Raac crisis: The UK’s largest Reits and infrastructure trusts check their buildings

The UK’s largest real estate investment trusts (Reits) and infrastructure trusts are checking their multi-billion-pound portfolios for reinforced autoclaved aerated concrete (Raac) as concerns about the material mount. More than 150 schools were told by the government to either close completely or block off some areas before students came back from the summer break, and Raac is also found in hospitals, Ministry of Defence buildings, and other public institutions. 

Investors’ Chronicle asked the UK’s largest Reits and infrastructure trusts – a total of 51 companies – if they had Raac in their portfolio after experts warned the use of the potentially dangerous material was much more widespread than just schools.

Nine companies (seven in the FTSE 350) said they were investigating the matter, one Reit confirmed it did have Raac in its portfolio, and five companies indicated they might have Raac in their portfolios – see the bottom of this article for a table of all the companies surveyed and their responses.

Just under half the companies declined to say one way or another, showing how sensitive the topic has become following the closure of buildings containing the material across the country. Other companies said it was not an issue for them, or that it was unlikely to be an issue.

‘Too early to say’

The UK’s second-largest Reit by market value, Landsec (LAND), said it is “incumbent on responsible property owners to do some precautionary work to understand where they might have exposure to Raac”, implying that other large real estate companies should be checking their portfolios too.

“Safety is always our number one priority, and so we’re taking a look at our portfolio, with a particular focus on the small number of properties we now own that were constructed during the period when Raac was a more common construction material,” it added.

Assura (AGR), PHP (PHP), Hammerson (HMSO), GPE (GPE), Henry Boot (BOOT), International Public Partnerships (INPP), CLS Holdings (CLI), Impact Healthcare (IHR) and Workspace (WKP) also said they were investigating the issue, with the latter four noting they owned some assets built within the timeframe of widespread Raac usage (the 1950s to the 1990s). CLS said it was “too early to say whether any remedial actions might be required” and INPP has told shareholders that local authorities would be responsible for any remedial works if needed. Its portfolio includes schools that combine old and new buildings. "It is possible that some of these older buildings may have used Raac in their construction," INPP said this week. 

Retail Reit NewRiver (NRR) was the only company to confirm it had found Raac in its portfolio. “We have been monitoring Raac as a matter of good practice and are satisfied that it only affects two assets, representing circa 1 per cent of our total portfolio, both of which we are actively managing,” said NewRiver chief executive Allan Lockhart. 

“Indeed, one of the assets forms part of a redevelopment that we are planning for next year, and the other asset with Raac is due to be sold within the next six months in line with our planned disposals programme,” he added.

Meanwhile, 23 companies declined to comment despite repeated requests. This included the UK’s largest Reit, Segro (SGRO); FTSE 350 companies 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); and many small-cap Reits.

Other companies said Raac was not – or was highly unlikely to be – a problem for them as most of their portfolio was built after construction companies stopped using Raac around the 1990s. Others said they had already completed an investigation of their portfolio and found no issues. Those with no Raac problems to report included giant British Land (BLND) and several infrastructure trusts with public buildings in their portfolio.

Many UK Reits with assets in Europe declined to comment, but Chris Goodier, a professor of construction and engineering materials at Loughborough University, said it was a mistake to imagine the Raac crisis as purely a UK problem. 

“It is likely that other countries are watching what is happening in the UK at the moment, and they will begin their own investigations – and perhaps experience a storm of news coverage about Raac – fairly soon,” he said in an article for The Guardian.