Continental Europe is top of the agenda for Henderson as it develops new funds and investment partnerships in the region.
The property team at Henderson Global Investors expects to feature regularly in the pages of EuroProperty this year. Its historic strengths are in the UK and Australasia, while the acquisition of US investment manager Phoenix Realty in 1999 gave it weight on the other side of the Atlantic. In the coming year, the 270-strong property department plans to raise its game in continental Europe.
Global director of property John Partridge chose to remain tight-lipped about the sectors and countries Henderson would be targeting, but emphasised the importance of continental Europe to the group and its clients. “It’s a key market for us, the centerpiece of our global [property] growth strategy. What’s been announced is the tip of the iceberg compared to what’s coming.”
The deals announced can be seen as a foretaste of Henderson’s strategy. They featured a joint-venture with an existing specialist vehicle – Henderson’s 50% stake in out-of-town retail specialist Pradera in December last year – and the launch of innovative products targeting cross-border investment. Henderson is soon to have three funds under management for German institutions in UK property.
In other words, Henderson’s expansion into Europe will be a mixture of organic growth under its own banner as it launches funds on the basis of its own research and management expertise, and investment and development partnerships with key players. Overall, Partridge is highly optimistic. “The property cycles are behind other economies, the markets are very inefficient and immature. That means there’s a lot of client demand, especially from the US.”
The yet-to-be-announced deals will build on a foundation of staff and offices that Henderson has put in place over the past year. New bases have been opened in Frankfurt and Milan (joining London, Amsterdam, and Madrid) while Rodney Bysh was attracted from HypoVereinsbank as director of property for continental Europe, and Tim Horrocks joined from DGI as chief investment officer for the region at the end of last year.
Henderson can trace its origins back to 1934, and by 1983 it had evolved into Henderson plc, a publicly-quoted investment trust manager. In March 1998 it was acquired by Australian financial services company AMP (Australia Mutual Provident). AMP then backed its existing asset management business into Henderson, and the combined asset management company started trading under the Henderson Global Investors name.
It now ranks as a top 10 global property fund manager, with $16bn under management in pooled and segregated funds, private limited partnerships and publicly-quoted vehicles. In turn, the funds encompass direct property investment, development opportunities, securities and equities. Half the total under management comes from insurance companies in the AMP Group – such as the UK’s Pearl and NPI – while the other half originates from external clients.
Property investment accounts for around 10% of the $165bn Henderson manages across all asset classes. Guy Morrell, director of UK property, likes to stress the advantage to clients in entrusting funds to a multi-asset investment house. “We don’t believe you can manage property properly by saying you manage property and nothing else. We can tap into a wealth of research into the bond and equity markets, which provides inputs into the property forecasting models.”
As an example of this research-led approach, Partridge cites the Henderson French Property Fund, launched in August 1999 to invest in Parisian office buildings outside the central core. “They are classic higher-yielding, actively-managed properties, a market segment we identified through research.” The fund was marketed to UK and Dutch pension funds.
In particular, Henderson hopes that its new European ventures will attract money from across the Atlantic. “The US is likely to become a major exporter of capital to Europe. We think their appetite for property will increase when we provide a safe, secure way to take US pension funds into Europe. Our aim is not about growing for growth’s sake, but taking money from one country to another in a tax-efficient way to meet the needs of clients.”
Partridge anticipates that the more mature continental European property markets will follow the UK trend towards outsourcing of property portfolios. “The move to enhancing shareholder value in the equity market is having enormous spin-offs for property. We can facilitate moving properties off the balance sheet and into tradeable vehicles”, he says.
But beyond that, he declined to speculate on the geographic area and specialist market sectors Henderson might target. Asked about central Europe, he said: “We are looking at particular areas of Europe which might include areas other than western Europe. For example, in countries that are potential members of the EU there may be some interesting plays as interest rates converge.”
Currently, the UK and continental Europe account for £4.5bn of the $16bn property total. Around £4bn is invested directly in bricks and mortar, and the rest in securities. Henderson believes in holding a mixed hand of investments and engaging in arbitrage between them. “As different markets go through cycles, you can take advantage of any mispricings to maximise returns,” says Morrell.
The Henderson team believes that there is an “accelerating trend” towards securities among its client base. “Globally, investors want exposure to property in more liquid, tradeable ways. Despite the problems you’ve had with the US Reit sector, we anticipate that weightings in holdings in listed securities is likely to rise.”
At the moment, the two principle securities vehicles are the TR Property Investment Trust, and the Henderson Horizon European Property Securities Fund, launched in 1998. As Partridge mentioned, Henderson also has mandates from three Dutch pension funds to invest in property via publicly-listed securities.
Henderson sees itself as responsive to the appetites among investors for new products. For instance, in 1996 it was the first to provide a fund specifically for German insurance companies to access the UK direct property market. The 10-year VV1 fund was followed by sister fund VV2 in June 1999, where it acts as the investment manager for HypoVereinsbank and ERGO-sponsored funds. It has recently been appointed to manage a third fund placed with German pension funds.
Morrell adds that Henderson could also roll out its “fund of funds” approach across continental Europe, where clients would give Henderson a mandate to invest in other management companies’ vehicles.
On the direct side, last December Henderson announced its 50% stake in the Pradera vehicle, set up by UK-based out-of-town retail specialists Paul Whight and Colin Campbell. The first fund – Pradera European Retail – raised Û180m on its first closing and is expected to shortly reach Û300m. Henderson’s injection of funds will bring forward the opening of new offices in Spain and Italy.
It is also investing in two major UK urban regeneration projects: in three schemes valued at $2.36bn in Birmingham with developers Hammerson and Land Securities; and in Liverpool where it is in the early stages of developing a 6ha slice of the city with developer Grosvenor.
Partridge sees new communications technology as a make-or-break element for property management in years to come. “The full impact of technology on property has been understated. Its biggest impact is uncertainty, which means that businesses don’t want long leases and inflexible buildings. Property fund managers are going to have to become more technologically able and sophisticated.”
Partridge says that Henderson is closely examining how property values will be affected by the advent of new technologies, and promises “work in progress and an announcement in this area”.
Henderson Global Investors
3 Finsbury Avenue
London, EC2M 2PA
Tel 44 20 7410 4100
Fax 44 20 7410 4499
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Funds under management |
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UK and Continental Europe catching up with Asia Pacific |
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|
Region |
Property funds under management $bn |
Total funds under management $bn |
|
UK and Continental Europe |
6.8 |
122 |
|
Australasia (Australia and New Zealand) and Asia Pacific |
8.2 |
41 |
|
North America |
1 |
2 |
|
Total |
16 |
165 |
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Source: Henderson |
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Selection of funds |
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Pradera fund raised €180m at first closing |
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Name |
Launch |
Investment strategy |
|
Henderson UK Property Fund |
1994 |
UK office, retail and industrial sectors |
|
Universal World Real Estate Fund |
1997 |
Global property securities |
|
Henderson Horizon European Property |
1998 |
European and UK-based listed property-related Securities Fund companies |
|
Henderson French Property Fund |
1999 |
Paris offices |
|
Pradera European Retail Fund |
2000 |
Continental Europe out-of-town retail |
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Source: Henderson |
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