14 January 2019
Focusing on sustainable rental income: Union Investment invests EUR 2.3 billion on behalf of its real estate funds
• Real estate fund assets exceed EUR 40 billion for the first time
• Holdings almost fully let at 96.6 per cent
• Portfolio expansion mainly in the smaller properties segment
• Acquisitions focused on projects with high level of pre-letting
Union Investment continued to refine the selective acquisition policy of its open-ended real estate funds over the past financial year, with a clear focus on stable long-term rental income. In addition to a strong projects business, investment in smaller properties was a cornerstone of the Hamburg-based real estate investment manager’s purchasing activity.
Transaction volume of around EUR 3 billion
In total, Union Investment realised an acquisition volume of around EUR 2.3 billion on behalf of its institutional and retail funds specialising in commercial real estate, spread across 36 transactions. In addition, 18 properties were sold for a total of some EUR 770 million. This brought the transaction volume to around EUR 3 billion, compared to EUR 2.9 billion in the prior year.
“Acquiring development projects is our key tool for gaining access to properties with sustainable earnings prospects in this late stage of the market cycle.”
Dr. Reinhard Kutscher, Chairman of the Management Board of Union Investment Real Estate GmbH
More than 50 per cent of all acquisitions at project stage
Union Investment secured a total of 16 real estate assets at the early or advanced project stage, representing more than 50 per cent of total acquisitions (EUR 1.2 billion). The purchase of the FOUR office tower in Frankfurt/Main and the Urban Environment House in Helsinki were among the largest project acquisitions in 2018.
Focus on smaller properties
Union Investment’s other acquisition focus last year was on smaller properties. For over two thirds of the purchased properties (25 out of 36 acquisitions), the total amount invested was below EUR 50 million.
"In line with the increasing breadth of our investment product range, we have significantly expanded our acquisition spectrum over the past three years. The small-size segment is now an established part of our strategy, especially with regard to existing buildings. It will continue to gain in importance, both in the context of our institutional solutions and of our products for retail clients”.
Martin J. Brühl, Chief Investment Officer and Member of the Management Board at Union Investment Real Estate GmbH
High occupancy rates - Returns between 2 and 3 per cent
Successful selling activity helped to underpin high occupancy rates across the individual real estate funds. As at the end of the financial year, the large real estate funds for retail investors reported occupancy levels of between 95.3 and 98.9 per cent (average: 96.6 per cent). A particular highlight is the German office portfolio, which has a record occupancy rate of some 98 per cent thanks to active asset management. The associated sustained rental income was a key contributor to the solid performance of the funds. As at year-end, the funds for retail investors reported returns of between 2 and 3 per cent.
More than EUR 40 billion real estate assets under management
The company’s successful investment year in the property segment is reflected in the sharp rise in real estate assets under management. Union Investment exceeded the EUR 40 billion mark for the first time, confirming its market-leading role. Active mandates and service mandates both contributed to the strong sales picture.
“In addition to solid growth in our traditional core business, our investments in various niche markets also made a very positive contribution to the overall result for our real estate business.”
“Early engagement with digitisation and sustainability and the resulting strong positioning in these key areas mean that we are very well placed to continue benefiting from the outstanding importance of real estate as an investment product in turbulent times.”
Dr. Reinhard Kutscher
For Union Investment Real Estate GmbH