UK - The West Midlands Pension Fund has bolstered its retail exposure in the UK by adding a shopping centre, warehouse park and supermarket to its direct portfolio.
The deals, undertaken by property manager ING Real Estate Investment Management, were worth £142m and may conclude the pension fund's recent acquisition trail in the UK.
The local authority pension scheme has been capitalising on a re-priced UK market in recent months.
Mike Hardwick, investment manager at West Midlands, told IPE Real Estate the acquisitions would bring the pension fund close to its target allocation to the UK and that they were unlikely to be followed by any significant further investment.
The latest acquisitions include the Arc Shopping Centre in Bury St Edmunds, bought for £79.45m, reflecting an initial yield of 5.55%, from a client of Delancey.
The modern shopping centre, opened in 2009, consists of 35 units and a department store totalling 271,000 square feet.
Mike Daggett, ING REIM fund manager for the West Midlands Pension Fund, said: "We are delighted to have been able to secure such prime retail assets for the fund's long-term core portfolio after a competitive bidding process that demonstrated the continuing institutional appetite for quality stock.
"The properties further our strategy of refreshing the portfolio, bringing in prime, well-let assets that will be well-placed to outperform in the medium to long term."
ING REIM has been reviewing potential shopping centre purchases for several months, and the fund manager believes the retail sub-sector in the UK will outperform over the next three to five years.
"In terms of its potential for rental and capital growth, The Arc is head and shoulders above the others we have considered," Daggett said.
"It is already partly reversionary, and there will be opportunities for us to apply our asset management skills to enhance performance in the future."
The second asset was Phase III, part of the Clifton Moor retail warehouse park in York, acquired for £37.5m, reflecting an initial yield of 5.5%, from a client of Scottish Widows Investment Partnership.
Daggett said: "The open A1 retail park in York is a prime investment, providing secure long-term income and the potential for rental growth.
"We already have a number of initiatives planned to capitalise on the property's pre-eminent location within the wider Clifton Moor Retail Park."
The third asset was a Morrisons supermarket in Wood Green, London, acquired for £25.75m, reflecting an initial yield of 4.28%, from Astra Estates.
"The Morrisons purchase follows our purchase for West Midland last year of a 100,000 square foot ASDA in Birmingham," Daggett added.
"We anticipate above-average rental growth from this sub-sector, and I am particularly pleased to have secured such a scarce commodity.
"We are confident these assets, which bring the total of new purchases to over £200m since we took over the West Midlands mandate at the end of 2007, will contribute strongly to the fund's performance in the future."
