Group FFO

The following key figures provide an overview of the development in Group FFO and other value drivers in the reporting period. The year-on-year comparison is slightly affected by the acquisition of Bien-Ries GmbH (today operating under BUWOG – Rhein-Main Development GmbH, referred to hereafter as BUWOG West) at the beginning of April 2020.

As of the end of the first quarter of 2021, our apartments were once again almost fully occupied. At 2.8% at the end of March 2021, the apartment vacancy rate was exactly on a par with the prior-year level seen at the end of March 2020. Rental income in the Rental segment rose by 3.1% from € 564.0 million in the first three months of 2020 to € 581.7 million in the first three months of 2021, largely due to organic growth resulting from new construction and modernization measures. Of the rental income in the Rental segment, € 467.0 million is attributable to rental income in Germany (3M 2020: € 457.9 million), € 88.2 million to rental income in Sweden (3M 2020: € 80.3 million) and € 26.5 million to rental income in Austria (3M 2020: € 25.8 million).

The current increase in rent due to market-related factors amounted to 0.7% (3M 2020: 1.0%). We were also able to achieve an increase in rent of 1.7% thanks to property value improvements achieved as part of our modernization program (3M 2020: 2.3%). The corresponding like-for-like rent increase amounted to 2.4% (3M 2020: 3.3%). Under consideration of rent increases due new construction measures and measures to add extra stories of 0.6% (3M 2020: 0.6%), the organic increases in rent totals 3.0% (3M 2020: 3.9%). The average monthly in-place rent within the Group at the end of March 2021 amounted to € 7.18 per m² compared to € 6.94 per m² at the end of March 2020. The monthly in-place rent in the German portfolio at the end of March 2021 amounted to € 6.98 per m² (March 31, 2020: € 6.83 per m²), with the figure for the Swedish portfolio amounting to € 10.18 per m² (March 31, 2020: € 9.20 per m²) and the figure for the Austrian portfolio amounting to € 4.79 per m² (March 31, 2020: € 4.65 per m²). 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).

We continued with our modernization, new construction and maintenance strategy in the first quarter of 2021. The total volume of maintenance, modernization and new construction activity fell by 8.3%, from € 414.5 million in the first three months of 2020 to € 379.9 million in the first three months of 2021. While the volume of maintenance measures in the first three months of 2021 totaled € 135.7 million, up by 10.3% on the value of € 123.0 million seen in the first three months of 2020, the modernization measures fell by 20.7% from € 208.1 million in the first three months of 2020 to € 165.1 million in the first three months of 2021. The decline in the volume of modernization measures is largely due to significantly lower investing activities in Berlin as a result of the rent freeze and isolated restrictions related to COVID-19. However, we do consider the current lower level of investment volume sufficient to reach the targets of our climate path. At € 79.1 million, new construction in the first three months of 2021 was down by 5.2% on the prior-year value of € 83.4 million.

Operating expenses in the Rental segment in the first quarter of 2021 were down by 5.0% on the figures for the first quarter of 2020, from € 103.5 million to € 98.3 million. All in all, Adjusted EBITDA Rental rose by 5.8%, from € 381.1 million in the first three months of 2020 to € 403.1 million in the first three months of 2021.

The Value-add segment was slightly impacted by the coronavirus pandemic due to individual construction delays affecting modernization measures. Vonovia’s own craftsmen’s organization made a contribution to the segment’s stable development overall.

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.

In the 2020 fiscal year, we changed the reporting of revenue for 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 2020 consolidated financial statements and in the segment reporting in the 2020 Annual Report. 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 in the first quarter of 2021 was up by 14.6% on the first quarter of 2020, from € 12.3 million to € 14.1 million. Group revenue rose by 4.7% from € 248.1 million in the first three months of 2020 to € 259.7 million in the first three months of 2021. In total, revenue from the Value-add segment came to € 273.8 million in the first quarter of 2021, up by 5.1% on the value of € 260.4 million seen in the first quarter of 2020. Adjusted EBITDA Value-add amounted to € 45.8 million in the first three months of 2021, 23.1% higher than the figure of € 37.2 million reported for the first three months of 2020.

We continued to pursue our selective sales strategy in the first quarter of 2021. In the Recurring Sales segment, we report all business activities relating to the sale of single residential units (Privatization). Income from the disposal of properties in the Recurring Sales segment came to € 192.7 million in the first three months of 2021, up by 77.4% on the value of € 108.6 million reported in the same period of 2020; of this, € 149.7 million are attributed to sales in Germany (3M 2020: € 80.5 million) and € 43.0 million to sales in Austria (3M 2020: € 28.1 million). We privatized 1,182 apartments in the first three months of 2021 (3M 2020: 760), thereof 982 in Germany (3M 2020: 621) and 200 in Austria (3M 2020: 139). Adjusted EBITDA Recurring Sales came in at € 47.1 million in the first three months of 2021, up by 78.4% on the value of € 26.4 million seen in the first three months of 2020. The fair value step-up for Recurring Sales came in at 35.8% in the first three months of 2021, down slightly on the comparative value of 36.8% for the first three months of 2020. This is due primarily to lower step-ups for sales in Germany compared to the previous year. The step-ups in Austria were considerably higher than in Germany overall.

Outside of the Recurring Sales segment we sold 70 residential units of the Non-core Disposal portfolio as part of our portfolio adjustment (3M 2020: 287) with total proceeds of € 9.0 million (3M 2020: € 49.8 million). At 64.1%, the fair value step-up for Non-core Disposals was considerably higher than for the same period in the previous year (36.0%). The individual sales of land contributed to this increase.

In the first quarter of 2021, the Development segment, with Development to sell business and Development to hold business, contributed positively to earnings in Germany, Austria and Sweden, thereby contributing to the successful growth of Vonovia.

In the “Development to sell” business, a total of 230 residential units were completed in Germany in the first three months of 2021 (3M 2020: 0). In the first three months of 2021, income from the disposal of properties amounted to € 84.2 million (3M 2020: € 45.4 million), with € 54.4 million attributable to project development in Germany (3M 2020: € 23.9 million) and € 29.8 million to project development in Austria (3M 2020: € 21.5 million). The resulting gross profit for “Development to sell” came to € 12.8 million in the first quarter of 2021 (3M 2020: € 7.2 million).

In the “Development to hold” business, a total of 149 units were completed in the first three months of 2021 (3M 2020: 122), thereof 68 in Germany (3M 2020: 114) and 81 in Sweden (3M 2020: 8). In the Development to hold business, a fair value of € 12.8 million was achieved in the first three months of 2021 (3M 2020: € 20.2 million), with € 2.5 million attributable to project development in Germany (3M 2020: € 20.2 million) and € 10.3 million to project development in Sweden (3M 2020: € 0.0 million). The gross profit for “Development to hold” totaled € 2.4 million in the first three months of 2021 (3M 2020: € 4.3 million).

Adjusted EBITDA for the Development segment amounted to € 10.1 million in the first quarter of 2021, down by 11.4% on the value of € 11.4 million seen in the first quarter of 2020. This was due primarily to higher operating expenses. The increase in operating costs compared to the previous year is related to the integration of BUWOG West and the resulting higher material and personnel costs as well as business expenses.

In the first three months of the year, the primary key figure for the sustained earnings power, Group FFO, increased by 14.1%, from € 335.5 million in the first three months of 2020 to € 382.9 million in the first three months of 2021, largely due to organic growth resulting from new construction and modernization measures as well as due to higher sales proceeds in the Recurring Sales segment. This trend was fueled primarily by the positive development in Adjusted EBITDA Total, which rose by 11.0% from € 456.1 million to € 506.1 million during the reporting period.

In the first quarter of 2021, the non-recurring items eliminated in the Adjusted EBITDA Total amounted to € 4.4 million, considerably lower compared to the prior-year value of € 14.8 million. The following table gives a detailed list of the non-recurring items: