Martin Bruhl, MD, CIO, Union Investment Real Estate
At this late stage in the cycle and in today’s competitive market institutions must adapt their strategy in order to keep up the quality of their portfolios, Martin Brühl, MD, CIO, Union Investment Real Estate, told Real Estate Day.
That is why alongside the big deals Union is now also investing in a more liquid range of smaller assets, with a particular focus on modern forms of residential like micro living.
‘We remain on course with our investment strategy with regard to the quality of the location and the asset,’ he said. ‘It may not be a spectacular statement to make, but I think long-term reliability and sustainability of our investments is key to our capital sources, which are predominantly retail-oriented. We have over a million private individuals who trust us with their savings’.
As geopolitical uncertainty characterises today’s environment Union’s investable universe is shrinking. This makes keeping up the quality more challenging, he said: ‘We try to get around this challenge by looking into markets which others don’t exploit as much. We have a broad range of capital and that is driving a shift in investment focus to include more strategies, but we will not take operational risks on top of real estate risks.’
One strategy is expansion into new promising asset classes, such as student housing and micro living. ‘I think new modern forms of residential is where demand will lie in the future,’ Brühl said. ‘We look into demographics and job growth, and micro living will be more in demand as people move to urban areas where accommodation is expensive’.
Another linked strategy is to go for smaller deals alongside the big tickets, even in the office sector which has long been a focus for Union. ‘We did 36 acquisitions last year and 25 of these were for assets under €50 mln,’ he said. ‘For the first time I really wanted to go for granularity, which is a lot more work. In terms of our institutional investment process, we spend as much time on a €35 mln transaction as we would do on a €500 mln transaction, it is the same due diligence’.
But the goal was getting the right balance between small and large assets for Union’s smaller vehicles as well as the ‘supertankers’, the flagship retail funds, Brühl said: ‘It is a strategy that is paying out in terms of liquidity so I think it is something we will keep doing in the future’.