Ocean Portfolio purchased by Legal & General Property

Posted on 16 December, 2014 by Kirsten Kennedy

Legal & General Property (LGP) has completed a deal to buy the entire Ocean Portfolio for £226.5 million, representing a net initial yield of 6.5 per cent.

Large furniture warehouse

The Ocean Portfolio is comprised of 13 different sites located throughout the UK, although much of the space can be found in the Midlands and North East. However, the majority of the portfolio’s total value comes from the two largest assets – Fradley Park industrial estate at Lichfield and Follingsby Park in Gateshead.

Although Legal & General Property claimed the headline sale, the transaction was in fact divided between its two separate funds. Therefore, going forward, its £1.7 billion UK Property Fund (UKPF) will claim ownership of the portfolio’s four largest distribution warehouse parks, while the remaining assets will fall under ownership of the £1.2 billion Industrial Property Investment Fund (IPIF).

Fund manager at the Legal & General UK Property Fund, Matt Jarvis, believes the acquisition will prove highly profitable in the future.

He says; “Providing a strong alignment to the fund’s strategic objectives, the impact of the acquisition will include an increase in yield and a higher weighting to good quality product in a sector we expect to outperform in the medium term.

“The purchases complement the fund’s current stock and style picking preferences, offering very good locations and modern warehousing, as well as presenting it with numerous and varied asset management initiatives to pursue over the short and medium term.”

Earlier this year, property advisor DTZ was appointed to dispose of the overall Ocean Portfolio by DTZ Receivers, which previously owned the package of assets. Although Fradley Park is not technically a part of the portfolio, its inclusion in the sale indicates that LGP intends to operate it in conjunction with its counterparts, thus boosting the annual rent roll of the combined assets to £15.6 million.

The Ocean Portfolio covers a total of 3,798,871 sq ft at present, although the sale also included a further 48 acres of potential development land lying adjacent to a number of the sites.

At present, it is unknown whether LGP intends to utilise this development land as a means of increasing asset value still further, but the existing 142 tenants of the Ocean Portfolio are not expected to be affected by the deal either way.

Since the start of this year, the UKPF aspect of LGP has acquired a number of assets which in total are worth £487 million. This is largely due to the inflow of capital from retail investors, although this latest move indicates that a venture into the industrial side of the commercial property market is very high on the priorities list in future.

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