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Leverage development

The ARC Fund's leverage level remained relatively consistent in 2022, decreasing from 20.3% to 20.1%. Both the total asset base as well as the drawn debt are relatively stable per year end. The drawn debt decreased from EUR 890 million to EUR 885 million on a year-end basis but was higher during the year. In December 2022. we managed to repay debt before year end by using the sales proceeds of the Joost Banckertsplaats asset sale. We will continue to actively manage the leverage and expect that leverage will increase during 2023 towards the target LTV (Loan to Value) ratio of 25%.

In combination with the headroom under the financial covenants, the ARC Fund retains adequate flexibility to further increase the overall debt position in order to fund new projects.

Exposure to interest rate risk temporarily increased during 2022 with a higher average drawn debt position during the year which is subject to floating interest rates. Mainly due to the rise in variable interest rates during 2022, the total interest costs have increased compared to 2021.

Partial refinancing of secured loan facilities

On 30 June 2022, the existing EUR 350 million revolving credit facility was refinanced with a new 5-year (plus two 1-year extension options) unsecured revolving credit facility and increased by EUR 100 million to EUR 450 million. The new facility is arranged by a bank consortium of four banks and has a new corporate unsecured structure, which also resulted in the release of mortgages on part of the portfolio. Due to its revolving nature, the facility remains on a floating interest basis and pricing is subject to a LTV/margin grid as well as an utilisation fee. The facility is structured as a sustainability-linked loan which connects pre-agreed sustainability related KPI targets to the applicable margin. The initial margin amounts to 0.80%, while meeting or failing the sustainability KPI targets can have an upward or downward effect of 0.05% on the applicable margin.

Next to the new EUR 450 million facility, the ARC Fund's existing two loan facilities of EUR 625 million of term loans with a bullet repayment profile remain in place.

The three facilities are provided by three different bank consortia:

  • A EUR 450 million revolving unsecured credit facility is provided by a bank consortium consisting of ABN AMRO Bank N.V., BNP Paribas S.A., ING Bank N.V. acting as Facility Agent and SMBC Bank EU A.G.

  • A EUR 500 million secured loan facility is provided by a banking consortium of four banks, consisting of ABN AMRO Bank N.V. acting as Facility Agent, Deutsche Hypotheken Bank AG acting as Valuation and Security Agent, ING-DiBa AG, and ING Bank N.V.

  • An EUR 125 million secured facility is provided by a banking consortium of two banks, consisting of Coöperatieve Rabobank U.A. acting as Facility and Security Agent, and ING Bank N.V.

As of 31 December 2022, EUR 885 million in term loans and revolving credit facility had been drawn. EUR 190 million of the committed revolving credit facility remains undrawn and available on demand. Following the refinancing of the revolving credit facility in 2022, at year end, the loan facilities had a combined weighted average maturity of c. 3.6 years (YE 2021: c. 3.2 years).

Financial covenants

The financial covenants of all three loan facilities include a maximum loan to value ratio of 40% and a minimum interest coverage ratio of 2.5 times. The ARC Fund adhered to all financial covenants in 2022.

Asset encumbrance

As a borrower, the ARC Fund grants security to its lenders under the existing secured loan facilities. As of 31 December 2022, EUR 1.5 billion of the investment portfolio was secured with mortgages. The market value of the security pool is within the maximum loan to mortgage value of 50%.

Interest rate risk

The ARC Fund’s policy is to limit interest rate risk exposure at a reasonable cost. We aim to keep the interest rate level low, while retaining flexibility for future investments and divestments. As of 31 December 2022, EUR 575 million of term loans (65% of drawn debt) had a fixed interest rate. The breakdown is as follows (ranges depending on the LTMV ratio):

  • EUR 290 million of term loans had a fixed annual interest rate of 1.218% up to 1.318%

  • EUR 60 million of term loans had a fixed annual interest rate of 1.596% up to 1.696%

  • EUR 150 million of term loans had a fixed annual interest rate of 1.733% up to 1.833% until its maturity in 2026.

  • EUR 75 million of term loans of the new facility had a fixed annual interest rate of 1.20% up to 1.40% until its maturity in 2025.