Dutch banking group ING took a major step in its slimming down process on 2 July with the much-publicised listing of its insurance arm NN.

Dutch banking group ING took a major step in its slimming down process on 2 July with the much-publicised listing of its insurance arm NN.

The listing is a preliminary step towards a definitive split-up of the banking and insurance group by end-2016, one of the European Commission’s conditions of a Dutch government bailout in 2008. While mainstream financial press focussed on NN’s public flotation this week, PropertyEU revealed that the Dutch insurance giant is stepping out of the shadows as a property investor in its own right.

Earlier this week it emerged that NN has gone on a spending spree in France and Italy. In the French deal, PropertyEU broke the news that the EU's competition authority had listed an NN subsidiary as the new owner of the 50% stake in a shopping mall in Le Havre, alongside co-owner and French REIT Klepierre. The news report was speedily followed by an announcement by CBRE Global Investors that it had acted on the buy side of the deal on behalf of an unnamed ‘separate account client’.

Meanwhile in Italy the Dutch insurer joined forces with German peer Allianz Real Estate to acquire Fiumara shopping centre in Genoa for around €150 mln.

Nationale-Nederlanden, which operates internationally as NN Group, has long been an investor in real estate thanks to its position within the ING Group. Indeed, it was a captive investor of its sister company ING Real Estate Investment Management (REIM) which until the beginning of this decade was one of the largest real estate investment managers in the world with assets under management of some €60 bn. The insurer’s exposure to direct and listed real estate was traditionally managed by ING REIM vehicles.

Once one of the largest integrated real estate companies in the world, the demise of real estate developer-investor-lender ING Real Estate was sealed following the outbreak of the global financial crisis. When parent company ING decided to 'go back to basics', a number of activities were no longer considered as core: the insurance business was put on the spin-off list while ING Real Estate Finance was seen as the only mainstay within the real estate division.

The vast majority of ING Real Estate Investment Management was subsequently sold to CBRE Global Investors, while the once-powerful development division has since been whittled down to ING Real Estate & Other – effectively a sales counter to dispose of development projects and other property-related bits and bobs in an orderly fashion.

CBRE Global Investors’ acquisition of ING REIM in 2011 was also in line with another stipulation set out for ING Group’s bailout. At the time, NN committed itself to remaining an investor in ING REIM vehicles after CBRE Global Investors took over their asset management. Some of these funds are now reaching maturity and CBRE Global Investors is currently engaged in selling off the assets. In that context, the deal in Le Havre could be interpreted as a de facto vote of confidence in ING REIM’s strategy as NN is effectively buying back – and expanding - a position it already held as a key investor in one of the manager’s funds.

NN ventures into real estate lending
The joint venture deals in Le Havre and Genoa suggest NN is seeking new avenues to maintain and increase its €3 bn exposure to real estate. According to the insurer’s 2013 annual report, its real estate portfolio is as much as €4.8 bn including third-party interests, leverage in funds and off-balance commitments. And NN's appetite clearly extends beyond direct holdings in bricks-and-mortar and real estate equities. At the recent Provada fair in Amsterdam in June, the insurer's investment arm, ING Investment Management (ING IM), announced plans to invest in real estate loans.

Under the plan, NN will invest up to €750 mln in a portfolio of commercial real estate loans issued by ING Real Estate Finance. Initially NN will invest €400 mln in Dutch loans with a second tranche of €300 mln earmarked for loans issued against foreign property.

The move makes the Dutch insurer one of the first local players to ‘discover’ property financing as an investment category since the financial crisis. As the risks associated with property financing subside and banks continue to grapple with their own funding issues, many non-bank players believe now is the time to enter the market. NN is in good company: European peers including AXA, Allianz, M&G and a growing number of other players have already ventured down this path.

‘All insurers are hunting for yield, an extra return, a premium for lack of liquidity for a long-term investor such as ourselves,’ Jelle van der Giessen, CIO of NN Group, told PropertyEU in a recent interview. ‘That’s why we have closed a deal with ING REF under which we will take over more than €400 mln in loans as an investment. With this move we want to create a new asset class.’

ING REF has around €25 bn in commercial real estate loans worldwide, making it the biggest property financier in the Netherlands and one of the biggest in Europe. ‘I think this deal is the first step on the road to mobilising more institutional money for the Dutch property market, in line with what business and government have been calling for,’ said Peter Göbel, CEO of ING Real Estate Finance in the Netherlands.

NN’s partnership with ING REF is a natural step given their sisterly ties within the ING Group. Moreover, the deal which CBRE GI orchestrated for NN in Le Havre has shown that a formal break-up need not be a barrier to further ventures. ING Real Estate may only be a shadow of its former self as it continues to be wound down, but other players within the ING Group like NN, but also ING REF, are stepping into the spotlight and building on the legacy.

Cormac Mac Ruairi
Senior Editor PropertyEU


Related articles:
ING insurance arm buys stake in €120m Le Havre mall
EXCLUSIVE: Allianz, ING acquire Genoan shopping centre
PROVADA Dutch insurer NN to invest up to €750m in property loans


Other retail deals this week:
Germany's Union buys 90% of Italian mall
Europa Capital JV scoops English mall for €37m
Tristan's EPISO 3 takes UK portfolio out of administration for €192m
CBRE GI and Texas Teachers buy Swedish mall at 6.1%
Pbb finances CBRE GI's Galeria Mazovia buy
EXCLUSIVE: Singapore's GIC takes full control of Roman mall in €200m deal
EXCLUSIVE: Pimco-backed GWM in talks to buy Turin mall: