TIME Investments suspends open-ended property fund on 'material uncertainty'

In the notice, the management said the fund’s independent valuer had “expressed material uncertainty regarding TIME:Freehold’s residential property valuations”.

It said this was a “direct result” of the government’s announcement of a consultation into restricting leaseholds on rental properties in the King’s Speech last week (7 November).

The new bill will ban leaseholds for new houses, but not new flats, in England and Wales, and increase the standard lease extension period to 990 years.

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The TIME fund invests predominantly in residential freehold properties, so unlike other recent property fund closures, it is “not temporarily suspending for liquidity nor performance purposes”, the management said.

Oli Creasey, property research analyst at Quilter Cheviot, explained the TIME fund had faced concerns over regulatory changes for some time.

“While this is another open-ended, monthly dealt property fund going into suspension, the causes underlying the move are quite different compared to the funds that found themselves in trouble last month,” he said. 

TIME’s management said in the statement that the bill would only impact residential ground rents “and has no implications to our other property assets or property funds”.

However, Creasey said it could be “hugely impactful on the values of freehold investments”, as it risked all residential ground rents being capped at a relatively low figure, or even permanently reduced to a nominal fee.

“Although it is too early in the consultation phase to have any indication of what the outcome might be, the risk of the ground rents being reduced or effectively eliminated is being taken very seriously,” he noted.

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This caused BNP Paribas, the independent valuer of the freehold fund, to activate the Material Uncertainty Clause, stating that it cannot confidently value the freehold assets given the regulatory landscape.

This would mean it would be unfair to investors to set a net asset value for the fund at which units could be bought or sold, as the NAV could prove to be “badly wrong”.

“It should be noted that the suspension is not a result of any action by the managers at TIME, who have maintained appropriate liquidity levels and delivered consistent returns over the past years,” Creasey added.

“It may also be the case that the consultation concludes with a much less impactful outcome and the fund is able to reopen without suffering a significant hit to NAV.”

TIME Investments has been contacted for comment.


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