Financial Performance Indicators
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 two 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.
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.
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 Value-add Business 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.
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 and new construction 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 Value-add Business 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 Value-add Business.
The total of the adjusted EBITDA Rental, Value-add Business 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.
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 IFRS. The financial performance indicators can, however, all be reconciled to the closest-possible key figure in the consolidated financial statements.