M&G Investments launches continental European long-lease fund

M&G Investments has launched continental Europe’s first dedicated long-lease real estate fund.

The investment manager, which runs a £3.2bn long-lease fund in the UK, has raised €265m from five UK and continental European pension funds for the strategy.

The European Secured Property Income Fund has already invested €100m, buying assets in Belgium and Portugal.

Ben Jones, who manages the £3.2bn M&G Secured Property Income Fund, told IPE Real Estate that it was an “appropriate time” to extend the long-lease fund concept to the continent.

While overall, lease lengths in the UK have been shortening in recent years, the market for long leases has also been increasing, Jones said. This “two-tier” market is expected to grow in continental Europe, especially as a growing number of companies look to enter sale-and-leaseback transactions.

The fund has bought a portfolio of supermarkets in Portugal, entering into a 20-year sale-and-leaseback deal with food retailer Sonae.

The acquisition of 12 food retail assets for €164m marks M&G’s first foray into the Portuguese real estate market.

The fund also bought a David Lloyd Leisure health and racquets club in Brussels, leased back to the tenant for 30 years.

Two further deals in Germany and Ireland are expected.

Simon Pilcher, CEO of fixed income at M&G Investments, said: “European companies are beginning to seek alternative ways to raise finance, with sale and leaseback being an increasingly popular option.

“Launching this fund is the natural next step as we take more of our institutional strategies into continental Europe.”

The fund is being managed by Jones and deputy fund manager Peter Riley.

Two years ago, Invesco Real Estate launched a pan-European long-lease strategy on behalf of a single investor.