28. Capital management

The primary objective of the Vesteda Companies’ capital management is to ensure that the Fund remains within its quantitative banking covenants and maintains a strong credit rating. The Vesteda Companies monitor capital primarily using a loan to value (LTV) ratio, which is calculated as the amount of outstanding debt divided by the valuation of the investment property portfolio.

Vesteda’s loan facilities have LTV covenants of 50% at VRF level (corporate unsecured debt).

In the year under review, the Vesteda Companies did not breach any of their loan covenants, nor did they default on any other of their obligations under their loan agreements.

Capital management
 

2019

2018

Carrying amount of interest-bearing loans and borrowings

1,814

1,739

Capitalised financing costs

11

7

Principal amount of interest-bearing loans and borrowings

1,825

1,746

   

External valuation of completed investment property (excl. IFRS16)

7,691

7,024

External valuation of investment property under construction

194

257

Total valuation of investment property

7,885

7,281

   

Loan to value ratio

23.1%

24.0%

Vesteda has performed a sensitivity stress test with regard to changes in required gross yield in relation to the loan to value ratio. An increase of the required gross yield of 5.4 percentage points (from 4.4% to 9.8%) would lower the value of the investment property to such extent that an LTV of 50% would be reached.