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Funding

Vesteda has a well-diversified fully unsecured funding structure, consisting of a combination of bank debt, euro commercial paper (ECP), private placements, public bonds, and financing from the European Investment Bank (EIB). This unsecured debt profile enables Vesteda to secure debt funding through various debt markets at any point in time. This is supported by a strong credit rating by Standard & Poor’s (S&P), which was upgraded to A- in April 2021.

Over the past few years, Vesteda has aligned its funding structure with its sustainable profile. In 2019, Vesteda issued its inaugural green bond, followed by the second green bond in October 2021. In 2020, we added EIB financing for affordable housing, arranged a green private placement, and in April 2021 we changed our Revolving Facility Agreement (RFA) into a sustainability-linked RFA. These transactions underpin Vesteda’s sustainable and social profile and help to diversify Vesteda’s funding structure and to improve its cost of debt.

Debt maturity schedule

Vesteda has a €150-million financing agreement in place with the EIB. The proceeds of this loan agreement will be used to fund projects in (regulated) mid-rental housing and to improve the sustainability of Vesteda’s existing portfolio, up to 50% of the total investments. This agreement has a tenor of 10 years and allows fixed-rate and floating-rate funding. At year-end 2021, this facility was not used. In March 2022, the drawdown period was extended from May 2022 to May 2023.

In April 2021, Vesteda agreed with its banks to amend the €700 million RFA, to make it a sustainability-linked RFA. For the purposes of this amendment, the financing embeds four KPIs that measure Vesteda’s sustainability performance. The KPIs are GRESB score, solar panel installation, percentage of green energy labels and the reduction of the emissions from our fleet of cars. These KPIs incentivise Vesteda to improve its sustainability performance. If the majority of these KPIs are met, Vesteda obtains a reduction in the interest margin. On the other hand, the interest margin will be increased if Vesteda fails to meet these KPIs.

In September, we welcomed JP Morgan (JPM) as a new lender in the sustainability-linked RFA. JPM replaced a lender that did not make use of the extension option. As JPM extended its participation to 2025, we now have a €700-million sustainability-linked RFA up to 2025. At year-end 2021, the remaining legal term was 3.4 years, and the facility was undrawn.

S&P upgraded Vesteda’s credit rating to A- in April 2021. This is based on Vesteda’s strong financial discipline, with a sustained low leverage, and supported by its conservative financing policy. S&P assessed Vesteda based on several specific ratios. Vesteda will monitor these ratios and report on them internally each quarter.

In October 2021, Vesteda successfully issued its second green bond. The €500-million bond has a term of 10 years and a coupon of 0.75%. The bond was four times oversubscribed. Vesteda updated its Green Finance Framework to issue green bonds and this is now based on the EU Taxonomy. Under this framework, Vesteda can also issue other green debt instruments, such as loans, private placements, and Euro Commercial Paper. The proceeds of the green bond will be allocated to homes with a minimum EPC label A, homes that have seen an improvement of primary energy demand of at least 30% up to a minimum EPC label of C, and new-build homes that have an energy performance coefficient of 0.4 or better.

Vesteda will report on the allocation of the proceeds, on the estimated energy savings and greenhouse gas emission avoidance of this green bond. This will be reviewed by an independent verifier and will also be published (post-issuance verification). We will seek to meet the requirements of the EU Taxonomy. This means that for the acquisition of new buildings, we plan to acquire newly developed houses where the primary energy demand is 10% less than the NZEB standard (BENG 2 standard -10% in the Netherlands).

Our funding strategy is based on the following funding targets:

  1. Leverage of ≤ 30%.

  2. Total fixed-rate and hedged floating rate exposure of ≥ 70%.

  3. Weighted average maturity of ≥ four years.

  4. Diversified funding profile, with at least three funding sources.

  5. Sufficient liquidity headroom: to refinance debt, finance committed pipeline, and to accommodate redemption requests (Redemption Available Cash).

  6. Maturity calendar ≤ 35% maturing in a single year.

  7. Asset encumbrance ≤ 15% long term.

At year-end 2021, we met all our funding targets.

Vesteda’s average weighted maturity of debt was six years, above our long-term minimum target of four years. The average total debt interest rate improved to 1.8% in 2021 from 1.9% in 2020. The loan-to-value ratio stood at 20.8% at year-end 2021, compared with 23.3% at year-end 2020. The interest cover ratio was 7.0 at year-end 2021, compared with 6.7 at year-end 2020.

Vesteda's main financial covenants, as part of its financing agreements, are a maximum loan-to-value ratio of 50% and a minimum interest cover ratio of 2.0. We comfortably met all the financial covenants of our financing arrangements in 2021. Vesteda’s funding targets contribute to its robust, well-diversified and flexible funding structure. Within this funding structure, Vesteda is always looking to further optimise its average cost of debt by making use of different funding instruments at different maturities.

Debt portfolio at year-end 2021

Committed instrument

Size
(€ million)

Drawn
(€ million)

Weight

Maturity

Tenor

Bond 2.50%

300

300

14.3%

2022

0.8 yr

Bond 2.00%

500

500

23.8%

2026

4.5 yr

Green Bond 1.50%

500

500

23.8%

2027

5.4 yr

Green Bond 0.75%

500

500

23.8%

2031

9.8 yr

EMTN PP 1.93%

35

35

1.7%

2027

6.0 yr

EMTN PP 2.50%

65

65

3.1%

2032

11.0 yr

Pricoa USPP 1.8%

100

100

4.8%

2026

5.0 yr

AIG Private Placement 1.03%

50

50

2.4%

2030

9.0 yr

NYL Private Placement 1.38%

50

50

2.4%

2035

14.0 yr

Syndicated RFA

700

0

0.0%

2025

3.4 yr

EIB Facility*

150

0

0.0%

2032

10.0 yr

Total

2,950

2,100

   

* EIB Facility of €150 million is fully assigned to committed projects.

Uncommitted instrument

Size
(€ million)

Drawn
(€ million)

Weight

Tenor

SMBC Uncommitted Facility

200

0

0.0%

0.5 yr

Euro Commercial Paper programme

1,000

0

0.0%

0.1 yr

Total

1,200

0