M&G Investments has announced the agreement of an approximately €470m (£350m) deal with David Lloyd Leisure Limited. The deal consists of the sale and lease back of 44 health and racquet clubs, 32 of which are already completed, on a ground lease basis for 125 years.
The majority of the capital has been provided by the €4bn (£3bn) M&G Secured Property Income Fund, which targets assets across a wide range of real estate sectors for investment and development. These properties are leased to tenants over the long term to provide M&G’s pension fund investors with returns linked to inflation.
Ben Jones, manager of the M&G Secured Property Income Fund, said: “Many defined benefit pension schemes are actively seeking cash generating assets in order to pay pensions. Long lease property investments such as this provide attractive cash flows that are inflation protected and contracted over the long term. This has led to over £750 million of further capital being committed to the Fund in 2015 from both new and existing clients.”
The M&G Secured Property Income Fund is advised by M&G Real Estate which sourced the transaction. Kris McPhail, investment director, M&G Real Estate, said: “Deal activity in operational real estate has been particularly prevalent in the past few years, with companies seeking to release value from their real estate assets. Alternative property sectors, which include leisure, can offer institutional investors considerable relative value compared to traditional real estate sectors, as well as attractive security when deals are structured appropriately.”
This long lease portfolio has seen the completion of over €1.34bn (£1bn) of deals in alternative property sectors over the past two years, including:
- €313m (£233m) deal for six hospitals with the Priory Group, the UK’s leading independent provider of specialist healthcare
- €232m (£173m) sale and lease back deal on a portfolio of 52 bingo clubs with Gala Leisure Limited.
- €123m (£92m) deal with The Bannatyne Group for 39 health clubs on a ground lease basis
- Fifty percent of the €322m (£240m) deal with British Car Auctions for 18 car auction sites across the UK.
M&G Real Estate was advised by CBRE.
