Hines will end 2020 with a one-third increase in the size of its European assets under management, to €28 bn.
European chief investment officer, Alex Knapp, told PropertyEU that its European portfolio, including the gross development value of projects secured or underway, has jumped this year by €7 bn.
The global developer’s expansion is being driven largely by investment in large urban redevelopments and particularly the explosion in client interest in the last couple of years in investing in residential projects.
‘The GDV of the living projects we have today is about €10 bn and so this sector is now more than a third of our book. Half is office, a third is residential and the balance is logistics and a bit of retail’, Knapp said.
This long-term investment approach had been a benefit during Covid, he said, but had begun to be implemented before the pandemic struck at the start of this year.
‘We were already seeing real estate as late cycle, and so there was a real focus on strategic, longer-term investing, well before Covid.’
Hines’ new $1.5 bn separate account mandate for Korean pension fund NPS will tap the developer-investor’s expertise in mixed-use build-to-core. Knapp expects the global venture to invest in ‘probably 3-4 cities in Europe, but not necessarily only Berlin, London or Paris, they could be other national capitals too.
‘The projects are going to be generational, really prime ones on exceptional sites where we can really create a lot of value.’
The fully discretionary, global mandate is believed to be the largest that NPS has given to a single real estate investor. Knapp declined to comment on this but added: ‘It is the product of a long-standing and very successful relationship with NPS - they have seen our capabilities around the world.’
The two have worked on projects in Europe and North America including the Sony Center in Berlin - sold by them to Oxford Properties for €1.1 bn in 2017 - and One Madison Avenue’s refurbishment in New York.
Some 20% or $300 mln of the $1.5bn has already been committed, for implementation of two projects, in North America and Asia-Pacific, Knapp said. Hines has just acquired a site for a 60,000 m2 office redevelopment at Melbourne’s 600 Collins Street but hasn’t said which client the deal is for.
‘One of the themes we’re certainly seeing is LPs wanting to do more with fewer managers. So they’re looking for simplicity and where they have trust they’re willing to make large commitments,’ he continued.
Raising slows down for core funds
Knapp said capital raising for its flagship core and value-add funds this year had been ‘respectable’ at ‘a bit less than €500 mln...the open-ended space has been a bit slower in terms of capital-raising this year because investors logically want to see if valuations change.’
Despite this, the core fund has deployed €1 bn, since and including Q4 2019, taking it to about €2.5 bn of GAV.
The pan-European open-ended core fund sector is growing ever-more competitive with AEW and Europa Capital the latest houses to confirm launches. Knapp said: ‘During Covid we have been taking advantage of less liquid markets and opportunities to buy into better real estate or buy in with thinner bidding pools. We’ve managed to transform the Hines Pan-European Core Fund (HECF) into one of the larger core funds in Europe with a well-diversified, grown-up portfolio.’
This year, GRESB recognised HECF as the most sustainable fund in its peer group of almost 50 entrants.
