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Legal and General in £176m last exit for UK fund – exclusive

The UK insurer has sold the remaining assets in UK PIF, its £300m core/core-plus 2010-vintage vehicle.

Legal & General Property, the property arm of British insurer Legal & General, has made the last exit from its first UK Property Income Fund (UK PIF). The firm sold a portfolio of trade park estates for £176.5 million (€234 million; $254 million) which reflects a net initial yield of 6.1 percent.

The fund, a £300 million 2010-vintage vehicle, focused on core and core-plus investments in UK properties. In a move considered to be the first of its kind in the UK, the fund featured different investing options through which investors have a choice of gearing levels they are exposed to. The structure effectively enables them to choose a level of gearing exposure from 0 percent to 50 percent.

Accordingly, the firm targeted net IRRs of 10 percent for ungeared investors and 15 percent for geared investors. It is understood that Legal & General have been able to better these returns.

“This final disposal marks a successful end to UK PIF I as it starts to wind down, and is in line with our business plan for this portfolio, having completed numerous active asset management initiatives to improve the income return, which has allowed us to achieve an exit price which will deliver strong returns to our investors,” said Charlie Walker, director and fund manager of UK PIF.

The portfolio was sold to Legal & General’s Industrial Property Investment Fund and comprises 47 trade parks located across England, Wales and Scotland. In total there are 273 units with a floor area of 1.6 million square feet and an average unit size of 5,900 square feet.

“We decided to sell as a portfolio earlier last year and on this occasion one of the Legal & General flagship funds joined the sales process. We have an independent IAC [investment advisory committee] to oversee any conflict and they were called upon here to oversee the interest,” said Walker.

“As a big industrial buyer, and pricing in the inherent growth drivers in the trade counter market, they came out on top.”

Legal & General have already closed and begun investing UK PIF’s successor, UK PIF II. The firm raised £403 million last May in what is believed to represent the largest volume of capital raised by a diversified UK closed-ended property fund in over 12 months.

UK PIF II has acquired four properties to date, totaling almost £372 million, which include Priory Court and Temple Court in Birmingham, The Overgate Centre in Dundee, the Grafton Centre in Cambridge and FC200, West London.