The insurer has won plaudits for its canny investment strategy in the US.
UK insurance company Prudential Corporation owns the biggest institutional property portfolio in the UK. Prudential Portfolio Managers, the fund management division of the business, runs eight funds that own a total of £7bn of property. The life fund has the biggest property portfolio, at £5bn; an internal pension fund owns £300m; and a large pooled investment vehicle for third parties has £225m of property.
The life fund, mostly active in the UK, owns more than 1,000 properties, including more than 20 shopping centres and a major central London office portfolio. The overall property portfolio showed a 19.6% return last year, out performing the IPD benchmark return by 21.8%.
Last year Prudential bought its rival Scottish Amicable, merging the company’s £15bn funds into its own. These portfolios are being reconfigured to increase their weighting in equities and improve the funds’ long-term performance. There are also plans to boost the £1bn ScotAm property portfolio.
Prudential added to its property holdings during 1997 with a number of key acquisitions, including central London offices at Millbank and the Grafton Shopping Centre in Cambridge. Last December it paid P&O £315m for the Arndale Shopping Centre in Manchester, where it plans a £100m extension.
On the development front, Prudential completed the rebuilding of 30 Berkeley Square in London’s Mayfair, let it to BT and started development of the £300m GreenPark, Reading, a 81 ha business space project.
In March, it won planning consent for a 24,154 m2 office redevelopment scheme in London’s mid-town area, pre-let to law firm Lovell White Durrant. And last month Prudential’s 67,325 m2 The Mall shopping centre at Cribbs Causeway in Bristol began trading.
The Pru has generally restricted its property investment to markets in which its insurance business is active. This rules out Europe, where the Prudential is not operational, but PPM has kept what it calls a “watching brief” on European markets and did own some property there in the 1980s, selling out in the early 1990s.
The Pru has, however, carried out a successful excursion into US real estate in the last two years. This was a tactical play on the prospect of recovery in the US, with the Pru buying 10 properties in October 1996 worth $350m split between offices (70%) and retail (30%). So far, sales have raised $313m. These include Platinum Tower, an office block in Atlanta, Georgia bought in 1996 for $32m and sold for over $41m and Lakeside Square, an office block in Dallas sold for $57m.
Traditionally, Prudential has relied very heavily on research to help it make investment decisions. Eighteen months ago it reviewed the Asian property market but decided not to go into it. It says that, overall, it still has an appetite for more UK property investment and it is considering external markets.
Prudential Portfolio Managers
|
Total funds under management (£bn) |
119 |
|
Equities |
63 |
|
Fixed interest |
43 |
|
Property |
7 |
|
Cash/other |
6 |
|
Operating profit 1997 |
£44m |
Prudential Corporation
142 Holborn Bars
London EC1N 2NH
tel +171 583 1415
fax +171 548 3725
