Fund and portfolio results 2022

The AL&C Fund closely monitors market developments and demographic trends to determine its investment strategy. This investment strategy is based on three pillars:

1. Providing care homes for a broad target group

2. Building a sustainable real estate portfolio

3. Investment focus on stable returns with a long-term horizon

Each year, we set targets based on KPI's. We determine these KPIs based on the material topics for the Fund. The Annex contains additional information on the materiality assessment and its translation into the Fund strategy.

1. Providing care homes for a broad target group

Establish partnerships with scalable, distinctive, and innovative care providers

The AL&C Fund partners with four care providers to implement its nursing home care concepts. We partner with Dagelijks Leven to serve people with low incomes, including AOW pensions. Futura Zorg and Het Gastenhuis deliver affordable care to a large target group of people with moderate pensions or individual wealth, serving as a price-competitive alternative to government-regulated nursing homes. Zorggroep De Laren provides care and (hotel) services to people with high incomes.

In addition, the Fund is in advanced conversations with home care organisations for the roll-out of the Assisted Living concept.

In 2022, the AL&C Fund delivered six locations for a total of 144 units. The portfolio size grew to a total of 85 locations, comprising into 1,738 care homes. Dagelijks Leven expanded by two locations, Het Gastenhuis by three locations and Futura Zorg by one location. Both Dagelijks Leven and Het Gastenhuis have ambitious growth objectives and aim to add more locations in the coming years. In terms of the relative investment volume, Dagelijks Leven remained the largest healthcare provider in our portfolio. In addition, we acquired nine properties – three of which are Assisted Living projects – totalling an estimated investment volume of EUR 113 million. We did not sell of any properties in 2022.

Figure 5: Number of locations per provider

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Figure 6: Relative investment volume per provider

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The share of locations in the middle segment (Futura Zorg and Het Gastenhuis) increased from 29% in 2021 to 32% in 2022. 61% of locations were in the low segment (Dagelijks Leven) and nearly 7% in the higher segment (De Laren).

Commitments

At year end 2022, the committed pipeline consisted of 11 projects for a total of 651 residential units. Four of the 11 projects are Assisted Living projects. The soft pipeline consisted of another four projects for a total of 105 units and includes one Assisted Living project.

Resident satisfaction

The mission of the AL&C Fund is to deliver high-quality living environments for those who need care and assistance. We closely monitor resident satisfaction to assess the Fund's performance in meeting the expectations of residents and the quality of care provided by our care partners.

In 2022, our care homes received an average score of 9.1* in the Zorgkaart Nederland survey of residents and their families. In the accommodation category – which is most material to the AL&C Fund – our facilities received an average score of 9.3*. Nearly all properties scored higher than the care home benchmark score of 8.8*.

The average accommodation score on a 4-year basis (2019-2022) per provider is:

• Dagelijks Leven 9.4 (based on 50 surveys)

• Het Gastenhuis 9.4 (based on 20 surveys)

• Zorggroep De Laren 9.2 (based on 5 surveys)

• Futura Zorg 8.8 (based on 6 surveys)

The AL&C Fund actively encourages all care providers to join the Zorgkaart Nederland platform in order to monitor resident satisfaction on a regular basis.

Quality of care

We set high quality standards for each of our care partners and consistently monitor their performance. We track inspection reports by The Health and Youth Care Inspectorate (IGJ), which conducts random inspections. None of the care homes of the AL&C Fund are currently under supervision by the IGJ.

Fire safety

The AL&C Fund pays close attention to the fire safety of its properties to protect our residents, particularly given the vulnerability of our target group. All our facilities meet the requirements for group care homes, even if not formally required by fire safety regulations. In 2022, all fire alarm systems were certified*.

^{*Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 59.}

2. Building a sustainable real estate portfolio

Investing in the sustainability of our portfolio is a crucial part of our long-term investment strategy. Real estate funds play an important role in reducing carbon emissions and meeting the Paris climate targets. We take responsibility for our role by setting strict energy efficiency standards for all new build projects and investing in sustainability improvements of existing buildings. Except for the historic building Het Gastenhuis Dordrecht, all buildings managed by the AL&C Fund have energy label A as per end of 2022. This results in 98.7%* of the portfolio with an A label and 1.3% C label.

Energy consumption

By monitoring the energy and water consumption of our properties, the AL&C Fund is able to set goals for optimisation. We use smart meters, in combination with the Environmental KPI dashboard, to track and report on the sustainability performance of our buildings. Energy Use Intensity (EUI) provides a consistent unit of measurement to report on the energy efficiency of our properties by converting heat energy into GJ and gas use into m³ to kWh/m²/year. Energy consumption, carbon emision and water use data for the prior year is not completely available at date of submission of this annual report. Therefore figures of 2021 are included in this report.

In 2022, the average EUI of our properties was 131.0 kWh/m³*, ranging from 34.2 kWh to 273.2 kWh, compared to 119.7 kWh/m³ in 2021. New builds perform better than renovated buildings, due to limited opportunities for improving the insulation of existing buildings. In addition, gas heating systems consume more energy than gas-free heating systems (e.g. hybrid or thermal storage heat pumps and district heating systems).

Carbon emissions

The AL&C Fund aims to reduce its net carbon footprint to 0kg CO₂ by 2050. In 2022, our total carbon emissions were 1,920,059 kg CO₂, up from 1,919,389 kg CO₂ in 2021. The 2022 building average was 21.0 kg CO₂/m²* compared to 19.4 kg CO₂/m² in 2021.

To determine our carbon footprint, we measure renewable energy generated on-site by solar panels and renewable energy generated off-site based on the energy contract. By year end 2022, 49 out of 79 (62.0%) of the Fund's buildings were equipped with solar panels, generating 421,421 kWh in 2021 for consumption by the care providers. Each generated kWh of solar energy reduces carbon emissions by 0.523 kg, resulting in total savings of 220 tons kg CO₂ in 2021.

The usage of renewable energy sources and gas contributes to the reduction of carbon emissions. Dagelijks Leven and Futura Zorg use a combination of renewable energy sources as well as gas. Het Gastenhuis relies entirely on renewable energy sources. Zorggroep De Laren uses (partially) green energy and gas.

Water use

The AL&C Fund has been measuring the water use of all buildings since 2021. In 2022, the total water usage was 79,670m³. The water use intensity in 2022 was 0.87 m³*, which is equal to 870 liters water per m².

After conducting a successful pilot with Futura Zorg, we implemented digital water meters across our portfolio. These smart meters enable us to automatically obtain water meter readings for all buildings. This gives both the healthcare providers and Amvest more insight into daily consumption and creates more awareness in this area.

GRESB performance

In 2022, the AL&C Fund maintained the maximum five-star GRESB rating, scoring 92* out of 100 points. For the third year in a row, the Fund received the GRESB award for Overall Global Sector Leader, Western Europe Healthcare Senior Homes Core. GRESB allows for an objective assessment of the sustainability of our portfolio. It takes a holistic view of sustainability, scoring real estate funds on environmental, social, and governance indicators of sustainability. The Global Sector Leader award recognises our Fund's commitment to incorporating sustainability into our operations and communicating our sustainability performance to our investors and stakeholders.

GPR Certificates

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 , we aim to remain among the best-performing healthcare 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 7.4* which is above our internal target of 7.0.

Renovation roadmap

Since 2021, we have been developing a renovation roadmap based on the actual energy usage of buildings in our portfolio. In 2022, we began working on an action plan for the lowest scoring buildings in terms of energy performance, based on the CCREM line of the portfolio*. The goal is to implement these actions in 2023 to further improve the sustainability of these buildings.

^{*Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 59.}

3. Investment focus on stable returns with a long-term horizon

The AL&C Fund has a long-term horizon. The Fund targets a stable dividend yield of 4.5%, which reflects the risk profile of the Fund. The dividend yield for 2022 was 4.2%. This is a strong result in challenging conditions. The combination of high investor demand and limited availability of product put pressure on gross initial yields, which also impacted the AL&C Fund.

The healthcare real estate investment market conditions in 2022 continued to have a strong positive effect on valuations, despite rising interest rates. The value of the properties in our portfolio continued to grow, increasing to EUR 453.7 million by year end 2022.

The income return of the Fund was 4.2% in 2022. The operating costs remained low because of the relatively young age of our portfolio and because our care provider tenants are responsible for the daily operating costs. In 2022, the net/gross ratio was 92.4%.

No debt finance is used to fund the AL&C Fund. The AL&C Fund has two participants, AEGON and PfZW. Of the total commitment of EUR 750 million, EUR 378.8 million remained available at the close of 2022. EUR 57 million of equity was called in 2022, while PfZW increased its equity commitment as planned by EUR 250 million in 2022. In the future, the Fund plans to use leverage at modest levels to fund its pipeline, subject to being able to generate positive leverage effects on direct income returns.