M&G Property Portfolio — Important information on the suspension of dealings

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests of all of its investors by continuing the temporary suspension in dealing in its shares.

The Fund’s current size is £2.1 billion with a cash balance of 10%. We continue to balance the objective of raising the cash level within the Fund with the need to protect the interests of our long term investors.

Since our last update, 82% of rent for Q3 has been collected and five assets have been sold for £38.4 million. A further £234.5 million of asset sales are currently being progressed, of which 59% are in the retail sector. The time taken to dispose of an individual asset typically remains elongated owing to current market conditions, including the practical challenges associated with buyers undertaking due diligence. There is no guarantee that these deals will complete.*

On 9 September, the Fund’s Standing Independent Valuer – Knight Frank – lifted Material Uncertainty Clauses (MUCs) from all sectors. As a result, none of the Fund’s direct property assets are subject to statements of material uncertainty.

M&G continues to waive 30% of the Fund’s annual charge during the temporary suspension in recognition of the inconvenience caused to our clients and customers. In all other respects, the Fund remains actively managed and reported on during the temporary suspension and continues to make income payments.

The ACD and the Depositary reviews the temporary suspension on a 28-day cycle and our next update will be on 3 November or earlier if needed.

Fund activity update

• Cumulative total of asset sales since suspension: £197.6 million
• Assets contractually exchanged or under offer to sell: £239.5 million

*As at the end of September 2020, the cash held by the Fund was 10%. £234.5 million of assets are under offer. There is no guarantee transactions will complete.

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests of all of its investors by continuing the temporary suspension in dealing in its shares.

The Fund’s Standing Independent Valuer – Knight Frank – has now lifted Material Uncertainty Clauses (MUCs) from all sectors with the exception of Retail, Leisure and Hospitality, where it deems there is still insufficient transactional evidence on which to base valuations.

As of 28 August, £1.1 billion (54% of the Fund’s net asset value) of the Fund’s direct property assets are no longer subject to a statement of material uncertainty, rising to £1.4 billion (64.7%) if cash, REITs and indirect holdings are taken into account.

After the MUCs for the remaining sectors are lifted, our focus will remain on an orderly sale of properties so we can pay any investors who wish to sell their holdings once the Funds have reopened. Whilst our continued priority is to restore cash levels, we are also balancing our intention to reopen as soon as possible with our responsibility to protect the interests of our long term customers.

Since our last update, 78% of rent for Q2 has been collected and one asset has been sold for £7.3 million. Deals are still taking much longer to conclude due to heightened levels of due diligence and logistical difficulties on behalf of those transacting. The Fund’s current size is £2.1 billion with a cash balance of 8.2% and £129.9 million of assets are in solicitors hands for sale. There is no guarantee that these deals will complete.*

M&G continues to waive 30% of the Fund’s annual charge during the temporary suspension in recognition of the inconvenience caused to our clients and customers. In all other respects, the Fund remains actively managed and reported on during the temporary suspension and continues to make income payments.

The ACD and the Depositary reviews the temporary suspension on a 28-day cycle and our next update will be on 6 October, or earlier if needed.

Fund activity update

• Cumulative total of asset sales since suspension: £159.2 million
• Assets contractually exchanged or under offer to sell: £129.9 million

*As at the end of August 2020, the cash held by the Fund was 8.2%. £113.5 million of assets are under offer. There is no guarantee transactions will complete.

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests of all of its investors by continuing the temporary suspension in dealing in its shares.

The Fund’s Standing Independent Valuer – Knight Frank – will continue to apply a statement of Material Uncertainty to its valuation of certain assets due to reduced transactional evidence available on which to base valuations. A total of £1.1 billion of the Fund’s direct property assets are no longer subject to a Material Uncertainty Clause, equating to 58.4% of the Fund’s net asset value (NAV) as of 31 July. Including the Fund’s cash, REITs and indirect holdings, £1.4 billion of assets (65.6% of the Fund’s NAV) are no longer subject to a Material Uncertainty Clause as of 31 July.

With several of the Fund’s tenants paying rents on a monthly basis, 77% of the Fund’s billable rent and service charge for June has been collected and income returns will continue to be influenced by the level of rental income received from tenants.

The fund has around £134.3 million of assets in solicitors hands for sale. There is no guarantee transactions will complete.*

Reopening the Fund for dealing will depend on cash levels but will also be contingent on the Material Uncertainty Clause being adequately lifted. The Fund’s current size stands at £2.1 billion.

The Fund continues to be actively managed and reported on during suspension and M&G continues to waive 30% of the Fund’s annual charge in recognition of the inconvenience caused to our clients and customers.

The ACD and the Depositary reviews the temporary suspension on a 28-day cycle and we will provide you with our next update on 8 September, or earlier if needed.

Fund activity update

• Cumulative total of asset sales since suspension: £155.5 million
• Assets contractually exchanged or under offer to sell: £139.3 million

*As at the end of July 2020, the cash held by the Fund was 8.2%. £134.3 million of assets have exchanged or are under offer. There is no guarantee transactions will complete.

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests of all of its investors by continuing the temporary suspension in dealing in its shares.

The Fund’s Standing Independent Valuer – Knight Frank – will continue to apply a statement of Material Uncertainty to its valuation of certain assets due to reduced transactional evidence available on which to base valuations. However, Knight Frank has advised that as of 11 July, that material uncertainty will no longer apply to central London offices and professionally managed, institutional grade student accommodation, which together account for 5.4% of the Fund. A total of 28.4% of the Fund’s property assets are no longer subject to this clause after the Material Uncertainty Clause for UK industrial and logistics properties was lifted in June.

With several of the Fund’s tenants now paying rents on a monthly basis, 71% of the Fund’s billable rent and service charge for June has been collected and income returns will continue to be influenced by the level of rental income received from tenants.

In a market which continues to see relatively low levels of transactions, no assets have exchanged this month. The Fund still has circa £180 million of assets under offer for sale or in solicitors’ hands - there is no guarantee these sales will come to fruition*.

Reopening the Fund for dealing will depend on cash levels but will also be contingent on the Material Uncertainty Clause being adequately lifted. The Fund’s current size stands at £2.2 billion.

The Fund continues to be actively managed and reported on during suspension and M&G continues to waive 30% of the Fund’s annual charge in recognition of the inconvenience caused to our clients and customers.

The ACD and the Depositary reviews the temporary suspension on a 28-day cycle and we will provide you with our next update on 11 August, or earlier if needed.

Fund activity update

• Cumulative total of asset sales since suspension: £148.2 million
• Assets contractually exchanged or under offer to sell: £180.8 million

*As at the end of June 2020, the cash held by the Fund was 8.4%. £180.8 million of assets have exchanged or are under offer. There is no guarantee transactions will complete.

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests of all of its investors by continuing the temporary suspension in dealing in its shares.

The Fund’s Standing Independent Valuer – Knight Frank – will continue to apply a statement of Material Uncertainty to its valuation due to reduced transactional evidence available on which to base valuations. However, they have announced the Material Uncertainty Clause for UK industrial and logistics assets will be lifted as of 12 June – accounting for circa 23% of the Fund’s assets.

Regular dialogue continues with occupiers to maintain the important focus on receipt of rental income. Nine weeks after the Q1 March rent collection, the Fund has received circa 76% of rent, which compares to more than 90% received at the equivalent point in 2019.

The Fund has approximately £180.8 million under offer for sale and assuming all assets which have exchanged or are under offer were to complete, it would take the cash position to 16.1%*. Reopening the Fund for dealing will depend on cash levels but will also be contingent on the Material Uncertainty Clause being lifted.

The Fund continues to be actively managed during suspension, including income payments and fund reporting and M&G also continues to waive 30% of the Fund’s annual charge in recognition of the inconvenience caused to our clients and customers.

The ACD and the Depositary reviews the temporary suspension on a 28-day cycle and we will provide you with our next update on 14 July, or earlier if needed.

Separately, Fiona Rowley has decided to leave the business after more than 27 years and Justin Upton will assume full responsibility for the management of the Fund after a handover period. Further details of this announcement are below.

Fund activity update

• Cumulative total of completions since suspension: £148.2 million
• Exchanged/under offer to sell: £180.8 million

*As at the end of May 2020, the cash held by the Fund was 7.9%. £180.8 million of assets have exchanged or are under offer, which would take the total cash holding to 16.1%, assuming all deals complete. There is no guarantee transactions will complete.

After 27 years at M&G Real Estate, Fiona Rowley has decided to step down as co-manager of the M&G Property Portfolio (the Fund) and leave M&G.

In line with the Fund’s succession plan – co manager Justin Upton, who has worked closely with Fiona for the last 8 years, will assume full fund management responsibility when Fiona leaves M&G following a comprehensive handover. James Mieville remains as the Fund’s Investment Specialist to provide Justin with continued support. Trading in the M&G Property Portfolio and its feeder fund has been suspended since December 2019 and will reopen once cash levels have been sufficiently restored and the Material Uncertainty Clause has been lifted.

Fiona Rowley comments: “I’ve had a fantastic career at M&G, which wouldn’t have been possible without the encouragement and continued support from senior management in my progression ultimately to become a fund manager. Having had such a close working relationship with Justin and the support of a highly experienced team behind the scenes, has made my decision so much easier and gives me and the business comfort that I leave the Fund in the very best of hands.”

Justin Upton adds: “In a changing economic environment with record low interest rates, a steady income stream is now more important than ever.

“My key focus will be to maintain a healthy income distribution for our clients and customers, whilst managing higher levels of liquidity against the current uncertain backdrop of COVID-19. I will also seek to ensure the fund is well positioned to take advantage of the demographic and technological changes we are witnessing in society and the economy.

Martin Towns, Head of UK Commercial at M&G Real Estate, says: “Fiona’s formidable leadership on the Fund has produced consistent income returns and long term capital growth for our investors over an extended period. Her close working relationship with Justin and the combination of his own longstanding experience and deep knowledge of the commercial property market, enables us to carry out a smooth succession whilst retaining our focus on doing our very best for customers at this challenging time. Justin’s knowledge of the assets and investor base put him in the best possible position to take the Fund forward.

“I would like to thank Fiona for her significant contribution to the business and wish her all the best for the future.”

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests of all its investors by continuing the temporary suspension in dealing in its shares.

The Fund’s Standing Independent Valuer – Knight Frank – also continues to apply a statement of Material Uncertainty to their valuation because of the reduced transactional evidence available on which to base valuations.

Given the effective lockdown of the UK in mid-March, transactions in commercial real estate have largely stalled, as a result of investors inability to travel, inspect properties and undertake physical due diligence. The Fund has approximately £197.4 million under offer for sale, albeit with reduced certainty of completion whilst social distancing measures continue.

Assuming all assets which have exchanged or are under offer were to complete, the cash position would rise to 17.7%*. Reopening the Fund for dealing will depend on cash levels but will also be contingent on the material uncertainty clause being lifted.

Tony Brown, Global Head of M&G Real Estate, says: “Although there is a significant amount of capital waiting to enter the market, for practical reasons we are seeing a considerable slowdown in capital markets activity and it is likely to be some time before investment volumes recover to more normalised levels. In the interim the fund management team remains focused on actively managing the portfolio through this challenging period.”

The Fund continues to be actively managed during suspension, including income payments and fund reporting. Given the Fund’s lower rent collection for the March quarter compared to previous quarters, we expect a corresponding reduction in the level of income distributions. M&G also continues to waive 30% of the Fund’s annual charge in recognition of the inconvenience caused to our clients and customers.

The ACD and the Depositary will continue to review the temporary suspension on a 28-day cycle and we will provide you with our next update on 16 June, or earlier if needed.

Fund activity update

• Cumulative total of completions since suspension: £113.6 million
• Exchanged/under offer to sell: £232.15 million

We are grateful for your continued patience and hope everyone is staying safe and healthy.

*As at the end of April 2020, the cash held by the Fund was 7.3%. £232.15 million of assets have exchanged or are under offer, which would take the total cash holding to 17.7%, assuming all deals complete. There is no guarantee transactions will complete.

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests of all its investors by continuing the temporary suspension in dealing in its shares.

Additionally, the Fund’s Standing Independent Valuer – Knight Frank – continues to apply the statement of material uncertainty based on the reduced transactional evidence available on which to base valuations. In the meantime a higher degree of caution should be attached to all UK property assets than usual.

While the majority of assets identified for sale by the fund managers are on hold due to COVID-19, a £38.8 million retail warehouse sale completed earlier this month alongside a £4.7 million ground rent sale. A further £40.8 million of assets have also exchanged. A total of £197.4 million is now under offer for sale and cash levels at the end of March 2020 were 7.33%. Assuming all assets under offer exchange and complete, the cash position will rise to 17.7%*, but reopening the Fund for dealing will also be contingent on the material uncertainty clause being lifted.

M&G Real Estate’s asset managers are in regular dialogue with occupiers to maintain the important focus on receipt of rental income. To that end, 66% of the Fund’s usual quarterly rent roll has been paid, which was due at the end of March and we continue to collect rent from other occupiers – the outstanding amount is still being processed. A further 24% of rent due has either been deferred or tenants will move to monthly instead of quarterly payments.

Tony Brown, Global Head of M&G Real Estate, comments: “We take our responsibilities as a major commercial property owner very seriously. We are supporting tenants to find solutions that help protect businesses in distress, whilst also protecting the interests of the many savers and pensioners whose money is invested in our buildings. We are doing all we can to preserve value during this period of market stress and are working with occupiers to balance business continuity with our objective to deliver returns at this very difficult time for all.”

The Fund continues to be actively managed during suspension, with income payments and fund reporting as normal. M&G also continues to waive 30% of the Fund’s annual charge in recognition of the inconvenience caused to our clients and customers.

The ACD and the Depositary will continue to review the temporary suspension on a 28-day cycle and we will provide you with our next update on 19 May, or earlier if needed.

Fund activity update

• Sales since the last update: £43.4 million
• Cumulative total of completions since suspension: £113.6 million
• Exchanged/under offer: £238.2 million

We thank you for your continued patience and hope everyone is staying as healthy and safe as is possible at this difficult time.

*As at the end of March 2020, the cash held by the Fund was 7.3%. £238.2 million of assets have exchanged or are under offer, which will take the total cash holding to 17.7%, assuming all deals complete. There is no guarantee all deals will complete.

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests of all its investors by continuing the temporary suspension in dealing in its shares.

In addition, the Fund’s March month-end valuation, carried out by the Fund’s Standing Independent Valuer – Knight Frank – will include a statement of material uncertainty. This move has been taken by Knight Frank due to the spread and impact of COVID-19 on the commercial property market. In the absence of enough transactions on which to base accurate valuations, a higher degree of caution should be attached to all UK property assets than usual.

Unsurprisingly, potential buyers, particularly in the Retail and Leisure sectors, are pausing to reflect on the impact of COVID-19, but the fund managers remain encouraged by the continued purchaser interest - despite delays to contractual agreements.

Since our last update on 25 February, a £4.9 million asset has been sold with a further £39.8 million exchanged, bringing the total of assets which have exchanged or are under offer to £296.8 million.

Cash levels as of the end of February 2020 were 4.65% and assuming all assets under offer and exchanged complete, this will increase to 17.8%*. Please note, however, that despite an increasing cash position, re-opening the fund for dealing will also be contingent on the valuer removing the material uncertainty clause.

Tony Brown, Global Head of M&G Real Estate, says: “As anyone who has bought or sold a property will know, a key aspect to an asset sale is an inspection. In the current climate, however, buyers are either curbing travel plans or are not granted access by tenants, so this part of the process is taking much longer than usual. Our immediate focus is to exchange and complete on all assets that are already well progressed.”

Looking ahead, as the fund managers rebuild liquidity they will target a higher cash level than the previous range. As part of this process, we want to ensure the cash position stabilises at this increased level, having met client redemptions once the fund reopens for dealing. We will share more information with you on this in due course.

The Fund continues to be actively managed during suspension, with income payments and fund reporting as normal. M&G also continues to waive 30% of the Fund’s annual charge in recognition of the inconvenience caused to our clients and customers.

Fund activity update

• Exchanged since the last update: £39.8 million
• Cumulative total of completions since suspension: £74.8 million
• Exchanged/under offer: £296.8 million

We thank you for your continued patience and hope everyone is staying as healthy and safe as is possible at this difficult time.

*As at the end of February 2020, the cash held by the Fund was 4.65%. £296.8 million of assets are now in solicitors hands, or under offer, which will take the total cash holding to 17.8%, assuming all deals complete. There is no guarantee all deals will complete.

On 17 March, the M&G Property Portfolio’s Standing Independent Valuer - Knight Frank - advised that effective immediately, all UK independent property valuers agree there is material uncertainty on commercial property valuations. Unsurprisingly, market activity is being significantly impacted by Novel Coronavirus (COVID-19).

What does this mean? With buyers unable to inspect properties and subsequently not enough transactions on which to base accurate valuations, all valuers are faced with the same set of unprecedented circumstances. Consequently, less certainty – and a higher degree of caution – should be attached to all UK physical properties than usual.

The temporary suspension for M&G Property Portfolio and its feeder fund, which took effect on 4 December 2019 remains in place and the Authorised Corporate Director (ACD) and the Fund’s Depositary, have been informed of this material uncertainty. The Fund will continue to be valued at month end, or more regularly if required.

The ACD and the Depositary will continue to review the temporary suspension on a 28-day cycle – or earlier if needed – and we will provide you with our next update on 24 March.

M&G Property Portfolio makes good progress in raising cash

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided, with the agreement of the Fund’s Depositary, it can best protect the interests its investors by continuing the temporary suspension in dealing in its shares.

The fund managers of the M&G Property Portfolio are making good progress in raising cash to rebuild liquidity to meet redemptions when it re-opens.

Dealing in the Fund’s shares was temporarily halted in December to give the fund managers the opportunity to raise cash without being forced to sell assets at below market values or compromising the structure of the portfolio. Notably - for both assets sold and on course to exchange - Retail represents 80% of the total, which will reduce the Fund’s exposure to the sector from 38% to 32%.

As at the end of January 2020, the cash held by the Fund was 4.8%. £245 million of assets are now in solicitors hands, or under offer, which will take the total cash holding to 16%, assuming all deals complete*.

Tony Brown, Global Head of M&G Real Estate, says: “We are making good headway in a more liquid market than last year and every effort is being made to ensure we can reopen as soon as possible – we appreciate your patience in this matter.”

The Fund continues to be actively managed during suspension, with income payments and fund reporting as normal. M&G also continues to waive 30% of the Fund’s annual charge in recognition of the inconvenience caused to our clients and customers.

Fund activity update

• The Fund’s retail vacancy rate (as of end January 2020) is below the MSCI IPD Quarterly Universe Index at 3.4% versus 4.8%.
• Completions since the last update: £19 million
• Cumulative total of completions since suspension: £70.1 million
• Under offer/in solicitor’s hands: £245.1 million

*As at the end of January 2020, the cash held by the Fund was 4.8%. £245 million of assets are now in solicitors hands, or under offer, which will take the total cash holding to 16%, assuming all deals complete. There is no guarantee these deals will complete.

The Authorised Corporate Director of the M&G Property Portfolio (“the Fund”) has decided it can best protect the interests of investors in the Fund by maintaining the temporary suspension in dealing in its shares.

Continued suspension will allow the Fund’s managers to carry on raising cash to meet client redemptions in an orderly fashion, while preserving value for the Fund’s shareholders in the long term.

Dealing in the units of the M&G Property Portfolio was temporarily suspended on 4 December 2019, due to high levels of withdrawals by investors related to ongoing uncertainty over Brexit during 2019 and structural shifts in the UK retail sector. Since then, the Fund’s managers have made good progress in raising cash by making selective disposals at market prices, while maintaining a balanced portfolio which allows them to continue to deliver the Fund’s objective of providing income and growth.

Since the Fund’s suspension, we have exchanged or completed on the sale of £70.4 million of assets and a further £172.2 million are either under offer or in solicitors’ hands. As at the end of December 2019, the cash held by the Fund was 4.8%.

Jack Daniels, Chief Investment Officer of M&G plc, says: “Since suspending the Fund, we’ve been encouraged by the support of many investors in the Fund, who understand our decision to give the managers room and time to complete disposals from the portfolio at fair prices. While customers want ready access to their investments, it’s also important that their long-term interests are protected.”

“Historically, we have held a low cash buffer in the conviction that our customers pay us to invest their money, not to keep it idle - particularly in times of near-zero cash interest rates. We believe that as an asset class, commercial property continues to have an important role to play in helping customers diversify their investment portfolios.”

The Fund continues to be actively managed during suspension of dealing, with income payments and fund reporting as normal. M&G will continue to waive 30% of the annual charge for the Fund in recognition of the inconvenience caused to investors.

Fund activity update

• The Fund’s retail vacancy rate (as of end December 2019) is below the MSCI IPD Quarterly Universe Index at 3.4% versus 5.14%.
• Completions since the end of December: no change
• Contracts exchanged since the end of December: no change
• Under offer/in solicitors’ hands: £172.2 million

M&G is to continue the temporary suspension of dealing in the M&G Property Portfolio and its feeder fund until further notice. The decision has been taken by the Fund’s Authorised Corporate Director (ACD) in the interests of protecting the Fund’s investors with the agreement of the Fund’s Depositary. The Financial Conduct Authority has also been informed.

The immediate priority is to raise cash levels in a controlled manner. The fund managers and associated teams are working hard to increase the Fund’s cash position and since the end of November, they have exchanged or completed on £70.4 million of assets and a further £67.2 million is either under offer or in solicitors’ hands. Once cash levels have been sufficiently restored, the Fund’s ACD will re-open the Fund for dealing.

Naturally, the Fund is still being actively managed and M&G is regularly communicating with clients, customers and other stakeholders. Whilst under continuous review by M&G and the Depositary, the ACD will formally report on the status of the suspension on a monthly basis and clients and customers will be notified in advance of reopening the Fund.

The Fund’s assets under management as at 30 November 2019 is £2.5 billion, with a cash position of 4.8%.

Fund activity update

• The fund’s retail vacancy rate is below the MSCI IPD Quarterly Universe Index at 3.8% versus 5.1% as of 30 November.
• Completions since the end of November: Ravenside Retail Park in Edmonton for £51.4 million.
• Exchanges since the end of November: 20 Kingston Road, Staines for £19 million.