The lockdown of U.K. real estate funds has now put about £20 billion ($25 billion) out of investors' reach as the coronavirus pandemic batters the economy and makes valuation of assets nearly impossible.
BlackRock, Schroders and Legal & General Group are among the latest firms to freeze some funds, telling their institutional clients that withdrawals are halted indefinitely because of the outbreak, according to company statements. The suspensions of these funds for professional investors, which have about £9 billion of assets under management, follow previous decisions by a range of firms to lock up up about £11 billions of mom-and-pop clients' cash.
The temporary suspensions, which will be regularly reviewed, show the impact that the government's shutdown of much of the economy is having on the commercial real estate market. The immediate difficulty for fund managers is that as real estate deals dry up, it becomes extremely difficult to accurately value their assets, reflected in the "material uncertainty" clause introduced in valuers' assessments. Funds are also getting hit by concerns over rental income as the risk increases that tenants won't be able to pay their bills.