HIH Invest Real Estate (“HIH Invest”) was able to keep growing its assets under management (AuM) even in 2022. In fact, they increased by more than 16 percent to 19.1 billion euros. The multi-manager business alone, with its master funds and consolidation solutions, accounted for 1.2 billion euros out of the 2.7 billion euros worth of assets added. The Hamburg-based investment manager now takes care of 92 funds or mandates on behalf of 261 institutional investors overall. The transactions volume of HIH Invest added up to a total value of c. 1.3 billion euros, thereof 1.15 billion euros in acquisitions and 0.15 billion euros in disposals.
“We are proud to say that we managed to continue our growth trajectory even in 2022 – despite the challenging market environment. We did so by identifying lucrative opportunities to buy or sell. Key to our success in this context is the market know-how of our team,” commented Alexander Eggert, Managing Director of HIH Invest.
Across funds, the AIFM company earned a 6.45 percent return on investment during the 2022 financial year. The leverage equalled around 29.6 percent. “The low leverage is of great advantage in times of such enormous interest rate hikes. As an equity-rich investor, we are in a position to shoulder acquisitions even without debt capital on occasion, assuming the right parameters. At this time, we have over 500 million euros in equity reserves available for future acquisitions. Accordingly, we are fully capable of acting even in the current market shakeout phase,” said Carsten Demmler, Managing Director of HIH Invest.
Product Line-up Expanded to Include Healthcare Real Estate and Renewable Energies
Acting on the intense communication with its clients, the investment house also expanded its product range in 2022. Recently added options include pool funds in the areas of healthcare real estate and renewable energies. A health centre in Michendorf near Potsdam was the first asset to be acquired for the HIH Vita Invest fund, which focuses on senior living, medical facilities and rehabilitation clinics in Germany. The pre-acquisition audit for another property is underway, with additional properties in the acquisition pipeline. The initial capitalisation was provided by seed investors in 2022, and there are options for drawing down additional investor capital.
Another fund, HIH Green Energy Invest, is also in possession of its first fund asset, a wind farm in France. The Article-9 fund invests in photovoltaics and on-shore wind power projects, and has a target volume of 750 million euros. HIH Invest is backed by 100 million euros in equity commitments as it screens the market for investment grade assets.
Second Logistics Pool Fund Successfully Launched
HIH Invest is deepening its commitment in the logistics sector. Its first pool fund, HIH Deutschland Logistik Invest, was launched in 2020 and achieved its target volume of c. 500 million euros within little more than a year, being fully invested now and in possession of 13 properties. For the company’s next logistics vehicle, an Article-8 fund called HIH Deutschland+ Core Logistik Invest and also launched in 2022, five properties in a total market value of c. 65 million euros were acquired. The latest acquisition involved a logistics property of 23,000 square metres in the Dutch town of Zwolle that meets the latest ESG standard. In addition, the company completed acquisitions, some of them large-scale, on behalf of individual funds.
Residential with Strong AuM Growth
In the residential sector, HIH Invest achieved an even faster increase in assets under management. The two pool funds grew by a total of twelve properties. Ten of these, in a combined value of c. 350 million euros, were added to the HIH Deutschland Wohnen Invest fund, while two assets worth c. 165 million euros were added to the HIH Wohninvest Quartiere fund. Felix Meyen, who became one of the Managing Directors of HIH Invest in April of 2022, commented: “We were still able to find properties benefiting from substantial public subsidies in excellent location and at attractive yield rates for HIH Invest. They will generate a steady cash flow. After all, demand for rental apartments remains as high as ever, and it exceeds supply in the cities where we invested.”
The historically strongest sector of HIH Invest has been office real estate. By the end of the year, HIH Invest had 170 office properties in a total market value of 8.7 billion euros under management. “Institutional investors continue to concentrate on office real estate because it is a use type that remained rather stable throughout the crises of the past three years. Strong demand for space still coincides with a scarcity of modern, centrally located units with alternative use potential. The focus is increasingly on ESG criteria, even among tenants; that is why the criteria have such a significance for our acquisition strategy,” added Felix Meyen.
HIH Invest to Maintain Focus on Growth in 2023
Carsten Demmler summarised the year 2022: “We observed the transition from a seller’s market to a buyer’s market. But the pricing cycle on the real estate market is not yet concluded, while interest rates have soared and the economic outlook is subdued. All of these aspects have made institutional investors more cautious. However, current price adjustments on the market make higher net cash-on-cash returns more realistic than a year ago, while real estate also provides investors with a certain inflation protection, unlike classic fixed income investments. Compared to equities, real estate is less prone to volatility. All of this ensures that real estate will remain an important component in the portfolios of professional investors.”
In regard to the plans for 2023, Alexander Eggert had this to say: “HIH Invest will keep pursuing its growth trajectory. We want to keep growing our assets under management, launch new funds and attract new clients. And we are also looking for reinforcements in terms of human resources.”
