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Union Investment strikes debut deal in Houston

 The Hamburg, Germany-based real estate investment manager has bought a trophy office asset in its third non-gateway city in the US.

Union Investment has closed on its first deal in the Houston real estate market. The Hamburg, Germany-based real estate investment manager acquired 1000 Main Street, a 36-story trophy office building, from Invesco Real Estate for approximately $440 million.

The Class A property, which was purchased on behalf of the firm’s Unilmmo: Europa real estate fund, is fully leased to ten well-credited tenants, including Shell, NRG Energy and UBS. Built in 2003, 1000 Main Street comprises approximately 836,000 square feet of rentable space and is considered one of the most prestigious office buildings in downtown Houston.  

“We are delighted to add this well positioned property with strong prospects for stable long-term income and rent growth to our excellent US portfolio,” said Martin Brühl, head of International Investment Management at Union Investment. In buying the building, the firm overcame concerns about the dramatic drop in oil prices that has occurred over the last several months, and the potential impact on energy companies such as those at 1000 Main Street, he said. 

“Domestic players got cold feet, given the decline in oil prices,” said Brühl. However, “oil prices have started to recover. In the midterm, we’ll have stabilized oil prices at a more comfortable and economically viable level.” 

The transaction was Union Investment’s third in a non-gateway US city in the past 20 months. Last September, the Hamburg, Germany-based real estate investment manager purchased 50 South 10th Street, a 500,000 square-foot office building in Minneapolis that forms part of the corporate headquarters for retailer Target Corporation. In August 2013, the firm purchased Research Park Plaza III & IV, a two-building office property in Austin, for $103 million. 

The acquisition of 1000 Main Street also is one of Union Investment’s largest transactions in the US to date. One of the few deals larger in size was the purchase of 555 Mission Street, a 33-story office property in San Francisco, for approximately $446.5 million in June 2012. 

In January 2014, Union Investment announced its plans to deploy $2 billion in the US over the next several years. To date, it has invested about a quarter of the capital. Brühl said that Union Investment currently has a pipeline of approximately $750 million of deals in the US. “It’s not low hanging fruit, but they’re the ones that have a certain probability of success,” he said.