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Joint venture

NPS, Hines set up $1.5 bn build-to-core strategy JV

By Dec 11, 2020 (Gmt+09:00)


NPS, Hines set up />.5 bn build-to-core strategy JV

The National Pension Service has set up a $1.5 billion joint venture with the US-based real estate investment firm Hines for a build-to-core portfolio, following the $2.3 billion property JV the world’s No. 3 pension fund launched with Germany’s Allianz SE in June.

Under the build-to-core strategy, the JV will buy defective properties in core locations and upgrade them to increase value. Hines, as a co-investor with NPS, will be responsible for sourcing, designing and executing development opportunities globally, utilizing its presence in 225 cities in 25 countrires. 

“The $1.5 billion equity joint venture will pursue urban infill developments across a broad span of sectors including mixed-use, residential, office and logistics in high-barrier-to-entry markets globally,” Hines said in a joint statement.

The venture has already committed 20% of its equity capital to projects in North America and the Asia Pacifc, it added, without elaborating further.

“This venture has committed to a long-term strategy capitalizing on the transformation of living environments, consumer behavior and space-use patterns combined with the latest technology in real estate development,” NPS Chief Investment Officer Ahn Hyo-Joon said in the statement.

NPS and Hines had previously teamed up on landmark investments in Europe and North America, including the 2010 purchase of Sony Center in Berlin; the 2017 development project of the skyscraper One Vanderbilt in New York City; as well as the redevelopment project of the luxury residential tower One Madison, also in New York, in 2020.

Hines, established in 1957, manages $144.1 billion of assets, including $75.5 billion for which Hines serves as investment manager.

Since the beginning of this year, NPS has been forming JVs with leading global institutions to improve deal sourcing capabilities, given the difficulty of conducting onsite due diligence on overseas assets in the wake of the coronavirus outbreak.

In June, NPS announced a $2.3 billion co-investment fund launch with Allianz to invest in landmark office buildings as well as logistics and residential facilities in big cities in Asia. They are currently in negotiations to jointly buy a 50% stake in OUE Bayfront, a Grade A office tower in Singapore's Marina Bay area.

In September, NPS formed a strategic alliance with Dutch pension fund manager APG to invest in Europe and Asia, including Australia, and established a co-investment fund with Singapore's Keppel Infrastructure Holdings

“By forming a partnership with a like-minded global institutional investor, NPS expects to share investment experience in real assets and gain the upper hand in securing prime investment deals, with a competitive edge in terms of investment amount and cost,” CIO Ahn said in October when announcing the strategic alliance formed with APG.   

NPS is expected to see its assets swell by 300 trillion won ($275 billion) to 1,000 trillion won in 2025, by which time it plans to expand its portion of  alternative assets to 15% from the current 12%.

Considering its asset growth pace and the expiry of invested funds, NPS needs to pour 15 trillion to 20 trillion won into new alternative investments annually through to 2025, by when its alternative investments are expected to reach 150 trillion won from the current 90 trillion won. 

Write to Jung-hwan Hwang at jung@hankyung.com

Yeonhee Kim edited this article.

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