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Report of the Board of Directors

Financial performance in 2017

Total return

The Fund realised a total return of 15.6% in 2017 (2016: 20.5%), consisting of 2.8% income return (2016: 3.4%) and 12.8% in capital growth (2016: 17.1%). The total return came in at € 637.6 million, compared with € 666.3 million in 2016, while the Fund’s NAV was 19.0% higher at € 4,752 million, from € 3,995 million in 2016. The capital growth is less than the nominal growth, as the nominal growth also consists of additional capital called. The main drivers for income return and capital growth are explained in more detail below.

Income return

The income return increased to € 113.9 million from € 110.0 million in 2016, an increase of € 3.9 million or 3.6%. This growth is the balance of increased net rental income from assets and increased fund and finance costs. A total of
€ 8.9 million of the higher net rental income came from existing assets. € 5.0 million of the net rental income growth was absorbed by higher fund and finance costs.

Existing assets at the start of 2017 contributed an additional € 6.1 million, or 4.7%, to the net rental income growth compared to 2016. Without the financial loss as a result of a fire in Het Kwartier, Amsterdam, on 28 February 2017, the net rental income would have been € 2.2 million higher, hence 1.7% less growth of the net rental income. The addition of 11 assets to the investment portfolio added € 3.2 million to the net rental income, a growth of 2.5% compared to 2016.

In 2017, the Fund incurred € 0.7 million in costs, mainly advertising and letting costs, for properties that are due to come into operation in the first half of 2018, such as Pontsteiger (Amsterdam) and Oostduinlaan (The Hague). These costs had a negative impact of 0.5% on net rental income.

The increase of net rental income from existing assets is the net result of the yearly rent increase per July 2017, which came in at an average of 2.9%, the increase in rent as result of the uplift in market rent levels at tenant changes, a slight increase of the occupancy rate and cost controls related to property operating expenses. By tendering maintenance activities and through the use of smart long-term maintenance schemes, the Fund was able to keep the maintenance costs at the lowest possible level, enabling the Fund to maintain the quality level of the investments.

Fund costs (administrative expenses) were higher in 2017, mainly as a result of the higher management fee, which is directly related to the growth of the Fund’s NAV. Compared to 2016, the Fund incurred more advisory costs related to further improvement of the sustainability of the portfolio.

The Fund’s income return as percentage fell to 2.8% from 3.4% in 2016. This is to a large extent the result of the high NAV of the Fund at the start of 2017, which is the result of a substantial inflow of capital of € 290 million in 2016 and the considerable value growth of the portfolio of € 556.2 million during 2016. The inflow of capital in 2017, which amounted to € 227.5 million, also had a negative impact on the income return, albeit to a lesser extent. The capital inflow in 2017 was needed to pay for the properties under construction. Without capital inflow, the income return would have been 2.9%.

Capital growth

The capital growth of € 513.4 million in 2017 was 7.7% lower than the € 556.2 million capital growth in 2016. This capital growth is the result of the value growth of the portfolio, which is the result of a combination of increased net rental income as described above, higher vacant values driven by higher demand from the owner-occupier market and continued high investor appetite leading to yield compression. In addition to the increased value of investment properties, properties under construction also contributed to the value growth of the portfolio. Value growth in the Netherlands was the highest in the Randstad. The fact that almost 85% of the Fund’s portfolio is located in the Randstad region played a major role in the higher valuations. At the same time, areas outside the Randstad have also shown significant value growth. The Fund’s capital growth as percentage came in at 12.8% in 2017, compared to 17.1% in 2016. This was largely due to the above-mentioned value growth of the portfolio.

Property performance

The total property return for 2017 came in at 16.7% (2016: 21.8%), consisting of a 3.3% direct property return (2016: 3.9%) and a 13.0% indirect property return (2016: 17.4%), which was lower than the IPD Property Index return of 16.9%. The reason for these returns are explained under fund income return and fund capital growth.

The fund return (INREV) and property return (IPD) are different performance indicators. The fund return is calculated according to the INREV Guidelines as a percentage of the net asset value (INREV NAV) and the property return is calculated according to the IPD methodology as a percentage of the value of the investment properties. For example, INREV includes cash, the fee costs and administrative costs in the calculation of the income return (INREV). Furthermore, the amortisation of acquisition is treated differently by INREV and IPD.

Capital Management


In accordance with the Information Memorandum, the Fund will be financed solely with equity and will have no leverage, but may borrow a maximum of 3% of the balance sheet total for liquidity management purposes.

In 2017, the Fund was financed solely with equity and did not use any loan capital for liquidity management purposes.

Treasury management

For treasury management purposes, the Fund acted accordingly to Bouwinvest's treasury policy in 2017, to manage liquidity and financial risks for the Fund. The main objectives of the treasury management activities were to secure shareholders’ dividend pay-out, assure other obligations can be met and to manage the Fund’s cash position.

At year-end 2017, the Fund had € 75.3 million freely available in cash and € 100 million in a 30-day deposit.

In 2017, the Fund’s cash position increased by € 61.1 million, as compared to year-end 2016. In 2017, the Fund paid out € 108.5 million in dividend to its shareholders. Also in 2017, the Fund made four capital calls for a total amount of € 227.5 million.

Interest rate and currency exposure

In 2017, the Fund’s bank balances were affected by negative interest rate developments. In order to minimise the impact of the negative interest rates on its bank balances, in 2017 the Fund used 30-day bank deposits.

As the Fund had no external loans and borrowings, nor any foreign currency exposure in 2017, the Fund had no exposure to interest rate risks or currency exposure risks.

Dividend and dividend policy

The Bouwinvest Board of Directors proposes to pay a dividend of € 90.82 per share for 2017 (2016: € 94.03), which corresponds to a pay-out ratio of 100%. It is proposed that the dividend be paid in cash, within the constraints imposed by the company’s fiscal investment institution (FII) status. Of this total dividend, 75.8% was paid out in 2017, with the final quarterly instalment paid out in March 2018. The remainder of the distribution over 2017 will be paid out in a final instalment on 26 April 2018, following approval by the Annual General Meeting of Shareholders to be held on 18 April 2018.


The Fund qualifies as a fiscal investment institution (FII) under Dutch law and is as such subject to corporate tax at a rate of zero percent. Being an FII, the Fund is obliged to distribute hundred percent its fiscal profits each year. To meet this distribution obligation, the Fund proposed to pay out hundred percent of its direct result which equals its fiscal profits.

The Fund met its obligations related to value added tax, transfer tax and other applicable taxes in their entirety in 2017.

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