Last year was another good year for Bouwinvest. We saw a strong recovery on the real estate markets, both in the Netherlands and globally. This led to good returns in our Dutch and International portfolios. More importantly, virtually all our funds outperformed the industry benchmarks on a long-term base, which shows that our investment strategy is working and that we are making the right choices. We invested a total of € 782 million last year, with € 522 million in our Dutch portfolio and € 260 million in international investments. This was lower than the record investment of € 1.1 billion in 2014, but was still a good performance given the fierce competition on the market and our strict quality criteria.
We made progress on a number of fronts and in line with the investment plan of our investor bpfBOUW. Our assets under management grew once again, to € 7.5 billion from € 6.7 billion at year-end 2014, despite the Office Fund’s disposal of a large portfolio of offices that no longer meet the Fund’s strategic premises. We also continued to improve the diversity of the portfolio, adding assets to both our Hotel and Healthcare funds and internationally increasing our Asia-Pacific and Listed allocation. We see a lot of potential in the healthcare real estate sector, given the combination of ageing of the population and higher life expectancy.
We retained our existing investors in our Dutch sector funds and welcomed eight investors to our main three funds. This means we have now welcomed a total of 11 institutional investors (in addition to bpfBOUW) to our funds in just over two years. Of course, this has helped us achieve another of our targets, which was to diversify the funding for our investment funds.
This underlines the growing interest in real estate investment among institutional investors. Real estate is a perfect long-term investment for pension funds and other institutional investors with long-term commitments. Returns are stable and relatively strong, compared to stocks and bonds. In addition, risks are under control and real estate offers institutional investors the opportunity to diversify their investment portfolios. Real estate also enables them to create value – beyond the financial benefits – in society as a whole. It provides homes, creates employment and is a very tangible investment, you cannot underestimate the importance of that element.
We believe these factors will continue to drive investment in the real estate sector in the years ahead. Looking to the future, we are convinced that investors want to choose whether they invest in the Netherlands or on an international level. The Netherlands is just one small part of a global market, which is itself getting smaller and smaller as the world’s major markets, like the United States, Europe and the Asia-Pacific region, become increasingly transparent. We can benefit from this globalisation, as we have built up a lot of experience and expertise in international real estate. After all, we currently have some € 2.6 billion invested in international real estate, via both listed and unlisted funds, with healthy returns.
Bouwinvest realises its investments strategy with a team of 140 people (131.1 FTE), all based in Amsterdam. We have the right strategy and the right focus, plus we have solid and sustainable partnerships with the best local experts. Because just as we focus on our core regions in the Netherlands, we focus on what we believe are the core regions on a global scale and the investment managers based in those regions.
Due to continuing urbanisation around the world, we believe the biggest growth – and the biggest increases in value – will be in the major cities of certain countries or regions. So on an international level we focus very specifically on major cities in what we see as the future powerhouses of the global economy. Of course, we invest in markets that have transparent real estate sectors, plus we work with partners that have solid track records and that reflect our own focus on quality. We and our anchor investor are convinced that this international investment strategy will provide solid returns long into the future. Which is why bpfBOUW has decided to increase the strategic proportion of international investments to 40% of its assets under management. The remaining 60% will remain invested in our five Dutch sector funds.
This faith in our international investments was certainly justified in 2015, as our international portfolio delivered an outstanding return of 19.2% on its listed and unlisted funds, with some help from a strong US dollar. We are of course very pleased to report that our five Dutch funds also delivered good performances last year (8.7%). We booked an overall return of 12.8% and on a weighted average outperformed the market.
Of course, all of this puts very heavy demands on the Bouwinvest organisation. The good news is that last year we once again made significant progress on a number of fronts at an organisational level. As part of our operational excellence drive, we renewed and improved the risk reporting of our portfolio and bpfBOUW’s entire portfolio. We also conducted integrated integrity risk analyses and arranged integrity training courses for all our people. Our efforts aimed at creating a pleasant and challenging working environment are also paying off. Last year, no less than 95% of our staff participated in our employee engagement survey. Our score for employee satisfaction improved once again, to 8.0 from 7.8 in 2013.
On the CSR front, we are all proud that our three main sector funds were awarded GRESB Green Star status for the second year in a row. Of course, we will have to work even harder to retain this status, as sustainability criteria will only become stricter and more important in the future. But that is part and parcel of our mission – to generate solid returns in a responsible manner – and inherent in our commitment to the long-term quality of our portfolio.
All that remains is for me to thank all our employees for their commitment, dedication and hard work over the past year. We can all be very proud of what we achieved in 2015.
Last year, we bid farewell to Marjanne Sint as vice-chairman of the Supervisory Board. We would like to thank her for her commitment and inspiration over the past eight years and her contribution to Bouwinvest’s success. We wish Marjanne every success in the future. Her seat has been taken by Carolien Gehrels, whom we welcomed as new member in July 2015.
Dick van Hal, Chairman of the Board of Directors and Statutory Director
Teaming up with 4 Dutch cities: Amsterdam, Rotterdam, The Hague and Utrecht, in profiling the Holland Metropole as one connected economic region is important as competition between international cities and regions for investment and jobs will intensify. Therefore Bouwinvest is working closely together with the cities to create an attractive urban living and working environment.
“Bouwinvest needs engaged and committed employees. But engagement cuts both ways. Our employees are engaged because Bouwinvest continues to invest in them and give them the room to grow and develop,” says Bouwinvest head of Human Resources Mirjam Eijer. “Our bi-annual employee engagement survey shows where we’re getting it right and where we could do better if we want to create a truly future-proof organisation.” Bouwinvest’s scores have steadily improved in each survey and in the September 2015 survey Bouwinvest emerged with a score of 8 (and a 95.5% response rate). “This is way above the average for the financial sector, but we believe we can do even do better,” Eijer says.
“Engaged employees are essential if you want to improve your productivity, to build relationships with clients, and make organisation sustainable,” says Sanne Durieux from Effectory, the company that conducted the survey. “We not only measure engagement and commitment, we also investigate employees’ views on leadership, teamwork and client focus. Providing organisations with feedback and ideas of their employees, allows them to take the next step all together.”
“Bouwinvest is looking forward to follow up on the findings of the survey and employees expect the board and executive team to actively take on their feedback and suggestions. At the same time, employees know best what should be changed and can be improved. We want to support them by making way, time and tools to take on the next steps”, concludes Eijer.
“You shouldn’t underestimate the impact of an engaged workforce”, Durieux adds. “Engaged employees love their job and are prepared to go that extra mile, making full use of their knowledge and experience. So they are both comfortable and stretched in what they do. “Plus engaged people have more energy, they are more productive and more innovative. And they are much more likely to be committed and focused on the interests of your clients.” Effectory will be working with Bouwinvest on several fronts this year, especially the company’s new collective goal for 2016 - Innovation and collaboration – and helping to future proof and make the already a highly successful organisation even more effective.
Sanne Durieux – Effectory
Bouwinvest and Reggeborgh have been working together for 10 years via a joint venture that invests predominantly in the German residential market. Last year, the two closed the biggest residential deal in Berlin, thanks to good teamwork and excellent timing. They decided 10 years ago that they wanted a sustainable partnership with long-term vision, based on their complementary strengths. “We both have roots in the construction industry, and we both invest in real estate for the long-term. Plus Reggeborgh actually invests half the equity,” says Stephen Tross, managing director International Investments at Bouwinvest.
Bouwinvest’s International Investments portfolio is a result of its client’s investment beliefs combined with a number of preconditions defined by the client for its strategic real estate portfolio. The investment beliefs and preconditions of bpfBOUW, the pension fund for the Dutch construction workers, include a long-term investment horizon, ESG criteria, including investment in transparent real estate markets and low leverage.
Reggeborgh’s Mark Bouwens says the partnership with Bouwinvest has given Reggeborgh a sharper focus. “Ten years ago we had around € 500 million invested in offices, retail and residential. Bouwinvest convinced us to focus, and now most of our real estate investments in the joint venture are residential. And we have important strides on the governance and transparency fronts.”
Bouwinvest and Reggeborgh are also a good match in terms of know-how and experience. Reggeborgh has been involved in the German real estate market for well over 20 years and knows the market inside out and can also act quickly. “What we bring to the table as Bouwinvest is our global view of trends in the world’s real estate markets. And our research focuses very much on cities, like Berlin. Reggeborgh’s on-the-ground experience and our global perspective institutional approach and in-depth research makes us a perfect match,” Tross says.
Bouwinvest and Reggeborgh sold a portfolio of residential properties in Berlin Marzahn in the biggest residential transaction in Berlin in 2015. The two had been discussing the sale of the Marzahn portfolio for two years, but the timing was not right until last year. “In the end we had two very keen rival bidders, which pushed the price way above our own expectations. And we took a much more institutional approach, hiring a merchant bank to broker the deal. The result was spectacular and we emerged with an IRR that was more the double the original underwriting for these assets,” Bouwens says.
The challenge now, of course, is to reinvest the proceeds of the deal in top-notch real estate, but Tross and Bouwens believe that will be possible. “We believe there’s still a lot of potential in Berlin residential real estate,” Bouwens says. Tross points out that GDP per capita in Berlin is one of the lowest among the top German cities. “That points to a lot of upside potential in terms of wages and spending. Plus some 40,000 people move to Berlin every year, so housing demand is growing fast. And who knows what’s going to happen over the next 10 years. Berlin is hot right now and we believe this is still a good time to invest in the city. ”
Stephen Tross – Bouwinvest and Mark Bouwens – Reggeborgh
A good way, amongst others, to achieve predictable and solid returns is optimal diversification, “You can diversify investments in terms of regions, sectors and risks, and listed real estate is a way to diversify in terms of investment strategies”, says Friso Berghuis, Manager Global Listed Real Estate. That’s why Bouwinvest decided to add listed real estate to its portfolio a few years back. It adds a whole new level of diversification, for one because it enables you to invest in market-sector combinations which might simply not be available via unlisted funds.” “On top of this, listed real estate adds liquidity to the portfolio, which in turn makes it easier to adjust to market developments or market outlooks”, says Leender Massier, Portfolio Analyst Listed.
“In the longer term listed real estate companies behave very much in line with the underlying real estate. However, due to the continuous pricing of listed real estate companies, changes in market expectations are quickly reflected in company valuations. Therewith, price movements in listed real estate tend to be six to nine months ahead of the unlisted real estate market. Although this is by no means a sure thing, it can offer additional insight in where direct real estate values might go in the near term. Furthermore, listed real estate share prices are also influenced by overall stock market sentiment. As a result, stock prices might substantially deviate from its underlying real estate values from time to time, potentially offering attractive market entry and exit points,” Leender says.
What this boils down to, Friso says, is that diversification really does work, especially when combined with a clear road map. “It can be the best way to achieve the optimum strategic portfolio with bottom line solid returns. And armed with the insights of both listed and unlisted real estate markets, we can make the right acquisitions and disposals, at the right time, and add value to the portfolio on a continuous basis.”
Leender Massier and Friso Berghuis – Bouwinvest
Property manager vb&t Vastgoedmanagement and Bouwinvest have been working together for more than 15 years and vb&t currently manages 1,400 Bouwinvest rental homes in the Brabantstad region and Limburg. Michiel de Bruine, the Head of Asset Management Residential, would like to see that number doubled in the next three to five years. Bouwinvest’s current pipeline of over 500 homes in Den Bosch, Tilburg, Helmond and Eindhoven will make a good dent in that target over the next year or so, De Bruine says.
The Residential Fund’s commitment to its growth strategy in recent years is now paying dividends. The Fund has taken full advantage of the numerous growth opportunities.
Of course, this will make a solid partnership with a local player even more essential, but De Bruine is convinced that Bouwinvest and vb&t have already forged a solid basis for future growth. “vb&t is my ears and my eyes in the market. They know this region like the back of their hands, and they have their ear to the ground for interesting opportunities.”
But what makes this partnership work in the long run is reciprocal trust, says Eric Prevoo, director of vb&t Vastgoedmanagement. “Like us, Bouwinvest has a long-term vision for this market. We trust each other, because we’re both very open and transparent about our goals and how we work. Very importantly, we’re both open to constructive criticism, as we’re always looking to improve.”
Bouwinvest’s tenant satisfaction scores are already above the industry benchmark, but neither company is content to stop there. “We want our homes and service levels to constantly exceed our tenants’ expectations. That’s a tall order for any property manager,” De Bruine says. Bouwinvest is demanding, Prevoo adds, but they are also open to new ideas. “It’s great to work with a partner who takes your ideas seriously and helps make them happen. For instance, we’re talking to tenants about fitting solar panels, and we’re working together to build trust and increase buy-in for the scheme.”
Increasing the sustainability of its homes is a major priority for Bouwinvest and new developments will take this to the next level. “Blok 61 in Eindhoven – a development of 96 loft apartments – will be state of the art on so many fronts, including sustainability. They will come fitted with solar panels and fibre optic network,” says De Bruine. “Our job then is to match that with equally high-quality services. We need to constantly respond to, or even anticipate, new tenant requirements and wishes. There’s no standing still in this market. Challenging each other to be better and keeping each other focused helps to keep us ahead of the game, ” Prevoo concludes.
Michiel de Bruine, Bouwinvest and Eric Prevoo, vb&t Vastgoedmanagement
Together with C&A, we have transformed the old C&A building in Amsterdam into a whole new flagship store that offers a first rate modern shopping experience. Bouwinvest had to collaborate very closely with C&A while the refurbishment was underway as they wanted the store to remain open as the work was being done.
Bouwinvest was challenged by departing tenants at Westerhaven due to declining footfall. We solved the problem by approaching anchor retailer Primark and carrying out a major redevelopment of the shopping center. We believe that the Primark brand will act as a magnet to draw footfall to Westerhaven.
Bouwinvest, WFIA and the municipality of The Hague have forged a sustainable partnership to develop the WTC. All parties share many of the same values: sustainable relationships with a clear view to quality. So we are not only investing in bricks and mortar, but also in networks and building a community.
2015 was a transition year for the Office Fund. We are confident about the future for the portfolio, which will deliver attractive returns for investors. The redevelopment of the Citroën buildings is part of our optimisation strategy. Here, we will create a dynamic and vibrant new destination for the city of Amsterdam.