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"Pension fund ABP and ING Real Estate today announced that they have entered into a real estate transaction with regard to KFN, a Dutch non-listed real estate investment trust, wholly-owned by ABP. KFN owns a portfolio of approximately EUR 1.6bn comprising some 600,000m2 of prime office properties, located across the Netherlands. The 80 office buildings are currently 94% let. The portfolio includes landmark properties such as WTC Amsterdam (50% share), WTC Schiphol (43%), Jaarbeursplein Utrecht and the Weena Tower, Rotterdam
Under the terms of the transaction the KFN portfolio will be held by two investment funds initiated and managed by ING Real Estate. KFN's employees will transfer to ING Real Estate. The transaction results in a significant expansion of the ING Dutch Office Fund, improving the fund's risk profile while maintaining its expected total returns and creating additional investment opportunities for clients. ING Real Estate also strengthens its fund teams with the addition of the 44 experienced KFN staff.
The transfer of KFN represents an important step for ABP as it marks the culmination of its strategy to reduce its wholly-owned indirect property investment in the Netherlands to a minority stake. It will also enable ABP to further diversify its real estate exposure more widely across the global real estate markets. ABP's decision to transact with ING Real Estate follows an extensive bidding process involving 14 parties.
While ABP will retain an investment of EUR 365m in equity, ING Real Estate will provide EUR 140m bridge equity.
Commenting on the transaction, Roderick Munsters, Chief Investment Officer of ABP said: "The transaction with regard to KFN is a historic moment for ABP. In 1995, ABP placed its direct real estate investments at arm's length in separate retail, housing and office funds. From the beginning, it was our intention to reduce our interest in these funds to a minority share in order to diversify our real estate portfolio further internationally and to increase liquidity. Over the past few years, we have realised our ambitions for the retail fund (now Corio) and the housing fund (now Vesteda). We are proud that as a last step in the process our Dutch office portfolio and the KFN team will be moving to a global player, ING Real Estate. Moreover, through our co-investment in ING Dutch Office Fund, we can keep a considerable stake in prime Dutch office property."
George Jautze, Chairman and CEO of ING Real Estate added "We are delighted that we have been able to create an innovative, custom made solution with ABP, furthering our long-standing relationship with them, while also providing existing and potential investors with the opportunity to gain exposure to the prime Dutch office market. The quality of the portfolio is unique and in the current market conditions this deal offers significant growth opportunities and is a very strong addition to the existing portfolio. It is very rare that an office portfolio of this calibre becomes available on the market. Being able to secure this portfolio and to structure the transaction in such a way that we retain ABP as a co-investor confirms our position as the leader in real estate investment management."
The ING Dutch Office Fund ('DOF') will obtain 228,226m2 of offices. ABP will have an equity stake of EUR 300m in DOF. DOF has been in operation since 1998 and is an unlisted, semi open-ended investment vehicle. It currently owns 652,220m2 of offices across the Netherlands. Following the transaction DOF's portfolio will comprise 880,446m2 of prime office property. Existing investors in the fund have unanimously given their consent to the transaction and have the option to invest further in the fund.
The balance of the portfolio comprises 367,861m2 of offices and will be held by ING Real Estate Office Fund Netherlands ('REOFN'), a vehicle designed to hold, rework and ultimately sell the assets in the medium term. Both ABP and ING Real Estate will each invest EUR 65m and ING Real Estate has already secured an additional three investors for the fund.
The transaction is expected to close in the first quarter of 2008 at which time the existing KFN team of 44 people will transfer to ING Real Estate, bringing substantial expertise, to complement the experience of the existing ING Real Estate Dutch office team. The combined team will jointly leverage its expertise, working closely with the tenants of both Funds to fully realise the value potential of the properties. Having secured a strong future for the KFN business, Paul Vismans and Frank Hendriksen, the current CEO and COO, have decided to pursue their careers outside of KFN.
At closing of the transaction KFN will repay the EUR 450m CMBS loan facility and EUR 200m syndicated loan facility which it incurred in 2004 and 2005 in full.
Morgan Stanley & Co International plc and Kempen & Co are acting as financial advisers to ABP and KFN in connection with this transaction. ING Real Estate was advised on the transaction by ING Real Estate Capital Advisors. Legal advisors were Stibbe on behalf of ABP and KFN and Nauta Dutilh on behalf of ING Real Estate. Tax advisors were Ernst & Young on behalf of ABP and KPMG Meijburg on behalf of ING Real Estate.
Completion of the transaction is subject to customary regulatory approvals".(CS delle Società)
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