Anyone who keeps a close eye on the global property markets will be familiar with this saying from the world of sports: Higher! Faster! Farther! It also applies to the universe of real estate professionals at present. Higher… because prices – not just those for office buildings and shopping centres in top locations in the regions – have reached levels that many investors hardly dreamed of just a few years ago. Faster… because the competition for the few attractive products is increasingly fierce – and the race is often won only by those who are ready to take action without hesitation. And farther… because professional property investors have long been prepared to expand to distant continents in search of buying opportunities and to spread the risk they face.
Anyone who wants to succeed in international competition will find inspiration from the similar athletic motto “Faster, Higher, Farther”. We produced a volume of transactions totalling €4.6 billion in 2016. And our teams have 39 property acquisitions and 20 sales around the globe to their credit. Some €4 billion was invested in new acquisitions alone, exceeding the result for the prior year by €500 million. Actively managed real estate fund assets rose from €28.5 billion to €31.8 billion during the year.
This offers impressive evidence to demonstrate the competitiveness of our teams. I strongly believe that competitiveness is based on three factors: the profound expertise in our own organisation, the meticulous selection and integration of innumerable outside advisors with a view to cooperation on an equal footing in a spirit of partnership, and finally the fact that the in house team and our outside sparring partners feel a commitment to the same high quality requirements and internationally recognised standards.
Sticking to these principles and staying in the picture by not carelessly cutting back on our training programme simply because the games in the current tournament are rushing toward us at an increasingly fast pace – these are among the most demanding and yet important tasks in the current market environment.
Union Investment therefore considers it indispensable to conduct a thorough examination of any property that is being considered for acquisition. Cutting back on due diligence simply to get hold of properties faster would be short-sighted and counterproductive. The comprehensive technical check, the analysis of the level of current and future rents, and the assessment of the micro- and macro-locations of specific properties – to mention just a few of the major components of due diligence – all require particular care. Speeding up checks and inspections means higher risks, and risk is precisely what responsible investors hope to avoid at the present time, as shown by the results of our most recent property investment climate study. Companies have made it clear that they are in fact willing to accept lower yields.
The most important obligation
Responsible investment is the most important obligation of an asset manager handling investors’ money in a fiduciary capacity – as Union Investment does. In concrete terms, this means that up-to-date risk management strategies and instruments must be used to verify that every decision to invest offers lasting value. In our view, failure to fulfil criteria that have been recognised as valid would be criminal. That is why our organisation continues to view a sustainability check – the evaluation of environmental, economic, and social sustainability criteria – as an integral part of all due diligence before acquisitions.
Our experience has shown that contractual partners highly esteem this level of attention to detail. And if a deal falls through because a competitor gets in first, before the check is completed? We remember a lesson learned long ago: sometimes the best deals are the ones that weren’t made.