Investors seeking core-plus returns at scale in Europe currently have limited options to pick from. Cognizant of this, London-based manager Henderson Park is out marketing its Enhanced Income Fund with the aim of accruing enough capital commitments to reach a long-term target of €3 billion in assets.
Thanks to its purchase of Lagoas Park from fellow London-based manager Kildare Partners earlier this month, the firm is now one-third of the way towards reaching this target. Indeed, the €421 million acquisition of the 1.5 million-square-foot office park brings the gross asset value of the fund’s assets to approximately €1 billion.
Henderson Park declined to comment on its fundraising endeavors. However, PERE understands the Enhanced Income Fund has garnered as much as €400 million in equity so far and is operating a leverage policy of around 50 percent loan-to-value for the vehicle. This suggests the firm aims to raise a further €1 billion from institutions to meet its long-term objective.
These sorts of numbers place the firm in a small cohort of private real estate managers offering pan-European core-like funds to institutional capital. Others to do so at a notable scale include Blackstone, Tristan Capital Partners, Brookfield Asset Management and Morgan Stanley Real Estate Investing. While Blackstone and Tristan’s vehicles have been open to investors for years, the latter two managers are relatively new entrants to the lower risk-and-return space in European real estate. Brookfield, for example, only raised its first €725 million in a first closing for its Brookfield Premier Real Estate Partners Europe fund this summer.
“There are not a lot of people with these vehicles,” commented one source familiar with the Enhanced Income Fund. “So, there’s slightly lower numbers of competitors for these types of assets.” In addition to this Portuguese office park, Henderson Park also has acquired a London office building and a mixed-use multifamily project in Dublin for the fund.
The firm, led by ex-Mount Kellett and Goldman Sachs Special Situations executive Nick Weber, is aiming for gross returns of 12 to 14 percent and net returns of 9 to 11 percent from the fund’s investments. These returns sit below the value-add to opportunistic style returns of 15 to 20 percent targeted for the first vehicle it introduced after its inception in 2017, the €2.2 billion Henderson Park Real Estate Fund I.
However, it is understood the firm will hunt for deals for both vehicles from the same markets. To date, Henderson Park has acquired properties in countries including the UK, Ireland, France, Germany, Spain and Greece.
Anthony Biddulph, chief executive officer of capital advisory firm Capra Global Partners, said managers with investment professionals able to operate in a wide array of European countries tend to be best placed to offer pan-European core vehicles, which explains why there are few such fund offerings in the region.
“There’s certainly a dearth,” he commented. “From the work we’ve done on pan-European strategies, what we’ve seen is funds tend to perform on strategies in just two to three centers where they have a presence and underperform in others. The key is for the firms to have folk with local skin in the game.” Henderson Park has a team of approximately 60 executives, coordinated from its London headquarters.
Most core and core-plus capital is raised via open-end funds, such as Henderson Park’s Enhanced Income Fund, making capital-raising data for the segment challenging to record. However, according to PERE’s closed-end fund research, 43 percent of the $14 billion currently being sought for the top 10 European private real estate funds is for core or core-plus strategies, versus 30 percent for value-add strategies. In the wider closed-end fundraising market, 34 percent of the total €66.34 billion of capital currently being sought is for core and core-plus strategies versus 29 percent value-add strategies.