Commentary:
In November 2020, The Hines Pan-European Core Fund (HECF) was awarded Sector Leader in the Global Real Estate Sustainability Benchmark (GRESB) for an unprecedented fourth year in a row. Daniel Chang, Managing Director at Hines Europe, stated: “In a year where climate change and a global pandemic have more than ever tested life as we know it, Hines has understood the important role that our industry can play in creating a more sustainable future and is committed to delivering projects that enhance and support the communities in which we operate. Hines has a proud history of innovative and sustainable real estate investments.” (https://www.hines.com/news/hines-pan-european-core-fund-named-as-a-sustainability-sector-leader-for-a-fourth-consecutive-year)
We talk to Daniel Chang about the relationship between architecture and economics and the importance of sustainability.
1- What does the managing director of a European fund do? Describe your typical day.
I oversee acquisitions and asset management of corporate real estate of different asset classes such as office, retail or residential buildings across all of Europe and specifically in Germany and Spain. Whenever we buy a building, I review the acquisition process to make sure it aligns with the portfolio and investment strategy. I make sure that when the company underwrites a building, the price is right and all the calculations make sense and fit into the overall plan. What we do is we buy buildings and put them in the portfolio of a set of funds. The Pan European Core Fund for example has 30 buildings and we need to be sure that every new building contributes financially to the overall economic value of it’s portfolio. In Germany and Spain, I have colleagues who are at the forefront of the negotiations with sellers but I make sure the acquisitions fit into the overall strategy.
2- How was your work impacted by Covid?
I used to travel around Europe once a week and visit the sites and look at the buildings we wanted to buy. We not only buy but we also manage the new properties. If there is a law firm that rents space from us and they need to negotiate the lease because its ending I will get involved to make sure the conditions of the lease make sense in the overall investment strategy. Covid has impacted everything because before I physically travelled to make sure the buildings we bought looked good and fit in the portfolio and I would speak to people face to face. In real estate, with a real building that will be leased it makes a difference when you are walking down the street to see what’s on the other side of the building or next to it. It’s important to know how far it is from the metro, if it’s dirty, safe or noisy and all these things are things that need to be seen in person. Because of covid no one could travel for a year so it means spending time on zoom calls. We are now buying a building in Germany that none of us have been able to physically see so we organized the call to virtually see it. But if you are going to spend 150 million euros on a building you don’t want to make decisions without having seen the actual thing. Another big thing is working from home. I have worked for the same company for 22 years and never worked from home until covid. It has its benefits but the days are much longer sat at a computer at home.
3- How has your architecture background helped you in your role?
I studied architecture and I worked as an architect and I really love it. I was more interested in the design of buildings, building the models and doing the drawings. I like to draw and I worked for a couple years in design competitions, long but fun and interesting hours spent creating. I studied in America and there you can do a master after your undergraduate degree. I decided I was definitely doing the master but I wasn’t quite sure I wanted to do architecture as I felt it was a bit narrow. In terms of how my brain worked, I was only using the creative part but not the mathematical or verbal part as I never had to write anything. I went to work in Paris for a few years and when I went back to America for my master I decided to explore other stuff and decided on Urban Planning MBA. Urban Planning was similar to architecture, MBA was totally different. It was about money, finance, business which I thought I wasn’t going to like. But I felt challenged and thought it was very interesting and pragmatic. Right after that, I started working for the company I work for now, which is a real state development / real state investment company. Real state is very broad. My first assignment which lasted two years was in the construction site of a skyscrapper and my background in architecture was very useful. With the years, I started to learn the commercial aspects of real estate, what provides value, how to buy and sell a building, how to attribute market value. Architecture taught me to visualize spaces. In the end, real state is business but the product is a building and the building comes from architecture. So…
4- Is there a relationship between architecture and economics?
Absolutely. This is a super interesting question. Hines has from very early on built its reputation on being a very good developer and building really good quality buildings. Buildings that we build come from very good architecture. I think we were one of the first firms to recognize that hiring a really reputable architect is good business. You can build a building and just have it be four walls, a ceiling, a floor in a good location…market it properly and it will be ok. But if you have a really good architect and good design that building will be economically valuable forever because it has an aesthetic quality that is unique. Just because you have a design architect doesn’t necessarily mean the building will be economically successful but if you have the right architect that also understands how to make it interesting for people and tenants then you have both and it can be economically successful
5- Hines has just won a sustainability award. What are the company’s objectives in terms of sustainability?
Hines is a very big company operating in USA, Europe, Asia and some of Latin America. The sustainability objectives across the firm are not exactly the same in every region. In Europe, we are a bit more advanced because of the sophistication of the market, regulation and legislation. The Hines Pan-European Core Fund (HECF) for example, for which I have managed the sustainability process for the last 11 years was awarded Sector Leader in the Global Real Estate Sustainability Benchmark (GRESB) for four years and has several key objectives. One is to become operationally net zero, basically looking at the way the buildings operate, trying to look at the electricity and energy contracts to make sure there is no waste and using renewable energy that comes from roofs, windows, windfronts, North Sea etc. Another objective is to have zero waste go to landfill to make sure any waste generated by the building is burned or recycled appropriately. There is also an objective to obtain sustainability certificates for all of our buildings. It’s a process through which an auditor comes in to evaluate if the building complies with certain aspects of sustainability and labels each part with the appropriate level. You can refer to the public Hines brochure on sustainability for all the objectives
6- Can you describe your greatest achievement in your work so far?
I feel grateful for having had a very rich career. I lived in lots of different cities whilst working for the same company: London, Paris, Barcelona, Dusseldorf, Madrid…I move around a lot and gained an experience that I really value because it made me understand how real estate works in different countries. And I also worked in different parts of the company: construction management, person and project management, investment management and sustainability management. I think this broad exposure made my career more interesting and I can now draw from this experience in my day to day. I can always refer to the work I did in construction for example and its very useful to me now. I think this multi-level experience is my thing.
7- Do you think Brexit will impact international funds like yours?
No, I don’t think so actually. In the beginning there was a lot of fear but we haven’t really seen an impact. It might be too early to say but the sentiment is that London will continue to be one of driving markets, one of the biggest markets In Europe the fund might want to have exposure to. In terms if activity, last year we bought $2 to $3 billion worth of property in the UK for one fund right in the middle of covid and Brexit. So at the moment, I would say not so much.
Resources:
https://www.archdaily.com/796154/economic-concepts-that-every-architect-should-know
