LGP continues to be one of the most active investors in the UK commercial property market.
08 January 2013
Legal & General Property (LGP) announces that it transacted over £1 billion of direct property in 2012, acquiring approximately £750 million, across 24 deals, and disposing of circa £300 million, representing 16 assets, once again making it one of the most active investors in UK commercial property market.
Using its superior access to on and off-market deals, and market leading in-house transactional capabilities, it has continued to take advantage of the opportunities that exist for those with capital in place or the ability to raise it. Due to its dedicated in-house development and project management teams, it has been able to complete creative forward fundings, and its unparalleled corporate contacts have also resulted in a string of successful sale and leaseback deals. This has led to it being the fastest growing, top five, UK property fund manager between 2009 and 2012, with an average of circa 20% growth in assets under management per annum, enabling it to move from position five to three.
Deals ranged in size from a £115 million forward funding of a 932,000 sq ft Tesco distribution warehouse in Reading to the acquisition of a £3.6 million single-let industrial unit on Ocean Estate, Trafford Park, in Manchester. Acquisitions also included three major University pre-let and forward funding deals totalling just under £200 million. These deals comprised student housing schemes for the University of Arts, University of Southampton and University of Greenwich. Based on 35 to 45-year leases, all with RPI uplifts, they offer secure annuity style cash flows backed by investment grade covenants and reflect the Company’s growing appetite for non-traditional real estate.
Over the last three years, LGP has transacted over £4 billion of UK commercial real estate, with £1.7 billion competed in 2011 and a further £1.3 billion completed in 2010. In December alone, LGP transacted approximately £263 million, with a further £385 million under offer. The last deal of 2012 comprised the acquisition of two call centres, located in Nottingham and Rotherham, which completed on 27 December for circa £28 million. Disposals during the year included the sale of CBRE’s City office, St Martin’s Court, Paternoster Square to Oxford Properties for £110 million.
These opportunities have not only emerged out of distressed situations, including a rising number of motivated sellers and banks looking to deleverage, but also, with little or no development finance available, the ability to create new, high quality, investment product, let to superior covenants, through large scale forward fundings. During the year a number of these completed, an exceptional example of which was the new Academy for English Football in Burton upon Trent, the hotel element of which LGP forward-funded based on a pre-let to the Football Association. Launched in October, the £100 million centre houses 12 pitches, a 230-bedroom Hilton hotel, the League Managers Association's head office, a sports science and performance research centre, conference facilities and a spa, boasting some of the top training technologies in the world.
Gordon Aitchison, Director of Transactions and Development, commented: “2012 proved a challenging year for the UK investment market, particularly in the first nine months of the year which saw disparity in pricing between the aspirations of sellers and true value. However, leveraging our extensive network of contacts and transactional capabilities, we continued to selectively stock pick assets. As pricing has adjusted we have been seeking to deploy capital into attractive value add opportunities, as well as continuing to target structured investments which provide security of income over the long term.
“As a result, we continue to be one of the most active investors in the UK real estate market, with a notable increase in appetite for alternative real estate sectors, such as student accommodation, which we believe provide an attractive proposition for investors given their lower levels of volatility and diversification benefits relative to other asset classes. As the year drew to an end, we also saw a continued correction in the mainstream real estate market, with transaction pricing moving out to reflect risk. It is our belief that 2013 will see an increasing number of opportunities coming forward that we are well placed to capitalise upon.”
Notes to editorsLegal & General Property (LGP) 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 approximately £391bn of assets on behalf of more than 3,300 clients (30 September 2012) and provides products and solutions spanning all asset classes. LGP is the third largest institutional property fund manager in the UK, managing or co-managing 16 separate funds or vehicles and two segregated mandates with an aggregate asset value of £10.4bn as at 30 September 2012.
These funds include:
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; Performance Retail Limited Partnership and Warrington Retail Limited Partnership
Life Fund; Linked Pensions; Linked Life; Managed Fund; Property Unit Trust; UK Property Income Fund; LPI Income Property Fund and the Hybrid Property Fund
LGP’s UK-focused fund management platform has built and retained a strong track record of out-performance across the sector. Owing to its size, diversity and penetration, it benefits from best in class banking and property industry contacts which, along with its wealth of in-house skill and expertise, have enabled it to continue to attract and secure high quality market opportunities. Taking a client-centric approach, the business places the highest priority upon integrity and transparency, leveraging upon the significant resources provided by the wider LGIM platform. Sector specialists cover each sphere of the market and are supported by LGP’s market-leading research capability.
LGP’s sector specialisms cross all facets of the real estate market. In particular, the Company has a major development platform, responsible for delivering the West End office market’s latest landmark, Central Saint Giles, and currently involved in developing its high profile Covent Garden scheme, Agar Street, as well as significant town-centre retail and leisure regeneration projects, including Bracknell, Trowbridge, Northampton and Eastbourne.
For more information please contact:
PR Manager, Legal & General Capital and Real Assets, LGIM (Property, infrastructure and alternative finance)
t: + 44 (0) 203 124 2777
m: + 44 (0) 7718 395 279