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Dutch pension giant ABP fund sells unlisted Reit to ING Real Estate in the Netherland’s largest ever deal

ABP’s sale of KFN, which owns €1.6 billion worth ($2.3 billion) of prime Dutch offices, completes a 12-year program of reducing wholly-owned property investment in the Netherlands as it diversifies holdings internationally.

ABP, the pension fund for public employees in the Netherlands and one of the world’s largest, has sold unlisted Dutch real estate investment trust KFN to two funds managed by ING Real Estate.

The move comes at the end of a 12 –year programme by APB to reduce its wholly-owned property investments in the Netherlands in favour of global diversification.

KFN owns a €1.6 billion portfolio of 80 well-let offices across the Netherlands totalling 600,000 square meters including the landmark World Trade Centre Amsterdam, in which KFN owns a 50 percent share.

In a statement, ING revealed that it was among a field of 14 bidders all vying for the deal, which it says is the largest real estate transaction in the Netherlands.

ING is to own the properties via two funds. The Dutch Office Fund will own 228,226 square meters to add to the current 652,000 square meters it already manages. The balance of 376,861 square meters will be owned by the ING Real Estate Office Fund Netherlands, a vehicle designed to hold, rework, and trade assets in the medium term. KFN’s 44 employees will transfer to ING Real Estate fund teams, however, Paul Vismans and Frank Hendriksen, chief executive officer and chief operating officer respectively, are leaving the company.

ABP is not selling out of the assets completely. Instead, it is co-investing €300 million in the enlarged Dutch Office Fund and is also taking a €65 million stake in ING Real Estate Office Fund Netherlands. ING, which is also investing €65 million in the latter fund, says it has attracted three additional investors to the vehicle.

Roderick Munsters, chief investment officer at ABP, said: “The transaction (KFN) is a historic moment for ABP. In 1995, ABP placed its direct real estate investments at arms length in separate retail, housing, and office funds. From the beginning, it was our intention to reduce our interest in these funds to a minority share in order to diversify our real estate portfolio further internationally and to increase liquidity.”

He said the Dutch office portfolio is the last to be sold following divestments of the retail portfolio, now managed by Corio, and the housing fund now owned by Vesteda.

KFN currently has a €650 million debt obligation having arranged a €450 million commercial mortgage-backed security (CMBS) facility in 2004 and a €200 million loan syndication in 2005. Both will be repaid in full by KFN in the first quarter of 2008 when the deal is expected to close.