Munich, Rosenheimer Straße 145 c. An office design company formerly occupied Wing 1510 here, which now stands empty. A peek behind the façade provides a glimpse of the hidden treasure about to be revealed by the renovation works. The interior spaces are cavernous, with soaring 4.7 metre ribbed ceilings and a continuous line of large windows that flood the loft with daylight. Known as MediaWorks Munich, this historic building complex covers a 4.2 hectare site and provides almost 100,000 square metres of office space. Union Investment and Hines acquired the property from the Blackstone Group this summer in an investment deal that attracted widespread attention, not least because it took place during the coronavirus pandemic. This is a typical refurbishment project and an excellent example of Union Investment’s manage-to-core strategy. The scale of the project makes it unusual, though – the two partners will invest around €1 billion here over the next few years. “We’re aiming to create a vibrant, mixed-use complex that offers its users clear added value compared to working from home,” says Monika Gerdes, Head of Manage to Core at Union Investment. The intention is to combine the charm of the old building with the quality of a new build. Retaining the existing architecture and structure of the property, the next step is to adapt it to the requirements of modern working life. Part of the ensemble, with its simple, classic lines, dates from the 1930s, while another section was built in the 1970s. It also includes three large, underused courtyards and an old multi-storey car park. Perhaps the most striking elements are the four flak towers from the Second World War, one of which contains an observatory operated by a non-profit association. It’s easy to envisage how this property could be turned into a successful and recognisable brand. “We were thrilled with the site the very first time we saw it,” says Christian Meister, managing director of Hines Germany. Additional space – more than 15,000 square metres – can be created by a combination of reconfiguration and adding new storeys.
A historical location enters the 21st century
And finally, there is the location itself: on the edge of the Werksviertel district, Munich’s new work and leisure hotspot. Alejandro Obermeyer, Head of Investment Management DACH at Union Investment, is bullish about the prospects: “Over the next decade, the Werksviertel will be the standout success in the Munich office market.” This synergy effect is one of the factors that prompted Union Investment to invest in the area for the second time in just a few months, following its purchase of Haus 27 in the nearby Neue Balan campus. “The context will ensure that MediaWorks Munich is a hit,” says Monika Gerdes. “We’ve already received the first lettings enquiries.”
The ensemble forms the southern gateway to the Werksviertel district, with a new municipal concert hall due to be built just a short distance away and a subway station also planned. These additions will improve accessibility and create new people flows. Up to now, MediaWorks Munich has appeared somewhat unwelcoming from the outside; in future the block will be opened up and thus offer added value in terms of the urban environment. While most of the buildings currently being built in the Werksviertel district are new, MediaWorks Munich has a rich heritage. Munitions were produced here during the war, followed by clothing during the post-war period. In the 1980s, bodybuilding pioneer Albert Busek set up a fitness studio here, where Arnold Schwarzenegger was among those coming to work out. Some years later, the city’s in-crowd flocked to cult nightclub Pacha. Even at the height of the pandemic, less than four percent of the office space in Munich stood empty. Tech companies including Apple, Google, Microsoft and IBM continue to expand their presence here, and the World Economic Forum in Davos is planning to set up a research centre in this booming city on the banks of the Isar. Accordingly, for most observers it’s pretty inconceivable that demand for high-quality office space in the Bavarian capital could slacken. While the pandemic will shift the balance between home working and office commuting, manage-to-core projects provide opportunities to take advantage of emerging trends. “MediaWorks Munich is a major project, but it’s low risk because there are so many options,” says Obermeyer. Meeting points can be set up, as can communication spaces, while state-of-the-art technical facilities are another pull factor. And not to forget the environmental aspects: MediaWorks Munich is designed to be carbon neutral. This will be achieved through lower consumption and the use of renewable energy, some of which will be generated on site.
Fans of the ensemble include electronics firm RF360, a subsidiary of American semiconductor manufacturer Qualcomm, which occupies more than a third of the rental space. “As a tenant that regularly expands, we need to take their needs into account,” says Monika Gerdes. RF360 will remain in situ when renovation of the site begins, with work progressing section by section. Many existing tenants have moved out; the first building section is already completely vacant. Where the schedule allows, the building will provide space for interim users, such as startups. Events and exhibitions are also planned to make Munich residents more aware of the ensemble’s quality and to boost brand recognition, adds Gerdes.
We were thrilled with the site the very first time we saw it.
Developer and investor join forces and collaborate on an equal footing
Union Investment and Hines have established a joint venture for the project, with Hines mainly contributing its expertise as a developer. For Union Investment, this form of collaborative working is new and signals the company’s willingness to tackle other major projects using the same approach in future. The right ingredients are certainly in place, with the partners being on an equal footing both technically and professionally. That’s particularly important when redeveloping an existing building because there are sure to be surprises. “Every wall we open up is a challenge,” says Meister. Although the courtyards are lined with trees, there’s also a lot of concrete and not much temptation to linger.
MediaWorks Munich is a flagship project for environmental regeneration
The redesigned complex will be based on the principle of “Work is where I am” and comply with the latest sustainability thinking. “Break up the paved surfaces, plant greenery, optimise water management,” is how Lars Krückeberg, founding partner of Berlin-based architects Graft, sums it up. The firm is in charge of drafting the upgrade plans using building information modelling. The fact that large parts of the existing structure will be retained helps to reduce the development’s carbon footprint and conserve resources. The planned additional storeys will feature timber hybrid construction. The old car park, today a dilapidated building with badly ruptured concrete surfaces, will be transformed into a mobility hub with hire cars, charging points, co-working facilities, a nursery and a small supermarket. That’s the vision, at least. And what will become of the flak towers, whose 20 by 20 metre rooftops offer stunning views of the city, its surroundings and the Bavarian Alps? The observatory will definitely stay – everyone agrees on that. Gerdes and Meister have lots of ideas about what to do with the towers, including a pool, a lounge or a drone airfield. That’s the great thing about a major regeneration project: bold and imaginative solutions are not just possible, but highly desirable.
An impressive example of manage to core: the MediaWorks Munich site fired the imagination of developer Hines and investor Union Investment. The partners will invest around €1 billion here over the next few years. The smaller photo shows one possible vision of the site, although that may change.
By Christine Mattauch
“Joint ventures help us to grow”
Martin J. Brühl, Chief Investment Officer of Union Investment Real Estate, talks about the company’s new emphasis on partnerships for its manage-to-core strategy.
Union Investment has entered into a joint venture with Hines for the MediaWorks Munich project. What do you see as the advantages?
We pride ourselves on being an equity-rich partner with a great deal of experience and expertise of our own when it comes to development projects. We are therefore particularly pleased to be teaming up with a highly professional and internationally experienced developer on this long-term project. Hines has an extensive track record and an excellent local team in Munich.
What role will joint ventures play in Union Investment’s investment and growth strategy going forward?
They provide another option alongside established models like forward funding and forward purchase. Joint ventures can make an important contribution to robust and profitable growth, particularly in situations where two and two make five, i.e. where they create added value for us. When entering into a joint venture, we always aim to hold a majority stake. Some of our funds can only accept minority stakes in limited circumstances.
To what extent are joint ventures part of Union Investment’s manage-to-core approach?
When it comes to development, a joint venture is one of the preferred arrangements because there are significant advantages around sharing work and risk. When working with an external developer, it’s often possible to implement a rapid growth model. The potential partners include local players – project development is often dominated by strong regional companies. The crucial factor is their professionalism. It’s an advantage to have a certain institutional DNA. Last but not least, it’s also advisable for both parties to have similar expectations around how long a property should be held and how it should be maintained.