M&G wins $500m UK mandate

The real estate arm of UK pension fund Prudential said the deal represents a shot in the arm for the UK property market after eight months of ongoing uncertainty following Brexit. 

M&G Real Estate, the real estate arm of UK pension fund manager Prudential, has been awarded a $500 million core mandate by an undisclosed European investor to invest in UK property.

M&G Real Estate, which has approximately £20 billion ($25 billion; €23.6 billion) worth of UK assets under management, said the agreement would see it target all property types in primary markets in the UK. However, the firm’s preference is thought to be the regional office market, in particular the ‘Big Six’ cities outside of London, namely Manchester, Birmingham, Edinburgh, Glasgow, Leeds and Bristol. This strategy, it said, was driven by strong tenant demand and limited supply in the UK office sector.

After regional offices, M&G will look at logistics assets, particularly ‘last mile’ sites on the outskirts of major conurbations.

Although M&G Real Estate did not reveal the identity of the investor, PERE understands the institution has previously done business with M&G Investments, Prudential’s fund and asset management business, in the past.

In the wake of the EU referendum, this commitment by a major European investor signals confidence in the UK real estate market and confirms the status of UK commercial property as a compelling asset class on a long-term basis,” said M&G Real Estate chief executive Alex Jeffrey.

“This new mandate reinforces our position as one of the most active participants in the UK real estate investment market and is testament to our market-leading reputation for origination, reliable execution and ability to participate in the full spectrum of real estate,” added Jeffrey.

Jeffrey also stated that the mandate reflected the firm’s strategy to grow its separate account business selectively in the UK, Europe and Asia. M&G confirmed that investing in the UK was the “first logical step” towards expanding its reach globally, but further mandates targeting continental Europe and Asia could be expected in the future.

“The UK’s decision to leave the European Union has created a period of political uncertainty, yet the UK’s economy is resilient and clear opportunities exist to take advantage of continued macro trends such as the growth of e-commerce and greater urbanization,” said Martin Towns, head of capital solutions at M&G Real Estate.

It is thought that the purpose of the mandate, from the investor’s perspective, is primarily to diversify its global portfolio. M&G Real Estate said it would drive income through rental growth and potentially, further down the line, asset management.