Concerns mount as reinforced autoclaved aerated concrete (Raac) is found in numerous public institutions and buildings across the UK.
The UK’s largest real estate investment trusts (Reits) and infrastructure trusts are currently conducting inspections of their multi-billion-pound portfolios to identify any presence of reinforced autoclaved aerated concrete (Raac), as concerns surrounding the material continue to grow. The government recently issued warnings to over 150 schools, instructing them to either completely close or block off certain areas due to Raac-related concerns. It has also been discovered in hospitals, Ministry of Defence buildings, and other public institutions.
The Extent of the Issue
In light of these developments, Investors’ Chronicle reached out to the UK’s largest Reits and infrastructure trusts, totaling 51 companies, to inquire whether they had any Raac within their portfolios following experts’ warnings that this hazardous material was more widespread than previously thought, extending beyond just schools.
The survey revealed that nine companies (including seven in the FTSE 350) are currently investigating the matter. Additionally, one Reit confirmed the presence of Raac in its portfolio, while five other companies indicated a possibility of Raac within their holdings. Unfortunately, nearly half of the companies declined to provide any information, highlighting the sensitivity of the subject matter in the wake of nationwide building closures. Some companies stated that Raac was not a concern for them, while others deemed it highly unlikely to be an issue.
Responsible Property Ownership and Precautionary Measures
Landsec (LAND), the UK’s second-largest Reit based on market value, emphasized the importance of conducting precautionary work to identify areas of exposure to Raac. They believe that it is the responsibility of property owners to take measures to understand and mitigate this risk. Consequently, it is expected that other major real estate companies will follow suit and inspect their portfolios accordingly.
Assura (AGR), PHP (PHP), Hammerson (HMSO), GPE (GPE), Henry Boot (BOOT), International Public Partnerships (INPP), CLS Holdings (CLI), Impact Healthcare (IHR), and Workspace (WKP) have also acknowledged and initiated investigations into the matter. Among these companies, CLS Holdings stated that it was still too early to determine whether any remedial actions would be required. INPP advised that if any remedial works were necessary, they would be the responsibility of local authorities. INPP’s portfolio includes schools with a combination of old and new buildings, some of which may have utilized Raac in their construction.
Retail Reit NewRiver (NRR) is the only company to have confirmed the presence of Raac within its portfolio. However, they assure stakeholders that this material affects only two assets, accounting for approximately 1% of their total holdings. NewRiver CEO Allan Lockhart expressed confidence in their ability to effectively manage the situation. One of the affected assets is scheduled for redevelopment next year, while the other is expected to be sold within the next six months, in line with their planned disposals.
Companies Declining to Comment and Raac Worldwide
Despite repeated requests, the UK’s largest Reit, Segro (SGRO), and several FTSE 350 companies, including Tritax Big Box (BBOX), Shaftesbury Capital (SHC), Derwent London (DLN), LXi (LXI), GCP Infrastructure Investments (GCP), Sirius Real Estate (SRE), UK Commercial Property (UKCM), Tritax Eurbox (EBOX), and Warehouse Reit (WHR), declined to comment on the matter. Many small-cap Reits also chose not to disclose any information.
However, companies such as British Land (BLND) and several infrastructure trusts with public buildings in their portfolios confirmed that Raac was not a problem for them. This is primarily because a significant portion of their holdings was constructed after the cessation of Raac usage in the 1990s. Other companies claimed to have already conducted investigations and found no issues.
While many UK-based Reits with assets in Europe refrained from commenting, Professor Chris Goodier from Loughborough University warned against perceiving the Raac crisis as solely a UK problem. He believes that it is highly likely that other countries will soon initiate their own investigations and experience similar media coverage surrounding Raac.
In conclusion, potential property investors in the UK must remain vigilant as the country’s largest Reits and infrastructure trusts conduct thorough inspections of their portfolios for the presence of Raac. It is crucial for property owners and companies to prioritize safety and take proactive measures to identify and address any potential risks associated with this hazardous material. This issue extends beyond schools and may impact various public institutions and buildings across the nation. As the situation develops, it is advisable to monitor news and expert opinions to make informed investment decisions in the real estate sector.