“May you live in interesting times” is an ancient proverb that has always appealed to me. Now, after my first full year as CEO at Bouwinvest I can safely say I have not been disappointed. The past year has proved to be far more interesting than I had hoped for, and initiating a transformation of the company in these turbulent circumstances has been challenging. Despite the challenging external circumstances, we have been able to remain focussed on delivering value and outperformance to our clients. Fortunately, I have been able to count on the support of my fellow executive board members, including Henk-Dirk de Haan who replaced Rianne Vedder as of October 2023. I would like to thank Rianne for her contributions during her years in office.

When I started in this role in September 2022, the global markets were significantly impacted by geo-political, financial, social and environmental turbulence. This has continued unabated since then. We are still dealing with the effects of the war between Ukraine and Russia, and in October the worrying and tragic conflict in Gaza escalated dramatically. In addition to the huge human tragedy, these conflicts have contributed to additional global instability and have had a major impact on market outlooks. In parallel over the course of the year central banks have fought inflation by raising interest rates to levels we haven’t seen in developed economies for fifteen years. Global real estate markets have suffered from this as well, with declining valuations stemming from higher borrowing costs, reduced investor confidence and appetite, economic uncertainty, and more government regulation. At the same time, the year 2023 will go down as the hottest and the wettest year since records began, showing once again that climate change is part of our day-to-day lives and that urgent global action from everyone, including the real estate sector, is required.

In the Dutch residential market in particular we saw more uncertainty due to tax and rental regulation, a steady increase in construction costs, issues with regard to power grid congestion, slow building permit processes, and a lack of resources on the public sector side to progress projects. In addition this year we saw a challenge in the Dutch courts to the mechanism that Bouwinvest and other institutional owners utilise to index residential rents on an annual basis. Bouwinvest was named in several cases and the next year will see higher appeal courts review and rule on this matter.

In these challenging times it is crucial to stay in close contact with our key stakeholders, especially the investors in our funds and mandates. An open communication strategy to align and inform is key to this. We aim to deliver stable returns to our investors in balance with clear objectives on environmental performance & risk management, while creating social value and keeping solid governance intact. Both Bouwinvest and our clients face increasing regulatory requirements which have their own impact on the organisation. Increasingly more resources need to be dedicated to complying with regulatory and client expectations. It is a fine balancing act between financial & ESG performance, risk management and management costs. Despite all these challenges Bouwinvest has realised a relative financial outperformance in the Residential Fund by 0.1%, the Retail Fund by 2.9%, the Office Fund by 2.9%, the North America mandate by 3.8%, the Asia-Pacific mandate by 4.9% and a relative underperformance in the Europe mandate by -/-4.3%. This resulted in an average return on invested capital over the year of -3.8%.

Bouwinvest has responded to the cyclical and structural changes by further sharpening our corporate strategy so that we can continue to deliver the services that our investors expect. This strategy has provided Bouwinvest with a clear vision and roadmap for the future and has clarified the organisational improvements that we needed to make in order to execute on this strategy. Both the corporate strategy and the change programme were approved by the supervisory board in September in total alignment with bpfBOUW, our shareholder.

This year was thus also a year with a significant focus on the internal organisation. We have named this internal transformation programme #Invest. As an organisation we have embarked on an ambitious journey to build a future-proof company. We have assembled a dedicated team to manage this transformation and ensure that it runs smoothly. We have set out clear objectives and defined seven workstreams, with the focus in the first half of the year on developing a new organisational design. After the summer, we started the implementation process, and this is already having a positive impact on our operations.

We also worked on other projects, all of which contribute to our corporate strategy and our objective of building scale over time. We moved forward on obtaining regulatory approval for opening the Dutch Healthcare Fund to third-party investors; we applied for a MiFID permit (an AIFMD top-up) and worked on complying with a European directive so we can broaden our investment services in Europe. In November we successfully launched  the Dutch Social Impact Partnership, a new product initiative developed together with bpfBOUW and ABP. This milestone marks a new phase for Bouwinvest in terms of business development and launching new products but more importantly, it is a contribution to creating social value in Dutch communities.

The combination of challenging market conditions, which caused a decline in assets under management and thus fee income, and the partly one-off costs for the organisational transformation, have resulted in a net loss for Bouwinvest REI over 2023. The loss including one-off costs totalled -/- € 2.2 million and when excluding these one-off costs a modest profit of € 0.3 million remains over 2023 for Bouwinvest REI. The decline in income is cyclical and the transformation costs are one-off, but these financial results re-emphasise the real need to execute on our new corporate strategy. We need to become more flexible and efficient in order to cope with cyclical downturns, increased regulatory requirements, and the corresponding additional resources required to address these. To develop a structural healthy cost/income ratio we need to invest in further client and product diversification, ensure continued outperformance in our funds and mandates and improve the time-to-market for launching new products and investment strategies.

We still have a challenging year ahead. The market outlook for 2024 foresees in continuing uncertainty. The global economic turbulence is set to continue, resulting in a flat to low growth of real estate markets. Interest rates are forecast to remain high for at least the first half of the year as part of the Central Banks strategy to combat inflation. Real estate markets will have to cope with other challenges and opportunities as well, including providing more affordable housing, building more housing for seniors, the decarbonisation of existing real estate portfolios, climate adaption, the changing use of office space and the adaptation of supply chains to a deglobalising world.

Despite all the challenges ahead, we remain positive about the long-term perspective for real estate markets in general, and in particular in Bouwinvest’s ability to strengthen its position as a leading real estate investment manager. Turbulent markets also bring opportunities and Bouwinvest plans to actively identify and exploit any opportunities that mat arise.

These are, as I said at the beginning of this message, interesting times indeed. Looking back at 2023, I would like to thank all our investors in our funds and mandates for their continuing confidence in Bouwinvest. I would also like to thank the Bouwinvest employees for their continuing delivery of outstanding results despite the current market conditions and the ongoing internal transformation.

Bouwinvest has a solid plan for the future. I look to the future with confidence and trust that we will realise our ambitions, together with our stakeholders, and continue to deliver ‘Real Value for Life’.

Mark Siezen

CEO