Group FFO

The following key figures provide an overview of the development in Group FFO and other value drivers in the reporting period. When comparing the current key figures against the previous year, it is important to remember that the business figures for 2019 include BUWOG and Victoria Park, which were acquired in the previous year, with their earnings contributions for the period from January to March 2019. As BUWOG was consolidated for the first time with effect of March 31, 2018, and Victoria Park with effect of June 30, 2018, their earnings contributions are not included in the previous year’s business figures for the first quarter of 2018.

As of the end of March 2019, our apartments continued to be virtually fully occupied. The apartment vacancy rate of 2.9% was up slightly on the value of 2.8% seen at the end of March 2018. Rental income in the Rental segment rose by 20.1% from € 418.3 million in the first three months of 2018 to € 502.2 million in the first three months of 2019, largely due to the acquisition of BUWOG and Victoria Park in the previous year. BUWOG’s contribution accounted for a volume of € 49.2 million, while Victoria Park contributed a volume of € 29.5 million. Out of the total rental income in the Rental segment of € 502.2 million, € 446.8 million is attributable to the portfolio in Germany, € 25.9 million to the portfolio in Austria and € 29.5 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 2.6%, thanks to property value improvements achieved as part of our modernization program. The corresponding like-for-like increase in rent came to 3.8% 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 Group monthly in-place rent at the end of March 2019 came to € 6.56/m² compared to € 6.18/m² at the end of March 2018. At the end of March 2019, the monthly in-place rent came to € 6.60/m² in the German portfolio, € 4.51/m² in the Austrian portfolio and € 9.10/m² in the Swedish portfolio. The rental income from the Austrian real estate portfolio additionally includes maintenance and improvement contributions. The rental income from the portfolio in Sweden reflects inclusive rents, meaning that the amounts contain operating and heating costs.

We had continued success with our modernization and maintenance strategy in the first three months of 2019. The total volume rose from € 221.1 million in the first three months of 2018 to € 339.7 million in the first quarter of 2019. This was driven by an increase in the modernization volume including new construction, which rose by 75.8% from € 137.7 million in 2018 to € 242.1 million in 2019.

Operating expenses in the Rental segment in the first three months of 2019 were up by 33.3% on the figures for 2018, from € 54.1 million to € 72.1 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 18.0%, from € 303.0 million in the first three months of 2018 to € 357.4 million in 2019.

The Value-add segment showed positive development in the first three months of 2019. We have further expanded the output of our craftsmen’s organization and have continued to invest in improving our portfolio. In addition, we have 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. As of the end of the first quarter of 2019, Vonovia Immobilien Treuhand provides services to a total of around 101,000 units, of which 78,784 are apartments managed for third parties. We also once again expanded our energy supply services in the first three months of the year. At the end of the first quarter of 2019, we supplied around 10,500 households with energy directly.

In the first three months of the year, external revenue from our Value-add activities with our end customers rose by 54.2%, from € 52.0 million in 2018 to € 80.2 million in 2019. Group revenue rose by 30.2% in the same period, from € 213.9 million in 2018 to € 278.6 million in 2019. Overall, this results in a 34.9% increase in the revenue from the Value-add segment from € 265.9 million in the 2018 reporting period to € 358.8 million in 2019. Our Adjusted EBITDA Value-add more than doubled in the first three months of the year, coming in at € 35.8 million in 2019 as against € 17.8 million in the first quarter of 2018.

The EBITDA margin of the core business, calculated based on the Adjusted EBITDA Operations (total of Adjusted EBITDA Rental and Adjusted EBITDA Value-add less intragroup profits contained) in relation to rental income within the Group, once again showed positive development in the reporting period. It increased from 75.2% in the first quarter of 2018 to 76.0% in the current reporting period.

We continued our selective sales strategy in the first three months of fiscal year 2019. In the Recurring Sales segment, we report all business activities relating to single residential units (privatization).

In the Recurring Sales segment, the income from disposal of properties came to € 109.0 million in the first three months of 2019, up by 62.4% on the value of € 67.1 million reported in 2018; of this, € 81.3 million is attributed to sales in Germany (3M 2018: € 62.5 million) and € 27.7 million to sales in Austria (3M 2018: € 4.6 million). We privatized 809 apartments in the first three months of 2019 (3M 2018: 594), thereof 652 in Germany (3M 2018: 573) and 157 in Austria (3M 2018: 21). Adjusted EBITDA Recurring Sales more than doubled in the first three months of 2019 in a year-on-year comparison to € 26.3 million (3M 2018: € 11.5 million). The fair value step-up for Recurring Sales came in at 37.2% in the 2019 reporting period, up on the comparative value of 27.6% for 2018.

Outside of the Recurring Sales segment, we transacted 713 Non-Core disposals as part of our portfolio adjustment measures in the first three months of the year (3M 2018: 1,149). At 15.7%, the fair value step-up for Non-Core disposals was slightly lower than for the same period in the previous year (15.9%).

The Development segment made a successful start to the 2019 fiscal year. In the “Development to sell” area, the income from disposal of properties came to € 59.4 million (3M 2018: € 0.0 million), with € 19.6 million attributable to project development in Germany and € 39.8 million attributable to project development in Austria. This produced a gross profit from “Development to sell” of € 13.3 million. In the “Development to hold” area, a fair value of € 47.3 million was achieved in the reporting period (3M 2018: € 6.1 million). As in the prior year, this was due to project development in Germany. The resulting gross profit for “Development to hold” came to € 5.3 million (3M 2018: € 0.3 million). The Adjusted EBITDA for the Development segment amounted to € 10.4 million in the first three months of 2019 (3M 2018: € 0.3 million). A total of 36 units were completed in the “Development to sell” area in the first three months of 2019 (3M 2018: 0 units), 36 of which were located in Germany. A total of 166 units were completed in the “Development to hold” area (3M 2018: 35 units), thereof 166 in Germany (3M 2018: 35 units). Around 36,000 units were listed in the development pipeline at the end of the first quarter of 2019.

In the first three months of the year, the primary key figure for the sustained earnings power of the core business, Group FFO, increased by 20.0%, from € 253.0 million in 2018 to € 303.6 million in 2019 due to acquisitions. This trend was fueled primarily by the positive development in Adjusted EBITDA total, which rose by 29.3% from € 332.6 million to € 429.9 million during the reporting period.

In the 2019 reporting period, the non-recurring items eliminated in the Adjusted EBITDA total came to € 17.9 million, down 35.8% on the prior-year value of € 27.9 million. In detail, the non-recurring items are as follows: