Please tell us about APG Asset Management
We’re a Dutch Pension Investor with EUR 514bn AUM: Around 10% of this is allocated to Real Estate and circa 20% of this global portfolio is invested in residential asset classes – EUR 8bn, with Europe accounting for EUR 3bn of that. That includes PRS, student accommodation and hotels.
Our mandate in Europe is investing in real estate where we focus on gateway cities. At the moment the most attractive for us are Dublin, Helsinki, Madrid and Barcelona, London and a few UK regional cities such as Leeds and Edinburgh.
We’re a long–term investor and our focus is on responsible long–term returns for pension fund clients and their beneficiaries.
How long have you been active in PRS?
We have been a long time PRS investor in The Netherlands and we have been investing in other PRS markets for over 20 years; outside The Netherlands we initially invested in the US and then in Germany. Over the last eight to nine years we have significantly added to our residential exposure in these markets and in markets we felt were immature and ripe for take–off such as the UK, Ireland and Spain. Another market we entered was Finland, a mature market where price seemed attractive relative to other markets.
We entered the UK market via a joint venture with Grainger in 2012, who already managed a PRS portfolio. We added new acquisitions to this portfolio and worked with Grainger on new developments.
In 2013 we started a joint venture with Delancey – now Get Living – and this started as purely a development play. The combination of the Grainger JV and the Get Living investments allowed us to have immediate access to the UK market and over time build brand new product and create the scale required as it has proven a challenge to find the right stock when other new market participants tried to enter the UK.
Last year we sold our interest in the joint venture with Grainger back to them. We are still expanding with Get Living acquiring new sites and developing. At present there is no intent to sell any of that portfolio.
We are also working with Hines, the international real estate firm, in Dublin developing purpose built PRS sites. In Spain, we set up a company with partner Renta called Vivenio, which acquires both standing PRS product as well as creates newly built units, predominantly in Madrid and Barcelona.
Why does the BtR market appeal?
There are several factors, but as a rule we like residential for rent – it offers stable income streams and generally the residential markets are under supplied so there is upwards pressure on rents. It delivers strong recurring income returns, not the highest, but strong and stable with good growth prospects. We like that. Over the past decade, residential in general has delivered great capital value growth, caused by the low interest rate environment and supported by the undersupply in capital cities.
Many of the markets we are active in are those that are under supplied and it allows for us to build new developments and get additional capital value upside from creating these new assets as well.
What is your strategy moving forward?
We want to continue to grow our residential exposure, partly because the development sites we have already bought will require capital to build out and so we will have natural growth. I can also see us expanding into other propositions that we find attractive.
Urbanisation is leading to PRS opportunities across the world. We are very interested in China and Japan. China is a huge market and is even newer to PRS than the UK.
We are starting to give more attention to Australia and we have recently invested in senior retirement living there, a market in which we are active in the US as well. However, in Europe we have not yet found a retirement living model that we think would work for us. We are looking though we haven’t found the right partner and/or model yet.
Other residential or “bed-strategies” such as student accommodation and hotels are also strong and growing markets and we will have a higher allocation to them going forward.