Pramerica Real Estate Investors has announced that it has won a new separate account mandate to invest £135 million (approx. 157 million) into UK Ground Lease properties on behalf of the trustees of a major corporate pension fund.
This follows Pramerica's announcement in August that it had raised an additional £98.3 million of equity from institutional investors for its UK Ground Lease Fund. Pramerica is the European arm of the real estate investment and advisory business of Prudential Financial, Inc (NYSE:PRU), which is based in the United States.
Once fully invested, this new mandate, together with the UK Ground Lease Fund and other expected commitments, will now bring Pramerica's total investment into this asset class to over £400 million, reflecting the ongoing trend of investors moving out of investments such as Index Linked Gilts and corporate bonds, and into alternative investments such as ground leases, which provide the potential for better returns with similar levels of risk.
This represents the pension fund's first investment into UK ground leases, and it has mandated Pramerica to invest in both commercial and residential property in the UK with very long ground leases of over 75 years, which typically offer investors the benefits of long term, secure income derived from high quality assets. However, unlike with the UK Ground Lease Fund, Pramerica will also be able to target assets with rent reviews of up to 15 years, as opposed to up to seven years.
"Being awarded this mandate is a huge endorsement of what Pramerica has achieved in ground lease investments, and we are excited to have the opportunity to work directly with a pension fund of this scale. We believe that winning this important mandate is a further demonstration of our team's ability to attract high quality investors and to work with them to structure products which are tailored to their requirements," said Charles Crowe, Pramerica's Director of UK real estate Strategy and Investment.
Paul Dennis-Jones, Pramerica's Director of UK real estate fund management added: "This investment provides further evidence of the growing trend amongst investors to look away from traditional products, such as Index Linked Gilts and corporate bonds, and look at alternative low risk investments with the potential for better returns and diversification, such as ground leases."
Source: FTI Consulting