What has changed for Henderson in the last year? What were your expectations and where is the company today?
I think 12 months ago we were just seeing the German capital base reawakening and there was a reluctance to invest in pool products, but over the past 12 months that has changed. A first product that we launched 12 months ago met with success and subsequently we launched a second product. I would say that German capital is back for pool products but the strategy they are focusing on tends to be mainly domestic (or we could include Austria as they also speak German there). German capital is back in pool funds predominantly investing in German strategies.
What was your focus during this last year?
We focused on funds, basically Spezialfunds, a German structure. We focused on income-orientated funds. The investors we are working with are basically looking for a high and regular annual distribution–they are not so concerned about total return, which you probably expect to see among other western European investors.
We focus particularly on the retail sector, out-of-town retail warehousing and logistics. Logistics is probably a new sector for the German institutions but in order to look for return they’ve had to widen the breadth of the sectors they’re prepared to invest in. We’ve had success in the logistics space because it’s obviously yielding a lot more than if you were trying to invest in the prime end of the German market.
Where do you expect things to go in the year to come? Where are you going to focus?
I think with both our funds we are busy investing but if we could get that money deployed, we’d certainly be looking to try and launch further products in the retail and logistics sector. I still think there’s return to be had. In comparison to some of the competition, who are looking at the prime end of the logistics market, we are taking on measured risk. During the holding period of the assets in our portfolio we have to renegotiate with the existing tenants or re-let but at the same time we can get 150-200 basis points margin above prime.
That’s also a new step, this investor base and the fact that they’re prepared to take on board that risk. We think it’s manageable because we target good assets in good locations which perhaps have already been through a letting cycle.
Is it difficult now to find all those quality opportunities?
In the logistics sector, I would say no. A lot of the market is focusing on the prime end and I would say that there is a shortage of prime stock. When assets do come to the market, the yields dip down quite hard. The thing that has changed in the market over the past 12 months is that there is more capital available, investors feel more comfortable, and it’s coming back to the asset story again.
What is your main interest now in terms of opportunities? Who should be approaching you whether it’s from the finance side or from the opportunity side?
As a third-party fund management business, we’d love to meet investors. Investors are usually quite difficult to track down at industry wide events like this and it’s also difficult to give them a sales pitch. It tends to be more deal-driven–you are looking to meet principals, agents etc. who have got assets or deals that could potentially be of interest to you. It tends to be more on the deal side.