NAB takes control of $7.3bn UK property fund

NATIONAL Australia Bank has taken a majority stake in British commercial property fund manager Orchard Street Investment Management.

NATIONAL Australia Bank has taken a majority stake in British commercial property fund manager Orchard Street Investment Management, a group with £4 billion ($A7.3bn) under management.

The deal, which will not alter Orchard Street’s day-to-day management, has yet to be formally announced to the Australian market.

It comes as the UK commercial property market continues to boom, and months after NAB sold off over a billion dollars’ worth of distressed loans in its UK property portfolio.

“We have been looking for an opportunity to provide our clients with access to this asset class and are delighted to announce this partnership with Orchard Street,” NAB Asset Management executive general manager Garry Mulcahy said.

“The partnership is consistent with our strategy of identifying and partnering with the best investment talent from around the world.”

Orchard Street, which invests across industrial, retail warehouses, offices and shopping centres, has grown its funds under management from £800 million ($A1.4bn) to around £4bn ($A7.3bn) in the past ten years.

Meanwhile, the fund manager praised NAB’s “strong cultural fit” for its business.

It will retain partner Chris Bartram as chairman of the combined entity, while Philip Gadsden will continue as managing partner and senior management committee head.

The Orchard Street agreement brings NAB’s stable of fund managers globally to 13, with total funds under management of around $178bn.

Although the UK’s commercial property market surge of the past two years has seen recent signs of moderation it remains very strong, with analysts eyeing the best returns in over two decades for 2014.

Rival London real estate major GVA, a subsidiary of Europe’s Bilfinger Real Estate company, which has €40bn ($A57.5bn) in funds under management, is forecasting total commercial property returns of 20 per cent in 2014. These are expected to moderate to 8.7 per cent and 7 per cent respectively for 2015 and 2016, it says.

Business Spectator