The fund’s board has extended the redemption period by 15 months, taking the total notice period up to seven years and three months.
The Glanmore Property fund, which was managed by Cardales, had assets of around £1.2 billion at its peak. Cardales was acquired by Tilney Asset Management in 2004, with Tilney subsequently bought by Deutsche Bank in 2006.
The fund ran into difficulties when the property market deteriorated in late 2007, breaching its covenants in 2009, which prompted the block on redemptions. Although it has since refinanced, it remains saddled with a considerable level of debt and has lost over 92% of its value.
In an update, the board said that it sold 21 assets for £136.8 million in the 12 months to the end of June, with the sales achieved at a price 8.8% ahead of the previous year’s valuation. The residual portfolio has 18 assets, which are valued at £156.9 million.
However, its net debt stands at £123.6 million, including the £6 million cost of a profit-sharing arrangement, equivalent to a loan-to-value of 78.9%. An £8.8 million credit facility expires in December, with the remainder expiring in October 2015.
‘The board continues to look at a variety of strategies to alleviate the level of borrowings but in the absence of a suitable alternative loan, the strategy is to continue to sell assets to meet the amortisation targets until the current borrowings are paid back in full,’ the fund update said.
But wealth managers have questioned why, if the fund’s assets are valued at a higher level than its borrowings, the portfolio cannot be liquidated more quickly and the money repaid to investors.
One wealth manager who took on a small number of clients with exposure to the fund, and does not wish to be named, said: ‘It looks like they are rolling over the debt for a further five years, but if the property it holds is worth £33.3 million more than its net debt, why don’t they sell that now and give people their money back?
‘People accept they have already lost most of their money and I would rather they take that loss and use it to invest elsewhere. There is an opportunity cost here too.’
Deutsche Bank declined to comment.