The UK Long Lease Property Fund will invest in alternative property assets in the UK, such as student accommodation, ground leases, primary healthcare and housing associations, as well as more traditional commercial long-lease assets such as supermarkets and offices. It has already attracted a total of £250 million from six pension funds, and more than £100 million of the seed portfolio has already been invested in property assets with an average lease term of over 20 years.
The fund, which is open to institutional investors only, targets a five per cent distribution yield with income distributions made on a monthly basis, making it attractive to pension funds and other institutional investors seeking help to match their liabilities with inflation-linked income. The strategy also offers the potential to outperform index-linked gilts and diversify fixed income portfolios.
BlackRock has ten years’ experience in investing in alternative property assets in its core UK property strategy – the BlackRock UK Property Fund - which offers exposure to a diversified mix of UK real estate, but this is the first time the firm has offered a fund focused in this area of investments.
Marcus Sperber, Head of Real Estate for BlackRock in Europe, the Middle East and Africa, said,
“Both traditional and non-traditional real estate can provide pension schemes with alternative sources of long-dated income, but we see alternative property assets coming more into vogue. We have instantly put money to work with this new strategy and are looking for other assets to acquire to build the portfolio further.”
Real estate accounts for more than a third of the total assets under management by the world’s 100 largest alternative asset managers, according to the latest Towers Watson Global Alternatives Survey and BlackRock expects this asset class to remain a core part of institutional portfolios.
This move to offer institutional investors further access to alternative property markets follows the news in May that the firm has entered into a definitive agreement to acquire MGPA, the independently-managed private equity real estate investment advisory company in Asia-Pacific and Europe. The planned acquisition will make BlackRock a global real estate investment manager, with pro forma assets under management of approximately $25 billion as of March 31, 2013 and substantial investment teams in the world’s top six markets which represent 75 per cent of the investable commercial real estate universe.
