UK – BP's UK pension fund has traded ownership of two retail parks worth £123m (€145.5m) for stakes in a supermarket and department store owned by M&G Real Estate.
The off-market retail asset swap, conducted with assets held by M&G's £2.2bn Property Portfolio fund, will see the BP Pension Scheme (BPPS) part with the Riverside Retail Park and Wycombe Retail Park in exchange for a store in Dover occupied by supermarket chain Tesco and a building used by retailer Debenhams.
M&G said the two retail parks were valued at £123m, whereas the Dover and Taunton-based assets were worth a combined £75m.
As a result, the asset manager paid the pension fund a further £48m net of costs.
Sally Bridgeland, chief executive of the £16.6bn BP scheme, told IPE that, like most UK funds, it was interested in assets that provided cash flows matching its long-term liabilities – prompting a shift in the emphasis in parts of its £1bn property portfolio.
She added that its real estate holdings were split between return-seeking and liability-matching assets, and that the two new units would be added to the latter portfolio.
Justin Upton, deputy fund manager at the Property Portfolio fund, said M&G's ability to conduct such a large deal off-market was a testament to the ongoing relationship between the scheme and the manager.
"This transaction is typical of the innovative approach the fund is taking to acquire high-quality assets in a restricted market characterised by low stock volumes," he said.
"By offering the BP Pension Fund this particular solution to cash re-investment risk, we were able to structure a mutually beneficial deal and remain substantial net cash investors ourselves."
According to BPPS's most recent annual report, its UK property holdings returned 4.5% at the end of December, with property rents contributing £63.7m towards 2012's investment income of £517m.
The fund's £1bn property portfolio largely consists of direct holdings, although £171m is invested in joint ventures, with outstanding capital commitments of £116m at the end of 2012.