Monitoring risks is embedded in the daily activities of the responsible line manager and is an integral part of the planning and control cycle. Bouwinvest monitors all the defined risks via key risk indicators, supported by the performance reporting and business incidents reporting processes. Each quarter, the Executive Board of Directors is provided with a risk report, including the risk indicators indicated above and actions necessary to limit or mitigate risk, if there is a deviation between the outcome and the pre-determined norm.
Risks in the portfolio are monitored closely and the following events and risks were noteworthy in 2019.
Market concentration risk
The Fund has concentrations in Amsterdam (> 40% of NAV, notably the Damrak asset, > 20% of NAV). However, these concentrations are supported by very strong locations and strong tenants, which continued to perform strongly in 2019, thus reducing risks, including valuation and credit risks.
Occupancy rate risk
The Fund has a different leasing strategy for each individual retail asset to achieve an optimal occupancy rate. In most locations, but especially in district shopping centres, it is also vital to achieve the right mix of complementary tenants to ensure the long-term success of a centre. As a result of these efforts (such as De Muntpassage, Weert), the Fund maintained its high occupancy rate levels in 2019.
Market liquidity risk
The polarised nature of the retail market has also resulted in a reduced investor market for assets outside our investment strategy, exposing the fund to additional real estate strategy risk and valuation risk. Nevertheless, the Fund was successful in selling six non-core assets, although the prolonged time it took to conclude these deals in combination with a lag in funding in 2019 hampered the Fund's acquisition strategy.
Credit risk
The Fund’s assessment of the top-10 tenants shows that exposure to tenants with weaker perspectives declined in 2019, while the impact of the defaults of several smaller retailers had no material impact on the portfolio.
Funding risk
Although a top-up commitment was used for a transfer of shares from bpfBOUW in early 2019, the commitment added in late 2019 will be used to finance the growth of the Fund. New acquisitions in line with the Fund’s strategy will only be made when opportunities arise and sufficient funding (including from disposed assets) is available.