Investors such as family offices and high-net-worth individuals have the opportunity to put their money into transformative real estate redevelopment, employed by Hines, an international real estate firm that launched a “strategic” real estate investment fund in January 2022. The series was first announced.
Investors have already committed approximately $590 million in equity to the Hines U.S. Property Recovery Fund — money that gives the fund the ability to invest $1.5 billion immediately. Hines plans to close the fund by May 2022 with a total investment of $1 billion, with purchasing power of $2.5 billion after leverage.
The fund has already purchased properties such as a trailer park in California and plans to redevelop it as an industrial one. Other projects could be redeveloping empty malls as mixed-use town centers or redeveloping old office buildings as apartments.
So why does Hines believe now is a good time to fund a redevelopment-focused fund? And why is Hines so interested in small, equity investments from investors like family offices and high-net-worth individuals?
To find out, we caught up with Alfonso Munk, Hines’ Chief Investment Officer — Americas.
This interview has been edited for style, length and clarity.
WMREWhy is it called a recovery fund?
Alfonso Munk: Recovery is linked to the pandemic but it is clearly much more than that. We are banking on some of the trends that were coming in real estate pre-pandemic which we think have intensified as a result of the pandemic. People have seen the decline of retail malls. …industrial is growing tremendously. Clearly the pandemic has also put a question mark on how much office space is needed. People are also looking at housing where they can have a little more space and where they can work.
Therefore, there is a lot of real estate which is old, which is not up to modern standards, be it design, location, sustainability perspective etc.
Recovery fund is going to come and expand some of the properties to replace them, modernize them, have better future use, better layout. We’ll choose assets that we can reconfigure for new uses. Older retail properties can be residential … with the same office buildings that are obsolete.
We are taking what we do every day, which operates, develops, transforms and modernizes the property and works hard on the property.
WMREWho are your investors in Recovery Fund?
Alfonso Munk: This vehicle is going to allow us to provide this opportunity to investors we haven’t worked with that much before.
In the past, most of our investors have been institutions. Often they have a minimum investment limit, typically $20 to $30 million.
With the creation of the Recovery Fund and the growth of our non-trading REIT The Hines Global Income Trust, we can bring our funds to investors who have a lower investment limit… individual investors, family investors, credit investors and wealth management platforms. . There is a lot of capital that is interested in investing in real estate, from property management.
WMRE: Do you have something about wealth management in the Hines private REIT structure and your dealings with them that makes you want to do more with them?
Alfonso Munk: Wealth managers are increasing their allocation in real estate. In the past this amounted to a single digit of their total volume. Now everyone is getting 10 percent of their total portfolio and more than 20 percent in real estate. They have become more important.
Wealth management platforms are the future.
Next, I think these investors value the pragmatic operational approach that Hines brought. We operate properties. We manage the property. we develop.
We provide access to more touch points for investors than the major financial platforms. If investors would like to learn about the Hines family or have time with me or the CIO, we make ours available.
WMREWhat is the average amount to be allocated by an investor in a recovery fund?
Alfonso Munk: As for the fund, that’s a wide range, starting with large family offices from $500 to $20 million or $30 million.
WMREQ: What kind of returns can you give to investors? What kind of returns are they demanding?
Alfonso Munk: Recovery fund is a high return fund. We are targeting at least 15 per cent to 16 per cent returns.
WMREQ: How are you staying in touch with your investors?
Alfonso Munk: We combine technical access with the kind of touch and feel of a real person… You can log in to your account and view relevant information on purchases or investments. We also assign contact points to investors. Individual or family investors… their sophistication has increased. His questions have become more detailed. In the past, perhaps, retail investors were less demanding.
WMRE: Does Hines invest its capital with investors in recovery funds?
Alfonso Munk: The family is invested in the fund along with the respective employees. Starting from the senior leadership and executives of the firm to the regional project officers.