Investors swarm as property funds sell offices and warehouses

There is a difference between what buyers and sellers think is a fair price.

Property funds are getting a lot of requests to cash out, so they will have to sell assets to meet these requests. Large asset managers and private investors with a lot of cash are waiting in the wings, ready to buy up assets that will be put on the market because of this.

Tom Betts, director of structured finance at Topland Group, an investment company set up by property businessmen Sol and Eddie Zakay that has more than £1bn to spend, said, "If the right asset comes along, we might get involved in the next month."

"The pension funds have already started asking questions of companies they know can get things done quickly and don't need to borrow money," said Betts.

A trustee at Airbus's UK pension scheme said that the fund would be looking to sell most of its property portfolio in the near future. But they insisted that the scheme wouldn't sell its hard-to-sell assets for less than they were worth.

The head of real estate at a global investment manager said that he was "looking to buy" because he saw opportunities in the property fund squeeze. Last week, his company bid on a warehouse that was being sold by a real estate fund for a lot less than it was worth earlier in the year.

Over the past year, investors have become more worried about a downturn in the commercial real estate market as interest rates and inflation have gone up. Goldman Sachs says prices could drop 20% between June 2022 and the end of 2024. Other analysts are even more pessimistic.

But many people in the market say that buyers and sellers have different ideas about what a fair price is.

"Half of the market is frozen. Costs for investors are going up, so they have to try to get a higher price. The head of real estate at a large private investment group said, "Sellers can either show you the door or show you their blood."

Many landlords want to wait until interest rates are more stable before putting their properties on the market. But property funds may soon have to sell assets to meet redemption requests, which have been increasing in the past few weeks.

Since the "mini" Budget, gilt yields have gone up, which has forced pension funds with "liability-driven" investment strategies to sell assets, such as property funds, to meet "collateral calls."

Since the fiscal statement, just under £190 million has been taken out of a sample of property funds covered by Calastone. The pace of withdrawals has picked up in the last week.

One private investor in real estate in the UK with a portfolio worth billions of pounds said that property fund managers would come to him with a list of buildings to buy.

"When they know and trust you, the funds will give you a list of all their assets and ask if you want them," he said.