Hines, NY Common Fund form $1bn joint venture

The New York public pension fund and the Houston-based real estate firm have formed a new joint venture to invest in office and medical office properties in the US over the next three years.

The New York State Common Retirement Fund (NYSCRF) and Hines have formed a new venture to invest more than $1 billion to develop, acquire, own and manage primarily single-tenant office and medical office buildings in the US. The partners will supply $500 million in equity toward the venture, while the remainder of the capital will come from third-party financing, according to Hines.

The venture, called Hines Corporate Properties II, will pursue a strategy similar to the partners’ previous venture, Hines Corporate Properties I, which was executed from 1997 to 2004. The earlier venture developed six build-to-suit office projects and purchased three single-tenant buildings, amassing a portfolio totaling approximately three million square feet.

“Hines and NYSCRF together believe that the timing is right to pursue this strategy,” said Hines vice president Doug Donovan, who is managing the venture. “There will be compelling opportunities to develop build-to-suit projects given the lack of options for large users in many markets.”

The venture will have a three-year investment period, but “life beyond that is not specified and will depend on the nature of the projects,” said Donovan. The partners will be focusing on major US markets and are “looking to build a geographically diverse portfolio.” Donovan declined to comment on the targeted internal rate of return.

Beyond its investment, Hines will provide real estate services for the venture, including site selection, development management, conceptual construction, construction management, property management and operations for the venture.

The New York State Common Retirement Fund is the third largest public pension plan in the US, with $146.5 billion in assets under management. A spokesman for the Office of the New York State Comptroller, which manages the fund, declined to comment.