Aviva prepares to rebuild its property portfolio
The manager of the UK’s largest open-ended property fund, which has been selling properties for more than two years, expects to start buying early next year to take advantage of a turnround in the market.
Philip Nell, manager of the £1.3bn (€1.5bn) Aviva Investors Property Trust, said: “We will continue to sell property in the near term. The likelihood is that we will sell in the third and fourth quarters, and might look at buying again in early 2010.”
He believes the market for UK commercial property has bottomed and links it to the recovery in equities markets since March.
Two years ago, the fund had 145 properties and about £4.2bn in assets. Today, the number of properties has dropped to 85. Over the three years to the end of June, the fund has lost 15% on an annualised basis, according to Aviva Investors.
Nell’s fund is still selling properties strategically to maintain a cash buffer, a necessary element of an open-ended fund that offers daily liquidity to investors.
In the wake of collapsing property prices and investor withdrawals, and the impact of the financial crisis late last year, many property funds in the UK and Europe imposed restrictions on investor withdrawals to avoid selling property at reduced prices.
Total returns from UK commercial property were -37% over the two years to the end of June, according to the Investment Property Databank’s UK monthly index, but property adviser CB Richard Ellis said this month that commercial property values increased by 0.2% in July, and total returns were 0.8%, marking the first positive returns since the market turned negative.
--write to pcraig@efinancialnews.com
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