Solid Business Development in the First Half of 2020 – Continued Focus on Climate Protection, New Construction and Senior-Friendly Apartment Conversion
- Vonovia continues to offer assistance to tenants facing financial difficulties due to the coronavirus.
- Investments in research and development for further CO2 savings in existing buildings.
- Increase in rent for existing properties due to market-related factors came to 1.0% in the first half of 2020; monthly rent of € 6.88/m² in Germany.
- € 2.3 billion increase in the value of the portfolio thanks to market development and investment.
- 617 new apartments completed; senior-friendly modernization of 7,000 apartments; energy-efficient modernizations completed for 5,000 apartments.
- Vocational training year off to a successful start; 100 additional trainee positions created.
Bochum, August 5, 2020 – Vonovia SE (“Vonovia”) will continue to focus on achieving CO2 savings in its real estate portfolio. The company’s ongoing positive commercial development forms the basis for investment in research and development and in the expansion of renewable energies. Vonovia achieved all of its financial objectives in the first half of 2020. “We have weathered the coronavirus crisis well so far,” says CEO Rolf Buch. “This means that we can do a lot for our tenants and live up to our social responsibility.”
Back in March 2020, Vonovia promised all of its tenants that there would be solutions available if they ended up experiencing financial difficulties due to the coronavirus. The number of tenants taking the company up on this offer only stands at around 1%. “We are glad to be able to help and offer people a bit of security. But it is still possible for people to be placed on short-time working, or to lose their jobs, due to the coronavirus. We remain committed to working with them to find an individual solution for their rental payments. We want our tenants to be able to stay in their homes”, says Rolf Buch.
The company is also taking responsibility for climate protection. Vonovia is increasing the share of renewable energies in its existing buildings and is in the process of rolling out its “1,000 Roofs” program. Vonovia generates a total of around 10 million kWh of solar power annually, allowing it to save 4,500 metric tons of CO2 a year in its portfolio. The “1,000 Roofs” program was launched in Dresden and Munich, and Vonovia now plans to continue it in the major cities of Leverkusen, Gelsenkirchen, Bochum and Cologne, all of which are in North Rhine-Westphalia.
In the mid to long term, Vonovia plans to decentralize the energy supply to its own neighborhoods. This means that instead of feeding the solar power into the public grid, which is what happens at the moment, it is to be made directly available to tenants – be it directly in their homes, to generate heat or at electric charging stations. This is the principle that Vonovia also intends to follow at its innovation center in Bochum-Weitmar, where it plans to test the production of hydrogen from renewable electricity as an efficient storage system, as well as the use of fuel cells, power storage facilities and heat pumps.
“The Climate Protection Act calls for the housing stock in Germany to be virtually climate-neutral by 2050. We are investing in energy solutions that our tenants can afford,” says Rolf Buch.
Economic Development Remains Solid
Vonovia’s Adjusted EBITDA Total increased by 8.0% from € 872.8 million in the first half of 2019 to € 942.2 million in the first half of 2020.
The Housing-Related Services (Value-add), Development and Recurring Sales business areas contributed a combined € 160.8 million (H1 2019: € 148.8 million) to the Adjusted EBITDA Total. Adjusted EBITDA Rental increased by 7.9% from € 724.0 million in the first half of 2019 to € 781.4 million in the first half of 2020.
In the same period, Vonovia increased the Group FFO (operating earnings) by 11.0% to € 676.3 million (H1 2019: € 609.1 million). Above all, the purchase of Hembla as well as organic growth resulting from new construction and modernization have had a positive impact. The project developer Bien-Ries was included for the first time in the second quarter.
In the first quarter, Vonovia concluded a total of € 500 million in financing with mortgage banks and placed two bonds with a volume of € 1 billion at the end of March. Two further bonds with a total volume of € 1.5 billion were placed on July 3, 2020. The funds will be used for the early repayment of various loans in Sweden. The transaction will allow Vonovia to achieve the intended financial synergies at Hembla, which form part of the acquisition synergies with a total volume of € 30 million.
The Loan-to-Value ratio at Vonovia at the end of June 2020 was 41.8% (December 31, 2019: 43.1 %) and therefore within the target range of 40% to 45%. Including the dividend payment of € 1.57 per share for 2019, Vonovia’s pro forma debt level comes to 42.7%. Around 41% of shareholders opted for the scrip dividend as opposed to a cash dividend.
Moderate Rental Policy and € 2.3 Billion Increase in Value
Vonovia managed around 415,000 of its own rental apartments as of June 30, 2020 (H1 2019: 397,000). With around 354,000 apartments in Germany, Vonovia has a market share of around 1.5 %.
The value of the company without liabilities (adjusted NAV) rose to € 29.7 billion. This is an increase of 5.4% on the end of 2019. The increase of around € 2.3 billion in the value of Vonovia’s properties can be attributed to the sustained high demand for apartments and the investments made.
With a vacancy rate of 2.8 % (June 30, 2019: 2.9%), the portfolio was still virtually fully occupied. Rental income in the Rental segment came to € 1,132.9 million (H1 2019: € 1,014.8 million). Above all, the acquisition of Hembla as well as organic growth made themselves noticeable. Market rent performance came to +1.0% compared with the prior-year period. In addition, investments in buildings as part of the modernization program (+2.3%) as well as in new construction and vertical expansion (+0.6%) contributed to rental development. The monthly rent in Germany came to € 6.88 per square meter at the end of June 2020.
Customer satisfaction (CSI) rose by 3.7 percentage points in the second quarter of 2020 compared with the first quarter of the year. The main reasons behind the improvement included, in particular, an improved assessment of the service provided, ancillary costs bills that are easy to understand, Vonovia’s response to tenant concerns and the manner in which it complies with any agreements reached. Measures to design both interior and outdoor areas also had a positive impact on the CSI.
Construction of Around 600 Apartments in the First Half of the Year
Vonovia has continued with its modernization, new construction and maintenance strategy in the 2020 fiscal year. The increased safety precautions introduced due to the coronavirus pandemic put the brakes on construction measures slightly in the second quarter of 2020, too. Rolf Buch: “When it comes to new construction and modernization, our projects are now starting to pick up speed again.” In the first six months of the year, Vonovia completed 617 apartments (H1 2019: 817) for its own portfolio (534) and for sale (83). Senior-friendly modernization measures were carried out on 7,000 apartments, while energy-efficient modernizations were completed for 5,000. The total volume of maintenance, modernization and new construction activity (excl. to sell) rose by 6.8%, from € 804.3 million in the first half of 2019 to € 859.1 million in the first six months of 2020.
The company spent € 9.33 per square meter or € 247.9 million (H1 2019: € 8.31 per square meter or € 208.7 million) on maintenance and € 437.1 million (H1 2019: € 432.1 million) on modernization measures. Investments in new construction for Vonovia’s own portfolio rose by 6.5% from € 163.5 million in 2019 to € 174.1 million in 2020.
Training at Vonovia – Prospects for Young People
At a time when career prospects for young people are looking uncertain, Vonovia set an example when its training year started at the beginning of August 2020, creating 100 additional trainee positions in the trades across Germany. This brings the total number of positions to 210, twice as many as originally planned. Vonovia is training additional career entrants in all regions as plant engineers, tilers, electronics technicians, painters and gardeners, with a particular focus on the Ruhr region (24 new positions) and the North region (26). Including the company’s commercial trainees, 265 career entrants are embarking on their vocational training at Vonovia in the new training year. Vonovia is still accepting applications for candidates looking to start on September 1 or October 1, 2020. Young people who cannot complete their vocational training due to their previous company going insolvent have the opportunity to continue their training at Vonovia, regardless of the starting date.
Positive Outlook – Focus on New Construction, Climate Protection and Senior-Friendly Apartment Conversion
The positive start to the year in commercial terms looks set to continue. Adjusted EBITDA Total is expected to be within the range of the most recently published guidance, between € 1.875 billion and € 1.925 billion. Group FFO is likely to come in the range of between around € 1.275 billion and € 1.325 billion.
Climate protection, demographic change and the lack of affordable homes remain the key challenges driving Vonovia’s activities. The company aims to complete more than 1,600 new apartments this year and to continue to forge ahead with senior-friendly conversion measures in vacant apartments. It plans to have refurbished a total of around 13,000 apartments by the end of 2020.
Vonovia continues to stand by its own target of completing energy-efficient refurbishment measures for at least 3 % of its own portfolio every year in Germany. This means plans to perform energy-efficiency refurbishment measures on around 11,000 apartments in 2020. All in all, investments in modernization and new construction will once again reach a high level, with an expected volume of between around € 1.3 billion and € 1.6 billion.
Interim Financial Report for 2020: https://reports.vonovia.de/2020/q2/en/
Media Center: https://www.vonovia.de/en/ueber-vonovia/presse/mediathek
Further information can be found in the Press Section
2020/2021 Financial Calendar:
October 1, 2020: “Outlook for climate-neutral living” (Perspektiven klimaneutralen Wohnens) conference, both in digital form and on the EUREF Campus in Berlin
November 4, 2020: Interim Statement for the first nine months of 2020
March 4, 2021: Annual Report 2020