Foreword Managing Board

2016: once again a year of exceptionally good results…

The past year was an exceptionally good one for investors in the Dutch residential market. The total return we recorded in 2016 exceeded the already exceptionally high total return of 2015, thanks to the strong increase in the value of the portfolio.

…but also of serious shortages in the non-regulated rental market

At the same time, the public debate about the functioning of the Dutch residential market has become quite heated in recent months. We are clearly seeing the consequences of the postponement of new residential construction during the crisis. The shortages we are now seeing, together with a historic low in interest rates, have resulted in a strong increase in house prices, especially in the owner-occupier segment, with price rises particularly strong in the country’s major cities.

A large group of people are struggling to find suitable accommodation due to the combination of expensive owner-occupier houses and the relatively limited supply in the mid-rental segment. Local authorities play a key role in facilitating the construction of more rental houses in the non-regulated sector. Cities and local councils often have the ambition to offer more rental properties in the non-regulated sector. But they could certainly be more effective in terms of realising those houses by setting more stringent requirements on what actually gets built instead of focusing primarily on maximising the yield of land prices. Our cities will not benefit in the long term by concentrating on the construction of small rental apartments where families simply do not fit in. If cities and local councils truly want middle-income earners who work in the city to be able to continue living in their city, they will have to accept that their requirements and wishes may yield lower land prices. In the long term, however, this will certainly improve the liveability and diversity in the city and will consequently increase the city’s social and financial position.

New organisational structure: effective, efficient, fully integrated and centralised where possible

In 2016, we took a number of decisions that had a significant impact on our organisation. We have taken the decision to centralise our three main locations in our new head office De Boel in Amsterdam. This means that we will close our former head office in Maastricht in 2017 and that we reluctantly will be saying goodbye or have already said goodbye to most of our colleagues from the south. Working towards a single integrated organisation also required changes to our organisational structure. As part of this move, over the past year we incorporated most of the Asset Management and Fund Management activities in other departments within the organisation.

Our organisation now consists of three core departments: Portfolio Strategy, Operations and Acquisitions. The Management Team is formed by the directors of those three core departments and the two members of the Managing Board. We expect to complete the implementation of the new organisational structure in the coming summer. We believe that this reorganisation will ultimately contribute to better services to our tenants. We realise that this decision had a very significant impact on our employees. We want to thank our employees for their commitment to Vesteda also during this transition phase and we wish our colleagues who will leave Vesteda or have already left a bright future.

Increased focus on our tenants

In addition to our new organisational structure, we devoted a great deal of attention to our mission, vision and core values, as part of the Vesteda Improves programme (Vesteda Verbetert). The basic premise of our revised mission is that together with our tenants, we create an environment in which they feel at home. We strive to constantly improve our services and our existing residential portfolio. And we also add residential complexes that are tailored to the living requirements of our tenants today and in the future.

We have also started the process of adjusting our corporate identity to bring it in line with our new mission, vision and core values. Our previous corporate identity was designed in 2004. A lot has changed at Vesteda in the intervening period. For one, we are more service-oriented now and we have focused on the mid-rental segment rather than the higher rental segment since 2011. Our portfolio is back on track to growth and we will move to one central head office this year. All these changes were reason enough to redefine our corporate identity. The roll out of our new corporate identity will be gradually and completed after the move to our new head office.

Much attention for acquisition and CSSR

Our Acquisitions department was able to acquire ten projects in 2016, adding a total of 1,147 residential units, despite the fierce competition we faced. All of these projects are an excellent fit with our portfolio strategy of expanding in the mid-rental segment of the market with a primary focus on the Randstad, the Brabant metropolitan area and the strong cities in the periphery of the Netherlands.

Corporate Sustainability and Social Responsibility (CSSR) really took off within our organisation in 2016. We are seeing a growing awareness and as investors in the residential market we can have a major impact on the sustainability front. We took a number of measures after our disappointing GRESB score in 2015. And we have made our CSSR targets an integrated part of our Business Plan. In other words, CSSR is for everyone. After successfully implementing the action plan to enhance our overall GRESB performance, in 2016 GRESB awarded Vesteda ‘Green Star’ classification, with three stars out of a maximum of five. This is an important (but not the only) stimulus to assess how we can continue to further embed CSSR in our organisation.

Structurally healthy housing market

A healthy and well-functioning housing market is of crucial importance to Dutch residents and investors in the Dutch residential market. Housing is a basic need and everyone ought to have the right to a safe and affordable house. However, that healthy balance has been missing from the Dutch residential market for many years, thanks to decades of subsidies in the regulated and owner-occupier segments of the market. At the same time, the ageing of the population makes finding a solution even more complicated. The over-65 age group is set to account for 2.9 million households by 2030. Where and how will this large group of older people, most of whom are house owners, choose to live in the future? At the time of the writing of this annual report, the debate about the shortage of affordable housing in the middle segment is receiving a great deal of attention in the run-up to the parliamentary elections in March 2017. That is a positive thing, but the debate is also muddied and often suffers from a one-sided approach to the problem.

Our relatively modest contribution to a healthier housing market is the further expansion of our investment portfolio in the years ahead. We believe that our strong focus on future developments in the Dutch residential market puts us in an excellent position to differentiate our offering and to offer our tenants lifetime housing opportunities that meet their changing and evolving demand. Vesteda’s property management is performed internally, resulting in highly efficient management of our portfolio and a deep insight in our tenant base. Our internal property management also has proved to be a valuable asset in assessing acquisition opportunities. Our primary focus remains on the Randstad, the Brabant metropolitan area and the strong cities in the periphery of the Netherlands. In these regions, Vesteda targets attractive, high-quality residential units in the mid-rental price segment of the liberalised rental market. Through entrepreneurship and operational excellence in sourcing, selecting and executing transactions, we aim to acquire attractive projects in which we have a relatively large influence on the design, life-cycle costs and sustainability of the product.

Vesteda Managing Board

Gertjan van der Baan (CEO) and Frits Vervoort (CFO)