Hamburg-based Union Investment Real Estate AG (formerly DIFA) has completed the process of realigning the portfolios of its two classic funds by adjusting its holdings in Germany. As part of a portfolio transaction, a further 53 German properties - predominantly belonging to UniImmo: Deutschland (formerly DIFA-Fonds Nr. 1) and UniImmo: Europa (formerly DIFA-GRUND) - have now been sold, together with the Frankfurter Welle office scheme that belonged to both funds. Acquired under the name Pegasus, the buyers of this portfolio with its focus on the Rhine-Main and Berlin regions are Morgan Stanley (MSREF) and IVG.
MSREF is taking over a subportfolio of 28 UniImmo: Deutschland properties for a total price of €1.36 billion, including the Neues Kranzler Eck development in Berlin. IVG is purchasing a second subportfolio comprising 25 properties, primarily held by the UniImmo:
Europa fund, for a total of €495 million. The Frankfurter Welle also goes to MSREF, for €703 million. Both in the case of the subportfolios and of Frankfurter Welle the expert valuations were exceeded. Atis Real and Latham & Watkins advised Union Investment Real Estate on the transactions. Morgan Stanley advised MSREF.
This sale reduces the proportion of German properties in the UniImmo:Deutschland fund from 70.6 to 57.5% and to 35.0% for UniImmo: Europa (previously 40.3%). "In a single move, this sale creates a balanced, well diversified portfolio structure within the funds, comprising an appropriate mix of solid high-yield German and Western European properties," says Dr. Frank Billand, member of the Management Board of Union Investment Real Estate AG. According to Dr. Billand, the office-focused Pegasus portfolio largely consists of buildings that no longer fit the funds' portfolio strategy and for which this was the optimum time to sell. In the case of the two CityQuarter developments, there was a need to act due to the reduction in volume of UniImmo: Deutschland over the past few years: "Neues Kranzler Eck and Frankfurter Welle are suitable holdings for a well diversified portfolio with a volume of more than €10 billion. With UniImmo: Deutschland now considerably smaller, the properties had become heavyweights representing an increased cluster risk which no longer matches the profile of the fund."
Following the sale of Pegasus and Frankfurter Welle, Union Investment Real Estate AG's property funds include 81 German properties valued at €4.8 billion. "Germany remains our most important investment location. We are looking for further investment opportunities here and currently see potential for our funds in Hamburg and Munich in particular," adds Dr. Billand.
Issue of units suspended
Because the prices achieved have significantly exceeded expert valuations, Union Investment Real Estate AG anticipates a noticeable rise in unit value when the properties are transferred and paid for in September. The company has therefore suspended the issue of units in the UniImmo: Deutschland and UniImmo: Europa funds until further notice in order to protect existing investors and prevent speculation. "It is likely that new units will start to be issued again in the third quarter of the year. Union Investment Real Estate AG