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Message from the chairman

Message from the Chairman

Dear stakeholders,

The Retail Fund delivered a very strong performance last year, recording a total return of 8.4%, the Fund’s highest return since 2010 and an outperformance of the IPD Property Index. This was partly driven by the strong rise in consumer confidence and a clear increase in consumer spending and we saw this improved sentiment reflected in our valuations last year. It is a clear testament to our strategy of focusing on the segments we believe will be the growth drivers in the retail sector for many years to come, the Experience and Convenience segments, which was where we saw the highest revaluations last year. We are already heavily invested in these segments and all our acquisitions last year qualify as either Experience or Convenience.

The upward revaluations also reflect a number of major redevelopments we have carried out in these segments, including the Damrak/Nowadays redevelopment in the Experience segment, the largest inner city retail redevelopment in the capital in many years. This constitutes a huge upgrade for this part of Amsterdam and a major contribution to Amsterdam city council’s efforts to transform the Damrak in to a fitting gateway into the capital. It was also a privilege to unveil the wonderful new Beurspassage, complete with the striking Amsterdam Oersoep artwork. Of course none of this would have been possible without the hard work of all our partners over the past six years. I’d like to thank all of them for their dedication, creativity and willingness to cooperate.

Of course, we also opened two new assets in the convenience segment in Amsterdam last year, Mosveld and Stadionplein and we added assets in Breda and Eindhoven. We made steady progress in our strategy of controlled growth and towards our target of € 1 billion in assets by year-end 2019.

There is still a certain level of volatility in the Retail Fund portfolio, but the balance of Experience and Convenience and the spread of risks make the portfolio resilient in the face of economic fluctuations. High street retail will always remain popular in our historical city centres, while the Convenience segment is not very vulnerable to the growing online shopping trend. And the fact high street retail assets tend to enjoy good indirect returns, while convenience centres offer good direct returns gives the portfolio a healthy balance on the return front.

There is no denying that the retail market will continue to be challenging in the years ahead. The Netherlands has one of the most dense retail stocks in Europe and a lot of surplus stock in towns and regions suffering from the negative impact of urbanisation and population shifts. And yet despite the general acceptance – certainly in the sector itself – that we need to redevelop existing stock rather than add new retail stock, building permits are still being issued. And they are primarily being issued for outlet centres, which add little value and actually threaten to destroy value in the long-term. The potential damage to existing stock from these new centres is something we monitor very closely when we are looking to acquire new properties.

We believe our strategy and our strong focus on quality and returns have helped us strike a healthy balance in our portfolio that will stand us in good stead in the years to come. We currently have an occupancy rate of around 95%, which is high compared with the retail sector as a whole. This is a clear sign that we are getting the balance right, something borne out by the rapid uptake by retailers of vacant assets last year. We are also building a solid reputation in the capital market and we managed to attract three new investors last year, which were fully invested at year-end 2016. For 2017, two investors increased their commitments to the Fund, and one new investor will be entering the Fund. We look forward to welcoming more new investors in the future.

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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