CBRE GI still sees opportunities in Dutch market

After a string of sales in the Netherlands, CBRE Global Investors still sees opportunities for new acquisitions, the company's head of Europe Pieter Hendrikse told PropertyEU in an interview.

‘We are raising capital for our Dutch office strategy and some serious investors have stepped in who like our active management programme. We are now in the early stages on the buying side and see new opportunities for an attractive risk-return. We used to be market leader with our Dutch office strategy, but it’s not about being the biggest, it’s about being the best.’

In July, the Amsterdam-based investment manager sold a portfolio of 32 office buildings in the Netherlands from its Dutch Office Fund to US-based private equity investor Lone Star Funds for a price tag of more than €380 mln, according to well-informed market sources.

That deal followed the sale of a Dutch residential portfolio to US investor and manager Round Hill Capital in one of the biggest deals of its kind in the Netherlands since the financial crisis.

MODERNISED TERMS AND CONDITIONS
In a push to attract new investors to its funds, CBRE GI has taken steps to modernise the terms and conditions in line with post-crisis investor requirements, Hendrikse noted. The company’s Dutch office strategy is a case in point. The vehicle – which was bolstered by the €1.6 bn acquisition of the KFN portfolio from Dutch civil servants pension fund giant ABP in 2008 - now has a different structure: instead of a supervisory board, the fund currently has an advisory board representing all its shareholders, Hendrikse noted. ‘The legal-fiscal structure has been simplified.’

Despite a number of major sales in recent months, the vehicle still offers top-quality offices and access to an interesting market, he maintained. ‘We have been very active in the market on the sell side, but we are not in a hurry to sell. Ultimately we aim to have a portfolio of at least €1-1.2 bn. But it’s not so much about size, it’s about having the best locations, rental prospects and quality.'

From the post-war period until the onset of the crisis, the Dutch real estate market was largely the domain of local pension funds and insurance companies. Encouraged by fiscal incentives, they played a pre-eminent role in the development of housing after the second world war. When their liabilities started generating attractive returns, they started turning to commercial real estate which spurred many of the country’s big banks – like ING - to move into property development and help create commercial real estate portfolios as well. More recently, however, a rising number of international investors, including opportunistic US private equity funds, have landed in the Dutch polder and a number are also buying into the residential sector.

FOREIGN PLAYERS ARE WELCOME
Hendrikse welcomes the growing presence of foreign players in the Dutch market. ‘The Netherlands already has a professional and mature real estate market with good management solutions. Until about 2005-06, the ownership of Dutch real estate was still in the hands of Dutch institutional investors. Then we saw a number of first movers like ING, but also PGGM and others who didn’t want to do the asset management anymore and who looked for an operator. The majority of Dutch institutional investors have now moved into funds and other indirect forms of ownership and some of those shareholdings will move to other – international - owners. This is good for the Dutch market.’

Germany witnessed a similar spending spree by US private equity companies in the run-up to the crisis, but some of them abandoned the market after failing to make the required returns. But Hendrikse believes that similar concerns about the Dutch market are unfounded and claims the risks for international investors are limited.

‘I don’t think we’ll see the same frustrated investors here. There are differences between the Netherlands and Germany. Changes in Dutch law have facilitated the conversion of social housing and there is now a level playing field between social housing corporations and commercial players. Different players can now be accommodated in this market, much more than in the past. That’s a good thing. When buyers come in now, they know perfectly well what the possibilities are; the Netherlands still has a lack of supply (in urban areas) and there is always demand. There need not be any fear of empty houses.’

The growing role of international landlords will make the Dutch market more liquid, Hendrikse pointed out. ‘The Dutch market is becoming very open and we need to be ready for that. But responsible ownership and compliance open up professionalism big time and everyone learns from that. It also fuels new business and that will benefit tenants as well.’

To capture returns, however, international investors need to be alert to local legislation and developments, particularly in the sphere of urban planning, he added. ‘You need to keep watching what’s going to happen in the future and how the dynamics between tenants and landlords are evolving. What we don’t want to see is international investors becoming frustrated, dropping their assets and leaving again.’