Publications

- February 1, 2020: Vol. 14, Number 2

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Taking the long view: In an era of low interest rates and rising maintenance costs, the benefits of long-income assets within UK real estate portfolios are hard to ignore

by Renos Booth

Economic uncertainty and plummeting government bond yields have increased the attractiveness of long-income real estate for liability- and cashflow-driven investors in the UK. Encouragingly, at the same time, opportunities to fund or acquire assets with counterparties of strong credit quality are emerging.

While some companies are reducing their sale-and-leaseback activity, partially due to IFRS accounting changes, many public sector entities are actively seeking new ways to finance real estate development, as well as monetise their existing ownership. These counterparties often have unique requirements, which entail complex structuring. By working bilaterally to achieve these goals, more attractive pricing should be achievable. More fundamentally, lower-for-longer interest rates, the search for alternative funding by public-sector entities and rising maintenance costs all strengthen the case for UK long-income assets.

Lower for longer

At the e

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