Tag Archives: Holland

Major European deals give flavour of the way UK rental market could go

Two new housing deals in mainland Europe have given a flavour for the potential in the UK residential rental market, once institutional investors have a stake in the market.

Already the UK market has seen the Abu Dhabi Investment Authority back Fizzy Living with a £200 million investment, while Qatari Diar has backed Get Living London’s East Village rental properties in Stratford. But recent news from Holland and Germany shows how a much larger scale rental property market will encourage larger scale institutional investment, and the major portfolio deals that go with this. There is also the potential for these mainland European investors to step across the Channel and make investments in the UK, if they can see a liquid market with returns that meet their corporate requirements.

In Holland, Dutch investor Bouwinvest has agreed a deal to sell 723 homes to a joint venture involving Credit Suisse and Qatar Holding. With a transaction value of around EUR90 million, the portfolio includes 723 homes in 16 apartment blocks, with just over half of the units social rented, while the remainder are private rented homes.

“The changes in the rental market and the favourable outlook have increased the interest for investors in Dutch dwellings,” said Bouwinvest director Allard van Spaandonk. “This gives us an excellent opportunity to use capital to rebalance our portfolio.” As a result, Bouwinvest will reduce the volume of regulated rental properties in its portfolio to just 15%.

Bouwinvest has around 15,000 rental properties across Holland, mostly in open market rent and at the higher quality end of the market. It looks to provide those investing in the company with a return of 6%.

And in Germany, consolidation in the housing market has seen property company TAG Immobilien grow its rental homes portfolio to 70,000 homes, from owning just 4,000 in 2009. The portfolio is a mixed bag, including 32,000 homes in eastern Germany. Recently, chief executive Rolf Elgeti has been informally canvassing potential institutional buyers for the portfolio, according to German newspaper Handelsblatt. But Elgeti has said any offer will need to provide a good deal for shareholders.

M&G invests in Holland housing as Dutch investors look to UK PRS market

Investor M&G has committed EUR110 million of mortgage finance to back the acquisition of a Dutch portfolio of 1,250 homes, including rental flats in Amsterdam. Yet the deal comes after the investment manager recently suggested investment activity was likely to be in the other direction, as Dutch residential investors eye up opportunities in the UK market.

The Dutch deal sees M&G providing 10 year funding for the portfolio of homes in Dutch cities, as well as a few commercial properties. The homes are located in housing apartment complexes in Amsterdam, Groningen, Heerenveen and Rotterdam. Unusually, the deal gives the borrower a combination of fixed rate and floating rate finance, a more flexible arrangement than that generally offered by Dutch banks.

“The Dutch market, both in the commercial as in the residential area, has had a difficult period and fundamental problems but, for investors such as M&G with good resources and client capital to deploy, there will always be relative value opportunities,” said M&G’s head of senior mortgages Paul Dittmann.

“We have been and still are a large lender to residential portfolios in the UK and Germany, and the asset class is well suited to our investor base. The Dutch market has its own particularities, including a high level of regulation in both the rental market and owner occupier market, but on the whole this was an appealing investment for us.”

The deal is a contrast to market comments from colleagues at M&G who last month suggested it is likely Dutch investors will shortly plough into the UK private rented sector market, where a “perfect storm” is inviting them to take an interest. “Shifting demographics, relatively low levels of construction and landlord-friendly UK regulations are trends that will continue to boost the UK rented sector for the foreseeable future,” said Stefan Cornelissen, head of institutional business development for Benelux and the Nordics at M&G Investments. “Such factors are luring Dutch and other international investors to the UK.”

For the Dutch, the UK market also contrasts with their own home situation, where renting is in decline, with the PRS sector representing 10% of all households, against 17% in the UK. “This suggests that in terms of the number of dwellings in the PRS, England alone is more than three times the size of the Netherlands,” said Alex Greaves, residential property fund manager at M&G.

The Dutch market has also seen good supply of new homes, with almost 10% added to the national stock of homes in a decade, moving ahead of household growth. In contrast, the UK continues to see a shortage of housing, largely due to the inability of politicians to ease the country’s planning system to meet demand.