The Schroder UK Real Estate Fund (SREF) has announced it has partnered with Zurich Investment Foundation Immobilien Europa Direkt (‘IED’, a Schroders Capital managed, pan-European strategy) to acquire “The Brewery”, a prime supermarket anchored, retail warehouse and leisure scheme in Romford, Greater London for £162 million in a 50:50 joint venture.
The Brewery comprises a 21-acre site with 545,478 sq ft of retail and leisure space anchored by national operators including a Sainsbury’s superstore, Nuffield Health, The Range, Boots, Pure Gym, a 16-screen Vue Cinema and several food and beverage outlets including Wagamama, Starbucks and Costa Coffee. The scheme also benefits from 1,750 car parking spaces and strong sustainability credentials including BREEAM in-use accreditation.
The acquisition follows research from Schroders that retail park rents are expected to stabilise, with customer footfall at retail parks currently 3% ahead of pre-pandemic levels. With typical rents and service charges being lower than shopping centres, Schroders expects there will be continued demand for retail park units from discount retailers, convenience-led occupiers, gyms as well as coffee and ‘grab-and-go’ food chains. The sector looks set to outperform other markets, underpinned by the active occupational market and the relatively high-income returns.
The Schroders Capital team are well placed to take the scheme forward following the acquisition and will look to deploy their considerable experience and expertise in the retail and leisure sectors to deliver performance. The specialist retail team at Schroders will combine strong existing relationships with occupiers across the sector with a collaborative and operationally focused mindset, a strategy that has demonstrated success at major schemes at Bracknell, Hammersmith, and Cardiff over recent years.
The Brewery also offers longer term alternative use potential, being located within the Romford Strategic Development Area. SREF has a strong placemaking track record, with several projects currently underway including Ruskin Square in Croydon, where over 500,000 sq ft of highly sustainable office space has been let to the UK Government and at Cambridge North, where SREF is developing the first 100,000 sq ft prime, Grade A office building at the 35-acre mixed-use urban quarter.
HampsonWall, CSP, Montagu Evans and Stephenson Harwood acted for the joint venture on the acquisition.
Jessica Berney, Fund Manager for SREF, Schroders Capital, comments: “The Brewery is a successful retail warehousing park which benefits from strong footfall and a good tenant mix that is weighted towards convenience and leisure occupiers in line with post-pandemic consumer demand. We will be working closely with local government planning teams to help enhance the site and this area of Romford.
“The asset offers an attractive initial yield for the fund and is in line with several of the fund’s objectives including growing income returns, increasing exposure in sectors expected to outperform, strengthening future capital performance potential, and improving the portfolio’s sustainability credentials. The acquisition follows the £345m industrial swap deal with SEGRO in October 2021, and continues to demonstrate SREF’s strategic ability to source future opportunities to deliver strong performance for its investors.”
Harry Pickering, Head of UK Retail, Schroders Capital, added: “The Brewery is an exciting opportunity, showcasing the best of what retail warehousing should be; well located, a strong trading performance, affordable rents and ample opportunities to perform asset management initiatives both in the short and longer term to create long term sustainable income growth and strong returns for SREF.
“We believe in retail assets that perform well for retailers. Our partnership approach to our retail tenants gives us strategic insight into how best to configure the physical real estate for optimal trading performance. The pandemic has accelerated omnichannel retailing sales techniques, helping to secure physical real estate at the centre of a retailer’s distribution network. Well positioned assets like The Brewery will continue to secure themselves as strategic retailing hubs for click & collect, fulfilment and convenience destinations. Our longstanding specialist expertise in retail and leisure has helped the repositioning of multiple retail warehousing assets, the Bracknell Regeneration, Mermaid Quay in Cardiff and the successful completion of our business plan at Kings Mall in Hammersmith, which we sold to Ikea in Q4 2019.”
Roger Hennig, Fund Manager for Zurich Investment Foundation Immobilien Europa Direkt (IED), Schroders Capital, comments: “This food anchored, retail warehouse and leisure scheme represents an attractive addition to the portfolio. The asset provides a strong income yield and will further diversify the portfolio, which has now increased in value to over €1.5 billion. The joint venture with the Schroder UK Real Estate Fund (SREF) will ensure that both partners can capitalise on the significant retail and placemaking expertise of the Schroders team to deliver performance from the asset going forward.”
IED is an investment vehicle managed by Schroders Capital. This investment vehicle is only available to eligible investors domiciled in Switzerland and is not available to investors in the UK.
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