Plunging UK commercial property values have sent investors
scrambling for property fund exit doors. However, many are finding
the doors shut, including those of insurer Axa UK’s Retail Life and
Pensions Property funds, which have total assets of £2.1 billion
($4.1 billion) and about 100,000 investors.
Axa’s funds, which had seen cash reserves fall to 5 percent of
fund values, are now subject to a six-month waiting period from the
date a request is received for an investment redemption or
transfer. Commenting, Axa UK’s investment MD, Ian Colquhoun, said:
“The commercial property slowdown has resulted in a fall in the
liquidity of property funds across the marketplace. The sale of a
property takes on average five months or more to complete.”
Axa joins other UK life insurers that have imposed deferrals on
redemptions. On 20 December 2007, Friends Provident set the ball
rolling by imposing a six-month deferral on redemptions from its
£1.2 billion property fund. Scottish Equitable, a UK unit of
Netherlands insurer AEGON, followed on 18 January 2008 by imposing
a deferral period of up to 12 months on the 130,000 investors in
its £2 billion fund. Three days later, Scottish Widows announced a
180-day deferral of redemptions from its two funds which have total
assets of £2.1 billion and 200,000 investors.
In all instances in which insurers have introduced deferral of
redemptions of investments in their property funds payments
relating to regular income already being paid, retirements and
death claims are not affected.
Indicative of the reversal of the fortunes of commercial property,
the UK’s largest listed property company, British Land, announced
in February that in the fourth quarter of 2007 it had marked down
the value of its property assets by 8.9 percent. Since values
peaked in June 2007, the mark-down of British Land’s property
values has totalled 10.3 percent.
“Significant uncertainties remain,” commented British Land’s chief
executive officer, Stephen Hester.