EXPO 2010: Allianz failing to reach investment targets

 
Allianz, the German insurance firm and one of the most aggressive buyers of real estate in recent times, said it had nevertheless missed its investment targets in the asset class. 

The firm, which has aspirations to increase global real estate investments from €17 billion to €30 billion over several years, blamed the “lack of market” for hampering efforts to ramp up its exposure as quickly as it had wanted.

Speaking at EXPO REAL 2010, Olivier Piani, chief executive officer of Allianz Real Estate, said it had failed to reach its targets on investing in new deals “not because we don’t want to, but because the market is not there. We are still short of our goals because liquidity is not quite there,” he explained.

Piani defended the firm by saying: “One of the worst things we can do is just go for ‘numbers’ without the proper risk-analysis and risk-return. We would rather not reach our targets in terms of the investment model than make bad deals. We are a long term investor, not traders.”

The insurer is hoping to have six percent of real estate assets on its balance sheet, but it is still at four percent – a level at which it has resided “forever” said Piani.

Yet the firm has still been one of the most active buyers of property. It has invested around €1.5 billion in the last 12-18 months, mainly in European real estate. In Germany and Central Europe, for example, it has invested in €650 million worth of deals, including a sale and leaseback transaction of 80 Aldi retail stores in Southern Germany.

In France, the firm has hired 16 people and bought around €680 million of assets. Meanwhile, the firm opened a US office this spring and is looking to invest in US property alongside investment partners.

Piani explained that while it had missed targets, global real estate markets had improved over the last year because liquidity was beginning to return. He added the “fundamentals” of real estate such as softer rental levels were “holding firm” while vacancy rates were “acceptable”.

As well as buying real estate, the insurer has also been selling assets in order to clean up the balance sheet and harvest returns, which has also contributed to limiting it to having four percent of real estate on the balance sheet instead of six percent.
 
It has sold €150 million of small properties in Germany and plans to sell another €1 billion as part of that cleaning up process, while in France it is offloading around €400 million.