The UK investment market is seeing plenty of action as portfolios flood on to the market from all sectors. At the same time, a growing pack of institutions are vying for mandates to manage property for outside clients.
FISPAM, the property arm of Friends Ivory & Sime, has launched its first vehicle for other investors - a £100 million sterling fund aimed at Irish investors who want a slice of the UK property market. The organisation said it has raised about £35 million for the Irish fund, mainly from individual subscribers.
According to Paul Herrington, managing director of FISPAM: "This is a very exciting opportunity for us as it breaks with traditionally managed Friends Provident funds. It gives another dimension to our already large and diverse property fund management expertise and brings total funds under management to approaching £2 billion."
He has geared the fund up to £100 million with debt from Royal Bank of Scotland. Investors are locked in for five years and expect to get a return of 1 per cent above the market performance as measured by Investment Property Databank.
FISPAM is not alone in recognising the Irish appetite for UK property. Savills, CB Hillier Parker and Mason Philips have all launched vehicles for individual investors in the past two years. But Mr Herrington said the 2 per cent gap between yields on Irish and UK property is continuing to fuel demand.
"The Irish appetite is still quite high," he said. FISPAM could look at a second round of fundraising later this year. And no wonder: product is entering the market as companies wanting to reduce their cost base, or rebalance portfolios, or indeed, having consolidated with others, sell off property assets.
Take Guardian's £750 million portfolio, which is now on the market. The majority of the portfolio comprises leasehold office space identified as surplus to requirements after a programme of rationalisation following AXA's recent acquisition.
Meanwhile, MEPC is clearing out £200 million worth of "small fry" in its portfolio sale. The company is selling a multi-million pound package of small retail lots as part of its shift to larger assets. The group is in talks with Prudential, Equitable Life, Henderson and Hermes.
Land Securities, Great Portland Estates and British Land are all re-evaluating their portfolios in the face of persistent share under-performance. The UK's largest developer, Land Securities is to sell its first substantial chunk of industrial property for several years. LandSec is reviewing its £400 million industrial portfolio and wants to sell a number of its smaller assets.
This month, King Sturge will market a package of 11 properties, with a total price of around £30 million, including the Royal Pennine Trading Estate in Rochdale and other investments in northern England, Scotland and the West Midlands.
In the retail arena, a new high-profile portfolio up for grabs is that of furniture retailer World of Leather. The chain has gone into receivership and Edgerley Simpson Howe is to dispose of the leases on 60 of the company's stores, plus leases on 15 out-of-town Uno furniture stores.
Morgan Stanley has struck an innovative £340 million deal with Sainsbury's. The deal involves the sale and lease-back (at full market value) of 16 supermarkets on new 23-year leases.
AT the same time, Morgan Stanley is issuing bonds backed by Sainsbury's rent to finance the deal, in a process known as securitisation. The bonus for Sainsbury's is that the rent, set at the market rate at the start of the deal, will rise by a fixed 1 per cent a year. This gives Sainsbury's the certainty of knowing exactly how much rent it will pay.
Marks & Spencer, the UK's biggest high street retailer, is moving in the same direction. The retailer is looking at a deal involving a sale-and-leaseback for its 324 stores coupled with a bond issue. Any deal would still allow the store group to alter or redevelop any of its properties or substitute others into the portfolio.
