Group FFO

The following key figures provide an overview of the development in Group FFO and other value drivers in the reporting period.

As of the end of June 2019, our apartments were still virtually fully occupied. The vacancy rate of 2.9% was up slightly on the value of 2.8% seen at the end of June 2018. Rental income in the Rental segment rose by 13.9% from € 890.7 million in the first half of 2018 to € 1,014.8 million in the first half of 2019, largely due to the acquisitions of BUWOG and Victoria Park in the previous year. BUWOG contributed a volume of € 100.4 million (April–June 2018: € 51.9 million), while Victoria Park contributed € 65.0 million. Out of the total rental income in the Rental segment of € 1,014.8 million, € 895.6 million is attributable to the portfolio in Germany (H1 2018: € 858.3 million), € 54.2 million to the portfolio in Austria (H1 2018: € 32.4 million) and € 65.0 million to the portfolio in Sweden. The increase in rent due to market-related factors came to 1.2%. We were also able to achieve an increase in rent of 2.5% thanks to housing quality improvements achieved as part of our modernization program. The corresponding like-for-like increase in rent came to 3.7% in the 2019 reporting period. If we also include the increase in rent due to new construction measures and measures to add extra stories, then we arrive at an organic increase in rent of 4.0% in total. The average monthly in-place rent within the Group at the end of June 2019 came to € 6.64 per m² compared to € 6.36 per m² at the end of June 2018. At the end of June 2019, the monthly in-place rent in the German portfolio came to € 6.65 per m² with a value of € 4.59 per m² for the Austrian portfolio and a value of € 9.20 per m² for the Swedish portfolio. The rental income from the Austrian property portfolio additionally includes maintenance and improvement contributions (EVB). The rental income from the portfolio in Sweden shows rents including ancilliary expenses.

We continued successfully with our modernization and maintenance strategy in the first half of 2019. The total volume increased from € 565.5 million in the first half of 2018 to € 804.3 million in the first half of 2019. This was driven by an increase in the modernization volume including new construction, which rose by 65.4% from € 360.2 million in 2018 to € 595.6 million in 2019.

Operating expenses in the Rental segment in the first half of 2019 were up by 7.5% on the figures for 2018, from € 133.8 million to € 143.8 million. This development is due primarily to the larger portfolio thanks to the acquisitions of BUWOG and Victoria Park. All in all, Adjusted EBITDA Rental rose by 17.4%, from € 616.9 million in the first half of 2018 to € 724.0 million in 2019.

The Value-add segment showed positive development in the first half of 2019. We expanded the services offered by our craftsmen’s organization even further and continued to invest in improvements to the existing building stock. In addition, we also continued to expand our business activities relating to the provision of cable television to our tenants, metering services and insurance and residential environment services. At the end of the first half of 2019, Vonovia Immobilien Treuhand provided services to a total of around 100,600 units, of which 79,015 are apartments managed for third parties. We once again expanded our energy supply services in the first six months. We supplied a total of around 15,000 households with energy directly at the end of the first half of 2019.

External revenue from our Value-add activities with our end customers in the first half of 2019 rose by 46.0% as against the same period of 2018, from € 92.4 million to € 134.9 million. Group revenue rose by 19.9% in the same period, from € 522.1 million in 2018 to € 626.0 million in 2019. Overall, this results in a 23.8% increase in the revenue from the Value-add segment, from € 614.5 million in the 2018 reporting period to € 760.9 million in 2019. The Adjusted EBITDA Value-add rose by 39.2% in the first half of 2019 to € 75.7 million as against € 54.4 million in the first half of 2018.

The EBITDA margin of the core business, calculated based on the Adjusted EBITDA Operations (total of the Adjusted EBITDA Rental and the Adjusted EBITDA Value-add less any intragroup profits included in these figures) in relation to rental income within the Group, once again showed positive development in the reporting period. It increased from 73.4% (including BUWOG) in the first half of 2018 to 76.4% in the current reporting period.

We continued to pursue our selective sales strategy in the first half of 2019. In the Recurring Sales segment, we report all business activities relating to the sale of single residential units (Privatize).

In the Recurring Sales segment, the income from disposal of properties came to € 174.9 million in the first half of 2019, up by 11.9% on the value of € 156.3 million reported in the same period of 2018; of this, € 125.1 million are attributed to sales in Germany (H1 2018: € 118.7 million) and € 49.8 million to sales in Austria (H1 2018: € 37.6 million). We privatized 1,234 apartments in the first six months of 2019 (H1 2018: 1,200), thereof 958 in Germany (H1 2018: 1,006) and 276 in Austria (H1 2018: 194). Adjusted EBITDA Recurring Sales came in at € 42.4 million in the first half of 2019, up by 21.5% on the value of € 34.9 million seen in the first half of 2018. The fair value step-up for Recurring Sales came in at 40.5% in the 2019 reporting period, up against the comparative value of 36.6% for 2018.

Outside of the Recurring Sales segment, we made 754 Non-core Disposals as part of our portfolio adjustment measures in the first six months of 2019 (H1 2018: 5,085) with total proceeds of € 51.8 million (H1 2018: € 230.1 million). At 20.4%, the fair value step-up for Non-core Disposals was considerably higher than for the same period in the previous year (15.4%).

The Development segment showed successful development in the first half of 2019. A comparison of the following key figures with the previous year is only possible to a limited extent, due to the acquisition of BUWOG on March 31, 2018. In the “Development to sell” area, the income from disposal of properties came to € 124.9 million, up by 69.9% on the value of € 73.5 million achieved in the first half of 2018, with € 53.9 million attributable to project development in Germany and € 71.0 million attributable to project development in Austria. The resulting gross profit for “Development to sell” came to € 29.7 million (H1 2018: € 12.9 million). In the “Development to hold” area, a fair value of € 103.8 million was achieved in the reporting period (H1 2018: € 25.5 million), with € 74.8 million attributable to project development in Germany (H1 2018: € 25.5 million) and € 29.0 million attributable to project development in Austria. The gross profit for “Development to hold” came to € 17.7 million (H1 2018: € 2.7 million). The Adjusted EBITDA for the Development segment amounted to € 30.7 million in the first half of 2019 (H1 2018: € 7.9 million). A total of 379 units were completed in the “Development to sell” area in the first half of 2019 (H1 2018: 365), thereof 74 in Germany (H1 2018: 61) and 305 in Austria (H1 2018: 304). In the “Development to hold” area, a total of 385 units were completed (H1 2018: 176), thereof 257 in Germany (H1 2018: 176 units) and 128 units in Austria. Around 36,000 units are in the development pipeline at the end of the first half of 2019.

In the first six months of the year, the primary key figure for the sustained earnings power of the core business, Group FFO, increased by 12.9%, from € 539.4 million in 2018 to € 609.1 million in 2019, largely due to acquisitions. This trend was fueled primarily by the positive development in adjusted EBITDA total, which rose by 22.2% from € 714.1 million to € 872.8 million during the reporting period.

In the 2019 reporting period, the non-recurring items eliminated in the adjusted EBITDA total came to € 25.3 million (H1 2018: € 50.5 million). The following table gives a detailed list of the non-recurring items: