ABP, ING RE agree EUR 1.6 bn Dutch office deal

Pension fund ABP has agreed to transfer its wholly owned non-listed office fund KFN worth some EUR 1.6 bn to ING Real Estate. The two Dutch companies said in a joint statement on Monday that the deal is 'the largest real estate transaction ever in the Netherlands'.

ING Real Estate was selected as the preferred partner after a bidding process last year involving 14 investors, of which only four made it to the final stage of the contest. At a press conference held in Amsterdam on Monday, ING described the deal as a 'one in a lifetime possibility.'

The portfolio consists of some 600,000 m² Class A office space spread over 80 office buildings across the Netherlands. With an occupancy rate of around 94%, the portfolio includes trophy assets such as the WTC in Amsterdam (in which KFN holds 50%), the WTC Schiphol (43%) and the Weena Tower in Rotterdam.

ABP and ING Real Estate said that the KFN portfolio will be separated into two office funds managed by ING RE. Some 228,226 m² of office space will be transferred to ING Real Estate Dutch Office Fund (DOF), with ABP taking a EUR 300 mln stake in the fund. Set up in 1998, DOF is a non-listed semi open-ended investment fund which currently owns about 652,220 m² of offices in the Netherlands. In a statement, ING said that only those assets that are in line with DOF's investment strategy would be transferred. The fund invests exclusively in big cities in the Randstad conurbation (Amsterdam, Haarlem, Leiden, The Hague, Rotterdam and Utrecht), and focuses on new buildings in top locations.

The largest part of the portfolio, or about 367,861 m2, will be held by Real Estate Office Fund Netherlands (REOFN), a new vehicle set up to manage and renovate the offices and eventually sell them within the next three years. ING RE and ABP will each take a EUR 65 mln stake in the vehicle. ING Real Estate said three other investors are prepared to take stakes in the fund, but declined to reveal their identity.

According to the plan, ING will also retain KFN's 44 employees. The company is buying the KFN portfolio through a cash-share mix of EUR 600 mln in equity and a stake in REOFN.

ABP said that the KFN sale marks an important step towards completion of its strategy to reducie its wholly-owned indirect property investment in the Netherlands to a minority stake. In line with this strategy, the Dutch pension fund earlier merged its retail fund Winkel Beleggingen Nederland with VIB to form property investor Corio, and in 2006 sold its majority stake in unlisted Dutch residential property unit Vesteda.

ABP's Chief Investment Officer Roderick Munsters said that the transaction will also allow ABP to expand its international exposure and increase liquidity.

The deal is being financed by ING Real Estate Finance and FGH Finance. ING will provide EUR 140 mln in bridge equity.