Frank Billand, Union Investment Real Estate

Union Investment Real Estate, based in Hamburg, Germany, was founded in 1965 and is today one of Europe’s leading real estate investment managers with focus on open-ended real estate funds for private and institutional clients. REP recently caught up withFrank Billand, a Member of the Management Board of Union Investment Real Estate, to find out more about the present and future of the company and of the real estate market in general.

What is Union Investment involved in today and which directions are you interested in?

“We are managing six different funds and have just reached the level of €20 billion assets under our management. We still have a very good net inflow of new capital, so our sourcing side is very stable. It has profited from the financial crisis, because the majority of private investors look for very safe investments and seek property and real estate investments, especially in retail which is a very strong part in our portfolio.

“We invested so far between €1.5 and €1.8 billion per year, depending on market opportunities and this year the target is €1.7 billion for new investments, or even more. We are looking for office buildings in the major cities of Germany or in the metropolitan areas in Western Europe and probably in recovering countries like the US. The buildings should be really high-quality with regards to location, the age of the building, the sustainable elements based on the Green Building listing and they should be fully leased or have a very low vacancy rate.

“We are also looking at shopping center investments, which in the last two years corresponded approximately to 40-50% of all new investments. We are aiming at prime shopping centers in good locations and here in Europe we are invested in shopping centers in 10 countries. Our third investment area is hotels and the fourth one is logistics.”

Has the crisis led you to change in any way your direction or your strategy?

“The crisis had a positive impact on us as owners of portfolios, because there are much less speculative developments, meaning huge building pipelines without tenants, which helps to balance the markets. Yesterday we learned here at the ICSC conference that even in the US there is much less new construction without very high pre-lease level. That helps avoiding oversupply and rent deterioration.”

Is redevelopment also important in your investment policy?

“Yes. New available assets are very sought-after and as a result the prices are very high, so we go a bit further in the chain to the development phase. We buy development opportunities as a means to overcome the shortage of realized, fully operative existing assets.”

Do you have a wish list in terms of countries and types of assets? Are you looking to divest from some countries where you do not want to have such strong presence?

“What is important for us now is to increase the component of our office building assets in Germany, because we sold a lot of them in 2007 and invested much in other asset types since then. We are also looking for shopping centers, specifically in the medium size, between €80 and €130 million, not just in Germany but in all the countries we are active in, namely Belgium, the Netherlands, France, Italy and Poland.

“We watch the countries that are mostly affected by the financial crisis very carefully, but in Italy, for example, we are still looking for new investments; we are a bit more careful with Spain. We have some assets that are performing very well there, but we have to be selective with new investments.”

How far do you look forward when you make an acquisition?

“On average assets stay in our portfolio for something between six and eight years. We usually keep shopping centers longer, because we keep them up-to-date with small to medium modernizations and adjustments, sometimes increasing the lettable space. The average period for shopping centers is between nine and 11 years.”

What is your company’s involvement in the Turkish market?

“We have purely retail investments in Turkey. We started with Forum Mersin, a shopping center in the city of Mersin and in December we opened Forum Kayseri in the central Anatolian city of Kayseri. In the beginning it takes time to stabilize a new center in Turkey, as Turkish retailers need time to get acquainted with the shopping centers’ structure and culture. But nowadays the centers are running well, we have a very stable footfall and a good frequency, good channels and new retailers who want to get in, which gives us a good feeling for future investments.”

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