Foreword Management Board

Dear stakeholders,

It is our pleasure to present you with our annual report for 2019. In this report, we account for our performance in 2019, in both financial and social terms, and report on how we intend to realise our ambitions for the future. We would also like to share our vision of the Dutch housing market and the role we want to play as an active and socially-engaged residential real estate investor. Please note that most of this report was written prior to the outbreak of the coronavirus (COVID-19). Vesteda has taken measures regarding the operational activities of the company to prevent the further spread of the virus. It is clear that the impact on the Global and Dutch economy will be severe, but at this point (18 March 2020) it is too early to determine the exact impact for Vesteda.

A year of consolidation

Having achieved significant growth in our portfolio through the acquisition of the former Delta Lloyd portfolio in 2018, last year we focused primarily on improvements to our organisation, services and the quality of the portfolio. We continued to optimise our financing structure and started insourcing the Delta Lloyd portfolio. The acquisitions and disposals we made in 2019 gave additional focus to our portfolio. We value quality above volume, and the transactions we completed have clearly improved the overall quality of our portfolio. We also took advantage of the momentum in the market to sell homes that were no longer a good fit with our portfolio or for which we saw insufficient potential for the future. Finally, we worked hard on our new ERP system, which is scheduled to go live mid-2020. This will help us to manage our portfolio even more effectively and efficiently.

Pressure on housing market continues to increase

Lack of good quality supply is a cause for concern for investors and for (potential) tenants. Demand for homes remains high and house prices are rising, but new-build production is lagging demand. Rising construction costs, due in part to tightening sustainability requirements, high land prices and the nitrogen crisis are making it difficult for new-build projects to get off the ground. In addition, there is uncertainty about potential regulation in the market. All in all, it is increasingly difficult for investors to find projects that generate returns that sufficiently compensate for the risks. We believe the key solution for the housing crisis lies in increasing housing stock by building more new homes in the mid-market segment and for (local) governments to invest in public transport to improve the mobility in our country.

The call for regulation

The shortage on the Dutch housing market is currently the subject of both public and political debate. National and local authorities are looking for measures to alleviate the shortage and they are exploring various initiatives at both a national and a local level. Together with many of our competitors and the IVBN (Association of Institutional Property Investors in the Netherlands), we are actively participating in discussions with stakeholders, to communicate our view of which regulations could be effective and which rules will be counterproductive. After all, regulation should not result in further stagnation of the housing supply and it has to remain profitable for investors to invest in the residential market. Meanwhile, consensus seems to be emerging towards regulation of the lower end of the mid-market segment by capping initial rents and indexation of rents for a certain period of time. A good example is the recently signed declaration of intent between the IVBN and the municipality of Amsterdam to build 10,000 rental homes for middle incomes. Vesteda anticipates this development with an appropriate strategy and has conditionally adopted regulated mid-market segment as a new investment category.

Attention to affordability in our portfolio

The limited availability of affordable housing in combination with rent increases far higher than inflation, is a problem for our target group, middle-income households. Supply is limited and this scarcity has driven up market rents in recent years. For pensioners in particular, affordability is a growing problem. In many cases, their retirement income has barely risen for several years, while rents and other costs of living have been rising steadily. We see it as our social responsibility to continue to provide high-quality and affordable housing. This is why Vesteda has voluntarily capped its rent increases for its free market rental contracts for the past two years.

A target group that has our specific attention are so-called key workers. Key workers are professionals who are essential for properly functioning cities, such as teachers, police officers and healthcare workers. These people often find it difficult to find affordable housing in and around the cities where they work, which may prompt them to relocate and work elsewhere. Vesteda wants to help key workers to find homes by allocating part of our available housing to this target group. On top of this, we want to allocate part of our future acquisitions to this target group.

A leader in sustainable housing

Vesteda wants to play a leading role in sustainable housing and in 2019 we made solid progress on our ESG targets and we once again achieved a GRESB 5-star rating. We invested in several projects that improve our ESG performance, and we are particularly proud of receiving the WELL Building Standard certificate for our 'Aan de Rijn' apartment complex in Arnhem. WELL is a certification system aimed at improving the impact of a building on the health, comfort and well-being of its users. Our 'Aan de Rijn’ project was the first existing residential complex in the world to receive a WELL certificate.

Our sustainability strategy is also aimed at encouraging our tenants to behave as sustainably as possible. In 2019, we launched a campaign that gave tenants a chance to pick up six LED lamps from IKEA at Vesteda's expense. Vesteda also offers an app that gives tenants insight into their energy consumption. Our goal is to reduce our tenants' energy consumption and to raise awareness of energy use.

We are on track with our sustainability programme and have raised our ambitions for the future. For example, we now aim to have a green energy label (A, B or C) for 99% of our portfolio by 2024. And we are drawing a CO2 roadmap to align our climate goals with the Dutch government’s climate agreement and the Paris Agreement.

Successful green bond issue

In May, Vesteda was the first residential investor to issue a green Eurobond. This green bond underscores our sustainability profile and will help us attract a broader group of investors. In addition, it lowered our average interest rate and extended the average maturity of our debt. We have used the €500 million proceeds of the bond to refinance sustainable homes, as well as to finance sustainable projects in the acquisition pipeline.

On the way to being the best residential landlord in the Netherlands

Looking back on 2019, we are proud of what we have achieved. We will continue our strategy, with the ultimate goal of becoming the best residential landlord in the Netherlands, and outperform on tenant satisfaction, sustainability and financial performance. We aim to achieve this by continuously making improvements to our organisation, services and the quality of our portfolio.

Finally, we would like to express our gratitude to all our employees for their dedication and hard work, and to our participants for their continued support and commitment.

Vesteda Management Board

Gertjan van der Baan (CEO) and Frits Vervoort (CFO)