Over the next 12 to 24 months, Bouwinvest, the Amsterdam-based real estate investment manager acting on behalf of Dutch pension funds, expects to deploy up to a further A$1 billion in Asia-Pacific.
Bouwinvest’s Asia-Pacific portfolio, which is managed on behalf of Dutch pension fund bpfBOUW, is valued at around A$2.5 billion, but it has the capacity to grow that to A$3-$3.5 billion over the next two years.
“We have quite a few investments to which we still have to deploy capital,” says Robert Koot, Director of Asia-Pacific Investment for Bouwinvest, who relocated from Amsterdam to Sydney in 2022.
Bouwinvest will target the living and logistics sectors – segments of the Asia-Pacific property market it sees as offering the best tailwinds for growth in coming years.
“We are a big fan of the living sector,” Koot told [i3] Insights. “If you look at the bigger picture of Bouwinvest, we have around (the equivalent of) A$25 billion under management and more than half of it is in that living sector.”
Investing for the Long-Term
“Living is perfect for long-term investors in my view. Housing is a basic need. It is a perfect category to ensure that we not only meet the financial objectives of our clients but also contribute positively to their broader societal and environmental goals.”
He adds: “If you look at other sectors, there is online shopping, work from home, AI and whatever the future brings, with these new technological trends impacting the property market in a quantifiable way. They also impact many sectors qualitatively.
“But there is one thing we know for sure: living is a basic need. You need to sleep somewhere. You need to have breakfast with your partner, fellow students or family. That will never change.”
Koot says technological changes have made the living sector even more important. “You work from home and shop from home, then it is a winning sector. It is growing with the economy and demographics.”
We are a big fan of the living sector. If you look at the bigger picture of Bouwinvest, we have around A$25 billion under management and more than half of it is in that living sector
When Koot speaks of the living sector, he thinks of the wide spectrum of living – from senior housing, assisted living and housing for people with disabilities to student housing and build-to-rent (BTR).
“Asia-Pacific presents a massive opportunity in the living sector. Currently, Japan offers the region’s most established investable universe landscape, but the sector is now taking off in Australia. If you look at the investable landscape in America and Europe the living sector is much more mature across the board.
There, the sector took off at least two decades ago and now represents 20 – 30 per cent of the institutional investment market in both regions.”
Bouwinvest is currently active in Japan, where it is invested in both multi-family and assisted living through the Nuveen platforms, Koot says.
Evolution of Australian Exposure
But it is in Australia that the Dutch investor is by far most active. It has a sizeable exposure to its burgeoning market for both student housing and build-to-rent (BTR) and an emerging market for housing for people with a disability.
Bouwinvest is one of half a dozen large offshore investors, mainly from Europe, which have provided the foundational capital to kickstart the country’s student housing and BTR industries.
The Dutch investor is not a stranger to Australia. It started investing through leading Australian property groups such as GPT Group, Charter Hall, Dexus and a number of others in their funds and clubs 15 years ago. These more passive investments were directed from Amsterdam.
But over the last decade, the Bouwinvest strategy has changed as it becomes a direct investor in partnerships and clubs to give it better control of its investments. Today, it runs up to 30 different investment strategies in Asia Pacific.
Along with its compatriot, APG, Bouwinvest was one of the first foreign investors to back a budding student housing operator, Scape Australia, in 2015. Today, Scape, which was set up by Craig Carracher and Stephen Gaitanos, is the single largest operator, developer and owner of student housing in Australia.
I have always been surprised why BTR hasn’t been a bigger part of the Australian market. Perhaps this is due to a lack of established stock
Last year, Bouwinvest expanded its relationship and investment scope with Scape, backing its move into BTR in a A$1.5 billion fund which is expected to run 10,000 rental units by 2030.
Koot says Bouwinvest also has investments in specialist disability accommodation (SDA) in Australia through Macquarie Assets Management (MAM). In 2017, in response to identifying a chronic shortage of SDA, MAM built expertise and asset management capability in the segment, running its strategies through best-in-class operators.
“I have always been surprised why BTR hasn’t been a bigger part of the Australian market,” Koot says, adding that this is perhaps due to a lack of established stock.
“You have to create the products yourself. It takes three to five years to build a portfolio, and the costs are ahead of benefits. You need to take a long breath before you can enjoy the returns here,” he quips.
But he is “super-convinced” that these sectors are poised for take-off in the next 10 years.
“Looking at the fundamentals of the Australian residential-for-rent market, a good quality asset will be 98 per cent rented in the first month and 5 years or 10 years thereafter occupancy will still be 99 per cent,” he says. “If you look at the demographics of Australia, which now has 26 million people, its population will grow by another five or four million in 10 years. Supply will always lag demand.”
Tapping the Potential of Asia
While there is no institutionalised living sector market to speak of in South Korea, Singapore or Hong Kong today, Koot believes the underpinnings of a professionally-managed residential rental market are present in Asia’s gateway cities.
Koot sees the beginning of a trend, citing as an example Singapore , where serviced residences have been around for some time and co-living, a sub-sector, has now arrived.
It is understood Bouwinvest recently formed a partnership with CapitaLand Ascott Trust to own a new asset, the former Hotel G, in Bugis in central Singapore. acquired from Gaw Capital Partners for S$240 million.
“We are now also looking at markets going through transformation, like South Korea,” Koot says. “Over the next year or so we will probably set up an investment program there. We are now at an early stage of assessing different opportunities.
“The key point is that it feels there are still many markets where the whole living sector could be accessible for institutional investors like ourselves.” Koot sees strong demand for an alternative to private rental markets across Asia.
“Institutional residential rental is a US$150 billion sector in the Netherlands. And it is a tiny country. It is also a big sector in Germany. So, to me, there is no reason why multifamily should not work in Australia, South Korea and even in New Zealand,” he says.
We are now also looking at markets going through transformation, like South Korea. Over the next year or so, we will probably set up an investment program there
“Our offering is so much different to the private market, we are creating newly-built products with high-quality sustainable housing where we would like the tenants to stay longer. We won’t push them out by increasing rents by 10 – 20 per cent every year. Our rents are linked to inflation with 1 – 2 per cent on top, at the maximum.”
Investors like Bouwinvest have no qualms about investing in the living sector, in part because of its positive experience. Over the decades it has also refined its systems along with asset management.
“We have created a template that can be used in newer markets,” Koot says. His expectation is that in 10 – 15 years, sector pie charts in Asia-Pacific will look more similar to those of Europe or the US, where the living sector accounts for 20 – 25 per cent of the total institutional market – up from 6 – 7 per cent today.
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[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.