L&G's first UK property income fund concludes with disposal of £176.5m trade park portfolio
Legal & General Property (“LGP”) announces, on behalf of its first UK Property Income Fund (“UK PIF I” or the “Fund”), that it has completed the sale of a portfolio of trade park estates for a total consideration of £176.5m which reflects a net initial yield of 6.1%, marking the end of the Fund’s life span as it begins the wind down process.
Thought to be one of the first post GFC UK closed-end funds to go full cycle, UK PIF I launched in 2010 and reached final close in 2011, securing a total of £300 million of equity from 14 major international institutional investors. The Fund was developed with a highly innovative debt structure which enabled both geared and ungeared subscriptions, providing investors with flexibility to select their optimal appetite for risk. Believed to be one of the first property funds of its vintage to offer investors the chance to select their individual level of gearing, the Fund has performed strongly throughout its life cycle, securing strong returns for our investors, demonstrating the strength of the Property Income Fund model.
Following the success of UK PIF I, LGP launched the second fund within the The UK Property Income Fund model series, which is targeting opportunities that are expected to allow it to achieve a net IRR of 8-9% for ungeared investors and a net IRR of 12-14% for geared investors. The fund will have a seven year life span and will deliver a core/core-plus risk strategy and includes investment from Legal & General Group and the fund team. Believed to represent the largest volume of capital raised by a diversified UK closed-ended property fund in over 12 months, UK PIF II announced its final close in May 2015, securing more than £403 million in equity, giving it a total buying power or Gross Asset Value (GAV) of £610 million when including gearing. UK PIF II has acquired four properties to date, totalling almost £372m, which include Priory Court and Temple Court in Birmingham and The Overgate Centre in Dundee, the Grafton Centre in Cambridge and FC200, West London and has a strong pipeline of assets.
The portfolio, which has been bought by LGP’s Industrial Property Investment Fund (“IPIF”), comprises 47 trade parks located across England, Wales and Scotland, with around 50% of the assets located in the south of the UK. In total there are 273 units with a floor area of 1.6m sq ft and an average unit size of 5,900 sq ft. The portfolio offers a good spread of income with an occupancy rate of circa 96%. The largest tenants include Travis Perkins, Topps Tiles Plc and Kingfisher Plc, with the portfolio generating an average passing rent of £6.76/sq ft and a long weighted average unexpired lease term (“WAULT”) of 6.4 years. JLL advised UK PIF, while CBRE advised IPIF on this transaction.
Charlie Walker, Director and Fund Manager of UK PIF, comments: “This final disposal marks a successful end to UK PIF I as it starts to wind down and is in line with our business plan for this portfolio, having completed numerous active asset management initiatives to improve the income return, which has allowed us to achieve an exit price which will deliver strong returns to our investors.
“The UK Property Income Fund model has proved popular with investors, due to both its innovative answer to accommodating varying investor appetites for leverage as well as the ever popular desire for income producing properties. The Fund was one of the first in its generation to re- establish trust in closed-ended strategies, demonstrated further by investor appetite for UK PIF II which announced a record final close earlier last year.”
For further information, please contact:
PR Manager, LGIM Real Assets
020 3124 2823
Notes to editors:
LGIM Real Assets:
LGIM Real Assets is a wholly-owned subsidiary of Legal & General Investment Management (LGIM), one of Europe’s largest institutional asset managers and a major global investor. LGIM manages £717bn in assets on behalf of over 3,100 clients (30 September 2015), providing products and solutions spanning all asset classes. LGIM Real Assets, headed up by Bill Hughes, has an aggregate asset value of £19.9bn (30 September 2015) and is responsible for the company’s direct investment capabilities in property and infrastructure. The company is made up of three specialist divisions, Legal & General Property (LGP), its property fund management arm, LGIM Infrastructure, its infrastructure lending and investment division, and Commercial Lending Limited (CLL), its commercial lending arm.
LGP is the fourth largest institutional property fund manager in the UK, managing or co-managing 17 separate funds or vehicles including three segregated mandates with an aggregate asset value of £17.5bn (30 September 2015). These funds include:
- Balanced Funds
- Life Fund; Linked Pensions; Linked Life; Managed Fund; Legal & General UK Property Fund; UK Property Income Fund I; UK Property Income Fund II; LPI Income Property Fund and the Hybrid Property Fund
- Specialist Pooled Funds
- The Leisure Fund Limited Partnership; Industrial Property Investment Fund; Arlington Business Parks Partnership; and the English Cities Fund
- Single Asset Vehicles
- Bracknell Regeneration Partnership; Central Saint Giles Partnership.
LGIM Infrastructure has concluded 14 debt investments to date across all key infrastructure sectors and has a total AUM of around £1bn.
CLL has now invested a total of over £1.5bn across 18 deals. Transactions include eight loans to the social housing sector, two loans to the student accommodation sector, two hotel debt deals and two loans to the care home market.