Hines’ Russian assets among commercial stakes imperiled by Ukraine invasion

Houston-based investment firm valued assets in Russia at $2.9B

National /
Mar.March 08, 2022 03:45 PM

Jeffrey Hines, chairman, Hines (Getty Images, iStock/Photo Illustration by Steven Dilakian for The Real Deal)

As Russia’s invasion of Ukraine nears the two-week mark, shockwaves from the war are reaching major commercial players with projects in Vladimir Putin’s country.

Hines is among them, counting assets valued at $2.9 billion in Russia prior to the invasion, the Wall Street Journal reported. While many real estate companies are cutting ties and ceasing operations in Russia for the time being, the Houston-based Hines has condemned the invasion and only gone so far as to say it will stop making new investments in the country.

“We do, however, have commitments made to our investors, partners, tenants and lenders and we are in discussions with them to determine the best path forward,” Hines told the outlet.

The firm’s dealings in Russia account for 1.8 percent of its total portfolio of assets under management, which is valued at $160 billion. The company employs 250 people in the country.

Hines first started investing in post-Soviet Russia in the early 1990s with an apartment and office building known as Park Place Moscow. According to the Journal, the investment firm has developed outlet shopping centers in major cities, as well as three office buildings and an industrial park, along with other commercial properties.

Hines isn’t alone in sticking it out in Russia, at least so far. A fund managed by Morgan Stanley Real Estate Investing owns the Galleria mall in St. Petersburg, as well as the Metropolis mall in Moscow. It owns a 50 percent stake in the latter; Hines and Calpers purchased a stake in the mall from the Morgan Stanley fund.

According to Knight Frank data reported by the Journal, 2.2 percent of investments in Russia’s commercial real estate sector in the first three quarters of 2021 came from foreigners. That’s the lowest level of foreign investment activity in the country since at least 2009.

Knight Frank and Savills are among those who have backed away from the country amid its invasion of Ukraine.

Though its assets in Russia represent almost 2 percent of its total assets, one expert told the outlet Hines’ keeping business in the country could spur social consequences or political blowback.

“The question now is reputation risk,” Cedrik Lachance, head of research for real-estate analytics firm Green Street, told the Journal.

[WSJ] — Holden Walter-Warner





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