Henderson Global Shifts
Property Mix in Europe

Henderson Global Investors has its sights set on continental Europe. The London-based investment manager, which handles £61.9 billion ($122.5 billion) of assets -- including more than £9.5 billion in real estate -- is increasing its exposure to markets such as Germany and Spain, as well as Asia.

James Darkins, managing director of property at Henderson in London, is leading the expansion across Europe. Responsible for real-estate acquisitions in the United Kingdom, Europe and Asia for the company's 18 direct real-estate funds, he says high real-estate prices in the U.K., where 75% of the company's assets are, make investment there less tenable. Mr. Darkins, 50 years old, joined Henderson in the U.K. from AMP Asset Management, which owned Henderson at the time. At AMP he was head of property in New Zealand. Here are excerpts from a recent interview:

The Wall Street Journal: What markets are most appealing?

Mr. Darkins: We're very interested in retail properties, such as shopping centers, in markets such as Spain and Germany, because we see good growth there. We're especially keen on shopping centers in prime locations that can be repositioned by active asset management, through refurbishments and altering the tenant mix.

Earlier this month, we created a 50-50 joint venture with German shopping developer Management für Immobilien AG to create a €2 billion [or more than $2.5 billion] German Shopping Centre Fund, which will offer international and domestic investors exposure to high-end specialist retail property throughout Germany.

Also, in March, we acquired a 50% stake in Parque Miramar, a shopping center and retail warehouse park in southern Spain, for €200 million. It marked our first investment in Spanish retail and brings the total invested by Herald, Henderson's European Retail Property Fund, to around €570 million. Earlier this year, we acquired the Shopping Cité shopping center in Baden-Baden, Germany, from Apollo Real Estate Advisors and Redos Real Estate for around €85 million.

European Union accession talks and its good economy also make Turkish retail attractive, although it is early days, and we have yet to actively enter the market. Although the majority of our property investment is centered on Europe, there are also opportunities in Asia. In 2005, we launched our Asia No. 1 fund, which has so far invested around $400 million in Japan, Hong Kong, Singapore and South Korea and has a target annual return of more than 20%.

We are currently in the middle of one of our more unusual developments in central Tokyo, an eight-story noodle bar of about 160 square meters per floor. This is due to open in August 2008 at a cost of around $40 million. Such an establishment is popular with salaried workers in Tokyo and also highlights how much of a premium there is on space in Tokyo.

In the U.S., we are interested in multifamily housing, where tenants typically stay for around one year. We own around 20,000 apartments across the U.S., as we believe them to be a sound investment in all economic cycles. When the market is strong, there tends to be a lot of job movement with people needing housing on a short-term basis. In a slowdown, the rental market picks up as homeownership becomes less affordable.

WSJ: How do your real-estate investment strategies differ in different markets?

Mr. Darkins: At the moment, around 75% of our assets are in the U.K., but we want to be more opportunistic and look at other markets going forward. Last year, we invested €3 billion in commercial real estate, of which around 60% was in continental Europe and 40% in the U.K. Our goal is that within the next 18 months at least 50% of our business will be in continental Europe. In the U.K., the emphasis is on managing existing assets to drive rents forward. On top of this, as yields fall, we are reducing levels of gearing on many of the U.K. funds. On the continent we are active across the EU-15.

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