ROTTERDAM, NETHERLANDS-Following a long negotiation, listed Dutch real estate funds VastNed Offices/Industrial and Nieuwe Steen Investments have agreed to merge to form a new mixed fund owning a portfolio of $3.4 billion mainly in high-yielding office and retail properties and generating rental income of more than $285 million from more than 300 individual assets.

The negotiations, broken off earlier this year and recently resumed, have led to an exchange ratio of 0.897 NSI shares for each VastNed O/I share. VastNed shareholders will also receive one Value Retention Warrant for each ordinary share. The combination is driven by a compelling rationale, the firms said, and is better equipped to be successful in the Dutch office market and take advantage of the more positive momentum in Dutch retail property.

“We are confident about the strategic rationale and the significant scale advantages offered by the combination with VastNed O/I,” says NSI CEO Johan Buijs. “The merger fits well with our strategy and ambitions… Size is becoming more and more a decisive factor to create attractive shareholder returns in the long term and compete for larger high-yield retail and office properties.”

Reinier van Gerrevink, CEO of VastNed O/I, added he is confident that shareholders will benefit from the proposed merger, and in particular the solution to retain part of the potential surplus value of its stake in Brussels-based Intervest Offices, which had been a sticking point. “NSI and VastNed O/I will benefit from significant scale benefits and have a stronger commercial position in the market,” van Gerrevink says.

The two firms have the fiscal status of Dutch REIT/FBIs. They aim to rebalance the combined holdings 50% each to retail and office in three markets: retail in Switzerland, office in Belgium, and both classes in The Netherlands - where office holdings are in the main concentrated in the Randstad area. The move should also booth investor profile and visibility, grow market capitalization, and boost share liquidity, potentially via inclusion in the NYSE Euronext Amsterdam AMX Index.

Allan Saunderson is a managing editor of Property Investor Europe and a contributor to GlobeSt.com.