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PSP in £500m London portfolio deal

The Canadian pension plan has acquired a 50% stake in a portfolio of 14 assets in a deal with the investment arm of UK insurer Aviva.

Public Sector Pension Investment Board (PSP), one of Canada’s largest pension investment managers, has acquired approximately £500 million (€705 million; $770 million) of central London real estate.

PSP’s investment has kick-started a joint venture partnership with Aviva Investors, the investment arm of UK insurer Aviva, with the purchase of a half-share in a portfolio of 14 assets in the capital city, including existing properties and development sites. Combined the assets represent more than 1 million square feet of space.

Neither Aviva nor PSP revealed how much was paid but according to the UK property magazine Estates Gazette, the stake cost in the region of £500 million.

Under the terms of the arrangement, Aviva will continue to act as the asset and development manager for the joint venture.

Prime yields in central London have compressed considerably in recent years, but Ed Casal, global chief executive officer for real estate at Aviva, said that London’s office market conditions remained attractive as “robust” occupier demand continued to lead to higher rents being obtained. Similarly, he said the city’s retail properties were still attracting healthy tenant demand and were benefiting from strong tourist numbers.”

He said: ““We are delighted to enter into this strategic partnership with PSP Investments, an experienced and sophisticated long-term global investor. Aviva Investors has a strong pedigree in investing in prime Central London real estate assets and a background in delivering high profile developments. We are well positioned to implement a number of attractive development opportunities within the portfolio and look forward to working with PSP Investments and our Aviva client as we bring these to fruition.”

Neil Cunningham, senior vice president, global head of real estate investments, PSP Investments commented: “This investment is consistent with PSP Investments’ real estate strategy to invest in prime and dynamic city centers that we expect will outperform in the future, and is complementary to PSP Investments’ existing portfolio in London.”