Saturday 1 October 2016

Hines prepares huge European asset sale

Jack Sidders and Peter Flanagan

Published 15/05/2016 | 02:30

The group is currently developing a new town centre and thousands of homes at Cherrywood in south Dublin. It also has a controlling interest in Liffey Valley Shopping Centre and has been involved in numerous other deals around the capital. Most recently it led a €242m bid for the One Spencer Dock office building in Dublin's north docklands.
The group is currently developing a new town centre and thousands of homes at Cherrywood in south Dublin. It also has a controlling interest in Liffey Valley Shopping Centre and has been involved in numerous other deals around the capital. Most recently it led a €242m bid for the One Spencer Dock office building in Dublin's north docklands.

Hines, the US property giant which has bought extensively in Ireland since the crash, is planning to sell assets worth as much as $5.5bn (€4.9bn).

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The firm is planning to sell down its European assets, although it has yet to publicly announce the sale. An office building leased by Morgan Stanley in London's Canary Wharf district is among the properties being prepared to be put on the market, according to a person with knowledge of the matter.

The Houston-based company, which manages $87bn of real estate assets, has hired Lazard to advise on the sale of the properties in the Hines Global Reit, the person said, asking not to be identified as the details are private. The real estate investment trust, which is not publicly traded, owns all or part of 43 properties.

The Hines Global Reit portfolio does not include any Irish assets, but is indicative of the firm's changing focus within the European market. Hines closed the fund to outside investors. Another portfolio, Hines Global Reit II, includes the Bishop's Square office block in central Dublin.

The group is currently developing a new town centre and thousands of homes at Cherrywood in south Dublin. It also has a controlling interest in Liffey Valley Shopping Centre and has been involved in numerous other deals around the capital. Most recently it led a €242m bid for the One Spencer Dock office building in Dublin's north docklands. That deal however fell apart after several weeks of due diligence by the buyers when the German investment fund backing Hines apparently discovered a major, unexpected, tax liability because of how the deal had been structured.

Hines Global Reit said it is evaluating a sale of assets, a sale or merger, a listing of shares on a national securities exchange or similar transaction in a March 28 filing to the SEC. "There is no set timetable for the execution of such an event," a spokesman for the firm said. Lazard and Morgan Stanley declined to comment.

US commercial real estate values fell in February, the second consecutive month of declines following a six-year streak of uninterrupted increases, according to an index by Moody's Investor Services and Real Capital Analytics. Total return from London investment properties, which combines changes in real estate values and rental income, was 1.54pc in the three months through March, the lowest since 2009, according to data compiled by MSCI.

About 62pc of the Global Reit properties by value are in the US, 15pc is in the UK and the remainder is split between Australia, Germany, Poland, France and Russia, according to Hines' website. The Global Reit's stake in the properties for sale is valued at about $5.3bn, the company said in March, with the remainder held by venture partners in some of the properties.

Morgan Stanley's office at 25 Cabot Square in London and the headquarters of Gap's Old Navy brand in San Francisco are among the buildings owned by the Reit.

Hines continues to buy property in Ireland. It is the frontrunner to buy the Setanta Centre in a deal that is expected to be worth north of €100m. The firm is competing against a number of other firms including Hardwicke Investments and former lawyer-turned developer Noel Smyth.

The office block is owned by businessman Larry Goodman. While he has not formally put the property on the market, he is understood to have hired advisors to gauge market interest in the block. The Setanta Centre, which was originally built in the 1970s, is considered a prime candidate for redevelopment if it is sold. Unlike modern city centre office blocks, the property has a large surface car park in a courtyard behind the front of the block. That means that only a small proportion of the site is used for lucrative office space at present.

While Mr Goodman is exploring his options for the property, industry sources have made clear that there is no certainty that at deal will close for the block in the short term and a sale may not take place at all. (Additional reporting by Bloomberg)

Sunday Independent

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