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 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. The Fund has continued to enhance its system for reporting and monitoring risk in 2018. These improvements enable management to act in a timely manner to counteract or mitigate risk.
The importance and relevance of the individual risk factors is constantly changing. In 2018, the Fund mainly focused on mitigating the market risk of lower financial occupancy in the portfolio. This risk is closely related to the ongoing growth in online sales and polarisation in the retail market. In addition, occupancy is an important driver for the expected return and value of the Fund. To mitigate the risk of lower financial occupancy, the Fund focused on the following activities:
Increasing the share of Experience and Convenience through new acquisitions. Both segments have less sensitivity to the online sales trend. (see also Chapter: The Fund’s Strategy);
Leasing activities: The occupancy rate depends very strongly on how leasing activities are carried out. The Fund tends to go a lot further than the regular leasing activities, such as asset management on location, outside-the-box leasing ideas and strategic tie-ups with real estate owners in the vicinity;
Redevelopment of retail properties to keep the portfolio future proof and to maintain the Fund's high occupancy level.
Fund-specific legal or regulatory risk
In 2017, the Dutch government proposed to amend the FBI-regime, potentially affecting the fiscal status of the Fund. End 2018, this proposal was repealed so this risk has not materialized. However, the Ministry of Finance announced to investigate the application of the FBI-regime by foreign real estate investors in situations that could be considered ‘abusive’. Since the application of the FBI-regime by the Fund is considered to be in line with the spirit and purpose of the law, we do not expect that the FBI-status of the Fund will be considered ‘abusive’ and hence, we expect such investigation will not have a major impact of the Fund.