Legal & General Property (LGP) has exchanged contracts to acquire the Overgate shopping centre in the eastern Scottish city of Dundee.

Legal & General Property (LGP) has exchanged contracts to acquire the Overgate shopping centre in the eastern Scottish city of Dundee.

The investment volume for the transaction on behalf of LGP's UK Property Income Fund II (UK PIF II) came to just over £125 mln (€150 mln).

Simultaneously, LGP secured a £150 mln debt facility with US lender Wells Fargo and Spanish banking group Santander on behalf of the fund.

Representing the first acquisition by UK PIF II, Overgate is the dominant retail centre in Dundee, Scotland’s fourth-largest city. The fully enclosed shopping centre totals 39,000 m2 of space, comprising 70 retail units and two multi-storey car parks with more than 1,000 spaces. It is anchored by Debenhams and Primark.

A replica of the first UK Property Income Fund (UK PIF I), to which Wells Fargo (previously Eurohypo) and Santander are also the debt providers, the seven-year facility provides a 'hunting licence' and supports the fund's gearing structure which allows investors to choose their preferred level of gearing of between 0% and 50% Loan to Value (LTV).

The all-in cost of borrowing is estimated at 4.5% for the duration of the loan. UK Property Income Fund II will target opportunities that are expected to allow it to achieve a net IRR of 8-9% for ungeared investors and a net IRR of 12-14% for geared investors, LGP said.

UK PIF II had already secured over €165 mln from seven investors based in the UK, Nordics and Middle East, giving it a total investment capacity or gross asset value (GAV) of €267 mln, when gearing is included. With a strong pipeline of investor interest and a second close expected before the end of 2013, the fund is targeting a GAV of £750 mln, through a series of closings, and is capped at a GAV of £1 bn.

Cushman & Wakefield acted for Land Securities and CBRE advised LGP.