Bouwfonds European Residential - Catella Real Estate AG

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Fund Management Report Real estate investment markets 2008 proved to be extremely difficult for international real estate markets, as for many other sectors. For example, the INREV “All Property European Total Return Index” recorded a drop of 26.8% in 2008, which was mainly due to a 30.3% depreciation in property values. However, total returns in the BVI index averaged 4.4% in Germany. Here, the financial crisis made itself felt in a different way: in the temporary closing of 12 open-ended real estate funds. One positive result of the financial crisis is that professional investors are increasingly seeing residential property as an independent asset class. According to INREV’s 2009 “Investment Intention Survey”, German residential properties are the number one investment target for institutional investors in Europe. This is reflected in increasing competition among providers of comparable products. However, Bouwfonds European Residential (BER) is currently the only fund in its segment that systematically ensures risk diversification by investing throughout Europe. Real estate markets In 2008, our target countries generated average economic growth of around 1.3% (Germany), 2.1% (Netherlands), 0.7% (France) and 1.1% (Belgium). 1 The trend in the number of households is of particular strategic interest as a long-term indicator. The tendency towards a rising number of households in BER’s target countries is having a positive effect on returns. In 2008, prices for residential real estate in our target countries performed as follows: France: At 0.6%, the rise in purchase prices for existing residential real estate of was restrained. However, considerable regional differences were recorded (e.g. Grenoble –4.7% versus Paris +8.7%). Rental price trends for French residential properties also varied in line with this, with the slight overall increase of 1.4% being spread unevenly across the regions. Whereas Grenoble, Montpellier and Paris, for example, saw increases of between 2.3% and 4.3%, rents in Lyon, Marseille and Toulouse stagnated. 2 8 Germany: A slight decline in prices – but still within the bounds of normal price fluctuations – was felt across Germany. Prices for existing real estate fell on average by between 0.5% and 1.0%, while prices for new builds in the residential segment were flat. However, significant regional differences are to be seen in both areas, with price increases of up to 8.0% in large cities. As a whole, rental prices across Germany remained relatively stable. Metropolitan areas in particular saw increases of 2.0% to 4.0% for new lettings. In contrast, structurally weak rural regions experienced increasing vacancies and a slight drop in rental prices. 3 Netherlands: Prices for residential properties remained unchanged between 2007 and 2008. The slight price increases seen in the summer levelled off again at the end of the year. 4 The rental market recorded an annual average rise of 1.9%. 5 Belgium: The prices for residential real estate in Belgium rose once again. Single-family homes saw a price increase of 5.2% and apartment houses of 4.0%. In 2008, the rent index was 4.0% higher on average than the previous year. The last ten years saw average annual growth of 1.7%. Bouwfonds European Residential’s strategy The Fund is aiming for the following allocation during the first three years: • Germany (30%-50%) • France (30%-50%) • Benelux (10%-40%) In addition, the Fund can invest up to 10% of fund assets in other countries in the European Economic Area and Switzerland. However, since the Fund follows a regional strategy that involves making focused investments in regions with above-average growth, it is equally important to consider the regional allocation: • Service regions (40%-60%) • High-tech regions (20%-30%) • Financial services regions (20%-30%) • “Government and administrative locations” (10%-20%) 1 Source: Eurostat 2 Sources: Callon, CNAB, OLAP 3 Source: IVD, Wohnpreisspiegel 2008/2009 4 Source: Nederlandse Vereniging van Makelaars o.g. en vastgoeddeskundigen NVM, NVM-cijfers van het 1 kwartaal 2009 voor heel Nederland 5 Source: Centraal Bureau voor de Statistiek, Consumentenprijzen; de gemiddelde verhoging woninghuur in Nederland
In terms of product strategy, the Fund invests in apartments (80%-90%) and in niche markets such as senior citizens’ apartments, serviced apartments and student accommodation (10%-20%). In order to offer investors additional yield potential, the Fund permits privatisations, although these are restricted to 20%. Investments in development projects of up to 20% are also permitted. The financial crisis has created new investment opportunities. In Sweden and the United Kingdom, for example, residential real estate’s risk/reward profile has improved substantially. In some regions, these markets had experienced pronounced price imbalances. The mark-to-market valuations used in these countries are currently having a positive effect on price levels. The Fund’s management expects excellent investment opportunities in the Fund’s target countries, although the markets there show fewer signs of volatility and hence no significant declines in prices are being seen. As a result, the Fund’s management will reassess its investment strategy as of the next semi-annual report. This applies in particular to the 10% quota for properties located outside the target countries of Germany, France and the Benelux countries, which the Fund’s management will make use of if attractive opportunities arise. Developments in the financial year The Fund was unable to achieve the target volume it had originally aimed for within the allocated time frame. Despite the significant advantages offered by the residential real estate asset class, the financial crisis prevented a large number of institutional investors from making new investment decisions. Overall, net inflows of €23 million were received from outside investors who are not associated with Bouwfonds’ asset managers and joint venture partners bringing assets under management to approximately €100 million. At the end of the financial year, the Fund’s management negotiated a loan facility of approximately €20 million. This has enabled the Fund to profit from the current extremely attractive financing terms and the banks’ interest in financing a core residential real estate fund. 1 According to the BVI method Performance and liquidity Against the backdrop of fundamentally difficult conditions in the European real estate markets, the BER open-ended real estate fund achieved a total return of 4.5% in its first year of operation, 1 slightly above the sector average of 4.4%. Nevertheless, the original target performance of 5-6% (according to the BVI method) was not achieved. This is mainly due to the letting rate for the new building in Markt Schwaben, which is significantly off target. Bouwfonds has successfully implemented the concept of constructing new rental homes for young families with children in many European markets, including on a significant scale in Germany. As a result, the Fund’s management believes that it should be possible to increase the letting rate significantly in the course of the financial year. (Read more about Markt Schwaben in the section entitled “Developments at existing properties”). Based on its assessment of the current market environment in the medium term, the Fund’s management believes that the target return can be achieved. Additional arguments supporting this conclusion are the increased marketing measures being undertaken in Markt Schwaben, debt financing offering positive leverage and additional acquisitions. Moreover, since the appraisers classed our properties’ risk premiums and initial returns as stable, the Fund has not recorded any losses in value. This goes to show that BER is living up to its claim to be a core product by remaining stable during market downturns. This is due to the low correlation of residential properties as an asset class with other assets and inherent low volatility, as well as to the systematic selection of the Fund’s assets. New acquisitions Markt Schwaben: Markt Schwaben (11,000 residents) is a typical commuter town in the Munich area with excellent transport links. The municipality boasts above-average economic output and one of the lowest unemployment rates in Germany. In the last decade, Markt Schwaben’s population has grown by around 14%. The market for residential real estate is strongly influenced by the shortage of living space in Munich. Strong 9
Page 1: Bouwfonds European Residential Open
Page 5: Table of Contents 05 Key Figures at
Page 9 and 10: modernisation measures that had alr
Page 11 and 12: Fund Management Report Overview of
Page 13 and 14: Valuation Information on changes in
Page 15: Development of Returns (Multi-year
Page 18 and 19: Development of the Fund 20 Realized
Page 20 and 21: Statement of Assets and Liabilities
Page 22 and 23: Notes to the Statement of Assets an
Page 24 and 25: Schedule of Properties 1 I. Directl
Page 26 and 27: Overview - Market Values and Rents
Page 28 and 29: Schedule of Real Estate Purchases a
Page 30 and 31: Statement of Income and Expenditure
Page 32 and 33: Calculation of the Distribution Ord
Page 34 and 35: Tax Information Income tax treatmen
Page 36 and 37: Tax Information €0.37 per unit wi
Page 38 and 39: Tax Information agreement). However
Page 40 and 41: Taxation of interim profits Interim
Page 42 and 43: Committees Investment Company Catel
Page 44: Catella Real Estate AG Kapitalanlag

Bouwfonds European Residential - Catella Real Estate AG

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