Netherlands Outlook 2015: Only top developments qualify for debt financing

Bank financing is returning to the real estate development market in the Netherlands, but only for the best-located projects with pre-leases.

This maintains the edge cash-driven players enjoy, according to Boris van der Gijp, director of strategy and research at Amsterdam-based Syntrus Achmea Real Estate & Finance.

‘We sold quite a few empty buildings ready for redevelopment last year and they were bought by players using 100% equity. It can be very difficult and expensive to get debt, resulting in a development not making financial sense anymore.’

Having a tenant on a long pre-lease makes all the difference. ‘That's a different story; banks are willing to lend and end-investors may forward-fund, and vacant buildings will become core properties in the end.'

There are signs the market is opening up further. In recent months Dutch bank ING announced it had €500 mln available for investments, and Syntrus Achmea is also active as a debt fund but only in regard to small amounts. ‘Nevertheless, spreads on debt, including for development, are coming in. Financing is available, if only for the best locations and really low-risk projects, and only for LTVs of 65-70%,’ he said.

FROM EMPTY OFFICE TO FULL HOTEL
The latest high-profile example of an equity-driven development project involves private Israeli developer-investor Omnam Investment Group acquiring The Dam, a vacant office building in the western Sloterdijk district of Amsterdam.

Omnam plans to convert the property, which previously housed telecom group KPN’s offices and had been on the market for four years, into a hotel to be operated under the mid-market Park Inn by Radisson brand owned by the Rezidor Hotel Group. Omnam paid €15.5 mln, according to the Dutch land registry. Including redevelopment costs of around €85 mln, the total investment in the property amounts to €100 mln.

INVESTMENT TIPS
Development aside, the Netherlands has a lot more opportunities to offer. ‘The strongest results can be expected from residential, both in the short and long term, but you need to team up with a local player who knows the market thoroughly,’ said Van der Gijp. Funds that invest in mortgages, he added, are another relatively safe and interesting opportunity.

OUTLOOK ROUND-UP

Click here for an interview with Boris van der Gijp on the Dutch real estate market.

For all the presentations, interviews and the report published in PropertyEU Magazine, go to the Netherlands Outlook 2015 round-up page