Key developments core departments

Vesteda’s new organisational structure consists of the following three core departments: Portfolio Strategy (previously Portfolio Management), Operations (previously Property Management) and Acquisitions (previously Acquisitions & Development). This section details the main developments within these three departments in the year under review. For the main priorities of these departments for 2017, see the section Outlook and management agenda of this report. You will find more information on our new organisational structure in the section Organisation of this annual report.

Portfolio Strategy

Improving the quality of the investment portfolio through acquisitions, operations and property sales

Portfolio Strategy is responsible for all strategic decisions regarding the portfolio, including value growth. Our strategic objectives are translated into guidelines and benchmarks for our two other key departments: Acquisitions and Operations (property management and individual unit sales).

In 2016, we devoted a great deal of time to updating our portfolio plan and we introduced a more sophisticated tenant approach. We used in-depth segmentation to define our most important tenant groups. This improves our ability to provide (potential) tenants with the most in-demand housing concepts in the various regions. We (re)determined the most attractive cities, areas and neighbourhoods to focus our investments on, based on economic, demographic and social developments.

Subsequently, we (re)determined our tactics for each and every property in order to optimise the performance of our investment portfolio based on our annual in-depth hold/sell analysis.

The circle diagram below shows the current tactics for the complexes in our investment portfolio. The tactic ‘operate’ applies to almost three-quarters of our investment portfolio. This translates into a focus on value creation through rental growth, optimal occupancy rates and effective and sustainable maintenance. Some 3% of our portfolio has been earmarked for the creation of additional value through refurbishments and sustainable investments. For roughly 20% of our portfolio we use the tactic unit sales. This involves the generation of additional value through the sale of individual apartments and houses. We have classified around 4% of our investment portfolio as non-core. These are complexes that in our opinion and analysis have only limited potential in the medium and long term due to their location and/or condition and/or particular product-market combination (PMC). We may sell these complexes in the future through block sales.

Current tactics (% of total portfolio)

Please see the section Key portfolio developments of this report for a detailed explanation of the main changes in our portfolio.

Relative performance (MSCI benchmark)

In 2016, Vesteda outperformed the MSCI Netherlands "All Residential" benchmark in terms of direct return (+0.4%) and performed in line with the benchmark in terms of indirect return (0.0%).[1]

Vesteda Residential Fund versus MSCI residential benchmark

 

Annual average

 

Average of past

 

2016

2015

2014

2013

2012

 

3 yrs

5 yrs

Direct return

        

Vesteda Residential Fund

4.6

5.0

5.0

4.9

4.5

 

4.9

4.8

MSCI-benchmark

4.2

4.5

4.5

4.4

4.2

 

4.4

4.4

Outperformance

0.4

0.4

0.5

0.4

0.2

 

0.4

0.4

         

Indirect  return

        

Vesteda Residential Fund

10.6

5.0

0.8

(3.8)

(5.1)

 

5.4

1.3

MSCI-benchmark

10.5

6.3

0.6

(4.0)

(3.7)

 

5.7

1.7

Outperformance

0.0

(1.2)

0.1

0.2

(1.4)

 

(0.3)

(0.4)

         

Total return

        

Vesteda Residential Fund

15.7

10.2

5.8

0.9

(0.8)

 

10.5

6.2

MSCI-benchmark

15.2

11.0

5.2

0.2

0.3

 

10.4

6.2

Outperformance

0.4

(0.8)

0.6

0.6

(1.2)

 

0.1

0.0

Percentages MSCI Netherlands “All Residential” benchmark, computed using MSCI definitions.

  • 1Direct return and indirect return might not add up to total return as a result of time weighted averages on a monthly basis.

Operations

The introduction of a new organisational structure also affected Operations (previously Property Management). The main change for Operations in the new structure is that the district managers are now responsible for both tactical and technical asset management. One of the key advantages of these changes is that the responsibility for the exploitation of the investment portfolio has now been placed in the Operations department. This move has also created room for the personal growth of a number of employees. Naturally, the new structure did create a number of challenges. The decision to relocate to a single head office in 2017 meant that we had to set up a completely new Commercial Support team, as the old team operated from our Maastricht office.

The rental market was booming in 2016, especially in Amsterdam. Consequently, our overall vacancy was historically very low in 2016. Thanks to the successful (re)letting of our standing portfolio and newly-acquired properties, we were able to improve our average occupancy rate in 2016, which in turn resulted in lower loss of rent. We improved the lettability of the properties in question considerably by making investments in new kitchens, bathrooms and toilets. Like-for-like rental growth exceeded inflation, once again proving the solid inflation hedge our portfolio offers. Active procurement management also enabled us to make considerable cost savings on maintenance. The gross/net ratio improved slightly compared with 2015.

Focus on tenants and sustainability

We have started on the implementation of our investment plan 2020, to improve the overall sustainability of our portfolio and to outperform the agreements laid down in the Dutch Energy Agreement. Taking into account the acquisition of the Olympia portfolio in Amsterdam, which consists of three older residential complexes and is therefore by definition less sustainable, and our greater ambition for the Schuilenburg apartment building in Amersfoort (net-zero energy), we are well on track.

Please see the Notes to the results section and the Key performance indicators section of this report for more detailed information on our results.

Apart from the annual tenant satisfaction benchmark survey which is described in the Tenant Survey section of this report, Operations also conducts annual research specifically into the quality of its services. This research revealed that tenants gave our services an average overall satisfaction score of 7.0 (2015: 6.9). Despite a slight improvement compared to 2015, this figure also shows there is room for improvement. This is why we introduced a new survey in 2016, to learn more about the ‘home feeling’ of our tenants. Our ambition is to translate the needs they express into knowledge about how to improve our services and the quality of our houses. Basically, we are trying to learn what our tenants find most important about their houses and their local surroundings. We also ask our tenants for feedback on our services. In 2017, we will take a closer look at the results from our most recent survey and identify any opportunities to improve our products and services.

Quality of service: average tenant rating

Acquisitions

Vesteda aims to continue the growth of its investment portfolio in the years ahead. Our primary focus for acquisitions is 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. The foundation of our growth strategy is the acquisition of new-build projects in which we have a relatively large influence on the design, life-cycle costs and sustainability of the product. We will add these to our investment portfolio in the coming years. In addition, we aim to acquire existing real estate, residential complexes or entire portfolios, which can be added to the investment portfolio and generate immediate returns.

In 2016, we once again expanded our Acquisitions team and acquisition pipeline. At year-end 2016, the team consisted of 10 (2015: 7) dedicated commercial and technical professionals, plus support staff. As of 1 July 2016, Pieter Knauff was appointed as Director Acquisitions. He succeeded Nico Mol, who remains committed to the Acquisitions department and will focus entirely on external relationships and current development projects.

The market for residential investment products was fiercely competitive last year. The majority of the residential complexes on offer were sold through public or private tenders and pricing was the sole selection criterion most of the time. However, Vesteda successfully secured a number of exclusive transaction opportunities thanks to our entrepreneurship and operational excellence in sourcing, selection and execution of transactions. We were selective in terms of participating in tender processes. Vesteda acquired 10 projects that included 1,147 residential units in 2016 (2015: 550 units). Around 75% of this volume was turnkey acquisitions of new-build properties, which we have added to our pipeline. The remaining 25% of this volume involved the acquisition of existing properties that we have immediately added to our investment portfolio.

Additions to the investment portfolio 2016

In 2016, Vesteda added a total of 598 residential units to the investment portfolio. The table below is an overview of the units added to the portfolio. The majority of these units are recently completed new-build properties acquired in previous years. The existing properties, Olympia Portfolio and Paradium III, were both acquired in 2016 and were immediately added to the investment portfolio.

Additions to the investment portfolio 2016

Residential building

Location

Total number of units

Apartment/ Family house

Region

Rental segment

Quarter of completion/ delivery

14Noord

Amsterdam

14

Apartment

Primary

Mid

Q1

Nieuw Princenhof

Leusden

25

Family house

Primary

Mid

Q2

De Boel

Amsterdam

154

Apartment

Primary

Mid

Q2

Olympia Portfolio

Amsterdam

205

Apartment

Primary

Reg. / Mid / Higher

Q2

Lunahof

Arnhem

31

Family house

Primary

Mid

Q3

De Wachters

Breda

75

Apartment

Primary

Mid

Q3/Q4

De Hagen I

Amsterdam

32

Apartment

Primary

Mid

Q4

Paradium III

Dordrecht

62

Apartment

Secondary

Reg. / Mid

Q4

Total inflow

 

598

    

Pipeline year-end 2016

In 2016, Vesteda added a total of eight new-build projects, totalling 880 residential units, to its pipeline. All of these projects are an excellent fit with Vesteda’s portfolio strategy in terms of region, rental segment and energy label. The majority of the projects are located in the urban expansion sites of the larger cities in the Netherlands, where Vesteda can benefit from the promising continued development of the area.

In the first quarter, Vesteda signed a turnkey agreement covering the Tango project in Haarlem (55 apartments). In the second quarter, Vesteda acquired 25 apartments in the De Goudsbloem project in Den Bosch, 235 apartments in the De Staatsmannen project in Kanaleneiland Utrecht and 64 apartments in the Schinkelhof project in Amsterdam. In the third quarter, Vesteda purchased the Langs de Rijn project in Arnhem, which includes 94 apartments. In the fourth quarter, Vesteda signed a turnkey agreement for 84 apartments in Purmerend (the Apollo project) and 134 mid-rental segment apartments in Leiden (the Alpha project). In the fourth quarter, Vesteda also expanded the number of apartments to be added to the investment portfolio from the Leidsche Rijn Centrum Project in Utrecht with 189 units.

The total committed acquisition pipeline at the end of 2016 consisted of 1,751 residential units, which together represented an indicative market value on delivery of nearly € 425 million.

Pipeline year-end 2016

Residential building

Location

Total number of units

Region

Apartment/Family house

Rental segment

Expected completion

De Hagen II

Amsterdam

32

Primary

Apartment

Mid

2017

De Diemer

Diemen

98

Primary

Apartment

Mid

2017

De Generaal

Amsterdam

56

Primary

Apartment

Mid

2017

De Goudsbloem

Den Bosch

25

Primary

Apartment

Mid

2017

Dunantstraat

Amsterdam

73

Primary

Apartm. & Fam. house

Mid

2017

Seattle Boston

Rotterdam

48

Primary

Apartment

Mid

2017

Tango

Haarlem

55

Primary

Apartment

Mid

2017

Amstel Tower

Amsterdam

192

Primary

Apartment

Mid

2017/2018

Leidsche Rijn Centrum (for rent)

Utrecht

440

Primary

Apartment

Mid

2017/2018

Leidsche Rijn Centrum (for sale)

Utrecht

121

Primary

Apartment

Mid

2017/2018

Langs de Rijn

Arnhem

94

Primary

Apartment

Mid

2018

Schinkelhof

Amsterdam

64

Primary

Apartment

Regulated-Higher

2018

Apollo

Purmerend

84

Primary

Apartment

Mid

2018

Alpha

Leiden

134

Primary

Apartment

Mid

2018

De Staatsmannen

Utrecht

235

Primary

Apartment

Mid

2018

Total committed pipeline

 

1,751