Interview with PropertyNL

The Amsterdam-based Resi has grown into the number two advisor in residential real estate investments in six years. The company, founded by Robbert Arkenbout and Alexander Buijs, focuses on advising on (re)development projects and the sale of those projects to investors or housing associations. In practice, they are seeing the effects of foreign investors retreating from the market: “They look at housing differently.”

Resi celebrates its sixth anniversary this summer as a specialist advisor in residential real estate investments. Former CBRE colleagues Robbert Arkenbout and Alexander Buijs embarked on a new adventure in the middle of the COVID pandemic: establishing an advisory firm that does more than merely broker transactions. “That starts with supporting developers during the planning phase. We review projects and provide advice on the residential product at a specific location. We support that advice with data,” says Arkenbout. “Our main objective is to be a sparring partner to developers. Once a project is fully designed or submitted for permitting, we subsequently guide the investment transaction.”

Resi fulfilled that role, for example, in the sale of a project comprising 475 rental homes in Eindhoven’s Vonderpark Kwartier, says Buijs. “Breevast asked us to review the design before the environmental permit application was submitted. That is often how we become involved. We went through the design together with Breevast and the architectural team, and afterwards we guided the transaction with CBRE Investment Management. We are not a delegated developer that takes work off people’s hands; we are a sparring partner for the design team, the development team and management.”

Advice based on substance

Resi also advises investors. “We prefer to focus on substance. For example, we previously advised NLV on the acquisition of the North Tower in The Modernist in Rotterdam, developed by Maarssen Groep. We are usually engaged to assess a proposition in terms of quality and purchase price. We also explore which plan optimisations can still be implemented, with the aim of creating a more sustainable residential product for the investor, resulting in further price optimisation. In addition, we advise the purchaser during negotiations with the seller and manage the acquisition process.”

This approach is paying off, as Resi now has a team of twelve advisors. “Within our team, we have people with both technical and financial backgrounds. We can deploy either area of expertise whenever required.”

In addition, the firm’s specialisation in residential real estate is a success factor, says Arkenbout. “We believe in a small menu. A good restaurant often has a limited menu with outstanding dishes.” The company’s activities have since expanded to include the sale of existing residential portfolios on behalf of national and international (institutional) investors. “Last year, we transacted approximately half a billion euros.”

Transformation

Resi is heavily involved in larger inner-city (re)development locations. “These can be office buildings, but increasingly they are shopping centres as well. We particularly enjoy the complex challenge of urban densification or creating housing above shopping centres. You have to deal with structural grid dimensions, a shopping centre that must remain operational throughout the process, parking requirements, municipal wishes, housing point systems — all those aspects combined. The real challenge is ensuring that the end result delivers genuine new-build quality rather than, so to speak, small units carved out of an old office building,” says Buijs.

One example of such a project is the transformation of a 1970s office building on Laan van NOI in The Hague for Egeria. “Using the existing shell structure, sustainable homes were realised that perform like new-build properties,” says Arkenbout. “These were ultimately sold to Bouwinvest. Our primary involvement was in the process where the architect and the developer need to make key decisions, from the sketch design phase through to the preliminary design phase. We are currently doing the same for a number of former V&D department store locations, such as in Nijmegen for developer MWPO. Part of the building is being demolished, part is being reused and part is being added. Right in the city centre of Nijmegen, which makes it extremely complex.”

More demolition and redevelopement

Arkenbout and Buijs also observe that most of the low-hanging fruit in the transformation market has already been picked. “At former office locations, we increasingly see a combination of demolition and redevelopment, rather than retaining the existing shell.” Arkenbout cites Blaak333 in Rotterdam as an example. “Within the same office location, and within the existing zoning plan, a new building with more than 300 homes was developed. Ultimately, the structural grid dimensions and the quality of the existing structure made it more efficient to demolish and rebuild.”

In addition, Resi is involved in several office locations in Amsterdam Southeast as part of urban densification projects. “We are currently working on around 600 homes there, and the old office buildings are being demolished.” Demolition and redevelopment are also frequently the result of investors’ stringent sustainability requirements, says Buijs. “Those requirements are significantly higher than the standards set out in the Dutch Building Decree. In that case, you are often forced to build new.”

Two types of transformation projects

At present, there are broadly two types of transformation projects, according to Arkenbout. “There are the inner-city redevelopment projects, where you often deal with a listed building or a property that has a strong identity for local residents, such as an old V&D department store. You can demolish such a building, but you can also reuse elements such as architectural ornaments.”

The second type involves adding residential units on top of neighbourhood shopping centres while simultaneously refurbishing the shopping centre itself. “Housing is added to make the business case viable. These are enjoyable assignments as well; essentially, you are giving a building a new lease of life. In projects like these, we can add more value than in a development consisting of a row of single-family houses.”

No hourly rates

Engaging Resi is relatively accessible, says Arkenbout. “We do not work on the basis of hourly rates, but on a transaction-based fee.” This does involve a degree of risk, as a transaction must be completed before any revenue is generated. And that can take time, given the still considerable backlog of appeals procedures at the Council of State. “We still have four projects pending from the first six months after we started the company. The projects have received permits, but they are still subject to potential appeals. Because the procedures take so long, we have still not been able to find an investor or housing association partner for those projects.”

According to Arkenbout, Resi currently has just under 5,000 new-build homes in its pipeline. “Ultimately, we are able to close transactions for around 1,000 to 1,500 rental homes per year. That is quite significant, but we also need that volume to keep the engine running.”

The market misses the different perspective of foreign investors

Arkenbout and Buijs recognise the retreat of foreign investors from the Dutch market, with German parties such as Union and DWS being among the best-known examples. “It is increasingly becoming a Dutch market,” says Arkenbout. “From our perspective, it is unfortunate that a category of investors is disappearing that looks differently at housing finishes and the residential product itself. Foreign investors contribute to greater diversity in rental housing products, for example by providing homes with curtains, flooring and wall finishes, or a slightly different kitchen. They make different choices regarding how a home is delivered to tenants. That was something we could then bring back to Dutch institutional investors: this is another way of doing it. Think of amenities in the ground-floor plinth, residential concepts with additional services and facilities, or furnished rental housing aimed at specific target groups.”

Developement is becoming less attractive

Moreover, the market becomes vulnerable if dependence on Dutch pension capital becomes too great, Buijs adds. “We could accelerate development if we were more attractive to foreign capital.” Like many market participants, he views stable government policy as a key condition for making the Dutch residential investment market more attractive. “The fluctuations in transfer tax policy are a very clear example. They show how unstable the treatment of the housing market can be. And in my view, institutional capital needs one thing above all else: long-term stability. So that you know what the rules are today, but also what they will be twenty years from now.”

In addition, faster permitting procedures and fewer requirements imposed on developers would be desirable. “We can easily name a list of developers who say: developing in the Netherlands is no longer enjoyable,” concludes Arkenbout.