Union investment Real Esate bought and sold €3.8 bn of property in Europe and the US during 2017.
The German fund manager said that it had exploited the 'positive economic conditions' in international real estate markets and grew its open-ended vehicles through targeted acquisitions and sales.
As a result, the real estate funds managed by Union Investment rose over the course of the year from €31.8 bn to EUR 34.5 bn.
'This excellent result ties in with the course we have set for future growth, which we achieved in 2017 by entering the residential real estate segment and also through progress on digitisation,' said Reinhard Kutscher, chairman of the management board. 'As a business, we took two important steps to help build on our leading market position in Germany and Europe.'
Residential
Launched in May 2017 by Union Investment and Zentral Boden Immobilien, Unilmmo: Wohnen ZBI instantly became the largest residential real estate fund for private investors distributed in Germany.
The strategic investment in data room solution Architrave agreed in September 2017 opens up new opportunities for Union Investment to extend its business model in the area of digital property management.
'As with the successful entry into residential and micro-living in 2017, this year we will be considering other opportunities for diversifying our solution offering,' Kutscher said. 'That includes developing new skills and exploring new approaches, with our strategic investment in ZBI and Architrave serving as a possible template.'
Focus on medium to small lot sizes
The largest investment in a commercial property in 2017 was Magnolia Park in Wroclaw for Unilmmo: Europa, at approximately €380 mln, which also delivered the strongest growth overall in Union Investment’s real estate fund family.
Union Investment is increasingly focusing on assets in the medium-to-small market segment. Twenty of the transactions involved an investment of less than €100 mln, while 13 were below €50 mln.
The 27 property sales in the commercial segment completed in the business year now ended were distributed across seven national markets: Germany, the UK, Poland, Sweden, Austria, Spain and the US.
With 12 acquisitions totalling €480 mln, Union Investment was particularly active in the German commercial real estate markets. As in the previous year, however, the largest acquisition volume was in the US markets. In Denver, Portland, Seattle and Washington DC, Union Investment secured a total of five office and hotel properties totalling €780 mln.
In addition to the 27 acquisitions, the investment teams headed by Martin Brühl handled 19 property sales worth €600 mln in the past year. The sales programme included The Hague, Brussels (Zaventem), Budapest and Jerez de la Frontera.
Balanced growth
Kutscher, growth would not be pursued at any cost. 'In recent years, we have adopted a very sensible balance between new sales and investment opportunities which takes account of growing risks in the investment markets.'
Capital inflows from private and institutional investors of €2.9 bn were matched by real estate acquisitions totalling €3.2 bn during 2017. In the prior year, by contrast, Union Investment acquired properties worth some €4 bn.
'Strong competition for good properties naturally requires a great deal of flexibility from real estate managers at the moment. Our benchmark for every single deal, however, is always our investor promise to minimise volatility of returns, which means refusing to compromise in terms of the quality of the properties acquired,' stated Kutscher.
New hotel markets
The hotel segment made a disproportionately large contribution to acquisitions in 2017, with five transactions in Germany, Poland and the US worth some €460 mln. 'The accelerated acquisition of hotels outside Germany increases the sectoral and geographic diversification of our funds,” Brühl said.
'With strong demand for modern hotels, the US hotel markets remain attractive for further investment. It’s also possible that in future we will extend our investment spectrum to include hotels in Mexico and Australia, where we have been invested for several years'.
