A €1bn programme, backed by a number of European pension funds, has been set up to invest in Dutch residential ground leases, according to Dutch fintech firm DNGB.
Under the new concept, known as Duokoop, future residents buy a home but sign a lease to the owner of the land it is built on.
De Hypotheekshop is among the Dutch mortgage advice bureaus targeting, in particular, first-time buyers.
According to Tido van Wieringen, chief business development officer at DNGB, Dutch pension funds have shown an interest, but first want to see whether the concept catches on.
“We have spoken with a few big players and we expect that Dutch pension funds will join as soon as the product has established itself.”
“At the moment, they want to avoid the scenario of ending up with a small and laborious portfolio as a result of disappointing land sales,” he said, noting that the portfolio would also be illiquid.
To find pension funds willing to invest in Dutch land, DNGB has involved Cabot Square Capital. “This British asset manager has experience with innovative kind of investments,” said Van Wieringen.
Olav Koenders, director of the fintech firm, said a phased €1bn programme has been set up with Cabot Square Capital but declined to provide details about the number of pension funds and where they are based.
According to DNGB, investing in land through Duokoop suits pension funds because of the long duration combined with low risk.
The long lease is eternal in principle, but home owners are entitled to buy the land at any moment.
Van Wieringen also mentioned the relatively high return, as the home owners are to pay 3.95% of the land value per annum.
He declined to mention the management fee level, but said that it was “slightly higher” than that associated with a mortgages portfolio.
Van Wieringen said the fact that the ground rent would be annually indexed for Dutch inflation added to the attractiveness of land investment.
He acknowledged that the fact that the home owners are entitled to buy the land at any moment, would increase the complexity of the product for investors, stressing that this was an important condition to the home owners.
He said that DNGB’s expectation was that the land would remain in ownership of the pension funds for an average of 12 to 15 years.
