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Message from the chairman

Dear stakeholders,

The Retail Fund had a good year in 2017, with the total Fund return of 7.8% exceeding our expectations and outperforming the IPD Property Index. The Fund also continued to optimise its portfolio and record growth on a number of fronts. We are clearly taking full advantage of the recovery of the Dutch economy and the steady rise in both consumer confidence and consumer spending, as well as the rising demand for retail investments, as both Dutch and foreign investors look to increase their exposure to retail real estate.

The market is still very fragmented as it makes the transition it needs to respond to ever-increasing online sales. This is where our very clear focus on Experience and Convenience is paying off, as investors have to be very careful where they invest in terms of the assets they acquire. On that front, the Fund made some useful acquisitions: two high street shops in Nijmegen (Experience) and two shopping centres in Zoetermeer and Hengelo (Convenience), all of which will contribute to our direct returns in the future.

Just as importantly, we continue to optimise the retail portfolio through redevelopment, upgrades and a wide range of sustainability measures. Last year saw the completion and delivery of the Molenhoek shopping centre in Rosmalen and solid progress in the redevelopment of De Munt in Weert and the Goverwelle shopping centre in Gouda. These investments are an essential part of our effort to future proof our portfolio and respond to current and future retail trends, plus they helped to increase our occupancy to 95.6% in 2017, from 94.7% at year-end 2016.

A good example of how these investments in sustainability are paying off was the 20-year lease we signed with the DOK library and art centre in Delft, which has teamed up with cultural education centre VAK for the optimal use of the available space. We clinched the deal after committing to extensive renovations and energy-efficiency improvements. The Sprengmolen Complex is now 100% leased to tenants with a sustainable and future-proof strategy, with the financial backing of the Delft city council.  

On another front, we are already seeing the convergence of the needs of online and bricks and mortar retailers. Online retailers still have a problem with the so-called last mile, delivery to their customers, and are looking to set up drop-off and pick-up points. More and more online retailers are now opening stores, plus they are keen to cooperate with bricks and mortar retailers and other retail players on this front.

We are also in talks with local and national government bodies on the much-needed rejuvenation of a number of medium-sized cities, as these very vulnerable to growing online sales and a number of demographic trends. They need a dynamic city centre to survive and thrive and looking at how to add the Experience element, a combination of shopping, culture and leisure, to attract more visitors.

Another potential challenge is the government’s recently announced policy on REITs, which would see the introduction of income taxes on real estate investments. Of course, we will deal with this, but this might actively discourage investments in real estate until we have a clear picture of what is going to happen. With regard to the project Damrak and Nieuwendijk, the Retail Fund is in discussion with the Dutch tax authorities about Bouwinvest Development B.V’s compensation calculated for its redevelopment activities. Untill now, the result is not clear yet.

However, we still have a lot of confidence in our portfolio. We have managed to maintain our high occupancy rate thanks to a large number of long leases, but also thanks to our decision to focus on Experience and Convenience. This is why we will continue with this strategy, while taking into account the reality of the transition currently underway in the retail market as we make new acquisitions. Others share this faith, as we added a new investor in 2017 and expect to add more in the period ahead.

We are a long-term investor and we have the knowledge, determination and stamina to make things happen and adapt to the ever-changing retail environment. Take Muntpassage in Weert and Molenhoekpassage in Rosmalen; we have invested a lot of time and effort in future proofing these shopping centres in cities that need a boost to keep their centres vital and healthy. Hopefully, the national government and local authorities will realise how important this is for many medium-sized cities, and to relieve the pressure in the Randstad region. These kinds of investments create a virtuous circle for cities, retailers and people. We fully intend to be at the forefront of initiatives to breathe new life into city centres and to help the retail sector adapt and thrive long into the future.

All that is left now is for me to thank our investors for their continued faith in our strategy and all our employees for their hard work and commitment to Bouwinvest in 2017.   

Dick van Hal

Chairman of the Board of Directors

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