UBS Group plans to liquidate a $2 billion real estate fund holding 12 office properties in the United States and Canada in the latest sign that investors are pulling funds out of the troubled commercial real estate market.
The Swiss bank plans to liquidate the properties in its Credit Suisse Real Estate Fund International, a fund it acquired after Credit Suisse collapsed in 2023, UBS said in a statement.
The announcement comes as share redemption requests by investors have exceeded permitted amounts allowed by such property giants as Blackstone Real Estate Income Trust and Starwood Capital, as property values have declined amid persistently high interest rates and recession concerns.
Real estate loans estimated at nearly $2 trillion in the U.S. are coming due within the next two years, a time when some investors have been unable to weather a combination of low demand for corporate office space — from both tenants and investors — and high interest rates.
The Credit Suisse Real Estate Fund International contains 53 properties across the globe, roughly 80% of which are offices, according to a company filing. The fund includes nine office properties in the U.S. and three in Canada, with the remaining assets in the United Kingdom, Europe, Australia, New Zealand and the Asian Pacific Rim.
UBS said the valuation of the fund’s global property portfolio declined 12% between Dec. 31, 2023, and June 30, 2024, based on the bank’s latest appraisals.
The U.S. properties in the fund include:
- Third + Shoal, a 29-story office tower at 607 W. Third St. in Austin, Texas
- 250 S. Wacker Drive, a 16-story office, and the four-story 1333 N. Kingsbury St. in Chicago
- 4555 Airport Way, a four-story office in Denver
- The eight-story 207 Goode Ave. in Glendale, California
- 777 Post Oak Blvd., a mid-rise office building in Houston
- 1320 SW Broadway St. in Portland, Oregon
- 101 Elliott Ave. W in Seattle
- 1099 New York Ave. NW in Washington, D.C.
The Canadian properties in the fund include 121 Bloor St. E and 160 Bloor St. E in Toronto, and The Exchange, an office property at 475 Howe St. and 819-829 W. Pender St. in Vancouver, British Columbia.
The fund had faced investor redemption requests, but UBS said meeting the requests would require selling assets at an "inopportune time" that would affect existing investors. The Swiss bank concluded it was better to start an "orderly liquidation" of the entire fund, according to the statement released Thursday.
"Given the current limited liquidity of the real estate markets, property sales and payments of liquidation proceeds will be made over several years," UBS said in the statement.
Nontraded real estate investment trusts allow retail investors to own shares in a managed portfolio, but place restrictions on taking out money in case there is a rush to the exit door.
Such trusts have clamped down on redemption requests as they have sought to shore up liquidity in the face of a wave of investors looking to exit as property values decline.
Billionaire Barry Sternlicht’s Starwood Capital, based in Miami Beach, Florida, in May limited redemptions from its nontraded $10 billion Starwood Real Estate Income Trust property fund.
The $60 billion Blackstone Real Estate Income Trust, the largest of the nontraded REITs, was the first to limit redemptions in 2022. In February, it lifted the restrictions and saw its shareholder buyback requests decline in the following months.