LV= Asset Management is undertaking a significant rebalancing of its property portfolio, according to Howard Meaney, the head of property investment.
Meaney says “after seeing a glimmer of hope in the market”, LV put seven of its properties, worth £43m, up for sale during the summer.
The market response has been good. “So far we have sold two and exchanged on a third, worth £18m, and we have lawyers working on deals involving the remaining four,” he says.
Meaney says LV are selling “a mixture of prime-ish assets and some secondary stuff”.
While he admits he was “surprised that debt was available to some of the buyers”, he says “due diligence is far more thorough, taking longer than two years ago, when people could not do deals fast enough”.
LV is reinvesting in the supermarket sector. It has secured two “very attractive” leaseback deals on properties from Tesco for £35m.
“They are 25-year leases, with a 5.3% initial yield and fixed increases throughout the term.”
Meaney is planning to diversify the LV portfolio further by investing in property-rated equities. “Some of these companies are very well priced,” he says, “and they will give us reasonably liquid investments.”
He is also seeing a recovery in the rental market. “This month we have seen interest in units that have been ignored for the last two years,” he says.
He is optimistic that recovery in the property sector will continue. “I think we will see positive returns of between 8 and 10% in 2010.”