Three assets were sold during 2022: the shopping centre ‘t Loon in Heerlen in January, marking the end of our retail disposal program, HNK Hoofddorp and a small asset in the Hague.
The combined proceeds of all disposals were € 17.3m (before transaction costs) reflecting on average a circa 0.8% discount over year-end 2021 book values. There were no acquisitions in 2022.
PORTFOLIO BREAKDOWN – 31 DECEMBER 2022
VACANCY
The EPRA vacancy at the end of 2022 is 6.2%, up from 5.9% at the end of 2021. On a like-for-like basis the increase was 0.6%, mainly due to tenant departures in Amsterdam and Other
Netherlands.
The vacancy rate at year-end includes 0.7% strategic vacancy for Alexanderpoort, Rotterdam. Adjusted for this the vacancy rate at year-end of 2022 is 5.5%.
EPRA VACANCY
RENTS
On a like-for-like basis, gross rents are up by 5.8% in 2022. Split by segment, Amsterdam is up by 6.5%, Other G4 is up by 6.8% and Other Netherlands 2.1%. Indexation accounted for circa 2.6% of the total increase. For Amsterdam, the rest of the increase was largely due to higher rent in Laanderpoort (circa 2.2%), related to the revised development agreement with ING. Net rents increased by 7.4% on a like-for-like basis in 2022 mainly as a result of lower maintenance.
LIKE-FOR-LIKE GROWTH NET RENTAL INCOME (€M)
REVERSIONARY POTENTIAL / ERV BRIDGE
As per 2022 ERVs were up by 4.6%. In Amsterdam the highest increase in ERVs was recorded in Zuidas at 12.2%. In Other NL the increase is in Leiden, at 11.3% and Eindhoven at 8.3%.
LIKE-FOR-LIKE GROWTH ERV (€M)
As per 2022 the investment portfolio is 6.1% reversionary, down from 7.9% at year-end 2021. This is mainly the result of higher rent levels, partially attributable to indexation.
REVERSIONARY POTENTIAL
The reversion for lease contracts due for renewal in 2023 is 7.9%, with Amsterdam remaining the most reversionary segment (13.6%).
Contracts were signed on average at approximately 3% above ERV. The total tenant retention rate for 2022 was 69.4%.
The WAULT of the portfolio is 3.9 years. Contracts representing an annualised rental income of € 10.6 m (14% of total annualised contractual rent) are set to expire in 2023. This includes ING’s lease at Laanderpoort, which will expire in relation to the development and € 3.5m in flexible lease contracts with maturities of one to three months, which typically are just rolled over.
EPRA YIELDS
The EPRA net initial yield is up by 50bps to 4.6% in 2022. This reflects both yield expansion and the impact of higher rents. The lack of liquidity in the investment market in combination with increased economic uncertainty has resulted in appraisers taking a more cautious stance to valuation yields.
PORTFOLIO YIELDS
VALUATIONS
The portfolio is appraised externally twice a year. All assets saw a change in external appraiser in H1 2022, in accordance with our standard appraiser rotation process.
The portfolio valuation is down by 5.6% over the 12-month period. H1 still saw a positive revaluation (+ 0.5%) while in H2 the deteriorated market conditions were acknowledged and reflected in valuations (- 6.2%).
The write-down is almost entirely attributable to yield expansion in response to heightened market uncertainty, higher interest rates and decreased investment volumes. The largest capital value decline was seen in Amsterdam (- 9.2%). The positive revaluation in other NL is related mainly to the Leiden BioScience Park which saw both an increase in ERV’s and a decrease in yields, to reflect the continued high desirability of medical offices and lab space even in the face of generally more challenging market conditions.
REVALUATION (€M)
CAPITAL EXPENDITURE
Capex is € 12.8m, of which € 2.4m is defensive. The € 10.4m of offensive capex includes € 7.2m of investments in the three major development projects.
CAPITAL EXPENDITURE (€M)
AMSTERDAM
Vacancy increased from 5.8% to 7.0% in 2022, mostly as a result of tenant departures at Centerpoint I and II and Q-Port.
The tenant retention rate during 2022 was 66.5%.
KEY METRICS AMSTERDAM
OTHER G4
The EPRA vacancy rate for Other G4 is 6.1%, down from 6.8% at year-end 2021, mainly thanks to occupancy gains at HNK Scheepvaartkwartier. The vacancy includes 2.3% in strategic vacancy for Alexanderpoort, where several floors are being held vacant as part of a major refurbishment.
The retention rate for 2022 amounts to 54.7%.
KEY METRICS OTHER G4
OTHER NETHERLANDS
The vacancy rate was 4.1%, down from 4.9% at year-end 2021. The vacancy in our Life Sciences activities in Leiden remains 0%.
The retention rate in this segment is 82.8%.
KEY METRICS OTHER NETHERLANDS
DEVELOPMENT AND RENOVATIONS
Laanderpoort
The Final Design has been approved by both ING and NSI. The agreement letter with the Municipality was signed in December 2022. Following selection of the contractor, demolition works are scheduled for Q4 2023.
Well House
We have made the decision to postpone the Well House project at this stage. We will actively revisit the case for Well House in 2023, taking into account construction costs, land values, yields and rent levels. We already have obtained an irrevocable building permit for this project.
Vitrum
The Final Design phase will be completed in February 2023. Following an additional delay in 2022 due to the approval needed from the owner’s association, the technical design should be fully ready Q3 2023, with the start of the project still foreseen for Q4 2023.
BALANCE SHEET IMPACT OF DEVELOPMENT
At the end of 2022, the balance sheet value of the development activities consists of Vitrum and Alexanderhof, Rotterdam, both transferred in 2021. In addition, the accumulated development costs of Vitrum, Laanderpoort and Well House are also included in investment property under construction.
Laanderpoort is currently not part of investment property under construction, as the asset is still leased to ING. It will be transferred once ING vacates the building in Q1 2023.
The negative revaluation in 2022 is mainly related to a decline in the valuation of Vitrum, due to yield expansion and a higher capex adjustment reflecting increased building costs assumed by the appraiser.
MOVEMENT TABLE INVESTMENT PROPERTY UNDER CONSTRUCTION (€M)
