At the level of the Group as a whole, our activities focus on boosting the value of the company. Growth from operating activities, modernization services and the value of our property assets are factors that are decisive for the further development of our company and that are reflected in the net asset value (NAV) – a standard parameter in our sector. Our NAV calculations are based on the best practice recommendations of the EPRA (European Public Real Estate Association). The adjusted NAV per share, after corrections for goodwill, is the relevant performance indicator.
Calculation of Adjusted NAV
Equity attributable to Vonovia’s shareholders
Deferred taxes on investment properties and assets held for sale
Fair value of derivative financial instruments
Deferred taxes on derivative financial instruments
The main standard key figure in the sector is Funds from Operations 1 (FFO 1) for managing the sustained operational earnings power of our business. This can be derived from the profit or loss for the period.
Calculation of FFO 1
Profit for the period
Depreciation and amortization
Net income from fair value adjustments of investment properties
Period adjustments from assets held for sale
Financial income from investments in other real estate companies
Adjusted EBITDA Sales
Adjusted EBITDA Operations
FFO interest expense
FFO 1 current income taxes
FFO 1 (Funds from Operations 1)
Based on the profit or loss for the period, we can calculate the EBITDA IFRS, i.e., earnings before interest, taxes, depreciation and amortization with the additional elimination of income from fair value adjustments of investment properties.
Adjusted EBITDA is calculated by adjusting for effects that do not relate to the period, recur irregularly or are atypical for business operation, period adjustments from assets held for sale and financial income from investments in other real estate companies. This can be broken down into the segment results: adjusted EBITDA Rental, adjusted EBITDA Extension and consolidation effects that are combined in adjusted EBITDA Other, as well as adjusted EBITDA Sales.
The adjusted EBITDA Rental reflects the operating profit from residential property management. It can be broken down into three central components: rental income from property management, expenses for maintenance and operating expenses from property management. The latter include all costs that do not comprise maintenance.
Calculation of Adjusted EBITDA Rental
Rental income from property management
Expenses for maintenance
Operating expenses from property management
Adjusted EBITDA Rental
In addition to the expenses for maintenance, we make large-scale investments in our real estate portfolios, with a distinction being made between capitalized maintenance and value-enhancing investment in modernization measures. The total amount of all maintenance and modernization measures includes the services performed by the Group’s own craftsmen’s organization, valued at the market price, and any third-party services that have been purchased. This figure shows the value of all value-maintaining and value-enhancing measures for our properties.
The Extension segment encompasses all of the business activities relating to the expansion of our core business to include customer-oriented services, e.g., services that are closely related to and/or influence the rental business. We manage these business activities using the adjusted EBITDA Extension.
Calculation of Adjusted EBITDA Extension
Operating expenses Extension
Adjusted EBITDA Extension
The total of the adjusted EBITDA Rental, Extension and Other, in which consolidation effects between these segments are combined, reflects the result of our entire operating core business and produces the adjusted EBITDA Operations.
As financing is a fundamental component for the success of our business activities, we deduct the current interest expense excluding non-recurring items (FFO interest expense) and also the current cash-effective income taxes incurred on the corresponding amounts from the total of these indicators of our operating result to calculate the FFO 1 as the key figure for the sustained earnings power of our business.
If we deduct capitalized maintenance from FFO 1, we arrive at the AFFO. This number reflects our sustained earnings power after deducting all necessary investments in our properties.
We always refer both metrics, adjusted NAV and FFO 1, to the number of shares in order to make the sustainable earnings and the company value per share transparent.
In addition to the management of our residential real estate portfolio and the services that are closely related to our rental business, another business segment relates to sales. We measure the success of our sales activities using adjusted EBITDA Sales.
Calculation of Adjusted EBITDA Sales
Income from disposal of properties
Carrying amount of assets sold
Revaluation of assets held for sale
Profit on disposal of properties (IFRS)
Revaluation (realized) of assets held for sale
Revaluation from disposal of assets held for sale
Adjusted profit from disposal of properties
Adjusted EBITDA Sales
The adjusted EBITDA Sales compares the proceeds generated with the fair values of assets sold and also deducts the related costs of sale. In order to disclose profit and revenue in the period in which they are incurred and to report a sales margin, the fair value of properties sold, valued in accordance with IFRS, have to be adjusted to reflect realized/unrealized changes in value.
Adding adjusted EBITDA Sales to FFO 1, while also taking current income taxes relating to the Sales segment into account, produces FFO 2. This means that FFO 2 shows the operating income generated from all of our business activities in the period in question.
As a non-operational key financial figure, the loan-to-value ratio (LTV ratio) is used for monitoring the degree to which debt is covered by the value of the properties. This key figure helps to ensure a sustainable ratio of borrowings to fair values.
All of the key financial figures shown here are so-called non-GAAP measures, i.e., key figures which cannot be taken directly from the figures in the consolidated financial statements according to the IFRS standards. The financial performance indicators can, however, all be reconciled to the closest-possible key figure in the consolidated financial statements.
EPRA (European Public Real Estate Association)
The European Public Real Estate Association (EPRA) is a non-profit organization that has its registered headquarters in Brussels and represents the interests of listed European real estate companies. Its mission is to raise awareness of European listed real estate companies as a potential investment destination that offers an alternative to conventional investments. EPRA is a registered trademark of the European Public Real Estate Association.
Valuation pursuant to IAS 40 in conjunction with IFRS 13. The estimated value of an asset. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
Rental income refers to the current gross income for rented units as agreed in the corresponding rent agreements before the deduction of non-transferable ancillary costs.
Maintenance covers the measures that are necessary to ensure that the property can continue to be used as intended over its useful life and that eliminate structural and other defects caused by wear and tear, age and weathering effects.
Modernization measures are long-term and sustainable value-enhancing investments in housing and building stocks. Energy-efficient refurbishments generally involve improvements to the building shell and communal areas as well as the heat and electricity supply systems. Typical examples are the installation of heating systems, the renovation of balconies and the retrofitting of prefabricated balconies as well as the implementation of energy-saving projects, such as the installation of double-glazed windows and heat insulation, e.g., facade insulation, insulation of the top story ceilings and basement ceilings. In addition to modernization of the apartment electrics, the refurbishment work upgrades the apartments, typically through the installation of modern and/or handicapped-accessible bathrooms, the installation of new doors and the laying of high-quality and non-slip flooring. Where required, the floor plans are altered to meet changed housing needs.
Adjusted EBITDA Rental
The adjusted EBITDA Rental is calculated by subtracting the operating expenses of the Rental segment and the expenses for maintenance in the Rental segment from the Group’s rental income.
The profit or loss for the period to reflect the adjusted profit or loss from sales; period adjustments from assets held for sale; specific effects that do not relate to the period, are non-recurring or do not relate to the objective of the company; the net income from fair value adjustments of investment properties; depreciation and amortization; deferred and prior-year current taxes (tax expenses/income); transaction costs; prepayment penalties and commitment interest; valuation effects on financial instruments; the unwinding of discounting for provisions, particularly provisions for pensions, and other prior-year interest expenses and income that are not of a long-term nature.
Adjusted EBITDA Sales
The adjusted EBITDA Sales is calculated by subtracting all operating expenses (excl. overheads) incurred in connection with sales activities from the profit on the disposal of properties generated by the Group and by adjusting the profit on the disposal of properties to reflect certain reclassification and time effects.
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
Adjusted EBITDA is the result before interest, taxes, depreciation and amortization (including income from other operational investments) adjusted for effects that do not relate to the period, recur irregularly or that are atypical for business operation, and for net income from fair value adjustments to investment properties. These non-recurring items include the development of new fields of business and business processes, acquisition projects, expenses for refinancing and equity increases (where not treated as capital procurement costs), IPO preparation costs and expenses for pre-retirement part-time work arrangements and severance payments.
In order to calculate FFO 2, the adjusted EBITDA Sales is added to FFO 1 for the periods in question and adjusted to reflect the FFO taxes attributable to sales.