EUROPE NEWS: Taking full control

It was only just over a year ago that TIAA-CREF, the New York-based real estate investment and management firm, completed the launch of its joint venture with investment manager Henderson Global Investors, to form the real estate powerhouse TH Real Estate.

But, before celebrating the first birthday of the London-based real estate asset management joint venture TIAA-CREF paid £80 million (€112 million; $122 million) for Henderson’s 40 percent holding to take sole ownership. The value of the transaction was negotiated between TIAA-CREF and Henderson and was based on the multiples of comparable real estate transactions and the multiple at the time of the original deal, according to a Henderson spokesperson.

“The original agreement contemplated TIAA having the ability to acquire more of the Henderson shares over time and that was dependent on the amount of capital support TIAA-CREF provided to the business,” James Darkins, chief executive of TH Real Estate told PERE.

“As it turned out, the business has been significantly more successful than we anticipated and a lot of capital support has been provided so what we saw was that things were actually accelerated faster than anticipated.”

TH Real Estate currently has $26 billion in assets under management across 50 funds and mandates. Since its launch, TH Real Estate has made 67 acquisitions valued at more than $3.7 billion. The venture also raised more than $1.3 billion of new equity mandates and secured $3.6 billion in capital recommitments from closed-end fund investors.

Yet, TIAA-CREF’s option was originally only to acquire an additional stake of up to 15 percent of TH Real Estate. This was planned to take place between the third and the seventh anniversary of the transaction’s completion and be dependent on a $1.5 billion investment injection by TIAA-CREF in TH Real Estate’s funds or products.

But, the Henderson spokesperson says it was definitely the right time to sell. “JVs of this nature are constantly reviewed. The business requires longer and deeper investment and we believe that TIAA-CREF as sole owner is best placed to develop it in the long term and maximize value.”

And to maximize value Tom Garbutt, head of global real estate for TIAA-CREF, says TH Real Estate will “collaborate” with TIAA-CREF. “We really do see the benefit of a global alliance here, it will be business as usual for TH Real Estate but the operation of a collaborative effort is just easier with shared ownership across two platforms.”

However, Darkins was quick to point out that although TH Real Estate and TIAA-CREF will be working even more closely, the pair would not run into any conflicts (TIAA-CREF is a TH Real Estate client). After the sale, TH Real Estate will operate as a stand-alone subsidiary within TIAA-CREF’s asset management multi-boutique platform, but will have independent executive leadership and investment teams.

“The transaction we have been involved with for want of a better word is the commercial arm of TIAA-CREF asset management, which is the new owner of our business. Also within TIAA is one of our clients which is the general account of TIAA-CREF, we deal with that completely independently and separately. It’s no different to the other 370 clients we have within the business.”

TH Real Estate’s clients can expect the new owners to aid the investment manager’s foray into the Asia-Pacific region. Darkins explicitly called out the region as an area of focus for the firm in the next 12 months.

“Going right back to when we first announced this joint venture in June 2013 we would likely to significantly grow our Asia-Pacific platform. We have undertaken a lot of initiatives in that region and we have finished with close to AUS$1 billion either invested or committed to that market so you can expect to see us doing more in Asia-Pacific.”