April 2016
Schroder Real Estate
For professional investors only. Not suitable for retail clients.
Selecting the right
real estate approach
www.schroders.com/realestate
Schroder Real Estate
Highlights
£13.1 billion
75% assets
outperforming
(€17.8bn / US$19.3bn)
of gross real estate asset
under management*
Broad range
of investment
strategies
over 3 years**
Independent
fund manager
45 years
experience
Over 120
people globally
of managing real estate
Award-winning
performance
Source: Schroders, at 31 December 2015.
Performance measured against its official benchmark (this may or may not include fees).
*
**
Active
management
from Schroders
managing real estate
Winner
2015
SREIT
Winner
2015
WELPUT
Selecting the right
real estate approach
3 St James’ Square, London
Schroder Real Estate has a range of products and services to meet the needs
of professional investors. This brochure is designed to help determine the most
appropriate solution to meet different requirements.
There are many ways to access real estate. Each investor will have their own
preferences so a good starting point is to consider which attributes matter most.
The three factors that are typically most important are the size of investment, the
desire for control and the need for liquidity. The priority of these will determine how
an investor implements their decision.
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Important attributes
to consider
Size of investment
Real estate is a physical asset where the value of a commercial property
is often measured in millions of £, € or US$. While large investors can
buy property assets directly, for most institutions investing less than £50
million (€70/$80 million), in a diversified portfolio of direct real estate is not
practical. In certain sectors such as central London offices, the threshold
maybe much higher.
As individual buildings are not divisible, many investors buy funds which
pool capital to acquire single assets or portfolios of assets. Collectively,
the pooled capital provides sufficient scale to make an investment with
an attractive risk profile.
Control
One of the benefits of direct investment in commercial property is that
it comes with control. This includes the ability to sell the property when
required; to select tenants and to manage the building.
As a physical asset, regular investment is required to maintain and
enhance value, which requires the resources and skill to manage real
estate. Not all investors making large allocations will want to buy property
directly and an indirect pooled approach is attractive and appropriate for
those who do not wish to be actively involved in property management.
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City Tower, Manchester
Liquidity
The direct real estate market is illiquid, with sales of commercial
properties taking months, not days to complete.
Unlisted pooled funds often provide greater liquidity with regular dealing
dates. Often an active secondary market is available which allows
holdings to be traded directly between buyers and sellers.
For investors wanting or needing a greater degree of liquidity, listed Real
Estate Investment Trusts (REITs) or other property companies may be the
most suitable means of gaining exposure. Though these investments
are typically more volatile than direct real estate in the short term, over
the medium term they offer a relatively high correlation of returns with
direct property markets.
Other factors
Additional factors which are not general to a particular style of
implementation, but which will condition the specific selection
of a real estate allocation include:
–– Investment objective
–– Diversification
–– Gearing.
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55 Bishopsgate, London
Summary
of priorities and solutions
Size
>£50m:
Direct/joint venture/
separate account/
pooled fund
<£50m:
Pooled fund/
Real Estate Capital Partners
Control
High control:
Direct/joint venture/
separate account
Lower control:
Pooled fund/
Real Estate Capital Partners
Liquidity
High liquidity:
Real Estate Investment Trusts
(REITs)/property securities
Moderate liquidity:
Pooled fund/
Real Estate Capital Partners
Least liquidity:
Direct/joint ventures
Investors should seek professional advice before making an investment.
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Further information
Tom Dorey
+44 (0)20 7658 3020
tom.dorey@schroders.com
Schroder Real Estate Investment
Management Limited
31 Gresham Street
London EC2V 7QA
+44 (0)207 658 6000
realestate@schroders.com
www.schroders.com/realestate
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About Schroders
£313.5 billion (€425.4 billion/
US$462.1 billion) managed across
equities, fixed income, multi-asset,
alternatives and real estate.
An extensive global network of
3,700+ employees.
38 offices in 28 countries across
Europe, the Americas, Asia,
Middle East and Africa.
Over 200 years’ experience of
investment markets.
Source: Schroders, at 31 December 2015.
Important information: For professional investors only. Not suitable for retail clients. The views and opinions contained herein are those of Schroder Real Estate Product
Team, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and
should not be relied on for, accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in the document when
taking individual investment and/or strategic decisions. The risks associated with investments in securities of companies principally engaged in the real estate industry include:
the cyclical nature of real estate values; risks related to general and local economic conditions; overbuilding and increased competition; increases in property taxes and operating
expenses; demographic trends and variations in rental income; changes in zoning laws; casualty or condemnation losses; environmental risks; regulatory limitations on rents;
changes in neighbourhood values; related party risks; changes in the appeal of properties to tenants; increases in interest rates; and other influences of capital markets on real
estate. Generally, increases in interest rates will increase the costs of obtaining financing, which could directly and indirectly decrease the value of the Fund’s investments. The real
estate market has, at certain times, not performed in the same manner as equity and bond markets. As the real estate market frequently performs, positively or negatively and
without any correlation to the equity or bond markets, these investments may affect the performance of the Fund either in a positive or a negative manner. Issued by Schroder
Real Estate Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Registration No. 1188240 England. Authorised and regulated by the Financial Conduct
Authority. For your security, calls may be recorded or monitored. w48629