Group FFO

The following key figures provide an overview of the development in Group FFO and other value drivers in the reporting period. The year-on-year comparison is slightly affected by the acquisition of Bien-Ries GmbH (today operating under BUWOG – Rhein-Main Development GmbH, referred to hereafter as BUWOG West) at the beginning of April 2020.

The income statement includes two months of income generated by the Deutsche Wohnen Group as an associate for the third quarter. The resulting Group FFO contribution based on Vonovia’s definition in the amount of € 25.6 million was included in the Group FFO.

Group FFO

in € million

9M 2020

9M 2021

Change in %

12M 2020

Revenue in the Rental segment

1,706.9

1,762.7

3.3

2,285.9

Expenses for maintenance

-234.9

-245.3

4.4

-321.1

Operating expenses in the Rental segment

-293.3

-277.4

-5.4

-410.6

Adjusted EBITDA Rental

1,178.7

1,240.0

5.2

1,554.2

Revenue in the Value-add segment

800.0

840.1

5.0

1,104.6

thereof external revenue

37.4

41.8

11.8

51.6

thereof internal revenue

762.6

798.3

4.7

1,053.0

Operating expenses in the Value-add segment

-689.9

-724.5

5.0

-952.3

Adjusted EBITDA Value-add

110.1

115.6

5.0

152.3

Revenue in the Recurring Sales segment

296.5

422.2

42.4

382.4

Fair value of properties sold adjusted to reflect effects not relating to the period from assets held for sale in the Recurring Sales segment

-211.6

-302.7

43.1

-274.0

Adjusted result Recurring Sales

84.9

119.5

40.8

108.4

Selling costs in the Recurring Sales segment

-10.0

-14.0

40.0

-16.0

Adjusted EBITDA Recurring Sales

74.9

105.5

40.9

92.4

Revenue from disposal of “Development to sell” properties

181.6

328.8

81.1

297.7

Cost of Development to sell

-145.0

-270.3

86.4

-235.9

Gross profit Development to sell

36.6

58.5

59.8

61.8

Fair value Development to hold

225.8

162.2

-28.2

298.2

Cost of Development to hold*

-181.5

-117.9

-35.0

-235.4

Gross profit Development to hold

44.3

44.3

-0.0

62.8

Rental revenue Development

0.8

1.0

25.0

1.2

Operating expenses in the Development segment

-12.9

-24.0

86.0

-14.9

Adjusted EBITDA Development

68.8

79.8

16.0

110.9

Adjusted EBITDA Total

1,432.5

1,540.9

7.6

1,909.8

FFO interest expense

-289.2

-267.5

-7.5

-380.1

Current income taxes FFO

-35.6

-58.2

63.5

-52.4

Consolidation**

-91.8

-93.5

1.9

-129.1

FFO at-equity effects relating to Deutsche Wohnen

25.6

Group FFO

1,015.9

1,147.3

12.9

1,348.2

  1. * Excluding capitalized interest on borrowed capital in 9M 2021 of € 0.9 million (9M 2020: € 0.3 million).
  2. ** Thereof intragroup profits in 9M 2021: € 27.2 million (9M 2020: € 24.1 million), gross profit development to hold in 9M 2021: € 44.3 million (9M 2020: € 44.3 million), IFRS 16 effects 9M 2021: € 22.0 million (9M 2020: € 23.4 million).

As of September 30, 2021, our apartments were once again virtually fully occupied. The apartment vacancy rate of 2.7% was up slightly on the value of 2.6% seen at the end of September 2020. Rental income in the Rental segment rose by 3.3% in total from € 1,706.9 million in the first nine months of 2020 to € 1,762.7 million in the first nine months of 2021, largely due to organic growth resulting from new construction and modernization measures. Of the segment revenue in the Rental segment in the 2021 reporting period, € 1,414.7 million is attributable to rental income in Germany (9M 2020: € 1,381.2 million), € 266.6 million to rental income in Sweden (9M 2020: € 246.3 million) and € 81.4 million to rental income in Austria (9M 2020: € 79.4 million).

The current increase in rent due to market-related factors came to 1.1% (9M 2020: 0.8%). We were also able to achieve an increase in rent of 1.8% thanks to property value improvements achieved as part of our modernization program (9M 2020: 2.2%). The corresponding like-for-like rent increase came to 2.9% (9M 2020: 3.0%). If we also include the increase in rent due to new construction measures and measures to add extra stories of 0.6% (9M 2020: 0.6%), then we arrive at an organic increase in rent totaling 3.5% (9M 2020: 3.6%). The average monthly in-place rent within the Group at the end of September 2021 came to € 7.34 per m² compared to € 7.07 per m² at the end of September 2020. The monthly in-place rent in the German portfolio at the end of September 2021 came to € 7.14 per m² (Sep. 30, 2020: € 6.91 per m²), with € 10.34 per m² for the Swedish portfolio (Sep. 30, 2020: € 9.67 per m²) and € 4.87 per m² for the Austrian portfolio (Sep. 30, 2020: € 4.76 per m²). The rental income from the portfolio in Sweden reflects inclusive rents, meaning that the amounts contain operating, heating and water supply costs. The rental income from the Austrian property portfolio additionally includes maintenance and improvement contributions (EVB).

We have continued with our modernization, new construction and maintenance strategy in the 2021 fiscal year. The total volume of maintenance, modernization and new construction activity fell slightly, from € 1,360.0 million in the first nine months of 2020 to € 1,355.1 million in the first nine months of 2021. Whereas the volume of maintenance measures in the first nine months of 2021 came to € 453.5 million, up by 13.6% on the value of € 399.1 million seen in the first nine months of 2020, the modernization measures fell by 17.0% from € 659.7 million in the first nine months of 2020 to € 547.8 million in the first nine months of 2021. The decline in the volume of modernization measures is largely due to significantly lower investing activities in Berlin as a result of the rent freeze and isolated restrictions related to the coronavirus pandemic. However, we do consider the current lower level of investment volume as enough to reach the targets of our climate course. At € 353.8 million, new construction in the first nine months of 2021 was up by 17.5% on the prior-year value of € 301.2 million.

Maintenance, Modernization and New Construction

in € million

9M 2020

9M 2021

Change in %

12M 2020

Expenses for maintenance

234.9

245.3

4.4

321.1

Capitalized maintenance

164.2

208.2

26.8

270.9

Maintenance measures

399.1

453.5

13.6

592.0

Modernization measures

659.7

547.8

-17.0

908.4

New construction (to hold)

301.2

353.8

17.5

435.5

Modernization and new construction measures

960.9

901.6

-6.2

1,343.9

Total cost of maintenance, modernization and new construction

1,360.0

1,355.1

-0.4

1,935.9

In the first nine months of 2021, operating expenses in the Rental segment were down by 5.4% on the figures for the first nine months of 2020, from € 293.3 million to € 277.4 million. All in all, Adjusted EBITDA Rental rose by 5.2% from € 1,178.7 million in the first nine months of 2020 to € 1,240.0 million in the first nine months of 2021.

The Value-add segment was slightly impacted by the coronavirus pandemic due to individual construction delays affecting modernization measures. Vonovia’s own craftsmen’s organization made a contribution to the segment’s stable development overall.

We continued to expand our business activities relating to the provision of cable television to our tenants, residential environment, insurance and metering services, and energy supply services.

In the 2020 fiscal year, we changed how we report revenue from the Value-add segment with the introduction of a new performance indicator, total segment revenue. Details can be found in chapter [A2] of the notes to the consolidated financial statements and in the segment reporting in the 2020 Annual Report. Key changes result from the separate reporting of ancillary costs outside of the segments in gross terms as well as the decision not to take account of revenue from the management of subcontractors in our internal Value-add income.

External revenue from our Value-add activities with our end customers in the first nine months of 2021 were up by 11.8% on the first nine months of 2020, from € 37.4 million to € 41.8 million. Group revenue rose by 4.7% from € 762.6 million in the first nine months of 2020 to € 798.3 million in the first nine months of 2021. All in all, revenue from the Value-add segment came to € 840.1 million in the 2021 reporting period, up by 5.0% on the value of € 800.0 million seen in the first nine months of 2020. Operating expenses in the Value-add segment in the first nine months of 2021 were up by 5.0% on the figures for the first nine months of 2020, from € 689.9 million to € 724.5 million.

Adjusted EBITDA Value-add came to € 115.6 million in the first nine months of 2021, 5.0% higher than the figure of € 110.1 million reported for the first nine months of 2020.

We continued to pursue our selective sales strategy in the 2021 fiscal year. In the Recurring Sales segment, we report all business activities relating to the sale of single residential units (Privatize). We privatized 2,367 apartments in the first nine months of 2021 (9M 2020: 1,883), thereof 1,928 in Germany (9M 2020: 1,412) and 439 in Austria (9M 2020: 471).

In the Recurring Sales segment, the income from disposal of properties came to € 422.2 million in the first nine months of 2021, up by 42.4% on the value of € 296.5 million reported in the same period of 2020; of this, € 321.6 million are attributed to sales in Germany (9M 2020: € 199.3 million) and € 100.6 million to sales in Austria (9M 2020: € 97.2 million). Selling costs in the Recurring Sales segment came in at € 14.0 million in the first nine months of 2021, up by 40.0% on the value of € 10.0 million seen in the first nine months of 2020.

Adjusted EBITDA Recurring Sales came in at € 105.5 million in the 2021 reporting period, up by 40.9% on the value of € 74.9 million seen in the first nine months of 2020. The fair value step-up for Recurring Sales was down by 39.5% year-on-year in the first nine months of 2021 (9M 2020: 40.1%).

Outside of the Recurring Sales segment, we made 620 Non-core Disposals of residential units as part of our portfolio adjustment measures in the first nine months of 2021 (9M 2020: 829) with total proceeds of € 49.5 million (9M 2020: € 154.7 million). At 50.7%, the fair value step-up for Non-core Disposals in the 2021 reporting period was higher than for the same period in the previous year (33.3%). The individual sales of land contributed to this increase.

In the first nine months of 2021, the Development segment, with its Development to sell and Development to hold areas, made positive contributions to earnings in Germany, Austria and Sweden, allowing it to once again contribute to Vonovia’s successful growth.

In the Development to sell area, a total of 580 units were completed in the first nine months of 2021 (9M 2020: 381), thereof 496 in Germany (9M 2020: 381) and 84 units in Austria (9M 2020: 0 units). In the first nine months of 2021, income from the disposal amounted to € 328.8 million (9M 2020: € 181.6 million), with € 174.3 million attributable to project development in Germany (9M 2020: € 132.4 million) and € 154.5 million to project development in Austria (9M 2020: € 49.2 million). The resulting gross profit for Development to sell came to € 58.5 million in the first nine months of 2021 (9M 2020: € 36.6 million).

In the Development to hold area, a total of 786 units were completed in the reporting period (9M 2020: 1,056 units), thereof 506 in Germany (9M 2020: 548 units), 154 in Sweden (9M 2020: 125) and 126 units in Austria (9M 2020: 383 units). In the Development to hold area, a fair value of € 162.2 million was achieved in the first nine months of 2021 (9M 2020: € 225.8 million), with € 96.5 million attributable to project development in Germany (9M 2020: € 94.7 million) and € 21.4 million to project development in Sweden (9M 2020: € 3.1 million) and with € 44.3 million to project development in Austria (9M 2020: € 128.0 million). The gross profit for Development to hold came to € 44.3 million in the first nine months of 2021 (9M 2020: € 44.3 million). Operating expenses in the first nine months of 2021 were up by 86.0% on the figures for the same period of 2020, from € 12.9 million to € 24.0 million. The increase in operating expenses compared to the previous year is related to the establishment of the BUWOG Deutschland organization and the resulting higher material and personnel costs and business expenses.

Adjusted EBITDA for the Development segment came in at € 79.8 million in the first nine months of 2021, down by 16.0% on the value of € 68.8 million seen in the first nine months of 2020.

In the first nine months of the year, the primary key figure for the sustained earnings power, Group FFO, increased by a total of 12.9%, from € 1,015.9 million in the first nine months of 2020 to € 1,147.3 million in the first nine months of 2021, largely due to organic growth resulting from new construction and modernization measures and to the much higher proceeds from sales in the Recurring Sales segment. This trend was fueled primarily by the positive development in Adjusted EBITDA Total, which increased by 7.6% from € 1,432.5 million in the first nine months of 2020 to € 1,540.9 million in the first nine months of 2021. The figure for the first nine months of 2021 also includes FFO at-equity effects relating to Deutsche Wohnen in the amount of € 25.6 million.

In the 2021 reporting period, the non-recurring items eliminated in the Adjusted EBITDA Total came to € 26.0 million, up by 7.9% on the prior-year value of € 24.1 million. This was largely due to costs associated with the Deutsche Wohnen public takeover offer, some of which were offset by income resulting from the valuation of shares in Deutsche Wohnen. The following table gives a detailed list of the non-recurring items:

Non-recurring Items

in € million

9M 2020

9M 2021

Change in %

12M 2020

Transactions*

5.4

21.5

>100

24.0

Personnel matters

12.1

0.3

-97.5

27.5

Business model optimization

10.0

7.8

-22.0

13.9

Research & development

2.8

Refinancing and equity measures

-3.4

-6.4

88.2

-3.9

Total non-recurring items

24.1

26.0

7.9

61.5

  1. * Including one-time expenses in connection with acquisitions, such as HR measures relating to the integration process and other follow-up costs.