Results of Operations

Overview

All in all, Vonovia started the 2023 fiscal year as was to be expected.

We saw continued rising demand for rental apartments and positive economic development in the core Rental segment in the first three months of the year.

The expected impact of the war in Ukraine and its implications, particularly with regard to energy and construction costs, as well as higher interest rates, were also reflected in the interim financial statements for the reporting period.

Any analysis of the figures for the first three months of 2023 has to consider the fact that the prior-year figures are reported based on the current segmentation, and that the indicators that are relevant from a corporate management perspective, namely Adjusted EBITDA Total and Group FFO, are reported in line with the current definition.

As of March 31, 2023, Vonovia employed 15,924 people (March 31, 2022: 15,900).

Total segment revenue came to € 1,430.7 million in the first three months of 2023, down by 12.2% on the figure of € 1,629.0 million reported in the prior-year period. This decline was due primarily to lower proceeds from the sale of real estate inventories and lower sales in the Recurring Sales segment due to volume-related aspects.

The overview below shows the other key figures for the company’s results of operations, as well as their reconciliation to the performance indicator Group FFO:

At the end of March 2023, Vonovia managed a portfolio of 548,368 of its own apartments (March 31, 2022: 550,496), 164,985 garages and parking spaces (March 31, 2022: 163,284) and 8,817 commercial units (March 31, 2022: 8,946). 70,583 residential units (March 31, 2022: 72,434) are also managed for other owners.

Details on Results of Operations by Segment

Rental Segment

At the end of March 2023, the portfolio in the Rental segment had a vacancy rate of 2.2% (March 31, 2022: 2.4%), meaning that it was once again virtually fully occupied.

The segment revenue in the Rental segment increased by 2.5% year-on-year in total in the first three months of 2023 (previous year incl. Deutsche Wohnen, 3M 2022: 1.5%) to € 800.2 million (3M 2022: € 780.3 million), mainly due to organic growth resulting from new construction and refurbishment and also taking into account the Berlin portfolio that was sold at the start of 2022. Of the segment revenue in the Rental segment in the 2023 reporting period, € 685.9 million is attributable to rental income in Germany (3M 2022: € 665.4 million), € 85.7 million to rental income in Sweden (3M 2022: € 88.2 million) and € 28.6 million to rental income in Austria (3M 2022: € 26.7 million).

Organic rent growth (twelve-month rolling) totaled 3.4% (3.9% as of March 31, 2022). The current rent increase due to market-related factors came to 1.2% (1.6% as of March 31, 2022; this includes one-off effects of 0.6% due to the Act Governing the Rent Cap for Residential Premises in Berlin (the “rent freeze”) becoming invalid) and the increase from property value improvements translated into a further 1.5% (1.6% as of March 31, 2022). All in all, this produced a like-for-like rent increase of 2.7% (3.2% as of March 31, 2022). New construction measures and measures to add extra stories also contributed 0.7% (0.7% as of March 31, 2022) to organic rent growth.

The average monthly in-place rent within the Rental segment at the end of March 2023 came to € 7.54 per m² compared to € 7.40 per m² at the end of March 2022 (incl. Deutsche Wohnen). The monthly in-place rent in the German portfolio at the end of March 2023 came to € 7.46 per m² (March 31, 2022: € 7.26 per m² incl. Deutsche Wohnen), with the figure for the Swedish portfolio down from € 10.28 per m² as of March 31, 2022 to € 9.70 per m², mainly due to reasons related to the exchange rate, and the figure for the Austrian portfolio amounting to € 5.26 per m² (March 31, 2022: € 4.90 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 real estate portfolio additionally includes maintenance and improvement contributions (EVB).

We have continued with our refurbishment, new construction and maintenance strategy, which has been adjusted to reflect the current overall conditions, in the 2023 fiscal year. The overview below provides details on maintenance, modernization and new construction in the Rental segment.

In the first three months of 2023, operating expenses in the Rental segment were down by 16.8% on the figures for the first three months of 2022, from € 124.7 million to € 103.8 million. All in all, the Adjusted EBITDA Rental came to € 579.7 million in the first three months of 2023, up by 5.2% on the prior-year value of € 551.2 million. 

Value-add Segment

Developments in the Value-add segment remained dominated by the new overall conditions for our own craftsmen’s organization. General price increases for construction services and materials, as well as productivity losses due to the shortage of skilled labor, had a negative impact on economic development. In addition, short-term changes in the technology for heating modernization measures resulted in lower service provision.

All in all, revenue from the Value-add segment came to € 345.4 million in the 2023 reporting period, up by 7.2% on the value of € 322.1 million seen in the first three months of 2022. € 35.7 million of this amount was attributable to external revenue from our Value-add activities with our end customers (3M 2022: € 24.9 million), with € 309.7 million attributable to intra-Group income (3M 2022: € 297.2 million).

Operating expenses in the Value-add segment in the first three months of 2023 were up by 17.4% on the figures for the first three months of 2022, from € 271.8 million to € 319.0 million. This was due, in particular, to higher construction costs, the use of more third-party services and higher energy costs. Adjusted EBITDA Value-add came in at € 26.4 million in the first three months of 2023, down considerably on the value of € 50.3 million seen in the first three months of 2022.

Recurring Sales Segment

In the Recurring Sales segment, income from the disposal of properties in the first three months of 2023 was down to € 69.8 million, 53.9 % lower than the 2022 value of € 151.4 million due to volume-related factors, with 282 units sold (3M 2022: 700), 143 of which were in Germany (3M 2022: 504) and 139 of which were located in Austria (3M 2022: 196). Income of € 31.8 million is attributable to sales in Germany (3M 2022: € 102.1 million) and € 38.0 million to sales in Austria (3M 2022: € 49.3 million).

In the first three months of 2023, the fair value step-up in the portfolio came to 56.0%, up on the value of 46.7% seen in the first three months of 2022.

Selling costs in the Recurring Sales segment came in at € 3.3 million in the first three months of 2023, down by 23.3% on the value of € 4.3 million seen in the first three months of 2022. 

Adjusted EBITDA Recurring Sales came in at € 21.8 million in the first three months of 2023, down considerably on the value of € 44.0 million seen in the first three months of 2022.

In the 2023 reporting period, 381 residential units from the Non-core/Other portfolio (3M 2022: 15,714) were also sold as part of our portfolio adjustment measures, with proceeds totaling € 46.0 million (3M 2022: € 2,526.7 million). At 19.7%, the fair value step-up for Non-core Disposals in the 2023 reporting period was higher than for the same period in the previous year (1.4%).

Development Segment

In the “Development to sell” area, a total of 104 residential units were completed in Germany in the first three months of 2023 (3M 2022: 0 units). No units were completed in Austria in the reporting period (3M 2022: 511 units). Income from the disposal of development properties to sell came to € 30.2 million in the first three months of the 2023 fiscal year (3M 2022: € 243.9 million), with € 18.3 million attributable to project development in Germany (3M 2022: € 133.6 million) and € 11.9 million attributable to project development in Austria (3M 2022: € 110.3 million). In Germany, the decline was chiefly due to a global exit in the previous year and, in Austria, to a lower notarization volume compared to the previous year. The resulting gross profit for “Development to sell” came to € 5.2 million in the first three months of 2023 (3M 2022: € 48.4 million).

In the “Development to hold” area, a total of 675 units were completed in the first three months of 2023 (3M 2022: 266 units), 307 in Germany (3M 2022: 244 units), 296 in Austria (3M 2022: 0 units) and 72 in Sweden (3M 2022: 22 units). In the Development to hold area, a fair value of € 113.4 million was achieved in the 2023 reporting period (3M 2022: € 62.0 million). € 22.0 million of this amount was attributable to project development in Germany (3M 2022: € 62.0 million), with € 81.3 million attributable to project development in Austria and € 10.1 million attributable to project development in Sweden. The gross profit for Development to hold came to € 16.2 million in the first three months of 2023 (3M 2022: € 18.7 million).

Development operating expenses came to € 10.9 million in the first three months of 2023, 47.3% above the comparative value of € 7.4 million seen in the first three months of 2022. The Adjusted EBITDA for the Development segment amounted to € 11.7 million in the 2023 reporting period (3M 2022: € 60.9 million).

Care Segment

The Care segment developed as expected in the first three months of 2023. At the end of the first quarter of 2023, there were still 72 care properties in the Rental portfolio, 71 of which were still owned by Vonovia. Segment revenue came to € 70.5 million in the first three months of 2023, up by 3.5% on the € 68.1 million reported for the same period of the previous year.

Expenses for maintenance came to € 1.3 million in the 2023 reporting period (3M 2022: € 1.3 million).

Operating expenses in the Care segment amounted to € 51.7 million in the first three months of 2023, as against € 44.5 million in the first three months of 2022. This is due primarily to higher personnel and energy costs.

The Adjusted EBITDA Care came in at € 17.5 million in the 2023 reporting period, down by 21.5% on the prior-year value of € 22.3 million.