Possible equity raising for €1.1bn fund that backs McArthurGlen schemes

Henderson Global Investors is to seek consent from the investors in its €1.1bn European factory outlet fund to raise new equity for its expansion plans.

Henderson, which manages the European Outlet Mall Fund with outlet specialist McArthurGlen, would use the new equity of up to €80m to develop new phases of its malls and to buy stakes in outlets owned solely by McArthurGlen.

The equity raising, development and prospective purchases would all be subject to the approval of existing investors in the fund.

Henderson plans to go to the market before the end of the year and conclude the equity raising in the first quarter of 2010. It hopes to raise the money from a maximum of three new investors. The existing minimum subscription of the fund is €30m. It will look to leverage at around 50% and expects to spend all the new equity and debt by the start of 2011.

Henderson and McArthurGlen are likely to develop new phases at their centres in Parndorf, Austria, and Roermond in the Netherlands.

Henderson also wants to buy a stake in McArthurGlen’s new outlet in Neumunster, near Hamburg in Germany, the first phase of which is due for completion in 2011.

The fund is leveraged at around 37% and has a target internal rate of return (IRR) of 13%. There is £31m of committed equity in the fund.

The fund was launched in 2004 with a portfolio value of €343m and has a 10-year life. It owns nine outlets across Italy, France, Austria, the Netherlands, Belgium and Germany, and 22% of three outlets in the UK through Henderson’s UK Outlet Mall Fund. McArthurGlen carries out the day-to-day management of the centres.

Last week the first phase of the fund’s latest mall, the 177,605 sq ft Designer Outlet Berlin, opened in Brandenburg, on the outskirts of Berlin. The scheme was developed and project managed by McArthurGlen with €100m of development funding from Henderson.

Outlet malls specialise in the sale of discounted, branded goods sold directly by manufacturers. Henderson may consider another fund launch in the sector.

David Williams, fund manager at Henderson, said: ‘The outlet concept is still relatively new and consumers are now beginning to understand its benefits. I think we see an opportunity alongside our partner, McArthurGlen, to give a better return than normal shopping centre investment.

‘Our target is 13% IRR for the life of the fund, which is a challenging return target, but we’ve been meeting that so far.’

Postscript :

Interview with McArthurGlen founder Joey Kaempfer in next week’s Property Week Global

By David Hatcher

Source: www.propertyweek.com, 26.06.2009