Henderson and TIAA-CREF keep door open to 'full-blown' property merger

Henderson Global Investors and TIAA-CREF have not ruled out a ‘full-blown’ merger of their respective property arms after unveiling a new JV in Europe to ‘exploit fast-growing investment opportunities around the globe’.

Speaking on a conference call to discuss TIAA Henderson Global Real Estate - their new JV - this morning, neither James Darkins, managing director of property at Henderson nor Tom Garbutt, head of TIAA-CREF’s global real estate division, ruled out the possibility of a ‘full-blown’ merger of their property units at some point.

‘There has been a shift in structure of the property business,’ said Darkins. ‘We want to accelerate our growth ambitions, which is the rationale for this deal, to take maximum advantage of the investment opportunities out there.’

The new company, which has been 18 months in the making, will combine TIAA-CREF’s existing European property business with Henderson’s European and Asia-Pacific property operations. The venture will pursue core and value-added investment opportunities in all major sectors of international commercial property. TIAA Henderson Global Real Estate will hold the exclusive rights to offer direct property and property debt investments for both firms in all regions outside of North America.

TIAA-CREF, the US provider of retirement accounts for teachers and non-profit organisations, will hold a 60% stake in the new company, with Henderson holding the remaining 40%. Garbutt described the split as ‘reasonable, considering TIAA-CREF’s capital commitment’. The transaction is expected to close in the first quarter of 2014, subject to regulatory approval. The new JV will hold £13 bn (€15.2 bn) of AUM, creating a global powerhouse to rival the likes of US private equity group Blackstone.

The JV is particularly keen to ‘exploit fast-growing investment opportunities around the globe, especially Asia, where we want to grow the business,’ Darkins added. And TIAA-CREF is open to other such alliances, Garbutt told journalists: ‘We’re always looking in the market to optimise what we can offer to our clients,’ he said.

For Henderson, the hook-up gives it access to a larger platform covering the US, Europe and Asia-Pacific, said Darkins. ‘The scale gives us the ressources to support our investment teams,’ he said.

The pair were asked if the firms' differences could create a conflict of interest as TIAA-CREF is best known for the pension funds it manages for US teachers, whereas Henderson is a public company.

Darkins and Garbutt responded that this would not be an issue. ‘We both want the same thing: to offer the best returns to our clients,’ said Garbutt. While Darkins admitted there could be ‘a dozen or so clients who could overlap’, Garbutt added that his firm’s investment ethos is ‘very much aligned with Henderson’s’. ‘We also know what it’s like to manage other funds,’ Garbutt added, referring to ventures TIAA-CREF already has in place with sovereign wealth funds, including Australia’s Future Fund.

‘This deal is a sign of confidence - opportunities are being identified in the sector both through direct and indirect investment,’ said Paul Coates, managing director of real estate finance at RBS in the UK.

TIAA-CREF has around $520 bn (around €397 bn) in assets under management. A Fortune 100 company, TIAA-CREF is the leading provider of retirement services in the academic, research, medical and cultural fields in the US. Henderson has $105 bn (€80 bn) of assets under management.