Henderson UK Property PAIF and Feeder Fund open for dealing

14/10/2016

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Update - 14 October 2016

We are pleased to announce that with effect from noon today (14 October 2016) the Henderson UK Property PAIF and its associated Feeder Fund are open for daily dealing.

We would again like to thank you for your patience and continued support and we apologise for any frustration and inconvenience the dealing suspension may have caused.

To view a video update from Simon Hillenbrand, Head of UK Retail Sales, and Ainslie McLennan, Co-Manager of the Henderson UK Property PAIF, please click here.

Update - 3 October 2016

We are pleased to announce that with effect from today (3 October 2016) we will remove the fair value adjustment that has been applied since 24 June 2016 to properties held by the Henderson UK Property PAIF.

In recent discussions with the fund’s independent property valuer it is clear that they now have an increased level of confidence in their valuations. The ‘uncertainty clauses’ that were introduced immediately after the European Union referendum result have been removed with effect from 30 September 2016. This is primarily as a result of an increase in transactional evidence across most types of property held by the fund. In the run up to our intended reopening of the PAIF and its associated Feeder Fund for dealing on 14 October 2016, we will continue to receive property valuations twice a month.

Update - 19 September 2016

Planned resumption of dealing in Henderson UK Property PAIF and Feeder Fund

Key points:

  • Daily dealing intended to resume from 12 noon on Friday 14 October 2016
  • Notice period allows investors to make informed decisions ahead of the re-opening
  • Good progress in asset sales has enabled re-establishment of liquidity buffer while maintaining a high quality, diversified portfolio with a strong tenant base and asset mix
  • Fair Value Adjustment reduced to –1.96% with effect from 20 September 2016

Background

From noon on 5 July 2016, dealing in the Henderson UK Property PAIF and its associated Feeder Fund was suspended. This was in response to extraordinarily heavy redemptions following the result of the European Union (EU) referendum and the consequential suspension of a number of other authorised property funds, which put exceptional liquidity pressure on the PAIF. The suspension was taken in the interests of all investors to allow time for the fund managers to conduct an orderly sale of some properties in the portfolio to enable the funds to re-open to daily dealing as soon as practicable.

Intended resumption of client dealing

Following the most recent review of progress to prepare the funds for a resumption of client dealing, the Board of Henderson Investment Funds Limited (HIFL), the authorised corporate director (product provider) for the funds, intends to end the current dealing suspension with effect from midday on Friday 14 October 2016. The decision to resume dealing has been taken in agreement with the funds’ Depositary, National Westminster Bank Plc. The Financial Conduct Authority (FCA) has also been informed.

What happens now?

First and foremost, we would like to thank you for your patience and continued support and we apologise for any frustration and inconvenience the dealing suspension may have caused. The move to reopening means client subscriptions and redemptions for acceptance on 14 October 2016 may be placed with Henderson at any time from start of business on 21 September 2016.

  • There will be no significance in terms of the order in which deals are received ahead of noon on 14 October 2016 – all deals will be accepted at noon on 14 October 2016 and receive the price of the respective class at that valuation point.
  • If your investment is held via a third party, such as a fund platform, you should contact your provider directly and they will confirm the point from which subscriptions and redemptions can be placed with them for the 14 October 2016 valuation point.

Those investors who have requested to redeem and no longer wish to do so, need to cancel their original instruction. If revised instructions are not received, their existing instruction will be dealt at the 12 noon valuation point on 14 October 2016.

Fair Value Adjustment

The downward fair value adjustment (FVA) to the direct property portfolio will be reduced to 1.96% with effect from 20 September 2016. A FVA of 5% was first applied the day the EU referendum result was announced. This was because the Board of HIFL was not confident that valuations post the Brexit result were accurately reflecting the value of properties in the market given the lack of transactional evidence, which the direct property portfolio’s independent valuer uses as the basis for its valuations. We expect to continue to reduce the FVA as transactional evidence better reflects current market conditions and will continue to provide updates via our website.

Significant liquidity

The dealing suspension allowed for an orderly sale of properties to raise the portfolio’s cash to a level that is enough to cover intended client redemptions, while also leaving a significant ongoing cash allocation. We are pleased with the pricing attained on the assets sold in the period since 23 June 2016, with the majority of sales exceeding 31 December 2015 valuations, and comfortable that this was achieved without compromising the diversification and performance potential of the remaining property portfolio. In the current environment, our intention is to maintain a cash weighting in the portfolio in the region of 20%.

Property portfolio update

In the period since dealing in the PAIF and Feeder funds was suspended 23 assets have either been disposed of or are under offer to be sold. The focus remains on holding a strong portfolio of defensive, core assets with a mix of robust tenants on long leases across all sectors. The portfolio provides an attractive net historical income yield of 3.2% (4.0% estimated gross yield for eligible investors), which, in the form of contractual rental income, offers a steady income stream and remains attractive relative to bonds and equities. Around a third of the income comes from leases with either fixed uplifts or Retail Prices Index (RPI) linked increases, providing an element of rental growth. The average lease term is 10.7 years and the managers are aiming for the fund to stay at around this level at the end of the sales programme. The void (vacancy) rate is 3.4%, well below the UK Investment Property Databank (IPD) benchmark average of 9.8% (30 June, latest available figure), evidencing the strength of the fund’s tenant base. All figures at 31 August 2016, unless stated otherwise.

Please see a recent update from Ainslie McLennan, Co-Manager of the PAIF, for more information on sentiment within the market and portfolio activity: HGi.co/propertyupdate.

An extended low interest rate environment should see investor demand continue for income-yielding assets and underscores the case for high-quality, well located UK commercial property. We believe the asset class remains attractive as a portfolio diversifier, given its supply of steady contractual rental income and its strong legal/regulatory framework.

Future resilience of open-ended commercial property funds

Henderson is acutely aware that the dealing suspension has represented a serious disruption of service to clients. Beyond retaining a significant cash buffer, we are also examining the best options for increasing the resilience of open-ended property funds to help avoid future dealing suspensions in periods of market distress. We understand the importance of this and we expect to share our thoughts and plans on this in due course.

We would again like to thank you for your patience and apologise for this period of disruption to the PAIF and its Feeder Fund.

Update - 24 August 2016

Progress continues but suspension remains in place

At the time of the suspension, we announced that the situation would be carefully monitored and the suspension would be reviewed at least every 28 days. This week the Board of Henderson Investment Funds Limited (HIFL), which is the authorised corporate director (ACD) for the fund, concluded that while good progress continues to be made in rebuilding liquidity in the fund, the fund is not yet at a stage where it can re-open to daily dealing. The dealing suspension therefore remains in place and will continue to be reviewed by the ACD with a further update provided within the next 28 days.

Liquidity

At 24 August 2016, liquid assets made up 13.9% of the fund’s Net Asset Value, comprising approximately 13.0% in cash and 0.9% held in Real Estate Investment Trusts (REITs).

Source: Henderson Global Investors, at 24 August 2016

Sales

In order to increase liquidity within the fund, the investment management team has been identifying suitable properties for disposal. In identifying these properties, the team is ever mindful of maintaining a well-balanced portfolio and retaining the fund’s quality bias.

The following sales have been completed to date in August and a number of other assets are under offer to be sold. The sales include:

  • Distribution unit, Trafford Park, Manchester
  • Amazon distribution centre, Kingston Park, Peterborough
  • Public house, Chiswick, London
  • Public house, Mortlake, London
  • Retail unit, Manchester
  • Retail unit, Islington, London
  • Office, Bath

Fair Value adjustment

A Fair Value Adjustment (FVA) was applied the day that the result of the EU referendum was announced. This was because the Board of HIFL was not confident that valuations post the Brexit result accurately reflected the value of properties in the market given the lack of transactional evidence.

The FVA to the valuation of the physical property portfolio of the fund is now -3.25%, reduced from the -5% adjustment following the referendum. The fund’s direct property assets are currently valued on a fortnightly basis.

We will continue to inform investors as further progress is made towards reopening the fund and provide updates from the investment management team.

Update - 1 August 2016

Suspension remains in place

At the time of the suspension, we announced that the situation would be carefully monitored and the suspension would be reviewed at least every 28 days. The Board of Henderson Investment Funds Limited (HIFL), which is the authorised corporate director (ACD) for the fund, has concluded that while good progress is being made in rebuilding liquidity in the fund, the fund is not yet at a stage where it can re-open to daily dealing. The dealing suspension therefore remains in place and will continue to be reviewed by the ACD with a further update provided within the next 28 days.

This update details the progress made towards readying the fund for a re-opening, focusing on:

  • Liquidity
  • Portfolio activity
  • Fair Value Adjustment
  • Market outlook

5 July 2016

Henderson UK Property PAIF and units of the Henderson UK Property PAIF Feeder Fund has been suspended

​With effect from 12 noon on 5 July 2016, dealing in shares of the Henderson UK Property PAIF and units of the Henderson UK Property PAIF Feeder Fund has been suspended until further notice.  Uncertainty generated by the European Union referendum has had a negative effect on market sentiment and led to substantial withdrawals from property funds.  The dealing suspension will allow for an orderly sale of some properties while liquidity is restored and help ensure that the strong attributes of the portfolio in terms of its mix of properties and quality tenant base are not compromised while cash is raised ahead of a re-opening. For further details of the suspension, please see attached notification and Q&A.



These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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Important information

Please read the following important information regarding funds related to this article.

Janus Henderson UK Property PAIF

Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Copies of the Fund’s prospectus and key investor information document are available in English, French, German, and Italian. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from Janus Henderson Investors registered office: 201 Bishopsgate, London EC2M 3AE.

Issued by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Copies of the Fund’s prospectus are available in English, French, Spanish German and Dutch. Key investor information documents are available in English, Danish, German, Finnish, French, Italian, Norwegian, Spanish, Swedish and Dutch. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from the local offices of Janus Henderson Investors: 201 Bishopsgate, London, EC2M 3AE for UK, Swedish and Scandinavian investors; Via Dante 14, 20121 Milan, Italy, for Italian investors and Roemer Visscherstraat 43-45, 1054 EW Amsterdam, the Netherlands. for Dutch investors; and the Fund’s: Austrian Paying Agent Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider CACEIS Belgium S.A., Avenue du Port 86 C b320, B-1000 Brussels; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; Singapore Representative Janus Henderson Investors (Singapore) Limited, 138 Market Street, #34-03/04 CapitaGreen, Singapore 048946; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

Information on this document is on Henderson's best endeavours.

Specific risks

  • This Fund is dual priced. The price at which you buy shares/units in the fund will incorporate the transaction costs incurred in buying physical properties. When you sell shares/units in the Fund the price you sell at incorporates the transaction costs incurred in selling physical properties. The difference between these prices is called the ‘spread'. This spread is currently c. 5% and reflects the high transaction costs of buying and selling commercial property. Typically the buying price of an individual commercial property can be 7-8% higher than the selling price. The spread of the Fund is not fixed and may vary over time depending on the composition of the Fund.
  • Some or all of the Annual Management Charge and other costs of the Fund may be taken from capital, which may erode capital or reduce potential for capital growth.
  • This fund is designed to be used only as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this fund.
  • The Fund could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Fund.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If the Fund or a specific share class of the Fund seeks to reduce risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or detrimental.
  • The Fund contains assets which may be hard to value or sell at the time and price intended. In particular, property investments may take a considerable time to sell. When many investors want to sell their shares, the Fund may have to delay processing requests so that certain assets or properties can be sold first. This is known as deferring redemptions.
  • The Fund's value may fall where it has concentrated exposure to a particular industry that is heavily affected by an adverse event.
  • Valuations are determined by independent property experts. The valuation of property is generally a matter of valuer's opinion. The amount raised when a property is sold may be less than the valuation.
  • Tenants in the Fund's properties may become unable to pay their rent. As a result, the Fund's income may be impacted and further costs incurred.

Risk rating

Janus Henderson UK Property PAIF Feeder Fund

Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Copies of the Fund’s prospectus and key investor information document are available in English, French, German, and Italian. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from Janus Henderson Investors registered office: 201 Bishopsgate, London EC2M 3AE.

Issued by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Copies of the Fund’s prospectus are available in English, French, Spanish German and Dutch. Key investor information documents are available in English, Danish, German, Finnish, French, Italian, Norwegian, Spanish, Swedish and Dutch. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from the local offices of Janus Henderson Investors: 201 Bishopsgate, London, EC2M 3AE for UK, Swedish and Scandinavian investors; Via Dante 14, 20121 Milan, Italy, for Italian investors and Roemer Visscherstraat 43-45, 1054 EW Amsterdam, the Netherlands. for Dutch investors; and the Fund’s: Austrian Paying Agent Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider CACEIS Belgium S.A., Avenue du Port 86 C b320, B-1000 Brussels; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; Singapore Representative Janus Henderson Investors (Singapore) Limited, 138 Market Street, #34-03/04 CapitaGreen, Singapore 048946; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

Information on this document is on Henderson's best endeavours.

Specific risks

  • This Fund is dual priced. The price at which you buy shares/units in the fund will incorporate the transaction costs incurred in buying physical properties. When you sell shares/units in the Fund the price you sell at incorporates the transaction costs incurred in selling physical properties. The difference between these prices is called the ‘spread'. This spread is currently c. 5% and reflects the high transaction costs of buying and selling commercial property. Typically the buying price of an individual commercial property can be 7-8% higher than the selling price. The spread of the Fund is not fixed and may vary over time depending on the composition of the Fund.
  • Some or all of the Annual Management Charge and other costs of the Fund may be taken from capital, which may erode capital or reduce potential for capital growth.
  • This fund is designed to be used only as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this fund.
  • The Fund could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Fund.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If the Fund or a specific share class of the Fund seeks to reduce risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or detrimental.
  • The Fund contains assets which may be hard to value or sell at the time and price intended. In particular, property investments may take a considerable time to sell. When many investors want to sell their shares, the Fund may have to delay processing requests so that certain assets or properties can be sold first. This is known as deferring redemptions.
  • The Fund's value may fall where it has concentrated exposure to a particular industry that is heavily affected by an adverse event.
  • Valuations are determined by independent property experts. The valuation of property is generally a matter of valuer's opinion. The amount raised when a property is sold may be less than the valuation.
  • Tenants in the Fund's properties may become unable to pay their rent. As a result, the Fund's income may be impacted and further costs incurred.

Risk rating

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