It has been a while since property firms have put their residential portfolios on the market. Recently, two Dutch institutional investors – Progress and BPF – announced to sell portfolios of mainly residential units through private auctions. Progress (Unilever’s pension fund) is selling 2400 residential units, of which some 1000 single family homes, along with 41.000 sqm of retail space. BPF Bouwinvest (responsible for the RE portfolio of BPF Bouw pension fund) is selling 600 residential units, both single- and multi family homes, and is considering a follow-up sale.
It is said that these portfolios are mainly ‘untouched’, meaning there should be good possibilities for onward individual sales of units. That said, it is questionable whether individual sales of homes are successful in todays markets. Given tight financing possibilities and high uncertaintly, tenants may be reluctant to buying their homes, along with other prospective buyers. As the strategy of individual sales of the units used to be one of the main drivers of the porfolios value, along with rental price appreciation outlook, it is hard to tell where portfolios will trade for these days.
Back in 2004 through 2006, similar resi portfolios were sold at multiples raising from 16 to as high as 24 with some exceptions of around 30 times in the Amsterdam market. These prices (high teens, low twenties) valued the portfolios at about 70-80% of their unoccupied sales price. Raising to 90% at its peak in 2006.
I don’t expect such prices to occur nowadays. Allthough interest rates have come donw a bit, financing is tough. As is onward sales, as discussed. I think conversion rate will be low in the short run, thus putting pressure on the bids. For cash-rich investors, this is an excellent opportunity to acquire a solid, cash producing, longer term investment with upside potenital at a bargain.
Curious to see where they sell for. Will follow up on this.