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Brexit tremors hit UK property funds; British Land inks £400M London sale

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021

Capital Markets View – January 2021


Brexit tremors hit UK property funds; British Land inks £400M London sale

Brexit jitters

Twoweeks following the referendum, Britain's open-ended property fund sectorappears to be on ice as a number of local funds have suspended trading sinceJuly 4 after a rush of redemptions requests.

, thefirst to pull theplug, was followed by AvivaPlc, PrudentialPlc's M&GInvestment Management Ltd., Henderson Group Plc's Henderson Global Investors andColumbia Threadneedle.

Apartfrom the trading suspensions, Brexit-related concerns are also growing over thephysical property market. At least £850 million worth of London commercial realestate deals have collapsed or are under review after the referendum, accordingto PropertyEU. Earlier, London's Financial Times the number at more than £650million.

London activities  

*Nonetheless, some investors are undaunted by the post-referendum uncertainty.In a £400 million deal, BritishLand Co. Plc agreed to sell 334-348 Oxford St., home of Debenhams' flagshipstore, in London to a private investor. The seven-story property in the WestEnd shopping district is leased to the retailer until 2039.

* Ina smaller deal, Mori Trust President and CEO Akira Mori, Japan's fourth-richestman, is believed to have agreed terms to a nearly £70 million acquisition ofthe 80-room South Place Hotel in the City of London. The price is lower thanthe £80 million asking price, CoStar U.K. reported.

* Inthe prime retail leasing market, retailers spanning fashion, food, beauty andhomewares have committed to new space as they expand their footprintnationwide, according to Hammerson Plc. The company said in a news release thatit signed seven leases covering more than 32,400 square feet in the 10 daysfollowing the referendum result.

Institutional investors    

*International real estate firm Hines and German investment companyUniversal-Investment boughta seven-story retail and office building on Piazza Cordusio in the historicalcenter of Milan. The deal was carried out for an institutional real estate fundadministered and managed on behalf of German pension scheme group BayerischeVersorgungskammer.

Financialterms of the transaction were undisclosed, but Property Investor Europe citedlocal media to report that the purchase price for the 11,000-square-meterbuilding was €130 million.

*French property manager Foncia is set to be sold for €1.83 billion to aconsortium of Swiss investment manager Partners Group, China Investment Corp.and Canadian fund manager Caisse de dépôt et placement du Québec, Property Investor Europe reported.

Crossing borders

*Thor Equities LLC and Meyer Bergman are selling to an unnamed Middle Easterninvestor a commercial building at 65 Champs Elysees in Paris, for approximately€490 million, Bloomberg News reported,citing a person familiar with the deal. The sale of the asset, which the duo boughtfor about €250 million in 2013, reflects a 64.4% internal rate of return and a3.8x multiple, accordingto PERE.

*Qatari retail group Al Mana bought the international business of U.K.department store chain BHS, providing the embattled group a better prospect in the Middle East, FT reported.BHS has 74 stores outside the U.K., including markets such as Dubai, Mongoliaand Uzbekistan. The deal comes with rights to the company's website.

Olive branches

*Market players wary of London's position as a leading global financial hub inthe aftermath of Brexit might find alternatives in other parts of Europe. Theregional government of Madrid is mulling granting tax breaks to lure banks andinternational companies seeking to relocate from Britain, Reuters reported,citing a spokesman.

*Meanwhile, the French government unveiled a list of measures to entice Londonbankers. Included in the list are an income tax break of up to 50% andproviding a single point of contact for those interested in relocating toFrance, FT reported.

Now featured

: SNL-coveredU.K.-based real estate companies filled many of the bottom spots on the totalreturns list in the second quarter, with Helical Bar providing the lowestquarter-to-date total return of negative 26.1%.

: The suspension of trading inmore than half a dozen U.K. open-ended real estate funds has reignited a debateabout the dangers of funds that are traded on a daily basis while investing inilliquid underlying assets such as commercial real estate.

: The uncertainty clearing over Mitsui Fudosan's plans to list itslogistics REIT in Tokyo and the first REIT to list in the Baltics made newsduring the week.

: S&P Global Market Intelligence presents aweekly rundown of recent significant management and board changes and personnelmoves in the European and Asia-Pacific real estate industries.