Fund and portfolio results 2023

Portfolio composition

In 2023, the AL&C Fund delivered 10 locations for a total of 200 units. The portfolio size grew to a total of 95 locations, comprising of 1,938 care homes. Dagelijks Leven expanded by eight locations and Het Gastenhuis and Futura Zorg both added one location. The Dagelijks Leven locations were part of the Luxor2+ portfolio acquired in 2023. 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 23 properties totalling an estimated investment volume of EUR 90.2 million. We did not sell any properties in 2023.

The share of locations in the low-priced segment (Dagelijks Leven) increased from 60% to 63% due to the acquisition of the Luxor2+ portfolio. The share of locations in the mid-priced (Futura Zorg and Het Gastenhuis) and higher-priced segment (De Laren) decreased slightly to 31% and 6%, respectively.

At year-end 2023, the committed pipeline consisted of 27 projects for a total of 1,036 residential units. Three of the 27 projects are Assisted Living projects. The soft pipeline consisted of two Het Gastenhuis locations for a total of 40 units.

Figure 5: Number of locations per provider

^{Number of locations}

Figure 6: Relative investment volume per provider

Fund developments

We periodically conduct a materiality assessment to bring our strategy and actions in line with stakeholder interests and priorities and to better manage our impacts on the economy, environment and people. We use the outcomes of the materiality assessment to determine our targets and KPI's. The materiality assessment also helps us to identify what topics to report on. In this section, we report on the topics that have been determined as most material to the Fund. The Annex contains additional information on the materiality assessment.

Resident satisfaction

We closely track resident satisfaction to assess the Fund's effectiveness in meeting the expectations of residents and to monitor the quality of care provided by our care partners. In 2023, our care homes received an average score of 9.2* 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 9.4*. Nearly all properties scored higher than the care home benchmark score of 9.1*.

• Dagelijks Leven 9.3 (based on 49 surveys)

• Het Gastenhuis 9.6 (based on 19 surveys)

• Zorggroep De Laren 8.2 (based on 6 surveys)

• Futura Zorg 9.8 (based on 3 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.

Fire safety

The AL&C Fund pays close attention to the fire safety of its properties to protect residents, particularly given the vulnerability of the target group. All our facilities meet the requirements for group care homes, even if not formally required by fire safety regulations. In 2023, 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 60.}

Investing in the mid-priced segment

The AL&C Fund has a strong focus on affordability. We aim to invest in nursing homes and Assisted Living properties in the lower-priced and mid-priced segments for at least 75% of the total portfolio book value. In 2023, the lower- and mid-priced segments accounted for 86% based on book value.

GRESB performance

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. In 2023, the AL&C Fund maintained the maximum five-star GRESB rating and increased its score to 95 out of 100 points (2022: 92). The higher score was the result of improved energy efficiency and reduced greenhouse gas (GHG) emissions intensity. We achieved a 15% decrease in energy consumption intensity compared to 2022, as well as an 8% increase in renewable energy usage. GHG emissions intensity decreased by 18.5% compared to 2022. We recorded a slightly lower score in the water data category as a result of a 4.6% increase in water consumption intensity in 2022. The Fund again received the GRESB award for Overall Global Sector Leader, Western Europe Healthcare Senior Homes Core. The 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) allows us to set goals for future optimisations and track the impact of our optimisation efforts. During the implementation process of GPR certificates we realised an average score of the GPR certificates retrieved during 2023 of 6.5* which is below our internal target of 7.0. The decline in the average score this year is attributed to the deliberate certification of predominantly transitional properties. The certification process offers the fund valuable insights into areas for improvement, thereby identifying potential opportunities. This strategic initiative is in alignment with the predefined objectives outlined in the renovation roadmap. Anticipated outcomes include a more sustainable portfolio, with a consequent potential for elevation in the average score across the entire portfolio. 

Energy and water consumption

The AL&C Funds aims to lower the energy consumption of properties and reduce the CO2 emissions of its portfolio. We monitor the energy and water consumption of our properties to set goals for optimisation. We use smart meters and an Environmental KPI dashboard to track and report on the sustainability performance of our buildings. Energy consumption, carbon emission and water use data for the prior year is not completely available at date of submission of this annual report. Therefore, the 2022 figures are included in this report.

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 m to kWh/m /year. In 2023, the average EUI of our properties was 111.4 kWh/m3*, compared to 131.0 kWh/m3 in 2022. The average Carbon intensity (CI) of our properties was 17.1 kg/m²/year, this is a decrease in comparison to previous year CI of 21.0 kg/m²/year. 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).

In 2023, the percentage of homes with an energy performance certificate A or B was 99%, which is on target.

The total water usage was 98,845 m³. The water use intensity in 2023 was 0.91 m³/m² *, which is equal to 910 litres water per m².

Sustainable procurement

We conducted a sustainable procurement survey of our most important suppliers in collaboration with Custom Eyes (under the umbrella of the IVBN) to gain insight into and move towards a more sustainable supply chain.

Renovation roadmap

We have a renovation roadmap based in place based on our CRREM targets. Since 2021, we have analysed the energy performance of all properties in our portfolio and determined which assets are at risk of becoming stranded by 2030. We have selected 15 properties for renovation through 2030, mapped out the sustainability improvements per property and finalised our plan, timeline and budget. We expect to execute the first renovation projects in 2024.

EU Taxonomy

During 2023, the ALC fund voluntarily determined for the first time what the EU taxonomy aligment for the portfolio is.

Based on the EU Taxonomy Regulation (EU) 2020/852, this annual report outlines ALC Fund's alignment with the criteria set forth in the regulation, aiming to provide transparency regarding our environmental performance andcommitment to sustainable development objectives. The SFDR Annex included in the annual report as other information contains three required Taxonomy KPI’s. In addition to that, we have also voluntarily assessed our real-estate-related assets only against EU Taxonomy alignment criteria of Climate Change Mitigation activity 7.7. Based on this alignment assessment, we are able to categorise 97% of assets as taxonomy aligned. The percentage is only based on real-estate-related assets, therefore excluding cash and other receivables. Our commitment to sustainability is reflected in our business practices and investment strategies.

^{*Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 60.}

Financial results

The AL&C Fund has a long-term horizon. The Fund targets a stable dividend yield of 3.5%, which reflects the risk profile of the Fund. As a result of strong operational performance, the dividend yield for 2023 was 3.7%.

The rising interest rate contributed to higher gross initial yields. The investment volume in the healthcare real estate market plummeted, resulting in negative revaluations. The AL&C Fund was also affected by the challenging market conditions. The value of properties in our portfolio nevertheless increased to EUR 543.2 million by year end 2023, as new investments offset the negative revaluations.

The income return of the Fund was 3.8% in 2023. The operating costs increased to 8.9% (2022: 7.6%) due to higher maintenance costs related to the Bosch en Duin property operated by Zorggroep de Laren, and the Warmond property operated by Het Gastenhuis. Our cost percentage nevertheless remains low due to the relatively young age of our portfolio and because our care provider tenants are responsible for the daily operating costs.

In 2023, the net/gross ratio was 91.1%. 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 265 million remained available at the close of 2023. EUR 114 million of equity was called in 2023, while PfZW increased its equity commitment as planned by EUR 250 million in 2023. 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.