Highlights
Press releases
Performance in 2024: Union Investment makes successful disposals and prepares for opportunities in the new market cycle
• Sales of around EUR 2.75 billion achieved
• Disposals focused on hotels and shopping centres
• 15 projects worth around EUR 2.0 billion completed and transferred to holdings
• Around 1.1 million sq m of commercial space let or relet
• Rental income up 2.2 per cent despite disposals
• Distributions by commercial retail funds increased
Union Investment leveraged the high quality of its real estate portfolio in the past accounting year to boost its cash reserves via sales in a market environment that remains challenging. In doing so, it also created opportunities for developing the portfolios going forward. The sales also stabilised fund performance. At year-end, the performance of Union Investment’s commercially focused open-ended retail real estate funds ranged between 3.18 and -0.18 per cent. All commercial real estate funds for private investors were able to increase their distributions in 2024 and paid out a total of EUR 677 million.
Overall, Union Investment realised record sales of EUR 2.75 billion in 2024, spread across 28 individual transactions. In almost all transactions, attractive returns were achieved over the holding period, with sales proceeds matching or exceeding the most recent expert valuation. Book values were exceeded by around EUR 330 million in total. The properties sold in 2024 made substantial annual contributions to performance during their holding periods in the portfolios, which averaged 11.2 years.
23rd of January 2025
“Our successful sales performance highlights the exceptional quality of our portfolio. In the current market phase, with no functioning price discovery yet in some property markets, our approach of broadly diversifying our commercial portfolios is proving to be highly effective. As a result, we have been able to realise sales in asset classes that are well consolidated and once again in demand among investors. Our strategy of focusing on large, broadly diversified flagship funds, together with our more defensive expansion strategy in recent years, has paid off and is boosting the resilience of our portfolios in the current market situation.”
Michael Bütter, CEO of Union Investment Real Estate GmbH
Investor demand for hotels and shopping centres
“When selling, we focus on properties where we have been able to achieve attractive increases in value over their predominantly long holding periods, thanks to active asset management,” said Martin Brühl, Chief Investment Officer and a member of the Management Board. Union Investment’s disposals in 2024 were concentrated on the shopping centre and hotel asset classes, where market liquidity has returned. “We made the most of the opportunity to restructure our portfolios and sell properties at good prices in areas where we have rarely been on the sell side in the past.”
Last year’s sales proceeds included EUR 1.4 billion from operational real estate. Union Investment sold three hotel properties in Germany, Austria and the US worth around EUR 204 million, as well as four retail properties worth some EUR 1.16 billion. The retail asset class also saw the largest single sales in 2024: the Fünf Höfe complex in Munich and the Magnolia shopping centre in Wrocław.
Broadly diversified through (still) troubled waters
“The retail market has corrected – including a rebasing of valuations and rents – and is now making headway again, with sensible prices being achieved for good assets. Hotels are also recovering, as indicated by the increase in revenue per available room, among other factors. RevPar now exceeds 2019 levels almost everywhere,” said Martin Brühl. “We aim to take advantage of the positive performance of both asset classes, hotels and retail, during the new accounting year.”
In addition to operational real estate, Union Investment’s other sales focus last year was on the office asset class. Union Investment successfully sold 12 office properties in Europe and Asia-Pacific worth EUR 633 million. This followed on from disposals in this segment totalling nearly EUR 1 billion in the previous year.
“The office asset class has not fully recovered yet. However, our broadly diversified office property portfolio, particularly in the prime segment, is essentially well positioned and meets users’ current and future requirements for good office locations. This is enabling us to achieve attractive rental income and our properties remain of interest to buyers even in a challenging market. Looking to the future, we are also ready to consider making acquisitions again in this segment.”
Martin Brühl, Chief Investment Officer and member of the Management Board
Return to normal expected from 2026
With the market remaining dysfunctional in 2024, no new acquisitions were made for the commercial real estate funds. Union Investment expects to see more acquisition opportunities from 2026 onwards provided that markets return to normal, particularly as a result of further interest rate cuts. “The new cycle that is just beginning in the UK as the first market will take time to gain ground. Accordingly, we are planning to invest mainly in our existing assets in 2025, rather than in new properties,” explained Michael Bütter.
The sales in the last accounting year were spread across eight commercial funds for private investors and institutional customers. The focus was on funds for private investors, with disposals totalling some EUR 2.5 billion. Net cash outflows from the products of around EUR 2.18 billion were offset by the sales proceeds achieved. The gross liquidity of the three open-ended real estate funds for private investors marketed in Germany – UniImmo: Deutschland, UniImmo: Europa and UniImmo: Global – was 15 to 18 per cent as at the end of 2024, thus significantly exceeding the statutory minimum liquidity requirement of 5 per cent.
The disposals reduced the real estate holdings of the funds for private and institutional investors to EUR 58.0 billion compared to EUR 59.5 billion at the end of the prior year. Global real estate fund assets under management fell from EUR 57.4 billion to EUR 54.9 billion.
Consolidation planned for 2025
“Our portfolio remains as strong as ever. With our consistent focus on quality, ongoing investment in existing holdings and broad diversification, including on the capital side, we are well placed to see our investors through a challenging 2025,” said Michael Bütter. “In the medium term, however, we and the entire industry need a return to functioning property markets and a reversal in net cash flows in order to maintain our strong portfolio and seize investment opportunities.”
“In the past, redeeming units in difficult market phases has usually not been a sensible strategy for investors,” commented Michael Bütter. “Our open-ended real estate funds are notable for achieving attractive distribution yields over the long term, including during tough market conditions. We are confident that the upcoming new market cycle will also deliver attractive long-term returns for property investors.”
At the time of disposal, the occupancy rate of the properties sold was 95.6 per cent. Across all institutional and retail funds, occupancy based on rental income was virtually unchanged compared with the end of the prior year. As at 31 December 2024, the average figure was 95.1 per cent (31 December 2023: 95.5 per cent). Strong lettings performance had a stabilising effect on the revenue side. Around 1.1 million sq m of space, including some 475,000 sq m of office space, was let or relet in the past accounting year. Total net annual rental income of some EUR 273 million was generated for the funds. Significant rent increases were achieved in some cases, with rental income up 2.2 per cent on the prior year despite the disposals. The US real estate market, meanwhile, is viewed by Union Investment as challenging, particularly the office property market, which is not recovering as quickly as originally expected.
Sustainable new-build quality for the portfolios
The losses on the revenue side caused by disposals will be partially offset in the future by the transfer of well or very well let projects to real estate holdings. “The 15 projects in the asset classes hotel, office and European residential that we completed in 2024 and transferred to holdings are not only examples of forward-looking, new-build quality but also reinforce the sustained earnings strength of the portfolios,” said Michael Bütter. The completed projects, which have a total value of some EUR 2.0 billion, include the Ara Almelo logistics property for UniImmo: Europa, the Paper Island 25hours hotel in Copenhagen for UniInstitutional European Real Estate and the Aura Class A office property in Helsinki for special fund UII EuropeanM.
Professional investors looking to re-enter the market
Union Investment is optimistic about the development of its institutional real estate business. “Professional investors are gradually getting ready to re-enter the market. The most interesting asset classes are those that have reached their turning point, such as hotels, neighbourhood retail and European residential, as well as selective office investments,” said Michael Bütter.
Institutional customers are also seeking solutions for pooling or transferring property investments. At the end of 2024, Union Investment was awarded a contract for a transfer mandate covering real estate holdings worth around EUR 2 billion in a public procurement procedure. The mandate was advertised by the Pension Institution of the Federal and State Governments (VBL). With around 5.2 million insured individuals, 5,400 employers and EUR 5.8 billion in payments to 1.5 million pensioners annually, it is the largest supplementary pension scheme for the German public sector. With the help of Union Investment as a Service KVG, the VBL wants to transfer its holdings to a special fund and develop the portfolio with a focus on sustainability. The VBL also aims to benefit from market-leading digital reporting as part of the mandate.