Henderson Agrees With TIAA-CREF to Form $20 Billion Venture

Henderson Group Plc (HGG) and TIAA-CREF, the manager of investments for employees of nonprofit institutions, agreed to combine their European and Asian real estate businesses to form a venture with 13 billion pounds ($20 billion) of assets under management.

TIAA Henderson Global Real Estate will buy and manage commercial and multifamily residential real estate, the companies said in a statement today. In a related deal, New York-based TIAA-CREF agreed to buy Henderson’s North American property business.

“There are compelling growth opportunities in global real estate,” Tom Garbutt, head of TIAA-CREF global real estate, said in the statement. “This new venture will leverage TIAA-CREF’s financial strength and long-standing real estate investment capabilities together with Henderson’s expertise and wide array of real estate investments in Europe and Asia Pacific.”

Asset managers including Henderson and BlackRock Inc. (BLK) are buying or merging property-advisory firms as their investors seek to diversify beyond stock and bond funds. The resulting increase in scale helps attract sellers of assets and gives them an advantage over other bidders because they are more likely to complete deals, Henderson Group Chief Executive Officer Andrew Formica said on a call with reporters today.

Investment Plan

The venture will invest $1.5 billion in cash from TIAA-CREF “over the next few years” in real estate deals, Formica said. The new company will also open a business in commercial real estate debt, including co-investment from TIAA-CREF. It will also look at investments outside of the real estate industry, according to the statement.

London, the U.S. and Australia are among the best areas for investment, Garbutt and the venture’s Chief Executive Officer James Darkins said on the call.

“The U.S. market is still a very attractive market,” Garbutt said. Investors buying there “see safety, they see longevity, they see durability of returns.”

TIAA-CREF will own 60 percent of TIAA Henderson Global Real Estate, while Henderson will own 40 percent. As part of the agreement, Henderson will receive 114.2 million pounds in cash, excluding deal costs, according to today’s statement.

Henderson was down 4.30 pence, or 3 percent, at the 4:30 p.m. close of trading in London, the lowest since Jan. 10. That pared the gain for the past six months to 5.4 percent.

London Home

Garbutt will become chairman of the new company, which will be based in London. The transaction is expected to be completed in the first quarter of 2014, according to the statement.

BlackRock, the world’s largest asset manager, agreed in May to buy private-equity property investment advisory firm MGPA to expand its real estate business in the Asia-Pacific region and Europe. The price wasn’t disclosed.

TIAA-CREF had $520 billion of assets under management at the end of March, the statement showed. Apart from real estate, the company’s businesses include mutual-fund management, life insurance and brokerage services, according to its website.

Henderson’s property business has about 12.7 billion pounds of assets under management.

To contact the reporters on this story: Patrick Gower in London at pgower@bloomberg.net; Neil Callanan in London at ncallanan@bloomberg.net

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