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$19.3bn) of gross real estate asset under management* Broad range of investment strategies over 3 years** Independent fund manager 45 years experience Over 120 people globally of managing real estate Award-winning performance Source: Schroders, at 31 December 2015. Performance measured against its official benchmark (this may or may not include fees). * ** Active management from Schroders managing real estate Winner 2015 SREIT Winner 2015 WELPUT
Selecting the right real estate approach 3 St James Square, London Schroder Real Estate has a range of products and services to meet the needs of professional investors. This brochure is designed to help determine the most appropriate solution to meet different requirements. There are many ways to access real estate. Each investor will have their own preferences so a good starting point is to consider which attributes matter most. The three factors that are typically most important are the size of investment, the desire for control and the need for liquidity. The priority of these will determine how an investor implements their decision. 1
Important attributes to consider Size of investment Real estate is a physical asset where the value of a commercial property is often measured in millions of, or US$. 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. 2
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. 3
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 Least liquidity: Direct/joint ventures Moderate liquidity: Pooled fund/ Real Estate Capital Partners Investors should seek professional advice before making an investment. 5
S C H R O D E R R E A L E S T A T E A P P R O A C H E S 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 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