Henderson targets £500m for Central London office fund

The closed-ended vehicle is hoping for a first close by the end of the year. Henderson says it wants to take advantage of market cycles and mispricing in London’s office sector.

Henderson Global Investors, a London-based group, has launched the Henderson Central London Office Fund II, targeting a total of £500 million (€359 million; $500 million).

The firm said CLOF II would be structured as 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”. The fund will be marketed to UK and overseas institutional investors and has a target annualised internal rate of return 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. However, the manager intends to keep both the commitment and investment periods short, to protect returns.  It said in a statement that it wanted a short-term fund life of seven years, with the intention to start returning capital to investors from the fourth or fifth year when advantageous to investors.

Clive Castle and Nick Deacon will manage the vehicle. The amount of gearing will be a maximum of 50 percent of the asset value.

Castle said the central London office market was 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,” he said. “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 in the future. 

Henderson’s predecessor Central London Office Fund 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 £100 million of capital was returned to investors in December 2008.