MetLife’s Prince: The Dutch office market has ‘structurally repositioned’

Following an €88m financing in the Netherlands, the US manager’s real estate finance director says the country’s office sector is no longer blighted by oversupply.


MetLife Investment Management, the investment division of US insurer MetLife, last month provided an €88 million loan to New York-based manager Time Equities to refinance a 36-property portfolio in the Netherlands.

According to consultancy JLL, which advised the borrower on the financing, Time initially assembled the portfolio of 34 offices, plus an industrial and a retail asset, using little or no financing. MetLife’s five-year, interest-only refinancing facility reflected a 50 percent loan-to-value and provided a day-one debt yield of 11.77 percent. The properties, located across the Netherlands, are 86 percent occupied and around 10 percent under-rented, JLL said.

According to Stefan Prince, real estate finance director at MetLife IM, the financing hints at the company’s drive to grow its loan exposure in the Dutch office market. Prince spoke to Real Estate Capital about the company’s outlook on the sector.

What led MetLife to underwrite this transaction?

The pan-Dutch portfolio financing provided an appealing opportunity for MetLife Investment Management to continue to increase its presence in the Netherlands, while expanding its financing relationship with a new and established sponsor. Additionally, the 36-asset portfolio, with 159 tenancies, provides attractive geographical and income diversity across an already appealing Dutch real estate market. The financing shows our continued focus and commitment to building up our real estate presence in this market.

Why does the Dutch office sector, and the country’s real estate more broadly, appeal to MetLife?

The structural repositioning of the country’s office sector over the past five years, coupled with the country’s macroeconomic recovery, have helped deliver an attractive and sustainable office market.

The Dutch office market suffered from a chronic oversupply of office stock following the GFC, not helped by the public sector significantly consolidating its office requirements and the general negative absorption rates due to the wider macroeconomic issues at that time. Since then, it has found an equilibrium assisted by the proactive approach the national government and the private sector have provided over the past five years, for the repurposing of the older grade B office properties – which made up a large percentage of the vacant stock – to predominantly residential use.

This not only resulted in an overall reduction of office supply but also ensured just the higher quality assets remained. Additionally, the repurposing to residential provided opportunities for local councils and developers to regenerate areas, once dominated by vacant office, into vibrant mixed-use markets, making it more attractive for office occupiers and investors alike.

What would MetLife consider a financeable office now?

The fundamentals of underwriting remain largely unchanged with a continued focus on location, ideally close to transport hubs/train stations, and leasing profile. ESG [environmental, social and governance] is a relatively new, but very important, factor in the current underwriting of deals across the sectors, where the origination team will assess everything from the energy rating and environmental sustainability to the social aspects of the office, which may include the layout and amenity space offering of office, to ensure an attractive working environment.

Finally, the sponsor remains key to any assessment. MIM works with experienced and proven real estate-focused sponsors which have demonstrated their asset management capabilities and adopted a meaningful ESG ethos.

Is the pandemic presenting any opportunities to you as a lender that did not exist before?

Working from home has driven the firm to embrace technology more than ever before with our real estate teams having identified new ways in which technology can assist in making the underwriting process more robust and efficient. These included investing in online communication applications which have helped to improve the efficiency and effectiveness of how our international offices interact, communicate and present opportunities to our real estate committees. Additionally, new access to quality data analytics tools and document management systems have assisted in reducing overall underwriting timeframes and driven efficiencies in the due diligence process.

MIM’s decision-making process and response time for new financing opportunities is now market leading, which has given us a significant advantage when bidding on new financing opportunities, particularly for acquisition financings where timescales and execution risk are paramount for sponsors.