Top performing long lease property fund invests £155M
Standard Life Investments, one of the largest property fund managers in Europe, has completed on behalf of its top performing Long Lease Property Fund a series of acquisitions totalling £155m.
Over five years to the end of March 2010, the Long Lease Fund was the top performing fund in the IPD UK PPFI All Balanced Fund sector with a return of 4.2% p.a. Over three years, it ranked 2nd out of 26 funds with a return of -3.6% p.a. and over the last 12 months it ranked 3rd out of 26 funds with a return of 22.6%.
On the strength of the impressive performance track record and increased investor interest, the Fund has been able to make a number of important acquisitions. These purchases include the funding of a £50m landmark 88,846 sq ft Grade A office building and 1,140 space multi-storey car park in Phase 1 of Collegelands in Glasgow, a 13-acre mixed use development on the east of the city centre. The office has been pre-let to Glasgow City Council for a term of 25 years with RPI linked reviews. The 1,140 space multi-storey car park was also pre-let to Glasgow City Council for a 31 year term with RPI linked reviews.
The Fund has also acquired a Tesco Supermarket in Colchester as a sale and leaseback from Tesco Stores Limited with a guarantee from Tesco plc for circa £43m. The lease benefits from annual RPI uplifts for the length of the term.
Other investments include the completion of an office and healthcare investment, in Bury Town centre for approximately £25m. The 40,000 sq ft office is let to Bury Metropolitan Borough Council for a term of 25 years and the 44,900 sq ft health centre is let to Bury Primary Care Trust for a term of 20 years. The Fund also purchased the Premier Inn, Tower Hill, London for approximately £25m, and a Sainsbury's supermarket in Southport for £9.5m.
Richard Marshall, Fund Manager - Long Lease Property Fund, Standard Life Investments, said: “Despite strong competition in the investment market, I’m delighted that we’ve been able to complete the purchase of several quality assets that have enhanced both the diversity of holdings and the quality of income in the Fund. Together these investments have incrementally increased the unexpired lease term of the Fund from 17.6 years to 18.6 years.
“The Fund continues to provide attractive returns relative to gilts; and our in house research demonstrates that property over the last decade has proved to be a good hedge against inflation. high proportion of leases with income streams which are subject to fixed or inflation linked increases. It continues to enjoy the support of a large number of Institutional investors and is open to further contributions from existing investors as well as from new investors.”
The Fund aims to provide long term growth from a combination of income and capital appreciation by investing in properties across all sectors with long leases and income streams predominantly underpinned by fixed or index- linked rent increases. The objective of the Fund is to outperform gilts by 2% per annum over five years.
The Long Lease Property Fund currently holds 40 properties with assets under management valued at £639m (as at 31.03.10). Other key assets include 20 Manchester Square in London’s West End, Tesco in Bracknell and 1 St John’s Lane, London City.