Management agenda 2020

Tenants

Annual tenant review 2019

We will once again be producing an annual review for tenants this year. As in 2018, the idea is to focus on a number of themes and summarise these in a digital, illustrated and – most importantly – comprehensible overview. This year’s review will also include the option to click through to a digital environment for more information on the chosen subjects.

AEDs

We are teaming up with the Dutch Heart Foundation to fill the gaps in the AED network in our portfolio of properties, i.e. the areas where there are no registered AEDs available 24/7 within a radius of 500 metres.

Service please

At the end of 2019, we kicked off an internal campaign aimed at making Vesteda a fully service-oriented organisation. By focusing on the quality of our services, we expect to achieve improvements in terms of reducing the number of complaints we receive.

Tenant communications plan

One example of how we will improve the relationship with our tenants is by regularly sharing information via our digital newsletters. In 2020, we will focus our communication primarily on insourcing of acquired homes from the former Delta Lloyd portfolio. Furthermore, a new Tenant portal will be launched. We will also use this tool to share our stance on relevant social themes and recurring subjects such as asbestos and fire safety.

Solar panels

On the sustainability front, we are very keen to increase the number of solar panels installed across our portfolio. We will be working on various scenarios to formulate an effective solar power policy.

Affordability: calculation tool for new tenants

Given that affordability is a major issue right now, we want to give our tenants more insight into the expected increases in the (overall) costs of a home (rent increases). We would also like to include information on expected energy costs for their particular home and family size (single person, two-person, small family, etc.). We are keen to improve the transparency of our communications on this front and manage new tenants’ expectations more effectively. The idea is to put a calculation tool on our website, giving tenants the opportunity to calculate their housing costs now and five years down the line. We are working with the National Institute for Family Finance Information (Nibud) to build this calculation tool.

Screens in the entrances

As a replacement for our message boards, we are currently investigating the possibility to install screens in the entrances of our apartment complexes, to improve and increase communications on complex-related matters.

Entrance upgrades

This year we will select one complex per region and upgrade the entrance to the complex. Our aim is to involve the residents in this exercise to make them feel even more at home in their residential complex. The acquisition team will also be working with operations to devote more attention to the entrances of any new-build complexes we acquire.

Portfolio

Continued focus on improving the quality and sustainability of the portfolio

Our main goal is a mid-market portfolio located in Vesteda’s chosen primary regions that consists of sustainable and future-proof, attractive, well designed houses, tailored to specific target groups but flexible in terms of future use, so we can continue to outperform the MSCI three-year IPD Dutch Residential Benchmark total return. Our focus is on a sustained income growth of 2.5%-3.0% and a low risk/return profile.

We conducted a study on the accessibility of jobs in the Netherlands. We believe that primary regions are the most accessible areas in and around cities, that offer fast connections to work, city life and leisure. The scores and insights from this study are used to determine the primary regions for our current portfolio and for potential acquisitions.

The strong economic climate has made acquisitions more challenging, but we still expect to record growth by adding new projects to our pipeline in the coming years. We expect to add approximately 1,100 units to our pipeline in 2020, but size or growth is not a goal in itself. We currently have sufficient scale to effectively manage our portfolio at an attractive cost level, so we have no intention of compromising on quality. We do not foresee any more residential portfolio sales and we have a selective disposal strategy.

We are constantly identifying opportunities for redevelopment and densification, or to optimise or add value to standing assets in our portfolio. We will develop data-driven models to support our decision-making. One local change and opportunity that we are facing in Amsterdam is the change in the leasehold system. In the modified system, the city council has opted for perpetual leaseholds and we will look into accepting the favourable conditions the council is offering to change our leaseholds.

The limited availability of affordable housing in combination with rent increases far higher than inflation, is a growing
problem for our target group, middle-income households. Demand is extemely high and there is no sign that this will abate anytime soon, given the urbanisation trend and the projected growth in the number households. We believe that it is our responsibility to play an active role in addressing the issue of affordability, for example by voluntarily capping the annual rent increase in the past two years. We also identified regulated mid-market segment as a new investment category. We expect continued high demand from tenants and increasing housing prices, which may result in new regulations, imposed by national and local governments.

With regards to climate change and the sustainability of our portfolio, we focus both on climate mitigation and adaptation. In 2020, we will complete the identified improvements to our portfolio in accordance with our 2016-2020 goals, and start our new round of sustainability investments to achieve a 99% green portfolio in 2024. This year we will also draw up a roadmap on how we plan to make additional improvements to our portfolio in line with the Paris Agreement and the Dutch government’s climate agreement.

We will also develop a model to gain more insight into the physical climate risks for our portfolio and use these insights to develop a policy to evaluate new acquisitions and help us to mitigate and/or reduce the risks to our existing portfolio.

Acquisitions and property sales

The investment market for high-quality residential products remains tight. Supply is limited and making projects feasible getting them to the start of construction stage remains challenging due to high construction costs, high land costs, high quality and sustainability requirements, rental regulations and limited capacity in the sector. The strong demand and limited supply at high prices is putting pressure on affordability and is fueling the public debate on rent control measures, such as caps on initial rents and rental growth.

Increased regulation is a risk for Vesteda’s existing portfolio. For new acquisitions, it might also be an opportunity. Vesteda has conditionally adopted regulated mid-market residential product as a new investment category. When we can price in rent control measures, we can service middle-income tenants more effectively with an affordable product, while we retain long-term reversionary potential after the restrictive period (as many rental restrictions are for a limited period).

We are planning to add approximately 1,100 new homes to our pipeline in 2020. We aim to acquire value growth propositions and we never compromise on quality, in terms of product, return and affordability.

We also continue to actively explore and work on redevelopment opportunities within our existing portfolio, geared towards combining densification with renewal and improvements to the sustainability of our existing portfolio. We take a disciplined approach to development risk. That said, we do explore investment opportunities earlier in the development process on a case by case basis, as this increases our influence on the quality and pricing of the developed product. This has also proven to give us a competitive advantage in the acquisition process.

After a substantial divestment programme in 2018 and 2019, we do not foresee any substantial divestment programmes for 2020.

Participants

Vesteda strives to provide its participants with good returns, transparency and service. Participant satisfaction is one of our key performance indicators. We seek to continuously improve the dialogue with all our participants, and invest in establishing relationships with potential new participants.

A topic that has gained in importance in recent years is socially responsible investing. This prompted Vesteda to set ourselves clear and ambitious CSSR targets, including a target for the GRESB benchmark score. Investors are also embracing other goals and initiatives, such as the United Nation’s Sustainable Development Goals (UN SDGs) and the United Nation’s Principles for Responsible Investment (UN PRIs). For more information, please see the CSSR section of this report.

Funding

We will continue with our strategy of diversifying our funding sources and improving the maturity profile, while maintaining a low leverage, a relatively low cost of debt, while at the same time making our funding more sustainable. The introduction of the Euro Commercial Paper programme helped to reduce the cost of debt, as this programme allows Vesteda to fund at a negative rate. We extended the RCF by one year and incorporated a swingline loan. This helped to improve the maturity profile and increases the flexibility of the facility. In 2020, we would like to extend the RCF by another year, making use of the second extension option.

The next bond issue is expected in 2021. This will probably be a green bond or possibly a sustainable bond. For 2020, we expect to arrange another private placement, of around €100 million. We will also review our other existing finance arrangements and investigate whether we should change these into green or sustainable financing facilities. We will also look into other finance opportunities, with a view to further diversifying our funding and to make use of the current low interest environment.

Organisation & staff

The year 2020 will be focused on insourcing of property management activities of the former Delta Lloyd portfolio, digitalization of the rental and property management process and replacement of our existing outdated IT systems with an off-the-shelf ERP system. Attracting and retaining high quality employees who are capable of serving our tenants is therefore key. Further HPO programme activities will be carried out to elevate and ultimately outperform in terms of quality of management and employees, long-term focus, continuing improvements and innovation, openness and speed of action.

Corporate Sustainability and Social Responsibility

To increase our ESG and health and well-being performance, we are aiming for another GRESB 5-star rating, which would put us among the best 20% of investors globally. We have invested heavily in the sustainability of our portfolio to comply with the Dutch government’s Energy Agreement in 2020. We expect to be able to improve most of our properties with a D, E, F and G label by 2020, with a few large projects that will be executed in 2021. From 2020 onwards, we will continue to improve the sustainability of our portfolio and we have set new goals towards 2024 accordingly. We will increase our knowledge of the future transition from natural gas and perform pilot studies on a limited scale.