Following the post-EU-referendum panic, the commercial property market seems to be stabilising. Legal & General (L&G) last Friday announced a reduction of the fair value adjustment to its property fund from -15% to -10%.
In other words, sellers will take a less drastic hit than before. Laith Khalaf at Hargreaves Lansdown notes that L&G's reduction in the fair value adjustment of its fund "isn't an indication of a reversal of flows into the property fund sector", but rather a "moderation of the mark down" made to the underlying portfolio in the aftermath of the vote. Even so, the fund price rose by 7% on the news.
Aberdeen Asset Management, meanwhile, reopened its property funds for trading after imposing a temporary suspension two weeks ago. Investors who sell out of its commercial property fund (and associated feeder trust) will now get back 26% less than they would have before trading was suspended.
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That sounds drastic, but Jason Hollands of stockbroker Tilney Bestinvest emphasises that today's situation isn't as dire as the crash in 2008, when "people thought the financial system was going to collapse".
One of the most notorious victims of that crash was the New Star International Property fund, which lost more than 40% of its value in less than 12 months and was suspended for 14 months. "This is a completely different set of circumstances," Hollands told Citywire.
He expects the remaining suspended funds to reopen within three to five months. As we noted last week, if you're stuck, sit tight. And to avoid liquidity problems in future, only invest in commercial property using investment trusts.
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