* Sees UK property investment mkt bottom in H2 '09
* Expects Germany, France recovery to follow in 2010
* Plans to raise 500 million euros in property funds
By Daryl Loo
CANNES, France, March 13 (Reuters) - Henderson Global Investors is looking to raise at least 500 million euros ($643.5 million) in funds this year to invest in real estate, and will focus on developed markets as investors seek to avoid risk.
Henderson, which manages about 10 billion euros in property assets worldwide, plans to launch at least two new funds, targeting mainly prime offices and malls in London and Paris, executives told Reuters at the MIPIM property fair.
"Central London offices is our strong 'buy' recommendation because of the recovery story ... we also like French retail due to the strong supply and demand fundamentals," Alice Breheny, Henderson's head of property research, said in an interview on board the yacht "Hero", moored on the French Riviera.
She expects the investment market in the UK, where commercial property values have seen the sharpest falls, to bottom out by the end of this year, followed by key European markets such as France and Germany in 2010 as attractive prices lure investors to return.
The biggest risk to this recovery, Breheny said, was if cash-strapped banks refused to finance property transactions.
Henderson has always been keen to acquire prime offices and shopping centres in Paris, but a small number of players control the market and currently do not intend to sell, said Christopher Linney, Henderson's head of property investments in France.
"But what we might see is that everyone is touched by the crisis and these people might need the liquidity ... we see that as an opportunity to get into this market," said Linney.
RISK AVERSE
The ongoing global financial crisis, sparked by a collapse in risky U.S. home loans, has meant property investors prefer to avoid unfamiliar territory and turn to core markets closer to home, Henderson said.
"We're back to a situation where we can get excellent returns in Paris or London, where we already have teams in place," said Timothy Horrocks, the firm's Amsterdam-based director of property portfolio management.
"Someone could come to me with an idea for, say, a Panamanian fund, or a South America fund offering 20 percent returns ... but I can probably, on my doorstep in London, get 8-10 percent, and that will take me further for next to no risk at all," he said.
While the sharp declines in the share price of Europe's listed property firms has meant their stock is trading at steep discounts to net asset values, investors are still avoiding the sector due to the massive volatility, Henderson said.
"Anything in the listed arena, the volatility is just immense ... if you look at some of the British REITs, their share prices are being decimated," said Horrocks.
"Listed property prices look very cheap, but unfortunately some of these companies will be forced to sell some of their best assets, which then makes them less attractive stocks," added Breheny. (See www.reutersrealestate.com for the global service for real estate professionals from Reuters) ($1=.7770 Euro) (Editing by Jon Loades-Carter)