Union Investment makes first Japan office buy

Germany’s open-ended funds are flexing their muscles again in global property markets, providing added competition to unlisted real estate funds.

Union Investment Real Estate has acquired the 11-story Shiomi-Koyama office building in Tokyo for 20 billion yen (€130 million, $188 million) in its first office deal in Japan.

The Hamburg-based open ended fund manager is investing through its Unilmmo vehicle, which has been expanding its investment remit beyond Europe in recent times. It has acquired property in Canada, the US, Mexico and Chile.

Its investment in the Shiomi-Koyama office block represents the first office deal for Union in Japan, though it has been active in the country. Last year it acquired six residential buildings in Tokyo.

Shiomi-Koyama is a grade-A office building in close proximity to Tokyo Main Station, in the Koto-ku neighborhood, overlooking the harbor front. The office block comprises some 220,000 square feet of rental space and is fully let. The seller was Shinjuku Koyama Building Company.

Union Investment used to be known as DIFA, though its Asia operation under the name DIFA Real Estate Asia Pacific.

German open ended funds in general are flexing their muscles in global markets now that they are enjoying net capital inflows again.

As recently as 2006, Germany’s open-ended property fund industry suffered net outflows amid a crisis of confidence stemming from corruption scandals, a lack of transparency and poor valuation methods.

However, last year the funds began to surge back. By November 2007 net inflows stood at €6 billion, according to the German trade association BVI.

The clear trend has been toward international investment, with most of the new investment going outside Germany. In September 2007 68.3 percent of assets under management were outside Germany, compared with 43.5 percent in September 2006.