Management team foreword
In 2022, we made significant strides in the implementation of our Assisted Living concept. The acquisition of four Assisted Living properties marks a major milestone for our Fund. At the same time, we strengthened our nursing home care portfolio and achieved healthy yields and strong operational results. We are able to succeed in today's challenging environment because of our commitment to investing with impact. Through our integrated housing and care concepts, we respond to the growing need for high-quality living environments for those who need care.
The confidence of investors in our mission has enabled the growth of our Fund. The new terms and conditions for the expansion of the Fund's financial commitments from €500 million to €750 million, with the possibility to borrow funds of 250 million, were formalised at the end of 2022. The expansion comes with an ambitious acquisition target of EUR 75 million annually. We comfortably met this target in 2022. We delivered six projects and, in partnership with our healthcare partners, welcomed 144 residents. In addition, we succeeded in acquiring 9 new properties in both nursing home care and Assisted Living.
Resilient
The healthcare real estate market proved resilient in 2022. Unlike the residential real estate market, our market was largely unaffected by negative revaluations. We have seen that the type of real estate that we invest in, is less prone to macro-economic developments. It is the demographic developments that matter most. As the population ages, the demand for nursing care homes and for suitable homes for those who can still live independently, continues to grow. Solving the growing shortage of such homes and living environments has become a major political priority. Recently, the Dutch government introduced the WOZO (Living, Support and Care for the Elderly) programme. Separating living and care to reduce the pressure on nursing home care is one of the programme's key pillars. The government's ambitions align seamlessly with our Fund's investment focus. By addressing societal and demographic needs, we will continue to deliver value – for residents and investors – well into the future.
In 2022, the strength of our portfolio resulted in a total return of 10.8% (2021: 8.0%) and a dividend distribution of 4.2% (2021: 4.3%). The indexation of the rents due to inflation contributed to the stability of our yields. In addition, the value of the properties in our portfolio continued to grow, increasing to €454 million by year end 2022.
A challenging year for our providers
As the threat of COVID-19 reached its lowest levels since 2020, residents returned to their normal day-to-day lives. They were once again able to enjoy social and community activities that are of vital importance to their quality of life. Meanwhile, our healthcare providers faced new challenges, such as growing personnel shortages due to the rising sickness absence rate among healthcare workers. Still, they continued to deliver high-quality care, a sign of their unwavering commitment to their residents.
The rising energy costs also caused concern among our partners. With an average age of 3.5 years old, the properties in our portfolio already meet strict energy efficiency standards. Nevertheless, our providers expressed interest in the measures we are taking to further reduce the energy consumption of our properties. In collaboration with Futura Zorg, we prepared an investment proposal for the installation of additional solar panels. By maximising the production of renewable solar energy, we will further reduce the carbon footprint of the Futura Zorg locations. In turn Futura Zorg will benefit from cost savings, as the rent increase for this investment will be outweighed by the reduction in their energy costs.
Signed contracts for Assisted Living
The acquisition of four Assisted Living objects was a huge achievement for the Fund. The Assisted Living concept has been in the works for several years. We have taken great care to develop a concept that aligns with the needs of our target groups. From the start, it has been our goal to enable people to live independently for longer, with access to care and a strong and supportive community. We are confident that with our approach, we will provide a much-needed solution to the growing shortage of suitable homes for the aging population. We have seen tremendous demand and interest from our investors in the expansion of our portfolio with Assisted Living properties, and we are proud to have achieved signed contracts for the first four projects.
High quality pipeline
By the end of 2022, our committed pipeline consisted of 11 projects totalling an estimated investment volume of EUR 285 million. The pipeline includes three Assisted Living projects in the middle and large sub-segments (Trappenberg, Sphinx, Soesterberg) and one Assisted Living project in the small sub-segment.
Within nursing home care, our pipeline includes one Futura Zorg location and several new Het Gastenhuis locations. Het Gastenhuis has ambitious growth plans. Six new care locations are currently under construction. Investment proposals for an additional five locations were approved.
GRESB sector leader
The AL&C Fund maintained its five-star GRESB rating and increased its score from 91 to 92 points (out of 100). In addition, we were named the Overall Global Sector Leader Western Europe Healthcare Senior Homes Core. GRESB evaluates funds’ performance against various ESG (Environmental, Social, and Governance) indicators. In 2022, we once again scored 18 out of 18 points for the social indicators, including the maximum score in the Tenants & Community category. This is a particularly important indicator for our Fund. In collaboration with our providers, we aim to create a sense of community among residents of our nursing home care locations. And with the introduction of our new Assisted Living concept, we look forward to creating new communities and establishing informal networks, which are both essential to combatting loneliness and to keeping care affordable in the future.
Zorgkaart Nederland
The feedback of residents and their family members is very important to us. ZorgkaartNederland gives us valuable insight into residents’ satisfaction with our accommodations and the quality of care. In 2022, the average accomodation score of our locations was a 9.3 out of 10, with an overall average score of 9.1 in 2022. This score puts us ahead of our peers and is an achievement to be proud of.
And despite the challenging healthcare labour market – and the pressure it puts on existing staff – Het Gastenhuis saw an increase in employee satisfaction from 7.9 to 8.1. In addition, Effectory named Zorggroep De Laren among the ‘Employers of the year’ based on feedback from its employees.
The future
The last year has shown us that the healthcare real estate market is markedly different from the regular residential market. Investing in healthcare real estate market is about investing with impact. We have proven that our concepts enrich the lives of people who need care. That they are a true place to call home. We have gone the extra mile in making our properties energy efficient and environmentally friendly, so that they contribute to a healthy future for future generations too. The expansion of our Fund into Assisted Living will only increase our impact by making quality housing and care accessible to a much larger audience. With that, we expect confidence in our mission to remain strong.
Nevertheless, the AL&C Fund is not completely immune to market developments. Acquiring new real estate that meets our return requirements may become more challenging due to the high interest rates and construction costs. We are monitoring the markets closely to ensure that our investment decisions deliver the stable long-term returns that our investors expect of us. Management has performed its going concern assessment and concluded that there are no going concern risks.