Aviva Investors secures record GBP1bn of capital commitments for real estate long income strategies during 2020
Aviva Investors' Real Estate Long Income (RELI) team secured GBP1 billion of new capital commitments over the course of 2020.
The figure, a record number, was driven by increased investor demand for an asset class which has performed well despite a challenging environment following the global pandemic.
The GGP1 billion of new capital commitments came from a mixture of local authority and institutional mandates, with investors increasingly seeking resilient income streams that can also offer cashflow matching characteristics. Of the GBP1 billion, GBP239 million originated from public sector capital, including London CIV, with the balance from new and existing UK and European institutional clients.
The growth in demand for Long Income strategies saw assets under management for Aviva Investors’ Long Income business pass GBP5 billion, following acquisitions totalling GBP528 million, across the logistics, office, hospitality and residential sectors.
The figures follow publication of Aviva Investors’ 2021 Real Assets House View in February, which cited Long Income as being expected to deliver best relative-value among real assets strategies. The sector’s stability of cashflows, availability of competitively priced, long-dated finance in leases and loans and highly creditworthy counterparties, has contributed to resilient performance over the last twelve months.
In line with Aviva Investors commitment to affect positive changes in society through its investments, new acquisitions are also selected for their existing or potential sustainability credentials. Furthermore, the future investment strategy prioritises opportunities with significant urban regeneration potential to create places of scale where people want to live and work.
Renos Booth, Head of Real Estate Long Income at Aviva Investors, says: “2020 was challenging for markets, businesses, communities and investors, so we are pleased to have been able to deliver strong investment outcomes for our clients. The increased inflows into our Long Income strategies show that investors are increasingly attracted to the nature of these investments in the current low interest environment.
“We believe the relative value of the sector will continue to drive positive long-term performance, supported by yield compression and strong asset management. Long income strategies also fit well with our commitment to improving the ESG credentials of our entire real assets portfolio, with the long-term nature of the investments offering a platform to deliver meaningful societal change.”
Notable acquisitions by Aviva Investors’ Real Estate Long Income strategies across 2020, include:
• Three Next distribution centres, acquired in a sale and leaseback, in South Elmsall, West Yorkshire. The units are leased to Next Plc for 26 years, subject to annual reviews of CPIH+1 per cent
• The forward funding of a 132,000 sq ft new office development on Bristol Business Park, pre-let to Babcock on a 15-year lease with five-yearly rent reviews to CPI+1 per cent
• Sale and leaseback agreements with two UK universities for multiple existing and newly-developed assets, on a long-term income strip basis
• A 784,000 sq ft Sainsbury’s distribution hub, in the West Midlands, for GBP139 million, let on a 25-year lease with five-yearly rental reviews linked to increases in RPI
The growth of the long income business has been led by Aviva Investors’ flagship Lime Property Fund (“Lime”), which passed GBP3 billion of AUM in 2020, whilst capital commitments from the public sector now account for 54 per cent of the investment. Lime has been recognised by MSCI as the most secure and least volatile fund in the MSCI quarterly UK real estate universe, outperforming all the other long lease funds in AREF long lease index over one, three and five years whilst also maintaining the MSCI highest risk adjusted return of all real estate funds over the last 10 years.