PROPER TY I N P E R S P E CT IV E
ISSUE 15 SPRING 2014
- Distress is leaving the US real estate market >   1
-T
he New York apartment market: Why is it
an interesting investment category and how
does it work?
> 4
-C
lavis Family Office: What do ‘direct
investments’ and real estate have to offer
to a family office and its clients?
-G
oudse Verzekeringen: Redevelopment of
our headquarters in Gouda: why we are
considering it>   9
- Changes in portfolio
> 12
> 6
Distress is leaving the US real estate market
AFIRE’s Winter Conference in New York in February 2014 was not only memorable for being cold and snowy; it also generated an important statement by two influential real estate
investors, Morgan Stanley and Starwood. “Distress is leaving the US real estate market which
makes it more difficult to find interesting investments”. Both parties indicated that they
now prefer to look for transactions in Europe. Morgan Stanley even said that they no longer
do new transactions in the US. Rental apartments, offices, industrial and retail core investments in all US sectors are hard to find or only at high prices. We believe that the only interesting new investments in the US are value-add transactions or development deals. In other
words, lower quality real estate at good locations but with unlocked opportunities that need
tender, loving care and additional capital expenditure to bring the investment to the next
level; or alternatively, new property that can be developed from scratch. Lagging real estate
markets like the Benelux and peripheral Europe (Italy, Portugal, Spain and Ireland) have
become the next frontier where investors are currently looking for opportunities. INREV has
published its fund index performance for Q4 2013. Trends are in line with the statements
above: performance will be found in value-add and not in core (low risk) investments. Valueadded funds delivered the highest return since Q4 2010 at 1.64% for Q4 2013 compared to
core funds which performed at 0.97%. Value-added funds outperformed core funds for the
third quarter in a row.
Winter in New York
We are often asked whether Spain is an interesting country for new investments for IBUS. Our
typical answer is that the Spanish real estate
market is certainly interesting but not without
in-depth knowledge of the real estate market,
an established legal and fiscal framework and,
last but not least, a network to find deals. These
S P R I N G 2 0 14
types of transactions only work with the right
local partners. Improving market conditions are
ideal situations for local players to offload problem assets to foreign investors that may look
like bargains but turn out to be management
headaches.
Another interesting statement was made at
AFIRE in New York about the AIFM regulation
(Alternative Investment Fund Managers) which
will be implemented as of July 2014. Large real
estate managers like Starwood and Blackstone
have come to the conclusion that AIFM will create a lot of additional hurdles to marketing to
European investors. As capital raising in the US,
Asia and the Middle East is up to speed at the
moment, large managers are increasingly deciding to ignore European investors because of the
‘AIFM hassle’. If this trend continues in the future, it will become more difficult for E
­ uropean
institutional investors to invest money outside
of Europe as there will be a limit on the new
1
i­nvestment products that will be offered to
European investors. Real estate management
­
firms that do decide to get AIFM approval to market in Europe will become the big beneficiaries
because there will be less competition. It could
also imply that smaller and mid-sized European
pension funds will increasingly invest through
listed real estate securities in Asia and the US.
With equities at peak
levels and bonds being
sensitive to rising inter
yoy change
est rates, we are seeing
Sovereign Wealth Funds
– 39%
significant demand for
Institutional
– 24%
real estate investments,
both from competing inPublic
– 15%
vestors as well as from
Private investors
+ 54%
our investors looking for
User/Other
– 22%
products. This demand
is not only coming from
Source: Real Capital Analytics
existing clients but also
from people who were typical equity investors
in the past. Rental apartments in New York (see
article elsewhere in this Property in Perspective)
seem to be a segment which is interesting to
High Net Worth Investors, families and family
offices. Our experience is that families take a
buy-and-hold approach when looking at a city
like New York. Why sell a good investment after
five or seven years after the hard work of upgrading apartment units has been done. Retain
the property and keep it in the family for capital
preservation purposes.
Yoy change in acquisitions by continental
cross-border investors
One of the main attractions is that New York is a
market with limited risks on the supply side and
a growing population. The same goes for inner
city Düsseldorf where we initiated a new investment at the beginning of 2014 (see Changes
in Portfolio section). Prices for New York residential property have risen significantly (condo
prices have risen by 75% since 2009, where
prices of up to a stunning USD 6,000/sq ft or
USD 65,000/m2 have been recorded). But that is
not a fair statement for the entire New York market. The high end is the residential market for
Russian oligarchs, Middle Eastern and Southern
European family capital which tends to focus on
the most expensive areas in New York, located
to the west, east and just south of Central Park.
The apartment market for the average New Yorker is a different story. Prices of USD 200 per
sq ft or around USD 200,000 per apartment in
2
Washington Heights (northern Manhattan) or
Brooklyn are achievable. Buying off market and
selling at auction already generates a price difference of up to 10-15% in a highly scattered
and opaque market like that for New York rental
apartments. Similar price patterns are visible for
London, Paris and Berlin, i.e. world capitals. Real
estate prices seem to indicate that the crisis is
behind us and there are no major economic challenges left. We do not think this is true. Without trying to be limitative, we should not forget
other highly relevant issues:
•
Strong economic contraction in emerging
markets like Brazil, Turkey, India, Thailand,
Philippines etc. due to Fed tapering in the US
•Increasing signs of debt bubble bursting in
China leading to a weaker yuan, weakening
economic growth and bailouts of aggressively
financed investment products by the Chinese
government
•The amount of debt used by equity investors in the US and Europe to buy equities is
higher than in 2007. Equity markets seem to
be driven more by low interest rates than by
future economic growth
•The Bundesbank (‘Buba’) has said that German
house prices are overvalued by 25%. The German central bank said that residential real estate prices in 125 of Germany’s largest cities
rose by 6.25% on average last year. In October
2013, the Buba reported that property prices
in the biggest German cities were 20 per cent
overvalued, which suggests that the problem
is getting worse. “This is especially true for urban real estate markets, where properties are
overpriced at between 10 per cent and 20 per
cent. In big cities, house prices are probably
overpriced by 25 per cent on average” is what
the Buba said.
What this tells us is that European GDP growth
remains subdued and needs to be ignited by low
interest rates. Asian economic growth will depend to a large extent on the actual vulnerability
of the Chinese economy to debt related shocks.
The US economy and that in the UK are showing robust GDP growth numbers of around 3.0%
and 2.5% respectively but debt issues in neither
country have been solved. The low cost of capital is leading to a flight of capital into ­equities,
commodities and real estate, increasing the
risks of a bubble. All this means that there are
PROPERTY IN PERSPECTIVE
still many hurdles and risks to ­
overcome and
therefore we still believe there is a long road to
travel before full recovery.
2013 sources of global capital
United States The effect of this on direct real estate markets
is shown in a recent update by Real Capital
Analytics on global capital flows. Global capital
buying real estate in Europe accounted for 27%
of EUR 48.9 billion in 2013. This was the peak
level since 2007 which underlines that global
investors (investors from outside Europe) are
buying real estate in Europe with the intention
of benefitting from current attractive pricing.
New investments by US and continental European investors in Peripheral European markets
(Spain, Italy, Portugal and Ireland) increased by
350% and 260% respectively in 2013. Continental E
­ uropean investors made 12% fewer investments in 2013 compared to 2012 whereas US
but also Asian investors have shown significantly higher investments. This is probably related to GDP growth and growth in domestic real
estate markets.
Domestic investors (mostly private investors)
appear to be the only investor group making
increasing new investments in Continental Europe. We are finding that private investors (HNW
individuals, families and family offices) are using current market opportunities to invest counter-cyclically in Europe. Sovereign wealth funds
changed direction in 2013 and increased their
new investments in the US while investing significantly less new capital in Europe in 2013.
Institutional, public (government and semi government) and end users all became significantly
less active in Continental Europe in 2013. Once
GDP growth starts picking up in Europe, these
groups will probably become more active again,
as will institutional investors such as pension
funds and insurance companies.
We have drawn a couple of conclusions for our
business approach to real estate:
•We will stick to real estate markets that we
know; we will not pursue new ventures in new
countries. It takes more time to get to know a
new market than for a market recovery to take
place. The risk of being too late is simply too
high. This judgement could be different for really large real estate players.
•Despite country-wide macro-economic trends,
economic growth will be better in larger cities than in rural areas. This is underlined by
S P R I N G 2 0 14
EUR x billion
yoy change
21.4
% of Total
+16%
12%
Canada
3.1 +16%2%
Middle-East
9.8 +87%6%
China/HK
6.1+178%3%
South-East Asia
4.1
+52%
2%
South Korea
1.3
+93%
1%
Australia
0.5+3,320%
India
0.4+583%0%
Latin America
0.4
Africa
0.4+367%0%
Japan
– 66%
0%
0%
0.4
– 36%
0%
Continental Europe
27.8
– 12%
16%
Domestic investors
101.1
+18%
57%
Total
177.8+17%
Source: Real Capital Analytics
the statements on German house prices by the
Bundesbank. As an example, our expectation
is that Düsseldorf will perform better than Germany and New York will perform better than
the US, etc. Or in other words, strong areas
will become stronger and weak areas will become weaker. The trick is to avoid one-track
cities like Detroit which turn from good to
­really bad due to the demise of their only economic driver.
•The risk of deflation remains higher than that
of inflation, which means that we would not
be surprised if interest rates remain lower than
the long term average for a prolonged period.
This is predominantly true for continental
­Europe.
3
Entrance of building at Fort Washington Avenue,
Washington Heights, Manhattan
The New York apartment market: Why is it an
interesting investment category and how does it work?
Interview with Max Berkelder of IBUS
IBUS launched its fifth investment in New York rental apartments in early 2014. IBUS is working with Sentinel Real Estate Corporation from New York in these transactions. Sentinel is an
independent specialist in US apartments operating in-house asset and property management
and is staffed by some 1,000 employees located in 13 US offices. Sentinel has developed an
investment strategy for what is essentially its backyard, New York. Sentinel started this strategy in 2005 by investing corporate money to learn about the strategy in practice. In 2007,
the company launched an institutional investment fund named Gotham City Residential
Partners for which IBUS sourced a number of interested Dutch institutional investors. This
fund held up well in the financial crisis and proved its resilience with a projected IRR of
10-11% over the expected term until 2016. Sentinel approached IBUS in late 2012 with the
opportunity of co-investing in an apartment building in Washington Heights in northern
Manhattan. Washington Heights is up and coming due to its proximity to Columbia Medical
Center and express subway connections to midtown and downtown. In early 2014, IBUS and
Sentinel will together close their fifth transaction in New York apartments. This niche market has emerged as an investment product with high investor appetite due to its value-add
characteristics, the low risk profile of its income, the partnership between Sentinel and IBUS
and the fact that it concerns off-market transactions in an opaque market like New York.
Max Berkelder joined us for an interview on how the New York apartment market works.
Max Berkelder
Why did you choose Sentinel as a partner
for this investment programme?
Max Berkelder: We have known Sentinel for
some ten years now and the partnership works
really well. It started in the institutional market.
Once Gotham I, the institutional fund, was fully
invested, we looked at an individual property for
the High Net Worth market in conjunction with
Sentinel. IBUS had done similar transactions in
Washington DC so we knew how the strategy
worked. That gave us a flying start.
How long has Sentinel been in existence
and why did it take until 2006 before they
started investing in New York?
Berkelder: It was set up in 1969, as the principal
investment arm for the management of Salomon
Bros. They started to develop the niche market
in New York from 2005 as it offers great opportunities to increase value by upgrading buildings and units. Sentinel started with their own
corporate money and in 2007 they launched a
large institutional fund in which Dutch investors
played an important role. The Dutch seem to
understand the New York rent regulations well
because they resemble the Dutch rental apartment system to some extent.
4
What is IBUS’ role in transactions for High
Net Worth Investors with Sentinel?
Berkelder: IBUS screens and selects the investments; IBUS brings in the equity, reports to investors and controls all major decisions.
In what sense is the New York apartment
market different to that in the rest of the
US?
Berkelder: Home ownership in the US as a whole
is about 60% while in New York it is only 30%.
And there is a lack of new construction due to
scarcity of land.
As a financial capital of the world, New York
must be a highly efficient investment market. Is that also true for rental apartments?
Berkelder: No. It is true for commercial real estate but not for rental apartments. There are
only a handful of institutional players active in
this segment. The rental part of the market is
highly fragmented. As an example, most deals
are offered through people directly connected to
the family that owns the property. That implies
that the largest broker only controls 3% of the
market volume.
PROPERTY IN PERSPECTIVE
Left: Unit under reconstruction on St Nicholas
Avenue, Washington Heights, Manhattan
Right: Renovated lobby of building at
St Nicholas Avenue, Washington Heights,
Manhattan
Who are the typical owners of rental apartments in New York?
Berkelder: Properties tend to be family owned
and undermanaged. Such families have no appetite for upgrading and improving units.
How does deal sourcing typically take place?
Berkelder: New York landlords know Sentinel
as an interested buyer and seller of this type
of transaction. Landlords know that Sentinel
will close the transaction if they say they are
interested. Sentinel approaches IBUS when they
believe the investment fits the IBUS criteria.
Properties are often offered to Sentinel before
they are widely marketed.
What are the critical factors for being successful in New York apartments?
Berkelder: The upgrading of apartments really
requires intensive management as apartment
units are upgraded one by one once they vacate. Sentinel has worked with three contractors
that are able to do the construction work within
budget and on time. That implies that this strategy has a high entry barrier.
The New York condo market has shown
tremendous returns. Does that mean that
rental apartments have become expensive
as well or can you still find interesting new
investments?
Berkelder: The New York condo market has recovered from the effects of the financial crisis.
We are typically looking for new investments
in gentrifying neighbourhoods like Washington
Heights, parts of Hudson Heights, Prospect Park
in Brooklyn and parts of the upper West Side.
These local markets have not seen the same
price increases as we have seen in midtown,
Soho, Tribeca and the Upper East Side.
Bill de Blasio became the new major of New
York in November 2013. Do you expect any
changes in legislation or taxes that might affect your strategy?
Berkelder: To start with, rent regulations are state
laws, not city laws, and they are in place until
June 2015, so between now and then the rules
are the rules. After that, any changes would come
from a vote in the state legislature. Currently
one body of the legislature is Democratic and
the other Republican. Republicans tend not to
like regulation so they are the group that gen-
S P R I N G 2 0 14
erally blocks major changes to the laws. An
agreement was reached on 4 March 2014 between De Blasio’s administration and a New York
developer, Jed Walentas, on a USD 1.5 billion
waterfront redevelopment of the former sugar
refinery in Williamsburg (east of Manhattan, in
the western part of Brooklyn). This was the first
development deal to be agreed under De Blasio,
whose statement during his election campaign
was that he will create more affordable housing
in New York. The deal struck between the De
Blasio administration and Walentas was that 660
affordable units in the project will be increased
to 700 units. Walentas is allowed to move these
affordable units to the back of the plot away
from the waterfront. In return, Walentas will receive a zoning change allowing towers of up to
55 storeys to be built, which is about 20 storeys higher than current zoning. We see this as a
positive development as the outcome is far less
restrictive than it could have been.
We expect that if rent regulations for existing
affordable housing are be changed substantially
in the future, then you will see accelerated rental
increases in market rate rents as the supply of
newly upgraded middle class units is shut off.
What about the angle of the strategy. Do
you expect that to change?
Berkelder: We launched five investments with
Sentinel in New York in 2013, two of which
were with one family as the ultimate investor.
These families look on these as long-term investments. These investors have no need to sell
after say five or seven years. That could imply
that instead of selling a building as a whole after five years (the strategy for our current New
York funds), we could go for a strategy in which
the start of the strategy remains the same, but
the exit could very well become the sale of individual condos. And we are looking at Brooklyn
as well.
5
Clavis Family Office: What do ‘direct investments’
and real estate have to offer to a family office and
its clients?
An interview with Michiel Dill and Paul van Hastenberg.
Clavis is an independent family office based in ’s-Hertogenbosch that started operating
in 2008. Clavis has 17 employees and works for an increasing number of wealthy clients/
families. Clavis plans to open an office in Amsterdam later in 2014 or early in 2015. Clavis
has three lines of business: wealth structuring, trust services and asset management. Clavis’
claim to fame is that it combines these three lines under one roof (see picture), which enables the office to assist their clients in the whole value chain of wealth management. That
means that Clavis is very different from many other advisors that only deal with one discipline. Clavis is growing substantially and won the prestigious Financieel Dagblad Gazelle
prize in 2012 and 2013. They have already met the criteria for the 2014 award. Michiel Dill
and Paul van Hastenberg joined us for an interview.
Why did you start Clavis in 2008 and was
that a good time to start a new business?
Michiel Dill: In 2007
I became the single
family officer for a
wealthy Dutch entrepreneur who had
just sold his company in return for
cash. I was subsequently approached
by the entire investment world who all
wanted a piece of
Michiel Dill
the pie. My background is in tax and the investment world was
relatively new to me. What struck me was that
everybody at the table started discussing asset
management, whereas my perception was that
they should have started by discussing how to
structure the assets and determine a strategy.
That was when I realised there was a world
to win.
What is the most important difference between Clavis and private banks or other
family offices?
Dill: Most other family offices are in essence
wealth or asset managers in my opinion. There
are none or only very few who combine wealth
structuring, trust services and wealth management as equal businesses within the same company. Our main difference is that we only act
on or build the client-owned infrastructure. This
ensures that the client has control and continu-
6
ity is safeguarded. Families need to be truly independent. And yes, this means that “the show
must go on without Clavis”. This is exactly the
type of relationship we are aiming for since we
firmly believe in our motto “zonder wrijving
geen glans” or no pain no gain.
In what sense is the institutional investment
world that you used to work for different
from your current working environment?
Paul van Hasten­
berg: In the institutional world there
is typically a gap
between the asset
manager and the ultimate beneficiaries
(e.g.
pensioners).
That gap is nonexistent in the private investor world
as we are in direct
Paul van Hastenberg
contact with the
wealth owner. That is of great added value to
me. At Unilever pension fund, I used to focus
on the relative return of the investment portfolio measured against a benchmark. My main
concern now is capital preservation for our clients, since first and foremost they want to stay
wealthy. Absolute return, in other words. Our
clients are not satisfied if the market declines
by 10% and their assets only decline in value by
5%, which means that the bar is set really high
for us.
PROPERTY IN PERSPECTIVE
C
R
AS
G
(family)
governance
SE
T
M
asset allocation
A
A
RU
TU
IN
risk management
EM
ST
G
own company
financial
fiscal
legal
notarial
compliance
operational
emotional
EN
real estate
T
private equity
infrastructure
manager selection
portfolio management
client
overview/grip
reporting /
performance
measurement
e
il
PE
RA
TIO
processing
paper flow
N
©
AD
cla
vis
M
fa
m
IN
N
A
TO
O
impact investment /
charity
T
R
IN
y
G
bank (payments /
financing)
fic
IN
review /
monitoring
accountant /
bookkeeper
of
NG
other service providers
(security, real estate
agent, insurers,
personal assistance)
platform /
custodian
12
coordination / execution
O
trust services
20
education
cash management
TI
estate planning
BRI
Clavis specialises in ‘direct investments’.
What does that mean?
Van Hastenberg: To us, direct investments mean
all investments outside the traditional financial
markets. We are most active in direct real estate,
private equity and in financing both of these.
We typically advise our clients to invest through
best-in-class funds managed by third party
managers. The reasons for this are threefold:
achieve sufficient diversification, limit personal
handling by our clients and be assured of professional management.
Diagram Asset Management 2.1
N
Clavis recently received approval from the
AFM to start offering wealth management
services. How important is that to Clavis?
Van Hastenberg: We applied for the AFM license
to avoid entering dangerous territory with our
fiduciary services. Other advantages for existing and prospective clients are that the license
means we are now supervised by the AFM on
a firm-wide basis and we need to meet strict
capital requirements. In addition, backed by
our license, we feel we are better equipped to
perform our other asset management services:
fiduciary management, wealth management coordination and direct investments.
IS
© Clavis
What do you see with regard to real estate
Diagram Asset Management 2.1 “The chain is only as strong as the weakest link.”
in your clients’ portfolios?
What are the main drivers for your clients
Clavis Family Office BV - Hof van Zevenbergen 1A - Postbus 1661 - 5200 BS - ‘s-Hertogenbosch - The Netherlands
Dill: Most clients own
direct real estate themto invest in real estate?
T +31 (0)73 744 00 07 - F +31 (0)73 744 00 06 - info@clavisfamilyoffice.nl - www.clavisfamilyoffice.nl - KvK 17.234.593
selves, often in connection with their family
Van Hastenberg: Given their entrepreneurial hisbusinesses. That means that their real estate
tory, most have experience with real estate. Real
_clavis-schema-handout-UK.indd 1
holdings are dependent
on their own personal
estate investments increase the recognisability
management and success, which is a large conof the portfolio which is often an important eletinuity risk. Typically, these real estate investment. Apart from that, real estate is tangible, it
ments lack diversification across sectors and
lowers the risk profile of the total portfolio, gengeographies (they are often local or regional
erates an annual cash return and provides inflainvestments). They often lack sufficient scale
tion protection to some extent. All this makes it
as well.
a sector our clients feel comfortable with.
When you say financing, do you also mean
real estate financing?
Van Hastenberg: Definitely, in multiple forms.
This includes development financing, bridge financing, mortgage financing and old school real
estate financing. For example, we have recently
provided construction financing to a Dutch developer for a German development project in
which IBUS will oversee the developer during
the construction phase.
S P R I N G 2 0 14
Is the current period a good time to invest
in real estate?
Van Hastenberg: Yes, we think it is. Obviously,
it differs per country, project and partner,
which means that we need to be very selective.
However, we believe that real estate equities
have seen most of their performance, just like
bonds. In a gradually improving economic environment, real estate as a late cyclical sector is a
good choice. This is further underpinned by the
fact that there is less institutional money available for many interesting projects. This obviously
7
Investment process
Designing
proper strategy
Sourcing
investment
propositions
Financial /
economical due
dilligence
benefits those investors with cash to invest.
Finally, large financial institutions want to sell
their real estate due to new regulations (Basel III
for banks, Solvency 2 for insurers) and this creates interesting secondary opportunities.
What needs to be done before an actual
investment is made and what needs to be
done after the investment?
Dill: A number of our clients built their portfolio by buying buildings and/or participations
without having a clear sense of direction at the
start. After a few years they realised that their
portfolio is a chain of opportunistic investments
that lacks diversification and requires too much
of their time. An essential first step, therefore,
is to start by determining a proper strategy
that provides focus and direction. Later steps
include sourcing the right funds, financial/economic and legal/fiscal due diligence. Once the
right investment has been identified, we assess
structuring and subscribe. After the investment
has been made, depending on the client’s preferences, we may be engaged to perform review &
control and cash management (managing capital calls and distributions). Finally, we typically
provide our clients with integrated reporting
across their direct investments. As a result of
this approach, clients have much more of a grip
on and control over their portfolio. And they can
choose to what extent they want to be involved
themselves, which can range from very handson to completely hands-off.
What is your best practice advice with regard to structuring?
Dill: We always try to arrange that all invest-
Fiscal / legal due
dilligence
Completing
subscription
Monitoring,
reporting
and cash
management
ments are governed through one entity which
gives the family control and continuity (familie­
stichting in Dutch). This proves to be a very efficient way for a family to arrange its affairs and it
helps when communicating with and involving
the next generation. Moreover, it ensures that
family wealth can be managed strategically and
in its entirety. We believe a VBI (Vrijgestelde Be­
leggingsinstelling) is a good entity to allocate assets to as it has an advantageous tax regime and
offers more flexibility than many people think.
That is an interesting statement because
what we hear is that the VBI does not allow
real estate investments.
Dill: We have structured both listed and private
(national and international) real estate investments through a VBI so we can confirm that it
works. The main criterion for a VBI is that the
investments are classified as a financial instrument and most of the real estate investments
that we make on behalf of our clients are. One
of the few investments that cannot be structured through a VBI is direct real estate in the
Netherlands. Those investments need to be
structured outside a VBI.
What do you consider your biggest challenge going forward?
Dill: One of the biggest challenges when building a high-quality portfolio of direct investments
is sourcing the right counterparties. We spend
considerable time selecting parties to work
with. This goes for all segments within direct
investments, including direct real estate.
Thank you for the interview!
Organizational chart Clavis
8
PROPERTY IN PERSPECTIVE
Goudse Verzekeringen headquarters
Goudse Verzekeringen: Redevelopment of our
headquarters in Gouda: why we are considering it.
Goudse Verzekeringen is an independent Dutch insurance company based in Gouda. The
‘Goudse’ as it is called was established in 1924 by Geert Bouwmeester Sr. His family still owns
the majority of the Goudse and is still involved in the day to day management of the company. The Goudse primarily focuses on insurance for small and medium-sized enterprises.
The Goudse offers a great variety of insurance solutions, including life, non-life and income
insurance. The Goudse owns its headquarters in Gouda, which has a GLA of 14,000 sqm. The
company has implemented efficiency strategies and reorganisation programmes, as a result
of which less office space is required at its headquarters. With office vacancy in Gouda presenting the Goudse with extensive leasing challenges, they hired IBUS Asset Management to
research and implement ways of redeveloping part or all of its headquarters. We interviewed
Geert Bouwmeester Jr, grandson of the founder and Vice President at Goudse Verzekeringen.
Pepijn Morshuis and Erik van Langeveld from IBUS joined him in the interview.
rely on information from my father. When they
were built, we wanted maximum flexibility that
would result in a building that was exactly as we
wanted it at a location that was most convenient
for us. We had the means to finance the building
and saw it as an investment. We have no plans
to change this situation.
Geert Bouwmeester
When were the Goudse headquarters built
and how would you describe the building?
Bouwmeester: They were built at the end of the
seventies and we moved into them in 1980.
Our major focus was on quality, which led to a
sustainable building. To illustrate this: we still
have our original ceilings. We have a five-floor,
no-nonsense building in which straight lines
dominate. It is an open plan office, where our
people are visible and accessible, enabling them
to work together quickly and successfully.
Why does the Goudse own its headquarters
and do you want to change this?
Bouwmeester: I was about ten when the plans to
build our headquarters were made, so I have to
S P R I N G 2 0 14
Has the recent crisis and the increase in use
of technology affected how the Goudse is organised and what impact has that had on
the number of employees and the amount of
space each employee uses?
Bouwmeester: Of course the crisis has affected
us. But it has not led to a major change in our
strategy and organisation or to a dramatic cutback in employees. As far as the latter is concerned, computer technology has played a far
more important role and for many years now. It
has led to a steady decrease in the number of
employees.
Whether people work with pen and paper or
a computer, they need a desk. In that respect
things haven’t changed much. Nevertheless,
computer technology has led to a significant decrease in the amount of space each employee
uses, for several reasons. To begin with, we
need less office space to store information.
Secondly, computer technology has enabled
us to ­create flexible work spaces, so that one
desk can sometimes be used by more than one
employee. In the third place, many employees
spend part of their working week at home,
working online.
9
When did you come to the conclusion that
redevelopment of your headquarters ought
to be considered?
Bouwmeester: Initially, we tried to let part of our
building to third parties. But in today’s market,
where there has been an enormous decrease in
demand, this was not possible. About two years
ago, we came to the conclusion that we had to
find a different solution by considering redevelopment.
What do you aim to achieve through this redevelopment process?
Bouwmeester: We aim to find a lasting solution
to letting part of our building in a commercially
acceptable way.
How did this redevelopment request end up
with IBUS?
Morshuis: We regularly discuss our real
estate
experience
with advisors who
have clients in need
of help with their
real estate through
our network in the
financial
services
industry.
Goudse
Verzekeringen disPepijn Morshuis
cussed the challenges of their headquarters in Gouda with
KPMG, who are aware of our capabilities in this
respect. Through KPMG we came into contact
with Geert Bouwmeester.
But we know IBUS as a real estate fund initiator. Isn’t this a totally different field of
expertise?
Morshuis: Yes and no. On the one hand our
main focus in the past has been to create investment opportunities for investors who had
a need for or wanted to invest in property, but
had no direct access to deals or did not have
the necessary funds to make investments on
their own. On the other hand, IBUS has always
invested in properties and portfolios requiring
a certain amount of repositioning, redevelopment or other form of active asset management.
The experience we have gained over the last 20
years with our asset management activities can
be put to good use in assignments like the one
for Goudse Verzekeringen.
10
What is the task and role that the Goudse
has given IBUS?
Van Langeveld: In
the first phase, we
operated as a consultant where we
analysed the possibilities for optimising the Goudse’s
office
use
and
subsequently conducted a feasibility
study into the comErik van Langeveld
mercial,
technical
and most financially attractive redevelopment
scenario for the building. This resulted in advice to modernise and extend the existing retail
section of the building and convert the two top
floors from offices into apartments. In the second phase, the Goudse has given us the role of
project manager and asked us to implement this
redevelopment strategy to the level of the preliminary design.
What is the process that IBUS and the Goudse
will go through together?
Van Langeveld: The joint target consists of extending the retail part as well as converting
the two top floors into approximately 40 apartments up to the moment that, after having selected a contractor, construction work can start.
This will be done in the most effective way possible, in which IBUS will provide its commercial
and financial expertise and will align with all
the stakeholders, such as the municipality of
Gouda, the architect, estate agents and advisors. The process is divided into phases, so that
after each level is completed, the Goudse can
decide on its “go/no go” decision in each phase.
To what extent are the board and employees of the Goudse involved in this process?
Bouwmeester: The decisions regarding our
building are made by our board. Our employees
do not play a role in this. But we do keep them
informed, of course.
What redevelopment view do you have for
the building?
Morshuis: The Gouda office market has one of the
highest vacancy rates in all of the Netherlands.
Despite the good quality and great location of
the building, it is therefore hard to make the
PROPERTY IN PERSPECTIVE
continuation of the building economically feasible as rented office space. In other words: a new
best and highest use for the building needed to
be established. The excellent location, next to
the railway station and the historic, retail-oriented city centre, as well as the suitable set-up
of the structure and floor plates of the building,
provide a great opportunity to change the use
of parts of the building to retail (ground floor)
and apartments (top two floors), while retaining
a large part of the building as the recognisable
headquarters of Goudse Verzekeringen.
How long will the redevelopment process
take?
Van Langeveld: This depends to a large extent
on how well the municipality of Gouda cooperates in altering the zoning plan and of course on
the pre-letting success. The procedure for the
expansion of the retail area will take less time
than the conversion into apartments. We expect
the lead time for delivery of the stores to be a
minimum of 15 months and for the housing an
additional 12 months.
What do you see as the biggest challenges
in this process?
Morshuis: Aligning all stakeholders. Besides
Goudse, the municipality of Gouda, residential
neighbours, the church and other commercial
parties need to be aligned in order to ensure a
smooth rezoning and repositioning process.
Bouwmeester: I couldn’t agree more.
When will you consider this assignment a
success?
Bouwmeester: When we have reached a situation where our vacant office space is operated
in a commercially viable way, to the satisfaction
of all stakeholders involved: not only our company, but also our employees, the municipality
of Gouda, and last but not least: our new neighbours!
Morshuis: When the amended configuration and
use of the building proves to be in line with
what the market is looking for and thus provides Goudse with a solid, long term investment
in their headquarters building.
S P R I N G 2 0 14
11
C HANGES IN PORTFO LIO
Acquisition and private placement of
a rental apartment building on West
171st Street, New York, US
IBUS has finalised the acquisition and placement of a rental apartment building on
171st street in Washington Heights, northern Manhattan. The equity of USD 3.2 million was invested by one Dutch high net
worth family. The acquisition price was
approximately USD 5.4 million, equating
to a net cap rate of about 3.8%. The building was built in 1915 and consists of 31
apartments. Our value-added investment
strategy includes renovating the apartments and the general areas in the years
to come. IBUS completed the investment in
partnership with a New York-based investment partner.
Disposal of rental apartment building
in Washington DC, US
IBUS has sold its apartment building on
Channel Square in Washington, DC. The
building, with a total of 223 apartments,
was part of a larger Fund with multiple
apartment buildings in Washington, DC.
This was the last remaining complex of
the original 750 apartment units in this
Fund. The building was sold to its tenants,
who purchased the building together with
two operational partners. The sales price
amounted to USD 35,200,000 (before sales
costs). It was acquired in July 2002 for USD
12,633,000 (including acquisition costs). A
major refurbishment and reconfiguration of
the building was done in 2011 costing USD
3 million. The total return to the investors
in the Fund amounted to 18%, which was
13% on an IRR basis.
Acquisition and placement of redevelopment project in Ackerstrasse,
Düsseldorf, Germany
Together with local German development
partner Fitis, IBUS has acquired and placed
an urban infill location in a desirable residential area in Flingern-Nord, Düsseldorf.
The investment goal is to redevelop the
existing residential and commercial space
into 35 apartments (average of 108 sqm)
and 8 town houses (average of 140 sqm)
which will be sold individually. The expectation is that the project will run for 3.5
years.
Acquisition and private placement of
rental apartment building: Wadsworth
Avenue, New York, US
IBUS has finalised the placement of a rental
apartment building on Wadsworth Avenue
12
in Washington Heights, northern Manhattan. The equity of USD 4.6 million was invested by a small group of HNW investors.
The acquisition price was approximately
USD 6.8 million, equating to a net cap rate
of about 3.7%. The six-story building was
built in 1909 and consists of 31 apartments
totalling 27,450 sq ft (2,550. m2). Our
value-added investment strategy includes
renovating the apartments and the general
areas in the years to come. IBUS completed
the investment in partnership with a New
York-based investment partner.
Sale of remaining three town houses
in The Bellingrath, Atlanta, US
Sales contracts for two town houses were
closed in Q1 2014; unit 8 was sold for USD
2.1 million and unit 7 for USD 1.8 million.
The final town house, unit 4, went under
contract for USD 2.0 million in January
2014 and will be closed by mid-2014. The
Bergedorfer Strasse, Hamburg-Geesthacht, Germany
town houses are 6,215 sq ft each (580 m2).
Asset Management for third parties –
Groothandelsgebouw, Rotterdam,
Nether­lands
Backed by a request from some of its shareholders, stock-listed real estate company
Groothandelsgebouw in Rotterdam has
contracted IBUS Asset Management as an
independent party to investigate possibilities for improving the company’s return.
Asset Management for third parties –
Development project, Düsseldorf,
Germany
IBUS has been asked to monitor the developer of a large development project in Düsseldorf on behalf of a Dutch family office.
The assignment includes monitoring the
due diligence process on the investment,
selecting the contractor, closing debt financing, finding an end investor and selling to an end investor.
Krijgsman 6
P.O. Box 8010
1180 LA Amstelveen
T. +31 (0)20-755 90 00
F. +31 (0)20-755 90 90
E-mail: info@ibus.nl
www.ibus.nl
Follow IBUS Asset
Management on Linkedin
The IBUS Company is an independent
group established in 1992 by Onno Husken,
former Chief Executive Officer of Wereldhave
N.V. and Kempen & Co. IBUS develops and
invests in office, retail, residential and
hotel properties in the United States,
Nyenrode Private Wealth Management
For the fifth year in a row, IBUS gave a presentation on How to Invest in Real Estate at
Nyenrode Business University. The presentation was part of the Private Wealth Management programme which covers topics
like Family Governance, Wealth and Fiscal
structuring and Investments including Real
Europe and Asia. Since inception, 61 real
Estate.
These assignments are directed towards
estate funds, with a total investment
consideration in excess of
€
1.6 billion,
have been introduced with private and
institutional investors. Over the years,
more
than
half
of
these
investments
were successfully sold. IBUS also uses its
real estate knowledge and experience
to
advise
companies
financial
and
institutions,
institutional
listed
investors.
portfolio analysis, asset allocation policy,
investment strategy and second opinions
on direct and indirect real estate investments.
in
IBUS
Amstelveen
is
(The
based
in
offices
Netherlands)
Washington DC (United States).
and