The £21bn Greater Manchester Pension Fund has added the Intu Chapelfield shopping centre in Norwich to its property portfolio in a joint venture with West Yorkshire Pension Fund.
LaSalle, on behalf of GMPF and WYPF, will acquire a 50% interest in the property for £148m, which represents a net initial yield of 5%. The price is in line with the valuation on 31 December 2016 of £296m and represents a small discount to the valuation at 30 June 2017 of £305m. The net rental income of the property was £15.5m last year.
Intu Chapelfield is located in the centre of Norwich and has an annual footfall of 12 million people. The centre has 90 units let to the likes of House of Fraser, Apple, Zara, River Island, H&M and Boots.
GMPF already has an interest in the success of Norwich, investing in April 2015 in an infrastructure fund that has invested in new trains on the East Anglia network including the London to Norwich intercity line.
Intu will continue to manage the centre on behalf of the joint venture. The closing of the transaction is subject to EU merger clearance.
The transaction further advances Intu’s stated strategy of introducing investment partners to its assets and recycling capital into its UK development pipeline. Intu will use the net proceeds of the transaction to repay debt on its revolving credit facility and to invest into its committed development pipeline.
In a trading update on Thursday, Intu said occupancy across its portfolio which includes Trafford Centre and Manchester Arndale, remained healthy at 96%. A £74m redevelopment of Barton Square to enclose the area under a roof and add an 88,000 sq ft Primark is progressing through the construction procurement stage with a mid-2019 completion date.
GMPF had 50 properties in its UK portfolio at 31 March 2017. The portfolio was valued at £683m. In 2016/17 LaSalle comp0leted its second year as property investment manager of the GMPF. It sold five smaller underperforming assets, four of these in the retail sector and the other an industrial unit. These were replaced with a retail park in Croydon and the 130,000 sq ft Alpha speculative industrial unit at Airport City Manchester for £12.2m, where it is also a development partner.
Tom Rose, fund manager at LaSalle, said: “This is an acquisition that we believe will provide long-term value. It is a quality asset in an affluent catchment area, well-aligned with our strategy for UK investments.”
Cllr Kieran Quinn, leader of Tameside Council and chairman of GMPF, added: “This is an excellent addition to our portfolio. Greater Manchester Pension Fund, which is the largest local government pension fund in the country and managed by Tameside Council, is committed to achieving sustainable long-term investment returns for our members’ pension requirements. I am confident that the partnership between LaSalle and intu will prove successful in its management of this asset.”
Shares in Intu Properties were up 10p to 223p.