UK - Schroders has joined forces with the Local Shopping REIT (LSR), a leading owner of UK property, to launch a £60m (€71.9m), five-year convenience store fund targeting the segregated-account clients of its multi-manager business.
The unlisted fund, which Schroders will manage with strategic advice from the AUM £190m REIT, will capitalise on a UK shift away from out-of-town superstores towards local outlets of national retail chains, targeting the customer habit to 'top up' supplies.
Co-head of Schroder property multi-manager Graeme Rutter pointed to UK supermarket chain Tesco's recent decision to halt development of out-of-town hypermarkets in favour of smaller, convenience-type outlets.
"People may be less cash rich, but they're also time-poor," he said. "There's a growing trend for people to top-up their shopping on the way to or from the station."
In the meantime, LSR's ability to deploy capital will be critical because the fund will acquire individual assets rather than portfolios.
The fund, which will invest in both small venues belonging to national retailers and adjacent stores, will also target value-added opportunities.
The 655-asset REIT, for its own portfolio, will consider assets worth less than £100,000 but cap potential portfolio acquisitions at £50m.
LSR chief executive Mike Riley said: "It's easy to buy property - but it's even easier to buy the wrong property. The question for investors is whether the locale can sustain the rents."
According to Riley, several long-term trends were contributing to an upsurge in local shopping, despite a moribund high-street sector, including not only an ageing population but also high petrol prices and parking constraints in many areas.
LSR, which plans to grow its business through joint ventures and third-party mandates, will co-invest £5m in the fund and receive performance-based fees on top of base management fees.
For the Schroders fund, it will rely on a network of 80 property agents nationwide, each with strong dealflow.
"They're already looking at specific acquisitions even before the investment phase begins," said Rutter.
He also pointed to LSR's contracts among property companies in the regions, suggesting the fund could also invest in development projects.
"In the past, property companies would have gone to banks and finance," he said. "That may not be an option now."
Schroders' fund comes within a series of 'real income' vehicles reflecting four changing structural themes: capital scarcity, a demographic shift towards an ageing population, sustainability and technology.