At the end of the third quarter, and three months since the M&G Property Portfolio temporarily suspended, good progress has been made raising cash levels on the portfolio.
M&G believes a more normal commercial property market combined with a fund cash holding target of 12.5% - plus additional cash for working capital and likely client redemptions - will provide a suitable environment to lift the suspension.
Asset disposals and cash holding
An elevated cash position is one of several pre-requisites that need to be in place before the Fund can re-open. As at 30 September the cash position was 8.9% on a fund NAV of £4.1bn.
The decision to suspend was driven by the desire to preserve value for investors, by raising cash in an orderly manner during an uncertain time for the UK commercial property market. During the period, 19 assets have been sold, a further 8 have exchanged with 27 currently under offer.
The portfolio consists of prime and good secondary properties – attractive, high quality assets. The majority of planned and completed sales are good secondary assets, and effectively reduce the Fund’s exposure to assets deemed riskier than their prime counterparts.
Overall discounts taken on all sold and agreed for sale properties have been negotiated at reasonable values compared to pre-Brexit levels, supporting the decision to temporarily suspend the fund.
Signs that market conditions continue to improve were evident in the mid-month decision by independent valuer Knight Frank to cease reporting uncertainty around property asset values. In line with this decision, the Fund moved from bi-monthly to monthly valuations on 30 September - a further indication there is confidence in pricing stability today.
The figures below provide information regarding asset sales that have taken place during the period 24 June to 30 September 2016:
M&G Property Portfolio completed Sales 24 June - 30 September