Investors trying to cash in their shares in commercial property funds face a long wait for their money as managers suspend trading.
Three massive funds have stopped paying back investors who want to redeem their fund units in just 24 hours.
First was the Standard Life Investment UK Real Estate Fund. Trading in the £3 billion fund was suspended as the company blamed fears of falling property values following the Brexit referendum vote.
The £2 billion Aviva Investors Property Trust followed a day later.
A spokesman explained that fund managers had to act to manage property sales to repay investors wanting out of the market.
City fears exodus of financial firms
Last year, the fund imposed a 4.7% exit charge to discourage investors from leaving. The move followed a flood of investor departures following a change of fund managers.
Next came M&G Investments £4.4 billion property portfolio and a feeder fund.
The firm argued that Brexit uncertainty has fuelled fears of uncertainty in the commercial property sector.
“Suspension will give fund managers breathing space to make sure any disposals make reasonable prices and is the best way to protect investor interests,” said a spokesman.
Property experts expect more large funds to follow suit over the coming weeks.
At the root of the problem are fears that large firms will quit the City leaving acres of office space behind them as a result of the Brexit vote to leave the European Union.
Financial firms regulated in one EU state can ‘passport’ their licences to other EU states, but Britain will lose this concession as part of the breakup with the EU.
Developers see share prices tumble
The City feels this uncertainty over regulation and access to the EU could lead to falling property values and a major loss of jobs in financial services as companies relocate.
The fears have also knocked out property developer shares in the FTSE100.
House builders Berkeley, Taylor Wimpey, Barratt Developments and persimmon all saw losses between 6.5% and 8.1% of share value.
Real Estate Investment Trusts (REITs) Land Securities, British Land and Intu Properties also tumbled in value by between 1.5% and 4.6%.
Other property related companies were also hit will share price drops on the FTSE 250 and FTSE Small Cap Index.
