21 January 2020 | 4 min.
Below we show prime examples of how the Manager, a.s.r. real estate, has been able to add value to the Fund in today’s challenging retail market. Making optimal use of the asset management teams and acquisition managers and with dedication to the vehicle, these case studies demonstrate the hands-on and active approach necessary in today’s market.
The ASR Dutch Prime Retail Fund (‘ASR DPRF’) is not active in an expanding real estate occupier market. Instead, ASR DPRF’s targeted growth has to be opportunity-driven, rather than securing pipeline commitments, and the Three Year Business Plan objectives for growing the Fund remain conditional on the investment opportunities that arise. The Fund has a targeted approach in terms of real estate markets, such as the top 15 high street cities and dominant district shopping centres. Together with disposals, this approach should further de-risk the portfolio.
The acquisitions that are suitable for the Fund in the upcoming period of 2020-2022 are likely to resemble the case studies outlined below, which are prime examples of how the Manager has been able to add value to the Fund. Using the team of asset managers, account managers, property managers and acquisition managers, who are dedicated to the vehicle, these case studies demonstrate the active, hands-on approach of the Manager, an approach which is vital in today’s retail market.
The Fund owns a shopping centre scheme in Middelburg, which was outdated in terms of both function and sustainability. Over the course of the last year, the Manager came up with an ambitious plan to improve the property and transform it from a single-tenant property with subleases to a small convenience-oriented shopping centre. Upon completion, in 2020, the property’s energy consumption per square metre will be almost three times lower than it was in 2018-2019.
The Manager identified a need for improved professionalism in the Food & Beverage (F&B) sector in the Netherlands, reinforced by millennials, gen X’ers and babyboomers who eat out more, and the trend towards eating out as a popular activity for recreational shoppers. After careful consideration, the Fund has been able to acquire an F&B property in The Hague, close to the Fund’s Kalvermarkt Primark asset. The long WAULT, relatively favorable terms and the mixed-use property all make this a solid addition to the portfolio in The Hague.
With a dominant position in city-centre locations, where supply is still limited and existing demand from retailers is strong over multiple cycles, the Fund has been able to outperform the MSCI Dutch Retail Total Return Benchmark. To assure strong future performance, the Fund has been able to acquire a high street portfolio of 14 high street properties in Amsterdam, Utrecht, Eindhoven and Maastricht over the past year, all in A1 locations in top 10 high street cities. The acquisition process, which was long in the making, was performed by a.s.r. real estate without heavy reliance on third-party advisers.
This property in Houten Castellum was acquired in 2017, when yields for high-quality shopping centres were still more attractive than they are today. As part of the acquisition proposal, the Manager identified certain areas where value could be added, such as reducing vacancy (from 11% in 2017 to c. 3% in 2020) and redesigning the internal lay-out, reinforced by the signing of a lease with Kruidvat in a previously vacant part of the shopping centre.
The listed status of several properties owned by the Fund can occassionally act as a barrier to CSR initiatives and accommodating tenants. However, tenants generally appreciate the listed qualities of the Fund’s listed properties and these properties offer an abundance of character and authenticity. In this case study, the Manager describes how original features were restored in The Hague, all while respecting the listed status and without sacrificing commercial returns.
Although bankruptcies are quite common in ASR Dutch Prime Retail Fund’s portfolio, due to the low delinquency rate and up-to-date terms, not all bankruptcies hurt the Fund. In the case of Damrak 25, for instance, the former tenant’s path into administration resulted in an opportunity for the Fund to attract a food-related retailer. The property, which has been in the Fund’s hands for over a century, is now seeing double-digit rental and value growth due to the Manager’s capture of its rental potential.
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