M&G Investments (“M&G”), the leading international investment manager, has launched the first pooled institutional fund to invest in long lease Continental European real estate, building on the experience it has gained with its market-leading £3 billion UK strategy.
The M&G European Secured Property Income Fund offers pension funds and other institutional investors income growing in line with inflation through investment into real estate leased to tenants over the long term. Its first investments, totaling €100 million, are in the leisure and retail sectors in Belgium and Portugal. Exchange on two further deals in Germany and Ireland is expected shortly and further opportunities are under review.
M&G has 15 years’ experience of investing in UK long lease real estate, launching its M&G Secured Property Income Fund in 2007 for third-party investors. Sale and leaseback has become an increasingly attractive way for UK companies with operating assets to unlock the value of their real estate. This is usually an alternative to bank financing, while enabling companies to maintain long term occupational security.
The new fund’s immediate pipeline totals €130 million, providing investors with a gross yield of 5.8% from leases to tenants which are 100% linked to inflation with a weighted average term of 34.5 years. The portfolio dynamics will evolve as further deals are completed. M&G’s Fixed Income and Real Estate businesses combine credit and property expertise to analyse both tenant quality and the underlying value of the real estate.
Simon Pilcher, Chief Executive, Fixed Income, M&G Investments, says: “A new European financing landscape is emerging following the financial crisis, where pension funds and institutional investors, the natural owners of long term capital, are providing long term finance where banks previously dominated the market. European companies are beginning to seek alternative ways to raise finance, with sale and leaseback being an increasingly popular option.
“Launching this fund is the natural next step as we take more of our institutional strategies into Continental Europe.”
Alex Jeffrey, Chief Executive, M&G Real Estate, says: “Long lease property is an established asset class in the UK but is not as widespread in Continental Europe. This innovative fund will enable investors to access an evolving opportunity at a time when the European economy is improving. Having invested in Continental Europe for over 15 years, we are bolstering our investment capability and expanding our footprint across the region as we strive to provide clients access to quality real estate with long term value.”
The launch sees M&G’s first foray into Portuguese real estate through a portfolio of supermarkets, which have been sold by and leased back to Sonae, Portugal’s leading food retailer. The new fund invested alongside M&G Real Estate’s European core property strategy. The investment in Belgium is for a David Lloyd health and racquets club in Brussels, which follows a circa £350 million deal announced in January 2016 for the chain’s UK clubs.
The M&G European Secured Property Income Fund is managed by Ben Jones with Peter Riley as deputy fund manager. Retail Partners Europe advised M&G Real Estate for the deal in Portugal.Commercial property specialists Phillips Sutton Associates has kicked off 2016 by brokering four key East Midlands deals.
The Leicester-based agency has let the remainder of the first floor suite at Charnwood Court, New Walk, Leicester, to fast-expanding “niche” bank Cambridge & Counties who specialise in lending to businesses secured on property and business assets, on behalf of its clients Bunbury Holdings.
Cambridge & Counties is benefiting from a strong economy and property lending market and came to Phillips Sutton Associates to help grow the business further. The Bank has used the extra space to hire several high-profile staff in its Leicester office.
Meanwhile, in Northampton, Phillips Sutton has let a 3,500 sq. ft. unit at Grafton Trade Park to the Northampton MOT Centre on behalf of CBRE Global Investors. Phillips Sutton Associates was appointed as joint agent on Grafton Park with Underwoods in July 2015. Both remaining available units on the business park are now under offer.
Phillips Sutton Associates has also advised a private investor on the acquisition of a ground floor retail unit with uppers at Queens Road, Leicester. This off-market deal was completed within just one month, and the investor is planning to refurbish the unit before it comes back on to the market. Phillips Sutton will also be marketing the refurbished unit.
Finally, acting on behalf of receivers, Phillips Sutton Associates have advised on the sale of 47 Clarence Street in Leicester city centre to a private London-based developer. The 6,914 sq. ft. building was sold for £400,000 and is set to be redeveloped into residential apartments.
Sam Sutton, director at Phillips Sutton Associates said: “These four deals are a great way to kick off 2016. The economy in the East Midlands is booming, and this is reflected in the number of investors pouring money into the region, which in turn is great news for tenants looking to expand. We’re looking forward to working with our clients to complete more deals over the rest of the year.”