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Directors’ report

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Results of the real estate portfolio

In addition to a social return, Bouwinvest aims for stable absolute returns and outperformance of the relevant indices. These figures are shown below. This is followed by a brief review per fund and mandate.

Funds and mandates (x € million)

2021

Plan 2023

Secured pipeline 2021

Return 2021

Relative performance 2016 - 2020

Dutch Residential Fund

7,681

8,662

533

11.1%

0.8%

Dutch Office Fund

1,239

1,369

27

7.3%

0.7%

Dutch Retail Fund

976

1,060

24

4.4%

3.8%

Dutch Healthcare Fund

456

628

54

10.5%

-

Dutch Hotel Fund

356

395

0

7.6%

-

Bouwinvest Development

61

4

0

10.5%

-

Europe Mandate

1,481

1,903

517

24.6%

(1.0)%

North America Mandate

1,939

1,931

319

28.7%

0.6%

Asia-Pacific Mandate

1,358

1,783

524

9.8%

1.1%

Other (The Netherlands)

109

    

Residential Fund

Residential Fund, Tudorpark, Hoofddorp

Despite the increase in the real estate transfer tax, the Residential Fund recorded solid returns in 2021. Driven by the growing housing shortage, particularly in the mid-market rental sector, investment values rose sharply in 2021, resulting in capital growth of 8.9%, well above the forecast at the start of the year. The income return came in at 2.1%, taking the total return to 11.1% (6.8% in 2020). The relative performance against the MSCI Netherlands Index was an outperformance of 0.8% over the five-year period of 2016-2020.

The Fund did face Covid-19-related construction delays in a number of projects and delays in closing deals for new projects. Nevertheless, the fund acquired new-build projects in the Holland Metropole region (one project in The Hague, one in Hoofddorp and two in Rotterdam) totalling approximately €153 million and added four projects to the portfolio (75 houses and 299 apartments). Just under 60% of the homes the Fund acquired last year fell within the affordable mid-market rental segment. In 2021, the Fund also made a start on income-dependent allocation when renting out homes. The Fund will continue this initiative in 2022.

Office Fund

Office Fund, Central Park, Utrecht

Thanks to the upward revaluation of a number of assets, the Fund posted capital growth of 4.6%, well above the -1.7% expected at the start of the year. The Fund's income return of 2.6% was slightly higher than expected, taking the total return to 7.3% (4.8% in 2020). The relative performance against the MSCI Netherlands Index was an outperformance of 0.7% over the five-year period of 2016-2020.

Last year was a particularly productive year for the Office Fund. One of the milestones was the completion of Central Park in Utrecht. Due to the pandemic and working from home, the Fund was able to accelerate the renovation of WTC Rotterdam and completed the renovation of Centre Court in The Hague. In 2021, the Fund signed leases for 4,400 m2 with stable, reliable tenants for a number of office properties, including Central Park, WTC Rotterdam and Centre Court. This led to significant reduction of the Fund’s vacancy risk.

Retail Fund

Retail Fund, Damrak, Amsterdam

The Retail Fund posted a total return of 4.4% in 2021, well above the plan of 0.5% and about 4% higher than the market average. Although the income return was lower than budgeted, largely due to the Fund’s financial assistance for tenants, it still came in at 3.9% (2020: 3.8%). The sharp decline in the value of experience retail properties was fully offset by the increase in the value of convenience properties, resulting in capital growth of 0.5%, versus a plan of -3.9% (2020: -3.4%). The relative performance against the MSCI Netherlands Index was an outperformance of 3.8% over the five-year period of 2016-2020.

A number of tenants in the experience segment of the Retail Fund once again experienced difficulties in 2021 and the Fund was forced to grant rent reductions to several tenants. Bouwinvest continues to have confidence in these high street retail properties for the long term and is actively involved in liveability initiatives in several cities. In the periods between lockdowns, consumers were also happy to resume their visits to shopping centres. Despite the challenging market, the Fund was able to reduce vacancy rates even further last year. This was partly due to proactive lease negotiations, including TK Maxx’s takeover of the C&A lease for the retail unit at Damrak 79 in Amsterdam (effected in January 2022). In addition, the Fund worked closely with supermarket retailers to facilitate their expansion plans. In 2021, the Fund acquired a project on the Lijnbaan in Rotterdam, consisting of 17 retail units, plus three high street stores in Eindhoven. In addition, despite the difficult market, the fund managed to sell the Muntpassage shopping centre in Weert and a retail unit on the Spuistraat in The Hague, as these assets were no longer a good fit with the Fund's strategy.

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Healthcare Fund

Healthcare Fund, Villa Verde, Harderwijk

The Healthcare Fund posted a total return of 10.5% in 2021 (4.0% in 2020), significantly better than the plan of 1.8%. This was primarily due to higher than expected capital growth of 7.2% (versus a plan of -1.7%), which was driven by market demand and increasing competition for healthcare real estate, the strong economic recovery and continued government support for the healthcare sector. Although the Fund's income return was lower than expected (3.2%), largely due to incidental maintenance, rent deferrals and discounts, the Fund expects this to recover in 2022 thanks to our high occupancy rate and a number of new assets.

The Healthcare Fund made good progress on all its strategic pillars last year, exceeding almost all targets for the financial year. The Fund acquired new complexes in the mid-market rental segment and intramural segment for € 82 million last year. The Fund also saw a significant improvement in its occupancy rate, which had risen to 98% by the end of the year. On the social return front, the continued development of the community-based approach proved very popular with tenants in the LIFE complex in Amsterdam. The majority of tenants are now participating in this initiative and the tenant satisfaction score for the complex saw a marked improvement. The Fund has now implemented this community concept at all Assisted Living complexes, ranging from a hostess to a full-fledged programme.

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Hotel Fund

Hotel Fund, Postillion Hotel, Rotterdam

The value of the Hotel Fund's portfolio remained stable in 2021; some assets even increased slightly in value. Following the decline in value of -6.8% in 2020, the fund posted capital growth of 3.6% in 2021, despite the expected decline at the start of the year. The Fund’s income return remained below plan at 3.9% due to the postponed completion of Hotel Postillion WTC Rotterdam and because the Fund recorded more rental losses than planned due to Covid-19. The total return came in at 7.6% (-4.3% in 2020).

In the year under review, the Hotel Fund devoted a great deal of time and energy to relationship management and making agreements with tenants regarding rent payments. The Fund also held numerous discussions with hotel operators about developments in the sector and forecasts for recovery. The Fund’s portfolio includes quality hotels in city centre locations in three major cities (Amsterdam, The Hague and Rotterdam). Covid-19 has had an enormous impact on the hotel sector, even though there have been differences between the various concepts. The completion of Hotel Postillion WTC Rotterdam marks another step in the Fund’s diversification across the most attractive hotel cities in the Netherlands. The benefits of a diversified portfolio also became even more apparent during the pandemic, as individual assets were affected in different ways at different stages of the pandemic. For example, the hotels in the portfolio were hit hardest by the restrictions on international tourists, while long-stay accommodations recorded higher occupancy rates due to the fact that they had numerous alternative rental options, such as temporary housing or work space. The impact of Covid-19 also varied by city. For example, the NH hotel in The Hague benefited from its proximity to the Scheveningen beach in the summer.

Europe Mandate

Europe Mandate, Ardstone, Dublin

The Europe Mandate recorded a return of 24.6% in 2021 (-4.6% over 2020), mainly driven by the strong performance of residential and logistics investments. The relative performance against the INREV/GPR index was an underperformance of -1.0% over the five-year period of 2016-2020. By year-end 2021, the portfolio had a value of close to € 1.5 billion and 57% of the core investments in the European portfolio scored above average on sustainability (GRESB 4 or 5 stars). The Europe Mandate’s pipeline of committed investments currently amounts to € 517 million. The mandate made new investments of € 173 million in 2021, mainly in (affordable) rental housing in Ireland and Germany.

North America Mandate

North America Mandate, Acton Courtyard, Berkeley

The North America Mandate recorded a return of 28.7% in 2021 (-2.3% over 2020), driven primarily by the strong performance of residential and logistics investments. The relative performance against the NCREIF/GPR index was an outperformance of 0.6% over the five-year period of 2016-2020. At year-end 2021, the portfolio had a value of over € 1.9 billion and 19% of the core investments in the North American portfolio scored above average on sustainability (GRESB 4 or 5 stars). The North America Mandate’s pipeline of investments currently stands at € 319 million. Bouwinvest invested a total of € 112 million in this region, primarily in data centres, life sciences (medical research centres and laboratories) and logistics assets in the United States.

Asia-Pacific Mandate

Asia-Pacific Mandate, Esplanade, Sydney

The Asia-Pacific Mandate delivered a return of 9.8% in 2021 (2.9% over 2020), mainly driven by the strong performance of logistics investments. The relative performance against the ANREV/GPR index came in at an outperformance of 1.1% over the five-year period of 2016-2020. At year-end 2021, the portfolio had a value of nearly € 1.4 billion and 57% of the core investments in this portfolio scored above average on sustainability (GRESB 4 or 5 stars). The Asia-Pacific Mandate’s pipeline of investments currently stands at € 524 million. In 2021, this mandate committed a total of € 347 million, including investments in logistics in South Korea and Japan, housing for disabled people, data centres and offices in Australia, and residential and healthcare real estate in several countries in the Asia-Pacific region.