13 January 2022
Union Investment sees strong growth in real estate business and expands investment universe
• Transaction volume exceeded EUR 8.1 billion in 2021
• Exceptionally strong year with 45 acquisitions totalling EUR 6.0 billion
• Successful Service KVG business with EUR 1.5 billion in acquisitions
• Real estate assets under management rose to EUR 51.7 billion
• Net cash inflows of EUR 4.2 billion recorded
• New topics and investment vehicles added to strategy
Backed by stable cash inflows, Union Investment significantly expanded its real estate business in 2021 while also strategically enhancing its successful property platform. New customer monies totalling around EUR 4.2 billion (net) were invested in the open-ended real estate funds for private investors and property solutions for institutional clients, while a record number of acquisitions took place: 45 properties with a total value of more than EUR 6.0 billion (2020: EUR 4.1 billion) were acquired. The 2021 transactions also include property sales worth a total of around EUR 600 million. The company also made property acquisitions and disposals in its fast-growing Service KVG business to the tune of EUR 1.5 billion. Real estate assets under active and passive management at the end of the 2021 financial year were 9.2 per cent higher than the comparable figure for the previous year, reaching a new record level of EUR 51.7 billion.
“The 2021 financial year was successfully used to further diversify the property portfolios and thus strengthen the resilience of our funds, thanks to strong performance by the entire real estate team and from sales staff. We also took key steps to enable us to continue pursuing our ambitious growth targets in the coming years.”
Michael Bütter, CEO and Chairman of the Management Board of Union Investment Real Estate GmbH
Strategic position established in European residential property markets
Strong growth on the real estate side is partly the result of realigning Union Investment’s investment strategy, which now includes new sectors and investment styles. The Hamburg-based real estate investment manager believes that this broader strategic focus offers additional potential for returns and diversification, thus boosting the stability of its investment products. Union Investment successfully tapped into the residential asset class outside the DACH region for its open-ended real estate funds for retail customers last year. Overall, projects worth a total of around EUR 1 billion were acquired in the residential segment in Amsterdam, Dublin, Helsinki and the US. In commercial real estate, Union Investment focused in particular on office investments in Munich, Brussels, Paris and London. A branch was established in London to strengthen the company’s local presence and take advantage of opportunities in the post-Brexit UK. The office will open in early 2022.
Focus on resilient asset classes and value-add investment styles
At around EUR 2.8 billion spread across nine transactions, Union Investment’s investment focus in 2021 was on German office and logistics markets. The company’s new manage-to-core strategy, which aims to create value by repositioning existing buildings, opened up new acquisition opportunities for Union Investment, especially in its home market. The Media Works Munich joint venture project was Union Investment’s largest transaction of the year, involving planned investment of around EUR 1.2 billion.
Investments in overseas markets again contributed to strong acquisition performance. In South Korea, Union Investment entered the Asian logistics property market by acquiring the West Anseong Logistics Center. Four transactions in the US worth more than EUR 376 million were also successfully completed. Union Investment entered the US residential real estate market by acquiring two apartment buildings comprising a total of 476 units in Fort Lauderdale, Florida, for some EUR 200 million. Also in the US, Union Investment entered the grocery-anchored retail asset class when it acquired the Fountains of Boynton property in Florida. “Expanding our investment activities in secondary cities in the US and in new asset classes, combined with greater diversification of our Asia-Pacific portfolio especially in Japan, Korea, Singapore and Australia, will be one of our strategic priorities over the next decade,” said Martin Brühl, CIO and Management Board member at Union Investment Real Estate GmbH. Reorganisation of investment management and the creation of a global investment unit headed by Henrike Waldburg are among the important steps already taken in this regard.
Union Investment was once again one of the most active hotel investors in Europe in 2021, demonstrating its commitment to the asset class at an early stage of the pandemic despite the sector being temporarily under severe pressure. With total investment of over EUR 300 million, acquisitions were focused on hotel concepts that have proven particularly resilient in challenging market conditions. They include long-stay offerings such as the planned Wilde by Staycity aparthotel in London, which is let on a long lease to a creditworthy tenant. Union Investment is planning to expand its hotel portfolio by entering the holiday hotel segment. In the retail sector, established neighbourhood centres were again the focus of acquisitions in 2021, including the Schlosspark Center in Berlin-Pankow, which features a crisis-proof tenant mix.
Average performance 2.0 per cent
With performance over the 12-month period averaging 2.0 per cent, Union Investment’s open-ended real estate funds generated solid and comparatively low volatility returns despite the difficult economic environment created by the pandemic.
Adapting to changing customer and user needs
“2021 provided powerful evidence of the flexibility, agility and strong execution skills of our real estate division,” said Jens Wilhelm, board member at Union Asset Management Holding AG. “We made good use of the time to take key steps to align the real estate business with the transformation requirements arising from changing customer and user needs, regulations, sustainability and digitalisation.” Building on its impressive track record, Union Investment intends to systematically develop its property business. “Our shared target vision is a strong real estate platform that serves a range of property asset classes and different customer needs. This will open up even more opportunities in the real estate market with regard to property types, risk-return profile and vehicles,” commented Jens Wilhelm.
Moving the corporate culture forward
The main groundwork has also been laid on the personnel side to support a forward-looking positioning and the proposed future growth – Union Investment is aiming to double its real estate assets under management over the medium term. Dynamic expansion of the real estate business means that additional positions will be created on an ongoing basis across the national and international locations. Union Investment is supporting multi-level staff development through a comprehensive HR programme that covers leadership, diversity and cultural change. “Our five-year strategy project, Immomentum, gives every employee the opportunity to contribute their values, ideas and suggestions for shaping an innovative corporate culture as part of a participation-driven bottom-up process,” explained CEO Michael Bütter.
A visible example of the change process under way at Union Investment is the Next Generation Board, made up of young professionals, which will serve as an advisory body to management from this year. “Well-managed generational diversity and a focus on improving and promoting career prospects for female professionals and managers are key levers we will use to retain top talent and to compete as an attractive employer for individuals who want to join us in taking our real estate business to the next level,” said Michael Bütter.
For Union Investment Real Estate GmbH