New Star is to make a multi-million pound investment in property shares after selling at a loss its biggest holding in its £1.5bn UK property fund, the London headquarters of Commerzbank.
Chief executive of prop-erty fund management Roger Dossett believes real estate shares are flattening out after an over-correction in the market at the end of 2007.
New Star sold the prop-erty at 60 Gracechurch Street for £127.5m, with half the proceeds expected to go into real estate equities.
Dossett says he felt that the property, which New Star bought 14 months ago for £146m, represented a disproportionately big holding. The second-biggest asset is a City office valued at £100m.
The move means that the liquidity level on the UK property vehicle rises from 18 to 25 per cent.
Dossett says: “This gives us extra liquidity to look into both real estate shares and direct commercial property, particularly as the former’s values are operating 25 per cent beneath underlying asset values.” He says thathe will look to have half of the 25 per cent liquidity in property shares, with investment in direct UK commercial property likely to come later this year.
Dossett says: “We will invest gradually both in real estate equities and direct UK commercial property if the opportunity arises.
“There was a very big movement in the value of properties at the end of last year but property is now yielding slightly better while the income stream is strong. You are also seeing a number of buyers in the market from Germany, Ireland and the Middle East.
“Property is still a strong long-term investment that will offer a steady, sound return based on income.”