Portfolio - operation

Rental policy

The portfolio net rental income in 2022 was EUR 119.5 million, compared to EUR 110.9 million in 2021. This growth is driven by the annual rental increase, rental turnover, and portfolio dynamics. As part of our asset management strategy, it is our goal to optimise the rental prices within the constraints imposed by regulation and with consideration for our tenants. Legislation caps the rental increase in the private rental market at CPI+1%. We implemented the annual rent increase in July. On average, annual rents increased by 3.3%*, which is 1.0% above the inflation for 2022 of 2.3%.

Vacancy

We aim to optimise the occupancy rate of our portfolio by investing in the quality of our properties and our service to tenants. In 2022, we realised a vacancy rate of 2.2%*, within our target of 2.5%. This figure includes operational vacancy (existing portfolio) and initial vacancy (newly built properties). To further optimise the occupancy rate, we are working on improving the customer journey.

Table 2 lists the ten investment properties with the highest operational vacancy as a percentage of the total portfolio vacancy.

Figure 19: Vacancy

_{**Total vacancy excluding sales vacancy is comparable with the occupancy rate in the key figures. The sales vacancy isn't
taken into account within the occupancy rate, since this is administrated in realized capital gains.}

Operating costs

Operating costs as a percentage of the theoretical rental income was 21.7% in 2022. The cost ratio increased compared to 2021 (20.6%) but remained within our portfolio plan target of 22%. On the one hand, the cost of materials, energy and labour remained high, resulting in (temporary) higher-than-average maintenance costs. On the other hand, the shortage of personnel resulted in the postponement of certain maintenance activities. To navigate the high costs and shortage of labour, we actively work to optimise our procurement and consolidate maintenance activities.

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 84.}

Home comfort

Tenant satisfaction is an important indicator of home comfort. By definition, our goal to deliver high-quality living environments means a commitment to tenant satisfaction. Each year, we strive to outperform our peers in the IVBN tenant satisfaction benchmark. For the fourth year in a row, the ARC Fund scored a 7.2*, which is higher than the benchmark (7.1), but below the KPI target of 7.5. The overall score of 7.2 is the average of three components: quality of the home (up from 7.3 to 7.8), the living environment (stable at 7.5), and property management (down from 6.6 to 6.3). The scores for complaints management and repair request management remain very low.

Figure 20: Tenant satisfaction*

^{Score out of 10}

While we matched our peers according to the benchmark, we did not achieve our target of obtaining a minimum score of 7.5. This is a challenging target given the relatively low satisfaction scores in our sector. However, we continue to hold ourselves to a high standard. As property managers have a significant impact on satisfaction levels, the implementation of our new partnership model for property management is a key priority.

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 84.}

We also pay close attention to the health and safety of our tenants. In 2022 we provided training sessions to instruct tenants on the use of Automatische Externe Defibrillators (AEDs) (installed in 2021) and how to perform cardiopulmonale resuscitatie (CPR). To ensure the fire safety of our buildings, we equip all homes with smoke detectors, periodically check, and communicate with tenants about fire safety at least annually, and maintain smoke detectors and fire extinguishers. To maintain a healthy indoor climate, we periodically clean and maintain air treatment and ventilation systems.

Investing in a future-proof portfolio

Investing in the energy efficiency of our properties is a key to our objective to achieve a future-proof and Paris-proof portfolio. By monitoring the energy consumption of our properties, the ARC Fund is able to set goals for optimisation. We increasingly use smart meters, in combination with a digital dashboard, to track and report on the sustainability performance of our buildings. The coverage rate representing the percentage of properties included in energy/water/gas consumption is set to increase over time to be able to improve insights in actual use figures. The coverage rate is 93.8%* of the portfolio, which represents an increase compared to prior year (84.7%). Energy Use Intensity (EUI) provides a consistent unit of measurement to report on the energy efficiency of our properties by converting heat energy in GJ and gas use in m³ to kWh/m²/year.

In 2021, the average EUI of our properties was 112 kWh/m²/year*, compared to 127.0 kWh/m2/year in 2021. The energy use of newly built buildings in 2021 is taken into account in the current figures, this results in an decrease of the EUI. 

New builds perform better than renovated buildings, as new construction must adhere to strict energy efficiency standards. In addition, new builds are significantly better insulated. In addition, gas heating systems consume more energy than gas-free heating systems (e.g. hybrid or ground-source heat pumps).

In 2021, the average carbon footprint of our properties was 17.5 CO₂/m²/year*. This is a decrease of 20.4% compared to 2020. 

We apply the CRREM framework to determine the required reduction in the average EUI of the ARC Fund to achieve a Paris-proof portfolio. By setting annual targets, we continue to work towards this long-term objective. The current carbon emissions of the fund are below the targets of CRREM*. Insight has been created and assets with highest need for improvement are investigated.

The ARC Fund portfolio composition of Energy Performance Certificates (EPC-labels) is 75% A label or higher, 16% B-label and 9% C label or lower. Resulting in 91%* A and B labels within the portfolio.

In 2021, we installed solar panels on several existing multi-family homes and on newly completed multi-family homes, after equipping the majority of single-family homes with solar panels in previous years. ARC Fund increased the number of solar panels with 4.0% to 19,059*.

GRESB

The ARC Fund has been participating in the Global Real Estate Sustainability Benchmark (GRESB) since 2013. GRESB allows for an objective assessment of the sustainability of our portfolio. The ARC Fund's score increased from 87 points in 2021 to 90 points* in 2022. We achieved our target of achieving a minimum score of 87 points and maintaining our five-star rating. Because of our improved score, our position in the ranking rose slightly.

GPR

To improve our score in the Building Certifications category, we continue to obtain GPR certificates for our properties. GPR is an instrument for measuring the sustainability of a property. Measuring the current sustainability of our properties in five different categories (energy use, environmental impact, health, quality, and future value) will also allow us to set goals for future optimisations and track the impact of our optimisation efforts. By investing in GPR certificates and other initiatives that contribute towards our GRESB score, we aim to remain among the best-performing residential funds in the field of sustainability. During the implementation process of GPR certificates we realised an average score of the GPR certificates retrieved during 2022 of 7.0* which is inline with our internal target of 7.0.

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 84.}