Sales: NLG 15.19 billion (US$7.45 billion) (1998)
Stock Exchanges: Amsterdam Paris Frankfurt
Ticker Symbol: D.ROM
SICs: 6512 Nonresidential Building Operators; 6719 Holding Companies, Not Elsewhere Classified
Rodamco N.V. of The Netherlands steers one of the largest property investment funds in the world, with investments in 14 countries and total assets of more than NLG 15 billion. Rodamco conducts its activities through four primary subsidiaries reflecting its worldwide areas of interest, including Rodamco Europe, Rodamco North America, and Rodamco Pacific; the fourth subsidiary, RoProperty Services BV, provides the management activities for Rodamco’s holdings. In the late 1990s Rodamco began preparations for splitting up the funds into these four segments as independently listed real estate investment funds.
Rodamco’s investment focus favors large–scale investments, with an emphasis on commercial shopping centers and other retail locations. In 1998 fully 69 percent of the company’s holdings was in retail shopping complexes. Office buildings comprise the company’s second largest group of investments, at 14 percent. In addition, Rodamco owns participations in industrial and renovation projects, which form five percent and nine percent, respectively, of Rodamco’s total assets. Despite its European roots, Rodamco’s North American investments form a major proportion of its portfolio, accounting for some 40 percent of total assets for 1998. Rodamco’s European holdings represented 46 percent of total assets in 1998. The Pacific region remained the third largest investment area, at 14 percent of total assets, helping to limit Rodamco’s exposure somewhat to the late 1990s economic crisis affecting much of that region.
Among Rodamco’s holdings are featured sites such as the Suria KLCC Retail Centre shopping complex at the foot of the Petronas Towers, in Kuala Lumpur, Malaysia; the Centre Commercial Vélizy 2, in Vélizy Villacoublay, France; the Walt Disney World Swan, in Orlando, Florida; and the Sheraton Hotel and Towers in Chicago, Illinois. In addition to its investment, Rodamco provides management services for many of its properties, generating management fees as well as rents as income. Despite a shaky period at the beginning of the 1990s, Rodamco’s investments have long been profitable for the company and its shareholders, representing a solid if conservative return on investment. In 1998 the company posted net profits of NLG 590 (US$289) million.
Rodamco remains under the direction of founding parent company Robeco, the largest Dutch investment fund, which itself was acquired by Rabobank in 1997. The principal institutional shareholder is the Algemeen Burgerlijk Pensionfonds (ABP), the Dutch civil service pension fund, which holds more than 20 percent of Rodamco.
“Ro”: Formed in 1979
Rodamco’s parent Robeco, which stands for Rotterdam Beleggings (Investment) Consortium, was formed in 1929. A group of wealthy Rotterdammers were attracted by the dip in the Wall Street stock exchanges, and they decided to pool their resources to take advantage of the soft U.S. stock prices. When the dip turned into the Great Depression, the group incorporated their holdings as Robeco. This incorporation enabled the group’s fund to survive the Depression. By the early 1970s Robeco had more than simply survived: it had grown to become the largest Dutch investment vehicle, including having captured some 70 percent of the country’s “household” investors. Beyond The Netherlands, Robeco had grown to become one of the largest investment funds in Europe.
The oil crisis of the early 1970s and the resulting worldwide recession convinced Robeco, which had built its portfolio in large part on the household goods market, to expand its investment holdings into the traditionally more stable real estate market. Through the 1970s Robeco made a number of significant purchases, notably of a US$120 million property and management portfolio purchased from Pakhoed, the Netherlands–based storage and transport business, and the property investment trust WAP, adding a portfolio of European and North American real estate holdings.
In the late 1970s Robeco found its dominance of the Dutch household investment market challenged as a number of Dutch banks launched their own investment funds. Robeco determined to meet this challenge by diversifying its product offerings, setting up several market–specific investment vehicles. One of these new funds would be formed with a US$230 million real estate portfolio spun off by Robeco in 1979 as Rodamco. In addition to diversifying its funds, Robeco also made it easy for investors to transfer their investments among the company’s various products.
Growth in the 1980s
From its start, Rodamco’s investments focused on the international scene. While some 45 percent of the company’s initial portfolio was concentrated in The Netherlands, at least 38 percent of its assets were situated in the United States. Rodamco also had footholds in much of Western Europe, but in particular in neighboring Belgium and Germany, and in France. The company aimed to expand its European holdings, despite restrictions still in place among European Community countries in the late 1970s; Rodamco also eyed an expansion into the Swiss market.
Like other Robeco vehicles—the names of each of which were required to feature the prefix “Ro” and the suffix “co,” for the sake of euphony—Rodamco was listed as an independent corporation, with an initial sale of 3.7 million shares, for a purchase price of NLG 100 per share, on the Amsterdam exchange. Over the following decade Rodamco would add its listing to most of the Western European exchanges in which it held investments and to the over–the–counter market in the United States. Like Robeco, Rodamco’s investors group was as international as its portfolio. While some 60 percent of the fund’s shareholders were Dutch, Rodamco—given liberal Netherlands’ investment policies, especially the lack of withholding and stock exchange taxes—was immediately popular with the worldwide investment community. This international focus would serve the company well as the European market countries moved toward 1992’s open market.
By the late 1980s Rodamco had increased its initial portfolio of NLG 500 million to assets of more than NLG 3 billion. This growth was the result not simply of shrewd investments, but of a Robeco–led policy of takeovers, including the NLG 1 billion purchase of the British real estate firm Haslemere Estates in 1986. In 1987 Rodamco’s acquisition of Hexalon brought it that investment firm’s U.S.–based assets.
The stock market crash of October 1987 sent investors reeling toward real estate—and Rodamco. By 1988 Rodamco’s war chest had grown sufficient for a new target: the nearly US$2.4 billion acquisition of Hammerson Property & Development Corp. of the United Kingdom, which complemented prime shopping center assets in England with a strong portfolio of international property investments. Rodamco also began to prepare to expand its assets toward a broader international scope, including enhancing its Western European portfolio, while beginning to build on its portfolio in the booming Asian economies.
The vigor with which the investment community turned to real estate was reflected in Rodamco’s staggering growth in the last years of the 1980s. By the beginning of the new decade Rodamco had jumped from a total assets package of just NLG 3 billion to a portfolio worth more than NLG 10 billion—earning Rodamco a place among the top four real estate investment funds in the world.
Crash and Repair in the 1990s
The real estate euphoria was short–lived. At the start of the 1990s the investment community woke with a hangover of massive overbuilding that would cripple the real estate market through much of the first half of the 1990s. An example of the glut in new buildings was represented by Houston, Texas, and other cities—flattened by the bust in the oil market in the 1980s, these cities found themselves confronted with large numbers of nearly empty office buildings.
These are exciting and challenging times for Rodamco. We have established our place at the forefront of international real estate companies and are now faced with the tasks of systematically evaluating priorities among new investment opportunities and carrying out timely divestitures.
With its current management structure, geographical diversification and the position of RoProperty, its strong international asset manager, Rodamco is strategically positioned to profit from healthy real estate markets, to weather the declines in weak ones and to seize opportunities wherever they arise. The prime objective is to increase our annual net profit per share.
By September 1990 the real estate crash had caught up to Rodamco. As part of Robeco, Rodamco had offered shareholders the ability to transfer investments among Rodamco and the other Robeco vehicles, as well as offering a degree of liquidity through redemption of shareholder investments. With the flight from real estate investments, however, Rodamco was forced to suspend its stock redemption policies. The stock market reacted strongly, and in September 1990 Rodamco was forced to suspend trading of its stock for four days. When trading reopened, Rodamco’s share price had fallen by some 25 percent. Rodamco’s share price would continue to face pressure, losing nearly 50 percent of its value over two years. Rodamco’s actions, which led to unsuccessful shareholder lawsuits, would haunt the fund through the first half of the decade.
The continued depressed real estate market also would affect the company’s bottom line, as its growth turned negative.
In 1992 Rodamco found some redemption of its own, when the Algemeen Burgerlijk Pensioenfonds (ABP), representing the country’s civil service pension fund, bought up a 12.5 percent stake in Rodamco, and an additional 20 percent in individual Rodamco divisions, for some NLG 2.5 billion. This new injection of capital enabled Rodamco to continue building its portfolio, including eyeing properties for the first time in the recently independent Eastern European market, but especially in expanding the company’s Far Eastern portfolio. Whereas the company’s investments had tended to remain in Australia, the fund now began liquidating these holdings in favor of the booming real estate markets in such “tiger” economies as Singapore, Malaysia, and Thailand, as well as in China, Taiwan, Hong Kong, and Japan.
Continued growth of the Asian Pacific region played a significant role in Rodamco’s future plans. The company expected to increase its Asian Pacific investments to represent some 25 percent of its total portfolio; its United States investments, which ranged up to 40 percent of total assets, would be brought back to some 35 percent, with Europe representing the remainder of the company’s asset portfolio. By 1994 Rodamco appeared to have recovered from the real estate crash—and regained the confidence of its investors. That year brought the company into Eastern Europe for the first time, with the NLG 70 million purchase of a shopping center in the Brandenburg region of former East Germany. Nevertheless, the fund remained guarded as to further Eastern European expansion.
Spain, on the other hand, presented a more attractive opportunity. In 1994 Rodamco purchased its first two shopping centers, for NLG 175 million. Rodamco would raise the number of its Spanish shopping center investments to 12 by the late 1990s, giving it one of the most important positions in the Spanish shopping center market. Indeed, shopping centers and retail stores would retain the largest part of Rodamco’s portfolio, as the company shied away from an office building market still suffering from an under–occupancy rate of more than ten percent.
Into the mid–1990s Rodamco returned to health and once again to significant acquisitions, including the NLG 800 million takeover of France’s Cegep real estate fund in 1996 and the NLG 1.3 billion acquisition of the assets of Britain’s Imry project development and investment group in 1997. These acquisitions made it difficult, however, for the company to reach its goal of placing 25 percent of its assets portfolio in the Far East. This difficulty would, in fact, serve the company well: in October 1997 many of the previously booming Asian economies collapsed, leading to a collapse in the region’s real estate market as well.
While the booming economies of the U.S. and European markets helped protect Rodamco, its Asian portfolio would nevertheless suffer through the crisis, which would extend through 1998 and threaten to take down much of the world’s economy as well. Rodamco was forced to write off nearly NLG 200 million of its Asian investment portfolio. As a result, Rodamco once again turned its interest to the European and U.S. market, as well as its Dutch home market.
In 1998 Rodamco began making preparations to split up its assets into four separately listed funds, three of which reflected the company’s regional interests, that is, Europe, the Americas, and Asia, with the fourth representing the company’s property management interests. In this way, Rodamco would be able to offer its investors the flexibility to place their shares in the region of their choice.
Rodamco Europe BV (Rodamco Retail Nederland BV; Rodamco UK BV; Rodamco France BV; Rodamco Deutsch–land BV; Rodamco Belgie BV; Rodamco España BV; Rodamco Hungary BV); Rodamco North America BV; Rodamco Pacific BV (Rodamco Australia BV; Rodamco Indonesia BV; Rodamco Philippines BV; Rodamco China BV; Rodamco Malaysia BV; Rodamco Singapore BV; Rodamco Thailand BV); RoProperty Services BV.
Billingham, Erica, “Rodamco UK to Go It Alone,” Estates Gazette, June 13, 1998, p. 55.
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Schutten, Henk, “Rodamco heeft klap doorstaan,” Het Parool, August 6, 1994, p. 9.
Shapiro, Harvey D., “Professor Kortweg’s Theory of 1992,” Institutional Investor, December 1988, p. 177.
____,“Will Rodamco Find Redemption with Investors?,” Institutional Investor, December 1990, p. 33.
Tamminga, Menno, “Vastgoedfonds Rodamco gaat winkelen op Engelse markt,” NRC Handelsblad, February 8, 1997, p. 21.
van Rijsingen, Jos, “Rodamco erg optimistisch voor beleggers,” June 12, 1997, p. 20.
—M. L. Cohen