Legal & General Property (LGP) transacted over GBP1bn of direct property deals in 2012, acquiring approximately GBP750m across 24 deals and disposing of circa GBP300m, representing 16 assets.
Deals ranged in size from a GBP115m forward funding of a 932,000 sq ft Tesco distribution warehouse in Reading to the acquisition of a GBP3.6m 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 GBP200m. 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 GBP4bn of UK commercial real estate, with GBP1.7bn competed in 2011 and a further GBP1.3bn completed in 2010. In December alone, LGP transacted approximately GBP263m, with a further GBP385m 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 GBP28m. Disposals during the year included the sale of CBRE’s City office, St Martin’s Court, Paternoster Square to Oxford Properties for GBP110m.
Forward fundings completed during the year included 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 GBP100m 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.
Gordon Aitchison, director of transactions and development, says: “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.”