What is the Henderson UK Property Fund?
The fund is a plain vanilla, tangible assets, bricks and mortar fund, which invests in mainly commercial properties based in the UK.
We also hold some liquid assets [assets that can be quickly converted into cash], which are mainly formed of cash, but also include a few REITs [Retail Estate Investment Trusts], such as British Land and Hammerson.
The fund aims to provide a steady income for investors by investing in properties that we believe will provide reliable rents. The average lease length of the properties in the fund is about 10 years, which is a long guaranteed income.
What kind of person invests in the fund?
The fund has a wide reach with people using it in everything from individual savings accounts (Isas), self-invested personal pensions (Sipps) and more. My mum and dad, are both retired and they’ve invested in the fund, as have I. The fund’s wide reach, as well as the fact myself and others I know are invested in it is a big incentive for it to do well.
How many properties does the fund own?
We own about 100 properties and they’re very diversifi ed both in terms of their use and what they’re worth – some assets are sub-£10 million, while others are worth over £100 million.
What do you look for when picking new properties?
We look at a number of things: Do we think that the tenant is good for their money? Do we think we could lock in a larger rent at the rent review?
What are the risks and is there a back-up plan if a tenant misses rent payments? Could we have a Plan B for the building – for example, changing the use?
You recently suspended the dealing of shares in the fund. What happened?
There was turbulence at an investor level, which led to the suspension of five funds, including our own [on 5 July 2016]. It was the first time that the fund had been frozen.
We had 15% in cash in the fund at the time of the Brexit vote [on 23 June 2016], which was enough to deal with withdrawals, but it wasn’t enough to deal with the impact from other property funds being suspended.
From our own perspective, it was the right thing to do to preserve the integrity of the fund and we reopened it on 14 October 2016.
I’ve worked on this fund for seven years, so it’s quite close to my heart and we’ve got some good assets. I wanted to start the next chapter with a nice feeling about the assets we hold and to know we got a good price for the assets we sold rather than just taking what we could get.
But I understand the frustration of investors at not being able to move money in that period. Some of these properties had been earmarked in our strategy to sell anyway, because, for example, on one building we’d hit the ceiling of how much we could raise rents. In other cases, we sold assets we’d done well on, but if tested economically may not have been as robust as they previously felt. We sold some larger assets and lots of smaller assets, but we didn’t sell our top 10 holdings.
When will you start buying property again?
Acquisition at this point feels quite far away. We stopped inquiring [about new properties] in 2016 as we had just spent substantial sums of money.
What has been the fund’s worst investment decision?
Our regional office in Manchester. I know there is vibrancy in the North and people talk of a northern powerhouse, but while it’s a great office and we’ve done well on the capital, the occupational market can get fragile in these regions quite quickly. It’s hard work to keep the tenants – never mind grow the rents – and that’s not what we’re about.
What has been the fund’s best investment decision?
I like logistics properties [warehouses or buildings owned by firms that transport goods to consumers]. There is so much mileage in them because of the change in our shopping habits, and how we now order online.
I also loved the building we had on The Strand in central London. We sold it prior to the Brexit vote because of a perceived risk about having financial companies as tenants in case they moved their businesses to the EU – two thirds of the rental income from this building came from Coutts bank. But it was a super asset – we bought it for £175 million and two years later sold it for £198 million.
What’s your top tip for a beginner investor looking to invest in the fund?
Look at the tenant base and look at the assets. We own properties right across the UK, so whoever is investing will have one of our assets nearby – drive by and take a look.
Henderson UK Property Fund key stats:
- Launched: June 1999
- Fund size: £3.17 billion
- Net yield: 3%
- Ongoing charges: 0.84%
Source: Henderson fund fact sheet, 30 November 2016
The team behind the fund
Ainslie McLennan and Marcus Langlands Pearse co-run the fund. Ainslie joined Henderson in 2002 before transferring to TH Real Estate in 2014 in a joint venture between Henderson and TIAA-CREF.
TH Real Estate is now solely owned by TIAA-CREF. Prior to this, Ainslie worked for a private property practice. She has a BA in Land Economy from Aberdeen University. Marcus joined Henderson in 2009 and also transferred to TH Real Estate in 2014. Prior to this, he worked at New Star and HypoVereinsbank.