The UK’s £7.8bn (€9.3bn) Santander pension scheme is to grow its exposure to leisure and retail assets in an attempt to benefit from the “mass affluent generation looking to relive their youth”, according to the company’s head of pensions.
The master trust, encompassing half a dozen legacy defined benefit funds of varying sizes, has grown its property portfolio by £800m since Antony Barker joined the firm in mid-2012 from consultancy, JLT.
As part of the expansion, it has acquired stakes in the Manchester Arena concert venue, a brewery complex in London and Liverpool One, a 16-hectare shopping centre redevelopment.
According to Barker, both the price of concert tickets and the speed at which these were sold were good indicators of how UK residents were spending their disposable income.
He added that the scheme was looking into the acquisition of further entertainment venues, as they often presented opportunities to grow income with the opening of other food outlets.
“Often these assets were built with public money and it would be uneconomic to do privately. But suitably repriced, they make a very good opportunity for us, particularly where we can see there is scope to add on hotel space, additional corporate hospitality or nightclub facilities.”
“We like properties whereby the intrinsic value may take 7-10 years to emerge, and will need work to do it,” he added. “If the value is obvious, it will be wiped off the price.
“Because they are perhaps a 7-10 year game, a pension fund would be the natural holder of these assets, but you need a pension fund with the capability to compete effectively in a transactional situation and the governance to support it.”
Speaking to IPE’s How We Run Our Money, Barker said that the fund’s strategy was to target distressed situations “where the property intrinsically has a much better value”.
“That’s not to say that it’s actually distressed property,” he explained. “It’s a distressed situation where – it could be the tenant, it could be the landlord, or in many cases, it’s the landlord’s banker – in trouble and therefore the need for a transaction leads to a price distortion.”