UK - Lancashire County Pension Fund has sold a UK industrial portfolio to two unnamed local authority pension schemes for £25.5m (€29.2m).

Knight Frank, which has managed the £4.6bn final-salary scheme's property portfolio since 1983, sold the five assets because smaller lot sizes no longer fit the strategy of the scheme's substantially expanded real estate portfolio.

The yield on the divestment was 7.3%.

The sale of the actively managed portfolio follows a series of new lettings over the past 12 months.

John Styles, head of Knight Frank Investors, said: "The scheme had completed all that asset management could do on the assets. There was no more value to be added."

Industrial has been one of the three major sectors targeted by the pension scheme since it increased its real estate allocation by £140m two years to a target exposure of £380m.

Property currently makes up just less than 9% of the overall portfolio, against a target of 10%.

Despite the scheme's earlier stated intention to pause once it had reached 10%, Styles said it had hinted that it might instead pursue other real estate strategies, possibly overseas.

"We started off investing in safe, core, income-producing assets," he said. "Over the past 12 months, we've been moving up the risk curve to take advantage of a recovery in the occupier markets over the next three-five years."

Aberdeen Property Investors acquired the assets on behalf of two unnamed pension schemes.

John Danes, head of UK property research and investment strategy at Aberdeen, cited a higher income return than that offered by retail and offices.

"There tends to be less volatility in industrial than in central London office in particular," he said.

The portfolio's assets are located in towns in the southeast of England, where there is more pressure on land and lower vacancy rates.

"Sometimes when you buy a logistics asset, you're buying it not for what it is but what it could be," said Danes.

"These assets could be converted in the long term into residential, for example - though that's not necessarily what will happen here."

Despite the protection against volatility offered by logistics, Danes acknowledged investors were selecting carefully on the basis of asset quality and covenant.

"Assets such as these with strong covenants and long leases come up pretty rarely," he said.

"Poor-quality portfolios come up more often, but investors are staying well clear of them because of the increased risk.

"They want to have secure tenants as a form of risk guarantee. Investors, including us, are quite risk averse at the moment."

In separate news, Knight Frank announced that the Lancashire pension fund had sold a central London office asset to its tenant for £1.7m - yielding 4.2% and "quite a significant premium over its value", according to Styles.