Bouwfonds European Residential - Catella Real Estate AG

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
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