Janus Henderson announced today that the manager of their UK property fund has exchanged contracts for the sale of the fund’s entire property portfolio, and has moved the fund into termination as a result.
This outcome is not a surprise, but the new detail is that the sale price is above the most recent valuation of the portfolio. We still don’t know the exact circumstances that led to the sale, but the fact that it is taking place above book value further reduces any concerns that this was some sort of distressed event.
What we don’t yet know is how far above book value the sale will take place at – clearly there is a difference between a 1% additional return vs 10% – and as the fund will bear the costs of the sale (lawyers/agents/etc) there is a risk that a small margin could still erode shareholder value.
However, given the likelihood that JH are not forced sellers, we think it is unlikely the fund would transact at a price that does not produce a positive net return for shareholders.
The fund is expected to finalise the transaction and return funds to shareholders around mid-June, although there is no guarantee on the dates yet.
Investors may now be asking what to do with the proceeds – we would highlight that the L&G PAIF has opted to waive the majority of purchase costs for any investors placing money in the fund (one of the biggest impediments to moving money between property funds), and investors looking for a like-for-like replacement for the JH PAIF could do much worse than consider this as an alternative, which is the largest and one of the best performers over the past few years.
