Of a Home the Value

in beeld special no 6

august 2012 inbeeld bouwinvest special no 6 year 3 August 2012

the value of a home residential bouwinvest tenants

lifestyles tenant segments target group characteristics average per target group

dynamic balance suburban community long-term stability extravert dynamic balance

€ 4,6 878 15% 25% 19% character typical family size tenancy length rental price home type reason for renting group oriented self aware 2-4 persons 4.6 years € 878 SFD 51% limited purchasing cheerful MFD 49% budget divorce

solitary sapce private quality urban short stay suburban community egocentric € 8 809 12% 9% 20%

character typical family size tenancy length rental price home type reason for renting spontaneous 4 persons 8 years € 809 SFD 79% renting is the norm cheerfu MFD 21% limited purchasing budget distribution by core region introvert long-term stability

€ 7 878 non-core region

10% character typical family size tenancy length rental price home type reason for renting 19% critical 1-2 persons 7 years € 878 SFD 36% renting is the norm 12% 24 mid-east well balanced MFD 64% leaving capital free 11 % 9% solitary space 13% randstad 16% 32% € 18% 7,4 871

18% 23% 34% 10% character typical family size tenancy length rental price home type reason for renting 9% 16% honest 3 persons 7.4 years € 871 SFD 66% renting is the norm 10% calm MFD 34% exploring housing market 18% 22% private quality

€ 4,6 953

brabantstad character typical family size tenancy length rental price home type reason for renting 5% 12% dynamic balance critical 3 persons 4.6 years € 953 SFD 53% exploring housing market 16% intelligent MFD 47% cohabiting/children 11% suburban community long-term stability urban short stay solitary sapce 22% € 33% 954 private quality 4,2

urban short stay 36 character typical family size tenancy length rental price home type reason for renting inteligent 1 or 2 persons 4.2 years € 954 SFD 18% exploring housing market self aware MFD 82% possession of secondary importance The Netherlands as investment opportunity 2 6 Focus on real estate 24 There's no place like home 38 Residential real estate 3 investors seek security my house is my home as the foundation in beeld special At Bouwinvest’s request, the prominent Six families in the Amsterdam region, happy with high-quality property Like our customer relations seminar earlier in the year, the theme of this Inbeeld firm of Henderson Global Investors has traditionally a melting pot of personalities David van As, director of the central Magazine is the residential rental market. Despite all the negative news on the August 2012 written an essay on the world of real and lifestyles, talk about how they have board of the bpfBOUW feels real estate owner-occupied market, the commercial rental homes market is not performing

no 6 no 6 estate seen through the critical eyes of made their rented house into their own investments contribute considerably to badly at all. After all, people are increasingly realizing the advantages of a

investors. place. the pension fund achieving a good result. comfortable home in which they can enjoy living without any worries. August 2012

16 Renting is hot again 32 Know the tenant 42 View to the future You will not be surprised to learn that we believe in the liberalised rental sector.

in beeld special high demand, scarce supply customer-oriented rental approach fascinating investor seminar This is reflected by the fact that we currently have several projects under con- The residential rental market stands in is efficient The theme of the annual Bouwinvest struction. Given that a more balanced relationship is forming between the rental sharp contrast to the owner-occupied A thorough knowledge of the tenant Investor Seminar included the future of and owner-occupied markets due to the mortgage interest deduction policy, the market, which is experiencing heavy means we can increase value for both the residential rental real estate market. prospects for this segment are good. In that knowledge, our aim is to make this weather. The malaise in that segment tenants and Bouwinvest. But it also The majority of those attending foresee an fact known beyond our borders. is actually pushing prospective buyers means we can find prospective tenants increase in the demand for rentals. into renting. more quickly. After all, the Netherlands is still largely unfamiliar territory internationally. In this issue, Henderson Global Investors quite rightly states that it is only a question of time before that changes. After all, the Netherlands is a Triple A country, without any social unrest and with a reasonable level of employment. The office market is in a deep dip, but also has some extremely strong segments, and the rental residential market is an interesting growth market. Some work is still required to convey that image successfully. But then foreign investors, too, will recognise the Netherlands as a good alternative with interesting returns at low risk.

I hope you enjoy this issue of Inbeeld. Have a good holiday.

 cover image | urban short stay | jip louwe kooijmans | stuurmankade 25 inbeeld is bouwinvest's relations magazine Dick van Hal, CEO and literally translates as 'insight'. ‘Overseeable, structured and transparent. Characteristics of the investment world in the Netherlands’

4 5 in beeld special August 2012

no 6 no 6

August 2012 in beeld special residential focus on real estate The case of real estate

michael keogh, henderson global investors, may 2012

6 7 It has been a turbulent period for fund managers globally, with in beeld special few asset classes able to weather what was initially a financial-led August 2012

no 6 no 6 recession, before evolving into a European sovereign debt crisis

August 2012 threatening the survival of the single currency. in beeld special

Investor uncertainty reflects fears for the global and bond markets to heal, macroeconomic economic outlook, as unprecedented fiscal and downside risks are prominent. monetary policy makes way for aggressive austerity packages to balance government The disorder of global markets in recent years has finances. Europe is poised to re-enter recession encouraged investors to seek out investments with in 2012, and with political uncertainties, bank low volatility whilst maturing pension funds are de-leveraging and default fears lingering, it is hard also looking to secure long-term growth via lower to envisage anything other than a low grade, risk assets. European Union (EU) regulatory patchy European economic recovery. Confidence is changes for pension funds, along with new capital stronger in the US and Asia-Pacific economies, but adequacy requirements for other institutional in light of the time needed for economic structures funds, have further reinforced this trend. returns. To appreciate property’s diversification henderson global Property has developed as an increasingly held benefits, investment managers must understand a Henderson Global Investors is a leading multi-asset ‘For investors stock in a multi-asset investor’s portfolio for three range of economic, financial and real estate independent investment management company fundamental reasons: specific factors such as transparency, liquidity, managing €80.0bn in assets. We are a major in- • High income component of returns income security and the policy and legal frame- vestor in the global property market with over 30 property offers appealing • Diversification benefits works that exist at a regional and local level. years in-depth experience working on behalf of se- • Relative risk-adjusted returns gregated direct mandates, pooled funds, property The comparative performance of property vis-à-vis securities and fund of funds clients. investment features’ As figure 1 shows property looks an attractive other major asset classes is one of its principal class, distributing income in excess of that of attractions. As table 3 shows, property deserves to We have a global property presence with offices equities or bonds. In relation to core European make up a significant component of any multi- in London, Paris, Frankfurt, Luxembourg, Milan, government bonds, a wide yield spread exists asset portfolio as it has delivered strong returns Madrid, Vienna, Hamburg, Chicago, Hartford, Beij- Globalisation has had a significant impact upon because of investor concerns regarding peripheral over time compared to equities, with traditionally ing, Hong Kong and Singapore, managing €14.9bn the strategy of international capital flows and the sovereign debt, but even prior to the funding crisis far less volatility. Healthy gilt performance reflects of property assets. required return targets of multi-asset investment property generated a higher yield. It is also worth the recessionary climate since 2008, but given the management houses. This is particularly the case noting that the weakness in the equity market keenness of present bond yields, is a return Note: All figures as at 31 March 2012 for asset allocators that have an asset-liability since the outbreak of the global recession has unlikely to matched going forward. matching strategy, whereby a growing ageing increased the yield on equities, but dividends are population require pension funds to hold less discretionary whilst rental income is contractually Global Property Market Trends volatile investments. agreed. Furthermore, the varied lease structures in US: a focus on the fundamentals place internationally and the ability for rents to The U.S. appears to be decoupling from Europe and Property’s core characteristics of a tangible asset grow stands in contrast to the fixed coupon paid looks set to avoid a double-dip recession and 8 backed by relatively secure and potentially on bonds. As we slowly return to more stable resume growth in 2012, but the economic uncer- 9

growing income have become desirable by economic conditions, the historically low correla- tainty has contributed to a levelling-off in the in beeld special investors. A recent survey by UBS, the Swiss bank, tion that property has, with either bonds or markets positive re-pricing sparked in 2010. Yields of global real estate investors indicated that 44% equities, should offer diversification benefits to a for commercial property sectors and apartments August 2012 of respondents believed a 5-10% allocation to real multi-asset portfolio. are still some way from their peak in 2007, but

no 6 no 6 estate was appropriate across a multi-asset fund, investors are correct to factor in lower demand

with a further 27% favouring an 11-15% allocation Different property markets across various regions fundamentals of future performance. The speed of August 2012 to property. As such, we believe investor interest in can have local performance drivers and economic recovery across occupier markets differs property will strengthen as investors search for cycles helping bring diversification to a portfolio. considerably between geographies, sectors and

in beeld special heightened capital stability and a steady stream of Moreover, increasingly accessible and growing quality of product. A return to employment growth cash flow in the form of rental income. international real estate markets of institutional quality increase the benefit and scope for tactical Investors have become increasingly keen to take asset allocation. By not restricting investors to figure 1 advantage of an expanding number and variety of their domestic market, there is the opportunity to % Property’s compelling real estate investment markets to construct a well access markets for enhanced cyclical returns. In income return vs diversified international portfolio. Often treated as taking a global approach, and to improve the risk- 7,500 equities & gilts an alternative asset class, property is a physical adjusted returns potential, investors can diversify source: datastream CBRE asset, rather than a financial asset. It displays both risk across multiple markets, properties and 5,875 bond and equity characteristics and can be property types thanks to the size and heterogene- EU bonds * compared to those asset classes on a risk / return ous nature of the international market. As figure 2 4,250 EU equities basis. At a time when bond yields are low, cash illustrates, even across the key financial hubs of property ** German 5 Yr Swap deposit rates offer little reward and equity Europe and Asia-Pacific, which one would expect to 2,625 dividend payments are uncertain, the high and mirror one another given their reliance on 1,000 * eurozone synthetic relatively secure income from property looks internationally-traded services and financial benchmark bond particularly attractive. market confidence, there is low correlation in ** average prime EU15

Q1 2000 Q3 2000 Q1 2001 Q3 2001 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 all property yield % figure 3 primary and key gateway markets; more optimistic ‘The major US property Annual total returns, investors might be inclined to look beyond the 15 % pa in local currency top-tier markets. vs equities & gilts markets should resume 10 source: IPD 1 year represents Asia-Pacific: income growth priced 2011 return into yields 5 their recovery’ Asian markets have led the global recovery, and 1 year 0 supported by robust economic forecasts, are well 5 year positioned to offer solid long term property 10 year -5 has supported an improvement in retailer market performance. Aided by large fiscal stimuli equities 10 year performance, but rental levels and valuations and loose monetary policies, most core Asian France Germany Netherlands UK gilts 10 year remain challenging. Technology and energy sectors property markets are projected to continue to are key growth areas for office occupier demand, benefit from a significant positive yield spread namely in Texas and California, whilst weaker over government bonds. The key challenge for its leasing dynamics in New York and Washington, a governments in 2012 will be to tame inflationary factor of the ills in financial markets, are being pressure without extinguishing demand. Property offset by robust investor demand for high quality investment volumes should be supported by assets. Western and Asian institutional capital seeking The office sector in Asia benefited from a strong financial volatility. Parties opposed to austerity safe havens amid continued volatility. Individual recovery in employment and corporate expansion cuts have been making substantial gains, so it is The major US property markets should resume market and policy specific risks nevertheless since 2010 which buoyed activity in China, Hong no wonder that financial markets have retreated their recovery as confidence improves in the warrant due attention by core investors, who will Kong and Singapore. However, recent evidence and bond spreads have once again become financial economy. In terms of investment themes, have to curb their expectations for capital growth suggests Hong Kong and Singapore are in the elevated. Restricted bank lending, unaided by 10 quality matters and investors should focus on and focus on income. early stages of a slowdown in the face of global regulatory change, is only compounding market 11

economic uncertainties and increasingly bearish fears. in beeld special investor sentiment. In contrast, while Tokyo lagged most other Asian cities in the upturn due Following a recovery in market pricing initiated August 2012 to the earthquake, its office sector should recover back in 2009, a further broad upturn in real estate

no 6 no 6 in 2012. The gateway Australian cities - Brisbane, values is unlikely in the near term given demand

Sydney, Melbourne, and Perth - are also in the and credit restraints. Those investors less reliant August 2012

figure 2 early stages of an upswing. on debt and under pressure to acquire assets Sydney Perth Hong Tokyo Singa- Paris Frank- Milan Madrid Stock- Zurich London Prime office total Kong pore furt holm having raised capital will remain the dominant

in beeld special return correlations, Sydney 1 In retail, Hong Kong and major Tier I and Tier II buyers, but cross-border investors remain 1990 – 2011 cities in China were the star performers of 2010 suspicious of Europe. They are naturally averse to Perth 0.83 1 and 2011. Consumer spending growth averaged southern markets where currency risks are Hong Kong 0.14 0.01 1 15% per annum reflecting rapid urbanisation, elevated, but also appear to be ambivalent to the domestic tourism and improved spending power. open economies of the Benelux region whose Tokyo 0.40 0.43 0.29 1 The Newly Industrialised Economies (NIEs) with flirtation with recession is exacerbating distress Singapore 0.46 0.64 0.44 0.46 1 their highly open, export-oriented economic in occupier markets. The UK, Germany and France

Paris 0.52 0.40 0.34 0.76 0.44 1 structures that correlate closely with Western economies are expected to see corrections in Frankfurt 0.12 0.23 -0.05 0.62 0.39 0.61 1 values. Japan, Australia and New Zealand appear Milan 0.28 0.23 -0.19 0.45 0.09 0.63 0.58 1 well-placed for broad-based medium term ‘The gateway Australian Madrid 0.44 0.48 -0.14 0.68 0.25 0.73 0.63 0.67 1 recoveries and healthy, albeit benign property performance. Stockholm 0.66 0.49 0.16 0.44 0.40 0.66 0.24 0.38 0.53 1 cities are also in the early Zurich 0.50 0.52 -0.02 0.59 0.47 0.67 0.56 0.65 0.60 0.48 1 Europe: an increasing divergent market Across Europe political uncertainty and social London 0.66 0.52 0.45 0.47 0.44 0.67 0.31 0.22 0.35 0.63 0.28 1 unrest have raised the possibility of on-going stages of an upswing’ together accounted for around three-quarters of Sentiment is vital to property markets and drives outcomes. Figure 4 allocates European markets to all EU-15 investment volumes in 2011, a telling occupier take-up in the absence of jobs growth, as either “core” or “periphery” and examines the ‘Traditional drivers of reflection on the current paralysis. evidenced in many of Europe’s central business consequences for occupier and investment The traditional drivers of property performance, districts in 2010 and early 2011. The deterioration markets under two competing scenarios: (i) a namely economic growth, business investment, in occupier demand since last summer has prolonged period of slower economic growth, property performance, are all employment and bank lending are all under extinguished the emerging rental recoveries and varying from country to country, or (ii) a banking immense pressure, and so one has to assume near halted any tentative investor creep up the risk crisis and deep recession triggered by a disorderly term property performance will be uninspiring. curve. Investors are likely, therefore, to focus on European break-up. The “core” is assumed to under a immense pressure’ The credibility of central banks, policy makers and those markets that are highly transparent and consist of Northern Europe and the Nordics, with politicians to deliver on reform has never been liquid, that have an established market structure the “periphery” dominated by southern Europe. under such scrutiny, and it is understandable that and where good opportunity for growth exists. It is However, these allocations are subject to debate and prime rents and yields ought to drift weaker in investors are choosing to delay acquisitions or worth noting, however, that should the majority of and recent survey evidence suggests the “core” the absence of cross-border investors. However, the sales until greater clarity has returned to financial investors continue to target prime property for its category is confined to fewer markets. outlook for prime should improve radically once markets and the political scene. Without an perceived safe-haven qualities, the strategy can these economies finally turn the corner and imminent return to economic growth and the become somewhat self-defeating. These are trends Under the low growth scenario prime yields in the conditions underpin rental uplifts from historically difficulty in meeting return requirements for core are also apparent in the US and Asia-Pacific. “core” should remain stable, providing recession is low levels. investors, limited capital flows into European real averted. However, rental growth has stalled in estate look set to continue, widening the void The European Outlook – alternative many core office centres and investors remain Under the more severe scenario, prime rents and between the northern and southern markets. scenarios fearful of delays to the economic and future rental yields in core markets would also be expected to Southern or peripheral euro zone markets will Because risk is currently elevated, a scenario recovery, and this should limit the appetite to bid experience a marked correction, causing poor remain off the radar until currency risks are approach can be used to highlight potential up capital values further. Access to finance for performance in the short term. A potential Japan- eliminated. non-prime assets and risk aversion from lenders style deflationary outcome could emerge, producing 12 suggests weaker short-term performance on an eventual recovery in prime yields, while further 13

non-core assets with yields edging higher and curtailment of the development cycle would support in beeld special weakening rental values as releases of second some modest recovery in Grade A rents. Yields on hand space exacerbate availability. “Periphery” non-prime assets are unlikely to return to levels August 2012 markets will endure recession in 2012 and 2013, experienced today for many years, however, as

figure 4 Core Periphery Medium term outlook no 6 no 6

source: Henderson Global Austria, Finland France, Belgium, Ireland, Italy, Greece, (2014 onwards)

Germany, Netherlands, Poland, Hungary, Portugal, Spain August 2012 Investors Research Sweden, UK

Central Scenario • Prime headline rents stall; • Prime rents weaken further Core: weak/modest perfor-

in beeld special Weak growth/recession incentives increase mance for prime over 5 years. • Investors price in currency Growth potential improves figure 5 • Country safe haven status in- risk. Bond yields higher. Prime from 2014; lower risk to exit Germany tensifies and low bond yields yields drift higher yields Growth 2012 – 2016 support prime pricing United States % pa vs Long term Periphery: Attractive outlook Australia average* 80% probability • Banks continue to lend selec- • Bank lending extremely from 2014 as economies turn source: Oxford Economics tively but terms tighten constrained the corner and yields move Sweden lower. Rental growth stronger • Secondary capital values • Big falls in secondary capital off lower base United Kingdom * between 1980 – 2007 weaken values France Banking crisis scenario • Prime rents fall – magnitude • Prime rents fall sharply for Core: stronger performance Defaults/deep recession depends on volatility longer from 2014 as yields move in Japan and rents stabilise Austria • Liquidity freeze: ‘Lehman- • Collapse of banking sector style’ impact on prime yields. disrupts investment market Periphery: Rental outlook Italy for many years improves 2015/16 but yields 20% probability • Deflation leads to very low remain structurally higher China bond yields and lower growth • Prime yields rise very sharply Spain outlook. Prime yields recover and stay structurally higher, international capital exits -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 Banks remain rightly committed to sufficiently a comparatively healthy demographic outlook. michael keogh ‘Investors still believe reducing their real estate exposure, and this Demographics are crucial for property investors senior investment and economic analyst similarly should filter through into more realistic and while a number of European countries have pricing as 2012 progresses. seen their population level off and even decline, Michael joined Henderson Global Investors in locations that generate Europe is the world’s largest regional economy, but the United Nations Population Division estimates in January 2009, having spent the previous six its recovery will not be uniform.(figure 5) Increased that the population in the Netherlands will not years working in the Economics, Investment & political uncertainty has established prime pricing peak until the early 2030s. Forecasting research team at CB Richard Ellis. high incomes’ in Northern Europe, aided by negative real bond yields in core Europe, even though values look From a property perspective, international For Henderson, Michael forecasts economic and historically expensive. We believe there is some investors value the high level of transparency and property markets across the UK and Europe, weight behind the argument that elements of the professionalism of the Dutch property market, analysing long term property trends, investment excessive levels of second hand availability delay strongest safe haven investment markets of which is mirrored by the maturity of the listed and and economic cycles to project future performance rental recoveries. A huge concern for the periphery Germany, Sweden and Switzerland are overheat- unlisted property sector as well as the important and output. Michael is involved in advising markets under this scenario would be soaring ing, or at least investors should be factoring in role Dutch investor’s play in other European Fund Managers in the acquisition, disposal and bond yields and elevated risk of ejection from the more muted return expectations. This mood is markets. The retail and residential property development of assets within the European single currency, in which case even prime yields confirmed by the slight cooling of investment markets in Holland are dominated by very strong property market. would need to remain structurally higher, and market sentiment in the UK, which has proved to domestic players, supporting pricing, whilst the capital values lower than current levels. be a good early gauge for Europe’s investment office market is firmly international, despite some markets. In Southern Europe international softening in investor appetite due to rising Concluding thoughts investors will remain largely absent, leaving the vacancy rates and the disposal of assets by the Property markets globally have recovered from the investment arena to domestic players with a German Open Ended Funds. valuation declines recorded in 2008, but in large strong bias towards prime property. After the 14 part, this has been restricted to quality product, in upward adjustment of prime yields in Southern 15

quality locations. Investors are now highly Europe at the end of 2011 further falls in pricing in beeld special selective in the market, but still value the high should remain relatively limited, but a wider and income generating characteristics. This may sound deeper risk-adjusted re-pricing at a broader market ‘The Netherlands belong to August 2012 controversial given that commercial property is level is likely, given occupier market woes and an

no 6 no 6 very much dependent upon tenant demand; with expanding bank bad loan book to property. On a the core Europe group’

broad occupier market requirements weak given more positive note, realistic property appraisals August 2012 the likelihood of subdued economic output, falling may at least instigate a coming together of buyer real income growth, restricted credit and high and seller aspirations, helping kick-start a needed

in beeld special unemployment. But for risk-averse investors, good improvement in investment volumes. Dutch banks have suffered disproportionally from quality real estate, let on long leases to financially the fallout of the financial crisis and the availabil- strong tenants still offers very attractive returns in Where does that leave the Dutch ity of credit to property investors is restricted with an ever uncertain financial world. market? bank margins often higher than elsewhere in core From a property investor point of view, the Europe. This combination of weak office occupier Assuming the bumpy economic ride continues Netherlands clearly belong to the core Europe market fundamentals and limited financing has led without excessive shocks, property investment group, led by Germany France and the UK. The Dutch net initial yields to rise above the level of markets should remain on their divergent path, Netherland’s government debt level is below other core markets, such as Germany, France, the split markedly by quality and region. This means Germany and France, it enjoys one of the lowest UK and Sweden. Cross-border investors are strong demand for prime and good secondary unemployment levels in Europe (4.5%, ILO defini- currently faced with the difficult choice between assets in the core countries, as investors hunt the tion) and on a per capita basis Dutch exports very low yields in much of Northern Europe, and relative security of income, together with some exceed even those of Germany. Near term risks do higher yields but significant downside risks in interest from a small group of opportunistic exist, however, in large part reflecting the Southern Europe and the periphery. We believe players beyond that narrow risk spectrum. Revised openness of the economy, but it is well balanced, that the combination of low risk, good medium economic projections and a lack of faith in with export-driven manufacturing as well as a term prospects and attractive yields in the policymakers have brought a new wave of realism strong service sector. In a long term context it is Netherlands will soon be discovered by cross- to the markets for secondary and tertiary assets. also important to note that the Netherlands show border investors, reviving the investment market. vision

Residential rental market investments in Europe (see figure 3). And the The other side of this malaise, however, is that Netherlands is actually the biggest market in the residential rental market is actually not residential real estate investments. Results in Renting is hot again performing badly at all. In fact, the continuing recent years show that real estate is a wise uncertainty in the owner-occupied market is, you investment. The Bouwinvest Dutch Institutional might say, pushing prospective buyers into (BDI) Residential Fund realised a return of 4.1% last renting. That is clearly reflected in the interest in year, for example. That follows the line that has Almost four years of crisis have knocked the housing market right out our homes and new developments. With an shown a stable return for many years (figure 4). Not occupancy level of 98.3 percent we have hardly any surprisingly, therefore, Henderson Global Investors of balance. The owner-occupied market, in particular, is in turmoil. vacant properties. There is a great demand for concludes its vision with the statement that the homes at a rental of € 700 to € 1200 per month and housing market in the Netherlands will also be Uncertainties with regard to domestic finances and difficulties in the supply is scarce. The Netherlands has a total of discovered by foreign investors (see page 15). It is some 240,000 private sector rented housing a market of a sufficient size, which generates a financing an owner-occupied home have, however, thrown new light properties. At the same time, 860,000 households stable direct return and has a low risk profile. with an annual income higher than € 33,000 are on renting a home. Renting is hot again. living in rented social housing. In other words, Focus there is already increasing potential for private In view of the increasing interest in the private sector rented housing (figure 2). Especially now rented housing sector, it is essential to make that government measures are being taken to choices. We are focusing strongly on the core actively prevent a skewed income-to-rent ratio. regions (figure 5). Our residential property And because more conditions are being attached portfolio, developments and purchases to obtaining a mortgage loan, such as compulsory concentrate on the urban areas in the Randstad, 16 annuity payments, the lowering of the loan-to- Brabantstad and the Central-Eastern Netherlands. 17

In the summer of 2008 an interview with Willem The austerity measures announced, the tightening value ratio and possibly also the scrapping of the That avoids the regions that are demographically in beeld special Vermeend, former Secretary of State and Professor up of mortgage interest policy and mounting mortgage interest deduction (now, incidentally declining. In addition to a good balance between of European Tax Law and Fiscal Economy, showed unemployment have dealt a heavy blow to only) for first-time buyers, the playing field for single-family dwellings and apartments, we are August 2012 how we in the Netherlands viewed the financial consumer confidence. It is primarily the stricter renting and buying in the housing market is seeing an increasing demand for sustainable and

no 6 no 6 crisis that grew to maturity in the United States at bank requirements (Basel III) and the introduction evening out. energy-efficient homes. Our portfolio can meet

that time. “We’ve got our act together in the of the Code of Conduct for Mortgage Financing, that demand, too. August 2012 polder,” was what Vermeend said. With our open however, that are making it more difficult for Consumer demand for housing economy, barely two months after the interview prospective buyers to obtain a home mortgage Naturally, it is also essential for the housing Then there is the future challenge of an ageing

in beeld special with Vermeend appeared, the dykes proved unable loan. The result? The NVM [Dutch Association of product to fit in perfectly with the consumer population. It is important to start addressing the to withstand the credit crisis. Real Estate Brokers] recently registered a drop in demand for housing. And in many cases consumers issue of accommodation for an increasingly older sales of 18 percent compared to last year (figure 1). want a single-family dwelling. And that is a rare Dutch population. We recently took our first steps The implications for the owner-occupied market And what about sales of new homes? They have commodity in the investment residential rental in providing sheltered apartments with were already visible in early 2008. The curve of currently hit new lows at just 500 homes per market. After all, in the past, new developments of customised care. price rises for owner-occupied homes stalled and a month. single-family dwellings were designed for the decline set in. House sales began to stagnate, too. owner-occupied market. Then ultimately another In the first year of the crisis, sales of new homes, 20 percent of investment housing properties were which accounted for 4,000 homes a month in 2008, needed and that demand was met by building dropped to just 1,000 homes a month. That year, apartments. Incidentally, at Bouwinvest we have incidentally, the Economisch Instituut voor de ‘Far more attention is being always aimed for an equal balance between Bouwnijverheid (Economic Institute for the apartments and single-family dwellings. Hence Construction Industry, EIB) predicted that most the 50%/50% balance between the two home types losses would be suffered in 2012. 2010 and 2011 paid to comfort and a high in the Bouwinvest Dutch Institutional (BDI) would be ‘transition’ years. We are now almost Residential Fund. We will be continuing on that halfway through 2012 and the credit crisis has course. Looking at the investor market, it turns out made way for the euro and debt crises. degree of quality’ that the Netherlands is among the top-5 real estate figure 1 250 30% figure 4 Number of residential Returns on rental real 25% property sales (NVM) 200 estate investments in

2000 – 2011 20% the Netherlands

source: Pasgoed.com/ 150 total return IPD ROZ Index woningmarktcijfers.nl, 15% 1977 – 2011 (Residential edited by ABF Property Sector & without 100 10% leverage)

5% 50 direct return (rental income) 0% indirect return (valuation) 0 -5% total return 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Inflation Index NL (CPI) -10%

-15% 1977 1978 1979 1980 1981 1982 1983 1985 1986 1987 1988 1989 1990 1991 1992 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 1984 1994 2004

figure 2 incomes < 33.000 incomes > 33.000 incomes > 43.000 total Housing inventory owner-occupied home 17 % 9 % 33 % 58 % according to income rented housing 29 % 5 % 7 % 42 % figure 5 level (Johan Conijn – total 46 % 14 % 40 % 100 % Bouwinvest Vogon, 2011) core regions Randstad 18 19 including Amsterdam, in beeld special The Hague, Haarlem, Leiden, Rotterdam, Utrecht August 2012

80.4 % € 2.2 billion

no 6 no 6 figure 3 IPD databank - capital value (€ bn) IPD market composition by sector - end 2010 (% capital value)

Size and distribution August 2012 of property investment Country All property Country Residential Retail Office Industrial Other market (IPD, Capital United Kingdom 157 Netherlands 46.9 28.5 19.2 2.5 2.9

in beeld special Value) France 114 Switzerland 46.8 18.8 28.7 1.9 3.8 Switzerland 54 Finland 19.5 21.6 33.3 8.1 17.6 Germany 46 Austria 18.2 27.1 44.8 1.1 8.9 Netherlands 39 France 15.0 21.0 52.1 7.6 4.3 Sweden 25 Germany 12.9 23.2 44.8 5.0 14.0 Finland 21 Denmark 11.9 24.6 59.6 1.8 2.0 Mid-East Italy 18 Sweden 8.0 16.5 69.2 1.9 4.3 including Apeldoorn, Arnhem, Norway 16 Belgium 7.6 17.8 68.1 5.5 0.9 Nijmegen, Zwolle Denmark 14 Portugal 1.3 51.2 24.6 11.2 11.6 4.9 % Portugal 10 United Kingdom 0.8 50.7 29.5 14.5 4.5 € 133 million Spain 9 Spain 0.4 54.9 32.6 10.1 2.1 Brabantstad Belgium 8 Norway 0.3 26.9 55.4 8.5 8.9 including Austria 6 Italy 0.1 42.7 42.2 10.8 4.2 Breda, Den Bosch, Poland 4 Poland 0.0 32.8 42.9 24.2 0.1 Eindhoven, Tilburg 2.7 % Czech Republic 3 Czech Republic 0.0 27.5 55.3 16.9 0.3 Non-core region € 75 million 12 % Ireland 2 Ireland 0.0 40.8 50.5 8.7 0.0 € 0.3 billion our vision explained

A wise choice

‘The stable return on the residential rental market makes this Low priority development in full swing Investments in the residential rental market have Although the impression has been given that many building segment a wise choice for investors,’ says Michiel de Bruine, Head of long been a low priority in new property develop- developments have ground to a halt, that primarily applies ment projects. After all, developing for sale was to projects in the owner-occupied segment. We are engaged Asset Management Residential. But increasingly so for tenants, as the top priority. With changing market conditions, in eight projects currently under construction. These involve De Bruine foresees a major shift in the near future. a total of 379 apartments and 158 single-family dwellings in well. ‘After all, it makes them flexible; they have no ties.’ “We were always in between subsidised regulated the liberalised rental sector, namely: housing and home purchases subsidised by mortgage interest deduction. That makes it • De Heelmeesters, Amsterdam difficult to compete. Recent government measures 179 apartments in the area of both regulated rentals and mortgage • Deo Neo, Haarlem interest deduction are creating a more level 72 apartments playing field. The products are coming more into • Parkwijk, Berkel and Rodenrijs The advantage of the crisis is that the image of Critical balance and the liberalised rental sector can 72 single-family dwellings renting has improved considerably in a relatively The wide range of products available also enables benefit from that. Eight percent of the housing • Hoogh Havezathe, Zwolle (Breecamp-Oost) 20 short time. “Renting is no longer the ‘second us to be highly critical. “And we are,” stresses De stock in the Netherlands is currently in the 56 single-family dwellings 21

choice’. You have no worries, you know what you Bruine. “We’re extremely selective.” That was also liberalised rental sector (figure 1). I think that share • Vasthorst, Amersfoort (De Bron) in beeld special have to pay each month and maintenance is taken the message he conveyed at the recent Bouwinvest will double over the next few years.” 55 single-family dwellings care of. The housing product is actually entirely Relations Seminar in Prinsenhof (now the WTC • Boogwoningen, Lent August 2012 different from homes twenty years ago, for The Hague) in The Hague. That seminar focused 22 single-family dwellings

no 6 no 6 example. Far more attention is being paid to on the theme of the future of the (rental) housing • De Groote Wielen, Den Bosch

comfort and a high degree of quality”. In his view, market. “Everything has to be right and correspond 25 single-family dwellings August 2012 home occupiers can make a clear decision: shall I to the demand from the target groups we aim to • Forum, Rotterdam rent or buy? “It’s important to get the flow going serve. If the plans for a project being offered are 56 apartments

in beeld special now. There needs to be movement in both the not right, then we see how we can rectify that. So owner-occupied market and the rental market”. we rarely buy a product as it is,” says De Bruine in

The Hague. figure 1 Urban areas Housing inventory Liberalised De Bruine has to renew five percent of the the Netherlands sector residential portfolio each year. “Selling is easy. 8% The homes in our portfolio are in urban areas, so aiming for the oil-stain effect there is a great demand from private investors. Bouwinvest likes to invest in small-scale projects Rentals The homes are all well maintained. Private that then have an oil-stain effect on the immediate 42% investors can therefore continue renting them out surroundings. “The Eenhoorngebied district near Total for a while and then sell them off as individual Amsterdam’s Amstel Station is a perfect example. Regulated 7.2 billion units”. De Bruine also feels the market offers We have already developed a hotel and commercial 92% (100%) plenty of opportunity for acquiring good products. property and now we have acquired an apartment “Lots of real estate development plans come our complex. The demand for liberalised rental homes Owner-occupied way. We also have our own projects in the pipeline. in the city centre is high, which gives us plenty of 58% We have done an awful lot of sowing recently and security and little risk,” says Michiel de Bruine, Head we are now beginning to reap the benefits”. of Asset Management Residential. 22 23 in beeld special August 2012

no 6 no 6

August 2012 in beeld special There’s no place like home

A house, in its most basic form, is four walls and a door, windows and

24 a roof. In practice, it is the place where you create your own personal 25 in beeld special home base in your own way. For some people that home base is August 2012 August 2012

geometric and white, for others it is cosy and comfortably chaotic.

no 6 no 6 no 6

Six families in the Amsterdam region, traditionally a melting pot of August 2012 personalities and lifestyles, talk about how a house became their home. in beeld special

‘I’ve been living here for about a year. My daughter comes over regularly and for Christmas she got some window pens. She made these doodles. She’s really creative, just like her father! We’re going to do some together soon.’

urban short stay | mikko and isha kriek | fortuynstraat 125 26 27 in beeld special August 2012

no 6 no 6

August 2012 in beeld special

‘We’ve made our house a home with a combination of nostalgia and renovation. We attach a ‘Low threshold and an open house style. That makes it feel like home for me, my partner great deal of value to family heirlooms, but we regularly buy something modern in contrast. and our three children. Everyone is welcome. We haven’t got any curtains. We’re growing A lot of our things, like souvenirs, remind us of good times.’ vegetables in pots in front of the big window.’

dynamic balance | dick and fredy klomp | bastenakenstr 112 urban short stay | emiel jansen | stuurmankade 236 28 29 in beeld special August 2012

no 6 no 6

August 2012 in beeld special

‘Our place feels like a little paradise in Amsterdam. When we moved in we really made it ‘We’ve been living here since October and it’s becoming more and more our own familiar our own, light and white. I work in the florists’ trade, so our place was immediately full of place. As we live on Java-eiland, we decided on an Indonesian-style decor. The floor is made decorative vases and flowers!’ from bamboo and the wallpaper is woven grass.’

urban short stay | gary loen | javakade 548 urban short stay | doede van der linden andt chantal laurent | brantasgracht 12 2

6 5

1|2 3 4

8 9

30 31 in beeld special August 2012

no 6 no 6

August 2012 Borneo-eiland Project Borneo-eiland Project Sloten VII Project Jansen & Louwe family Kriek family Klomp family in beeld special 1|2 Stuurmankade 236 and 252 3 R.J.H. Fortuynstraat 125 4 Bastenakenstraat 112 Target group Urban Short Stay Target group Urban Short Stay Target group Dynamic Balance Number of homes 380 Number of homes 380 Number of homes 231 Gross theoretical rent per Gross theoretical rent per Gross theoretical rent per annum* annum* annum* € 4,419,000 € 4,419,000 € 2,357,000

Java-eiland Project Java-eiland Project Diemen Noord VIII Project Loen family Linden/Laurent family Tönis family ‘I moved here three years ago. Before this I was living in a seventh-floor flat. The south- 5 Javakade 548 6 Brantasgracht 12 7 Oude Waelweg 54 facing garden has been done up. I love the fact that you can just open the door and go into Target group Urban Short Stay Target group Urban Short Stay Target group Suburban Number of homes 706 Number of homes 706 Community the garden whenever you feel like it.t’ Gross theoretical rent per Gross theoretical rent per Number of homes 54 annum* annum* Gross theoretical rent per annum*

suburban community | andré tönis | oude waelweg 54 € 8,037,000 € 8,037,000 € 408,890

* by 31 December 2011 own tenant segmentation2 for the private sector way of values. Do they consider freedom and rental market. creativity important, or structure and authority? Customer-oriented Do they seek the company of others or are they Own tenant segmentation provides more self contained? Those are the new predicting in-depth customer insight factors, also when it comes to renting homes. Based on a large-scale survey of our own tenants rental approach leads (n-5000) we have identified six clearly distinct segments. These vary according to lifestyle The essence: Translating customer (according to the Smartagent Brand Strategy knowledge into the real estate process Research (BSR) model, see box), housing ambition There is nothing special about having customer to better results and the reason for renting. Especially this aspect segments or customer knowledge. Many distinguishes our segmentation from other organisations have them and you can even methods. Each of these segments has clearly buy segments ready for use! But knowing how different requirements in respect of housing type to translate them into the real estate process (apartment or single-family dwelling, for example), is essential. We start with a Product Market living environment (city centre or suburban Combination (PMC), in which the local tenant Deploying customer knowledge makes renting more effective and efficient. environment, for example), rent level, expected population in the vicinity of a location is linked to a desired product. We know that around 50% of It not only enables the housing product to be almost made to measure; it also tenants come from within a radius of 5km (and 80% ‘From a house party, within a radius of 20km). The product will therefore helps find prospective tenants far more rapidly. That is what Erwin Drenth, have more chance of success if it corresponds with the requirements of those groups. There is a strong 32 Manager Marketing, Communication & Corporate Social Responsibility at via the office and on to correlation between the target groups in our 33 complexes and those in the vicinity. As soon as in beeld special Bouwinvest concludes in his essay on his experiences in the rental segment. we have established a target group, we can use a classical concert’ a software tool to outline a list of Requirements. August 2012 This tool calculates the target groups’ preferences

no 6 no 6 tenancy length, or requirements of the home for twelve variables (such as outside space, 3

itself . We have opted for value-oriented finishing level and number of bedrooms). That August 2012 segmentation, in other words based on internal gives us a clear view of whether the proposed In 2011 the residential fund recorded an characteristics of the product (or service) they buy. values and customer convictions (what people product corresponds and which improvements

in beeld special outperformance for the IPD benchmark of more Or, to put it another way, the customer decides consider important in life, such as status, freedom, are possible. than 2% points (4.1% as opposed to 1.9%)1. what he feels is of value. In the owner-occupied solidarity and control), as opposed to a traditional Moreover, the physical occupancy level rose market, this translates into co-creation projects, socio-demographic segmentation based on age, After completion of a project, this segmentation further in 2011 to around 98%. That is due to a for example, where the future customer realises income, education and family situation. After all, plays an important role in the initial occupancy number of factors, such as the quality of the the ideal place to live together with the developer. it has become clear that the latter method of of our properties. Our entire marketing and property, location, management and – not least – segmentation now has little or no power of communication approach is set up to enable us to the customer-oriented approach Bouwinvest has Things are slightly more subtle in the residential prediction. In the Netherlands, in particular, the differentiate by target group. Based on PMC, we applied for many years. rental market. After all, we cannot offer a home 1 Also see the Bouwinvest Dutch boundaries are blurring between what used to be look at which market values are relevant to a for one specific customer. For the majority of our Residential Fund annual distinct population groups or classes. Nowadays, project and apply our resources to them. Use of The customer decides customers renting is a temporary situation. report at www.bouwinvest.nl for example, someone can be at a house party one colour, conceptual detailing, channel preferences, Being customer oriented, or letting the customer Bouwinvest therefore needs insight into the 2 In close collaboration with the night, appear at the office the following day in a social media preferences and tone of voice: We hold the reins, co-creation, wisdom of the crowds, motives and requirements of groups of tenants Smartagent Company suit and, after an hour’s kite surfing, go to the can specify everything by segment. We also know, these are various expressions of an overall trend rather than individuals. Essentially, our major 3 At www.bouwinvest.nl/ Concertgebouw for a classical concert! by means of origin analyses for other complexes whereby (groups of) people are demanding issue is “How can we make sure someone will want over-bouwinvest/Pages/ in the vicinity for example, where potential ever-more control of their own lives. From a to pay 800 or 900 euros a month for our home and Expert-center.aspx you can Twenty-five years ago, those were still relatively tenants are likely to come from. We then aim any commercial point of view that means consumers be happy with it?” To answer this question, as far see videos in which our own separate worlds, but now the borders overlap. house-to-house approach, sandwich boards or bus increasingly want to (help) decide the back as five years ago Bouwinvest developed its tenants play the starring role. Unless you look at what links these people in the shelter posters at those neighbourhoods we consider to have the greatest chance of success. gert jan hagen The matrix can be divided into four fields. We call The yellow world: That leads to less waste and a higher result. smartagent these the perception worlds. Each respondent involvement and harmony (Suburban Community) is given a percentage score for each perception The yellow world consists of consumers with After this period, in the management phase we consumer segmentation: world. Some respondents score as highly in one a group-oriented, extravert attitude. These use our specially devised property managers’ from sociodemographic to particular perception world, while others score consumers attach a great deal of value to good programme to train them in the use of the right equally for various perception worlds. The worlds (friendly) social contacts both at work and in the resources for each product/market combination. psychographic provide insight into the consumer type. neighbourhood where they live. They have an How to most effectively deploy Google Adwords Together with SmartAgent Company, Bouwinvest open attitude, feel highly involved with others or Facebook, in other words, given a particular has identified six individual tenant segments. Together with Bouwinvest we have added and are always ready to help someone else. target group, and which photographs and tone SmartAgent Company uses the research programme questions to this lifestyle model regarding Harmony and balance are major motivations of voice to use. Brand Strategy Research (BSR) to identify them. consumers’ specific rental motives. So why they for these consumers. Gert Jan Hagen, managing partner at Smart-Agent want to rent, for example, and how they feel about Guiding principle: Customer insight Company explains. renting. This ultimately produced Bouwinvest’s six The green world: enables more effective and efficient segmentation models. These are Urban Short Stay, security and certainty (Long-Term Stability) rental Creating value is directly related to the significance of Dynamic Balance, Private Quality, Solitary Space, To conclude, we can see that the use of customer the area, the product or the service for the end user, Suburban Community and Long-Term Stability. The green world is also group oriented, but is knowledge by both ourselves and our property the consumer. So we have to know what is important This transforms a general lifestyle model into a far more egocentric than the yellow world. managers makes for more effective and efficient to the customer. Consumers can be identified at segmentation model aimed exclusively at the People lead a quiet life, frequenting a small circle rental. We devote a great deal of attention to various levels. First of all, the consumer can be tenants’ market and Bouwinvest’s customers. of family, friends and/or neighbours with whom accountability to make us ever more able to analysed at the demographic level (name, address, they have intensive contact. From that point of employ our resources as effectively as possible: household composition and suchlike). Then at the Lifestyles versus tenant segments view, the world is not very big for the greens. Which campaign ultimately generates the behavioural level (transactions, living behaviour) For a good understanding, the four lifestyles 34 most tenants? Incidentally, we also foresee and at the attitude level (loyalty, satisfaction). Things are listed below, with the tenant segments They characterise themselves as calm, quiet and 35

opportunities for further efficiency drives in the really start getting relevant at motivational level, Bouwinvest has identified between brackets. serious. Privacy is extremely important and the in beeld special future. For instance, making more use of social however: which motives, standards and values guide green consumer likes to stay in his own home. media and turning our tenants into ambassadors. the consumer? The red world: August 2012 The result is an even higher occupancy level and freedom and flexibility (Urban Short Stay and

no 6 no 6 even more satisfied tenants. Reversing the company column Dynamic Balance)

SmartAgent’s research programme Brand Strategy August 2012 Research (BSR) conducts an in-depth, systematic Consumers from the red world describe study into consumers’ underlying motives, values themselves as intelligent, individual and self-

in beeld special and needs. aware. The ‘red consumer’ is a consumer with a free spirit, who considers freedom and Completing a questionnaire with a list of independence extremely importance. association items (including profession, hobbies and values) and domain-specific statements (such The blue world: as: the door is always open to everyone) positions ambition and control (Private Quality and Solitary ‘Customer knowledge a respondent in terms of the three dimensions of Space) social science: • Sociology: group-oriented or egocentric In the blue world, performance is all important. helps us rent more • Psychology: introvert or extravert This group is generally highly ambitious and • Anthropology: normative or non-normative sees a successful career as a major goal in life. This is achieved with a great deal of effort, effectively and efficiently’ The sociological and psychological dimensions using analytical capacities, assertiveness and generally demonstrate the greatest distinction intelligence, but also caution and well-considered between the various consumer groups. The diagram decisions. on page 36 shows the association items for these dimensions. bouwinvest tenants

lifestyles tenant segments target group characteristics average per target group

dynamic balance suburban community long-term stability extravert dynamic balance

solitary space private quality urban short stay suburban community egocentric € 8 809 12% 9% 20%

character typical family size tenancy length rental price home type reason for renting spontaneous 4 persons 8 years € 809 SFD 79% renting is the norm cheerful MFD 21% limited purchasing budget distribution by core region introvert long-term stability

€ 7 878 non-core region

10% character typical family size tenancy length rental price home type reason for renting 36 37 19% critical 1-2 persons 7 years € 878 SFD 36% renting is the norm 12% in beeld special mid-east well balanced MFD 64% freeing capital 11 % 9% solitary space 13% August 2012

randstad 16% 32% 18% € 871 no 6 no 6

7,4

18% 23% 34% August 2012 10% character typical family size tenancy length rental price home type reason for renting 9% 16% honest 3 persons 7.4 years € 871 SFD 66% renting is the norm 10%

in beeld special calm MFD 34% exploring housing market 18% 22% private quality

€ 4,6 953

urban short stay

character typical family size tenancy length rental price home type reason for renting inteligent 1 or 2 persons 4.2 years € 954 SFD 18% exploring housing market self aware MFD 82% possession of secondary importance According to David van As, director of the central participants’ portfolio. The average age is How is the property portfolio ‘Rental homes constitute board of the bpfBOUW, this relatively good result rising. We have to make allowances for that. constructed? stems from a mix of factors in which real estate In the way our fund is structured financially, “Of the 5.7 billion euros, some 3 billion investments – the majority of which are in the too. What does concern us slightly is the falling euros are invested in 15,000 liberalised a stable foundation Dutch residential rental market – constitute a influx of new participants into the fund. The sector residential rental properties in the stabilising factor. construction industry is going through difficult Netherlands’ core regions. That is a major times. As a pension fund we therefore have to foundation for our pensions. Liberalised sector for pensions in the Van As, who previously worked at the ensure that pension entitlements that have homes have an extremely high occupancy level Nederlandsche Bank where he supervised the been built up are secured.” and are very popular. People are not so easily 50 largest pension funds in the Netherlands, buying a new home in view of the economic construction sector’ has been director of the management support Despite low interest rates, strongly uncertainty. In the liberalised sector, we can unit of the foundation bpfBOUW (the pension fluctuating stock markets and pass on the normal rent increases to our fund is legally a foundation) since September an ageing working population, tenants. In addition to the rental income, in 2011. Forming a central board is a major step bpfBOUW has succeeded in the long term we can also benefit from forward in professionalising the fund in order achieving a coverage level where the value development of the property. interview with david van as, to accommodate the increasing complexity of it is not yet necessary to Investments in the residential sector behave director of the central board of bpfBOUW pension funds. cut pensions. like an inflation-linked bond, so you can use “The investment mix and risk coverage have them to hedge against inflation. That is a good “A fund of this size cannot manage without turned out well. We have hedged currency product for our pension fund. Ultimately, what professional managerial support. I see myself as a and interest rate risks and implemented strict matters is that the future pension payments Once they were a bastion of calm; these days sparring partner for the board, helping to prepare risk management. bpfBOUW’s high quality give our participants sufficient purchasing pension funds are constantly in the public eye and meetings and ensuring the proper follow-up of real estate is an investment category we are power.” 38 are experiencing highly turbulent developments. board decisions made during meetings. My task extremely pleased with, as it contributes 39

Under pressure from an ageing population, the is to help increase the board’s countervailing to a stable return for the fund. We invest a in beeld special crisis in the international capital market, volatile power. There is a lot of outsourcing in the pension relatively large proportion of our portfolio, stock markets and low interest rates, both small world and important elements of fund activities 20%, in real estate. That makes us one of the August 2012 and large pension funds are having trouble are entrusted to third parties. At bpfBOUW that largest institutional investors in real estate in the pension system in

no 6 no 6 keeping up their level of coverage and the ratio is organised professionally. Nevertheless, we the Netherlands percentage-wise. Bouwinvest, the netherlands

between the fund capital and the pensions they have to realise that those parties also have their a 100% subsidiary of bpfBOUW, executes the August 2012 have to pay out now and in the future. own interests at heart. The board therefore management for us. The good results we The pension system in the Netherlands is unique in needs to have more counterforce in house. The achieve in real estate are due to the quality of the world. It is based on three elements: 1 in beeld special bpfBOUW, the Dutch Pension Fund for management support unit has one sole interest: the real estate Bouwinvest has invested in.” The state pension (AOW), which applies to everyone Construction Workers, which represents the Providing firm support for the board in protecting over the age of 65, is funded with premiums paid interests of roughly 800,000 employees and former participants’ interests.” How do you limit the risks of real by people who are working by means of the employees in the construction industry, is also estate investment? ‘apportionment system’. going through difficult times. With an invested Who are those participants? “Bouwinvest devotes particular attention to 2 Supplementary pension paid in via the employer. capital of around 34 billion euros, the fund is one “We have more than 800,000 participants in our such issues. We ensure the right procedures This supplementary pension is based on a capital of the top-5 largest industry pension funds in the participants’ portfolio of whom less than a quarter for remaining in control and make this funding system where the pension is financed Netherlands. Some large pension funds, such as are still active in the construction industry and demonstrable for stakeholders and other with the premiums paid in by people in the past, the Dutch civil servants pension fund (ABP), and there are roughly 200,000 retired members who prospective participants in Bouwinvest. plus interest on those premiums. This is done the funds for the metal industry (the PME and PMT) draw a pension from the fund. There are also External supervisory bodies such as the collectively in a company or sector pension fund recently had to announce that they might have to around 400,000 sleepers. Those are people who Nederlandsche Bank (DNB) and the Authority and sometimes through an insurer. cut pension payments in 2013. For the bpfBOUW have worked in the industry in the past and built for the Financial Markets (AFM) keep a critical 3 Individual pension provisions. Self-employed that was not necessary. At the end of March up pension entitlements in that period. If the eye on our real estate investments. They persons often have to rely entirely on the third this year, the fund’s coverage level had risen to pension entitlements are not transferred those look at how well the pension fund board has element for a supplementary pension through 100.7%. It has to rise to 104.1% by the end of 2013; participants still have a nest egg here. Like many considered this policy and how the risks are annuities, single premiums, savings, investments otherwise there will have to be cuts after all. other funds, our fund is contending with an ageing monitored.” and life insurances. Real estate accounts for 20% of the permitted to value at historic cost prices. Our fund developments in the external environment, local investment portfolio; that cannot uses independent surveyors to value the property authority plans for the area, who is there and ‘Rental homes constitute hedge against the entire inflation risk. in accordance with an extremely clear system that suchlike. That is the good thing about real estate “bpfBOUW has a carefully compiled asset mix, anyone can follow. It is an extremely good system experts; they understand their business and act on of which real estate is an important part. There and I’m impressed with how Bouwinvest set it that understanding.” a stable foundation for are other risks you have to watch out for, such as up. It is a system that is sufficiently independent interest rate risks. Real estate is a stable factor in and critical in establishing the value of the Actually, investing in your own sector is the portfolio: in the long run it has an anti-cyclical property and expresses that on the balance sheet. dangerous; pensions have to be safe. our pensions; they have an character. In recessions, the construction industry Transparency is ingrained in the Bouwinvest “We are an industry pension fund with more holds its own relatively well with real estate, as organisation, the desire to have risk management than 13,000 affiliated companies; we are not real estate generally reacts slightly more slowly and transparency in order.” investing in companies but in company products inflation-linked character’ to a crisis. Naturally, the reverse applies, too: when with an extremely wide spread; we also invest stocks and bonds soar property sometimes lags How do you see the future of the internationally. We have investments in the office behind.” liberalised sector rental market? market, too, but the majority are in the residential “Looking at the trend, we foresee growth: The market.” that people live longer into account. What will also What effect is the crisis in the housing population of the Netherlands is ageing and there survive, regardless of the elections, is the idea of market having on the portfolio? is a shift towards individualisation in society. Banks are ever more cautious in making pension contracts more complete. We will “In the housing market, the crisis is primarily on Family units are smaller and that means more extending credit, the government be deciding how we distribute financial surpluses the mortgage side. The housing stock may well homes are needed. The plans are based on that. has to make heavy cuts and there are or, for that matter, shortages. How long do you experience some depreciation, but it is difficult to Another trend is the extramuralising of care; with growing calls for institutional investors allow a fund to remain without sufficient coverage predict whether that will directly affect our real rising healthcare costs people continue living to contribute to regulated housing, and when do you take measures?” estate portfolio. As a fund we may receive a blow, in their own homes longer, being cared for and for example. 40 but the value of the bpfBOUW’s real estate assets growing old in their own living environment. That “There were similar calls in 2008 when the financial 41

is strictly monitored to make sure we are well presents another opening for pension funds. The world collapsed and it looked as if everything in beeld special positioned and determine whether we should buy triptych of pensions, accommodation and care is was turning into chaos. There were those who, or sell. It is a process that continually monitors the an interesting proposition. This can be done, from like Keynes, said that the government should August 2012 current value of our assets: Pension funds are not the point of view of the investment horizon, by stimulate the economy through infrastructure

no 6 no 6 investing in accommodation and care products. On projects and institutional investors were rallied to

the other hand, we are considering the concept of the cause. But it is not our job, as a pension fund, August 2012 pensions in kind, but that is rather complicated. to save the economy, maintain employment or put david van as As a pension fund, we have to stick to our task and government bookkeeping in order. There can be an

in beeld special On 1 September 2011 David van As was appointed continue operating within the legal frameworks.” indirect interest; if everything is running smoothly director of the management support unit of and generating a return then the value of the bpfBOUW. In that capacity he acts as a sparring Would investing in real estate also be investments is higher but the risk, return and cost partner for the board of the bpfBOUW. a solution for other funds that are now considerations that apply to infrastructure also Van As brings with him a wealth of experience in having to cut pensions? apply to investments in construction projects.” the pension world. After graduating, he worked for “We have an historic affinity with the construction ten years for Ernst & Young Accountants and for industry. You have to have an extremely good With the fall of the cabinet, the pension three years he was a supervisor for insurers and knowledge of the sector. You have to have the agreement reached between employers financial conglomerates. expertise in how risks, return and costs are related and employees to raise the pensionable For the last eight years, as head of department at and how they develop with time. Real estate age is also open to discussion. What the DNB, he was responsible for the prudential experts keep a close eye on where opportunities would the scrapping of the pension supervision of the 50 biggest pension funds. He for high-quality property present themselves agreement mean for the pension world? was closely involved in the introduction of risk- worldwide and have to grasp them promptly. It is “The discussion concerning the pension agreement based supervision and he specialises in pension interesting to see what determines the value of reached last year is now taking on an entirely fund governance and fit and proper testing. Van As a property. Naturally, the quality of the tenants different dimension. I think a couple of the basic is also a lecturer in pensions (NBA, Nyenrode, SPO). counts, but it also depends on the expected principles will hold good, such as taking the fact Relations seminar Tuesday 15 May

Michiel de Bruine, Head Asset Management Residential During the Relations Seminar Bouwinvest organises annually on the third Tuesday in I expect rented housing in our portfolio to rise by at May, participants’ views are sounded (pension funds, asset managers and consultants). least 3% this year. Conclusion: the owner-occupied market remains shaky and investing in residential rental real estate in the Netherlands is a good choice.

statement 1 Society has an increasing need for flexibility and 1 therefore rental housing. 42 43 in beeld special August 2012

no 6 no 6

statement 2 August 2012 Rental real estate in the Netherlands deserves a in beeld special 2 place in every investment portfolio.

Taco van de Hoek, director EIB We have a solid residential statement 3 market; in the end time will do its work. The price of owner-occupied homes will rise again 3 from 2013. Facts & Figures Bouwinvest Dutch Institutional Residential Fund N.V.

The results below are based on the responses of 38 visitors to the seminar in the categories of pension funds, asset managers and consultants.

Fund profile The BDI Residential Fund is characterised by: Fund name Bouwinvest Dutch Institutional Strong economic regions in the Netherlands; Residential Fund N.V. Good diversification of housing types; Sector Residential properties Focus on private rental sector; Current fund size EUR 2.8 billion Relatively new portfolio; Forecast return Expected long-term average Constant high occupancy level; statement 1 annual total fund return: 6.0%. Risk profile Core investment style Term Undetermined time, portfolio breakdown according to rental sector semi-open-ended-fund Solvency requirements 15% 27% yes 87% no 13% Leverage None 73% 44 Fiscal structure Fiscal investment institution 45

Management fee 0.50%, excluding VAT, of the value in beeld special of the property in the fund.

August 2012

liberalised rental sector

no 6

no 6 Fund characteristics regulated rental

statement 2 Number of properties 224 properties August 2012 Occupancy level 97,1%. portfolio breakdown according to housing type Reference projects Java-eiland (Amsterdam),

in beeld special Borneo-eiland (Amsterdam), 45% Het Kwartier (Amsterdam), 55% yes 65% no 35% Kop van Zuid (Rotterdam) and Prinsenhof / WTC The Hague.

Strategy single-family dwellings The fund aims for diversification in the portfolio in respect apartments of both risk profile (largely low and medium), regional statement 3 distribution in the Netherlands (focusing on core regions with a favourable economic and demographic outlook) and No rights can be derived from the content of this fact sheet. The information in this fact sheet is not exhaustive. The entire content of this fact sheet is governed by the conditions diversification to segments. Growth of the fund is achieved in the Information Memorandum on the fund, which is or will be made available on request. This material does not constitute an offer for sale of shares in the fund and the by means of active portfolio management. fact sheet has been compiled solely for the purpose of gauging the interest of potential investors. Bouwinvest is exempt from the licensing obligation pursuant to article 2: 65 of the Dutch Financial Supervision Act (Wft) and is therefore not under the supervision of yes 22% no 78% the AFM (authority for the financial markets) or DNB (De Nederlandsche Bank).

For further information please visit www.bouwinvest.nl

Our top 5 properties

No. Property City 1 Java-eiland Amsterdam Publishing 2 Het Kwartier Amsterdam Bouwinvest 3 Borneo-eiland Amsterdam La Guardiaweg 4 2 4 Kop van Zuid Rotterdam Amsterdam 5 Prinsenhof / The Hague Postbus 56045 1040 AA Amsterdam WTC The Hague T +31 (0)20 – 677 1600 F +31 (0)20 – 677 1700 [email protected] www.bouwinvest.nl

Coordination and final editing Marketing and communications 46 department, Bouwinvest 47 4 in beeld special Editorial concept Marketing and communications

August 2012 department, Bouwinvest

Hans Ouwerkerk, Ouwerkerk Tekst &

no 6 no 6 Advies

viervier strategisch ontwerp August 2012 1 5 Graphic design viervier strategisch ontwerp in beeld special

Text and editing Bouwinvest Hans Ouwerkerk, Ouwerkerk Tekst & Advies Monique Harmsen, freelance journalist (interview with David van As) 3 Henderson Global Investors, Michael Keogh, Senior Investment and Economic Analyst (translation: WTS Vertalingen B.V.)

Photography David de Jong Twan de Veer Hollandse Hoogte

Printer Akxifo

48 August 2012

no 6

in beeld special