Schroders shops locally for 8.5% return

Schroders Real Income Fund is targeting an 8.5% gross yield for investors from a joint venture with Local Shopping REIT. Schroders’ multi-manager clients, including those in the Real Income fund of funds, have invested £55m in Local Retail Fund. LSR has put £5m into the ungeared joint venture.

Schroders’ head of property William Hill said the investment for these clients in local convenience shopping followed others in UNITE’s Student Accommodation Fund, Schroders’ motor retail property unit trust and the MedicX Healthfund. “Convenience shopping is not discretionary spending and it’s a sector where banks are not willing to lend,” Hill said.

“This is an interesting example of how the multi-manager business is developing; identifying talent to manage the money. You can’t rely on the right fund going past your shop window.”

LSR joint chief executive Mike Riley said the five-year fund has a one-year investment period. It has five stores let to Tesco, Martin McColl, One Stop, Co-op and Sainsbury’s under offer for £2.5m in total.

Riley said the new fund was “consistent with our strategy of building revenues from joint ventures and asset management for third parties”. LSR also has a £100m  value-added joint venture with Pramerica, which has invested about a third of its capital in a year. It buys properties that LSR believes can generate 20% internal rates of return from asset management.