Sharing the rewards of investment excellence. Our blueprint for successful real estate investment.

Transcription

1 Sharing the rewards of investment excellence. Our blueprint for successful real estate investment.

2 Dear business partners, Reliability and a partnership approach are values that have always been associated with Union Investment. Together, they form the foundation of our success and help us to demonstrate corporate responsibility in a fast-changing market environment. Our solid investment strategy, with its focus on reliable returns, has proved its worth over many years and earned us the trust of our investors. Another key factor is our strict separation of products for retail investors and institutional vehicles, a policy we have applied right from the start. Accordingly, for us there were no painful lessons to be learned from the financial crisis; on the contrary, we emerged stronger than ever. Buoyant demand for our real estate products confirms that we are on the right track. Past experience should not, however, blind us to current and future issues. In recent years, indirect property investment has become increasingly attractive to risk-averse investors. The current low interest rate environment has accelerated this development. The trust shown by our investors and the resulting cash inflows bring new and positive challenges, which we are fully embracing. We intend to deliver an even greater number of transactions and larger volumes in future, while many real estate markets are undergoing a major shakeup. Rising demand for property in good locations has set prices soaring. The consequence of this, particularly in core markets, are declining yields, which are making investment increasingly difficult. Achieving a successful outcome requires sustained investment excellence. Over the past decades, we have consistently demonstrated our ability to deliver excellent real estate investment. We now aim to manage the upcoming growth via best-in-class processes and an updated investment strategy that further enhances our agility. The necessary groundwork has already been done, in the shape of organisational changes and a restructured investment process designed for maximum effectiveness. The following pages contain further details. You are warmly invited to join us on the journey ahead and to share the benefits of stable growth. Best regards, Dr. Frank Billand Member of the Management Board Union Investment Real Estate GmbH 3

3 Quality attracts quantity Our decade-long ability to retain our investors trust has resulted in continuous growth. That applies to the Union Investment Group as a whole and to the Real Estate segment in particular. As a leading European real estate investment manager, we follow a clear investment mandate. Union Investment is one of Germany s largest asset managers and the fund management specialist within the cooperative FinanzGruppe alliance, which includes over 1,100 cooperative banks (Volksbanks and Raiffeisenbanks). These institutions provide a strong platform for offering our products to over 4 million private investors and 1,600 institutional customers. The results are impressive. After more than 55 years in the fund business, the Union Investment Group now employs 2,550 people and has assets under management of around EUR 232 billion. The portfolio covers all the major asset classes, from equity funds, bond funds, money market and open-ended real estate funds through to multi-asset, guarantee and capital protected funds. Union Investment s real estate funds a success story Assets under management in the Real Estate segment EUR bn Our specialised structure and outstanding expertise deliver stable growth, with the Real Estate segment being a prime example. Union Investment Real Estate GmbH and Union Investment Institutional Property GmbH are the real estate n Actively managed funds n Passively managed funds specialists within the Union Investment Group. Operating out of our Hamburg office, they have provided tailored real estate solutions to meet the 4

4 Barceló Raval hotel, Barcelona, Spain Zebra Tower, Warsaw, Poland needs of private and institutional asset allocation for five decades now. Products were initially marketed to retail customers only, but since 1977 we have also serviced institutional investors. We currently have total assets under management of EUR 27.8 billion across 20 real estate funds and are the market leader in Germany for open-ended retail real estate funds. A leading European real estate investment manager We operate in the commercial property sector both as an institutional investor and an active asset manager. Our real estate portfolio comprises more than 360 properties and projects distributed across 23 national markets in Europe, the Americas and Asia Pacific. Our investment reach reflects the broad investment remit of our funds. A transaction volume of EUR 3.5 billion (2014) makes us one of the leading real estate investment managers in Europe. As such, we combine the capital market expertise of a strong corporate group with professional real estate management along the entire value chain from fund management and acquisition, active asset management (including management of project acquisitions and existing use redevelopments) through to disposal. Decades of expertise, local market insights and a carefully considered investment strategy pay dividends, both for our investors and our business partners. Net cash inflows of approximately EUR 3.0 billion in 2014 speak for themselves. Approx. EUR 3.0 bn net inflows in 2014 alone 5

5 Guided by quality We create value for our customers by focusing on quality. This strategy is delivered across a broadly diversified investment universe core properties, different uses and lot sizes, and attractive regional centres within Germany and in other countries. Indirect property investment is typically a long-term saving option. We are committed to managing and increasing our customers assets in a responsible manner, in accordance with our fiduciary duty. Our market behaviour follows the same principles: we operate professionally and reliably, based on a strong set of values. A broad range of investments To achieve the attractive long-term returns that characterise our funds, we focus on core properties. They provide a solid foundation for our portfolios, but rigorous quality standards are still essential. Accordingly, we invest solely in sustainable properties sustainable with regard to cost efficiency, user comfort, location and construction quality, as well as energy efficiency. To spread risk and enhance performance, we have a strict policy of investing in a mix of uses, regions, property sizes and sectors. Investments in city centre office space are the mainstay of our investment Southpoint, Brisbane, Australia strategy. In addition, we are increasingly investing in logistics facilities, shopping centres and business hotels in selected locations. At the same time, we are boosting the international diversification of our portfolios. Holdings in European countries outside Germany, and also in markets outside of the eurozone, such as the UK, the US, Latin America and Asia Pacific, are an increasingly dominant feature. We have extended our investment reach over the past eleven years to include 19 new national markets, increasing the proportion of real estate assets outside Germany from 33 % to 53 % in the process. 6

6 Distribution of total portfolio by type of use Residential Logistics Hotels Retail Enhancement of core strategy Business parks Office Valuation in EUR m % Type of use 23, n Office 13, n Retail 7, n Hotels 2, n Logistics n Residential n Business parks Our quality-driven investment strategy is a cornerstone of our success. This is also recognised by rating agency SCOPE, which regularly awards us high marks for quality. The challenge here is that properties in core markets and excellent locations are popular, resulting in a shortage of this type of real estate and corresponding price rises. While maintaining our focus on quality, we are therefore increasingly including properties with a higher risk profile in our portfolios, e.g. investment in dynamic economies outside the eurozone with a pronounced risk / reward profile; properties at the development stage; or where greater marketing effort is required. In addition, we are also acquiring an increasing number of properties located outside of wellknown major cities (e.g. in attractive regional and mid-sized centres in Germany, as well as secondary cities in other countries). Our advantage here is our strong asset management capability, backed by expert teams for tenant management and development projects, which enables us to acquire properties at an early stage of construction. This in turn allows us to secure quality properties and corresponding returns even when prices are high. Distribution of total portfolio by risk category Emerging markets Core plus markets Core markets Valuation in EUR m % Properties Risk category 23, n Core markets 21, n Core plus markets 1, n Emerging markets The record inflows of the past two years and the attractive returns generated by our funds demonstrate that our strategy produces the desired results. We therefore remain committed to our growth strategy, despite the challenging market environment, and plan to achieve an annual transaction volume of approximately EUR 3 billion by The relevant structures and resources are in place. 7

7 Funds with a broad investment remit Real estate solutions by Union Investment are highly valued. In the past three years alone, we have established 11 new fund products and now offer 20 real estate funds for private and institutional investors, with our retail funds for private investors leading the way. Having said that, institutional investors are also increasingly discovering real estate as an attractive asset class. All the more so because our proven expertise across different regions and sectors allows us to offer them a wide range of compelling products. Retail funds for private investors We have always maintained strict separation between investments by private individuals and institutional customers. This policy proved especially beneficial during the financial crisis and we are now in a stronger position than ever. Our two flagship funds, Unilmmo: Deutschland our classic fund and Unilmmo: Europa, have performed particularly well. UniImmo: Deutschland Worth around EUR 10.0 billion, this fund invests in the European Economic Area, with a strong focus on the German market, which currently accounts for 65 % of total assets. The fund targets almost exclusively core properties and aims to invest significantly in retail and hotel real estate alongside office buildings. Distribution of market value by property type Business parks Logistics Hotels Retail Office UniImmo: Europa The investment strategy of this fund, which has assets under management of some EUR 9.8 billion, is significantly more international. Although currently only 26 % of the total is invested outside Europe, this proportion is set to rise in future. A good balance of different size classes with individual investments ranging from EUR 25 million to 200 million is sought. Regional distribution of real estate assets Share of portfolio (%) Target: % Target: up to 48 % % % 0 Europe World (excluding Europe) n Actual distribution n Target corridor Valuation in EUR m % Property type 7, n Office 3, n Retail 2, n Hotels 1, n Logistics n Business parks Unilmmo: Global, by contrast, pursues a much more opportunity-driven strategy. Up to 50 % of fund assets can be invested in properties in socalled core plus markets and up to 30 % in emerging markets. 8

8 UII Shopping Nr. 1 properties by size Share of portfolio (%) % under 25 m n Actual distribution 22 % m 31 % 47 % m n Target corridor m 0 % 0 % over 125 m m UII Hotel Nr. 1 regional distribution of real estate assets Share of portfolio (%) Target: % Target: 0 40 % % % Germany Europe (EEA) Wide choice for institutional investors We have been creating real estate funds for institutional investors since Our first such fund, DEFO-Immobilienfonds 1 and DIFA-Fonds Nr. 3 are tailored to the interests of special investor groups and invest primarily in Germany, supplemented by properties elsewhere in Europe. For large investment amounts, we develop specific product solutions, such as the thematic funds UII Hotel Nr. 1 and UII Shopping Nr. 1. The hotel fund enables investors to benefit from the opportunities provided by the growing German budget hotel market, which forms the investment focus of the fund. UII Shopping Nr. 1 specialises in retail real estate and invests in a wide range of properties from office / retail buildings and smaller retail parks to vibrant regional shopping centres. Last but not least, we have our specialist retail funds. The EUR 2.9 billion UniInstitutional European Real Estate fund, established in 2004, invests primarily in the European Economic Area. The UniInstitutional German Real Estate fund is also performing very successfully. The name says it all: this fund invests solely in Germany, including smaller properties in attractive German regional centres. UniInstitutional German Real Estate: Investment focus on major German cities and regional centres with growth prospects The extensive product range gives rise to a correspondingly wide investment remit. 9

9 Setting the course for growth When faced with the need to boost the number of transactions in line with ongoing fund growth, streamlined processes and structures for handling acquisitions and disposals are essential. We have redefined our investment process accordingly, creating the conditions for further growth with a new organisational structure that supports effective end-to-end management of the entire process. EUROPA-Galerie, Saarbrücken, Germany Ensuring the long-term competitive performance of our fund products requires a smart investment strategy which responds to market changes, as well as best-in-class processes that implement the strategy efficiently. In view of the anticipated ongoing growth in volumes, we have adapted our investment strategy and added new investment objectives. Organisational changes and improved processes also form part of our preparations for accommodating future growth. New investment process implemented In 2012, we comprehensively restructured the Real Estate segment. As part of the realignment away from a function-based structure towards a strict process-based approach, core management activities were redesigned and interfaces optimised. The main change, however, involved our operating model, i.e. the investment process, which was redefined to meet the new challenges we face. The result is a new, leaner transaction process which has been incorporated into a newly created division, Investment Management. These changes mean that we can now leverage opportunities even more effectively. All stages of the process have been fine-tuned and decision-making procedures have undergone significant streamlining. Deal captains with centralised control At the heart of the new process are four investment management teams with the resources and expertise to support our regional and sectoral focus. As deal captains, they manage the transaction process: they are responsible for sourcing real estate according to fund management requirements, they form the interface with the individual departments and decision-making bodies and are in charge of delivering acquisitions, as well as having overall budget responsibility. 10

10 Responsibilities of Investment Management You benefit from: Decision-making bodies and committees Investment manager role Investment managers Sourcing / acquiring property at the request of fund management Face to the market: contact for transaction partners Market and property specialist Responsible for delivering acquisitions / disposals (internally) Management of internal interfaces Budget responsibility External transaction partners and service providers Internal departments a single point of contact in-depth regional / sectoral expertise significantly faster checks and decisions a high degree of transaction reliability from an early stage of the process. Investment managers lead the entire process, drawing on in-house experts from Participations and Finance, Tax and Law and also from Asset Management where necessary to assist with technical issues. On development projects, for example, they work closely with our 30-strong team of engineers, architects and commercial experts. Their expertise helps us to accurately assess the potential of a project, enabling early involvement in development schemes, which typically comprise up to 30 % 50 % of our annual investments. Introduced in 2012, the new investment process has already proved highly successful, as demonstrated by our 2013 / 2014 transaction results. 11

11 Embedded in the market As a result of our process-related and structural changes, the company s organisational structure and operational activities are now more tightly integrated. Specialist teams for Europe, International Investment, the Shopping Centre segment and Hotels reflect our specific expertise. The investment managers ensure that these units are embedded in the market. Our extensive product range and the diversity of our fund profiles result in a broad investment remit, which is handled by four specialist units: IM Europe, IM International, IM Shopping Centres and IM Hotels. We not only operate out of Hamburg, but also have offices in Paris and Madrid, New York and Singapore, spanning three continents, with our own teams present in all major core markets. High market penetration Think global, act local is no empty phrase for us closeness to our markets is a defining feature of the way we operate. Our investment experts have many years of experience and deep-rooted knowledge of their markets. They are familiar with the economic conditions, the market players and the real estate offering. They are equally aware of the cultural conventions and traditions. Alongside regular deal tracking, a frequent local presence is key here. In addition, we have a close-knit network of strategic partners, developed over many years, which we continue to expand. The resulting deep knowledge of markets guarantees that no property gems remain hidden for long, even at the very earliest development stage, often allowing us to complete deals off-market. Fund Management Dr. Reinhard Kutscher Management Board of Union Investment Real Estate GmbH Operations Dr. Heiko Beck Investment Management Dr. Frank Billand Asset Management Volker Noack Even closer involvement in the future We intend to take a more active role in directly developing new markets in the coming years, broadening our international reach in the process, particularly in the shopping centre and hotel segments. We will also build on our contacts in existing markets and develop new relationships. Investment Management Europa Investment Management International Investment Management Hotels Investment Management Shopping Centres 12

12 ITO, Amsterdam, Netherlands Assets under management EUR m n Acquisition volumes n Sales volumes Fund assets Number of transactions 28,000 26,000 24,000 22,000 20,000 18,000 Transactions EUR m 3, , , , , , , , , , Our expertise with regard to both existing buildings and project acquisition, our in-depth market knowledge, stability and reliability are valued by business partners across the world from major hotel chains and shopping centre operators to investors and partners in international markets. Clear lines of regional and sectoral responsibility ensure consistency of contact person and maximum transparency. Market engagement pays off. We are therefore open for new strategic partnerships. Why not get in touch? A long-term relationship based on close collaboration is sure to deliver mutual benefits. Approx. EUR 3.5 bn transaction volume (2014), of which approx. EUR 1.0 billion of disposals 13

13 Impressive results Our new structure has allowed us to achieve record results over the past two years. A broad range of investments and disposals yielded an impressive transaction volume of EUR 6.3 billion. In 2013 / 2014, we delivered more than 100 acquisitions and sales in Europe and overseas, including strong expansion of individual segments. That total includes 18 project acquisitions and a full range of property sizes and values. Investment Management Europe two teams for Europe Team IME 1 operates in the German-speaking market, where in 2013 alone we acquired 14 properties worth some EUR 1.25 billion. In 2014, attractive new purchases were made in Berlin and Stuttgart, in secondary cities and in Vienna. We are focusing increasingly on secondary cities provided we can secure top properties, such as Weser Tower in Bremen, which we acquired in Team IME 2 leveraged the positive market conditions in France to sell properties in Paris and the Île-de-France region, capturing significant appreciation gains. At the same time, we have acquired real estate in other markets, most notably the Netherlands, but also in Luxembourg, Belgium, Finland and Poland, where our investment in Wrocław enabled us to gain a foothold in what is currently one of the most exciting investment markets in Europe. Investment Management International active around the globe From the UK and the Americas to the eastern hemisphere, our investment footprint could hardly be larger. By handling a range of transactions outside the eurozone, three teams at three locations have contributed to further diversification of our port- WeserTower, Bremen, Germany folio and paved the way for global growth. Attractive investments in secondary cities in the UK and the Americas, where we added two properties to our high-value US portfolio the Research Park Plaza office building in Austin, Texas, and the Target Building in Minneapolis, Minnesota were particular highlights. In Asia, we were active primarily on the sales front, successfully divesting several properties in Singapore and Tokyo, but also made an acquisition in the shape of J6 Front. We are especially proud of our J6 Front, Tokyo, Japan 14

14 first investment down under, which saw us securing the attractive Southpoint development project in Brisbane. Investment Management Shopping Centres a whole world of shopping After office buildings, retail properties are the second largest position in our funds. In 2013 and 2014, we were again very active in this segment with the acquisition of shopping centres worth around EUR 850 million. This included expanding existing properties, as well as acquiring retail parks, smaller shopping centres and shopping centres with cross-regional catchment areas. Palladium, Prague, Czech Republic The following are two examples: In 2013, we acquired Issy Trois Moulins on the outskirts of Paris, a small retail centre with approximately 7,300 sqm of retail space. The Palladium shopping centre in central Prague, by contrast, which we secured at the end of 2014, comprises some 58,500 sqm of retail and office space and welcomes more than 15 million visitors a year. Investment Management Hotels always well bedded We have been investing in hotels for more than 40 years and are one of the largest institutional hotel investors in Germany. Over the past two years, we have impressively reinforced our position. Motel One, Munich, Germany Focusing on Germany and the growing budget hotel segment, which is the mainstay of our thematic fund UII Hotel Nr. 1, we acquired 12 hotels in 2013 / 2014, including development projects and a complex portfolio deal. At the same time, we continue to invest in 3-5 star hotels and in other parts of Europe, as illustrated by our most recent acquisition, the Radisson Blu in Amsterdam. Our advantages: Excellent knowledge of the hotel industry, a high level of active structuring expertise, alliances with key hotel chains and close strategic partnerships. 18 project acquisitions in 2013 /

15 Geographic distribution of real estate assets Americas Valuation in EUR m: 2,093.1 Properties: 18 Germany Valuation in EUR m: 11,040.7 Properties: 205 Europe (excl. Germany) Valuation in EUR m: 9,604.6 Properties: 124 Asia Pacific Valuation in EUR m: Properties: 13 16

16 EMPORIO, Hamburg, Germany The bottom line Our growth is based on stable foundations. We have exciting plans for the future that you can be part of. After all, success can only truly be savoured when it is shared. What we offer: Compelling prospects Dynamic growth of our funds and thus of our investment volume Well-defined requirements Clear investment criteria based on a proven, updated investment strategy Open for a range of investment ideas A broad spectrum of investment objectives from Germany to Europe and other international markets, different uses and different property sizes High degree of transaction reliability A restructured, streamlined investment process with clearly defined responsibilities and robust early-stage decisions that our partners can rely on Strong execution capability Thanks to deep knowledge of the major markets and an internal process that enables us to leverage opportunities with maximum effectiveness Strong focus on finding successful solutions Ability to handle complex transactions, development projects and participations Personal commitment A direct contact person and a long-term collaborative partnership Interested? Then read on to meet our four Investment Management units.

17 This document is not intended for passing on to investors. The information and visuals contained in this presentation were prepared by Union Investment (Marketing, Communication) using its best judgement. The information was up-to-date at the time of producing the presentation and is subject to change on a regular basis. Information regarding opportunities and risks associated with the funds must be taken solely from the latest prospectuses, contractual terms and the relevant annual and semi-annual reports. Union Investment Real Estate GmbH Union Investment Institutional Property GmbH Valentinskamp 70 / EMPORIO Hamburg, Germany Phone: Fax: service@union-investment.de All information current at (exceptions are marked) Date of printing: March 2015