The subsidiary of Dutch-Belgian banking and insurance firm Fortis is looking past its home turf of Belgium to Southern Europe and wants to upgrade ageing stock in its portfolio
Rarely does a deal in the Belgian market complete without the Fortis name being mentioned, either as an occupier, developer or investor.
Fortis Real Estate is a 100% subsidiary of the Dutch-Belgian banking and insurance firm Fortis. Although the company operates both in the Netherlands and in Belgium, most of its real estate activities take place in Belgium. The company, however, wants to diversify away from that country.
“For 2007, what we would really like is to get an official mandate from our board that will allow us to focus 20% of our portfolio outside of Belgium and more on Southern Europe,” said Marc Brisack, head of Fortis’s asset management team. “Also, we must upgrade our portfolio, some of which has become outdated.”
In Belgium, Fortis has invested €1.8bn. Only Cofinimmo and Befimmo have invested more. But accounting for the buildings Fortis owns for its own use, it has a portfolio of €2.8bn. “We consider ourselves the largest property owner in Belgium,” comments Brisack.
In 2002, Fortis acquired Bernheim-Comofi for €525m, a price that included development and parking subsidiaries.
The development subsidiary, previously named Bernheim Real Estate Development, is Fortis Real Estate Development, which is headed by Alain De Coster in Brussels. It has so far built 2m m² of office, residential, retail and mixed-use space throughout Belgium for such clients as Axa, Allianz and Befimmo.
Also included in the deal was an 85% stake in Interparking, for which Fortis now manage some 175,000 car parking spaces in 176 cities throughout Europe.
In Amsterdam, Fortis Real Estate announced the launch of two non-listed real estate funds of funds after returning 55.38% gross of fees over 2006, a figure that beat its benchmark by 7.64% on its L Fund in Europe.
But the bulk of Fortis’s European activities are the responsibility of Fortis’s asset management team in Belgium. The 120-strong team, headed by Brisack, handles around €2.8bn worth of investments annually. In addition, Fortis handles third-party estate certificates and trusts investments – under a separate team to avoid any conflict of interest.
Fortis has been able to acquire some key prime properties in Brussels over the past year. Some 70% of its investments are within the office sector the remaining 30% are shopping malls and other retail properties, as well as industrial and residential properties. Seventy percent of Fortis’s office portfolio is prime grade A, with the other 30% requiring renovation. “Our office portfolio has some ageing buildings that need renovating, but that will be our focus over the forthcoming year. We need to move on this, otherwise we could end up with a portfolio such as the Kungsleden one,” says Brisack.
The properties in the Kungsleden portfolio, a seven-piece mixed-portfolio in Brussels, have an average age of 30 years. The portfolio was bought by Catalyst Capital for €90m with the intention to re-develop the old assets. The Manhattan tower, one of the portfolio’s largest properties, will be leased by Fortis soon.
Key acquisitions over the past year for Fortis includes the Ellipse scheme in Brussels, which is a new 50,000m2 office building. At €180m, the property was one of the biggest single-asset deals in Belgium of 2006. Another big purchase was the Central Plaza, which is located within Brussels’ CBD. The brand-new 23,000m2 office building will house much of Fortis’s banking services.
Fortis’s biggest deal so far is the North-Light development in the north of Brussels. The scheme, which gained planning approval in March, will add 75,000m2 of office space over the next three years. Fortis bought the land for the scheme from the De Pauw family.
The company sees more value in development than in standing buildings. “We can be aggressive, but some buildings are being sold at crazy prices,” says Brisack. “We were very surprised when Rubicon bought the Hermes Plaza at yield below 6%. That sort of thing is completely unrealistic for us. Cofinimmo’s recent purchase of RTL was also very aggressive. We certainly wouldn’t have paid that. Some of these buys are completely illogical.”
As yields compress in the traditional asset classes and more aggressive bidders enter the market, Fortis has attempted to diversify. Following a recent spate of buying, Fortis has acquired ABX logistics, a global provider of logistics and transport that brings the value of Fortis’s industrial portfolio to €100m.
In addition, Fortis recently took control of Agridec, a listed Belgian property and real estate investment holding company that manages a portfolio worth €7.5m and controls 25% of leading Belgian developer Codic.
“The fact that you can control some land as it becomes more and more scarce is important because, despite it being industrial land right now, it could be good office land in some years’ time,” says Brisack.
