Debt capital

2017 in review

During the year under review, we focused on continued long-term optimisation of Vesteda’s debt portfolio in line with the main targets of our debt funding strategy:

  • Further reduction of interest costs

  • Maintaining long-term leverage of approx. 30% of total assets

  • Maintaining diversification, with at least three different funding sources

  • Extension and diversification of maturity profile, while maintaining a well distributed repayment pattern

  • Maintaining sufficient liquidity headroom to allow for acquisitions and the refinancing of short-term debt maturities

  • Further reduction of asset encumbrance for secured debt

At year-end 2017, Vesteda’s drawn debt capital amounted to €1,177 million which is below the debt capital drawn of €1,237 million at year-end of 2016, mainly as a result of our use of the new equity investment in May 2017 for a temporary reduction in drawn debt.

As a result of the lower amount of drawn debt in combination with the continued positive revaluation of Vesteda’s assets, total leverage during 2017 declined to a leverage ratio of 23% at year-end 2017 from 28% at year-end 2016.

On the back of improved credit metrics, in May 2017 Standard & Poor’s reconfirmed Vesteda’s credit rating of BBB+ with stable outlook.

In 2017, we continued to focus on a balance between a sustainable reduction of interest expenses while increasing our debt capital’s weighted average maturity. The following transactions contributed to achieving our long-term debt funding targets:

  • In August 2017, Vesteda prepaid all remaining outstanding mortgage loans with FGH Bank. As a result, Vesteda has no refinancing obligations until July 2019.

  • In December 2017, Vesteda issued a new €35-million 10-year private placement and a €65-million 15-year private placement transaction under the Vesteda Finance EMTN-programme, which contributed to the lengthening of the weighted average maturity of Vesteda’s debt portfolio. The proceeds were used to reduce the drawn amounts under our revolving credit facility.

  • In December 2017, the remaining interest rate swap with a notional of €215 million and a term until 2020 was unwound for a total consideration of €12 million, which lowered total hedged and fixed interest exposure to 76.5% at year-end 2017 and will reduce interest expenses in the future.

Through these transactions, Vesteda increased its average weighted maturity profile to 4.6 years, above its long-term minimum target of four years. The prepayment of the FGH Bank mortgage debt ended asset encumbrance compared with 4% encumbered assets at year-end 2016. As at year-end 2017, Vesteda retained €323 million of headroom under its revolving credit facility, providing flexibility and liquidity headroom to cover potential acquisitions and refinancing obligations. The average total debt interest rate at year-end 2017 was 2.2%. 

Vesteda's main financial covenants, as part of its financing agreement, are a maximum loan-to-value ratio of 50% and a minimum interest cover ratio of 2.0.  Throughout 2017, we comfortably met all the financial covenants of our financing arrangements.

Vesteda debt portfolio at year-end 2017

Facility

Type

Security

Recourse

Committed

Drawn

Average Amortisation

Maturity Date

Margin/ Spread

Revolving Credit Facility

Bank Facility

Unsecured

Guarantors

€600,000,000

€277,000,000

Bullet

1 June 2021

0.90%

Pricoa Private Placement

Private Placement Loan

Unsecured

Guarantors

€100,000,000

€100,000,000

Bullet

16 December 2026

1.13%

Pricoa Private Placement

Private Placement Loan

Unsecured

Guarantors

€100,000,000

€100,000,000

Bullet

8 May 2021

1.80%

Bond Issue 1.75% 2019

Bond, issued under EMTN programme

Unsecured

Guarantors

€300,000,000

€300,000,000

Bullet

22 July 2019

1.25%

Bond Issue 2.50% 2022

Bond, issued under EMTN programme

Unsecured

Guarantors

€300,000,000

€300,000,000

Bullet

27 October 2022

1.95%

Private Placement Issue

Private Placement, issued under EMTN programme

Unsecured

Guarantors

€35,000,000

€35,000,000

Bullet

15 December 2027

1.10%

Private Placement Issue

Private Placement, issued under EMTN programme

Unsecured

Guarantors

€65,000,000

€65,000,000

Bullet

15 December 2032

1.30%