German insurer Allianz has described 2017 as a record year for its real estate investment business, as it grew its overall property assets under management to €56 bn. Allianz is seeking to expand this further to €75 bn by the end of the decade.
Allianz Real Estate carried out €8.9 bn of new investments last year, the highest annual real estate volume in the insurer's history.
New equity investments in Europe amounted to €3.1 bn, a 72% increase compared to Allianz's deal volume of €1.8 bn in 2016. Besides core investments last year like the acquisition of the prime office complex Vertigo in Luxemburg, Allianz Real Estate started to invest in forward purchase transactions, core projects that are in the construction phase and have not yet been completed. Investment examples include the prime office projects The Icon in Vienna; Kap West in Munich and the new headquarters in Milan for energy company ENI.
Annette Kröger, CEO of Allianz Real Estate North & Central Europe: 'With new investments of nearly €1 bn in our region we can look back on a very successful year 2017. Our ambitions for the coming years see us planning new offices in Austria/CEE and the Nordics to support in further managing our diversified portfolio as well as introducing new strategies. Forward deals played an important role in 2017’s growth. Entering projects at an early point in time enables us to source additional value for our investors by working with development partners on high-quality real estate in prime cities.'
Allianz has been one of the largest real estate investors in Europe for several years. PropertyEU's last Top Investors real estate AUM ranking, published in October 2017, placed Allianz Real Estate in eighth place. This was based on the company's European AUM volume of €28.7 bn at end-2017.
Allianz Real Estate's 2016 transaction volume of €1.8 bn earned the company 46th place in the Top 100 Investors Deals and Dealmakers ranking published in March 2017. The next Deals and Dealmakers ranking - based on 2017 European real estate transaction volumes - is published in May 2018.
'Real estate remains a very attractive asset class for Allianz,' said Francois Trausch, CEO of Allianz Real Estate (pictured). 'We continue to grow and diversify our global portfolio, not only in our established markets in Europe and the US, but also by expanding our footprint in Asia with significant investments in India and China. We target €75 bn in assets under management by the end of 2020.'
New equity investments carried out by Allianz Real Estate in 2017 showed strong growth and totalled €5.2 bn, with €2.6 bn in direct and a further €2.6 bn indirect investments via funds and joint ventures. The total equity portfolio rose to €40.2 bn: €31.0 bn in direct and €9.2 bn in indirect investments. Indirect equity accounted for 16% of Allianz Real Estate’s portfolio allocation as at the end of 2017.
'Partnerships are a core element to the way we do business and 2017 saw us deepening relationships with a number of third party managers and joint venture partners. This approach enables us to increase our exposure to new markets and fast-growing sectors such as logistics and student housing,' commented Olivier Téran, chief investment officer of Allianz Real Estate. 'We also added a number of new strategies to our portfolio in 2017, investing for the first time in India and seeing new debt and equity in the UK already bearing fruits. This continues in 2018 where we will be looking to increase exposure to direct and indirect value add segments.'
Expanding role of debt
The firm also reported increased activity on the debt side. Senior financing grew by €3.7bn – up €1.8bn in the US and €1.9 bn in Europe – increasing Allianz Real Estate’s overall debt portfolio to €16 bn. European debt exceeded €6.3 bn while the US debt portfolio amounted to €9.9 bn. Key debt investments included prime office buildings Window in Paris, and The Atrium in the Netherlands; 55 Baker Street, a mixed-use building in London and Miami South Beach's 1111 Lincoln Road.
Roland Fuchs, head of European real estate finance for Allianz Real Estate, commented: 'European debt played a central role in our asset growth in 2017 with a number of landmark deals for our pan-European portfolio. The development of our UK strategy has led to further diversification of our European debt portfolio, and the UK remains a market of interest for us going forward.'
Alongside its strong US debt business, Allianz Real Estate also saw substantial growth in its US equity investments through the acquisition of a 43% stake in 1515 Broadway, a class A mixed-use building, located in New York's Times Square, and the formation of a key partnership with Columbia Property Trust, established to pursue the acquisition of Class-A office properties. AUM in the US increased to €14.3 bn at the end of 2017 following the origination of €2.9 bn in equity and debt investments.
Christoph Donner, CEO of Allianz Real Estate of America: 'Our new investments are underscoring the importance and attractiveness of the US market. For future growth and diversification, we opened additional regional offices in Atlanta and Los Angeles to more effectively identify high-potential opportunities nationwide.'
Allianz Real Estate started to invest more broadly across the Asia-Pacific region during 2017. The business grew from €500 mln in 2016 to €1.9 bn at the end of 2017. Allianz Real Estate completed its first transaction in India through a partnership with Shapoorji Pallonji Group, targeting Indian office markets. Allianz also invested in an outlet fund with TH Real Estate in China, in a mixed-use development in Shanghai's Hongkou district and in a logistics fund with Redwood focused on the fast-growing logistics sector in Japan.
Rushabh Desai, CEO of Allianz Real Estate Asia Pacific: 'Fast growing economies like China and India now account for more than half of our investments in the region, with the rest split between Australia, Japan, Singapore, Korea and Hong Kong. We expect to increase our allocation to Asia Pacific beyond our current 5% of the global portfolio.'