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 2020, our apartments were virtually fully occupied. The apartment vacancy rate of 2.4% was down slightly on the value of 2.6% seen at the end of 2019. Revenue in the Rental segment rose by 10.2% from € 2,074.9 million in 2019 to € 2,285.9 million in 2020 largely due to the acquisition of Hembla in early November 2019 as well as to organic growth resulting from new construction and modernization. Hembla contributed a volume of € 182.9 million to this figure (2019: € 29.6 million). Of the rental revenue in the Rental segment, € 1,845.4 million is attributable to rental revenue in Germany (2019: € 1,801.2 million), € 332.5 million to rental revenue in Sweden (2019: € 165.4 million) and € 108.0 million to rental revenue in Austria (2019: € 108.3 million).

The increase in rent due to market-related factors (including the effects resulting from the Berlin rent freeze) came to 0.6% (2019: 1.1%). In addition, we were able to achieve an increase in rent of 1.9% thanks to property value improvements achieved as part of our modernization program (2019: 2.3%). The corresponding like-for-like rent increase came to 2.5% in the reporting period (2019: 3.4%). If we 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 totaling 3.1% (2019: 3.9%). The average monthly in-place rent within the Group at the end of December 2020 came to € 7.16 per m² compared to € 6.93 per m² at the end of December 2019. At the end of 2020, the monthly in-place rent in the German portfolio came to € 6.95 per m² (Dec. 31, 2019: € 6.79), with the figure for the Swedish portfolio coming to € 10.31 per m² (Dec. 30, 2019: € 9.46) and € 4.79 per m² for the Austrian portfolio (Dec. 31, 2019: € 4.64). The rental income from the portfolio in Sweden reflects inclusive rents, meaning that the amounts contain operating, heating and water supply costs. The rental income from the Austrian property portfolio additionally includes maintenance and improvement contributions (EVB).

Despite the coronavirus pandemic, we were able to continue with our modernization, new construction and maintenance strategy in the 2020 fiscal year. Isolated modernization and new construction measures were affected by construction delays. All in all, the total volume of our maintenance, modernization and new construction activity came to € 1,935.9 million in 2020, down slightly on the previous year’s figure of € 1,971.1 million. The amount spent on capitalized maintenance rose considerably from € 172.7 million in 2019 to € 270.9 million in 2020. This was due, among other things, to investments in improving building security and fire protection, as well as maintenance work carried out as part of modernization projects.

In the 2020 fiscal year, operating expenses in the Rental segment were up by 25.0% on the figures for 2019, from € 328.6 million to € 410.6 million. This development is due primarily to the larger portfolio resulting from the prior-year acquisition of Hembla in November 2019. All in all, Adjusted EBITDA Rental rose by 8.1%, from € 1,437.4 million in 2019 to € 1,554.2 million in 2020.

The Value-add segment was impacted by the coronavirus pandemic, largely due to construction delays affecting individual modernization measures due to the coronavirus. Vonovia’s own craftsmen’s organization made a contribution to the segment’s stable development. We continued to expand our business activities relating to the provision of cable television to our tenants, residential environment, insurance and metering services, and energy supply services. We supplied a total of around 23,100 households with energy directly as of the end of 2020 (2019: around 18,200).

In the 2020 fiscal year, we changed how we report revenue from the Value-add segment with the introduction of a new performance indicator, Total Segment Revenue. Details can be found in chapter [A2] of the Notes to the consolidated financial statements and in the segment reporting. Key changes result from the separate reporting of ancillary costs outside of the segments in gross terms as well as the decision not to take account of revenue from the management of subcontractors in our internal Value-add income. External revenue from our Value-add activities with our end customers rose by 2.0% from € 50.6 million in 2019 to € 51.6 million in 2020. At € 1,053.0 million, Group revenue in 2020 was down by 4.6% on the prior-year figure of € 1,104.2 million, mainly due to the coronavirus crisis. Overall, this results in a 4.3% drop in the income from the Value-add segment from € 1,154.8 million in 2019 to € 1,104.6 million in 2020. In the 2020 fiscal year, operating expenses in the Value-add segment were down by 5.6% on the figures for 2019, from € 1,008.5 million to € 952.3 million. This development is mainly due to construction delays related to the coronavirus. Adjusted EBITDA Value-add rose by 4.1%, from € 146.3 million in 2019 to € 152.3 million in 2020.

We continued to pursue our selective sales strategy successfully in the 2020 fiscal year in spite of the coronavirus pandemic. 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 € 382.4 million in the 2020 fiscal year, up by 4.7% on the value of € 365.1 million in 2019; € 264.2 million of this amount is attributed to sales in Germany (2019: € 250.9 million) and € 118.2 million to sales in Austria (2019: € 114.2 million). We privatized 2,442 apartments in the 2020 fiscal year (2019: 2,607), thereof 1,870 in Germany (2019: 2,012) and 572 in Austria (2019: 595). Adjusted EBITDA Recurring Sales came in at € 92.4 million in the 2020 fiscal year, up by 0.5% on the value of € 91.9 million seen in 2019. The fair value step-up for Recurring Sales came in at 39.6% in 2020, down slightly on the comparative value of 41.3% for 2019. This is due primarily to lower step-ups for sales in Austria as against the previous year. The step-ups in Austria were higher than in Germany overall.

Outside of the Recurring Sales segment, we made 1,235 Non-core Disposals of residential units as part of our portfolio adjustment measures in the 2020 fiscal year (2019: 2,177) with total proceeds of € 203.9 million (2019: € 145.6 million). At 40.1%, the fair value step-up for Non-core Disposals was considerably higher than for the same period in the previous year (15.8%). The increase was largely due to the sale of a large commercial property in Dresden.

In the 2020 fiscal year, the Development segment, with its Development to sell and Development to hold areas, made positive contributions to earnings in Germany, Austria and Sweden, allowing it to contribute to Vonovia’s successful growth. The segment revenue from Development (total of income from the sale of Development to sell properties, fair value from Development to hold and rental income in the Development segment) rose by 15.5% from € 516.9 million in 2019 to € 597.1 million in 2020.

In the Development to sell area, a total of 646 units were completed in the 2020 fiscal year (2019: 791 units), with all 646 units located in Germany (2019: 350 units). No units were completed in Austria in 2020 (2019: 441 units). In 2020, income from the disposal of Development to sell properties amounted to € 297.7 million (2019: € 249.5 million), with € 201.0 million attributable to project development in Germany (2019: € 131.8 million) and € 96.7 million to project development in Austria (2019: € 117.6 million). The resulting gross profit for Development to sell came to € 61.8 million (2019: € 52.2 million).

In the Development to hold area, a total of 1,442 units (2019: 1,301 units incl. attic conversions) were completed, thereof 862 in Germany (2019: 870 units), 383 units in Austria (2019: 401 units) and 197 units in Sweden (2019: 30 units). In the Development to hold area, a fair value of € 298.2 million was achieved in 2020 (2019: € 266.3 million). € 157.1 million of this figure is attributable to project development in Germany (2019: € 164.3 million), € 127.9 million to project development in Austria (2019: € 96.3 million) and € 13.2 million to project development in Sweden (2019: € 5.7 million). The gross profit for Development to hold came to € 62.8 million (2019: € 58.9 million).

The Adjusted EBITDA for the Development segment amounted to € 110.9 million in the 2020 fiscal year (2019: € 84.5 million).

In the 2020 fiscal year, the primary key figure for the sustained earnings power, Group FFO, increased by 10.6% from € 1,218.6 million in 2019 to € 1,348.2 million in 2020, largely due to acquisitions and organic growth. This trend was fueled primarily by the positive development in Adjusted EBITDA Total, which rose by 8.5% from € 1,760.1 million to € 1,909.8 million during the reporting period.

In the 2020 fiscal year, the non-recurring items eliminated in the Adjusted EBITDA Total came to € 61.5 million in 2020 (2019: € 93.1 million). In the third quarter of 2020, income of € 18.1 million was recognized following the reassessment of a compensation entitlement for non-controlling interests. The following table gives a detailed list of the non-recurring items: