Largest UK authorised property fund buys first building for two years

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Wednesday, 23 December 2009 15:08

Aviva Investors Property Trust, the UK’s largest authorised property fund has bought its first property for more than two years, and is hopeful of buying more.

The £1.56 billion fund has paid £20 million for a retail and office building in Chester, yielding 6.4%.
Manager Philip Nell said the fund has its first net inflows since June 2007 in August and he expects this to continue in the last quarter of this year, increasing its size by 12.5%. It has made an offer for another building at £100 million and is looking at properties worth a further £250 million.

Aviva is generally looking outside London where more reasonably prices properties can currently be found. Its strategy also involves buying privately. Nell said this avoids competing bids whilst looking outside London means it can find markets where rival overseas buyers are a bit thinner on the ground.

The fund holds 68 properties, half the number it held in the middle of 2007 and about 40% of fund assets are in properties in London and the South East. It has not been forced to sell any that it would rather have held.
Nell said that enough quality properties remain to absorb more inflows but he will not buy if it compromises performance for present investors. Some commercial investors felt early this year that selling by troubled banks would cause a glut depressing prices, but now there is a feeling they are not selling enough.

‘Senior lenders are being very measured and considered in their response to their loan books. They are not just selling the worst assets, they are putting properties on the market that are creating opportunities,’ Nell explained.

While Nell's fund did not suspend redemptions in the credit crunch, many did. Henderson's New Star International Property fund is on the verge of reopening, and last week Aviva reopened its European Property Sicav.