After well over a decade investing in Asia-Pacific real estate, the Dutch construction industry pension fund's property arm finally opened its first dedicated office in the region in January.
The new office in Sydney – Bouwinvest’s first outside the Netherlands – will spearhead its efforts to increase its Asia-Pacific property investments by two-thirds over the next three years.
To ascertain his plans, AsianInvestor spoke this week to Tjarko Edzes, director for Asia-Pacific investments at Bouwinvest, a unit of bpfBOUW, whose assets under management totalled €58.24 billion ($66.3 billion) at the end of September.
And to help make that happen, a priority is to pair up with local partners, both operating managers and other institutional investors, to pursue specific strategies, he said.
“It is good to have local presence and boots on the ground,” Edzes said. “Being permanently based in the region gives us better access to markets and our partners which further improves our ability to source and monitor the right investment opportunities.”
Australia, led by the Sydney office sector, is currently Bouwinvest's biggest Asia-Pacific market, accounting for 32% of its total regional exposure.
But there are plans to switch the focus more to the logistics and residential sectors.
“Going forward, we will continue to focus on investment opportunities that are both backed by long-term demand drivers and provide relative value,” Edzes said.
He explained that Bouwinvest, which has allocated funds to property in the region since 2005, mainly invests through unlisted vehicles but also in listed property companies and real estate investment trusts.
In the Netherlands, Bouwinvest invests in assets within five Dutch property sector funds on behalf of 22 institutional clients. Outside the Netherlands, Bouwinvest currently only invests on behalf of the pension fund and sole owner bpfBOUW, of whom Bouwinvest is an independent, separate company.
Globally, Bouwinvest’s real estate AUM total about €10 billion.
Edzes has already started to pick up the pace in terms of its Asia-Pacific investments, carrying out transactions amounting to more than €300 million in 2018.
That was two thirds more than the AUM in the region by the end of 2017 and as such on the trajectory to fulfil its 2021 allocation target. And it has continued to be active so far in 2019.
In February, for instance, Bouwinvest announced its participation in a fund targeting multifamily residential assets in top-tier Chinese markets, with an initial focus on Shanghai. The fund, managed by Charleston-based rental housing specialist Greystar Real Estate Partners, closed with total $450 million in equity commitments from Bouwinvest, the asset management arm of another Dutch pension fund, APG, and the real assets investment subsidiary of Macquarie Group.
The investment in the fund targeting multifamily residential in China is an example of how Bouwinvest aspires to seek out more specific investments with partners. After Bouwinvest first built its Asia-Pacific portfolio through funds and club deals, it has increasingly moved towards join ventures with local partners in the region with specialist knowledge.
According to Edzes, this development has been carried out to ensure increasingly strong governance rights and to get closer to a select few investors and operating partners to gain knowledge.
Although pleased with its current partners, Edzes said Bouwinvest was open to forming new partnerships with interesting strategies and looking for partners with high ethical standards, strong track records and an interest in building portfolios from scratch in niche sectors where it might take time to build scale.
Besides the China residential fund investment, other recent allocations include multifamily investments in Tokyo, student housing in Australia, logistics in Singapore and retail in Hong Kong.
Although securing core investments and stable rental income streams remains central to its strategy, Edzes explained that Bouwinvest does sometimes take on more risk both in terms of development, for instance with modern logistics, and operational for hands-on heavy niche types like healthcare and senior housing.
He added that Bouwinvest, which has some experience with mezzanine debt in both European and US markets, may also look to lend in Asia against attractive real estate strategies and assets.
In 2018, its Asia-Pacific portfolio made a net annual return of 9.2%.