Blackstone struck again in the Netherlands this week with the acquisition of the new head office of global IT services company Capgemini near Utrecht in the Netherlands from developer AM Real Estate Development.
Blackstone struck again in the Netherlands this week with the acquisition of the new head office of global IT services company Capgemini near Utrecht in the Netherlands from developer AM Real Estate Development.
It is the second time in as many months that the US private equity giant has gone Dutch. In March Blackstone bought three logistics assets in various locations across the country with a combined area of 56,000 m2 from CBRE Global Investors. Together the two deals amount to just under €100 mln.
Blackstone is not the only investor to raise an American flag on Dutch soil in recent months. Earlier this year Mount Kellet Capital Management completed the joint venture acquisition of 10 shopping centres in the Netherlands from listed retail specialist Corio at a discount approaching 30%. And according to Dutch media reports, US investors are also in the running for the residential portfolio of Dutch housing corporation Vestia.
Indeed, interest among international investors for rented housing in the Netherlands has skyrocketed, according to a study by Capital Value. Earlier this year, more than 35 of the key investors from the US, but also the UK, Germany and the Middle East attended a presentation in London that was organised in collaboration with the Dutch Ministry of the Interior to explore the opportunities. Dutch housing minister Stef Blok is seeking to inject more private-sector equity into the Dutch housing sector as part of a broader campaign to make housing corporations refocus on their core task: providing housing for lower incomes. Part of the portfolio that Vestia is selling comprises more expensive free-sector rental units.
First-quarter data from Real Capital Analytics (RCA) confirm the trend – which already became clear last year - that US investors are leading the growth of international investment in the Netherlands. In total, US buyers accounted for six of the top 10 cross-border purchases over the 12 months to end-March. Over the period, foreign buyers forked out €3.5 bn in transactions in the Netherlands, RCA found. Meanwhile, domestic investment has remained steady in a narrow range over the past five years at between about €2.5 to €3.5 bn on a rolling annual basis.
RCA’s investment figures beg the question of whether the Dutch have become blind to bargains on their own home turf. Or is it that they see dangers that foreigners do not see? The growing appetite among foreign investors suggests they believe the Dutch market is firmly on the road to recovery, but their optimism is not supported by the latest GDP data from the national statistics office CPB. While the Dutch economy reported an unexpectedly high growth figure of 1% in the final quarter of 2013, the figure plunged again to a negative 1.4% in the first three months of this year, due in part to a decline in energy consumption and natural gas exports following an exceptionally mild winter.
While the spluttering of the Dutch economic engine may be down partly to seasonal effects, structural flaws continue to plague the recovery of the real estate sector due to the unbridled development of offices in the boom years, spawned by municipal governments keen to make money on the sale of new land. In an interview with PropertyEU, Pierre Vaquier, CEO of Europe's largest real estate investment manager AXA Real Estate, called the Netherlands the biggest graveyard for offices in Europe. Obsolescence is also rife in the Dutch retail sector.
Fundamental imbalances
The clearest example of the fundamental imbalances in the system is the Dutch headquarters of auditing firm KPMG which is owned by Germany’s IVG Immobilien. This week IVG’s Dutch trophy asset descended deeper into the quagmire after KPMG’s Dutch chairman Jurgen van Breukelen stepped down amid a series of controversies that have hit the firm recently, topped by fraud allegations revolving around the development of the new headquarters. Situated in the Amsterdam suburb Amstelveen, the complex - described as impressive or pretentious, depending on the commentator - has been controversial since KPMG decided to co-develop it in the mid-2000s near its former 47,000 m2 headquarters. That older building – which is owned by another German investor Commerz Real - remains vacant to this day and is seen by many as a potent symbol of over-build in the Dutch office sector during the boom years.
In the latest twist to the KPMG saga, PropertyEU revealed earlier this week that KPMG is coming under increasing pressure to lease out some of the space in its new headquarters to other tenants to reduce costs. However, that would appear easier said than done. Sources told PropertyEU that it would be difficult to find a new tenant for the 7,000 m2 space. Needless to say, it would require a Herculean effort to let the full 58,000 m2 of the tainted building should it come free in the future.
It is to be hoped for Blackstone that the office building it has just acquired near Utrecht is spared such a fate. This building, too, has a history of controversy. CBRE Global Investors, the owner of CapGemini’s former headquarters in the Papendorp business park near the city of Utrecht, unsuccessfully sought to halt construction of the new office building for the ICT services company now owned by the US private equity giant. According to CBRE GI, the builder had an unfair competitive advantage because the Utrecht municipal authorities had offered the developer a 15% discount on the land price and eased the norm for the number of permitted parking spaces.
The Dutch have a rich tradition of building new land and know better than anyone else what that soil is made of. A word of advice for foreign investors seeking real estate opportunities in the Netherlands: dig deeper before raising a flag in this country.
Judi Seebus
Editor in chief
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