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Hines Brazil head steps down – exclusive

Longtime executive Douglas Munro has left amid allegations of improper payments relating to office leases with embattled state oil company Petrobras.

Douglas Munro, managing director of Hines Brazil, has resigned from his position as head of the Houston-based real estate firm’s operations in the Latin American country. A Hines spokesman confirmed that Munro was no longer with the company, and that he had ceased to work at the firm “in an official capacity” several weeks ago.

Munro was a longtime Hines veteran, and had been the firm’s first and only Brazil country head to date. He was hired in 1998 as a managing director to open Hines’ office in São Paulo and was responsible for establishing and building the firm’s operations in the country. 
In July, the Brazilian newspaper O Globo reported Hines Brazil had allegedly made improper payments totaling R$1.4 million, or approximately $700,000, in the form of real estate commissions paid to a broker in connection with office leases with Petrobras in Rio de Janeiro between 2004 and 2009. The leases included the Brazilian national oil company’s full occupancy at Hines’ Torre Almirante, a 36-story office tower in Rio de Janeiro. Hines announced the 442,233 square foot lease with Petrobras in September 2004.
“As such behavior is not consistent with Hines’ values, we immediately commenced an internal review of these transactions,” a Hines spokesman said. “Although our review is not yet complete, Hines has reached out to the relevant authorities to disclose what we have learned to date, and we are committed to fully cooperating with any investigation that may ensue.”
In a statement to PERE, Hines chief investment officer Hasty Johnson added: “We treasure our reputation and are committed to the highest ethical standards of conduct. Our investors, clients and coworkers deserve nothing less.”
The firm also said that Munro resigned during the course of the review, and that the internal audit confirmed some impropriety with the commission payments. Hines has put interim leadership in place in Brazil and hired an executive search firm to help in recruiting a new country head.
Hines also is understood to have notified its investors about the change in leadership at Hines Brazil. These investors include the California Public Employees’ Retirement System, which has been one of Hines’s largest investors in Brazil, beginning with the creation of Hines CalPERS Brazil I Interests LP (HCB I), a development fund to invest primarily in Brazil’s office, industrial and residential markets, in 2005. The two parties subsequently formed HCB II in 2007 and HCB III in 2010. CalPERS was not an investor in the Torre Almirante.
“We are monitoring the situation,” a CalPERS spokesman said in an email to PERE.
Petrobras currently is at the center of a corruption scandal that broke about a year ago, when the company publicly disclosed that it was the subject of a probe called ‘Lava Jato Operation’ (Operation Car Wash) by the Brazilian federal police. The scandal – which led to charges of money laundering and organized crime against Petrobras – has implicated the country’s most senior politicians, including president Dilma Rousseff, as well as numerous companies that have done business with Petrobras. 
Since opening its Brazil office in 1998, Hines has developed more than 11 million square feet of office, industrial and residential space and currently is developing an additional 10.7 million square feet in 16 additional projects. The firm operates in five markets throughout Brazil, including São Paulo city and state, Rio de Janeiro, Curitiba and Manaus.