The £8bn (€10bn) Tesco Pension Scheme has completed the purchase of a shopping centre in the town of Lincoln for £46m.
Located in the heart of Lincoln, in the east of England, the centre was purchased from asset manager Capital & Regional as part of the scheme’s growing real estate portfolio.
The manager recently invested in redeveloping the shopping centre before handing over the reins to the Tesco scheme, itself a large supermarket chain.
The pension fund allocates roughly 10% of its assets to real estate and manages the UK portfolio of assets in-house.
In an interview with IPE in September, CIO Steven Daniels said the fund liked retail exposure in its real estate holdings, as they offered long-term lease agreements, highly rated tenants and inflation-linked rental income.
He said the index-linkage allowed the fund to match pension increases and avoid the use of derivative-based hedging instruments.
In 2013, the pension fund supported a new office development in Cambridge, investing £32m in construction costs and pre-letting 90% of the office space.
In other news, the Makro Staff Pension Scheme has completed a £185m insurance buy-in arrangement with Rothesay Life.
The deal, adding to 2014’s already booming insurance bulk annuity market, covered a significant majority of the scheme’s liabilities.
Makro, originally a Dutch chain of warehouse stores for a range of goods, sold its UK business to rival outlet Brooker Group in 2012.
At the end of 2011, it closed the defined benefit scheme to new members and future accrual, with the view to insuring remaining participants.
As a general rule, insurance buy-ins are arranged to cover pensioner members and act as an asset held by the scheme, while the insurance company makes regular payments covering pensions.
Consultancy LCP advised on the transaction while Pinsent Mason provided legal advice.
Emma Watkins, partner at LCP, said covering both pensioner members deferred members added additional complexities to the deal.
“[The deal showed the] determination on the part of the trustee and the company to get to this position,” she said.
“It also shows how well-prepared trustees and sponsors who respond quickly when opportunities arise can take advantage of favourable market conditions and competitive pricing.”
LCP recently predicted the UK bulk annuity market would regularly exceed £10bn in deals each year, as the funding positions of UK schemes improves.