Behringer Harvard, HCI form $1.3b JV

Behringer Harvard and German investment firm HCI Capital have formed an alliance to invest $1.3 billion (€1 billion) in European real estate, the firms said today. The partnership will buy property across the sectors with a regional focus on Germany, the Netherlands and the UK.

The move represents an expansion into Europe for Dallas-based Behringer Harvard, which made its first acquisition outside the US through its partnership with HCI in March, when it bought a 5-story office building located near Schipol Airport outside Amsterdam. The partnership, which will target short- and mid-term opportunistic and value-added investments, also represents a shift in strategy for HCI, which has previously focused on conservative core real estate plays.

“Real estate has become more and more global, and in a global view European real estate still holds and promises a lot of potential,” said HCI managing director Oliver Georg. “Through solid, improving economic fundamentals in Europe, there is a strong potential for rental growth combined with a realistic opportunity for yield compression,” he added.

Each acquisition will be made via a series of ringfenced joint ventures between Behringer and its local partner, with both firms providing equity, officials from the companies said on a conference call. HCI, which owns and operates 75 core assets in Western Europe, will manage the day-day operations for all acquisitions.

Behringer’s Dutch office acquisition was made for its Strategic Opportunity Fund I, which closed on $65 million in March and is fully committed.

It entered the German market in April with its acquisition of a four-building, 146 unit apartment complex, the first acquisition for its Strategic Opportunity Fund II. The firm, which partnered with a local manager on the transaction, may convert all or part of the complex condominiums, according to the announcement of the purchase.

In addition to a greater focus on opportunistic and value-added investments through its partnership with Behringer Harvard, HCI will place a greater emphasis on its real estate operations. The firm, which went public in 2005, has an investment volume of €11 billion, with € 1 billion dedicated to real estate. In addition to its property funds, it also operates closed-end private equity funds, ship funds and umbrella funds.

Behringer Harvard also operates two non-listed REITs, a short-term opportunity fund and a mid-term value enhancement fund, all of which invest across sectors, in addition to its strategic opportunity funds.