Annual Report 2019

Remuneration of the Management Board

Remuneration System

The remuneration system and the amount of remuneration of the Management Board are determined by the Supervisory Board on the proposal of the Executive and Nomination Committee. They are discussed yearly, for the last time in November 2019, and adjusted according to the framework found as adequate. The Annual General Meeting approved the basic principles of the remuneration system on May 9, 2014, and its last amendment on April 30, 2015.

The criteria used to assess whether the remuneration is appropriate include the duties of the individual Management Board member, his or her personal performance, the economic situation, the company’s success and future outlook and the extent to which such remuneration is standard practice. When determining whether the level of remuneration is standard practice, the company looks at its peer group and the remuneration structure that applies in the rest of the company. Furthermore, we compare ourselves with other listed companies of a similar size. The remuneration structure is oriented toward the sustainable growth of the company.

In addition to fixed remuneration, the members of the Management Board receive variable short-term as well as variable long-term remuneration which takes account of both positive and negative developments. The Supervisory Board can, at their own due discretion, award Management Board members a discretionary bonus for particular achievements, even without a prior agreement. There is no entitlement to these bonuses. In the event that a discretionary bonus is paid, the underlying decision-making criteria are published. Furthermore, the members of the Management Board receive fringe benefits in the form of insurance premiums, as well as the private use of means of communication and company vehicles. In addition to his Management Board contract with Vonovia, Management Board member Daniel Riedl has another Management Board contract with the Austrian company BUWOG. This means that, in Daniel Riedl’s case, the remuneration amounts listed below include the remuneration components from both Management Board contracts.

Fixed Remuneration and Fringe Benefits

The fixed remuneration, which contains not only the basic remuneration but also, in varying amounts, the remuneration for assuming mandates at Vonovia Group companies, subsidiaries and participating interests, is paid to the Management Board members in twelve equal monthly installments. In addition to their fixed remuneration, the Management Board members are given the opportunity to pay an annual pension contribution into a deferred compensation scheme, with the exception of Daniel Riedl, whose annual pension contribution is paid by BUWOG into an external pension fund. The contribution for Rolf Buch comes to € 355,000, while the contribution for Arnd Fittkau, Klaus Freiberg, Daniel Riedl and Helene von Roeder amounts to € 160,000 in each case. Alternatively, the amount is paid out as cash remuneration. As Arnd Fittkau’s contract of employment commenced on May 16, 2019, the contributions are correspondingly on a pro rata basis.

The fringe benefits include 50% of health and nursing care insurance contributions, albeit up to the amount of the maximum statutory employer’s share at the most, and, in two cases, a term life insurance policy. In the event of illness, salaries continue to be paid for a period of twelve months, but until the end of the employment contract at the latest. In the event of death, the company continues to pay the salary to the employee’s surviving dependents for up to six months. The members of the Management Board are provided with a company car as well as communication means, which they have the right to use for private purposes. Travel expenses are reimbursed in line with the Vonovia/ BUWOG Travel Expense Policy. An agreement was reached in Daniel Riedl’s contract of employment with Vonovia that the company would reimburse the costs associated with travel from Vienna to Bochum and back, as well as any overnight accommodation in Bochum.

In addition, the contract of employment concluded with Helene von Roeder includes an agreement that, upon presentation of corresponding proof furnished by her previous employer, Helene von Roeder will receive compensation payments for all entitlements to variable remuneration that are not satisfied by her previous employer because the contractual relationship between her and that previous employer ended as a result of her move to Vonovia. This results in a gross compensation payment of € 64,874 for 2019.

Should the Management Board members be held liable for financial losses while executing their duties, this liability risk is, in principle, covered by the D&O insurance for Management Board members of the company. Vonovia follows the statutory requirements, which provide for a deductible of 10% of any claim up to an amount of one-and-a-half times the fixed annual remuneration for all claims in one fiscal year.

Bonus

The variable short-term remuneration is based on success criteria set in advance by the Supervisory Board as well as personal targets. The variable short-term remuneration is capped at € 700,000 for Rolf Buch as the Chairman of the Management Board, and at € 440,000 for Arnd Fittkau, Klaus Freiberg, Daniel Riedl (contractual entitlement for Vonovia SE € 140,000 and contractual entitlement for BUWOG € 300,000) and Helene von Roeder. The Supervisory Board is authorized to increase or reduce the arithmetical entitlement to the variable short-term remuneration by up to 20% at its own due discretion. As Arnd Fittkau’s contract of employment commenced on May 16, 2019, the amounts for 2019 are granted on a pro rata basis. Vonovia’s success criteria state that 40% of the variable short-term remuneration depends on the achievement of the Group FFO target, 15% on the achievement of the Group Adjusted NAV per share target and a further 15% on the achievement of the Group Adjusted EBITDA Total target. In Daniel Riedl’s case, 40% of the BUWOG entitlement to variable short-term remuneration depends on the achievement of the EBITDA Rental + Value-add target, 15% on the achievement of the EBITDA Recurring Sales target and a further 15% on the achievement of the EBITDA Development target. A further 30% of the variable short-term remuneration is related to the achievement of the personal targets agreed with the Supervisory Board.

The targets for the three quantitative success criteria and the target achievement levels for the 2019 calendar year are set out below:

STIP target achievement level

Group FFO

Adjusted NAV/share

Adjusted EBITDA Total

 

 

 

 

85% = budget

1,165.5

46.27

1,669.9

100%

1,200.4

47.38

1,719.8

Actual target achievement level

100%

100%

100%

 

 

 

 

The Management Board members receive the variable short-term remuneration one month after the adoption of the annual financial statements of Vonovia.

Long-term Incentive Plan

The variable long-term remuneration (long-term incentive plan, LTIP) is a plan which meets the requirements set out in the German Stock Corporation Act (AktG) and the German Corporate Governance Code as published on May 9, 2019 and aims to ensure that the remuneration structure focuses on sustainable corporate development. The LTIP was introduced in 2015 and replaced the previous plan, which was launched at the time of the successful IPO.

The members of the Management Board are offered an annual remuneration component with a long-term incentive effect and a balanced risk-return profile in the form of notional shares (“performance shares”) in line with the provisions of the LTIP, which does not provide for an early payout in the event that the Management Board contract is terminated before the date provided for therein.

The Supervisory Board offers the Management Board members a prospective target amount (“grant value”) in EUR for each performance period, which corresponds to four years as a general rule. Rolf Buch is awarded performance shares with a grant value of € 1,900,000 a year. Arnd Fittkau, Klaus Freiberg, Daniel Riedl and Helene von Roeder are each awarded performance shares with a grant value of € 800,000 a year. As Arnd Fittkau’s contract of employment commenced on May 16, 2019, the grant value for 2019 is awarded on a pro rata basis in line with the contractual provisions.

The actual payout amount is calculated based on this grant value, the target achievement level during the performance period and the performance of Vonovia’s shares, including dividends paid during the performance period. If the share price remains the same and the target achievement level comes to 100%, then the actual payout amount corresponds to the grant value (plus any dividends paid to the shareholders during the performance period).

The initial number of performance shares for the performance period in question corresponds to the grant value divided by the initial share price, rounded up to the next full share.

The overall target achievement level for a performance period is determined based on the following success targets:

  1. Relative Total Shareholder Return (RTSR)
  2. Development in Adjusted NAV per share
  3. Development of Group FFO per share
  4. Customer Satisfaction Index (CSI)

Each of the four success targets is assigned a weighting of 25%.

At the start of each performance period, the Supervisory Board sets an objective for each of the four success targets. If all of these objectives are reached, the target achievement level comes to 100%. It also sets a minimum value for each of the four success targets as the lower target corridor threshold. If this value is reached, the target achievement level comes to 50% (“minimum value”). The Supervisory Board also sets a maximum value. If this value is reached or exceeded, the target achievement level comes to 200% (“maximum value”). If the value achieved for a particular success target falls below the minimum value, the target achievement level for this success target is 0%.

The Supervisory Board has the right and the obligation to appropriately adjust the calculation modalities if there are significant changes in the comparator group.

The reporting on the new LTIP is based on actuarial reports of an independent actuary.

At the end of each performance period, the initial number of performance shares is multiplied by the overall target achievement level and rounded up to the next full share. This multiplication produces the final number of performance shares.

The final number of performance shares is multiplied by the final share price, which, by definition, includes the total dividends paid per share during the performance period in relation to the final number of performance shares. This multiplication produces the cash payout amount.

The payout amount is limited to 250% of the grant value (“cap”).

As far as Rolf Buch is concerned, the performance period for 100% of the performance shares granted as part of the 2015 tranche ended on December 31, 2018, marking the end of a four-year period. In Klaus Freiberg’s case, the performance period for 50% of the performance shares granted as part of the 2015 tranche ended on December 31, 2018, marking the end of a four-year period, with 25% of the performance shares granted as part of the 2016 tranche ending on December 31, 2018, marking the end of a three-year period. The payment made in line with the contractual provisions, totaling € 3,000,000 (gross) for Rolf Buch and € 1,000,000/€ 479,937 for Klaus Freiberg was made in the 2019 fiscal year.

The targets for the four success criteria for the 2016 tranche and the target achievement levels following the end of the performance period on December 31, 2019, are set out below:

Targets

Minimum value

Target value
(100%)

Maximum value
(200%)

Target achievement

 

 

 

 

 

Relative Total Shareholder Return

-30%

0%

30%

169.69%

Growth of NAV per share (NAV per share on Dec. 31, 2015 = € 30.02)

0% growth rate p.a.

3% growth rate p.a.

5% growth rate p.a.

200%

Growth of FFO 1 per share (FFO 1 per share in the 2015 fiscal year = € 1.30)

3% growth rate p.a.

7% growth rate p.a.

9% growth rate p.a.

200%

Customer satisfaction (CSI in the 2015 fiscal year = 57 points)

+2 points

+5 points

+7 points

0%

 

 

 

 

 

Upper Remuneration Thresholds

In addition to the provisions governing variable remuneration, upper thresholds have been contractually agreed for the remuneration paid to the Management Board as a whole in line with the recommendations set out in the German Corporate Governance Code (GCGC). As a result, the total remuneration for Rolf Buch is capped at a total of € 6,970,000 p. a., with a cap of € 3,500,000 applying to Arnd Fittkau, Klaus Freiberg and Helene von Roeder in each case. The total remuneration for Daniel Riedl is capped at € 2,500,000 p. a. in his Vonovia contract and at € 1,000,000 p. a. in his BUWOG contract. As Arnd Fittkau’s contract of employment commenced on May 16, 2019, the upper remuneration threshold has been calculated accordingly on a pro rata basis.

Share Holding Provision

The Management Board members are obliged, for the duration of their appointment as members of Vonovia’s Management Board, to hold shares in the company (restricted shares) in the amount of the annual fixed remuneration and to furnish evidence showing that this obligation has been met at the end of each fiscal year by presenting suitable documents to the Chairman of the Supervisory Board. The value of the shares to be held is to be redefined in the event of changes to the annual fixed remuneration/a share split. In the first four fiscal years after an individual’s initial appointment as a Management Board member, the restricted shares can be accumulated on a pro rata basis.

Retirement Provision/Deferred Compensation Scheme

The pension entitlements of the Management Board members are based on the opportunity to pay an annual pension contribution into a deferred compensation scheme. Rolf Buch, Arnd Fittkau and Helene von Roeder make use of this opportunity, whereas Klaus Freiberg opts for a payout as cash remuneration. In Daniel Riedl’s case, the annual pension contribution made by BUWOG is paid into an external pension fund.

For each calendar year, the contractually agreed pension contribution is converted in accordance with the in-house “Pension Instead of Cash Remuneration” model and is converted into an annuity based on actuarial principles depending on the age of the individual in question.

In 2019, the pension contribution was € 946,410 for Rolf Buch, € 291,772 for Arnd Fittkau, € 437,241 for Helene von Roeder and € 160,000 for Daniel Riedl, corresponding to the pension fund contribution made.

Payments in the Event of Premature Termination of Management Board Duties

Payments to a Management Board member on premature termination of his or her contract, including fringe benefits, are contractually regulated to not exceed the value of two years’ remuneration and are paid for no more than the remaining term of the employment contract (severance pay cap). Payments in the event of premature termination of a Management Board member’s contract due to a change of control are limited to 150% of the severance pay cap.

Following the termination of their contracts of employment, Rolf Buch and Daniel Riedl are subject to a twelve-month non-competition clause. The ex gratia payment for Rolf Buch corresponds to 75% of the contractual payments most recently received by him (incl. STIP and LTIP) over a period of 12 months, while the ex gratia payment for Daniel Riedl amounts to a gross total of € 1,700,000 over the same period. The other Management Board members are not subject to any non-competition regulation.

In connection with the termination of Klaus Freiberg’s Management Board contract with effect from December 31, 2019, a 17-month non-competition clause was agreed with him. In return for his adherence to the non-competition clause, Klaus Freiberg will receive compensation during the period in which the clause applies in the total amount of € 1,929,666.67, which will be paid out in monthly installments of € 113,509.80. If Klaus Freiberg generates additional income during the term of the non-competition clause without breaching it, the income will be offset against the compensation payments.

At the same time, Klaus Freiberg will support Vonovia in various areas for the period from January 1, 2020, to May 31, 2021, as part of a consultancy agreement. Fees resulting from this activity will be offset against the compensation payments agreed for the non-competition clause.

Loans/Advances

The Management Board members were not granted any loans or advances.

Remuneration of the Management Board Within the Meaning of the German Corporate Governance Code

 

 

 

 

 

 

 

 

 

 

Rolf Buch
CEO

Klaus Freiberg
COO
until May 16, 2019

Grants allocated in €

2018

2019

2019
(min)

2019
(max)

2018

2019

2019
(min)

2019
(max)

*

This is the total contractually agreed upper threshold.

**

Annual variable remuneration agreed in the termination.

***

LTIP is granted for the complete financial year regardless of the termination during the year.

 

 

 

 

 

 

 

 

 

Fixed remuneration

1,150,000

1,150,000

1,150,000

1,150,000

600,000

225,000

225,000

225,000

Compensation payment

Cash remuneration

160,000

60,000

60,000

60,000

Fringe benefits

26,651

27,453

27,453

27,453

27,600

10,350

10,350

10,350

Total

1,176,651

1,177,453

1,177,453

1,177,453

787,600

295,350

295,350

295,350

Annual variable remuneration (bonus)

700,000

700,000

0

700,000

440,000

440,000**

440,000**

440,000**

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

 

 

2018–2021

1,902,392

801,007

2019–2022

2,060,584

0

4,750,000

867,614***

0***

2,000,000***

Total

2,602,392

2,760,584

0

5,450,000

1,241,007

1,307,614

440,000

2,165,000

Pension expenses

966,356

946,410

946,410

946,410

Total remuneration

4,745,399

4,884,447

2,123,863

6,970,000*

2,028,607

1,602,964

735,350

3,500,000*

 

 

 

 

 

 

 

 

 

 

Arnd Fittkau
CRO
since May 16, 2019

Helene von Roeder
CFO
since May 9, 2018

Grants allocated in €

2018

2019

2019
(min)

2019
(max)

2018

2019

2019
(min)

2019
(max)

 

 

 

 

 

 

 

 

 

Fixed remuneration

375,000

375,000

375,000

386,957

600,000

600,000

600,000

Compensation payment

64,874

64,874

64,874

64,874

Cash remuneration

Fringe benefits

18,721

18,721

18,721

13,157

29,608

29,608

29,608

Total

393,721

393,721

393,721

464,988

694,482

694,482

694,482

Annual variable remuneration (bonus)

275,000

0

275,000

283,768

440,000

0

440,000

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

 

 

2018–2021

516,592

2019–2022

504,793

0

1,078,125

 

867,614

0

2,000,000

Total

779,793

1,353,125

800,360

1,307,614

0

2,440,000

Pension expenses

291,772

291,772

291,772

265,457

437,241

437,241

437,241

Total remuneration

1,465,286

685,493

2,187,500*

1,530,805

2,439,337

1,131,723

3,500,000*

 

 

 

 

 

 

 

 

 

 

Daniel Riedl
CDO
since May 9, 2018

 

Grants allocated in €

2018

2019

2019
(min)

2019
(max)

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed remuneration

386,957

600,000

600,000

600,000

 

 

 

 

Compensation payment

15,111

 

 

 

 

Cash remuneration

103,188

160,000

160,000

160,000

 

 

 

 

Fringe benefits

18,932

29,404

29,404

29,404

 

 

 

 

Total

524,188

789,404

789,404

789,404

 

 

 

 

Annual variable remuneration (bonus)

283,768

440,000

0

440,000

 

 

 

 

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

 

 

2018–2021

516,592

 

 

 

 

2019–2022

867,614

0

2,000,000

 

 

 

 

Total

800,360

1,307,614

0

2,440,000

 

 

 

 

Pension expenses

 

 

 

 

Total remuneration

1,324,548

2,097,018

789,404

3,500,000*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. A. Stefan Kirsten
CFO
until May 9, 2018

Gerald Klinck
CCO
until May 9, 2018

Grants allocated in €

2018

2019

2019
(min)

2019
(max)

2018

2019

2019
(min)

2019
(max)

 

 

 

 

 

 

 

 

 

Fixed remuneration

215,217

215,217

Compensation payment

 

 

Cash remuneration

4,058

 

Fringe benefits

24,105

7,317

Total

243,380

222,534

Annual variable remuneration (bonus)

157,826

157,826

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

 

 

2018–2021

333,753

333,753

2019–2022

Total

491,579

491,579

Pension expenses

116,396

192,180

Total remuneration

851,355

906,293

 

 

 

 

 

 

 

 

Rolf Buch
CEO

Klaus Freiberg
COO
until May 16, 2019

Arnd Fittkau
CRO
since May 16, 2019

Inflow in €

2018

2019

2018

2019

2018

2019

 

 

 

 

 

 

 

Fixed remuneration

1,150,000

1,150,000

600,000

225,000

375,000

Compensation payment

Cash remuneration

160,000

60,000

Fringe benefits

26,651

27,453

27,600

10,350

18,721

Total

1,176,651

1,177,453

787,600

295,350

393,721

Annual variable remuneration (bonus)

700,000

665,000

528,000

308,000

275,000

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

5th tranche 2018

3,568,511

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

2015–2017

1,000,000

2015–2018

3,000,000

1,000,000

2016–2018

479,937

Total

4,268,511

3,665,000

1,528,000

1,787,937

275,000

Pension expenses

966,356

946,410

291,772

Total remuneration

6,411,518

5,788,863

2,315,600

2,083,287

960,493

 

 

 

 

 

 

 

 

Helene von Roeder
CFO
since May 9, 2018

Daniel Riedl
CDO
since May 9, 2018

Dr. A. Stefan Kirsten
CFO
until May 9, 2018

Inflow in €

2018

2019

2018

2019

2018

2019

 

 

 

 

 

 

 

Fixed remuneration

386,957

600,000

386,957

600,000

215,217

Compensation payment

64,874

64,874

15,111

Cash remuneration

103,188

160,000

4,058

Fringe benefits

13,157

29,608

18,934

29,404

24,105

Total

464,988

694,482

524,190

789,404

243,380

Annual variable remuneration (bonus)

283,768

425,812

283,768

412,007

146,667

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

5th tranche 2018

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

2015–2017

1,000,000

2015–2018

2016–2018

Total

283,768

425,812

283,768

412,007

1,146,667

Pension expenses

265,457

437,241

116,396

Total remuneration

1,014,213

1,557,535

807,958

1,201,411

1,506,443

 

 

 

 

 

 

 

 

 

 

Gerald Klinck
CCO
until May 9, 2018

Inflow in €

 

 

 

 

2018

2019

 

 

 

 

 

 

 

Fixed remuneration

 

 

 

 

215,217

Compensation payment

 

 

 

 

Cash remuneration

 

 

 

 

Fringe benefits

 

 

 

 

7,317

Total

 

 

 

 

222,534

Annual variable remuneration (bonus)

 

 

 

 

157,826

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

5th tranche 2018

 

 

 

 

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

2015–2017

 

 

 

 

750,000

2015–2018

 

 

 

 

2016–2018

 

 

 

 

Total

 

 

 

 

907,826

Pension expenses

 

 

 

 

192,180

Total remuneration

 

 

 

 

1,322,540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thomas Zinnöcker
until January 31, 2016

Dr. A. Stefan Kirsten
until May 9, 2018

Gerald Klinck
until May 9, 2018

Inflow in €

2018

2019

2018

2019

2018

2019

 

 

 

 

 

 

 

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

2015–2018

2,156,250

1,000,000

750,000

2016–2018

479,937

479,937

Total remuneration

2,156,250

1,479,937

1,229,937

 

 

 

 

 

 

 

Group FFO
Group FFO reflects the recurring earnings from the operating business. In addition to the adjusted EBITDA for the Rental, Value-add, Recurring Sales and Development segments, Group FFO allows for recurring current net interest expenses from non-derivative financial instruments as well as current income taxes. This key figure is not determined on the basis of any specific international reporting standard but is to be regarded as a supplement to other performance indicators determined in accordance with IFRS.
Adjusted EBITDA Total (Earnings Before Interest, Taxes, Depreciation and Amortization)
Adjusted EBITDA Total is the result before interest, taxes, depreciation and amortization (including income from other operational investments and intragroup profits) adjusted for effects that do not relate to the period, recur irregularly and 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. The Adjusted EBITDA Total is derived from the sum of the Adjusted EBITDA Rental, Adjusted EBITDA Value-add, Adjusted EBITDA Recurring Sales and Adjusted EBITDA Development.
Recurring Sales
The Recurring Sales segment includes the regular and sustainable disposals of individual condominiums from our portfolio. It does not include the sale of entire buildings or land (Non-core disposals). These properties are only sold as and when the right opportunities present themselves, meaning that the sales do not form part of our operating business within the narrower sense of the term. Therefore, these sales will be reported under “Other” in our segment reporting.
EPRA NAV/Adjusted NAV
The presentation of the NAV based on the EPRA definition aims to show the net asset value in a long-term business model. The equity attributable to Vonovia’s shareholders is adjusted to reflect deferred taxes on investment properties, the fair value of derivative financial instruments and the deferred taxes on derivative financial instruments. In order to boost transparency, an adjusted NAV, which involves eliminating goodwill in full, is also reported.
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.