Forecast for the 2018 Fiscal Year

Our forecast for the 2018 fiscal year is based on the corporate planning for the Vonovia Group as a whole described in the chapter on our management system. Our plans for 2018 have taken appropriate account of possible opportunities and risks associated with the company’s future development, meaning that these plans reflect realistic expectations regarding portfolio development and Vonovia’s development. The forecast data below is based on Vonovia’s portfolio as it stood when the plans for 2018 were drawn up in the fall of 2017.

Furthermore, the Group’s further development remains exposed to general opportunities and risks. These have been described in the chapter on opportunities and risks.

The forecast for the main performance indicators was based on the accounting principles used in the annual financial statements, with the adjustments described elsewhere in the management report being made.

The planning for 2018 is based on the above-mentioned assumptions on the development of the overall economy and on the development of the real estate market in Germany.

In the 2018 fiscal year, we once again plan to further expand our leading position on the German residential real estate market and continue with our successful business strategy. In particular, we will be further expanding our investment program in the areas of modernization and new construction as well as our activities in the Value-add Business segment. We will continue to pursue our established sales strategy in 2018 and dispose of properties that do not fit with our real estate portfolio in the long term and do not meet our location, quality and/or return requirements.

We plan to further improve our sustained operational earnings power in the 2018 fiscal year. The taken in the 2017 fiscal year will also help us to achieve this. We predict that FFO 1 will increase to somewhere in the range of € 960 million and € 980 million in 2018. This corresponds to an per share – based on an unchanged number of shares – of € 1.98 and € 2.02. The forecast does not take account of any further larger acquisitions of real estate portfolios. In the 2018 fiscal year, we will continue to forge ahead with our efforts to improve our customer service. Given the renewed increase in customer satisfaction in the 2017 fiscal year, we expect to see a similar in 2018. We expect the value of our company to increase further in 2018 and predict a moderate increase in NAV/share.

We will continue to invest a considerable amount in our real estate portfolio in 2018. In the 2018 fiscal year, we plan to spend around € 1 billion on modernization measures, including new construction. The focus will remain on energy-efficient modernizations, the refurbishment of units to improve the standard of comfort, and on senior-friendly conversions. We will also, however, be investing in programs such as modernization in response to tenant request, the development of residential districts, the construction of new apartments and the addition of stories to existing properties. In addition, we expect to perform ongoing work, including capitalized maintenance, with a volume of around € 360 million. All in all, this equates to a maintenance and modernization volume of up to € 1.4 billion in the 2018 fiscal year.

As far as rental development is concerned, we expect the per square meter to increase organically by between 4.6% and 4.8% in 2018. We expect the to come in at under 2.5% at the end of 2018. All in all, we expect to remain stable at a level of between € 1,660 million and € 1,680 million despite the planned sales.

In the Sales segment, we will continue to pursue our strategy of selective sales. In the privatization business, we expect around 2,300 apartments to be sold in 2018 with a step-up on the of these apartments of around 30%. We will also continue with our strategy of selling properties from the with slightly positive step-ups insofar as corresponding opportunities present themselves.

We again plan to allow our shareholders to participate adequately in our company’s success in 2017 and intend to propose a dividend of € 1.32 per share.

Bochum, Germany, February 26, 2018

Rolf Buch (CEO) (signature)

Rolf Buch (CEO)

Dr. A. Stefan Kirsten (CFO) (signature)

Dr. A. Stefan Kirsten (CFO)

Klaus Freiberg (COO) (signature)

Klaus Freiberg (COO)

Gerald Klinck (CCO) (signature)

Gerald Klinck (CCO)

Modernization Measures
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 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.
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.
CSI (Customer Satisfaction Index)
The CSI is determined at regular intervals by means of systematic customer surveys and reflects how our services are perceived and accepted by our customers. The CSI is determined on the basis of points given by the customers for our properties and their neighborhood, customer service and commercial and technical support as well as maintenance and modernization management.
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.
Monthly In-Place Rent
The monthly in-place rent is measured in euro per square meter and is the current gross rental income per month for rented units as agreed in the corresponding rent agreements at the end of the relevant month before deduction of non-transferable ancillary costs divided by the living area of the rented units. The in-place rent is often referred to as the so-called “Nettokaltmiete” (rent excl. ancilliary costs such as heating etc.). The monthly in-place rent (in €/m2) on a like-for-like basis refers to the monthly in-place rent for the residential portfolio that was already held by Vonovia 12 months previously, i. e., portfolio changes during this period are not included in the calculation of the in-place rent on a like-for-like basis. If we also include the increase in rent due to new construction measures and measures to add extra stories, then we arrive at the organic increase in rent.
Vacancy Rate
The vacancy rate is the number of empty units as a percentage of the total units owned by the company. The vacant units are counted at the end of each month.
Rental Income
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.
Fair Value
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.
Sell portfolio
In the “Sell” portfolio, our focus is on selling properties in locations that offer below-average development potential in the medium to long term to private and institutional investors. Limited potential is defined, in particular, by below-average property condition combined with a location that is of similarly below-average quality. It contains locations and properties that were identified in the latest extensive review of the overall portfolio as not being absolutely essential for further strategic development.