Tuesday, October 4, 2016

Germany’s Union Investment Makes First Acquisitions in U.S. Retail Properties

Union Investment is further diversifying its international real estate portfolio by making its first investments in U.S. urban retail. Union is acquiring a 49% stake in four high street properties with a total area of 113,500 square feet for its open-ended real estate fund Unimmo: Global.

The buy will be done via a joint venture with TH Real Estate (a division of TIAA Global Asset Management). London-based TH Real Estate last month unveiled its U.S. Cities Fund series, a re-launch of the $2 billion TIAA-CREF Core Property Fund LP that plans to invest in retail, office, industrial and multifamily properties in major urban markets in the U.S. The four assets are owned by this fund, which originally paid $150 million for them.

TH Real Estate will act as the managing member and will continue to hold a 51% stake in the portfolio.

The four properties are located in prime shopping locations in New York, San Francisco and Philadelphia. The purchase price is not disclosed.

Two of the properties that make up the urban retail portfolio are in New York and together represent around 70% of the total value. Located in the Upper East Side of New York, 1511 Third Ave., which comprises approximately 43,300 square feet, is occupied by fashion retailer GAP and a fitness studio. TIAA-CREF acquired the property in December 2012 for $60 million.

In 636 Sixth Ave., 18,300 square feet of ground floor space belongs to the portfolio and is let to CVS Pharmacy on a long lease. TIAA bought the first floor condo in December 2014 for $42 million.

The remaining 30% of the portfolio is split between 856 Market St. in San Francisco and 1608 Chestnut St. in Philadelphia. The tenant of the approximately 9,100 square feet of space close to Union Square in San Francisco is sportswear manufacturer New Balance. TIAA acquired the property in October 2014 for $23.5 million.

The property in Philadelphia is located in the City Center, the historic and cultural heart of the city. The entire 42,800 square feet three-story building, which is let to Japanese fashion retailer Uniqlo, belongs to the portfolio. TIAA paid $24.5 million for the building in December 2014.

This deal marks Union Investment’s first step in building a retail portfolio in the U.S. The company’s investment strategy targets the full spectrum of the retail property universe, from urban retail to grocery anchored shopping centers and malls.

“Diversification and internationalization are two strategic goals for our retail portfolio that go hand in hand. Four properties in major cities with global reputations are an excellent start in the US market, with our ambition being to significantly increase our retail exposure,” said Henrike Waldburg, head of retail investment management at Union Investment Real Estate GmbH.

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