Oz funds eyeing bargain UK property

Written by Ray Clancy

Wednesday, 24 March 2010 09:22

Some Australian pension funds are looking to invest in UK properties to take advantage of low prices and a strong Australian currency, it is claimed.

Cordea Savills, which is 60% owned by UK property consultant Savills, has launched an open ended fund, the Cordea Savills UK Income and Growth Fund, in to buy prime office, retail and industrial assets.

George Tindley, a fund director for Cordea Savills, said Australian investors are drawn to the UK market because the value for prime assets has fallen 45% during the global financial crisis.

‘That 45% fall in value almost becomes like 70% when you take into account currency falls. That’s really the primary reason for people looking at the UK at the moment,’ he explained.

‘We’ve got some long-standing conversations going with some of the big names. There are some encouraging noises in Australia,’ he added.

The fund is aiming to deliver a total return of 10 to 14% and is targeting a size of one billion pounds. It has already secured investors including Aviva Investors.

The UK property market started to recover last year with investors returning to look for bargains. Unlisted UK commercial property funds saw inflows rise from £450 million in the third quarter of last year to £2.9 billion in the fourth quarter, according to Cordea Savills.

Tindley said yields had already been compressed but property prices were still fairly priced. ‘We think it’s still a good time to be buying now,’ he added, noting that the UK has a long lease structure offering stable rental growth.

‘We are not pretending that it’s going to be easy couple of years looking forward in terms of the UK economy, but the types of properties we are buying are very strong tenants and very low-risk type properties,’ he said.