The international investment company Invesco has confirmed it is liquidating one of its property funds — effectively wiping out the investments of thousands of its clients.
In a London Stock Exchange statement, the independent management company — headquartered in Atlanta, Georgia, and with 20 offices around the world — informed investors that they should expect “no return” from a closed-ended real estate strategy about to be wound up because it no longer meets its loan repayments.
The UK Listings Authority, which monitors market disclosures, immediately suspended trading in the closed-ended investment trust, which reported £160m in property assets at the end of last year, a significant fall from its high of seven years ago.
Launched in September, 2004, Invesco’s Property Income Trust primarily targeted British commercial property. Within two years it had changed it strategy to include real estate in mainland Europe. And in the summer of 2007, just as the recession was gearing up, the trust had accumulated assets of £520m.
Among its high-profile acquisitions was the Le Directoire office block in St Cloud, Paris, but the fallout from the global crisis only highlighted the trust’s over-extension.
Two years ago, in 2012, Invesco admitted its property trust had been “too highly geared … just as the appetite for commercial property was on the wane”. Since then the company has had to restructure the trust’s borrowing a number of times, breaching its loan-to-value boundaries on several occasions.
The statement from the Berumda-incorporated company — whose trading names include Trimark, Invesco Perpetual, Atlantic Trust, WL Ross and Powershares — explains that proceeds from the trust wind down will be used to repay loans from the fund’s main lending, the Royal Bank of Scotland.
Although therehas so far been no reaction from its other creditors, the RBS has agreed a three-month extension to an existing September repayment deadline. It’s unlikely the bank will recover all of its money.
The trust’s web site is still open and, although it hints at debt repayments, gives no indication of its closure. “Invesco Property Income Trust Limited is a property investment company delivering instant access to diversified UK and European property,” it says.“The company owns properties predominantly within the ‘business space’ sectors of industrial and office uses.”
Innes Urquhart, a research analyst at Winterflood Investment Trusts, describes the Property Income Trust as “a bit of an outlier” Closed-ended funds in the commercial property sector as a whole, he added, now have leverage levels at a much more reasonable level.
As far as Invesco’s trust was concerned: “The damage had been done by the credit crunch. Property values as a whole have been improving, but this is a case of too little, too late.”
