- Apr 06, 2012
By Keat Foong, Executive Editor
A private company, Hines is developer of some of the most eye-catching commercial buildings to grace the skylines of cities in the United States and internationally. It is also one of the largest real estate organizations in the world. However, although it has developed residential properties in other countries, Hines did not have a significant presence in the domestic apartment sector—until recently.
Last year, Hines hired Alan Patton, then president of The Morgan Group, to lead Hines’ efforts to expand its multifamily development activity. “We think Hines can become a very successful player in multifamily, especially with someone of Alan’s specialized knowledge and experience base on our team,” said Hines President and CEO Jeff Hines in a statement at the time of the announcement. “The multifamily sector is poised for near-term growth, and we are seeing strong interest among our investors.”
Having boosted the company’s multifamily capacity with an additional 12 hires at regional levels, Hines is rapidly ramping up its multifamily development. Hines currently has 15 multifamily projects, representing about 4,000 units, under development in cities throughout the U.S., including Boston, Houston, Washington, D.C., Atlanta, South Florida and Minneapolis, says Patton. The company is preparing to break ground on the first of these projects by the summer.
An inherent competitive advantage of Hines as a multifamily developer is that the company has long-established office development operations and expertise in cities throughout the U.S. The company, which was founded by Founder and Chairman Gerald Hines in 1957, today invests, develops and manages commercial real estate in more than 100 cities around the world. It has offices in 18 countries and 63 cities in the U.S. Hines’ portfolio consists of more than 1,192 properties, and the company controls assets valued at about $22.9 billion.
Hines’ existing office development infrastructure can be utilized to serve its apartment development efforts, whether the company needs to access local market knowledge, source off-market development sites, obtain entitlements or execute the multifamily construction process. “We are able to leverage off of all that existing platform that has been established,” says Patton. “There are great synergies between the multifamily and office operations because we look at some of the same sites and cities.”
In numerous occasions in the past, Hines was compelled to pass the apartment or condo portions of its tracks of land to multifamily developers. The company could now develop such sites. And in this day and age of infill-site scarcity, every advantage helps. The company is also able to “take advantage of the contacts and relationships we have. There are many development sites that many do not know of or see,” says Patton.
Hines will be targeting the top 15-20 major metropolitan areas which exhibit strong job and population growth, Patton indicates. The vast majority of the multifamily properties will be mid-rises located in infill sites. Patton estimates Hines will average about 15 apartment starts per year in the next five years. He said leverage will be able 65 to 70 percent on the construction debt. Most projects will be sold before the permanent debt is placed, as Hines’ institutional investor partners seek to exit within a four- to six-year period.
The multifamily market will remain strong over the next seven years, says Patton. “It will be difficult to develop enough multifamily to meet what we see as the demand.”