- Growth of assets under management to € 6.7 billion (10%)
- Return on assets under management 6.5% (excl. forex) and 8.8% (incl. forex)
- Record investments of over € 600 million in the Dutch portfolio and more than € 500 in international unlisted and listed funds
- First two acquisitions for Healthcare Fund
- New investors in the Residential Fund
- Management fee (0.5%) of Dutch investments below benchmark
- AIFMD license acquired as per 17 February 2014
- GRESB Green Star rating for our three Dutch sector funds
- Two new Supervisory Board members
- New Managing Director Finance as per 1 October 2014
- Growth of FTEs to 128.0 (4.4%)
- Low rate of absenteeism (2.35%)
Investment Plan bpfBOUW
Key achievements included the controlled growth of assets under management, improving the quality and consistency of returns, the diversification and internationalisation of assets, controlling costs, refining the CSR strategy and establishing more stringent checks and balances within the investment management organisation. In addition to the AIFMD license, we took a number of significant steps in improving governance, notably in achieving ISAE 3402 type II certification, COBIT 4 level 3 compliance and establishing a Business Continuity Plan. Last year, we realised our first investments in the healthcare segment, which we believe has huge growth potential. And finally, we and bpfBOUW went on a study visit to London, which was organised with APG.
Increased interest in our family of funds
The Rabobank pension fund’s participation in the Residential Fund at the start of 2014 was a first step in realising our multi-client strategy. This strategy was validated further by subsequent participations in the Fund by four third party investors later last year and in early 2015. We are seeing an increased interest in our family of funds, partly thanks to our efforts on the Investor Relations front, our investor seminar and our Dutch property tours. Commitments of well over € 120 million during the past 12 months, on top of the existing commitment of bpfBOUW, have put us in an even stronger position to take advantage of opportunities in the years ahead while adhering to the consistent and sustainable growth strategy of our funds.
Real estate sectors
Residential Fund (open for third-party investors)
Pipeline secured by record investments of over € 400 million
The Residential Fund generated a total return of 5.1% (2013: 0.0%), with a direct return of 3.9% (2013: 3.6%), and an indirect return of 1.2% (2013: -3.6%). The Fund had a high and stable average occupancy rate of 96.5%. Like-for-like rental growth for 2014 amounted to 3.2% (2013: 3.1%), while rent arrears were low at 1.2% (2013: 1.5%). The dividend return for 2014 is 3.9% (2013: 3.6%).
The Residential Fund reaped the benefits of our regular growth strategy following the completion and delivery of seven excellent new-build projects, six of which were fully let before completion. We have a secured pipeline of 18 new residential projects following record investments totaling € 407 million in 2014 that will add 1,447 apartments and 207 family homes. We anticipate they will benefit from the growing scarcity of high-quality residential units in the liberalised rental sector, giving us visibility for the Fund’s future and matching the Fund’s regular long-term growth objectives.
The recovery in the residential market and growing interest from domestic and foreign investors have led to a steady rise in values, giving us a positive indirect return in 2014, and we expect this to continue in the next few years. The renewed interest in the residential sector created an opportunity for the Fund to optimise its portfolio last year by selling 21 non-core assets for a total of € 116 million, which is close to its three-year target for divestments.
The recovery in the residential sector and the very high quality of the residential portfolio enabled the Fund to attract five new investors alongside anchor investor bpfBOUW in the 12 months to the end of January 2015. Rabobank pension fund invested in January 2014, followed by a € 30 million investment by the pension fund for the Dutch confectionary industry in July of 2014. Three more pension funds followed suit, investing a total of € 72.5 million by January 2015, while the pension fund for the Dutch confectionary industry added another € 20 million to its initial investment in the Fund.
At year-end 2014, the Fund’s portfolio consisted of 210 properties with a total value of € 2.6 billion.
Retail Fund (open for third-party investors)
Two-pillar strategy is starting to pay off
The Retail Fund booked a return of 1.8% in 2014 (2013: 8.1%), the result of a direct return of 4.5% (2013: 5.1%) and a negative indirect return of -2.7% (2013: 3.0%). The average occupancy rate increased to 94.4% in 2014 from 92.9% the previous year. The dividend return for 2014 is 4.5% (2013: 5.0%).
The Retail Fund benefitted from a substantial increase in values of its retail assets in Amsterdam and improved its portfolio by investments and upgrades of existing assets. This reflects the Fund’s commitment to investing in assets with solid growth prospects throughout the crisis years. While retail real estate will be a challenging sector in the years ahead, we believe that portfolio with a good balance of 'Experience' and 'Convenience'-oriented retail real estate assets will continue to generate solid returns in the long term.
In 2014, we acquired some excellent assets that matched our strategic focus on shopper 'Experience' and 'Convenience'-oriented retail properties. Towards the end of the year, we acquired almost 30 retail units in the multifunctional building Beurs-WTC Rotterdam in the heart of the city. This excellent addition to the portfolio’s Experience category of retail property assets has enormous potential. In the Convenience category of retail assets, we added the new Parkweide shopping centre in Ede to our portfolio. The Retail Fund made € 57 million in acquisitions in 2014 and intends to upgrade and future-proof several existing assets, reflecting our continued commitment to this segment of the real estate market.
On a very positive note, in 2014, the Retail Fund agreed new leases and renewed existing contracts for a total of 32,590 m2 of space, representing a rental value of some € 9.3 million.
At the end of 2014, the Fund’s portfolio consisted of 41 properties with a total value of € 0.6 billion.
Office Fund (open for third-party investors)
Three prime assets acquired at the bottom of the market
The Office Fund booked a return of 0.1% in 2014 (2013: -0.3%), the result of a direct return of 5.7% (2013: 5.6%) and a negative indirect return of 5.6% (2013: -5.9%). The average occupancy rate fell slightly to 89.9% in 2014 from 90.4% in 2013. The dividend return was 5.7% (2013: 5.5%).
Last year was a turnaround year for the Office Fund as it made its first investments since 2008. The Fund invested € 138 million in three prime properties in Amsterdam and Rotterdam. The Dutch office market will continue to be an extremely challenging sector, but these high-quality acquisitions in prime locations highlight the fact that there are still excellent opportunities available. Our long-term commitment to this real estate sector means that we will continue to look for opportunities in the prime segment of the office market.
The Fund acquired two prime properties in Amsterdam, the Valina building in the centre and the former Citroën buildings in the popular southern part of the city. The assets are in prime Amsterdam office locations and represent significant additions to the Fund’s overall portfolio. Towards the end of 2014, the Fund also acquired the Beurs-WTC office complex in the heart of Rotterdam’s business district. The Citroën building and Beurs-WTC are both multi-functional, multi-tenant complexes, which are a primary focus for the Office Fund.
One of the highlights of 2014 was the Fund’s success in winning its second successive IPD European Property Investment Award for the highest outperformance over the preceding three years (2011-2013).
Active asset management and continued investment in upgrading and updating its office assets ensured that the Fund renewed or signed new leases for a total of 22,507 m2, representing an annual rental income of € 4.1 million in 2014.
At the end of 2014, the Fund’s portfolio consisted of 30 properties with a total value of € 0.6 billion.
Hotel Fund (on behalf of bpfBOUW)
Best performing Fund in Dutch portfolio
The Hotel Fund lifted profits to € 9.8 million (2013: € 5.6 million) in the year under review. The Fund‘s total return slipped to 6.5% from 7.1% in 2013. Highlights of the year include its € 1.7 million investment in expanding the restaurant at CASA400, as well as the installation of thermal energy storage facilities for CASA400 and NH The Hague. The Hotel Fund’s portfolio comprises three fully-let hotels with a total value of € 140 million. The Hotel Fund was our best performing Dutch fund in 2014.
Healthcare Fund (on behalf of bpfBOUW)
First acquisitions in very promising market
In its first year, the new Healthcare Fund reported a profit of € 0.4 million, while its total return amounted to 3.1%. In 2014, the Fund invested 3.0 million. Acquisitions included the assisted accommodation complex Hildebrand in Haarlem and the intramural care complex Ingenhouszhof in Amsterdam.
As healthcare moves from the state sector into the consumer market, we expect the demand for better quality services to increase substantially as people seek more value for money. We are on the threshold of a new era where ‘one size fits all’ is no longer the norm, and consumers will require different levels of healthcare and accommodation according to their lifestyles and needs.
The ultimate potential for the entry of market forces into healthcare real estate in the Netherlands is immense, as the floor space in the sector is projected to grow to 30 million m2
by 2030 in or roughly midway between the size of the retail and office markets. Real estate brokers DTZ and CBRE estimate that annual investment transaction volumes in the sector could hit between € 650 million and € 800 million over the next five years. The bpfBOUW mandate to invest in healthcare is € 300 million for the coming years.
Shift to listed investments improved returns
The total return on Bouwinvest’s international investments came in at 12.5% in 2014, excluding currency variations. The exceptional performance of unlisted real estate funds in North America (17.3% in 2014) and listed real estate investments (23% in 2014) stood out as all regions performed well. The total return of 9.8% from European investments was a considerable improvement on the previous year’s return and a sign of the gradual recovery that we are seeing in this region. The Asia-Pacific region performed well, with a 9.0% return in 2014. At year-end 2014, the average leverage in the portfolio had fallen to 33.6% from an average of 36% in 2013. However, new investments with a higher leverage level are planned for 2015-2017. The maximum average portfolio leverage is 45%, with a maximum leverage of 60% per investment. The total value of the international investments portfolio stood at € 2.4 billion at year-end 2014, compared with € 1.9 billion a year earlier. Total investments came in at € 438 million in 2014, while disposals came in at € 307 million, in line with the growth strategy outlined in the mandate for international investments. Exchange rates contributed € 137 million while valuation movements also added € 197 million to the growth of the portfolio in 2014.
Bouwinvest Development (on behalf of bpfBOUW)
Landholdings represent opportunities
Bouwinvest Development booked a negative return of 16.7% in 2014, widening from the -13.8% return reported in 2013. The direct result came in at -2.5% (2013: 0.4%) and the indirect result amounted to -14.2% (2013: -14.2%), mainly the result of a significant depreciation of a landholding in Nieuw Vennep.
The existing landholdings in the portfolio are becoming more and more important again. The landholdings represent a potential of 5.000 dwellings.