A lack of development land in the Netherlands and growing demand for housing is creating an opportunity in repurposing existing buildings as residential schemes, according to the chief financial officer of Amsterdam-based developer Elfi.
This week, UK-based private real estate manager Tristan Capital Partners announced it has backed Elfi’s latest project – an office-to-residential conversion in the Dutch city of Rijswijk, near The Hague, with a €45 million loan.
According to Just Pereboom, Elfi’s CFO, sourcing loans for conversion projects is more straightforward than arranging construction financing for ground-up projects in the country. “[Development] land is indeed considered scarce in the Netherlands,” he said.
Pereboom added that Elfi views conversion schemes as the most effective route to the highest achievable returns for sustainable projects. He said the Rijswijk scheme also attracted lender interest because, compared with ground-up development projects, it entailed less risk due to a building permit having been obtained, and a building contract with Dutch construction company Volker Wessels already secured.
Pereboom expected to see more opportunities for schemes in which existing assets are converted to residential due to the structural supply and demand imbalances in the Netherlands. “Despite the dampening effect of rising construction costs, interest rates and regulations on transaction volumes in the Netherlands, the market is anticipated to witness an increase in redevelopment and conversion opportunities,” he said.
The scheme will see three fully consented office buildings transformed into a multifamily residential scheme, including 244 high-quality and energy-efficient residential apartments together with commercial space, amenities and outdoor spaces.
The loan facility is for 2.5 years and reflects a 70 percent loan-to-cost acquisition and construction facility. Tristan provided the loan through its flagship real estate debt fund, Tristan Income Plus Strategy One.
“The current dynamics of the Dutch market make this scheme an ideal asset for TIPS One as the supply constraints on the delivery of new homes in the Netherlands is creating favourable demand dynamics for high quality, well-located and sustainable residential,” said Dan Pottorff, head of debt investment at Tristan.
Elfi used Dutch sustainable finance advisory firm Sustainable Capital Group and through it “Tristan emerged as the most competitive candidate, excelling in both hard and soft criteria, such as margins and a strong willingness to execute promptly”, Pereboom said.
The firm said, through the refurbishment works, the scheme is targeting an energy efficiency rating of EPC A+ or A++ for all units, the realisation of which will trigger a reduction in loan margin under the TIPS sustainable financing framework.
Separately, Tristan is preparing to launch its successor this year with the aim of raising up to €750 million.
Including this latest transaction, Tristan has deployed over €700 million in whole loan lending on 14 loans across the UK and Europe.