NETHERLANDS- Shell pension fund has sold its e400m Dutch commercial real estate portfolio to a syndicate of Bouwfonds Asset Management, Inflation Exchange Fund and MN Services.
The transaction, which is one of the largest real estate deals in the Netherlands, was initiated by MN services as a means of securing insurance against inflation for one of its clients, the pension fund for the metal and technical industrial sectors (BPMT).
Inflation Exchange Fund first devised the concept of ‘inflation cover’ and has since developed it with MN Services to apply to pension funds.
Bouwfonds paid the e400m for the portfolio and will continue to manage it. But MN has paid Bouwfonds an undisclosed amount, based on its inflation estimates, to cover against inflation and the effect it has on the fund’s liabilities.
Since rent from the real estate portfolio is index linked, so Bouwfonds can use it as a stream of cash to cover some of BPMT’s inflation-linked liabilities.
MN says that they have paid to have the cover for up to thirty years but that there is a secondary market for inflation cover where they can trade if they find their estimates for future inflation are out.
“MN is not interested in owning the real estate ourselves. We have basically paid to have the risk associated with inflation covered,” says Harald Wouters at MN Services.
Shell pensions fund made the decision to sell the real estate portfolio a year ago and the money raised will be invested two thirds in bonds and a third in equities.
MN Services administers capital worth a total of e19bn, of which e2.8bn is in real estate. Bouwfonds’ main activity is to build up, structure and manage real estate portfolios involving non-listed funds for both private and institutional investors.