NETHERLANDS - The Dutch Association of Institutional Property Investors (IVBN), is setting up a framework for risk management to prevent fraud in institutional real estate investment.

With the framework, to be published later this month, IVBN intends to better enable parties involved in the institutional real estate sector to "minimise the chance of fraud".

René Hogenboom, head of the IVBN, commented: "Boards, shareholders and (external) supervisors of real estate investment firms will be able to take example from the framework," although he added it would not be a checklist of requirements.

"Every institutional investor needs to make its own choices as to which of the mentioned control measures will be useful and practical to them," said the IVBN.

The report will look at the buying, selling and valuation of real estate, but also at "personal integrity, governance and culture, and (mainly) the proper functioning of supervision on these issues". The association is also calling for proper checks and balances on the part of supervisiors.

Hogenboom also said that cases of fraud in the real estate market should be treated differently: "You need to distinguish between the alledged fraud cases in the real estate CV's [Commanditaire Vennootschappen, in which investors can invest through participations], the building and mortgage fraud in Rotterdam, and the possible fraud with an institutional investor and developer."

In April last year, Dutch regulators DNB and AFM already announced they would be probing institutional investors' real estate investment activities to detect corruption. (See earlier story: ‘Regulators probe Dutch institutional real estate').

Following various scandals in the real estate sector over the last few years, DNB announced in its annual report it would investigate if institutions - such as pension funds and insurers are "knowingly or unknowingly" being used for the improper activities of others.

The news comes, as officials at the electronics giant Philips said that any financial support from the company to fill the shortfall caused by the property fraud at its pension fund will depend on the outcome of the current investigation into the extent of damage and liabilities.

"Although chairman Gerard Kleisterlee's words were ill-chosen, he didn't mean to say that the participants in the pension fund should not expect anything," stressed Philips' spokesman Eric Drent stressed.

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