Legal & General Capital and Dutch pension fund manager PGGM have launched a £375 mln (€500 mln) joint venture focusing on London offices.

Legal & General Capital and Dutch pension fund manager PGGM have launched a £375 mln (€500 mln) joint venture focusing on London offices.

The partnership has made its first acquisition in Broadwick Street, Soho, for nearly €90 mln and will target assets with value-add potential and a value of between €40 mln and €120 mln. Legal & General Property (LGP) will lead the acquisitions process and act as fund manager.

In a statement, the partners said the venture aims to secure Central London investments which 'provide superior growth prospects due to neighbouring infrastructure and regeneration projects, as well as significant asset management opportunities such as repositioning and redevelopment.'

'This partnership is another example of our ambition to have a high degree of control over our investments,' said Mathieu Elshout, senior investment manager at PGGM.

Laura Mason, director of direct investments at Legal & General Capital, said: 'Today’s announcement is an excellent example of what can be achieved by partnering with forward-thinking international capital, and I would expect many more joint ventures of this type to follow.'

The purchase of 72 Broadwick Street in Soho for £67 mln (€89.6 mln) represents a net initial yield of 4.7%. The island site is expected to benefit from the opening of a nearby commuter rail station in 2018.

The property has a net internal area of 6,070 m2, including 5,026 m2 of office space and 1,042 m2 of residential accommodation over six floors. The offices, including 22 basement parking spaces, are let to The National Magazine Company until September 2018 and provide potential for expansion.

Walbrook Land and Savills acted for LGP on the acquisition and JLL acted for the vendor.

The news follows the announcement earlier this month that L&G and PGGM had partnered together to acquire the Bishopsgate Long Term Property Fund Unit Trust for around €495 mln. Held in a joint venture as well, the Trust comprises a portfolio of 24 commercial properties located across the UK and arranged over 143,370 m2.

Legal & General Capital manages the principal investments of Legal & General, a UK insurance group with a market capitalisation of €20.6 bn.

PGGM manages €179.5 bn in pension assets.

While PGGM works with just under a dozen or so fund managers and operators, the trend is to avoid the overheads of fund structures and to invest via joint ventures and club deals, according to the group's management.

In 2013, the pension fund withdrew from a London office fund because they had no control over the investments. ‘With joint ventures we have control and we are not drawn into a strategy which we do not support. And this way of investing also provides a lower cost,’ Elshout told Dutch financial newspaper Het Financieele Dagblad.

The Dutch pension fund giant had a ‘super active’ year in 2014, Guido Verhoef, the fund's head of private real estate, said during a panel discussion at INREV’s Amsterdam Investor Intentions seminar last week. 'In total we invested €2 bn in real estate last year, this is partly committed and partly invested.'

For the coming year, Verhoef expects to increase the allocation to real estate from 11% to 12% with a 50-50 split between direct and indirect. In volume terms, however, the amount will be somewhat lower than last year, he added. 'Altogether, we expect to invest about €1.5 bn this year.'