Management team foreword

We measure success by our financial results, our operational performance and most importantly by our ability to improve access to high-quality housing and care. In a challenging economic environment and stagnant investment market, we may temper our expectations when it comes to our acquisition rate, but we never reel in our ambition to reach more people with our concepts. In 2023, we were able to honour our commitment to our investors, meet the urgent need for more nursing care homes and enrich the lives of those who need care. The acquisition of the Luxor2+ portfolio played a large role in our success.

A unique opportunity in a challenging environment

Rising interest rates, high construction costs and a growing shortage of healthcare workers all left their mark on the healthcare real estate market in 2023. Our projections – which included moderately negative revaluations and limited opportunities for new acquistions – all materialised. The opportunity that did come our way, however, was a perfect match for our Fund. Over the years, we have built a strong relationship with care provider Dagelijks Leven. Their small-scale residential care facilities provide a comfortable and affordable home for people with dementia. Specifically, they serve people with a low income or state pension (“AOW-uitkering”), an important target group of the AL&C Fund. In the summer of 2023, we were pleased to finalise an agreement to acquire 22 properties to be operated by Dagelijks Leven. The agreement enables Dagelijks Leven to realise its ambitious growth objectives. It also aligns seemlessly with our Fund's investment focus. The ability to acquire the Luxor 2+ portfolio at favourable conditions in a tight investment market was a highlight of 2023.

Assisted Living

The high demand for Assisted Living facilities that enable people who need care to live independently for longer is in stark contrast to the insufficient availability of suitable real estate. While the construction of the three Assisted Living properties acquired in 2022 – Trappenberg, the Sphinx and Soesterberg – was progressing on schedule, we did not acquire any new Assisted Living properties in 2023. The economy and the state of healthcare in the Netherlands contributed to the challenging investment environment. Traditional care providers are struggling to retain and attract the personnel needed to operate at full capacity, let alone expand their capacity. The supply of new healthcare is suffering as a result.

That persistent shortage of qualified healthcare workers only underscores the importance of investing in alternatives to nursing homes. We therefore spent significant time preparing for the delivery of our first three Assisted Living properties, and the many we expect to follow once the market recovers. For one, we developed the Assisted Living marketing concept Seasons. It captures the impact that we want to create: beyond providing high-quality housing and facilitating access to care, we want people to enjoy this season of their lives. That requires community, social interaction and individualised care. Our new Seasons concept invites like-minded people to join and help shape those communities. Our social impact lies in our ability to facilitate informal care, which is key to helping people stay healthier for longer, reducing the demand for formal WMO care and lowering the cost of care. Next to developing the Seasons concept, we continued to explore partnerships with home care organisations to deliver the personalised care that we envision, with a focus on local organisations that are rooted in their communities. These organisations will work in close partnership with our Amvest community management provider Fuzer and all other providers within the Seasons ecosystem.

Financial performance

Financially, the year was characterised by mixed results. Our income return exceeded our expectations as a result of new additions to our portfolio as well as annual rent increases. The capital return suffered due to four consecutive quarters of negative revaluations, which surpassed our initial expectations. Following a double-digit fund return a year earlier, we achieved a total return of -/-0.4% in 2023 (2022: 10.8%), and a dividend distribution of 3.7% (2022: 4.2%). Given the challenging economic circumstances, we are nevertheless satisfied with our overall performance.

Sustainable impact

Another takeaway from the year is that our Fund consistently performs well in every area that we have control over. That is evident from our growth in rental income, but also from our sustainability performance and the Zorgkaart Nederland ratings of our properties. We maintained our five-star GRESB rating, remained the Overall Global Sector Leader Western Europe Healthcare Senior Homes Core and increased our score from 92 to 95 points. The delivery of new sustainable properties and obtainment of building certifications contributed to our point increase. Notably, we added our first energy-neutral (“energieneutraal gebouw” or “ENG”) property to our portfolio. The choice for energy neutral versus almost energy neutral (“bijna energieneutraal gebouw” or “BENG”) was made in partnership with our care provider Futura Zorg. The additional investments were offset by an increase in rental income. Our first venture into energy-neutral building and our partner's commitment to our cause serve as an interesting case study. It confirms that we can realise healthy returns while maximising our sustainable impact. We will continue to challenge ourselves and our care providers to make properties as sustainable as possible. We have also voluntarily completed our EU taxonomy alignment assessment and 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. 

Zorgkaart Nederland

The feedback of residents and their family members is very important to us. Zorgkaart Nederland gives us valuable insight into residents’ satisfaction with our accommodations and the quality of care. In 2023, the average accommodation score of our locations was a 9.4 out of 10, with an overall average score of 9.2 in 2023. We achieved higher scores than our peers in all categories: accommodation, interaction with employees, listening, keeping agreements, quality of care and quality of life.

Outlook

By the end of 2023, we began to see signs of a stabilisation of the healthcare real estate market. Long-term interest rates are in a declining trend since the fourth quarter of 2023 and expected to stabilise on a lower level in 2024, which is good news given our ambitious growth objectives. Specifically, we expect favourable conditions for the acquisition of new Assisted Living properties, a key area of focus for the coming years.

We look forward to an eventful year that includes the scheduled completion of more than 20 projects for a total of 573 homes. The delivery of our first Assisted Living property in Soesterberg will be a major milestone for our Fund. We are actively marketing the property through our Seasons-branded website, as the Fund will rent Assisted Living homes directly to residents instead of a care provider.

The pipeline also includes a large number of Luxor 2+ properties operated by Dagelijks Leven. With the delivery of these properties, we significantly improve acccess to high-quality housing and care for people with modest or low incomes. This is exactly what drives us, and what drives our investors. By opening up our Fund to additional investors in 2024, we hope to raise the equity needed to amplify our positive impact in the years ahead.