The Transparency of Real Estate Funds:

A Prospectus Study

Supervisor: Dr. E. Giambona

By

Dirk Deneer

0515833

August 2009

Abstract:

There are a lot of ways to invest in real estate. One of these is participating in non-listed funds. The main purpose of this thesis is to test if investing in these non-listed funds is transparant. The data used in this thesis, are different prospectuses of several Dutch non-listed real estate funds. After analyzing the prospectuses, they will be criticized and conclusions will be drawn.

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Table of content

1. Introduction p. 3

2. Real Estate p. 4

2.1 The four quadrant model of DiPasquale, Wheaton and Fisher p. 5

2.2 Investing in real estate p. 6

2.2.1 Direct real estate p. 7

2.2.2 Indirect real estate p. 8

3. The supervision on the non-listed real estate funds in the Netherlands p. 11

4. The risks of investing in private real estate funds p. 13

5. Real estate and criminality p. 14

6. Research: Prospectus study p. 15

7. Conclusion p. 18

References p. 19

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1 Introduction

In the past few years there has been a positive growth of the interest in real estate participations.

Participating in a real estate project is a form of investing in indirect and non stock market listed real

estate. According to research of ProperyNL there are about ninety tenders active on this market in the

Netherlands. An estimation of the number of investors in real estate participations shows that there are

about 60.000 of them (Nyenrode Business University, 2007). In 2008 the privately owned investors are

representing almost 30% (around four billion Euro) of the total market of commercial real estate in the

Netherlands. In despite of the poor reputation in the Netherlands, with several extortions, murders and

fraud as example, real estate still represents a big part of the investment portfolio of a lot of people. But

nowadays, in the time of crisis and financial uncertainty people are willing to invest their money

without taking any risks. So, is it safe to participate in real estate projects or will people bare a

disproportionate amount of risk? Is the information given by the initiator of the project sufficient for

the investors to make a well considered choice?

The main question of this thesis will be: is the non-listed real estate fund market transparent? This

question is answered based on examining different prospectuses from several funds, from the period

January 2008 until now.

After carefully examining these different prospectuses, one can conclude that the non-listed real estate

fund market is still not transparent. The information given in the prospectuses, is not sufficient for

making a liable choice. Investors will bare a disproportionate amount of risk and they will likely lose a

part of their invested amount of money.

The thesis is structured in the following order: in chapter two there is general information about real

estate listed and an important model is explained. Besides that, the advantages and disadvantages of

investing in real estate are summed up. Finally, there is also a difference made between direct and

indirect real estate. In chapter three there is paid attention to the supervision on the non-listed real

estate funds in the Netherlands. In chapter four the risks of investing in private funds are mentioned.

After that, the criminality in the real estate market is mentioned in chapter five. At the end of each

chapter, the theory is applied to the analyzed prospectuses. In chapter six the most important findings

about the prospectus study are repeated. Finally, in chapter seven follows the conclusion.

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2 Real estate

At March 17th 2009 the Centraal Plan Bureau (CPB) presented the report Centraal Economisch Plan

2009. The conclusion of this report was very obvious: the Netherlands is in a deep recession. The

consequences of the worldwide credit crisis are noticeable everywhere. The real estate market suffers

also in this time of bad business outlook. There is less money invested at this moment in real estate and

that leads to a hard time when someone is trying to sell his house for example. This leads further to a

decrease of house prices. In February 2009 there were approximately 8900 houses sold and thats 41%

less than February a year ago. Besides that, a lot of new housing estate project are postponed or

canceled and the vacancy of properties is rising. See the graph below.

The black line shows the total vacancy in the Netherlands. The red bars show the average vacancy per

property in the Netherlands.

Consequences of such a decrease in prices can be visualized with different models. In the next

paragraph this will be further explained.

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2.1 The four-quadrant model of DiPasquale, Wheaton and Fisher

The developments on the real estate market are in a close relationship with the situation in the

economy. To explain certain events on the real estate market, there are different theoretical models

available. A well-known example is the four-quadrant model of DiPasquale, Wheaton and Fisher. This

model connects the real estate market to the situation on the financial markets. See the model below.

The four-quadrant model

The first quadrant shows the relationship between the height of the rent and the total volume in

square feet of the demand for real estate. When the rent rises the demand will decrease.

The second quadrant is closely related to the first and shows the relationship between the height

of the rent and the price of the real estate. It implies that when the rent rises, the price of the

underlying real estate rises proportionally. The quotient of the rent and the price of the real

estate is known as the kapitalisatievoet.

The third quadrant focuses on the connection between the price of real estate and the production

of the construction sector. When the prices are higher, the production will rise. The reason that

the line does not start in the centre is because of the minimum prices in the construction sector.

They need a certain level of prices before it is profitable to start building a real estate project.

The fourth quadrant completes the model by connecting the production of the construction

sector to the total volume in square feet of the demand for real estate.

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Assuming this model is correct, there are private funds, which promise their potential participants

false figures. It is obvious that the economy is in a financial crisis. Due to a high percentage of

vacancy, prices of real estate are falling. Focusing on the second quadrant and assuming the annual

rent is constant, it is impossible to promise a rising kapitalisatievoet, in the present situation.

Instead of a higher kapitalisatievoet, it will be significantly lower.

2.2 Investing in real estate

Investing in real estate can be described as: the direct or indirect acquisition of real estate, with the

aim of realizing a future cashflow from exploitation and the sell of the real estate (Van Gool, 2007).

The most common advantages of investing in real estate are:

Real estate gives the investor a relatively stable cashflow for a long period of time due to rental

receivings.

Real estate combines this relatively stable cashflow with minimal risk.

Real estate has a positive effect on the spread of an investmentportfolio. It also reduces the

portfoliorisk due to a low (and sometimes even negative) correlation with for example stocks

and bonds.

Real estate protects against inflation, due to the indexation of rental receivings.

Besides the advantages, investing in real estate also has negative aspects. The most important ones are

summed up below:

To be a successful real estate investor, one needs to be well informed. Specific knowledge is

essential.

To invest in direct real estate, an investor needs a lot of working capital. For a small investor,

direct real estate will be unattainable and they will be forced to invest in indirect real estate.

Investing in real estate is illiquid. Due to all the official documents formulated by for example

the notary, the transaction costs are high.

There are different ways to invest in real estate. The most important difference to make is the one

between direct and indirect real estate.

In the case of direct investing the investor is the actual owner of the real estate or the owner of financial

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papers, which give him the right of having all the benefits of the real estate. The direct investor owns

the majority of the real estate and has the right of say. On the opposite, in case of indirect investing the

investor is not the actual owner of the real estate, but he owns financial papers, which give him the

right of having benefits of the real estate. In this case the investor does not own the majority of the real

estate and has no right of say. This form of investing occurs for example when a person buys stocks in

a real estate fund.

The danger of having no right of say, when investing in indirect real estate, is that the investor has to

trust the management of the real estate fund. If the management is not reliable and competent, it can

result in big losses for the investors. In practice, this took place a couple of times. See chapter five.

2.2.1 Direct real estate

As seen in the graph below the total investment in direct real estate has risen significantly. This graph

shows that direct real estate is very popular by investors in the Netherlands.

Below, there is a summary of the most important characteristics of direct real estate.

The real estate is not transportable, so therefore it is very sensitive to changes in the economic

situation. For example when the purchasing power of the local people decreases or when the

real estate market suffers from the recent credit crisis.

Direct real estate is not affected by fluctuations of the stock exchange. Economical

developments are slowed down towards the demand and supply of the real estate. This is caused

by the long term rental contracts and the relatively long building period of the real estate. This

makes real estate a late-cyclical investment and is also known as the pork cycle. When the

prices of real estate are high, more projects will be realized. However, due to the relatively long

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building time, their effect is delayed. The real estate market will become exuberated, which in

time will lead to a decline in prices. As a result of this, less projects will be realized, but again

the effects will be delayed. When the decline in prices is noticed, the demand for real estate will

rise. After some time the prices will rise, due to the risen demand. This cycle will repeat itself

continuously. This pork cycle can be illustrated by the Cobweb-model. This model is

illustrated below.

Direct real estate is very illiquid. The complexity and the heterogeneity of the investment result

in extensive purchasing and selling transactions. Another factor, which causes the illiquidity

of direct real estate, is the lack of transparency of the market. Data about transactions are kept

secret and there are a number of serious consequences of this lack of transparency. Well-known

examples are vacancy, rigid prices and gaining of exceptional profits.

Due to the fact that high working capital is needed, investing in direct real estate usually comes

together with leverage. To work with leverage, a mortgage for example, has some advantages.

One of the most attractive is the tax deductibility of the interest on the loan.

The transaction costs, coming with the purchase and selling of the direct real estate, are

relatively high. Examples are: notary costs, transfer tax and information costs. The information

costs are high because of the lack of transparency in the direct real estate market.

2.2.2 Indirect real estate

There are different types of indirect real estate. An investor can distinguish listed funds and non-listed

funds. Non-listed funds are also called private funds and can be divided into funds with different

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structures. The most commonly used structures are a partnership or a limited partnership. The

difference of the two structures is clarified in chapter six.

Listed funds

The investors who invest in listed funds, becomes a stockholder of the real estate fund. In the past

decades the popularity of listed real estate funds showed a considerable growth. Nowadays, the market

value of listed real estate funds in the Netherlands is around fifteen billion Euro. The most important

funds on the Dutch stock market are Rodamco Europe, Corio and Wereldhave. When investing in listed

real estate funds, the investor has to take specific characteristics into account. The most important ones

are listed below.

An investor can participate in a listed real estate fund from a couple of Euros to millions of

Euros. There is no minimum deposit and the transaction costs are low. Usually the transaction

costs are a fixed amount, so the larger the deposit, the lower the percentage of transaction costs.

On the opposite of the illiquid investment in direct real estate, listed real estate funds are

considerably liquid. An investor can sell or buy stocks of the listed fund in a relative short

period of time. Although it is only possible when the stocks of the listed fund are traded

actively.

The returns of investments in listed real estate funds are more volatile. This is due to the fact

that the stock price is not only affected by the underlying value of the real estate, but it is also

influenced by fluctuations of the stock market itself. This off course effects the level of

diversification of the investors portfolio in a negative way. The correlation-coefficient between

the fluctuations of the stock price of the listed fund and the fluctuations of the stock market as a

whole will be closer to one, in comparison with the correlation coefficient between direct real

estate and the stock market.

Another specific characteristic of listed real estate funds is the fact that the investors have no

control of the management. The investors own stocks, but they have no right of say in the

choice of which real estate the fund is going to acquire. After the purchase of the real estate, the

investors still have no influence on the management.

Non-listed funds

On the opposite of the listed funds, there are the non-listed funds. The investor can become a

shareholder of the non-listed (private) fund. Because the fund needs money to buy real estate, it issues

participations. The investors have to deposit money and in exchange they are compensated with interest

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payments. When the fund sells the real estate after the agreed period, this will be with an agio or a

disagio. It depends on this sale whether a participant gains or looses money. Examples of Dutch private

real estate funds are Homburg Participations, ANNEXUM Invest, Westplan Investors, APF

International and Van Boom & Slettenhaar. The most important characteristics of non-listed funds are

listed below.

Unlike the listed funds, the profits the investors enjoy when investing in a private fund are not

influenced by the fluctuations of the stock market. This influences the diversification of an

investors portfolio in a positive way.

Every private fund issues a prospectus to attract the investors. The prospectus shows what kind

of real estate the private fund will acquire with the money they collected. Just as with the listed

funds, the investors have no control of the management, but with the help of the prospectuses

they can choose the type of real estate they want tot invest in.

The liquidity of participating in a private fund is minimal and there is quite some knowledge

needed to separate the prospectuses and make a well considered investment.

There around ninety tenders active in the private fund market and they all use different ways to show

their vision on the expected results. This makes it very difficult to make a comparison between all the

prospectuses, especially because there is a enormous asymmetric knowledge relationship between the

potential investors and the writer of the prospectus. For potential investors it is very important that they

try to see why some assumptions are made and if they are realistic.

3. The supervision on the non-listed funds in the Netherlands

3.1 Authority Financial Markets (AFM)

The Authority Financial Market (AFM) is supervisor on the behavior of all groups on all financial

markets in the Netherlands. This contains the markets of saving, lending, investing and the insurance

market. So this also covers the non-listed real estate funds. The statutory goals of the AFM are

stimulating order and transparency on the financial markets, an unfailing relationship between

different market parties and the protection of the consumers. The AFM monitors all parties so, that

they will obey the law and respect the rules (AFM report, 2005).

Until 2007 Dutch non-listed funds, which where supervised by the AFM, where subjected to either the

Wtb (Wet toezicht beleggingsinstellingen) or Wte (Wet toezicht effectenverkeer). To determine

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which one should be applied, it was necessary to examine the activities, which where financed with the

collected money from the issued participations. When a private fund was passively supervising the

obtained real estate, it was subjected to the Wtb. In this case the AFM would provide a permission to

this private fund to do business, but only if it meets certain requirements. Examples are a competent

and reliable management and the prospectus should include all the information required by law. If the

private fund was not only passively supervising the real estate, but also constructing their projects, it

was subjected to the Wte. In 2007, the Wtb got replaced by the Wft (Wet financieel toezicht).

Because the Wft is far more important for the most non-listed funds than the Wte, examples of the

requirements the funds have to meet are listed below.

Wft The prospectus will be carefully examined. Special attention will go out to topics as: cashflow

statement, finance structure the notification of an accountant and if there are interlocked

interests. The fund is obliged to provide the investors with a financile bijsluiter. In this

enclosure the investor will find good and clear information about a complex investment. The

financile bijsluiter is designed to inform the potential investors about the basic facts of an

investment, such as: risk, costs and the return. A third condition to get a permission to do

business, is to have a competent and reliable management. This will be extensively tested, for

example by setting minimal capital requirements. If a private fund has obtained a permission of

the AFM, it still has to follow certain rules. All annual and semi-annual statistics have to

become public. Besides that, the fund has to rate the real estate in their portfolio by a

independent appraiser.

There are still examples of private funds, which are out of reach of the Wft. This occurs for

example when the participations are offered in a private community. The most popular escape from

the supervision of the AFM is to issue participations with a minimum amount of 50.000,-. If this is

the case, the fund is not under supervision by the AFM. This can lead to several problems, related

to the issued prospectuses. Accountant statements are not added and financial paragraphs are not

signed. See the review of the prospectuses.

3.2 Stichting Transparantie Vastgoedfondsen (STV)

Stichting Transparantie Vastgoedfondsen literally translated in English is Foundation Transparency

Real estate funds. The aim of this foundation is the improvement of the transparency and the

comparability of the prospectuses, released by Dutch non-listed funds. To realize this, the STV is

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developing, maintaining and controlling different standards for the information provided in the

prospectuses.

According to the operation procedure, the private fund has to pay the STV a standard fee first. After

this the STV will examine the prospectus, according to their standards, within fifteen days. The STV

will only give their approval if all the required information is mentioned in the prospectus. If there are

one or more things, which are deviating from the standards of the STV, the STV will report this on

their website. In this case, the initiator of the fund is not obliged to explain why there are deviations. By

means of a standardized statement the STV will make public, in what extent the fund is meeting the

requirements.

Examining of a prospectus by the STV is not obligated and funds, which are examined can not be

sentenced. This raises the question if it is necessary at all. The STV has not enough power to function

as a controlling instrument.

3.3 Vereniging Vastgoed Fondsen (VVF)

The VVF (Association Real Estate Funds) is an organization, which looks after the interests of the non-

listed real estate funds. Funds, which are under supervision of the AFM, as well as funds which fall

under the dispensation of AFM supervision, can become a member of the VVF. When a fund becomes

a member, it commits to take certain behavior codes in consideration. These codes include for example

special requirements regarding the information in the published prospectus. The tasks of the VVF are:

Strengthening the trust of the investors in the non listed real estate fund market;

Formulating certain standards with regard to the organization of a fund, the published prospectus and to the uprightness and expertise of the management;

Discussing with the authorities and with other supervising organization. The AFM and the STV for example;

Stimulating the communication between the non listed real estate fund market and other related markets;

Advising the member with regard to the different aspects of the real estate market. Especially the fiscal, financial and social developments are closely followed.

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4. The risks of investing in private real estate funds

For an investor in non-listed indirect real estate, there are several risks which he should be aware of.

The most important risks are listed below:

The liquidity of the participations is minimal. This is called the lock-in risk. Another aspect of

this lock lock-in risk is the exit strategy of the real estate funds. Some investors are forced to

sell their participations after a certain period. For example: investors who are forced by contract

to sell their participations now, in the current recession, have to take their losses. At the same

time its very plausible that the market will recover in the following years. Due to the forced

sell of the participations, the investors can not profit from this recovery.

There are a lot of specific risks for an investor in non listed indirect real estate:

Economic situation: When a country is in an economical crisis it is possible that the vacancy will rise. Besides that it is likely that the market value of the real estate will fall,

which makes it hard to obtain the promised yields.

Inflation: In a situation of high inflation, the market value of the real estate will fall. In prospectuses of investment opportunities from real estate funds, there usually is an

estimation of the inflation in the coming years. If the actual inflation differs in a

negative way from the estimation, it also can be hard to obtain the promised yields.

Rising interest: In the most cases the real estate portfolio of a real estate fund is financed with a mortgage. The leverage is in general very high. This results in an increase in the

sensitivity of interest changes. When the interest is rising, it is possible that the real

estate fund can no longer pay off the interest or the redemption.

Vacancy: When a part of the real estate is vacant after the ending of a rental contract, long term vacancy can be the consequence if there is no new tenant found. If there is no

incoming rent, the promised receivings will not cover the interest payments to the

participation holders and the debt holders.

Disputable debtors: The promised interest payments to the participants and the redemption of the debt holders can be problematic when debtors do not pay off their

rent.

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Rising maintenance costs: When maintenance costs are higher than expected, the cashflow statement will change in a negative way for the investors.

Behavior and Morality of the initiator: There are many examples of criminal behavior by initiators. When they operate in their own business, it is possible that the investors

can be damaged. One popular example of causing damage to investors is a so called

ABC-construction. In this case the book values of the bought real estate are

exaggerated. A consequence of this construction is a substantial profit for the initiator

and losses for the people, who invested in the participations.

As listed above, there are a lot of risks on investing in private funds. The potential participators should

understand that whenever one scenarios occur, the promised yields are almost impossible to realize. To

make sure that the fund will continue to exist and pay its debtholders and participators, it is very

important to have enough cash funds. If there is money to absorb shocks, the fund will be able to

survive. However, in despite of this knowledge, almost none of the analyzed prospectuses had funds

allocated to cover possible risks.

5. Real estate and criminality

Real estate is for many people synonymous for a market with a lot of extortions, murders and

racketeering. Due to the fact that the real estate market in the Netherlands has had a lot of negative

publicity in the last couple of years, this image is still not adjusted. Two of the most monstrous and

known cases since 2007 are: Palm Invest and Easy Life.

5.1 Palm Invest

At the beginning of 2008 the initiators of the real estate fund Palm Invest were accused of fraud. The

fund pretended to invest in real estate in Dubai. The initiators issued participations and gathered around

24 million Euro from investors. Instead of investing it in real estate, they enriched themselves.

Numerous people were harmed and lost their money. In the beginning of 2008, the FIOD broke into the

office of Palm Invest in the Dutch city Hilversum. They seized all the possessions of the fund and

arrested the initiators and two of their staff members. Today, the two initiators have been released from

custody, but are still on surveillance of the authorities.

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5.2 Easy Life

At the end of 2008 another initiator of a real estate fund turned himself in at the police. It was the

owner of Easy Life, John W. He admitted that he damaged about 500 investors for an amount of

approximately 33 million Euro. Easy Life pretended to invest the money in insurance companies in the

United States. But instead of doing so, they bought a lot of real estate in the Netherlands. Besides these

investments, John W. enriched himself extremely. All those possessions were auctioned and John W. is

still in custody.

A plausible explanation for the rather high percentage of criminality on the real estate market, can be

that the market is very imperfect. Fact is, that criminality always moves to a market with minimal

regulation (Eichholtz, 2006). This makes it possible for people with bad intentions to operate on the

real estate market. Some recently issued prospectuses are showing beautiful figures, so that every

potential investor immediately will deposit his money. But if you read the subscripts, there is

sometimes said that the fund expects to have a negative income for the coming years. Is this a less

extreme form of criminality? A lot of people who will be or become the victims of these kinds of funds

will think it is.

6. Research: Prospectus Study

In this chapter there will be tried to explain the answers to the main question of this thesis: is the

private fund real estate market transparent enough nowadays? To answer this question, there are fifteen

prospectuses used. They were all requested on the internet sites of the real estate funds. The

prospectuses which are used are issued for real estate projects dated from January 2008 until today. In

this thesis there are no names mentioned and the identity of the initiators of the funds are kept

anonymous. This is done to prevent possible reputation damage to one of the discussed funds.

After carefully reading and analyzing the different prospectuses, all the data, which was insufficient

according to contemporary knowledge on real estate, is listed below.

First of all, it is important to determine in which form the fund is organized. It can be a partnership or a limited partnership. The difference between these two comes to expression in

the responsibility. With a limited partnership, the investors loss is limited to his/her deposit. On

the other hand, in the case of a partnership, the investors can lose their whole private equity. In

this case, creditors can collect their debts with the investors. In the prospectuses the risks and

the consequences of the different business structures are not always clearly showed.

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When acquiring real estate, the funds usually finance it with the money of the investors plus a mortgage. In some cases, the mortgage is partly issued in foreign currency. In this case, it is

obviously necessary to allocate money for possible differences in exchange rates. When the

mortgage term ends after a couple of years and the fund has to issue a new mortgage, it is

possible that the foreign currency has risen in value. This will be more expensive and the

cashflowstatement in the prospectus can differ from reality.

As mentioned at the end of chapter four, there are a lot of risks when investing in non listed real estate funds. If a private fund does not allocate funds for unexpected situations, the cashflow

statement they are presenting in their prospectus is very unrealistic.

There are funds, which calculate huge starting fees. In the same time, the funds have a very low own equity. So before the real estate is acquired they already make a profit. Off course this

money is deducted from possible gains for the investors. This is also the case with the emission

costs. This money goes also directly to the fund.

To enjoy as much profit as possible, the fund will exploit the acquired real estate. There are long-term rental contracts issued. But in some prospectuses the rental contracts are ended before

the investment period is expired. In this case it is possible that there is not enough money to pay

the annual interest to the participation holders. And again there is no money allocated for

situations like this.

In some prospectuses there is a prognosis on the sale of the real estate when the duration of the fund is expired. As indication on the possible profit or loss for the investors, there is a number

which is called the kapitalisatievoet (See the four-quadrant model on page 6). To calculate

this number, the selling price of the real estate is divided by an amount, equal to the annual rent.

According to the four-quadrant model it is impossible to have a rising kapitalisatievoet in

times of crisis, while the annual rent stays the same. Nevertheless there are prospectuses, which

show a rise in this number by almost 1.0.

In almost all of the prospectuses there are numbers used, based on the past. In the difficult economic situation of today, one can not rely on these numbers. Some funds use a historical

average in their calculations and some an estimation of future values. The second one is more

realistic, but is less used, because it is less attractive to predict losses.

Just as the example with the foreign currency, it is also possible that a mortgage in Euro will end before the investment period expires. If the interest percentage has risen in the meanwhile,

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there will be more costs for the fund when the new mortgage term starts. And also in this case,

you can not find this in the cashflow prognosis in some prospectuses.

There are prospectuses in which psychological numbers are used. In the cashflow prognosis, there are numbers used to estimate the different costs. At the end there is a positive number

below the line, but only because all of the estimated costs are kept low. This is especially the

case with the maintenance costs and the exploitation costs. The numbers are so low, that when

for example a leakage will take place, the number below the line will become negative in some

cases. To let it look attractive for potential investors the numbers are always positive. That

works psychological in their benefit. The same problem occurs with the taxation value of the

real estate.

When a fund issues participations, there is a date on which everyone should registered themselves at the latest. However funds which have participations left, are passed that date. The

people who participated expect an interest payment in a year after the due date. But if there is

still no real estate acquired, so the fund receives no money on the exploitation, who is going to

pay for that? In the prospectuses where this is the case, it is not clearly mentioned.

There is one prospectuses in which literally is stated that it is very plausible that for the coming years no corporate tax will be paid. That is the reason why it is not taken into account when

making the cashflow statement. This means that the fund probably will have a negative fiscal

result. Who will invest in a fund, which will only cost the investor money?

The most of the prospectuses are not examined by the AFM because they are not under supervision by this authority. In the most cases that is because the minimal amount to take place

in the fund is 50.000,- or more. This results in missing accountant statements in some

prospectuses.

In two of the prospectuses, the financial paragraph is not signed. Readers can not judge what they read when this is the case. If the financial section is written by a independent and skilled

party, is that off course a positive fact. In contradiction to that, if a person with mixed interests

wrote this, it is negative information.

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7. Conclusion

It can be concluded that there is still not enough transparency on the non-listed real estate market. In

despite of the fact that the most prospectuses are very extensive, it will be very hard for the most

investors to separate the important information from the less important data. This makes it very hard to

make a well considered choice based on the information in the prospectus. The biggest problem in the

prospectuses is the manipulation of the input. The calculation of for example the maintenance costs or

the exploitation costs are based on (for the investor) unknown assumptions. This makes it more

difficult to compare certain prospectuses with each other, because all are based on different

assumptions. The profit prognosis is also based on changeable numbers, which are calculated in the

benefit of the fund. For example the expected inflation, the taxation value of the real estate, the

expected vacancy and the annual costs. To solve this transparency problem, it is important that there is

more supervision. The AFM should make every fund subjected to its supervision. The STV and the

VVF should develop their ideas more, so it can lead to more reliable prospectuses. The analysis of the

prospectus by the STV should become obligated for all funds. If all the supervisors can work together

and gather their power, it will be possible to increase the transparency.

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Diem, J.K. van (2006). Zelfregulering van de Nederlandse CV-markt. Amsterdam School of Real Estate.

Gool, P. van (2002). De opmars van niet-beursgenoteerde vastgoedfondsen. PropertyNL, maart.

Gool, P. van (2002). Is niet-beursgenoteerd vastgoed het best? PropertyNL, mei.

Gool, P. van, Brounen, D., Jager, P., Weisz, R.M. (2007). Onroerend goed als belegging. Groningen: Wolters-Noordhoff.

Hoedjes, M.C.H. (2004). Vastgoedmaatschappen en CVs in Nederlands vastgoed, een kwaliteitsonderzoek. Amsterdam School of Real Estate.

Markowitz, H. (1952). Portfolio Selection. Journal of Finance 7(1).

Nyenrode Real Estate Center (2007). Rekenen op vertrouwen! Breukelen: Nyenrode Business University.

Pagliari, J.L. (1995). The handbook of Real Estate Portfolio Management. Burr Ridge, USA: Irwin Professional Publishing.

Seebus, J. (2006). AFM voor vastgoedsector is onwerkbaar. Het Financieele Dagblad, 10 april.

Schutte, A., Schoonhoven, P., Dolmans Bude, I. (2002) Commercieel Vastgoed. Amsterdam: Reed Business.

Internetsites:

http://www.vastgoedmonitor.nl

http://www.vastgoedkennis.nl

http://www.stichtingtransparantievastgoedfondsen.nl

http://www.verenigingvastgoedfondsen.nl

http://www.afm.nl