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 September 2019, our apartments were still virtually fully occupied. The apartment vacancy rate of 2.9% was up on the value of 2.7% seen at the end of September 2018. Rental income in the Rental segment rose by 9.6% from € 1,393.3 million in the first nine months of 2018 to € 1,527.0 million in the first nine months of 2019, largely due to the acquisitions of BUWOG and Victoria Park in the previous year. BUWOG contributed a volume of € 149.5 million (April–September 2018: € 105.7 million), while Victoria Park contributed € 100.4 million (July–September 2018: € 29.0 million). Out of the total rental income in the Rental segment of € 1,527.0 million, € 1,346.3 million is attributable to the portfolio in Germany (9M 2018: € 1,304.9 million) and € 80.3 million to the portfolio in Austria (9M 2018: € 59.5 million) and € 100.4 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 property value 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 September 2019 came to € 6.69 per m² compared to € 6.43 per m² at the end of September 2018. At the end of September 2019, the monthly in-place rent in the German portfolio came to € 6.71 per m² (Sep. 30, 2018: € 6.45), for the Austrian portfolio € 4.63 per m² (Sep. 30, 2018: € 4.53) and € 9.15 per m² for the Swedish portfolio (Sep. 30, 2018: € 9.03). The rental income from the Austrian property portfolio additionally includes maintenance and improvement contributions (EVB). The rental income from the portfolio in Sweden reflects inclusive rents, meaning that the amounts contain operating and heating costs.

We continued with our new construction, modernization and maintenance strategy in the first nine months of 2019. The total volume increased from € 983.0 million in the first nine months of 2018 to € 1,301.3 million in the first nine months of 2019. This was driven by an increase in the modernization volume including new construction, which rose by 46.9% from € 656.3 million in 2018 to € 963.9 million in 2019.

Operating expenses in the Rental segment in the first nine months of 2019 were up by 3.1% on the figures for 2018, from € 207.8 million to € 214.3 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 12.0%, from € 966.7 million in the first nine months of 2018 to € 1,082.5 million in 2019.

The Value-add segment showed sustained positive development in the first nine months 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. We continued to expand our business activities relating to the provision of cable television to our tenants, metering services and insurance and residential environment services. We once again expanded our energy supply services in the first nine months. We supplied a total of around 16,500 households with energy directly as of the end of September 2019.

External revenue from our Value-add activities with our end customers in the first nine months of 2019 rose by 39.8% as against the same period of 2018, from € 133.6 million to € 186.8 million. Group revenue rose by 16.9% in the same period, from € 877.0 million in 2018 to € 1,025.2 million in 2019. Overall, this results in a 19.9% increase in the revenue from the Value-add segment from € 1,010.6 million in the 2018 reporting period to € 1,212.0 million in 2019. The Adjusted EBITDA Value-add rose by 21.4% in the first nine months of 2019 to € 117.5 million as against € 96.8 million in the first nine months 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 74.3% (including BUWOG) in the first nine months of 2018 to 76.3% in the current reporting period.

We continued to pursue our selective sales strategy in the third quarter 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 € 273.5 million in the first nine months of 2019, up by 4.5% on the value of € 261.7 million reported in the same period of 2018; of this, € 190.1 million are attributed to sales in Germany (9M 2018: € 194.1 million) and € 83.4 million to sales in Austria (9M 2018: € 67.6 million). We privatized 1,893 apartments in the first nine months of 2019 (9M 2018: 1,992), thereof 1,472 in Germany (9M 2018: 1,639) and 421 in Austria (9M 2018: 353). Adjusted EBITDA Recurring Sales came in at € 69.1 million in the first nine months of 2019, up by 15.7% on the value of € 59.7 million seen in the first nine months of 2018. The fair value step-up for Recurring Sales came in at 41.4% in the 2019 reporting period, up against the comparative value of 37.1% for 2018.

Outside of the Recurring Sales segment, we made 1,679 Non-core Disposals of residential units as part of our portfolio adjustment measures in the first nine months of 2019 (9M 2018: 7,665) with total proceeds of € 106.2 million (9M 2018: € 411.8 million). At 15.2%, the fair value step-up for Non-core Disposals was slightly lower than for the same period in the previous year (16.3%).

The Development segment showed successful development in the first nine months 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” business, the income from disposal of properties came to € 194.9 million, up by 58.6% on the value of € 122.9 million achieved in the first nine months of 2018, with € 92.4 million attributable to project development in Germany and € 102.5 million attributable to project development in Austria. The resulting gross profit for “Development to sell” came to € 46.8 million (9M 2018: € 15.1 million). In the “Development to hold” business, a fair value of € 185.3 million was achieved in the reporting period (9M 2018: € 65.1 million), with € 91.5 million attributable to project development in Germany (9M 2018: € 33.1 million) and with € 93.8 million to project development in Austria (9M 2018: € 32.0 million). The gross profit for “Development to hold” came to € 33.1 million (9M 2018: € 10.2 million). The Adjusted EBITDA for the Development segment amounted to € 62.0 million in the first nine months of 2019 (9M 2018: € 17.5 million). In the “Development to sell” business, a total of 515 units were completed in the first nine months of 2019 (9M 2018: 365), thereof 74 in Germany (9M 2018: 61) and 441 in Austria (9M 2018: 304). In the “Development to hold” business, a total of 840 units were completed (9M 2018: 328 units), thereof 440 in Germany (9M 2018: 147) and 400 units in Austria (9M 2018: 181 units). Around 38,000 units are in the development pipeline as of the end of September 2019.

In the first nine months of the year, the primary key figure for the sustained earnings power of the core business, Group FFO, increased by 10.7%, from € 842.7 million in 2018 to € 932.8 million in 2019, largely due to acquisitions. This trend was fueled primarily by the positive development in Adjusted EBITDA Total, which rose by 16.7% from € 1,140.7 million to € 1,331.1 million during the reporting period.

In the 2019 reporting period, the non-recurring items eliminated in the Adjusted EBITDA Total came to € 36.5 million (9M 2018: € 93.8 million). The following table gives a detailed list of the non-recurring items: