Annual Report 2019

Group’s Business Development

Business Development in 2019 – An Overview

2019 was once again a very successful fiscal year for Vonovia. We continued with our modernization and new construction strategy, investing around € 1.5 billion in our portfolio. We completed 1,301 apartments for our own portfolio, as well as 791 apartments for sale. Furthermore, we also expanded our position in Sweden further with the acquisition of the Akelius Residential Property portfolio and Hembla AB.

The table below provides an overview of the development of our most recent forecast performance indicators (only adjusted NAV per share incl. Hembla) and the target achievement level for these indicators in the 2019 fiscal year. When comparing the figures with the prior year, it is important to remember that BUWOG is included in the 2018 figures with an earnings contribution for the months from April to December, and that Victoria Park is included with an earnings contribution for the months from July to December. The figures for 2019 include contributions for the full year for BUWOG and Victoria Park, while Hembla is included with its earnings contributions for November/December 2019. The IFRS 16 accounting standard was also adopted for the first time in 2019. The resulting effect on the adjusted EBITBA total amounted to € 29.9 million in total. This effect is eliminated in the Group FFO reconciliation.


Actual 2018

Last forecast for 2019 in the 2019 Q3 report

Actual 2019


Based on the current number of shares in each case.





Adjusted NAV per share

€ 44.90

€ 51.50–53.00

€ 51.93

Adjusted EBITDA Total

€ 1,554.8 million

upper end of range € 1,700–1,750 million

€ 1,760.1 million

Group FFO

€ 1,132.0 million

upper end of range € 1,165–1,215 million

€ 1,218.6 million

Group FFO per share*

€ 2.18

upper end of ange € 2.15–2.24

€ 2.25

Customer Satisfaction Index (CSI)

Decrease of 2.6%

Down by single-digit percent value year-over-year

Decrease of 8.0%

The Adjusted NAV per share came in at € 51.93 in 2019, up by 15.7% on the prior-year value of € 44.90. This corresponds to an EPRA NAV per share of € 54.96 (2018: € 50.39). This increase was due primarily to the net income from fair value adjustments of investment properties of € 4,131.5 million (2018: € 3,517.9 million).

The Adjusted EBITDA Total (incl. the earnings contribution made by Hembla in November and December 2019 in the amount of € 9.6 million) came to € 1,760.1 million in 2019, up by 13.2% on the prior-year value of € 1,554.8 million. All segments reported a positive increase that contributed to this development.

Group FFO rose by € 86.6 million to € 1,218.6 million in 2019 (2018: € 1,132.0 million). Hembla is included with an amount of € 3.8 million in 2019. This corresponds to a Group FFO per share of € 2.25 (2018: € 2.18). The improvement in Adjusted EBITDA Rental was the main factor behind the increase in Group FFO. It rose from € 1,315.1 million in 2018 to € 1,437.4 million in 2019. This is due, on the one hand, to positive organic growth as a result of our modernization and new construction strategy and, on the other, by the acquisitions in Austria and Sweden. The Group FFO interest expense came to € 358.6 million in 2019, up by 9.1% on the prior-year value of € 328.8 million. Current income taxes FFO came in at € 50.1 million in 2019, around 37.3% higher than in the previous year (€ 36.5 million). At € 132.8 million, consolidation effects in 2019 were up considerably on the prior-year value of € 57.5 million. This can be traced back primarily to the increase in gross profit from Development to hold (2019: € 58.9 million, 2018: € 18.7 million) and to the initial application of the IFRS 16 accounting standard in the 2019 fiscal year in the amount of € 29.9 million.

Contrary to the expectations based on improved operating performance, the CSI fell by 8.0%. This unsatisfactory development is being explored in detail, the aim being to identify the areas in which our services are falling short of our customers’ expectations. Initial findings have shown that the sociopolitical discussion on the shortage of housing, energy-efficient refurbishment and the private-sector housing market had a clear negative impact on the CSI due to the uncertainty these issues create. It is also clear that Vonovia’s investment activity, which was higher than ever before in the company’s history in 2019, is a matter of concern for our tenants. This prompted Vonovia to revamp its own business philosophy in 2019, setting out that Vonovia is part of the solution to the problems the housing industry is facing. We expect the measures taken in this regard, in particular doing more to get tenants on board in our work, will have a positive impact – measured in terms of the CSI – on how our work is accepted.

Statement of the Management Board on the Economic Situation

The net assets, financial position and results of operations of the Group are extremely positive, particularly given the solid financing, the resulting balanced maturity profile and the financing flexibility gained through the rating-backed bond financings with a view to both organic and external growth. The ongoing improvements to the property management processes, the expansion of the Value-add segment, the steady Recurring Sales and a successful development business promote ongoing improvement in profitability.

Adjusted EBITDA Rental
The Adjusted EBITDA Rental is calculated by deducting the operating expenses of the Rental segment and the expenses for maintenance in the Rental segment from the Group’s rental income.
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.
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.
Fair Value
Fair value is particularly relevant with regard to valuation in accordance with IAS 40 in conjunction with IFRS 13. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
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.
Classification of debtors or securities with regard to their creditworthiness or credit quality according to credit ratings. The classification is generally performed by rating agencies.
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.