Trust erosion

19 Feb 2008 By George Hay Follow @gfhay

Because that s the cheapest way to buy UK property these days. So a New Star fund is investing some of the proceeds from asset sales in closedend funds which are going at a big discount. That may make sense, but then why should investors pay New Star a 1.5% management fee?

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New Star has sold Commerzbank's headquarters at 60 Gracechurch Street, one of its biggest UK properties, for £127.5m.

The asset represented 7.7% of New Star's £1.5bn UK property fund and moves liquidity levels at the authorised property unit trust from 18% to around 25%.

New Star is expected to reinvest half the proceeds into listed property companies, including British Land, Land Securities and Hammerson, according to the Mail on Sunday. These are currently trading at discounts of up to 35% to stated net asset values.

New Star said the sale, to Evans Randall, represented a strategic rather than a distressed sale. The selling price was 13% less than the November 2006 asking price.

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