Pramerica UK Ground Lease Fund sees strong investor interest with new inflows of GBP98.3 million
Property Funds World has reported that the Pramerica Real Estate Investors has raised an additional GBP98.3 million of new subscriptions to its UK Ground Lease Fund since the mandate was transferred to Pramerica on 1 September 2010, resulting from a trend of investors moving out of Index Linked Gilts into alternative investments, which provide the potential for better returns with similar levels of risk.
Once the new subscriptions are fully committed the fund will have about GBP225 million from investors. Pramerica is the European arm of the real estate investment and advisory business of Prudential Financial, Inc. (NYSE: PRU), which is based in the United States.
In addition, Pramerica has secured the acquisition of three assets representing a value of GBP28.6 million, including the ground leases of two landmark Central London buildings on behalf of investors in the fund. The assets are diversified across the office, hotel and residential sectors of the real estate market, and comprise:
The ground lease on Vintners’ Place, Upper Thames Street, London for GBP10.5 million in an off market transaction. The lease is subject to an unexpired term of 128 years. Vintners’ Place is a high profile 265,000 sq ft prime office building in the City of London. The freehold is owned by the Worshipful Company of Vintners.
The ground lease on the Great Northern Hotel, King’s Cross, London, for GBP12 million in an off market transaction. The transaction allows the owner to extract value from the asset itself to invest in the redevelopment of the hotel, and the 999-year ground lease has been structured specifically for the deal, expiring in June 3010. The Great Northern Hotel is a core, Central London asset close to King’s Cross and St. Pancras stations, and is located in an area that is currently undergoing considerable regeneration.
A ground lease portfolio of 184 residential holiday homes in the Cotswolds, UK for GBP6.1 million. The leases on each unit are over 970 years, meaning none will expire before 2979. The homes are all well located, waterside properties in a desirable area of the UK.
These deals follow the acquisition of the ground lease at the Park Plaza Riverbank Hotel, London, in October 2010. Pramerica’s Ground Lease Fund targets very long ground leases of over 75 years, which typically offer investors the benefits of long term, secure income derived from high quality assets.
“These acquisitions are an excellent fit with the criteria of our fund, offering very low risk income with the potential for an attractive yield,” says Charles Crowe, Pramerica’s director of UK real estate transactions and strategy. “They demonstrate our ability to source high quality assets and secure deals on behalf of our investors across all sectors of the property market. As well as providing an attractive, secure investment, ground lease sales also frequently benefit freeholders, as they are able to monetise a sometimes overlooked asset and deploy that cash in their business or the redevelopment of the assets in question.”
“The fund has now successfully invested GBP44.6 million in high quality assets, and we continue to seek out further opportunities to acquire good ground leases,” adds Paul Dennis-Jones, Pramerica’s director of UK real estate fund management. “The demand for the long term, secure income offered by this type of product and underpinned by the fund’s strict investment criteria has been clearly shown by the GBP98.3 million that we have attracted to the fund in the last nine months. We are increasingly seeing that investors are looking further afield from traditional assets such as Index Linked Gilts for investments such as the Ground Lease Fund, which offer the potential for better returns and diversification for similar risk.”