TIAA CREF and Henderson Create Global Real Estate Powerhouse

New investment venture will launch in Q1 2014 with £41.5 billion in assets under management.

(June 24, 2013) — US teachers’ investment specialist TIAA-CREF has joined forces with Henderson Global Investors to launch a new real estate investment management powerhouse, with £41.5 billion in assets under management from day one.

The joint venture, to be called TIAA Henderson Global Real Estate, is expected to be completed in the first quarter of next year, and will be 40% owned by Henderson, with the remaining 60% belonging to TIAA-CREF.

The fund will consist of TIAA-CREF’s existing European real estate business, alongside Henderson’s European and Asia Pacific-based institutional real estate businesses.

In a related transaction, Henderson will also be selling its US real estate business to TIAA-CREF Real Estate. Both transactions will result in a cash injection of £114.2 million from TIAA-CREF.

Of that, around £7 million is expected to be spent on deal costs, with up to another £7 million being spent on separation costs, according to Shirley Garrood, chief financial officer for Henderson Global Investors, speaking on a teleconference to investors on June 24.

TIAA-CREF will retain its North American real estate business.

The first quarter of next year will also see the launch of a new commercial real estate debt fund by the joint venture, which is expected to run several billion dollars’ worth from the start of the partnership.

The board of TIAA Henderson Global Real Estate will feature two members from Henderson and three from TIAA-CREF.

This isn’t the first time TIAA-CREF has entered into a deal with a European fund manager: in February, Norges Bank Investment Management reached a $1.2 billion agreement with TIAA-CREF, focussing on high quality office properties in Boston, New York, and Washington, DC.

As with the Henderson deal, TIAA-CREF was the dominant partner, owning 50.1% of the merged venture.

Tom Garbutt, head of TIAA-CREF global real estate, will become chairman of the new company, and James Darkins, managing director, property at Henderson will become the chief executive officer. The company will be headquartered in London with offices in Europe, Asia Pacific and North America.  

No redundancies are expected on either side of the joint venture.

Garbutt said in a statement: “We believe there are compelling growth opportunities in global real estate. 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.”

Darkins added: “The combination of TIAA-CREF’s and Henderson’s European and Asian real estate interests create a new powerhouse in global real estate. Between us, we have the scale and capital resources to serve the real estate investing needs of our existing clients, as well as create exciting new opportunities to co-invest alongside them around the globe.”

TIAA-CREF has been attempting to break into the UK market for some time: In December 2012, Money Marketing wrote that TIAA-CREF was looking to launch a UK-based business, but the manager refused to confirm or deny the venture.

Henderson Global Investors’ property business currently has around 350 institutional clients, just 200 staff and produced revenue of £61.5 million, as of the end of 2012.

Henderson also acts as acquisition partner and investment advisor to the Canada Pension Plan and Dutch pension fund manager APG, among others.

TIAA-CREF Real Estate, meanwhile, has around £29 billion in assets under management, with £2 billion in European real estate. It currently employees 136 staff, including 13 in Europe.

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