Independent asset manager, Henderson Global Investors, has launched the Henderson Central London Office Fund II ("CLOF II"), a seven year absolute return, closed ended fund designed to capitalise on the cyclicality of the central London office market, and the emergence of interesting opportunities into a limited capital market. The fund will be marketed to UK and overseas institutional investors and has a target annualised IRR of 12 per cent per annum over the life of the fund.
Henderson is initially seeking to raise up to £200 million for a first close by the end of 2009. The overall target equity raise is up to £500 million. However, the manager intends to keep both the commitment and investment periods short, to protect returns.
The Fund will be managed by Clive Castle and Nick Deacon. Together, Clive and Nick have 36 years of experience in the central London office market and have completed over £2 billion of transactions while at Henderson.
Key points include:
- An absolute return target with performance fees based on realised returns. This aim is to provide managers with an incentive to dispose of assets at the right time;
- A relatively short-term fund life of 7 years, with the intention for capital to start being returned to investors from the 4th or 5th year (where advantageous to investors);
- Prudent use of gearing, with a target maximum of 50%;
- A flexible investment strategy allowing the fund manager to identify the best value in the central London office market.
Clive Castle says, "The central London office market is one of the most liquid, transparent and exciting property markets worldwide. We are already beginning to see interesting assets at attractive prices, and aim to be in a position to invest ahead of the general market re-pricing expected from 2010 into 2011. Everything in the strategy and structure of the fund has been designed to capture the benefits offered by this unique market and its cyclicality and to release them to investors."
CLOF II will focus on quality assets in good locations, with medium-term secure income. The manager will favour multi-let properties and intends for the fund to be well protected from occupier risk in the short-term, but with potential for asset management thereafter. This will include management of tenants and leases, and refurbishment (it is unlikely that there will be any exposure to development). There will also be scope to release value from leasehold titles.
Mike Sales, director of property investment at Henderson, adds, "With the launch of CLOF II we are offering investors access to the right market, at the right time, with an expert team. We believe that there will be a finite opportunity to invest in assets of this quality, in this world class location, at historically attractive prices, while capital markets are restricted. For overseas investors there is the additional benefit of the currency position. There is a rare chance for overseas investors to enter the central London office market at extremely good value.
Our specialist central London team are uniquely positioned to capitalise on this opportunity for investors. We are acting now to raise CLOF II so that we are ready to invest when the time is right."
The launch of the fund follows the success of the Henderson Central London Office Fund (CLOF), Henderson's first fund targeted at London offices, which was launched in 2004 with an objective of out performing the central London offices element of the IPD's UK Annual Index. The Fund runs until 2011, but a number of properties were sold in 2007 and 2008 to crystalise their performance, and £100 million of capital was returned to investors in December 2008. As at March 2009, CLOF was valued at £507 million and has a good track record of out performance against the benchmark.