An artist’s impression of Brisbane’s South Point development that Union bought last year. Source: Supplied
Germany’s biggest open-ended fund manager, Union Investment, aims to fairly quickly double its €1 billion ($1.4bn) of property investments in the Asia-Pacific after making its first foray into Australia last year, according to Eric Cheah, the group’s regional head of real estate.
“We are very focused on Australia — it’s one of our target markets, and one of our priority markets as well,” said Mr Cheah, who comes to Australia every few weeks from his Singapore base.
Union, which has €240bn invested globally with just over $26bn of real estate assets under management, struck a $200 million deal to buy the Southpoint office tower in Brisbane from Anthony John Group a year ago.
The construction of the 23,500 sq m development at South Bank, which will house Flight Centre’s 2000 Brisbane staff, is being funded by Union.
Australia had always been on the group’s radar, Mr Cheah said. “It was quite a proud moment for the group and we would love to do more,” he said of the Southpoint acquisition. “We would like to double our €1bn investment (in the region) in the short- to medium-term, three to five years.”
Mr Cheah who worked for Hudson Conway on the building of Melbourne’s Crown Casino before moving to Singapore in 2000, said Southpoint’s 10-year weighted average lease expiry would allow the investment to ride out the additional supply coming into the Brisbane market, which is already facing high vacancies.
Mr Cheah declined to comment on potential investments, although market sources said the funds giant had been an underbidder on Leighton Properties’ North Sydney office tower, which was sold in 2013 for $413m and has run the ruler over Brisbane’s Waterfront Place, which is under due diligence to Dexus at more than $630m.
Globally, the fund manager invests across commercial property sectors and also owns 47 hotels and residential property. Outside Europe, Union is more focused on CBD locations and would initially look at office investments in Australia, Mr Cheah said. In the Asia-Pacific, Japan is its other investment focus.
“But over time, as we have a greater allocation to Australia, we would hope to broaden that universe,” he said, noting that hotels and CBD retail here would also make sense.
Mr Cheah said Union’s challenge was to deploy its capital in the increasingly competitive global markets.
“We have roughly more than €10m a day that comes through the door,” he said.
While Australia had gained attention as an investment destination, quantitative easing had seen the global investment playing field awash with capital, Mr Cheah said.
“We have a 50-year history of being a prudent investor that we want to preserve.”
While on the surface it appeared an asset bubble could be forming, Mr Cheah questioned whether the money would “peel away and be less relentless”
“If you stopped QE today, that doesn’t stop the volume of money already printed, so the pressure remains.”
By Turi Condon