|57||number of Hines investment funds/programs sponsored since 1991|
|32||number of countries represented by investors|
|185+||institutional investor clients/partners|
Hines will enhance the software capabilities of the Hines Track Record Project to further analyze investment performance across multiple factors and scenarios, informing strategy and enhancing investor relations.
Hines Proprietary Research, Business Technology Group and IT enhanced the Hines Track Record Project and streamlined the collection and reporting of financial performance across assets and portfolios. This data has enabled Hines to better identify opportunities for outperformance—adding beta to the Hines alpha. Additionally, Hines formed a centralized group of investment specialists to use proprietary transaction data, Hines Research, and market knowledge to help fund teams underwrite and identify unique acquisition opportunities.
Hines will explore database platforms to track additional information across the lifecycle of an asset, and further inform investment strategies, enhance decision making, and support investor reporting.
- Hines’ Responsible Investment Statement
- Governance Structure
- Fund and Separate Account Managers
- 2017 Investor Survey
- Reinvigorating a District Portfolio through Partnership
- Hines Proprietary Research
- Hines Policies
- Risk Management
- Sustainability Investment Considerations
- Investment Management
- Investor Engagement
- Hines Investment Portal
- Investor Relations Group
- Investment Strategy Group
The Hines Pan-European Core Fund (HECF) achieved the highest possible rating of five Green Stars and was named a Global Sector Leader in the Global Real Estate Sustainability Benchmark (GRESB) 2017 Real Estate Assessment.
The GRESB survey assesses sustainability in areas including stakeholder engagement, building certifications, energy management system monitoring and performance indicators, risks and opportunities, policies and disclosures, and management. The fund achieved very strong scores across several GRESB categories and ranked first among all European portfolios that participated in the optional Health and Well-being module.
“This is the first time that HECF has participated in GRESB. We believe it is a strong reflection of the quality of our portfolio.” says Daniel Chang, Managing Director.
HECF was established in 2006 with a focus on acquiring a geographically diverse portfolio of core commercial buildings across Europe. The team utilizes a very transparent information policy and clear guidance on the Fund’s evolving strategy and has actively adopted industry best practices promoted by INREV.
“From inception, sustainability has been an integral part of the Fund’s investment strategy and is a key way to deliver value to our investors and improve the quality of the built environment and our communities,” adds Peter Epping HECF Fund Manager.
During 2017, HECF completed three acquisitions and added two new countries—Denmark and the Netherlands—to its Pan-European portfolio, which is now close to full occupancy at 99.4 leased, an increase of six percentage points from 2016 (93.5 percent). Over three and five years, the performance has been consistently strong with 9.7 percent and 7.1 percent, respectively. For fundraising, 2017 marked the strongest year since fund inception with €288m equity raised (of which €101m were from existing investors).
At the highest level, the primary bodies for governance and decision making at Hines are the Executive Committee, Audit and Compliance Committee and Investment Committee. Hines’ decentralized regional structure puts decision making closer to the real estate. Regional CEOs, who are members of the firm’s Executive Committee, direct the activities of regional organizations that source and execute investments and oversee regional development and operations.
New Chief Investment Officer
In June 2017, Hines announced an internal promotion to the firm’s investment team. As Chief Investment Officer, David Steinbach will provide direction to the organization on investment strategies. He reports to the Vice Chairman Hasty Johnson, who heads the firm’s Office of Investments, and works in concert with Hines regional business units, Proprietary Research and Risk Management.
The Hines Executive Committee sets policy for the firm. It is composed of ownership, regional and central leadership, and the firm’s Chief Risk Officer.
These committees serve as vehicles for change and communication. They complement the work of existing departments and committees responsible for day-to-day operations at Hines. The Management Committees are: Strategy; Investments & Performance; Finance, Operations & Tenant Relations; Capital Markets; Compensation, HR & Morale; Risk, Sustainability & Corporate Citizenship; and Steering.
Audit and Compliance Committee
The primary function of the Audit and Compliance Committee is to serve as an objective and independent party in ensuring compliance with policies and systems of internal control in the areas of finance, accounting, operations, legal compliance and business ethics. Current membership consists of the Chief Executive Officer and President, Chief Financial Officer, Chief Risk Officer, Treasurer, Chief Administrative Officer and Vice President – Legal. The committee meets quarterly, more frequently as circumstances dictate.
The Investment Committee has final authority over all investment decisions. Members are the Chief Executive Officer, Chief Investment Officer, Chief Financial Officer, CEO of Capital Markets, CEO of Investment Management and Chief Risk Officer. The head of Hines Research is also a member of the committee and consults with it on each investment being considered. The fund manager for the asset being considered also has a vote on the Investment Committee for that specific decision. Voting is blind. Any three “no” votes or a single “no” vote from the Chief Risk Officer stops any approval. Where investment approval guidelines specific to an individual fund exist, those guidelines prevail and take precedence over the approval authority stated above.
Responsible for setting and maintaining the Code of Conduct and other employee policies, the Personnel Committee also sets guidelines for employee compensation.
Investment Review Group (IRG)
The purpose of the Investment Review Group is to bring discipline and organization to Hines’ relationship with investors. The IRG will review and approve all funds, strategic offerings and programmatic joint ventures before their presentation to investors. The IRG is the final decision-making body and resolves disagreements involving what is presented to investors; works closely with the CEO of Capital Markets on terms and structuring; and is the deciding body for performance-related compensation issues.
Hines’ decentralized regional structure puts decision making closer to the real estate. Regional CEOs, who are members of the firm’s Executive Committee, direct the activities of regional organizations that source and execute investments and oversee regional development and operations. They work in strong collaboration with Central Resources and with the investment fund and separate account management teams. Investment decisions for properties within a fund or in a separate account are made at the fund level.
For each property, a senior regional staff member is appointed to serve as a “single point of responsibility” in the execution of the business. Experience has shown that this structure maximizes accountability and streamlines decision making.
In 2017, Hines retained Kingsley Associates to conduct interviews with numerous Hines’ investors and partners worldwide to gather candid assessments of Hines’ performance, as well as the key priorities of our investors. Notable improvements to scores were achieved in Risk Management and Research, two areas where feedback in 2014 led to a redoubling of efforts by Hines to meet investor expectations. Survey participants cited Hines’ global reach, quality of personnel and development expertise as key strengths and differentiators.
“The results of the investor survey were encouraging, and have generated new ideas and initiatives to further enhance the quality of the services provided to the firm’s investors and partners.”
Senior Managing Director,
11% increase in 2017
Hines Proprietary Research Group applies data to create proprietary models that inform investment decisions, reduce risk and enhance returns. Using historical data from global sources, including CoStar, PMA, IPD and Moody’s Analytics, among others, Hines Proprietary Research identifies drivers of performance for the firm’s investments.
In addition to publishing forecasts for hundreds of global markets to inform Hines’ regional teams, the group supports the Hines Track Record Project and performance reporting to current and potential investors. The team collaborates with other internal groups to enhance a database management system to track and report performance for multiple factors across the lifecycle of an asset, and further improve reporting to our investors and partners.
Hines policies are divided into three categories: 1) Hines U.S. Policies coordinated through the Personnel Committee and issued by Human Resources; 2) Regional and International Policies issued by the appropriate Regional CEO; and 3) Department Policies issued by the respective department heads. Department and regional policies may not conflict with or contradict company policies.
The following are key foundational policies:
Code of Business Conduct
The Hines Code of Business Conduct sets forth fundamental principles of law and ethics governing the way that Hines does business. Hines employees at every level must comply with the Code and associated policies and guidelines. In particular, employees contributing to financial record keeping must comply strictly with Hines’ finance and accounting standards. Managers are expected to review the Code with their teams on at least an annual basis and whenever there is a significant change. Hines requires its suppliers, consultants, contractors and partners to conduct their businesses in a legal and ethical manner.
Conflicts of Interest Policy
This policy states that employees should actively avoid any activity that might influence their ability to act in the interest of the company or perform their work objectively. Specifically, it addresses procedures relating to: business gifts and entertaining; gifts to staff of public pension funds; ownership of competitive real estate; service on the board of banks, financial institutions or for-profit enterprises; and seeking political office in jurisdictions in which Hines owns or manages real estate.
Political Contributions Policy
In order to ensure compliance with applicable laws governing political contributions, all Hines officers and any other employee who solicits a government entity for investment are required to obtain pre-authorization of any intended political contribution. In addition, any intended support by the firm, or its officers and employees, of any state or local referenda or initiatives are required to be cleared using local counsel and Hines Vice President—Legal.
It is the policy of Hines that all employees, including employees of all U.S. and international affiliates, comply with the Foreign Corrupt Practices Act (FCPA) as well as local anti-bribery laws in the conduct of international business. Hines provides annual training on compliance with the FCPA and other relevant anti-corruption legislation to all employees.
Under the FCPA, it is unlawful for a U.S. person or U.S. business to pay or offer a bribe of any kind to a foreign official. Accordingly, the company’s policy prohibits the payment of money, gifts, services, entertainment or any other thing of value to such officials. Hines provides FCPA training to employees.
OFAC Compliance Policy
It is the policy of Hines to avoid transactions with any party confirmed by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to be on the Specially Designated Nationals (SDN) List, and to comply and report to OFAC in the event Hines controls assets that are required to be frozen. In Europe, Hines complies with similar regulatory requirements existing in the UK, Luxembourg and Italy, where Hines operates regulated activities.
The Hines Environmental Policy states that employees should use reasonable efforts to accomplish the following:
- Conduct business in accordance with applicable environmental laws and governmental directives
- Minimize potential environmental liability arising from the ownership, development and management of land and property
- Address the environment responsibly
- Create and manage guidelines in appropriate environmental areas, including but not limited to the following: asbestos, hazardous materials, indoor air quality, refrigerant management and underground storage tanks
- Strive to reduce the volume of commercial solid waste at Hines facilities, while promoting cost-effective waste recycling and reuse
- Communicate the organizational commitment to environmental stewardship throughout the company
The policy further defines the roles and responsibilities of regional management, employees and corporate risk management to ensure the development, communication and implementation of the controls, standards and procedures necessary to achieve compliance with the Hines environmental guidelines. Hines’ international regions have adapted the environmental policy to best address local contexts.
Hines recognizes that development, construction, management and investment in real estate impacts our stakeholders and the communities in which we operate. In recognition of these impacts, Hines maintains policies and procedures to mitigate negative environmental effects, engage stakeholders, and enhance our investment performance. The firm will:
- Comply with the applicable environmental laws, regulations, legislation and implement industry best practices and ownership objectives.
- Advance environmental performance and excellence through innovative practices that reduce the properties’ impact on the environment. This includes conservation of natural resources, energy, water, waste minimization and enhancing health and safety.
- Communicate the firm’s environmental and sustainability commitment to employees and other stakeholders.
- Develop and implement programs, processes and practices as needed to comply with laws, regulations, legislation, industry practices and ownership objectives.
- Encourage Hines business leaders to incorporate sustainability issues into the overall business practices of investment, development, construction, renovation and management.
- Encourage, recognize and communicate achievements of environmental leadership and innovation of Hines employees.
- Encourage Hines’ contractors to employ sustainable practices and incorporate these requirements into contracts as appropriate.
- Participate with industry and governmental organizations in the evolution of environmental performance as appropriate to the real estate industry.
The successful implementation of policies and environmental and operational standards by Hines employees and contractors is fundamental to a risk management program that strives to eliminate or minimize risk in order to protect ownership, investors and related entities from financial and physical loss.
The Central Resources risk management team supports regions by overseeing these functions: risk exposure identification and analysis; insurance procurement and administration; contractual risk transfer review and negotiating; litigation management; claims management; and loss prevention and control coordination.
A guidance document identifies what to consider when completing the sustainability section of a Hines Investment Committee proposal. Sustainability elements are considered in the context of investor objectives, market factors and local regulations, among other things. Questions to consider on a particular investment include:
- Is the sustainability objective for this investment to acquire a building with strong environmental performance or to acquire an environmentally underperforming asset with an emphasis on improvement?
- Is this property a candidate for net-zero?
- How will Hines’ investment in or development of this project enhance the community?
- How is the building able to be repurposed to respond to evolving tenant use?
Hines’ investment partners and clients include major public and private pension funds, government investment authorities, insurance companies, financial institutions, endowments and individual investors.
Hines-managed investments generally fit in the following classifications:
- “Separate accounts” consist of one investor plus Hines. These funds can be either open-ended or have a clear end date
- “Commingled funds” include multiple investors with an investment strategy or mandate and can be open-ended or closed-ended
- One-off investments typically target a property or project with a primary investment partner in cases where Hines has identified a strategic opportunity
- Independent investment projects are pursued and financed by the firm, provided this strategy creates no conflict with existing discretionary funds or separate accounts
Within each type of fund or separate account, Hines is typically designated as the managing general partner, and all other investors are limited partners, reserving certain decision-making and approval rights as established in each fund’s partnership agreement.
Hines’ management of regulated funds in Luxembourg is overseen by relevant national regulators. Capital raising for Hines is regulated by FINRA in the United States and FSA in Europe.
Hines REIT / Global REIT / Global REIT II
Hines sponsors three publicly offered investment programs. Classified as “real estate investment trusts” for U.S. federal income tax purposes, Hines REIT, Hines Global REIT and Hines Global REIT II are separate legal entities and are subject to regulation by the U.S. Securities and Exchange Commission.
Hines, as an investment manager, seeks to achieve superior rates of return on its investments, providing complete, timely and accurate financial and operational information. For each fund or investment project, Hines and its clients agree in the documents that govern the relationship to reporting standards and requirements.
As a private investment firm, Hines continues to evaluate the benefits of voluntary adoption of standardized financial and non-financial reporting frameworks for efficiency, comparability and transparency. Such frameworks include the European Association for Investors in Non-listed Real Estate Vehicles (INREV) and the Global Reporting Initiative (GRI). Hines seeks ongoing feedback from its stakeholders to help inform the completeness and effectiveness of its reporting.
With professionals in Europe, North America and Asia, the Hines Capital Markets group works closely with investors ranging from the largest sovereign wealth funds to individuals. Deep, long-standing relationships with investors, together with participation in investor conferences worldwide, allow Hines to identify early how investors’ needs and preferences are evolving. As it develops investment offerings, the Capital Markets group relies heavily on Hines Research for insight on the economy, property markets and risk/return tradeoffs.
Hines asks investors for feedback through a variety of channels. Investor surveys are conducted periodically via telephone interviews by a third party. Hines hosts an investor roundtable every 18 months, bringing together investors from around the world to share ideas and inform Hines practices.
The Hines online investor portal is a secure web environment that provides access to reports and other information related to an account’s assets and performance. The portal supports more rapid distribution of financial information and provides a repository for historical data in a secure manner that is available worldwide at the investors’ convenience.
The Investor Relations group works closely with Investment Management, Capital Markets, Corporate Communications and our region/country teams to lead company-wide efforts to add more structure and consistency to our service model for investors and partners around the globe.
A head of Investor Relations oversees the coordination of internal and external investor communication to maximize the engagement of our existing investors and strategically build upon the relationships we have cultivated over our tenure as a developer, service provider and investment manager.
Hines is committed to providing our investors with best-in-class service, and this group helps bring us closer to reaching our goal of being the best real estate investor, partner and manager in the world.
The Investment Strategy Group (ISG) helps prioritize new initiatives across the firm. The four-member group acts as a forum where ideas proposed by Hines employees can be reviewed, developed and, if approved, implemented and disseminated. Additionally, the ISG focuses on the application of actionable results developed by Hines Research into investment action. Across Hines, the “four pillars” of Research, the Hines Regions, Investment Management and the Capital Markets group will provide guidance on the strengths and weaknesses of a proposed strategy. ISG works closely with all four groups to ensure that every initiative receives buy-in from each of the four groups and a clear consensus to move forward.