EUROPE - Hermes and Dorset local authority pension scheme are among the buyers of a £100m (€114.5m) portfolio of UK car showrooms.

PPH1, the property subsidiary of car retailer Pendragon, sold 35 assets in five packages. All of the assets sold are leased to Pendragon for minimum 15-year terms.

Among the mainly UK buyers, the £1.4bn Dorset scheme acquired a Mercedes dealership in Glasgow for £7.7m, representing a 7% yield.

ING REIM fund manager Ian Wilson, who manages the Dorset scheme's property portfolio, said the rationale for the acquisition was an income stream above the IPD index "at day one". 

He added that the RPI-linked rental uplift made the asset sub-class appropriate for the scheme's alternatives portfolio.

Although the inflation link makes car showrooms comparable to student accommodation or healthcare assets, Wilson said he only considered buying a single asset for the scheme from a relatively large portfolio - although he pointed out that other pension schemes managed by the fund manager had invested in the sub-class.

Pension funds have historically focused on car dealerships let directly to the manufacturers themselves because of their attractive covenants, and which tend to go for less than 6% yield.

Second-tier assets such as those owned by specialist firms such as Pendragon are more frequently traded and tend to be less coveted.

"They come up reasonably often," said Wilson.

Other buyers of the Pendragon portfolio included Schroder Property, which acquired assets worth £37m for a pooled vehicle via a joint venture between the firm's multi-manager clients and the £1.2bn Schroder Exempt Property Unity Trust (SEPUT).

In a statement, Schroder head of UK property fund management Ian Mason pointed to the fund manager's strategy to target non-mainstream markets offering resilient rents and expected above-inflation income growth.

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