ANALYSIS: Union Investment is now sated following Dutch spending spree

German fund manager Union Investment Real Estate appears to be sated after its recent shopping spree in Amsterdam which has propelled it to one of the largest foreign commercial property landlords in the city.

Early last week, the Hamburg-based company acquired the 4-star Radisson Blu hotel in the Dutch capital. The price was not disclosed but PropertyEU Research has established it was around €90 mln, or €360,000 per room. Union Investment already owns the Motel One development and 207-room Crowne Plaza hotel in the Zuidas. Including its latest hotel acquisition, Union Investment now has 774 hotel rooms in the Dutch capital.

The latest hotel deal is being added to the portfolio of Union Investment's UniInstitutional European Real Estate fund. It follows hard on the heels of a string of office acquisitons in the Dutch capital. In January Union Investment acquired the new headquarters of law firm Stibbe for €54 mln from developer Dura Vermeer. That acquisition followed the purchase of a neighbouring project, also being developed by Dura Vermeer, for Dutch coatings specialist AkzoNobel, for €82 mln or a yield of 6.2%, according to PropertyEU Research data. And in April, it added the ITO + SOM office complex to its portfolio of assets in the prestigious business district for around €244 mln or a gross initial yield of 6.7%, according to market watchers.

With that last purchase, Union Investment has virtually cleaned out all the prime office assets up for sale in Amsterdam’s Zuidas. The only other high-profile development in the district that was still seeking an investor until recently was The Edge, a creation of green developer OVG. The new office development, which will house the new headquarters of accountancy firm Deloitte and law firm AKD, was acquired last week by German peer Deka Immobilien. Deka bought the 40,000 m2 building from the Rotterdam-based green office specialist for around €200 mln on a freehold basis, reflecting a gross initial yield of 6.5%, PropertyEU Research has established.

ZUIDAS
While the building has been slated as one of the greenest buildings to arise in the area, well-informed sources said that Union Investment was not interested in the development. It is believed that the asset’s location at the very edge of the Zuidas was considered a potential drawback. Following the transaction, Deka now ranks as the largest foreign landlord in the business district. Including the Edge, Vinoly, The Rock and Symphony buildings, Deka now owns offices in the area totalling 134,000 m2.

Meanwhile Union Investment remains a large player with nearly 107,000 m2 of office space in the Zuidas area followed by CBRE Global Investors' Dutch Office Fund, which owns the WTC Amsterdam complex comprising 125,410 m2.

While Union Investment is keen to expand in a number of foreign markets in and outside Europe, it is now sated in the Dutch capital after its recent spending spree, conceded Union Investment's chief investment officer Frank Billand. In any case, he is no longer eying offices in Amsterdam and other Dutch cities like The Hague are not on his shopping list either. ‘We already have an office investment in The Hague in the Central Business District. The Hague is a centre of government and non-profit organisations. It’s a hard business to find other tenants for long-term leases,’ he said.

Following hard on the heels of Germany, the residential sector in the Netherlands is now heating up, but Union Investment has no investment or expertise in this area and is not planning to branch out into the segment, Billand said. He added, however, that Union Investment would also consider logistics assets in the Netherlands.

Initially, Billand had his work cut for him trying to explain why Union Investment was considering the Netherlands given the country’s high office vacancy rate and image as ‘a graveyard’ for obsolete buildings. But the focus was specifically on the Zuidas, he noted. ‘Vacancy rates are low here and we were able to buy new product at prime locations.’ With a vacancy rate at around 6.8%, Amsterdam’s Zuidas district is one of the Netherlands’ most attractive office markets and demand for office space in this core location is also rising significantly.