Canadian pension fund seals European warehouse deal with Segro
LONDON (Reuters) - One of Canada's largest pension funds formed a joint venture with Britain's Segro (SGRO.L) for a portfolio of European warehouses, the latest global investor attracted by the high returns of industrial real estate.
Such industrial property typically offers higher yields than offices or shops due to the risks associated with lettings to single tenants in outlying locations that can be difficult to fill should they leave.
The sector is also expected to benefit from the growth of online shopping which is increasingly dependent on warehouses for distribution.
Canada's Public Sector Pension (PSP) Investment Board, which manages C$64.5 billion ($61.5 billion) of police and army pension money, will contribute 303 million euros ($394 million)of equity for its half stake in the venture, the two said on Friday.
The JV will own 34 properties valued at 974 million euros in countries including France and Belgium and the rental yield is 7.9 percent, three or four percentage points higher than the best offices or shops in central London or Paris.
Norway's sovereign wealth fund formed a 2.4 billion euro joint venture for European warehouses with U.S.-based Prologis (PLD.N) last year.
"It (industrial property) is a perfect asset class in this world of falling bond yields because you have higher yields and letting momentum is actually picking up," said J.P. Morgan analyst Harm Meijer.
PSP Investments and Segro said they planned to grow the portfolio to at least 2 billion euros through developments and acquisitions over the coming years. About 11 percent of PSP Investments' assets, or $7.1 billion, is invested in real estate, with just 3 percent of that in industrial property.
Shares in Segro were trading 2 percent higher at 280 pence by 10.40 GMT.
Segro said the deal, which is due to complete by September, would reduce its full year EPRA pretax profit by 10.8 million pounds and lower its debt levels. ($1 = 0.7691 euros) ($1 = 1.0491 Canadian dollars)
(Editing by David Cowell)
NEW YORK - Stocks posted their largest drop in a month on Wednesday as traders locked in recent gains after a provisional budget deal out of Washington removed one of the near-term reasons for the Fed to keep up its current pace of economic stimulus.
WASHINGTON - U.S. small business sentiment bounced back from a seven-month low in November, with owners setting their sights on creating more jobs and expanding operations.
BEIJING/HONG KONG - China reiterated its opposition on Thursday to a European Union plan to limit airline carbon dioxide emissions and called for talks to resolve the issue a day after its major airlines refused to pay any carbon costs under the new law.