German open-ended fund manager Union Investment is believed to be mulling the sale of a €500 mln pan-European property portfolio, according to those who track the market.
German open-ended fund manager Union Investment is believed to be mulling the sale of a €500 mln pan-European property portfolio, according to those who track the market.
‘For 2015, our target is to sell pan-European properties totalling about €1 bn,’ a company spokesman said. ‘Last year, we sold 23 properties totalling around €1 bn.’
He declined to comment on specific sales.
Swiss developer and investor Realis is also understood to be selling a pan-European portfolio worth between €200 mln and €300 mln, according to those who track the market.
Realis could not be reached for comment.
Agent JLL is forecasting an increase in portfolio sales this year, according to Marcus Lütgering, head of office investment in Germany at JLL: ‘I expect to see an increase in the number of deals in Germany this year in excess of €100 mln. We had around 20 such deals in the office sector last year. I think we’ll see a lot of portfolios in the €200 mln to €500 mln range come to market in the first quarter, including pan-European portfolios, some of which will be sold by banks to boost their liquidity,’ Lütgering said.
Many of these portfolios will have been acquired between 2006 and 2007, shortly before the financial crisis.
Interestingly, there has been a marked change in the past six months in terms of what is bundled into a portfolio, he added. ‘Today, the volume of the portfolios is the key driver, whereas before, the long-term income potential was more important. Investors are also much more willing now to take on a range of assets in a portfolio, comprising assets from €10 mln to €100 mln in different locations and with different risk profiles. This reflects the strong demand for portfolios,’ he said.
There is also heightened demand today for ‘big ticket’ deals, Lütgering said: ‘The bigger the ticket, the greater the number of bids. It’s not unusual to get as many as 20 bids, even on big deals, due to investor demand.’
As a result, investors are also looking at regional cities in search of additional investment opportunities. Strong demand has pushed prime office yields down in the past year to 4.2%-4.5%, compared to 4.7% last year. Similarly, secondary office yields have fallen to as low as 5.2%, down from up to 7.2% last year, according to JLL.