AEW UK has made its first acquisitions for its recently launched Real Return Fund with the £33 mln (€43 mln) purchase of two leisure assets in London and a portfolio of public houses, restaurants and convenience stores in the Midlands and the South East.
The AEW UK Real Return Fund is a new strategy which seeks to align the real benefits of property with the liabilities of pension funds. The open ended, core-style fund targets a total real return of 4% per annum net of fees and expenses.
'We are delighted to have acquired our first properties in the ‘alternative’ sectors and hope to be able to make further announcements soon,' said Ian Mason, portfolio manager at AEW UK Real Return Fund. 'We aim to deliver better risk adjusted, liability focused returns with inflation-linked cash flow and income growth central to strategy. The Fund is challenging the way investors can think about property as a real asset and match for liabilities. We believe however that it is property skills, rather than only holding long leases that should ultimately preserve capital and drive performance; much of the income profile has been created through our own asset management.'
The portfolio includes a total of 24 properties, with 70% of the income linked to inflation, a weighted average unexpired lease term of over 16 years and a yield of over 6.5%.
The largest assets are the Point in Borehamwood, which is let to Pure Gym, Gala Leisure and Reel Cinemas, and Cross Point, comprising 44,000 sq ft of space in Coventry let to Tenpin and Pizza Hut.
The other assets comprise 17 freehold public houses, restaurants and five convenience stores which provide a combined rental income of £1.33 mln per annum. These are let to a variety of independent and corporate operators including Spirit Pub Company, Stonegate Pub Company, Tesco, Co-Op and Brunning & Price.
