The real size of the Dutch real estate investment market An estimate of the total professionally managed real estate market Bert Teuben Rob Courtens Eindhoven, June 16 2011

Agenda Introduction Literature review Real estate market size estimate Top down Bottum-up Theoretical estimates Based on transactions Debt and equity Market structure

Introduction Importance of estimate market size for total sector: More information on the different type of investors and their influence on the real estate market and the economy; For foreign investor the market size gives more information on the (potential) liquidity and attractiveness of a country; More transparency on equity and debt in the market is essential. Additional IPD goals: Market coverage for IPD indexes; Weighting of countries in pan-European and global indexes; Indentifying missing investors in IPD- indices.

Previous literature Top down approach from different sources , mainly government data (Callender e.a., 1996) Based on a relation to the GDP in a country (Ling, e.a. 1999) Difference between investible and invested

Theoretical framework Real estate market Banks End investor Capital market RE Debt RE Equity RE Derivatives Fund of funds Listed Non-Listed Direct RE market Assets Corio, Wereldhave, Unibail, Vastned, Nieuwe steen etc. Eurindustrial, ING funds, Achmea funds, Altera, Q-park, Bouwfonds, Ping properties, Bouwinvest Institutional: Spoorweg, MN services Private: Kroonenberg, Mayfield

Agenda Introduction Literature review Real estate market size estimate Top down Bottum-up Theoretical estimates Based on transactions Debt and equity Market structure

Top down not market value, but includes social housing and owner occupied; invested = € 110 billion (market value) Total stock € 2.081 billion Residential € 1.653 billion Non-residential € 428 billion includes owner occupied, agricultural land and buildings, government assets, factories Statistics Netherlands (CBS)

Bottom up Dutch and non-domestic investors: 60 pension funds and insurance companies with direct investments 32 listed funds 348 non-listed funds 89 private investors with portfolios of over € 100 million Total € 118 billion, but not completely sure on covering all real estate owners

Theoretical estimate Investible 45% of GDP (Hordijk) 45% of € 592 billion is € 266 billion Invested 36% of investible 36% of € 266 billion is € 96 billion

Based on transactions Only for commercial real estate (offices, retail and industrial) transaction are recorded over long time-periods (average annual figure € 5.8 billion); Average holding period of sold assets during the period 1995-2010 was 15 years for commercial real estate (source IPD/ROZ real estate index) 15 x € 5.8 billion = € 87 billion Source: Jones Lang LaSalle

Summary real estate market estimate Approach Estimate Missing Top-down Residential € 110 billion Offices € 53 billion Retail, industrial and other Bottom-up Professional managed € 118 billion Small private investors GDP € 96 billion Transactions Commercial real estate € 87 billion Residential Total market size is € 197 billion (€ 87 billion commercial plus € 110 billion residential) of which € 118 is professional managed DTZ (2011) mentions a total market size of € 196 billion

Agenda Introduction Literature review Real estate market size estimates Top down Bottum-up Theoretical estimates Based on transactions Debt and equity Market structure

Equity – top down Real estate equity investments by Dutch institutional investors also non-domestic investments Source: Statistics Netherlands

Equity – top down Real estate investments by Dutch institutional investors also non-domestic investments Source: Statistics Netherlands

Equity – bottum up Equity in real estate investments in the Netherlands in € billion Investor Type of investment Estimate of equity Pension funds and insurance companies Listed funds € 3 billion Non-listed funds € 20 billion Direct holdings € 18 billion Private investors € 4 billion Direct holdings (only > € 100 million) € 15 billion Direct holdings (only < € 100 million) Unknown Non-domestic investors Listed, non-listed and direct investments € 12 billion Total Equity € 72 billion

Debt – top down Debt determined by annual reports banks - € 55 billion Dutch banks > only Dutch real estate and no development exposure - € 9 billion non-domestic banks - € 1 billion corporate bonds - € 4 billion direct CMBS/RMBS transaction no securitisation Total debt € 69 billions

Debt – bottom up Debt in real estate investments in the Netherlands in € billion Investor Type of investment Estimate of debt Pension funds and insurance companies Listed funds € 3 billion Non-listed funds € 7 billion Direct holdings € 0 billion Private investors € 10 billion Direct holdings (only > € 100 million) € 17 billion Direct holdings (only < € 100 million) Unknown Non-domestic investors Listed, non-listed and direct investments € 9 billion Total Debt € 45 billion

Agenda Introduction Literature review Real estate market size estimates Top down Bottum-up Theoretical estimates Based on transactions Debt and equity Market structure

Market structure Debt and equity in real estate investments in the Netherlands in € billion Investor Type of investment Estimate of equity Estimate of debt Total Pension funds and insurance companies Listed funds € 3 € 6 Non-listed funds € 19 € 7 € 26 Direct holdings € 18 € 0 Private investors € 4 € 10 € 14 Direct holdings (large > € 100 million) € 15 € 17 € 32 Non-domestic investors Listed, non-listed and direct investments € 12 € 9 € 22 Total market professional managed real estate investments € 72 € 45 € 118 Top down approach (total real estate investments) € 128 € 69 € 197 Small private direct investors (< € 100 million) € 55 € 24 € 79

Debt (non-domestic banks) Market structure Market structure of professional managed real estate in the Netherlands (excluding private investors < € 100 million) amounts in € billion 72 Debt (Dutch banks) Equity (Dutch) 96 Debt (non-domestic banks) Equity (non-domestic) 9 12 37 59 38 35 118 Dutch real estate Non-domestic real estate Conclusions LTV 40% is low compared to European average of 60% Size of € 118 billion is larger than earlier estimates Low Dutch exposure by non-domestic investors (18%) Large non-domestic exposure by Dutch investors (43% of total exposure)

Further research Carry out more research on market sizes in other countries Carry out market sizes per sector within a country (offices, retail, industrial and residential) Estimate isn’t stable over time so yearly updates would be preferred Probably not all private investors and separate accounts are included in the figures Market size of owner occupied market for commercial real estate is unknown (retail, offices and industrial)

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