A long-term investment strategy that aims to deliver regular inflation-linked income from investment grade rental cashflows in the UK.
Income strips are similar to traditional sale-and-leaseback transactions, except that the ownership of the asset usually transfers back to the tenant at the end of the lease (assuming all contractual rent has been paid). This removes the residual value uncertainty of the investment at lease end.
All the value of these investments are derived from the contracted cashflows under the lease agreement.
Rental payments over the contracted lease term (usually 25 years plus) offer a close alignment with the liability-matching objectives of many institutional investors, in that they are bond-like, inflation-linked cashflows. They are also secured by ownership of real assets during the lease term.