Direct return
The Fund booked an income return (ROE) of 5.1% in 2015 and is lower than the 5.9% in 2014.
Direct property return is lower than 2014 because new objects were added to the portfolio (Hildebrand and Van 't Hofflaan). These have a lower (target) return (and lower risk profile) than the legacy objects Bewegingshuis and Dousberg.
The indirect return
Values recovered in 2015 but less significant compared to the residential real estate market, partly due to clarity on government measures. This resulted in the Fund’s capital growth (ROE) 0f 2.6% in 2015.
Indirect property return is 1.3% in 2015 and slightly higher than expected due to higher valuations of the newly acquired healthcare objects.
Total return
The total fund return (ROE) came in at 7.7% in 2015 and equals the total property return which also came in at 7.7% in 2015.
The fund performance equals the property performance. Administrative expenses are paid from the net rental income, leading to a lower fund income and fund total return compared to the direct property return. Under INREV, acquisition costs are capitalised and expensed to the income statement over five years. For 2015, this led to an improved fund indirect and fund total return compared to the indirect property return. For 2015, these two influences cancelled each other out, resulting in a total fund return equal to the total property return.
Fund return versus property return
The fund return (INREV) and property return (IPD) are different performance indicators. The fund return is calculated according to the INREV Guidelines as a percentage of the net asset value (INREV NAV) and the property return is calculated according to the IPD methodology as a percentage of the value of the investment properties. INREV e.g. includes cash, the fee costs and administrative costs in the calculation of the income return (INREV). Furthermore the amortisation of acquisition is threated differently by INREV and IPD.
Rent
Secured rent will be 100% of the 2015 gross rental income until 2018 (three-year horizon).
Rent in arrears came in at 4.7% of the gross rental income for 2015. This was due to the late payment (in January) of the December rent of Hildebrand. As there are only three tenants currently in the Fund, the impact of this is relatively high.
Acquisitions
The budget for 2015 was € 62 million in transactions and cash-out of € 49 million. However, the Fund failed to meet this target, due to the time needed to assess the numerous propositions we received and the lack of suitable properties. Total approved investment proposals came in at € 53.4 million and cash-out stood at approximately € 15 million at year-end 2015.
Make or buy
Over the past two years, we have found that far too many properties on offer do not meet the quality requirements we have set for any additions to our portfolio. There is a large existing supply and numerous healthcare organisations who are eager to sell their real estate and sign long-term leases with us, but this real estate frequently fails to meet our criteria in terms of quality, location or lease conditions.
We now know that if we want high quality assets we need to build them ourselves, or be involved in the design and construction – or potential redevelopment and repurposing - at a very early stage in the process, as this enables us to tailor the asset to the specific needs of our target groups. However, this does mean that the share of new-build projects, as opposed to properties already in operation, has been higher than previously expected. New-build projects do mean that cash-out tends to be later than originally foreseen.
However, we did enter into negotiations that resulted in five transactions to acquire the previously mentioned assets in Zeist, Utrecht and Den Bosch, Haarlem and Amsterdam.
Divestments
Het Bewegingshuis was sold in the last quarter of 2015, with a profit of 0.2 million.
Financing
The Fund did not use any loan capital financing in 2015.
Treasury management
The Fund had € 10.2 million in cash freely available at year-end 2015.
Interest rate and currency exposure
As the Fund has no external loans and borrowings, it has no exposure to related interest rate risks. The interest rate risk related to bank balances is limited at the Healthcare Fund. The Fund has no currency exposure.
Governance
The Fund has a transparent governance structure, which ensures effective and efficient management, combined with proper checks and balances. On 9 December 2015 the general meeting of shareholders decided to change the governance of the fund. In the new governance there will be no longer a supervisory board. The new governance structure became effective as per 4 January 2016.
Accounting policies
The Board of Directors changed the accounting policies of the Healthcare Fund from BW2 titel 9 to IFRS for the financial year 2015. Therefore this is the first year for which the Fund reports in IFRS.
Dividend and dividend policy
The Board of Directors of Bouwinvest proposes to pay a dividend of € 34,089 per share for 2015 (2014: € 15,822), which corresponds to a pay-out ratio of 100%. It is proposed that the dividend be paid in cash, within the constraints imposed by the company’s fiscal investment institution (FII) status. Of this total dividend, 72.6 % was paid out in 2015 and the fourth dividend payment was paid on 2 March 2016. The remainder of the distribution over 2015 will be paid in one final dividend payment following the Annual General Meeting of Shareholders on 18 April 2016.
Tax
The Fund is structured as a fiscal investment institution (FII) under Dutch law and is therefore not subject to corporate tax. Being an FII, the Fund is obliged by law to maintain a pay-out ratio of 100% of the Fund’s distributable profit; as stated above, the Fund proposed to pay out 100% of its distributable profit. The Fund met its obligations related to value added tax, transfer tax and other applicable taxes in their entirety in 2015.
Dutch Management and Supervision Act
The Dutch Management and Supervision Act (Wet bestuur en toezicht) came into force on 1 January 2013. Bouwinvest has amended its articles of association and internal regulations in line with this legislation, insofar as applicable and relevant. The Management and Supervision Act includes a guideline for a balanced gender ratio within the Board of Directors and Supervisory Board. At least 30% of these positions should be filled by women and at least 30% by men. Bouwinvest’s Board of Directors and Supervisory Board do not yet have the above-mentioned gender balance. Based on the profiles of the members of the Board of Directors and of the Supervisory Board, in the event of future resignations Bouwinvest will carry out an evaluation to determine the desired profile of any new members. This evaluation will take into account diversity criteria, including a balance of male and female.