Henderson Global Investors Ltd. and Centurion Properties Ltd. set up a fund to invest 250 million pounds ($373 million) in U.K. warehouses.
The venture between the unit of Henderson Group Plc and Centurion plans to buy groups of industrial buildings outside London with more than one tenant, Henderson Global property director Cameron Fraser said today in an interview. Prices have fallen because some buyers have struggled to raise money for acquisitions, he said.
Henderson and Centurion are targeting an internal rate of return, a measure of profitability, of 8.5 percent during the Industrial Income Fund’s five-year life, the London-based companies said in a statement today. The gap between returns from warehouse properties outside London and real estate in the U.K. capital is the highest ever, Andy Schofield, Henderson Global’s director of research, said in the statement.
The diversity of tenants for warehouses “is likely to make industrials the most attractive U.K. property sector over the next seven years,” he said.
Yields for the best-located U.K. warehouses ranged from 6.25 percent to 8.25 percent in 2012, compared with 12.25 percent for poorer quality industrial properties, according to data compiled by CBRE Group Inc. Yields are the annual rent expressed as a percentage of the purchase price.
Henderson, which manages 12.5 billion pounds of real estate, and Centurion plan to raise 100 million pounds from institutional investors and wealthy individuals by September, according to the statement. They will then try to raise another 90 million pounds, Fraser said. The fund will add debt to give it a value of 250 million pounds, he said.
Total returns from income-producing U.K. warehouses were about 3 percent last year, compared with about 4.7 percent for offices and 2.4 percent for retail properties, according to data compiled by Investment Property Databank.