The UK's largest wealth manager St. James's Place is to close all three of its property funds, effectively hoisting a for-sale sign over £1.84 billion of commercial property.
Announcing the proposed wind-down, the group blamed the downturn property markets have seen since the COVID-19 pandemic began, which it termed “a challenging period for the sector as a whole”, as well as the expected regulatory changes to open-ended property funds being explored by the Financial Conduct Authority and the Bank of England.
The company said in a statement it will wind down its Property Unit Trust, Pension and Life funds, which collectively have £1.84 billion of assets. The split is between the Property Unit Trust, which holds £789.4 million of real estate assets, the Property Pension Fund, with £622.8 million, and the Property Life Fund, with £428.4 million.
The assets in the Property Unit Trust as of 31 October comprise: J31 Park, Motherwell Way, West Thurrock; Altrincham Retail Park, Altrincham; City Business Park, Bristol; Kingsway Retail Park, Derby; Nimbus Park, Dunstable; J4 Industrial Estate, Camberley; The Brinell Building, Brighton; St Andrews House, Cambridge; Widford Industrial Estate, Chelmsford; and 75 Farringdon Road in London.
The portfolio is weighted 45.3% to industrial, 22% to offices, 17.6% to retail warehouses and leisure 15.1%. The geographic spread is South East 40.6%, North 26.1%, London 15.7%, Midlands 9.9% and rest of South 7.7%.
The assets in the Pension Fund as of end of October are: Slough Retail Park, Slough; 25 Great Pulteney Street, London W1; Cox Lane, Chessington; Zenith Industrial Estate, Basildon; 27-35 Mortimer Street, London W1; The Griffin Centre, Staines Road, Feltham; Snipe Retail Park, Manchester; 10 Templeback, Bristol; Maylands Wood Estate, Hemel Hempstead; and Cornerhouse, Nottingham.
London and the South East together take up 71% of the industrial spread, while industrial has the highest weighting at 42.9% followed by office (24.2%) and retail (21.3%) and leisure at 11.6%.
The assets in the Life Fund as of end of October are: Maylands Wood Estate, Hemel Hempstead; Albany Park, Frimley; Snipe Retail Park, Manchester; Gildersome Spur, Wakefield Road, Leeds; Richmond Riverside, Richmond; Blackthorne Road Industrial Estate, Poyle; 10 Templeback, Bristol; Priory Fields Retail Park, Taunton; Junction One Retail Park, Rugby and Communications Park, Hounslow.
The highest weighting is industrial at 48.9%. London and South East has 55% of the weighting.
St James's Place said it will sell the assets and expects the process for the majority to take about two years, with investors to receive returns on a "regular basis".
More than 117,000 clients are invested in the unit trust. The pension and life funds have another 80,000 client accounts. Orchard Street, the specialist real estate fund manager which managed the funds, has been replaced by Invesco in handling the wind-down.
St James's Place joined other open-ended funds in suspending its dealings in its property unit trust in October last year. The other two funds had been subject to deferred withdrawals.
"Following the suspension of the fund in October 2023, we have reviewed all options available to us and concluded that the best course of action is to wind down the funds. Doing so over a period of time will allow us to maximise value for our clients," said Tom Beal, group investment director at SJP.
Negative sentiment towards open-ended property funds has built in recent years as various economic shocks including the Brexit vote and the COVID-19 pandemic have highlighted the so-called liquidity mismatch between real estate, which takes time to sell, particularly in difficult market conditions, and regular dealing fund investments.
Last year, various fund managers decided again to close for business or suspend trading. The most notable initial one of these was M&G Investments which on 19 October 2023 said it would close its M&G Property Portfolio due to "declining interest in open-ended daily dealing property strategies from UK retail investors".
St James's Place followed this by suspending dealing in its then £924.2 million open-ended fund at the end of October 2023 after facing a surge in redemption requests. Canada Life Asset Management subsequently suspended withdrawals from its UK property fund, saying the “overwhelming majority” of its investors wanted an exit.
The Bank of England and Financial Conduct Authority have both been pursuing major but long-running reviews of UK open-ended real estate funds to tackle the so-called liquidity mismatch between daily trading and the ability to sell real estate in difficult market conditions, with the FCA notably suggesting there should be an up to 180-day delay on redemption requests.