Hines is more than halfway to reaching the €1.25bn capital-raising target for its latest European value-add real estate fund.
The global real estate firm has secured €637m in a first close for Hines European Value Fund 2, already close to the €721m it raised in total for its debut fund in 2018.
Hines, which has a large development arm, has been an active value-add investor in Europe through global funds and separate accounts, but in 2016 made the decision to set up a new series of discretionary funds for the region.
Fund manager Paul White told IPE Real Assets that Hines had deliberately kept the first fund small “relative to our size” with the “intention we would invest that quickly and well… and then move to bigger things with subsequent funds”.
The first fund was oversubscribed and committed all of its capital within two years, making nine investments in Germany, the UK, Denmark, Spain, Italy and Poland.
Hines has already secured two seed assets for the new fund: an office in Munich and a residential asset in Madrid. A third asset, a West End office/retail project is also under exclusivity.
With leverage and 5% co-investment from Hines, the new fund is expected to have total purchasing power close to €3bn.
There a number of European value-add real estate funds raising capital, although the Hines fund is at the larger end of the scale in terms of its fundraising target. BlackRock is aiming for the same amount for its latest European fund, and NREP is understood to be following suit for its Nordics-focused value-add fund.
But future funds in Hines’ European Value Fund series could get even larger, according to White, who said that Hines had the long-term “aspiration to have the flexibility to have more complex and larger portfolio and platform deals” more commonly associated with large opportunity funds.
Value-add funds tend to be smaller than opportunity funds because the former are more management-intensive and the latter often rely on scale to make larger portfolio or corporate acquisitions.
But White said Hines had already “dipped its toe” in the space, with its first value-add fund having made a €300m portfolio acquisition.
He said the new fund would have the capacity to make further inroads into an area where opportunity funds “are perhaps less determined to drive all of the asset-level value creation that might be possible in the underlying real estate”.
He added: “They may be moving assets out more quickly for the IRR, whereas our core skillset is at the asset level with our hands on the buildings optimising their value.
“I definitely see the future of this Value Fund series encroaching on that space, and… bringing more competition into that realm.”
Alex Knapp, recently appointed CIO for Europe, said the first fund had “been a huge success story”.
He said: “The fund series builds on our unparalleled European platform with local team members in 17 offices across 12 countries, providing unique local intelligence across the key European city markets.
“Our strength in depth across the continent and trust and confidence we instil in our investment partners, while leveraging our proprietary research, enables us to quickly deploy capital and execute key off-market transactions across multiple locations and sectors, as we’ve demonstrated with our first seed assets for this fund.”
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