The Local Shopping REIT plc. ('LSR'), a UK real estate investment trust focused on investments in local shopping assets, is pleased to announce that it is combining with Schroders to create a £60 million unlisted fund to invest in convenience retail opportunities.
Local Retail Fund (the 'Fund') will be an English Limited Partnership managed by Schroders and strategically advised by LSR, market leaders in the niche market of convenience and local shopping.
Structured with a Jersey PUT feeder, the Fund will be ungeared and will have an income based focus. LSR will have a strong alignment of interest through a £5 million co-investment and a performance related fee basis in addition to base management fees.
The Fund, which is exclusive to Schroder Property Multi-Manager clients, will have a five year life and will target convenience retail stores, such as Tesco Express and Sainsbury's Local, with adjacent units let to national multiples and local retailers. The expected target investments of circa £1 million will provide a diversified portfolio and it is anticipated that target investments will provide an average net initial yield of 6.5%.
The Fund will also be seeking to identify properties which will offer additional asset management opportunities for LSR to exploit to enhance each asset's capital value and income stream.
Mike Riley, Joint Chief Executive Office of Local Shopping REIT plc, commented: "The creation of Local Retail Fund is consistent with our business strategy of building revenues from joint ventures and asset management for third parties. We've been very impressed with the efficiency and thoroughness of Schroder's due diligence and are looking forward to working closely with them to create value for their investors.
"Tenant demand for convenience and local shopping assets from both national operators (in particular, supermarkets) and independent traders is holding up well and we look forward to using our specialist management skills and experience of stock selection to work alongside Schroders to build a strong presence in this niche, but growing, sub-sector of the retail market."
Graeme Rutter, Co-Head of Schroder Property Multi-Manager, comments: "This is another example of Schroders creating exclusive products for our clients around exceptional property managers like LSR. Local Retail Fund will be available to our segregated mandate clients and will be a significant holding for our Real Income Fund, which targets resilient income treams and tenants with pricing power in an environment of modest economic growth."
Source: FTI Consulting