Hines is continuing to review its circa €1.75 bn of direct real estate in Russia after ceasing any new investment there.
Speaking at Mipim, where the conflict between Russia and Ukraine is one of the main talking points, one of Hines’ senior European management team said that the situation in Russia ‘is taking our full attention right now.’
Some real estate firms, such as CBRE and Colliers, have already taken the decision to exit their Russian operations. However, Hines’ Jorge Duarte said: ‘Real estate is an illiquid asset class and we can’t just leave our investors there.’
Hines went into Russia over 30 years ago after the fall of the Berlin wall. ‘We went with our investors to explore new markets where we saw outsize returns’, Duarte said. None of the US developer-investor’s discretionary funds is invested in the country.
Duarte recently joined Hines from Barings, as fund manager of a new diversified, core+ open-ended fund called Hines European Property Partners. He said that HEPP will identify investment opportunities in dynamic urban centres and cities using the manager’s 16 offices - but would not include CEE yet because of the proximity of the region to the conflict.
HEPP will sit between Hines flagship Hines European Core Fund which targets returns of 6%-7% and the Hines European Value Fund series, targeting 12%+.
HEPP’s returns will be about one third from income and from buying assets with potential to increase growth to achieve a return of 9%-11%. Gearing will be capped at 50%.
Duarte expects to hold a ‘significant’ first close within the next few weeks with at least six investors from the US and Europe. ‘We have found a lot of investor interest in this fund and we feel there aren’t as many in the core+ space,’ he added.
He said that despite the geopolitics, high inflation and the prospect of higher interest rates and stretched valuations, ‘we shouldn’t lose sight of the opportunities that we see now. It is about mega trends in tech, demographics and ESG and how they are accelerating obsolescence across all sectors which is creating more opportunities.’
HEPP has assets in two major European cities in exclusivity: an office building for repositioning; and a student housing investment which Hines’ in-house operational business would take over and seek to improve with the potential to add to it through more development.
