Why Hines is raising capital for Mexico and Canada after a five-year hiatus

The Houston-based firm raised almost $2bn via two single-investor development vehicles, seeing a growth opportunity in the markets adjacent to its home, Americas CIO Alfonso Munk tells PERE.

It may be a global investment firm, but Hines has turned its attention to raising and deploying capital closer to home for the first time in over five years.

In the second quarter, the Houston-based manager formed two single-investor vehicles focused on Mexico and Canada, with a total of up to $1.8 billion available to invest. Both are primarily focused on developing assets in response to a historic undersupply of Class A, institutional product in both markets, Alfonso Munk, chief investment officer of the Americas for Hines, told PERE.

Single-investor vehicles are typical in both countries for Hines.

“Because we see the opportunity as pressing now, we have the ability to do single-investor funds that allow us to be more nimble and more expedient,” Munk said, adding that it was a quicker way to develop scaled purchasing power as opposed to going through the complicated process of raising a multi-investor vehicle.


North of the border, Hines is focused mainly on residential. In June, the firm launched its latest Canadian vehicle with an undisclosed equity commitment from an unnamed investor. The firm is aiming to assemble a portfolio with a gross asset value of C$2 billion ($1.54 billion; €1.52 billion). That is double the amount that Hines had amassed – C$1 billion ($758.6 million; € 758.3 million) – for its first Canada vehicle, originally raised in 2015 with the same investor. Before raising dedicated vehicles, Hines would form partnerships on a deal-by-deal basis.

The opportunity Hines sees in Canada is an undersupply of class A, institutionally-owned multifamily assets. A report the firm prepared at the end of last year found that over 40,000 units are needed in four of the top five cities in Canada. Toronto needed just shy of 40,000. Hines is targeting Toronto and Vancouver, as well as Montreal and Calgary, for its development strategy. In all of those cities except Calgary, institutional multifamily represented less than 50 percent of the available stock in the market, the report found.

Alfonso Munk

Canadians have historically had a high home ownership rate, accounting for 68.5 percent of the population, according to the recent data from Trading Economics. Meanwhile, rental properties have primarily been owned by individual investors, with over 90 percent of the stock more than 20 years old, Munk said.

“This is a challenge for tenants,” he said. “Tenants have been demanding more institutionalized multifamily in Canada because it is easier to deal with maintenance and other issues.”

This demand for institutional multifamily assets has led to higher rents in properties Hines developed in its first Canadian vehicle compared to rents in other multifamily assets built in Canada from 2016 onwards. Where Hines differentiates itself from its competitors is in its amenities and property management, Munk said. Those distinguishing factors have led to the firm being able to charge rents up to 17 percent higher than properties of similar vintages in cities like Calgary.

Given the lack of institutional capital in Canadian multifamily, Hines sees an advantage in making a bigger push into the sector now.

“There’s really limited competition,” Munk said. “A lot of the traditional US multifamily developers are not present in Canada.”


Hines began investing in Mexico over 30 years ago but has not raised dedicated capital to deploy in the country since 2016. In May, the firm launched HGM, targeting Mexico’s industrial and logistics sector. The vehicle was initially capitalized with $300 million with a capacity to invest up to $900 million, per a release. HGM is solely focused on Mexico’s industrial and logistics properties, and primarily targets development but can include some acquisitions.

The continued onshoring trend is making Mexico more appealing to manufacturing companies serving the US, Munk explained. Labor costs are cheaper and availability of labor is higher relative to the rest of the world, Munk said. Companies that predominantly serve the US market also want to avoid any potential tensions with China, not to mention tariffs they would incur if they were to manufacture certain goods in the latter country.

Undersupply in the industrial sector, particularly of newer product, is the reason for the development focus, Munk said. The nearshoring trend has driven that. Demand due to nearshoring increased by 500 basis points between 2019 and 2022, according to research provided by Hines. This is most acute in northern cities like Tijuana and Juarez, which have collectively accounted for 84 percent of the more than 125 million square feet of nearshoring absorption that has happened during that three-year period.

Many of the companies looking to take manufacturing space in Mexico are multinational, meaning they have great credit and are denominated in US dollars. Industrial rents also have not grown at the pace they have in the US, Munk said, making them more attractive to tenants and also showing more growth potential for investors. Finally, yields for the sector also tend to be higher than in the US, Munk said.

“If you look at the potential yield of an industrial asset in Mexico versus an industrial asset in the US, there’s the same quality of credit on the tenancy and no currency exposure, but you have a 400 to 500 basis points difference in unlevered returns,” Munk said. “We find that a very compelling opportunity.”