International investment objectives mark a new era for shopping centre segment
Reliable cash flows and stable value make well-managed shopping centres in inner-city locations a sought-after asset class. The acquisition of Les Grands Prés in Mons, Belgium in 2004 was Union Investment’s first milestone on the way to creating one of the finest shopping centre portfolios in Europe. Further foreign investments followed. In 2016, Union Investment entered the US retail market. The company is seeking to leverage its strong position in the US office and hotel markets to extend its retail holdings to North America.
“Due to their reliable contribution to performance, shopping centres have been highly favoured by our fund managers for decades. The decisive move into international markets came ten years ago with acquisitions in Belgium, followed by Spain, Austria, Italy and Poland. We now invest in this segment throughout Europe,” explains Henrike Waldburg, head of Investment Management Retail at Union Investment. Exposure to the retail asset class has been expanded across all Union Investment funds. Initially included on an ancillary basis, retail property has evolved into a second core area alongside office real estate.
Opened in 2003 in Mons, 70 kilometres south of Brussels, Les Grands Prés was the company’s first shopping centre acquisition outside Germany and offers excellent sales potential. As part of its active asset management strategy, Union Investment invested EUR 69.7 million in 2012 to expand the high-yield shopping centre by 8,650 sq m. The property is held by UniImmo: Europa and previously comprised around 18,500 sq m. The arrival of IKEA at the location is set to further boost the appeal of the centre, with 34,000 sq m of IKEA retail space and a 19,000 sq m Carrefour supermarket being directly connected to the shopping centre. Upon completion, the extended shopping centre will feature some 100 shops, including major chains.
Further international expansion in Europe and the US
Mons was just the start of a wave of activity across Europe. At the end of December 2005, Union Investment acquired Centro Comercial y de Ocio Area Sur in the Spanish tourist destination of Jerez de la Frontera. In the same year, the company made its first investment in Austria by acquiring the Bühl Centre in Krems. This was followed by Centro Commerciale Carrefour di Pavia, 3 Stawy and Sisjö Entre – the first investments in northern Italy (2007), Poland (2008) and Sweden (2008) respectively.
Investment in this asset class in foreign markets laid the foundation for a real success story. Today, Union Investment manages 47 properties in 12 countries with a value of nearly EUR 7.5 billion, corresponding to around 25 per cent of the company’s total real estate assets. Union Investment thus boasts the largest shopping centre portfolio in the German open-ended real estate fund sector. This reflects Union Investment’s robust investment remit with regard to retail properties and strong track record of implementing investments quickly and reliably throughout Europe. “Over the next few years, we aim to grow this asset class internationally,” says Henrike Waldburg.
The first milestone in the US was a joint venture in 2016. Union Investment acquired a 49 per cent share of four high street properties with a total area of 10,550 sq m for its open-ended retail real estate fund UniImmo: Global. The four properties are located in prime shopping areas in New York, San Francisco and Philadelphia.
Henrike Waldburg: “Diversification and internationalisation are two strategic goals for our retail portfolio that go hand in hand. Four properties in major cities with global reputations are an excellent start in the US market, with our ambition being to significantly increase our retail exposure.”