UK property funds 27-month high inflow causes headaches (UK)

Increased capital flows into UK pooled property funds are causing many funds "headaches" according to a leading investment expert. Capital flows into UK pooled property funds reached their highest in the third quarter since Q2 2007, according to IPD's Property Fund Vision (PFV).

James Crookes investment partner at international law firm Pinsent Masons said: "The return of investor demand for property to 2007 levels is a real positive for the industry, but it is leaving many funds with a headache. With ongoing concerns about the underlying occupier market, there remains a gross undersupply of what many funds see as acceptable stock in which to invest. It remains to be seen whether investment activity will increase - either because tenants are perceived to have come through the worst or because weight of cash in the funds forces fund managers to widen their investment criteria - and until then, some funds may be forced to close to new money".

The PFV monitors 74 UK unlisted pooled funds, equally split between balanced and specialist funds, holding properties worth £32.4 bln. (approx. €35.7 bln.). Net new investment reached £21 5mln. in Q3, compared with outflows of £20 mln. in the previous quarter according to statistics released at last week's IPD/IPF Property Investment Conference in Brighton.

Mike Riordan Gerald Eve's head of City investment said: "Evidence of this dramatic turn around is the fact that an increasing number of properties bought only 6-9 months ago are now being turned in the market at a significant profit."

Evans Randall is understood to have agreed to sell its Milton Gate office building in the City, EC2, to Spanish insurance company Mutua Madrileña for around £152m - a circa 6.25% yield. Evans Randall, on behalf of joint venture partner Al Salam Bank Bahrain, bought the building in June from UBS Triton Property Fund for £127m – a 7.46% yield.

Source: Brown Lloyd James Financial

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