Hines has begun the process of liquidating its unlisted REIT, firing the starting gun on a process that will see more than $4B of assets across the world put up for sale.
At the end of last month Hines put forward a plan to shareholders in the Hines Global REIT proposing that it sell off its assets piecemeal over the next couple of years. The REIT decided on the strategy after starting a review of the portfolio in 2016 examining other options like undertaking an initial public offering on a public stock market, merging with another company or selling the portfolio as a whole.
Hines said that if it undertook one of these kind of transactions it would likely have to sell the portfolio at a discount, whereas the market for individual assets or smaller portfolios remains strong, and it expected to sell the assets at their current book value or above. Shareholders will vote on the proposal in July.
The process means that assets in the U.S., Europe and Australia are now up for grabs. According to accounts for the REIT the value of its portfolio was $4.4B as of December.
The REIT owns 33 properties totaling 13.9M SF, which produced revenue of $84M last year. The REIT owns nine U.S. office assets, four U.S. retail assets, one U.S. residential asset, 11 international offices in Europe and Australia and a pan-European logistics portfolio.
The portfolio is 90% leased and has debt of $1.8B secured against it with an average maturity of 1.5 years.
The sales have already begun — Hines said it has already commenced the disposal of its European logistics portfolio. It did not have a current valuation for the portfolio, but the assets were bought for a total of $488M between 2011 and 2015, at yields of between 7% and 11%, and with logistics values having risen significantly in the past two years.
The Australian Financial Review also reported that Hines has appointed JLL to advise on the sale of $375M of Australian office assets.
The largest single asset in the portfolio is 25 Cabot Square in the Canary Wharf district of London. Hines bought the 450K SF building for $372M (£280M) in 2014. About 250K SF is leased to Morgan Stanley and Hines is currently refurbishing the remainder of the space and rebranding the building The Cabot.
Some assets in the portfolio might prove trickier to unload than others. In 2011 Hines paid $96M for the 94K SF Gogolevsky 11 office Moscow, an 8.9% yield. The Russian market is currently something of a no-go area for many buyers, given the sanctions in place against the country. Moscow has come in last place in the Urban Land Institute and PwC’s Emerging Trends report on city rankings in the last three years.
“Because we’re seeing strong capital markets interest at the portfolio, sub-portfolio, and individual asset level for our remaining high-quality assets, we believe the time is right to recommend a plan of liquidation for the Company in an effort to bring liquidity and maximize value to our shareholders,” Hines Global REIT President and CEO Sherri Schugart said in a statement.
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