Covid-19: A message from our Chief Investment Officer, Tim Munn

To our valued clients, colleagues and friends in the property industry.  These are unprecedented times and we appreciate that, with increased uncertainty and disruption, investors will be concerned.  We are proud stewards of the funds entrusted to us by our clients and will be doing all that is necessary to protect their interests.  Our leadership team is tracking events closely, we have robust systems in place to continue our operations and are continually communicating with our extensive market network.  

We expect market activity – both investment and leasing - to reduce dramatically as restrictions on movement tighten.  There is limited evidence of transactions completing over the last two weeks, but these are generally deals that were agreed some weeks ago and had momentum with the vast majority of due diligence already undertaken.  Some investment transactions have completed at reduced prices, particularly in the retail sector where structural conditions have been weak for some time and prospects are continuing to deteriorate. Other live investment transactions, in the office, industrial and residential sectors, either appear to have been put on hold or are progressing at a slower pace.  We are monitoring these transactions closely as we attempt to ascertain pricing in the current market. 

Given the unknown future impact that COVID-19 might have on the real estate market the leading valuers have introduced an industry agreed “material uncertainty” clause into their valuation certificates, which will effectively qualify their valuations. Under new FCA rules, when reported valuations are qualified on the basis of material uncertainty, authorised fund managers are required to suspend dealing until such time as liquidity improves. This measure is designed to protect the interests of investors and ensure all are treated equally, particularly regarding unit pricing.  The majority of open-ended funds are therefore now closed.

Whilst not underplaying the seriousness of the situation and extensive disruption to markets, it should be acknowledged that real estate is a long term investment.  Our thematic investment approach, focussed on secular trends in the global economy and identifying where future occupational demand will be strongest and sustained, will withstand short term shocks to the market.  At our core, we are income-focussed investors and build portfolios that produce resilient and enduring cashflows.  Accordingly, we remain focussed on income risk: keeping on top of vacancy, forthcoming lease expiries and tenant credit risk.  

As part of this process we will be working very closely with our tenant customers during this unprecedented period, ensuring they get the support they need for their real estate requirements.  We have provided guidance to our property managers to ensure a consistent and measured approach is taken in responding to requests from tenants for temporary rental concessions such as monthly payments and rent deferrals.  In principle, we will be supportive of our tenants when they are able to demonstrate difficulties, whilst continuing to ensure the interests of our investors are protected.

We are committed to developing trusted partnerships with our clients.  Accordingly, we acknowledge the importance of transparency and clear communication, especially during uncertain times.  You can expect to receive regular updates from us as we continue to operate through this unprecedented period.

Download an updated Briefing Note authored by Frances Spence, our Director of Research, Strategy & Risk.