Long lease inflation-linked

UK long lease and EU long lease

Long lease real estate typically comprises high-quality assets let on long-term leases to financially robust tenants, including listed companies, universities and local authorities. These investments are often structured through sale-andleaseback transactions, enabling occupiers to release capital while retaining operational control of business-critical properties. Ground rent investments can also form part of the opportunity set, offering exposure to ultra-long-dated income streams.

Long lease structures can provide investors with secure and predictable cashflows, often incorporating inflation-linked rental growth. This combination of income visibility, inflation protection and potential capital appreciation can make long lease real estate well suited to the objectives of institutional investors.

Drawing on more than two decades of experience, M&G employs a long-term, relative value-driven investment approach focused on business-critical assets in sectors supported by positive structural trends. By combining real estate and fixed income expertise, we have built diversified portfolios of high-quality investments designed to deliver attractive risk-adjusted returns over the long term.

The UK strategy primarily invests in long-dated leases, typically 25 years or longer, secured against high-quality real estate and investment-grade tenants. The portfolio focuses on assets that provide long-term, inflation-linked income with the potential for capital value growth.

The European strategy applies the same investment philosophy across selected European markets, typically investing in assets secured by leases of 15 years or longer. The focus is on generating long-term, inflation-linked income from highquality properties occupied by financially strong tenants.

UK income strips

Income strips are similar to traditional sale and leaseback transactions, except that ownership of the asset transfers back to the tenant at the end of the lease. Returns are therefore derived from inflation-linked rental payments over the contracted lease term – usually 40-years plus. Like other types of long lease real estate investment, underlying assets often constitute business-critical real estate. 

Income strips can provide close alignment with the objectives of many institutional investors, given that they offer bond-like cash flows with attractive yield potential. While they are secured by ownership of real assets during the lease term, 100% of the return is derived from rental income therefore returns are not dependent on the real estate market. 

Our strategy aims to deliver long-dated, secured income from investment grade rental cashflows in the UK. Over more than two decades, leveraging real estate and fixed income expertise has enabled us to build a large, diverse portfolio of high quality investments, with the aim of delivering attractive and consistent risk-adjusted returns.

The views expressed on this webpage should not be taken as a recommendation, advice or forecast. The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested.  Past performance is not a guide to future performance.