Hines Forms $1.5B Build to Core JV with Korea’s National Pension Service

South Korea’s National Pension Service has made its second mega-deal of this month as the Jeonju-based giant today unveiled a $1.5 billion joint venture with US developer Hines to invest in real estate projects globally.

The $672 billion fund manager is teaming up with the Houston-based developer to pursue a build-to-core strategy that will encompass residential, office, logistics and mixed-use opportunities worldwide, with 20 percent of the venture already committed to projects in North America and Asia Pacific, the partners said in an announcement today.

“Like us, NPS values permanence, quality and innovation in core real estate,” said Hines chairman and chief executive Jeffrey C. Hines. “We see this new mandate as a natural extension of our longstanding relationship and a further opportunity to apply our real estate investments and execution skillsets to create differentiated multi-sector projects that enhance communities.”

The development initiative was announced on 10 December, just one week after the NPS had unveiled a joint venture with US fund manager Stockbridge, along with an additional investor which was not named, to acquire a 14.3 million square foot (1.3 million square metre) logistics portfolio. Media reports citing sources familiar with the deal valued that transaction at $2 billion.

Core Locations, Sustainable Demand

This latest joint venture will pursue urban infill projects in high barrier-to-entry markets, according to the partners, with the aim of creating a portfolio of prime assets able to weather market uncertainties.

“We believe there are significant opportunities to invest in the highest-quality, bulletproof assets that will provide long-term value to NPS stakeholders,” said Hyo-Joon Ahn, chief investment officer for the NPS.

With the pandemic having influenced all elements of the commercial real estate market, Ahn indicated that the joint venture would seek to build properties that would hold value under challenging conditions. “This venture has committed to a long-term strategy capitalizing on the transformation of living environments, consumer behavior and space-use patterns combined with latest technology in real estate development”, he said.

The partners said that the venture will focus on proven locations and that they plan to support their project by deploying innovative approaches and new technology that will allow them to capture sustainable demand.

With offices in 225 cities globally, Hines will be responsible for sourcing, designing and executing development opportunities for the venture, in addition to investing alongside the NPS.

Decade-Long Partnership

Today’s deal is the latest milestone in a partnership between Hines and the NPS that stretches back at least a decade to when the US firm advised the Korean fund on its €570 million acquisition of the Sony Center in Berlin. Hines acted as the asset manager for that property following the acquisition, with the NPS having sold the eight-building complex at the Potsdamer Plotz to Oxford Properties and Madison International Realty for €1.1 billion in 2017.

During the same year that the NPS sold off its Berlin asset, the Korean fund teamed up with Hines to invest $525 million to buy a piece of SL Green’s One Vanderbilt Avenue project in Manhattan. In that venture, the NPS purchased a 27.6 percent stake, while Hines acquired 1.4 percent.

In May of this year the NPS joined with Hines again to take a 49.5 percent stake in SL Green’s One Madison Avenue project in New York. The partners committed to invest at least $492.2 million to acquire that slice of the 26-storey office development.

In June of this year the NPS focused on Asia Pacific in setting up a $2.3 billion joint fund with Allianz Real Estate aiming to acquire a portfolio of core properties around the region.

Late last month Singapore’s OUE Commercial REIT confirmed that it was in talks to sell a piece of the OUE Bayfront property on the city’s Collyer Quay to a buyer believed to be that NPS-Allianz venture. The fund is said to be offering around S$640 million ($479 milllon) for a 50 percent stake in that 399,824 square foot office block.

Note: An earlier version of this story indicated that the NPS is based in Seoul. It has since been updated to show that the entity is based in Jeonju, South Korea. Mingtiandi regrets the error.