UK - Merseyside Pension Fund (MPF) has extended two major contracts for real estate investment services instead of exposing the pension fund to the pressures of the volatile property markets.
Wirral Council's pension committee revealed in official papers last week the MPF was extending the property investment valuation contract with Colliers CRE to cover the March and September 2009 valuations, to provide the pension fund with "additional assurance" during the tough economic climate.
Peter Wallach, head of Merseyside Pension Fund, said: "In common with other financial assets, the property market has been affected by the credit crunch and has seen price falls and a reduction in the number of purchases and sales. The reduction in the number of transactions makes it more difficult to value properties.
"Consequently, in the current situation, the fund believes it is advisable to ensure that valuations are undertaken on a consistent basis - hence its decision to extend the contract with its current valuer for a year," he added.
The contract with Colliers CRE, awarded on December 18 2003, was due for renewal in March 2009 but MPF will instead initiate a tender exercise to award a new contract to begin with the March 2010 property valuation.
The pension fund has also extended the property estate management contract with CB Richard Ellis, awarded on 23 November 2004, for an additional two years and plans on awarding a new contract to begin on 1 February 2011.
Meanwhile, the MPF has begun a procurement process to award a new contract for strategic property investment advice, which was awarded to Cordea Savills LLP on 18 December 2003 and is due to expire on 30 June 2009.
As a result of the financial crisis, the pension fund has decided to hold back from investing in new properties.
"The fund's response to the current economic climate has been to focus on "asset management" - changing the use, format and tenants/occupiers of our properties to improve rental yields - rather than buying and selling properties," Wallach told IPE Real Estate.
The Merseyside Pension fund currently allocates 10% to real estate and, as of 31 March 2008, had net property assets worth £295.4m (€319.1m).
According to MPF's annual report for 2007/2008, however, property returned -11.5% against a benchmark return of -10.7%.
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