EUROPE - Fund manager Internos will sell off the 39-asset portfolio of Invista European Real Estate Trust after Luxembourg regulator CSSF approved changes to the SICAF'S strategy.
Posting half-year results for the Luxembourg-based fund today, Invista said Internos was already marketing four assets with an anticipated value of €60m.
Internos, which took over the fund in December, intends to reposition and sell the remaining portfolio before the end of 2013, when its €287m senior debt facility expires.
Invista valued the total portfolio at €434.9m - a drop from €451.1m last September attributed to a combination of continued discounts on non-core assets with short leases or significant vacacies, and weakening macroeconomic growth across European markets.
Overall, vacancies have increased from 10.2% in September to 16.3% as tenants exercised contractual lease breaks. However, fund manager Ludovic Bernard has recently negotiated lease extensions averaging 4.4 years with tenants representing 11.5% of rental income. Bernard said he would focus on selling down assets to deleverage the portfolio.
Chairman Tom Chandos said the fund's assets, mostly located in France and Germany, would in the meantime continue to come under pressure from weak consumer and business confidence.
"Occupiers have become increasingly cautious, leading to postponements of expansion plans and a focus on securing prime assets," he said. "Investors are predominantly risk-averse and are attracted to prime assets in core markets that offer long-term income stability."
Chandos warned today that the timescale for realisation "may be longer than previously expected, in order to avoid unnecessary sacrifice of value" but expressed optimism in the realisation strategy for the medium term.
Invista shareholders had already approved realisation of the property portfolio and the return of capital to shareholders last October.
In the past few weeks, the €2.1bn Internos said it had reached agreement to buy Invista REIM's outstanding shares for £33.6m.
It had already acquired two funds, including the SICAV, since Invista began the process of dismantling the business in October 2010, when shareholder, Lloyds Banking group subsidiary HBOS, transferred assets out of the former HBOS subsidiary.