Hines hopes to strike a balance between its discretionary capital and strategic partnerships in Asia Pacific by 2030.
This is despite the fact the Houston-based firm has just announced a A$1.5 billion ($961 million; €972 million) Australian build-to-rent partnership with Canada’s Cadillac Fairview. The latest strategic partnership with the real estate arm of the Ontario Teachers’ Pension Plan will take Hines’ strategic partnerships to two-thirds of its $6 billion assets under management in Asia Pacific, with the rest being in discretionary capital. Prior to launching its first pan-regional commingled fund, Hines Asia Property Partners (open-ended) in April 2021, the firm had focused on forming strategic partnerships with institutional investors in the region.
Ray Lawler, CEO at Hines Asia Pacific, told PERE that one of the firm’s biggest focuses in Asia Pacific now is to scale up its $1.12 billion open-ended core-plus fund HAPP as it endeavors to achieve a 50:50 ratio between its discretionary capital and strategic partnerships in the region by 2030. He thought such balance gives the firm “access to all the markets in the right way.”
He noted that the next six to 12 months would be an interesting time for foreign investors to invest in Asia Pacific. “With the many of the currencies in APAC devaluing against the US dollar, we think our US dollar based investors will find Asia more attractive as they see things effectively becoming cheaper. And I’m curious to see how this all evolves in this period of volatility,” he explained. For Hines, having an open-ended regional core-plus fund gives its investors the flexibility to tap the market at a time like this with a long-term view.
While building up its discretionary capital in Asia is a priority for Hines in the region, he acknowledged growing its strategic partnership business is equally important. “Some of the developments are just so big that they cannot go into funds and those would always be strategic one-off partnerships where these are also increasing,” Lawler explained. He pointed out that these partnerships are often formed with investors in the firm’s funds. “They are often the same investors, just different buckets of money right now. These relationships are very interconnected,” he said.
Indeed, Cadillac Fairview was one of founding investors in HAPP, where it committed $400 million to the firm’s pan-Asia vehicle. In the pair’s latest Australian BTR partnership, the vehicle will focus on projects located in vibrant submarkets close to transportation, employment hubs, diverse retail offerings and entertainment centers.
Karl Kreppner, senior vice-president, investments Asia Pacific at Cadillac Fairview, said in a release that the latest investment aligns with its “strategic objective of expanding our investment portfolio in Asia by forming partnerships with best-in-class operators and developers in attractive asset classes, such as residential, office and logistics.”
Seeing the structural changes in the global economy, Hines has diversified its portfolio in Asia Pacific across different sectors since 2018, according to the firm. In 2018, the firm’s Asia AUM was entirely in office but today around half of its regional portfolio is in office while the rest is in residential, logistics and mixed-use real estate.