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 half of 2021, our apartments were once again virtually fully occupied. The apartment vacancy rate of 2.7% was down slightly on the value of 2.8% seen at the end of June 2020. Rental income in the Rental segment rose by 3.3% in total from € 1,132.9 million in the first six months of 2020 to € 1,170.5 million in the first six months of 2021, largely due to organic growth resulting from new construction and modernization measures. Of the rental income in the Rental segment in the first half of 2021, € 939.4 million is attributable to rental income in Germany (H1 2020: € 918.4 million), € 177.4 million to rental income in Sweden (H1 2020: € 161.9 million) and € 53.7 million to rental income in Austria (H1 2020: € 52.6 million).

The current increase in rent due to market-related factors came to 0.9% (H1 2020: 1.0%). We were also able to achieve an increase in rent of 2.0% (H1 2020: 2.3%) thanks to property value improvements as part of our modernization program. The corresponding like-for-like rent increase came to 2.9% (H1 2020: 3.3%). If we also include the increase in rent due to new construction measures and measures to add extra stories of 0.5% (H1 2020: 0.6%), then we arrive at an organic increase in rent totaling 3.4% (H1 2020: 3.9%). The average monthly in-place rent within the Group at the end of June 2021 came to € 7.29 per m² compared to € 7.03 per m² at the end of June 2020. The monthly in-place rent in the German portfolio at the end of June 2021 came to € 7.09 per m² (June 30, 2020: € 6.88 per m²), with € 10.32 per m² for the Swedish portfolio (June 30, 2020: € 9.65 per m²) and € 4.82 per m² for the Austrian portfolio (June 30, 2020: € 4.73 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 half of 2021. The total volume of maintenance, modernization and new construction activity rose by 1.0%, from € 859.1 million in the first six months of 2020 to € 868.0 million in the first six months of 2021. Whereas the volume of maintenance measures in the first six months of 2021 came to € 291.0 million, up by 17.4% on the value of € 247.9 million seen in the first six months of 2020, the modernization measures fell by 20.0% from € 437.1 million in the first six months of 2020 to € 349.8 million in the first six 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 the coronavirus pandemic. However, we do consider the current lower level of investment volume as enough to reach the targets of our climate course. At € 227.2 million, new construction in the first six months of 2021 was up by 30.5% on the prior-year value of € 174.1 million.

Operating expenses in the Rental segment in the first half of 2021 were down by 6.9% on the figures for the first half of 2020, from € 196.8 million to € 183.3 million. All in all, Adjusted EBITDA Rental rose by 5.4% from € 781.4 million in the first six months of 2020 to € 823.8 million in the first six 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 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 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 half of 2021 were up by 11.2% on the first half of 2020, from € 25.1 million to € 27.9 million. Group revenue rose by 6.7% from € 496.1 million in the first six months of 2020 to € 529.5 million in the first six months of 2021. All in all, revenue from the Value-add segment came to € 557.4 million in the first half of 2021, up by 6.9% on the value of € 521.2 million seen in the first half of 2020. In the first half of 2021, operating expenses in the Value-add segment were up by 5.4% on the figures for the first half of 2020, from € 453.6 million to € 478.2 million.

Adjusted EBITDA Value-add came to € 79.2 million in the first six months of 2021, 17.2% higher than the figure of € 67.6 million reported for the first six months of 2020.

We continued to pursue our selective sales strategy in the 2021 fiscal year. In the Recurring Sales segment, we report all business activities relating to the sale of single residential units (Privatize). We privatized 1,865 apartments in the first six months of 2021 (H1 2020: 1,327), thereof 1,527 in Germany (H1 2020: 1,046) and 338 in Austria (H1 2020: 281).

In the Recurring Sales segment, income from the disposal of properties came to € 327.8 million in the first half of 2021, up by 68.1% on the value of € 195.0 million reported in the first half of 2020; of this, € 253.0 million are attributed to sales in Germany (H1 2020: € 138.3 million) and € 74.8 million to sales in Austria (H1 2020: € 56.7 million). Selling costs in the Recurring Sales segment came in at € 7.9 million in the first half of 2021, up by 23.4% on the value of € 6.4 million seen in the first half of 2020.

Adjusted EBITDA Recurring Sales came in at € 83.5 million in the first half of 2021, up by 73.6% on the value of € 48.1 million seen in the first half of 2020. The fair value step-up for Recurring Sales came in at 38.7% in the first six months of 2021, on par with the previous year’s level (H1 2020: 38.8%).

Outside of the Recurring Sales segment, we made 319 Non-core Disposals of residential units as part of our portfolio adjustment measures in the first half of 2021 (H1 2020: 604) with total proceeds of € 29.2 million (H1 2020: € 122.6 million). At 38.2%, the fair value step-up for Non-core Disposals in the first half of 2021 was higher than for the same period in the previous year (36.5%). The individual sales of land contributed to this increase.

In the first half of 2021, the Development segment, with its Development to sell and Development to hold areas, made positive contributions to earnings in Germany, Austria and Sweden, once again allowing it to contribute to Vonovia’s successful growth.

In the Development to sell area, 452 units were completed in the first half of 2021 (H1 2020: 83), thereof 368 in Germany (H1 2020: 83 units), 84 units in Austria (H1 2020: 0 units). In the first half of 2021, income from the disposal amounted to € 191.7 million (H1 2020: € 107.5 million), with € 115.8 million attributable to project development in Germany (H1 2020: € 82.7 million) and € 75.9 million to project development in Austria (H1 2020: € 24.8 million). The resulting gross profit for Development to sell came to € 31.5 million in the first half of 2021 (H1 2020: € 23.8 million).

In the Development to hold area, a total of 389 units were completed in the reporting period (H1 2020: 534), thereof 297 in Germany (H1 2020: 308 units) and 92 units in Sweden (H1 2020: 34). No units were completed in Austria in the reporting period (H1 2020: 192). In the Development to hold area, a fair value of € 64.4 million was achieved in the first half of 2021 (H1 2020: € 144.7 million), with € 54.1 million attributable to project development in Germany (H1 2020: € 63.5 million) and € 10.3 million to project development in Sweden (H1 2020: € 3.1 million). However, project development in Austria did not lead to the recognition of fair value in the first half of 2021 (H1 2020: € 78.1 million). The gross profit for Development to hold came to € 18.9 million in the first half of 2021 (H1 2020: € 26.5 million).

Adjusted EBITDA for the Development segment came in at € 35.3 million in the first half of 2021, down by 21.7% on the value of € 45.1 million seen in the first half of 2020. This was due primarily to higher operating expenses. The increase in operating expenses compared to the previous year is related to the integration of BUWOG West and the resulting higher material and personnel costs and business expenses.

In the first six months of the year, the primary key figure for the sustained earnings power, Group FFO, increased by a total of 13.1%, from € 676.3 million in the first six months of 2020 to € 764.7 million in the first six months of 2021, largely due to organic growth resulting from new construction and modernization measures and to the much higher proceeds from sales in the Recurring Sales segment. This trend was fueled primarily by the positive development in Adjusted EBITDA Total, which increased by 8.4% from € 942.2 million in the first half of 2020 to € 1,021.8 million in the first half of 2021.

In the 2021 reporting period, the non-recurring items eliminated in the Adjusted EBITDA Total came to € 91.7 million, up considerably on the prior-year value of € 37.9 million. This was largely due to costs associated with the Deutsche Wohnen public takeover offer. The following table gives a detailed list of the non-recurring items: