Report of the Board of Directors

Outlook

Sentiment positive, but recovery fragile

Following an extended period of widespread uncertainty in the residential real estate sector, the market entered markedly calmer waters in 2014, and we expect this stabilisation of the market to continue in 2015. Given the increase in the number of transactions last year and the improved sentiment in the residential investment market, we believe we will see further improvement in valuations in 2015. That said, the recovery in the housing market is still fairly fragile and any worsening of economic conditions or unemployment and a worsening of global geopolitical tensions could threaten this recovery.

Residential market looks bright

We are optimistic about the long-term prospects for the Dutch residential investment market due to a number of factors:

  • Continuing quantitative and a qualitative shortage of housing on the Dutch market, with shortage set to become even more acute given the current low rates of housing construction.
  • Measures taken by the Dutch government to create a level playing field in the housing market have made the liberalised rental sector more competitive.
  • Tenants with above-median incomes currently renting in the regulated sector are now faced with higher, income-related rent increases, which may encourage them to switch to the liberalised rental sector.
  • Financially troubled housing corporations are now being forced to return to their core mission, to provide affordable housing in the regulated sector.
  • This is set to increase demand in mid-rental liberalised sector and increase the potential for above-inflation rate rent increases.
  • The residential rental market is now a mature and full-fledged alternative asset class.

Fund perfectly poised

Given the above trends and our high-quality portfolio, the Residential Fund is in an excellent position to take advantage of the current market conditions and trends and to respond to future demand. The Fund made some excellent acquisitions in 2014 and we expect to acquire more high-quality homes in 2015 and 2016. We have earmarked around € 700 million for residential investments in the period to 2017. And given the divestments we made in 2014, we expect to make very few disposals in the coming years.

Adding value through active asset management

In addition to targeted acquisitions, we will continue to optimise the standing portfolio through active asset management aimed at maintaining and increasing the value of our portfolio, and by devoting specific attention to developing and maintaining close relationships with our tenants to preserve our high occupancy levels.

Given our growth strategy, focus on robust cities and regions and our active asset management approach, we expect to see stable high direct returns in 2015 and above-inflation rate increases in value in the long term.

Amsterdam, the Netherlands, 16 March 2015

Bouwinvest Real Estate Investment Management B.V.

Dick van Hal, Chairman of the Board of Directors and Statutory Director
Arno van Geet, Managing Director Finance
Allard van Spaandonk, Managing Director Dutch Investments
Stephen Tross, Managing Director International Investments

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