The largest local authority pension fund in Britain has made its second multi-million pound commitment to expanding its commercial property portfolio in less than two weeks — taking its investment cash pot to more than £1bn.
Earlier this month the Greater Manchester Property Venture Fund — a sub-fund of the Greater Manchester Pension Fund (GMPF) granted commercial property specialists GVA a seven year extension on its mandate to manage a £300m investment allocation.
Now the largest local authority pension fund in the UK has awarded LaSalle Investment Management a £750m contract to build up a property portfolio with a specific condition that it concentrates on British commercial holdings.
Claimed to be one of the biggest real estate acquisition mandates awarded in the UK in recent years, LaSalle will also take over the management of the fund’s existing properties. If successful it’s also possible the allocation could be topped up with a further £250m.
The GMPF decided to outsource its domestic real estate portfolio last year because, as director of pensions Peter Morris explained, it “did not possess the internal resources to increase the value of the pension fund’s property assets and the size of its holdings”.
One of the requirements for company’s tendering for the 10 year mandate was that they should already have at least £3bn of UK property assets under management. LaSalle, which currently oversees around £10bn of assets, said it would initially seek to acquire UK properties worth up to £75m on behalf of the fund.
Profits from the Greater Manchester Pension Fund are ploughed into retirement schemes for employees of the 10 local authorities in Greater Manchester. According to its 2013 annual report, property made up between six and seven per cent of its £12.6bn investment portfolio. LaSalle’s future purchases will take that share closer to 10 per cent.
“This is a significant mandate that can rise up to £1bn, and we hope LaSalle can make a significant long-term contribution for the fund’s returns,” said the fund’s chairman and Tameside Council leader, Kieran Quinn.
Earlier this year LaSalle’s estate agency arm, Jones Lang LaSalle, predicted that relatively high yields on secondary property will encourage more buyers to enter the sector. Property share prices, currently trading at a hefty premium to underlying asset values, are an indication that there will be a rise in values in the near future.
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