Dear stakeholders,
The Retail Fund had a relatively good year in 2014, as we recorded a good deal of progress in implementing our strategy of optimisation and growth, thanks to our acquisitions and investments in a number of upgrades and redevelopments across the Fund’s portfolio. We also kept our occupancy rate at a good level of 94.4%, in a year in which retailers had trouble maintaining sales.
The retail segment in the Netherlands has been the best performing real estate sector during a very long period of crisis, despite the sustained dip in consumer confidence and a concomitant fall in consumer spending. And of course the rise of online sales has left many empty stores. Despite this, retail investments continued to record positive returns, while office and residential indirect returns had dipped into the red.
And yet, there is still a lot of negative sentiment in the retail segment in the Netherlands, because of online shopping, ageing, the surplus square metres, too many new developments, low consumer confidence and low economic growth. And of course, returns are lower now, but this is a very cyclical market. We believe that especially in the secondary segment this negative trend will continue for the next few years and values will dip even further. But we are a long-term investor and we are convinced that retail is a very sound long-term investment. Especially if you have the right strategy and you are willing to take a very active asset management approach.
Right now, this could be a very good time to add high-quality retail assets to portfolios, as prices are at the lowest they have been in years. Just as we did in the residential market in the past, and that is certainly paying off now. Last year, we acquired some excellent assets in both our strategic focus areas of ‘Experience’ and ‘Convenience’. And we have committed to substantial investments to upgrade and future-proof these assets, because we are convinced they will add value to our portfolio.
An excellent example of our strategy on the Experience front from last year is the Fund’s acquisition of 8,100 m2 of high street retail units in the Beurs-WTC Rotterdam. The Retail Fund is investing over € 40 million in this acquisition. The location is perfect, right in heart of the city centre with a very high consumer footfall. The building is also above a major junction of the Rotterdam metro system, which brings huge numbers of office workers and shoppers to the area. Plus, a new Primark store is set to open very close by in the near future. Our choice to buy was also driven by the quality of the retail assets. The synergy in this deal is one of the reasons that Bouwinvest is committed to investing in a full range of real estate sectors. Especially as we believe multi-functional real estate complexes, often with a mix of office, retail, hotel and other leisure facilities, will be the best performing real estate assets in the future. It also gives our investors the potential to compose a mixed real estate portfolio focusing on the segments they want.
We also made several investments on the Convenience front last year, either in new assets or in upgrades for our existing assets, in both the Randstad conurbation and outside. Balance is vital in retail. While assets in the Experience segment will perform better in the major urban centres in the Netherlands, the value of Convenience centres is likely to rise more in the regions. Achieving that balance and optimising our portfolio will be our main focus in the years ahead. As it now stands, retail offers a good perspective for low-risk investments with a good dividend yield of 5 to 6% and with potential value increases in the longer term.
I would like to thank all our employees for their commitment, dedication and hard work over the past year in a time of market uncertainty and challenges.
Dick van Hal
Chairman of the Board of Directors
