Hines, New York Retirement Fund Create $1B Office JV

Hines and the New York State Common Retirement Fund have formed a joint venture, Hines Corporate Properties II, that has been capitalized with $500 million of equity and will allow for the investment of more than $1 billion.

August 2, 2011
By Barbra Murray, Contributing Editor

Hines and New York State Common Retirement Fund have formed a joint venture, Hines Corporate Properties II, for the purpose of investing in both traditional office and medical office properties. HCP II, capitalized with $500 million of equity, will allow for the investment of more than $1 billion in the development and acquisition of assets.

HCP II, which will focus primarily on properties occupied by single tenants, will rely on Hines to fulfill a variety of needs for the joint venture’s portfolio ranging from the identification of locations for development to building construction to property management. HCP II is designed to accommodate a particular audience. “Hines can be a great resource to corporate tenants that choose not to commit a large portion of their capital to real estate, as well as to those who want more flexibility in determining their long-term space needs,” Jeff Hines, president and CEO of Hines, noted in a prepared statement. “Hines’ development and management experience will further mitigate the risk associated with developing their own facilities and provide tenants with the highest quality product for the price.”

No deals have been made, but the joint venture is already actively pursuing acquisition and new development opportunities in major U.S. cities across the country, with an investment strategy centering more on the tenant than the market.

The timing of the establishment of the partnership appears to be just right. The national office market is on the rebound and the future looks quite bright for the MOB subsector, in particular. According to a recent study produced by the Urban Land Institute and real estate investment management firm Seavest Inc., the demand for medical office buildings will jump 19 percent by 2019. Approximately 11 percent of that demand will be spurred by the aging baby boomer population and healthcare reform. “Given the significance of this sector of the economy, Hines and NYSCRF together believe that there will be opportunities to develop build-to-suit office projects related to the medical field,” a Hines spokesperson told CPE.

HCP II is partially modeled on a previous partnership between Hines and NYSCRF that proved quite successful — HCP I. With a focus on office assets, the joint venture, launched in 1997, amassed a 3 million square-foot office portfolio through the construction of six build-to-suit properties and the purchase of three single tenant-occupied buildings over a seven-year period. HCP I was also capitalized by $500 million, $280 million of which Hines and NYSCRF provided, and ultimately completed investments totaling $1.4 billion, including the development of Computer Associates Plaza, a 215,500 square-foot build-to-suit completed for Computer Associates International Inc. in Plano, Tex., in 2001.

*This story was updated on August 2, 2011, at 5:20 p.m. EST.