UK - Hermes Real Estate is to sell the BT Pension Scheme's interest in the Bluewater Shopping Centre as part of a wider rebalancing of the portfolio away from "less liquid" indirect and joint venture holdings in the UK.
The 7.5% stake in one of the UK's largest shopping centres is a high-profile move, but just one of a number of partial or indirect UK real estate holdings of the BTPS portfolio that Hermes is seeking to sell.
Through a desire to achieve more control and liquidity and less exposure to leverage, the fund manager is seeking to reinvest capital in wholly owned, single assets.
Hermes is also likely to sell the pension fund's interests in a number of sector-specific funds, including a logistics fund and provincial office fund.
Chris Darroch, BTPS fund manager, said: "These things we can access directly ourselves, so we don't need to go indirectly.
"When we go directly, we have more control on the investment decisions, and we can get in and out of those markets more quickly. What we are trying to do is increase the liquidity of the portfolio."
The credit crunch and subsequent downturn from late 2007 highlighted the liquidity risk in the UK real estate market, especially in the indirect sector, where open-ended funds froze redemptions.
Darroch said it was particularly difficult to sell joint venture interests or units in funds in difficult market conditions when the BT Pension Scheme wanted to reduce its overall exposure to real estate.
"Selling those types of assets was not easy at all," he said. "We had to sell other direct assets, which had the impact of increasing our exposure to the indirect sector.
"So we want to control the future of the portfolio, and the only way we think to do that is to have 100% control over all the assets in the portfolio in the UK."
Hermes is also keen to reduce the BTPS portfolio's exposure to leverage that often comes with investments in funds.
"We don't see there really is a place for debt within our portfolio," Darroch added. "That is one of the principal drivers for reducing exposure."
The BT Pension Scheme's interest in the 1.6m square foot Bluewater Shopping Centre is estimated to be worth approximately £120m (€137m).
Darroch said: "Bluewater is a good asset, and it is probably one of the more liquid indirect assets we have.
"Selling Bluewater, however, meets two goals: it reduces exposure to an indirect holding, but it also reduces exposure to shopping centres, which effectively we have a healthy overweight position to."
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