Union Investment: Real estate business and expanding its investment universe

by   CIJ News iDesk III
2022-01-13   09:35

- Transaction volume in 2021 at a total of over 8.1 billion euros
- Exceptionally strong year with 45 acquisitions valued at EUR 6.0 billion
- Successful KVG service business with purchases worth EUR 1.5 billion
- Increase in real estate fund assets to EUR 51.7 billion
- Net cash inflows of EUR 4.2 billion
- Strategic development to focus on new topics and vehicles

On the basis of stable cash inflows, Union Investment expanded its real estate business very dynamically in 2021 and strategically further developed its successful real estate platform. Newly collected customer funds with a net volume of around 4.2 billion euros in the open-ended real estate funds for private investors and the real estate solutions for institutional customers is a record purchase balance with 45 newly acquired properties with a total value of more than 6.0 billion euros (2020: 4.1 billion euros) compared to The transaction balance for 2021 also includes property sales with a total value of around 600 million euros. In addition, there are real estate purchases and sales in the strongly growing service KVG business with a total volume of 1.5 billion euros. At the end of the 2021 financial year, the actively and passively managed real estate fund assets were 9.2 percent above the comparable value of the previous year and reached a new record level of EUR 51.7 billion.

"With a strong performance by the entire real estate team and sales, the 2021 financial year was used very successfully to further diversify the real estate portfolios and thus strengthen the resilience of the funds. At the same time, we have set the course that will enable us to realize our growth ambitions in continue to pursue in the coming years," said Michael Bütter, CEO and Chairman of the Management Board of Union Investment Real Estate GmbH, at the presentation of the 2021 annual balance sheet.

Established strategic position in European residential real estate markets:
The strong growth on the real estate side is, among other things, the result of Union Investment's realigned investment strategy, which has opened up to new sectors and investment styles. The Hamburg real estate investment manager expects additional return and diversification potential from the strategic expansion and thus additional stability for its investment products. Last year, Union Investment successfully developed the residential asset class outside of the DACH region for open-ended real estate funds for private customers. In total, project purchases for a total of around one billion euros were realized in the Amsterdam, Dublin and Helsinki locations as well as in the USA in the residential segment. In the commercial real estate segment, Union Investment placed a strong emphasis on office investments in Munich, Brussels, Paris and London. Another foreign location was founded in London to strengthen the local presence and to expand activities in the promising post-Brexit UK, which will open at the beginning of 2022.

Focus on resilient asset classes and value-adding investment styles:
With around EUR 2.8 billion spread over nine transactions, Union Investment's investment focus in 2021 was on the German office and logistics markets. With the new manage-to-core strategy, which is aimed at adding value through repositioning in the portfolio, Union Investment has opened up new acquisition opportunities, especially in its home market. With a planned investment volume of around EUR 1.2 billion, the Media Works Munich joint venture project is Union Investment's largest transaction of the year.

Investments in overseas markets also contributed to the positive level of purchases. In South Korea, Union Investment secured the West Anseong Logistics Center and thus entered the Asian logistics real estate market. In the USA, four transactions with a volume of over 376 million euros were successfully completed. Union Investment entered the US residential real estate market by acquiring two apartment buildings with a total of 476 residential units in Fort Lauderdale, Florida, for around EUR 200 million. Also in the USA, Union Investment entered the food retail asset class with the acquisition of the Fountains of Boynton property in Florida. "The expansion of our investment activities in the USA in secondary cities and in new asset classes as well as the greater diversification of our Asia-Pacific portfolio, especially in Japan, Korea, Singapore and Australia will be one of our strategic priorities in the next decade," says Martin Brühl, CIO and Managing Director of Union Investment Real Estate GmbH. With the reorganization of investment management and the establishment of a global investment unit under the leadership Henrike Waldburg has already set the course for this.

Union Investment was again one of the most active hotel investors in Europe in 2021 and showed its commitment to the temporarily severely affected asset class early on in the pandemic. With a total investment volume of more than 300 million euros, the acquisition focus was on hotel concepts that have proven to be particularly resilient in the difficult market phase. These include long-stay concepts such as the projected “Wilde by Staycity” aparthotel in London, which has been rented to a financially strong tenant on a long-term basis. The Hamburg real estate investment manager plans to expand its hotel portfolio by entering the holiday hotel segment. In the retail sector, acquisition activities continued to focus on established local supply centers in 2021, such as the Schlosspark-Center in Berlin-Pankow, which is characterized by a crisis-proof tenant mix.

Performance at an average of 2.0 percent:
With an average one-year performance of 2.0 percent, Union Investment's open-ended retail real estate funds have generated solid and comparatively low-volatility performance, even in the difficult economic environment caused by the pandemic.

Setting the course for changed customer and user requirements:
"The year 2021 is impressive proof of the flexibility, agility and implementation strength of our real estate division," says Jens Wilhelm, Member of the Management Board of Union Asset Management Holding AG. "We used the time intensively to set the course and align the real estate business with the transformation requirements resulting from changed customer and user requirements, regulations, sustainability and digitization." Building on the impressive track record, Union Investment intends to consistently develop its real estate business further. “Our common goal is a powerful real estate platform that serves different real estate asset classes and different customer needs. We will thus open up even more possibilities in the future to take advantage of the opportunities on the real estate market - in terms of property types, the risk/return profile and the vehicles," says Jens Wilhelm.

Development of corporate culture:
For a future-oriented structure and the planned further growth - in the medium term Union Investment is aiming to double the assets under management in the real estate sector - important prerequisites were also created on the personnel side. In line with the accelerated expansion of the real estate business, further positions are to be continuously created at the national and international locations. Union Investment is supporting the ongoing development, which is taking place at many levels, with a comprehensive human resources program that encompasses the dimensions of leadership, diversity and cultural change. "Our five-year strategy project 'Immomentum' offers all employees the opportunity to contribute their values, ideas and suggestions for shaping an innovative corporate culture in a participatory bottom-up process," says CEO Michael Bütter.

Visible example of the change process that has started at Union Investment: At the start of the new year, a Next Generation Board made up of young professionals will support the management as an advisory body. "Well-managed generational diversity and the targeted improvement and promotion of career prospects for female specialists and managers are key levers with which we bind top executives to the company and, as an attractive employer, apply for personalities who, together with us, can take the real estate sector to the next level want to lift,” says Michael Bütter.