Legal & General Property has invested £69.5m (€97.7m) in a Birmingham hotel and office for its long-lease fund.

The investment manager bought the headquarters of beer brewer Mitchells & Butlers and an adjacent hotel operated by the Ibis Styles brand.

The assets, in Fleet Street and Lionel Street, were bought for the Limited Price Inflation Income Property Fund, backed by defined benefit pension schemes.

LaSalle Investment Management sold the properties at a 3.94% net initial yield.

The 95,000 sq ft office building was built in 2003 for Mitchells & Butlers, which in 2009 signed a 35-year lease.

Derek Gilby, senior fund manager at Legal & General Property, said the asset was the first major regional, city-centre office asset bought for the fund.

The ULI and PwC’s jointly compiled Emerging Trends in Real Estate report this year found Birmingham to be the most investable city in the UK and the sixth most investable in Europe. 

The report said Birmingham had risen from 17th last year. 

Gilby said: “Birmingham is set to benefit from a number of significant infrastructure projects already underway, and the asset is well-positioned to gain from the regeneration of the adjacent Paradise area, which is undergoing a rapid transformation. 

“Mitchells & Butlers offers the fund a strong tenant covenant, providing secure, inflation-proofed income over a long lease term, yet with the benefit of market rental upside.”

Launched in 2010, the LPI Fund has £675m in assets under management.