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 of A- by Standard & Poor’s.

Over the past few years, Vesteda has aligned its funding structure with its sustainable profile. Vesteda issued green bonds in 2019 and 2021, arranged a green private placement in 2020, and added EIB financing for affordable housing in 2020 and 2022. Furthermore, the Revolving Facility Agreement (RFA) was made sustainability-linked. 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

The first EIB financing of €150 million was fully used at year-end 2022. The proceeds of this loan agreement are 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. In December 2022, Vesteda arranged a second EIB financing of €150 million. This will also be used for the same purpose. It has an availability period up to 2025 and allows utilisations with a tenor of 10 years.

In April 2021, Vesteda agreed with its banks to amend the €700-million RFA, to make it a sustainability-linked RFA. The financing embeds four KPIs that measure Vesteda’s sustainability performance. In 2022, Vesteda met three out of four KPIs, which meant that Vesteda is able to obtain a reduction in the interest margin.

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 2022, we met all our funding targets.

Vesteda’s average weighted maturity of debt was 5.6 years, above our long-term minimum target of four years. The average total debt interest rate remained at 1.8% in 2022, similar to 2021. The loan-to-value ratio was 22.9% at year-end 2022, compared with 20.8% at year-end 2021. The interest cover ratio was 7.1 at year-end 2022, compared to 7.0 at year-end 2021.

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 2022. 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, and by floating or fixed rate debt.

Debt portfolio at year-end 2022

¹ EIB 2 Facility of €150 million not assigned to committed projects yet.