Frankfurt-based Universal-Investment has raised more than €4bn of equity for property investments.
Among the company’s recent acquisitions is the Hofstatt building in Munich. Located in Munich’s historic centre, the asset was acquired for a fund launched by Universal on behalf of five institutional investors and managed by Hamburg-based Quantum Immobilien.
The acquisition price of the office and retail complex is, according to market rumour, around €400m. Developer and seller LBBW Immobilien converted the former headquarters of the German newspaper Süddeutsche Zeitung into shopping arcade and office space, opening the revamped asset in April 2013. The completion date was originally set for 2010 but could not be achieved owing to chemical contamination of the property from the former newspaper print works, in addition to financial difficulties.
Morgan Stanley had originally planned to buy the Hofstatt building for around €300m following completion, but the bank backed away from the deal in 2009.
Universal-Investment is an investment company, administrating funds for securities, shares and bonds, providing risk management as well as loan portfolio structuring services. The value of its management brief is currently around €170bn.
Two years in the property business
In 2011 the company entered the property business, providing fund administration services in the real estate sector. The move into property was the result of demand from Universal’s existing customers, which needed a platform on which they could bundle not only their securities and bonds but also their real estate holdings. Universal works with institutional investors such as pensions and insurance companies.
For its real estate business the company raised about €4bn of equity, which will increase to between €6bn and €7bn including leverage. It has already invested €1.1bn in 60 properties, including leverage. “There is a strong trend from direct investments to regulated funds,” says Universal-Investment managing director Alexander Tannenbaum. This observation is based on a survey by Universal which found that the German institutional investors planned to increase the percentage of real estate in their portfolios from 10% to 12%. Property investors have about two-thirds of direct investments and one-third of indirect investments. This ratio is expected to reverse to two-thirds of property exposure held in indirect investments, and one-third in direct investments.
Tannenbaum is responsible for the company’s property business. He joined the company in 2011 and has since built up the firm’s real estate platform including its infrastructure, back office and IT, as well as his own team. Universal does not provide active asset management, so the company has, up until now, worked with 14 external asset managers such as LaSalle Investors, CBRE Global Investors, F&C REIT, Quantum and TMW Pramerica.
Looking at Universal’s 45-year history in the bond and security business and considering that the firm started its property division in 2011, one could argue that the company does not have sufficient experience in the sector. However, Tannenbaum has about 14 years of expertise in the industry and is supported by a team of 15. He joined the company from Aberdeen Asset Management Germany and before that worked for Commerz Real and Credit Suisse.
The company currently runs 11 special property funds, which are exclusively for institutional investors. Nine of these funds hold portfolios in Germany and two hold Luxembourg portfolios. The largest fund is a property special fund with a target volume of €1.8bn launched at the end of 2012 . The vehicle has already acquired a property in Australia and a further Australian property.
Universal is the administrator and responsible for liquidity and currency management; the asset management of this fund is carried out by four different companies, each responsible for a different industry sector – office, retail, logistics and residential.
The company’s targets are core and value-add properties in good and prime locations priced between €5m to €50m. The leverage will be up to 50%.
One of the company’s clients is ?property manager MGPA, which was acquired by BlackRock in October 2013. Universal is administrating a special fund for the company focused on core and core-plus property in Asia-Pacific. This ?fund already has one investment in Australia and two in Japan.
Eleven funds launched
“Since starting the property business in summer 2011, we have launched eleven funds with a total equity volume of €4bn in Germany and Luxembourg for investors and asset managers,” said Tannenbaum.
About 70% of the investments the Universal handles are in Germany and the remaining 30% are in Asia. The firm is expecting to adjust this ratio to 50% in Germany and 50% outside Germany.
www.universal-investment.de
