally in positive territory for the previous 12 months, at  just 0.06%. This falls to -1.27% including secondary market pricing, not a large fall because of the relatively favourable premiums to net asset value (NAV) of around 1-1.5% seen in mid 2011.

Secondary market pricing remained fairly stable in June. The industrial sector fell the most, by -0.65%, then retail warehouses, by 0.33%. Office fund pricing rose for only the second time this year, by a moderate 0.25%.

Balanced funds

Average balanced fund pricing has hovered around NAV since the start of the year. Lothbury PUT and Hermes PUT pricing remains at 2%-plus above NAV, while most other funds trade at between NAV and bid price. RREEF UK Core is the clear exception, with vendors accepting around 10-20% discounts to NAV and buyers discounts of around 20-25%, due to concerns about the fund’s management and portfolio quality.

Retail funds

Shopping centre fund pricing remained mostly flat in June. Standard Life’s shopping centre fund fell 50bps to 4% below NAV and Lend Lease Retail Partnership to around 7% below NAV. The Mall held at around -30%.

Pricing of Henderson Shopping Centre Fund rose 100bps to around -6.5% following the extension of the fund’s life (see news). Buyers still want relatively deep discounts  to NAV, following the significant volume traded in February at 8% below NAV, but vendors are unwilling to sell at these levels.

Retail warehouse pricing fell further, with June pricing down -0.33% on average. The Henderson Retail Warehouse fund fell 75bps to around -9.25%; Hercules Unit Trust by 25bps to around -10.75%; and Standard Life Retail Park Trust remained at around -5.5%.

Industrial and office funds

Pricing was stable in June, apart from for Ashtenne, in which vendors are now trading at closer to a 30% discount to NAV, while buyers seek around 35% discounts.

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Demand for AIPUT remains healthy, with buyers willing to transact at around 4-5% discounts to NAV. But vendors are generally happy to hold units in the fund and require pricing closer to NAV to tempt them to sell.

The Industrial Trust pricing remains at 20%-plus discounts to NAV, while IPIF has risen 25bps to around -6.75% to NAV.

Office sector pricing improved in June, with WelPUT pricing rising from -8% to around -7% to NAV. Henderson’s Central London Office Fund fell from a discount of -3.0% to -3.5%. Appetite for regional office vehicles remains absent from the secondary market.

Other funds

L&G’s decision to raise equity for its Leisure fund pushed up secondary market pricing for the vehicle from a small discount to a small premium to NAV.

Unite is attracting interest, with buyers moving close to NAV, at discounts of around 2%. Last month the fund was repaid £12.5m of the £30m it had on deposit with now wound-up Icelandic bank Landsbanki,  but with the date for further repayments unknown, buyers and sellers are unable to price in the impact on future trading.

Units in Quercus continue to be available at NAV -10%, but there is little buyer interest.

 

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