Long lease real estate represents a defensive investment that blends traditional fixed income and real estate characteristics. It provides long-dated, inflation-linked income from high quality investment grade tenants, secured by prime UK real estate, further strengthening cash flows. The universe of long lease real estate assets comprises investment structures such as sale and leasebacks, ground rent transactions and income strips. All transaction types give investors the benefit of long dated lease contracts, with quarterly rental payments and contracted, inflation-linked uplifts.
Long lease real estate can offer diversification benefits versus equities, typically offering similar return potential but with less volatility. The risk profile can also be considered to be lower than traditional real estate, with an illiquidity premium over corporate bonds demonstrating relative value.