Portfolio - operation

Rental policy

The portfolio gross rental income in 2023 was EUR 164.2 million, compared to EUR 153.5 million in 2022. This growth is driven by the annual rental increase, rental turnover, and portfolio dynamics. As part of our asset management strategy, it is our goal to optimise the rental prices within the constraints imposed by regulation and with consideration for our tenants.

Legislation caps the rental increase in the private rental market at wage growth (“CAO-loonstijging”) +1%. We implemented the annual rent increase in July. On average, annual rents increased by 3.8%, which is 2.8% below the 2023 wage growth of 6.6%.

Vacancy

We aim to optimise the occupancy rate of our portfolio by investing in the quality of our properties and our service to tenants. In 2023, we realised a vacancy rate of 1.7%*, well within our target of 2.5%. This figure includes operational vacancy, renovation vacancy (existing portfolio) and initial vacancy (newly built properties). The low vacancy rate is indicative of the quality of our portfolio and the ongoing pressure on the housing market. The vacancy within the property Sijpesteijn, Utrecht is mainly related to vacancy of the parking garage. There is limited interest of tenants for the parking places. 

Table 1 lists the ten investment properties/districts with the highest operational vacancy as a percentage of the total portfolio vacancy.

Figure 20: Vacancy

_{**Total vacancy excluding sales vacancy is comparable with the occupancy rate in the key figures. The sales vacancy isn't
taken into account within the occupancy rate, since this is administrated in realized capital gains.}

Operating costs

Operating costs as a percentage of the theoretical rental income was 23.4% in 2023 (2022: 21.7%). The increase was due to extensive planned maintenance activities. We remained within our portfolio plan target of 23.5%. The cost ratio is expected to remain stable at 23.5% in 2024, after which it is expected to decrease. The delivery of a large number of new MFH units will contribute to a lower cost ratio beginning in 2025.

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 85.}

Tenant satisfaction

We aim to achieve a minimum tenant satisfaction score of 7.5 (out of 10) and outperform our peers in the IVBN tenant satisfaction benchmark. In 2023, the ARC Fund scored a 7.0*, compared to 7.2* in 2022. This is below the benchmark and below our target. The weaker performance is primarily caused by a lower score on handling of complaints and maintenance requests. We are working to resolve this issue in cooperation with our property managers in order to improve this score going forard. The overall score of 7.0 is the average of three components: quality of the home (down from 7.8 to 7.6), the living environment (stable at 7.5), and property management (down from 6.3 to 6.1).

Figure 21: Tenant satisfaction*

^{Score out of 10}

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 85.}

Sustainability

We invest in the energy efficiency of our properties to achieve a future-proof and Paris-proof portfolio. By monitoring the energy consumption of our properties, the ARC Fund is able to set goals for optimisation. We increasingly use smart meters with a digital dashboard to track and report on the sustainability performance of our buildings. The coverage rate representing the percentage of properties included in energy/water/gas consumption is set to increase over time to be able to improve insights in actual use figures. The coverage rate is 94.7% of the portfolio, which represents an increase compared to prior year (93.8%).

The ARC Fund aims to lower the energy consumption of properties and reduce the CO2 emissions of its portfolio. We monitor the energy 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 in GJ and gas use in m to kWh/m²/year. In 2023, the average EUI of our properties was 93.1 kWh/m²/year*, compared to 112.0 kWh/m²/year in 2022. The energy use of newly built buildings in 2022 is taken into account in the current figures, this results in a decrease of the EUI. New builds must adhere to strict energy efficiency standards and therefore perform better than renovated buildings. They are significantly better insulated and make use of gas-free heating systems (e.g. hybrid or ground-source heat pumps), which consume less energy than gas heating systems.

We aim to reduce carbon emission by 50% between 2020 and 2030 by investing in assets that are at risk of becoming ‘stranded’, meaning that they do not meet future energy efficiency standards and are at risk of becoming economically obsolete. The carbon emissions of the portfolio in 2020 averaged 36 kg CO₂/m²/year. A 50% reduction therefore amounts to an average maximum carbon emission in 2030 of 18 kg CO₂/m²/year. In 2023, the average carbon footprint was 17.4 kg CO₂/m² per year (2022: 17.5kg CO₂/m²). We are well on track to achieve our 2030 reduction target.

The ARC Fund portfolio composition of Energy Performance Certificates (EPC-labels) is 89.3% A label or higher, 8.2% B label and 2.5% C label or lower.

GRESB

The ARC Fund has been participating in the Global Real Estate Sustainability Benchmark (GRESB) since 2013. GRESB allows for an objective assessment of the sustainability of our portfolio. The ARC Fund's score increased from 90 points in 2022 to 91 points* in 2023. We achieved our goal to score at least 90 points and retain our five-star rating. Because of our improved score, our position in the ranking rose slightly.

GPR

We aim to achieve GPR/BREEAM certificates for at least 80% of the portfolio. In 2023, 75.6%* of our portfolio was GPR/BREEAM certified. GPR and BREEAM are instruments for measuring the sustainability of a property. We will continue to obtain GPR certificates to improve our insight into the sustainability performance of our portfolio, set optimisation targets and improve our GRESB score.

During the implementation process of GPR certificates, we realised an average score of the GPR certificates retrieved during 2023 of 6.6* which is below our internal target of 7.0. We applied for and obtained our first BREEAM certificate in 2023. The newly delivered Jonas property in Amsterdam was BREEAM Outstanding certified, the highest BREEAM rating available.

^{* Please refer to the KPI tables in the Annexes. KPIs include limited assurance by external auditor. A separate assurance report is included on page 85.}

EU Taxonomy

During 2023, the ARC 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 ARC Fund's alignment with the criteria set forth in the regulation, aiming to provide transparency regarding our environmental performance and commitment 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 94% 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.