Hines, a big US real estate investment firm and developer, has set up a new office in Hong Kong and designated it as its new Asia headquarters to help beef up regional investments and expand its regional client base.
The new branch opened on January 21 with a five-strong team and is Hines's ninth in Asia. The region accounts for just $3 billion (2.5%) of the firm's $120.6 billion under management.
Speaking exclusively to AsianInvestor, New Asia Pacific co-chief executive Ray Lawler said Hines is likely to invest a larger proportion of its assets in the region in the future, given that global investors are increasing their real estate allocations generally and moving towards greater Asian exposure.
Hines has $120.6 billion in global AUM, providing fiduciary investment management services for $66.5 billion (covering both direct investments and investment vehicles), and third-party property-level services for the other $54.1 billion.
While Lawler declined to indicate a precise target allocation, he said the total should rise fairly quickly “due to the wide variety of opportunities in which to deploy capital in the region and the larger ticket size of projects here”.
The Houston-headquartered company will also run its Asia-Pacific operation on a standalone basis for the first time, rather than overseeing it from San Francisco. Lawler said the regional businesses had operated independently and it was time to pull them together.
He added that setting up in Hong Kong, in particular, makes sense because Hines wants the new headquarters to be close to its mainland China operations – where the firm has 138 professionals led by Jim Morrison – and near the Greater Bay area. Plus, Lawler noted that many of Hines’s existing capital relationships with clients and service providers are in Hong Kong.
ACCESSING THE REGION
Hines does not currently manage an Asia-specific fund, but managing director Claire Thielke told AsianInvestor the company intends to create them in the future. That is similar to its approach in Europe of running pan-regional core and value strategies and as well as separate mandates.
It would also consider country-specific vehicles or programmatic joint ventures and other types of local partnerships in Asia, as it has done elsewhere, she added.
In Asia, the number of pan-regional real estate funds is growing, incorporating a rising trend for open-ended vehicles as the regional market matures and investment demand rises for such assets.
Asia-Pacific-focused vehicles raised $19 billion last year, up from $13.5 billion in 2017 and $10.6 billion in 2016, according to research house Preqin’s universe of data. And property services firm CBRE estimates that $62 billion of capital will be deployed by Asia-Pacific closed-end real estate funds between 2019 and 2023.
Managers raising pan-Asia funds said most of their investors are US pension schemes and endowments, followed by Middle Eastern capital and European pensions and insurers, according to a November report by consultancy PwC, Emerging Trends in Real Estate: Asia Pacific 2019.
Several asset owners are beefing up their exposure to, and capabilities in respect of, Asian property. Dutch pension fund Bouwinvest, German insurer Allianz and the Abu Dhabi Investment Authority are among those to have indicated their growing appetite for such assets in the past year.
And fund houses, such as Aberdeen Standard, Nuveen and Schroders, have been building out regional property teams.
However, concerns are mounting that real estate valuations are very high and potentially due a fall in several Asia-Pacific markets, according to the PwC research.
Indeed, buyers will evaluate potential deals in the region with caution due to the tighter yield spread against the cost of borrowing and pricing that is well above the previous peak, said CBRE last month in its 2019 Asia-Pacific real estate outlook.
HINES’S HONG KONG TEAM
Houston-headquartered Hines has relocated several senior executives to its new regional headquarters in Hong Kong and plans to add local hires over time.
Ray Lawler took up his new role as Asia-Pacific co-chief executive on January 1 and will run development, acquisitions and operations activity as well as establish new ventures in other major markets in the region.
Managing director Claire Thielke and director Drew Huffman will be jointly responsible for project development, asset management, acquisition, leasing and financing, and business development.
Lawler has been with Hines since 2007 and most recently served as San Francisco-based senior managing director in the West Region responsible for the acquisition, development and asset management of projects.
Lawler’s co-CEO is Jim Buie, founding CEO of Hines’s West Region, which previously oversaw the China and Australia operations.
Thielke joined Hines in 2009 and most recently served as chief operating officer of investment management. Huffman moved to Hines in 2011 as an analyst and was promoted to director in March last year.
Outside of Hong Kong, Hines has Asian branches in China (Beijing and Shanghai), Australia (Brisbane, Melbourne and Sydney), India (Gurgaon), Japan (Tokyo), South Korea (Seoul). However, the Indian presence is managed as part of Hines’s Eurasia Region.