M&G leads £237m Tesco supermarkets deal for Asian investor

The platform formerly known as PRUPIM has acquired three Tesco supermarket in a deal that sees it form a partnership with an unnamed Asian institutional investor and Tesco’s pension fund.

M&G Real Estate, the real estate arm of Prudential-owned M&G Investments, has led the purchase of a majority stake in a three-strong portfolio of Tesco supermarkets in partnership with an unnamed Asian institutional investor. The deal involves the purchase of units in a Jersey property unit trust, which owns the properties.

M&G, which rebranded last month from PRUPIM, acquired for its partnership a 70 percent stake in Tesco supermarkets in London, Durham and Swindon for a combined value of £237 million (€280 million; $361 million) from the Tesco Pension Fund. The pension will retain the other 30 percent stake.

M&G, which manages more than €17 billion of real estate globally, and its partner will inherit exposure to combined space of 450,000 square feet through the transaction. The real estate investment management firm will manage the properties and act as advisor to its partner going forward.

Alex Jeffrey, chief executive of M&G Real Estate, said the deal reflected growing institutional appetite for secure, long-dated income streams linked to inflation. “This is an excellent opportunity for us to acquire assets that provide the type of income that our clients usually seek from the index-linked government securities markets,” he added.

“It also is an opportunity to build a partnership with an Asian institutional investor of the highest calibre,” Jeffrey said. “UK commercial real estate, particularly retail property of this prime quality with a tenant of such standing, is increasingly attractive to overseas investors with a long-term investment horizon.”

Steven Daniels, chief investment officer of Tesco Pension Investment, the platform responsible for investments by the Tesco Pension Fund, underlined the importance of entering into a long-term partnership with both M&G Real Estate and its partner, but also in retaining a position in the three properties. “These three superstores are prime assets to which we wanted to retain exposure, and the partnership route enables us to achieve this,” he said.