Union Investment inks US JV with TH Real Estate

Union Investment is entering the US urban retail market through its first joint venture with TH Real Estate, which will hold a majority stake in the project, the firms said Monday.

Union is purchasing a 49 percent stake in four buildings through its open-ended real estate fund, Unimmo: Global. TH Real Estate will own the 51 percent interest and manage the properties, which are located in New York, Philadelphia and San Francisco. Terms of the deal were not disclosed.

TH Real Estate bought the properties for a combined $150 million between December 2012 and December 2014, according to real estate data provider Real Capital Analytics.

“Diversification and internationalization are two strategic goals for our retail portfolio that go hand in hand,” said Henrike Waldburg, Union’s head of retail investment management. “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.”

Two of the properties are located in New York and represent about 70 percent of the portfolio’s value, according to Monday’s statement. One of the buildings, at 1511 Third Avenue in Manhattan’s Upper East Side neighborhood, comprises about 43,300 square feet and is occupied by fashion retailer Gap and a fitness studio. The second, at 636 Sixth Avenue in Manhattan’s Flatiron District, has 18,300 square feet of ground floor space that belongs to the portfolio and is let to a pharmacy on a long-term lease.

The three-story Philadelphia property, at 1608 Chestnut Street, is entirely leased to Japanese fashion retailer Uniqlo, and the 9,100 square feet of the San Francisco building, at 856 Market Street, is leased to New Balance.

“These four properties offer diversified exposure to prime urban retail, an asset class we believe will remain in high demand as the trend toward urbanization continues and both residents and businesses seek the convenience of urban centers,” said Adriana De Alcantara, one of TH Real Estate’s senior directors.

The new JV comes a month after TH Real Estate announced it is revamping its core fund structure. The real estate behemoth, which manages $97 billion globally, is remaking its TIAA-CREF Core Property Fund into the US Cities Fund series. This will comprise a master overarching feeder fund as well as four sector funds that allow investors to allocate capital to retail, office, industrial and multifamily properties through the open-ended vehicles.