Financial performance
Fund return
The Fund realised a total return of -6.3% in 2023, consisting of a 2.4% income return and -8.5% capital growth. Net rental income, administrative and finance expenses were the main drivers for the income return. The decline in capital growth was primarily driven by high (mortgage) interest rates, high energy prices, the uncertainty regarding the potential regulation of the residential market and the geopolitical situation.
The total fund return ended below plan. The Fund’s income return ended above target and capital growth 3.5% points below target as a result of the uncertainties in the market.
Fund performance | 2023 | 2022 | |
Actual | Plan | Actual | |
Income return | 2.4% | 2.0% | 1.9% |
Capital growth | (8.5)% | (5.0)% | (1.3)% |
Fund performance | (6.3)% | (3.1)% | 0.6% |
Income return
Net rental income of € 206.6 million was € 19.3 million higher than the plan of € 187.3 million (2022: € 191.2 million). The deviation from plan was due to higher gross rental income (€ 3.4 million) and lower property operating expenses (€ 15.5 million). Higher gross rental income due to indexation and new assets added to the portfolio. Several maintenance projects are postponed to 2024, this resulted in lower property operating expenses in 2023.
Administrative expenses (€ 35.2 million) were € 0.9 million lower than plan (€ 36.1 million) due to lower management fee costs, directly driven by the Fund's lower average NAV. Finance expenses totalled € 0.4 million, which were below plan (€ 3.7 million) due to higher interest income (€ 3.3 million).
The higher net rental income and lower administrative expenses resulted in an income return of 2.4%, compared with the plan of 2.0%.
Capital growth
The Fund realised capital growth of -8.5% compared with a plan of -5.0%. Highly changing market circumstances in 2023 caused all real estate forecasts to be less accurate. Especially the further rise of inflation and interest rates affected the yields and thus the capital values. In addition to the higher interest rates, the uncertainty regarding rental regulation remains hanging over the residential market. This resulted in an above average yield increase for the residential market.
Property performance
Property performance | 2023 | 2023 | 2022 |
Actual | MSCI | Actual | |
Income return | 2.9% | 3.1% | 2.4% |
Capital growth | (8.6)% | (8.8)% | (1.4)% |
Property performance | (5.8)% | (5.9)% | 1.0% |
The total property return for 2023 came in at -5.8%, consisting of a 2.9% income return and -8.6% capital growth. The Fund showed an overperformance of 6 basis points versus the MSCI Netherlands Index (all properties). The overperformance was largely driven by the capital growth, which was 20 basis points higher than the benchmark's capital growth of -8.8%. In addition, the income return was 16 basis points lower than the benchmark's income return of 3.1%.
The Fund return (INREV) and property return (MSCI) 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 MSCI methodology as a percentage of the value of the investment properties. For example, INREV includes cash, fee costs and administrative costs in the calculation of the income return (INREV). Furthermore, the amortisation of acquisition costs is treated differently by INREV and MSCI.