Hines secures €637m at 1st close of new €1.5b value-add fund

US real estate group Hines has secured around €637 mln of equity commitments at the first close of its Hines European Value Fund 2 (HEVF 2), exceeding 50% of the €1.25 bn total target.

The first close has been made less than three months after the launch of HEVF 2 in September 2019, with subsequent closings expected to take place through 2020, with Hines co-investing 5% of the total investor commitments. When factoring in leverage, the fund is expected to have total purchasing power approaching €3 bn. At this first closing, Hines accepted investments from 13 institutional investors.

HEVF 2 has been launched following the success of the first Hines European Value Fund (HEVF 1), a Core Plus/Value-Add fund for which Hines raised €721 mln of equity commitments in closings from July 2017 to August 2018, exceeding the original fund target size by over 40%. HEVF 1 has successfully secured a portfolio of nine investments in Germany, the UK, Denmark, Spain, Italy and Poland within less than two years of closing its first acquisition and ended its investment period.

Building on the investor appetite for asset level value add strategies, HEVF 2 will target a return of 11-13% net IRR, adopting a diversified approach across top institutional city markets, risk profiles and asset classes, with a primary focus on the office sector.

In a statement, the Houston, Texas-based independent firm said that it will be focusing on mature, primary city markets which demonstrate reliable liquidity across the cycle, while capitalising on its proprietary research to help identify the subset of markets with the most attractive pricing and fundamentals momentum at each phase of investment.

Seed portfolio

Hines has secured and signed two seed assets for the fund in recent weeks to secure a rare value-add office opportunity in Munich and a market-leading residential for rent scheme in Madrid, Spain. Both transactions were originated off-market through the Hines network of local market teams. A third HEVF 2 acquisition, this time a mixed-use office/retail project, has since been taken into exclusivity in the West End of London. The total equity allocated across the three deals is €300 mln, with further acquisitions expected in early 2020.

Paul White, HEVF 1 and HEVF 2 fund manager, said: 'The pace and quality of our deployment of the first HEVF value-add fund led us to accelerate the anticipated launch of the follow-on fund. HEVF 2 will closely follow the philosophy of its predecessor, prioritizing skilled asset-level value creation in prime locations of Europe’s most institutional city markets. We expect that HEVF 2 will be almost twice the size of HEVF 1, to reflect the strength of the opportunity pipeline the Hines platform is able to originate, and it is anticipated to be Hines Europe’s largest closed-ended fund to date. That clearly demonstrates the firm’s emphasis on this flagship value add series.'

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