Dutch Pension Fund Manager Bets on Downtown Stores as Rents Rise

The manager of the world’s third-largest pension fund increased its investments in Dutch city-center stores after retail properties beat other types of commercial real estate in the Netherlands last year.

APG Algemene Pensioen Groep NV invested about 200 million euros ($261 million) in the Dutch Prime Retail Fund run by insurer ASR Nederland NV’s property-management arm, said Patrick Kanters, who oversees APG’s 28 billion euros of real estate investments.

Retail properties generated returns of 7.6 percent last year, the highest in the Dutch commercial real estate market, according to Investment Property Databank Ltd. Stores in Dutch cities including Amsterdam and Rotterdam have benefited from local planning policies dating from the 1970s designed to preserve city centers by discouraging out-of-town retail parks or large malls.

“The fund’s high street retail shops are located in the top Dutch inner cities, providing further embedded rental growth,” Kanters, 44, said in an interview at APG’s offices in Amsterdam last week.

APG has invested or pledged about 1 billion euros this year, including the 200 million euros earmarked for Dutch retail properties in ASR’s second round of money-raising. In December, ASR raised 380 million euros for the fund, which owned 210 stores on city shopping strips, supermarkets and shopping centers valued at about 1.1 billion euros at the time.

Koningsplein Purchase

In July, the Dutch Prime Retail Fund completed the acquisition of a 7,500 square-meter (81,000 square-foot) store with upper-floor office space on Koningsplein, a prime shopping strip in central Amsterdam, for an undisclosed sum.

APG manages 314 billion euros of assets for seven pension funds including Stichting Pensioenfonds ABP, its owner. APG’s latest investment is equivalent to 90 percent of total retail property sales in the Netherlands during the first half, according to calculations using data compiled by Los Angeles-based CBRE Group Inc.

About 40 percent of APG’s real estate investments are in funds or direct ownership of properties, such as its stakes in Westfield Group’s Stratford City mall in east London and the Cap 3000 mall in the French city of Nice. The rest is in stocks.

Joint Investors

APG prefers to invest in partnership with other asset managers to provide them with the ability to do larger transactions or in funds with a limited number of investors “so that we are nearer to the deals,” Kanters said.

Earlier this month, APG joined Government of Singapore Investment Corp. and AP4, a Swedish national pension fund, in committing 1.6 billion Swedish kronor ($240 million) to a Swedish real estate fund managed by Stockholm-based Andersson Real Estate Investment Management AB.

APG also plans to step up its investments in real estate lending, Kanters said. The company committed 38 percent of the 492 million pounds ($792 million) raised in May 2011 by Pramerica Real Estate Capital I fund, managed by a unit of Prudential Financial Inc.

“We’re planning to do more in the junior and mezzanine debt space in Europe, targeting the most deep markets in Europe,” such as the U.K. and Germany, Kanters said.

APG holds stakes of at least 5 percent in some of Europe’s and the U.S.’s largest publicly traded companies, including Unibail-Rodamco SE, Simon Property Group Inc., Klepierre SA, Corio NV, Hammerson Plc, British Land Co. and Segro Plc.

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