Union Investment boosts 2024 sales, strengthens liquidity for future growth

Union Investment has successfully navigated the challenging real estate market in 2024, achieving a sales volume of approximately €2.75 billion across 28 transactions. The company strategically focused on selling assets in the hotel and shopping center segments, leveraging the high quality of its real estate portfolio to bolster liquidity reserves and create flexibility for future investment opportunities. Despite market uncertainties, the sales have provided financial stability and contributed to the resilience of Union Investment’s open-ended mutual property funds.

In a year marked by cautious investor sentiment, the company maintained its commitment to long-term value creation. The properties sold delivered impressive annual value contributions over an average holding period of 11.2 years, generating returns that exceeded their book values by approximately €330 million. The overall performance of Union Investment’s funds ranged from 3.18% to -0.18%, reflecting the strategic divestment approach and proactive asset management efforts.

CEO Michael Bütter emphasized the importance of diversification across asset classes in maintaining stability amid fluctuating market conditions. He noted that the company’s focus on flagship funds with broad asset mixes, coupled with a defensive expansion strategy, has positioned Union Investment to capitalize on market shifts and continue generating value for investors.

The company’s divestment strategy in 2024 centered on hotels and shopping centers, with operator-run properties accounting for €1.4 billion of total sales revenue. Notable transactions included the sale of three hotel properties in Germany, Austria, and the U.S., totaling approximately €204 million, and four retail properties valued at €1.16 billion. The highlight transactions in the retail sector were the sales of the Fünf Höfe in Munich and the Magnolia shopping center in Wrocław.

Union Investment also made significant progress in the office sector, selling 12 properties across Europe and the Asia-Pacific region for a combined total of €633 million. While office properties have faced challenges in the current market, the company’s portfolio, particularly in prime locations, continues to attract buyers due to its high quality and long-term potential. Looking ahead, Union Investment plans to consider selective acquisitions in this segment once market conditions stabilize.

Looking forward to 2025, the company intends to focus on consolidating its portfolio rather than pursuing aggressive acquisitions. Union Investment anticipates that stronger purchasing opportunities may not materialize until 2026, pending a normalization of market conditions and further interest rate cuts. In the meantime, efforts will be concentrated on maximizing the value of existing assets and maintaining high occupancy levels across the portfolio.

Union Investment’s funds remain well-positioned, with a gross liquidity ratio of between 15% and 18% for its three open-ended real estate funds marketed in Germany—UniImmo: Deutschland, UniImmo: Europa, and UniImmo: Global—well above the statutory minimum of 5%. Despite divestments, rental income across the portfolio increased by 2.2% year-on-year, driven by strong leasing activity. In 2024, the company successfully leased or re-let approximately 1.1 million square meters of commercial space, with office properties accounting for nearly half of this total.

As part of its long-term sustainability strategy, Union Investment continues to enhance the environmental and operational efficiency of its holdings. The completion of 15 new projects in 2024, with a total volume of €2.0 billion, further strengthens the company’s earnings potential. Among the newly added assets are the Ara Almelo logistics property in the Netherlands, the 25hours Hotel Paper Island in Copenhagen, and the Aura office building in Helsinki.

Despite ongoing market challenges, Union Investment remains confident in the future of real estate investment, with institutional clients showing renewed interest in asset classes that have reached a turning point, such as hotels and residential properties. The company is also managing a major mandate from the Versorgungsanstalt des Bundes und der Länder (VBL), the largest supplementary pension institution for public sector employees, further solidifying its position as a trusted investment partner.

With a focus on financial stability, asset quality, and strategic growth, Union Investment is poised to navigate the evolving real estate landscape while delivering long-term value to its investors.