Schroder UK Real Estate Fund (SREF) announced that it has partnered with Zurich Immobilien Europa Direkt’s investment foundation (“IED”, a pan-European strategy managed by Schroders Capital) to acquire “The Brewery”, a supermarket-anchored retail warehouse and leisure scheme in Romford, Greater London, for £162million in a 50/50 joint venture.
The brewery comprises a 21-acre site with 545,478 square feet of retail and leisure space anchored by national operators including Sainsbury’s supermarket, Nuffield Health, The Range, Boots, Pure Gym, Vue cinema 16 screens and multiple food and drink outlets including Wagamama, Starbucks and Costa Coffee. The scheme also benefits from 1,750 parking spaces and strong sustainability credentials, including BREEAM accreditation in use.
The acquisition follows Schroders’ research that retail park rents are expected to stabilize, with retail park footfall currently 3% above pre-pandemic levels. With typical rents and service charges lower than malls, Schroders expects there will be continued demand for retail park units from discount retailers, convenience, gyms as well as take-out cafes and food chains. The sector should outperform other markets, supported by the active professional market and relatively high yields.
The Schroders Capital team is well positioned to drive the program forward post-acquisition and will seek to deploy its extensive experience and expertise in the retail and leisure sectors to drive performance. Schroders’ dedicated retail team will combine strong existing relationships with occupiers across the industry with a collaborative, operations-focused mindset, a strategy proven in major Bracknell, Hammersmith and Cardiff in recent years.
The brewery also offers potential for longer-term alternative use, being located in the strategic development area of Romford. SREF has a strong track record of creating space, with several projects currently underway, including Ruskin Square in Croydon, where over 500,000 square feet of highly sustainable office space has been leased to the UK government and Cambridge North , where SREF is developing the first 100,000 square feet. First Grade A office building in the 35-acre mixed-use urban neighborhood.
HampsonWall, CSP, Montagu Evans and Stephenson Harwood represented the joint venture in the acquisition.
Jessica Berney, fund manager for SREF, Schroders Capital, comments: “The Brewery is a thriving commercial storage park that benefits from strong footfall and a good tenant mix that favors convenience and leisure occupants in accordance to post-pandemic consumer demand. We will work closely with local government planning teams to help improve 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 to sectors expected to outperform, building future performance potential capital and improving portfolio sustainability credentials The acquisition follows the £345m industry swap agreement with SEGRO in October 2021 and continues to demonstrate SREF’s strategic ability to find future opportunities to deliver strong returns to 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, strong business performance, affordable rents and ample opportunity to execute both short-term and long-term asset management initiatives to create sustainable long-term revenue growth and strong returns for SREF.
“We believe in retail assets that perform well for retailers. Our partnership approach with our retail tenants gives us strategic insight into how best to configure physical real estate for optimal business performance. The pandemic has accelerated omnichannel retail techniques, helping to secure physical real estate at the center of a retailer’s distribution network. Well-positioned assets like The Brewery will continue to position themselves as strategic retail hubs for Click & Collect, Fulfillment and Commodity destinations. Our long-standing specialist retail and leisure expertise has contributed to the repositioning of several retail warehousing assets, the Bracknell Regeneration, Mermaid Quay in Cardiff and the success of our business plan at Kings Mall in Hammersmith , which we sold to Ikea in the fourth quarter of 2019.”
Roger Hennig, Fund Manager for Zurich Investment Foundation Immobilien Europa Direkt (IED), Schroders Capital, comments: “This leisure, retail warehouse and food program is an attractive addition to the portfolio. The asset offers a high yield and will further diversify the portfolio, which has now grown in value to over €1.5 billion. The joint venture with the Schroder UK Real Estate Fund (SREF) will ensure both partners can capitalize on the significant expertise of the Schroders team in retail and venue building to ensure asset performance in the future.
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.