2 Feb 2021
Legal & General’s Industrial Property Investment Fund reaches £2.5 bn AUM as it expands its portfolio
LGIM Real Assets (Legal & General), on behalf of its Industrial Property Investment Fund (‘IPIF’ or ‘the Fund’), announces that it has expanded its investment portfolio to over £2.5 billion following a string of deals, investing over £100 million in multi-let operational industrial assets and development sites across the UK
IPIF’s strategy is to acquire undermanaged industrial estates and use its asset management skills to continue to add value and grow the Fund over the long-term.
Given wider concerns over some commercial property sectors and the lack of activity in the retail and office markets as a result of Covid-19, investors are increasingly turning their focus towards the industrial market; a sector that had already proved its buoyancy prior to the pandemic. The rise of e-commerce alongside continued population growth, have proved significant contributors to strong occupational demand. With a scarcity of high-quality, well located industrial assets, the supply, demand imbalance is significant. This presents a compelling investment proposition, particularly in multi-lets.
Representing the largest single transaction in the Fund’s most recent string of deals, IPIF has acquired The Saxon Portfolio, a 525,000 sq. ft. portfolio comprising 11 multi-let light industrial and trade counter estates for £58 million from PFC Property Ltd, with assets located in Worthing, Goring-by-Sea, Chichester and Midhurst.
Recognising the high prospects of rental growth in the South-East, the Fund has had ambitions to gain greater exposure to the south coast market for some time. The Saxon Portfolio is let to 74 occupiers with an average unit size of around 5,500 sq. ft. with a number of opportunities to increase value through active management. Notable tenants include World of Books, Booker Wholesale, Saint-Gobain, Screwfix and Toolstation. Substantial holdings of quality industrial stock are rare in this area, making The Saxon Portfolio a strong addition to the Fund.
Forming part of LGIM Real Assets strategy to build and diversify its real estate portfolio, IPIF has recently acquired two purpose-built operational self-storage assets in Bury and Lichfield, and an under-utilised retail park in Stevenage, Hertfordshire, with the intention to reposition the site into a self-storage, retail and trade park. With a combined investment of £20 million, these transactions demonstrate a continued focus on investing in operational assets and developments for the Fund’s growing self -storage portfolio.
IPIF has remained highly resilient and continued to outperform the market. It has delivered the highest returns of the AREF index over one, three, five and ten years. Over the past 10 years, the fund has delivered a return of 16.2% per year compared to the PFI all property return of 3.9%. Through a proactive and transparent approach to collaborating with occupiers, IPIF has maintained high occupancy levels throughout the coronavirus pandemic.
As a result of our strategy to invest in multi-let industrials, a prudent gearing policy and strong asset management, alongside a commitment to future proof our portfolio through the delivery of net zero carbon by 2050, the Fund continues to deliver significant added value and rental growth.
Given the continued strength of the industrial sector, the Fund is targeting a significant proportion of its new investment on value creation opportunities, primarily large scale development opportunities. With a focus on sectors that continue to see a growth in demand, IPIF has around 20 projects in the pipeline across urban logistics, trade developments and self-storage accommodation, requiring c. £200 million of capital expenditure over the next two years. An equity fundraise is currently underway to support the delivery of these projects.
Jonathan Holland, Senior Fund Manager at LGIM Real Assets