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Message from the chairman

Message from the Chairman

Dear stakeholders,

Last year was an exceptional year for the Residential Fund, as we recorded a total return of 20.5%. This was way above the sector average and 14.2% higher than our own forecast of 6.3%. This very high return was largely due to the capital growth of 17.1%, which also exceeded our expectations. A large part of this was due to real estate market trends that led to a major upsurge in house prices, especially in Amsterdam and in our other core regions.

These included ongoing urbanisation, combined with a drastic shortage of housing in major urban centres in the Netherlands, especially in the big four cities (Amsterdam, Rotterdam, Utrecht and The Hague). On top of this, positive macro-economic developments – rising employment, higher business and consumer confidence - and the very low interest rate climate had a huge impact on mortgage uptake. This in turn boosted the prices of owner-occupier homes by almost 8.9% on a national level and by over 23% in Amsterdam. And because our valuations are directly correlated to the owner-occupier market, we saw values rise strongly right across the portfolio, but especially in our core market of Amsterdam.

Values have also been lifted by the increasing interest in Dutch residential real estate among both domestic and foreign investors. Back in 2012 nobody was interested, even though the fundamentals were exactly the same as they are now – urbanisation, housing shortages, low interest rates, etc. Our current portfolio is so strong precisely because we continued to invest in homes in what we identified as core regions, and they are the ones that are now delivering the strongest performance in both direct and indirect returns. The increasing demand and the housing shortage have led to an overheating market, especially in Amsterdam and Utrecht. What we are seeing is that people are already looking outside the big cities, due to the sharp increases in both house prices and rents. The best solution would be to build more houses! This is why our policy is to help accelerate planning permission for new-build residential projects in and around our core cities. There is a lot of land destined for homes right now, but getting building permits takes too long. So we are working with local councils and other sector organisations to speed up the process, which we think will lead to the more rapid addition of housing stock in high-pressure locations. We believe the market is reaching a new balance and that returns will be more stable in the years ahead. One thing is certain and that is that demand for liberalised sector rental homes is only going to increase.

The Residential Fund also had a very good year on the acquisitions front, despite the fact that we are operating in an ever more fiercely competitive market. Last year, we added € 307 million to the portfolio, while making no concessions to our quality and return requirements. We also welcomed six new investors, taking the total to 16 investors in January 2017. We currently have a solid and well-balanced pipeline of € 630 million and the commitment of investors put us in a strong position to continue to invest in top-quality properties in the years ahead.

Our biggest residential investment in the Netherlands in 2016 was TT Vasum located nearby the NDSM Werf in Amsterdam containing 304 apartments. The Fund also made some excellent acquisitions outside Amsterdam, giving us a very nice spread across our core regions and putting us in a strong position to respond to mega trends that are affecting the residential real estate sector. And of course we saw 15 outstanding projects added to the portfolio last year, almost all of them fully-let upon completion. We will continue to look for good acquisitions in the next three years and beyond and we are confident that we will be able to meet our return targets in the years ahead.

All that is left is for me to express my gratitude to our investors for their continued trust and all our employees for their dedication and commitment to Bouwinvest.

Dick van Hal

Chairman of the Board of Directors

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