Schroders Property Investment Management will consider turning some or all of its Hercules Unit Trust into a real estate investment trust.
The group is in talks with investors and advisers over strategies it could adopt to prolong the life of its £3bn retail warehouse fund past 2010, when it is due to wind up.
Executive director Michael Clarke said: “We will consider taking the real estate investment trust route, but the main thing is to consult with all the investors. If you don’t bring people in at an early stage, you get difficulties.”
One of the options Schroders could take for the fund would be to create a “feeder” REIT to work in conjunction with the closed-ended Jersey unit trust, taking advantage of the tax benefits of the REIT regime without converting the entire fund.
However, the more likely option is to extend the life of the closed-ended fund without materially altering its constitution, but introducing measures to improve liquidity, such as having periodical redemption windows.
Clarke said: “While we have all this excitement about REITs, this will be the first example of investors in the fund industry being able to give feedback after the introduction of REIT regulations.”
