LONDON -- With commercial real-estate values falling, investors in many open-ended United Kingdom property funds are clamoring to cash out.
Many are finding that it isn't that easy. Fund managers can't meet redemption requests and are enforcing waiting periods because sales have slowed to a crawl. Because the funds hold property, not cash, they can't honor redemption requests until they sell some assets.
For example, U.K. asset manager Morley Fund Management, which is owned by Aviva PLC, UBS AG's Triton property fund and Deutsche Bank AG's RREEF U.K. open-ended core funds, has imposed 12-month waiting periods on investors in recent weeks. Fund managers said the limits aren't new and were always part of the terms of the fund. In the past, managers were willing to relax their deadlines, and now they are rigidly adhering to them.
Meanwhile, returns on U.K. commercial real estate in November hit their lowest level since records have been kept, falling by 3.4%, according to data released Friday by independent research body the Investment Property Databank. This brings the year-to-date return to minus 1.8%. It is the first time the U.K. annual index has recorded a negative return since 1992 and is the worst monthly performance since records started in 1990.
However, the fundamentals of many commercial properties remain healthy. Rents are stable and the vacancy rate isn't rising in most markets.
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