Hines earmarks €500m for bailed-out Greece in 2014

US private developer-investor Hines is gearing up to take on bailed-out Greece, earmarking €500 mln for real estate investment there this year, according to Lars Huber, senior managing director and CFO of Hines Europe in London.

‘We plan to increase our exposure to Greece this year and would like to invest up to €500 mln there this year if we can,’ Huber told PropertyEU. ‘We’re about to invest in a resort in Greece due to the increase in consumerism as well as tourism there,’ he added, declining to provide further details.

Bailed-out Greece is starting to bounce back from its recent debt crisis. Just last month, it returned to the bond markets after a four-year hiatus, raising €3 bn at an interest rate of less than 5%.

Also, next month, Hines will have its first closing for its Hines Poland Sustainable Income Fund.

‘We’re hoping to raise €150 mln of equity in the first closing, growing it to €300 mln of equity. With leverage, this will give us a fire power of around €550 mln,’ Huber said.

Around two-thirds of the fund will be invested in offices in Warsaw and second-tier cities with the remainder invested in logistics across Poland. It will target income-producing, core and core plus assets, providing a net IIR of 11% and will run for eight years.

Hines has invested €1.5 bn in European real estate in the past six months, according to Huber: ‘We invested €2 bn in Western Europe last year and I expect us to invest a similar amount this year,’ Huber added.

Building momentum on the development front
Hines has diversified significantly over the past decade, moving away from its core business of office development to acquire a broad-range of real estate assets. ‘Last year, three-quarters of our investment globally was in acquisitions, with the remaining quarter going to development. That breakdown was also mirrored in Europe in 2013,’ Huber said.

This year, Huber expects to gain more momentum on the development front in Europe but still expects acquisitions to outweigh development. ‘We see a lot more investor confidence in Europe and we’ve also broadened what we invest in to include retail, residential, logistics and even hotels,’ he said.

The year has already got off to a good start. In February, Hines acquired a majority stake in the Liffey Valley shopping centre in Dublin with an asset value of €350 mln. Hines acquired Aviva’s 72.8% interest in Liffey Valley in a joint venture with HSBC Alternative Investments Limited (HAIL).The other 27.2% is owned by Grosvenor Britain & Ireland. The 46,500 m2 centre is anchored by Marks & Spencer.

Also in February, Hines acquired the Amazon headquarters at 60 London in London from AXA Real Estate for around €300 mln. The 210,000 sq ft (19,500 mw) building is believed to have generated an initial yield of 4.9%. Sixty London is one of the most sought after assets in London’s midtown market and investors such as Chinese investor Gingko Tree and Germany’s Deka Immobilien are also believed to have bid. Both deals were done as joint ventures with institutional investors because, typically, Hines doesn’t invest more than 10% in any one deal, Huber said.

In addition to having discretionary funds, Hines also holds separate accounts with several hundred million euros of equity ‘dry powder’ allocated to Europe. ‘This allows us to move faster and to take advantage of changing market conditions. In this cycle in Europe, we think it’s more opportune to focus more on separate accounts and one-off investor partnerships, including with pension funds, SWFs and insurance companies,’ Huber explained.

This year, his firm remains very interested in the UK, Germany and France. ‘We also want to increase our presence in Spain but it’s hard as it’s very competitive and there aren’t enough opportunities,’ Huber said. However, Hines is increasing its exposure to Italy. By the end of this year, its €2 bn Porta Nuova development project in Milan that it has been working on for the past 10 years will be finished. The 300,000 m2 mixed-use project is part of a wider regeneration drive in the city aimed at getting it ready for the Expo 2015 World’s Fair. Russia is also still an important market to Hines as it has been active there since 1991, investing and developing offices, retail, logistics and residential.

Since 1991, Hines has sponsored 44 investment vehicles with over US$24 bn (€17.5 bn) in equity for property acquisition and development globally.

Sara Seddon Kilbinger
Correspondent Germany