HOUSTON-Hines has fully funded a second office fund to buy value-add properties in the US. The fund, backed by $828 million of equity, has $2.7 billion of buying power.
The Hines US Office Value Added Fund II targets back-office assets in the Top 20 markets. "Ideally, we want to find good, well-located office buildings that have some problems we can fix," says the fund's manager, Hines senior vice president David Congdon. He explains that the targeted properties can have challenges ranging from low occupancy to renovation or even value-add opportunities from additional development. "We're trying to focus on improving the assets' occupancy and income potential," he says, adding that hold periods will range from three to five years in order to build value into the assets.
Congdon tells GlobeSt.com that office markets nationwide are continuing to perform well, which is the reason for the fund's timing. "We think we're in the middle of the typical office cycle where demand is strong and supply has not yet met up with the demand," he adds.
In all, 17 public and private pension funds, insurance companies and financial services firms in the US, Europe and Japan seeded the fund. Hines principals have invested 5% of the equity. To date, about 30% of the equity has been investment into five projects in Washington, DC, Miami and San Jose, CA.
The Value Added Fund II is slightly different from Hines' other funds in that it will focus on assets that need some help to realize their full potential. In the past, Hines funds have been designed to develop new projects or acquire core assets. But, Congdon doesn't see the new fund as a departure from Hines' overall investment platform. "It's complementary to the other funds. It's just another part of our overall investment platform," he says.
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