Results of Operations
Overview
All in all, Vonovia’s performance was in line with expectations in the first nine months of 2023.
Core business in the Rental segment showed positive economic development, bolstered by high demand for rental apartments and positive rental price development.
In the other segments, the expected negative impact of the war in Ukraine, particularly with regard to energy and construction costs, as well as higher interest rates, was reflected in the business figures.
Any analysis of the figures reported for 2023 has to consider the fact that the prior-year figures are reported based on the current segmentation.
As of September 30, 2023, Vonovia employed 15,798 people (September 30, 2022: 15,851).
Total segment revenue came to € 4,232.3 million in the first nine months of 2023, down by 8.1% on the figure of € 4,606.3 million reported in the prior-year period. This decline was due primarily to lower sales in the Recurring Sales segment and lower proceeds from the sale of real estate inventories due to volume-related aspects.
Total Segment Revenue
Total Segment Revenue | ||||||||
in € million | 9M 2022* | 9M 2023 | Change | 12M 2022 | ||||
Rental income | 2,367.2 | 2,416.0 | 2.1 | 3,168.1 | ||||
Other income from property management unless included in the operating expenses in the Rental segment | 90.2 | 93.2 | 3.3 | 118.3 | ||||
Other income from property management from the Care segment | 208.0 | 217.1 | 4.4 | 280.1 | ||||
Income from disposals Recurring Sales | 392.6 | 204.6 | -47.9 | 515.7 | ||||
Internal revenue Value-add | 856.7 | 809.8 | -5.5 | 1,152.4 | ||||
Income from disposal of properties | 486.9 | 273.3 | -43.9 | 588.4 | ||||
Fair value Development to hold | 204.7 | 218.3 | 6.6 | 433.9 | ||||
Total Segment Revenue | 4,606.3 | 4,232.3 | -8.1 | 6,256.9 | ||||
- *Prior-year figures for Deutsche Wohnen adjusted to new segment definition.
The overview below shows the other key figures for the company’s results of operations, as well as their reconciliation to the performance indicator Group FFO:
Group FFO
Group FFO | ||||||||
in € million | 9M 2022* | 9M 2023 | Change | 12M 2022 | ||||
Revenue in the Rental segment | 2,363.7 | 2,411.6 | 2.0 | 3,163.4 | ||||
Expenses for maintenance | -326.5 | -311.2 | -4.7 | -443.6 | ||||
Operating expenses in the Rental segment | -351.9 | -297.1 | -15.6 | -486.3 | ||||
Adjusted EBITDA Rental | 1,685.3 | 1,803.3 | 7.0 | 2,233.5 | ||||
Revenue in the Value-add segment | 947.9 | 904.7 | -4.6 | 1,272.0 | ||||
thereof external revenue | 91.2 | 94.9 | 4.1 | 119.6 | ||||
thereof internal revenue | 856.7 | 809.8 | -5.5 | 1,152.4 | ||||
Operating expenses in the Value-add segment | -822.6 | -831.4 | 1.1 | -1,145.3 | ||||
Adjusted EBITDA Value-add | 125.3 | 73.3 | -41.5 | 126.7 | ||||
Revenue in the Recurring Sales segment | 413.5 | 209.1 | -49.4 | 543.4 | ||||
Fair value of properties sold adjusted to reflect effects not relating to the period from assets held for sale in the Recurring Sales segment | -286.2 | -146.3 | -48.9 | -391.6 | ||||
Adjusted result Recurring Sales | 127.3 | 62.8 | -50.7 | 151.8 | ||||
Selling costs in the Recurring Sales segment | -14.5 | -11.2 | -22.8 | -16.7 | ||||
Adjusted EBITDA Recurring Sales | 112.8 | 51.6 | -54.3 | 135.1 | ||||
Revenue from disposal of Development to sell properties | 466.0 | 267.9 | -42.5 | 560.6 | ||||
Cost of Development to sell | -372.0 | -233.4 | -37.3 | -440.4 | ||||
Gross profit Development to sell | 94.0 | 34.5 | -63.3 | 120.2 | ||||
Fair value Development to hold | 204.7 | 218.3 | 6.6 | 433.9 | ||||
Cost of Development to hold** | -154.2 | -205.2 | 33.1 | -340.6 | ||||
Gross profit Development to hold | 50.5 | 13.1 | -74.1 | 93.3 | ||||
Rental revenue in the Development segment | 2.5 | 3.5 | 40.0 | 3.5 | ||||
Operating expenses in the Development segment | -24.9 | -23.1 | -7.2 | -33.8 | ||||
Adjusted EBITDA Development | 122.1 | 28.0 | -77.1 | 183.2 | ||||
Revenue in the Care segment | 208.0 | 217.2 | 4.4 | 280.1 | ||||
Expenses for maintenance | -4.7 | -4.5 | -4.3 | -7.0 | ||||
Operating expenses in the Care segment | -138.7 | -158.9 | 14.6 | -188.5 | ||||
Adjusted EBITDA Care | 64.6 | 53.8 | -16.7 | 84.6 | ||||
Adjusted EBITDA Total | 2,110.1 | 2,010.0 | -4.7 | 2,763.1 | ||||
FFO interest expense | -361.9 | -460.8 | 27.3 | -493.8 | ||||
Current income taxes FFO | -97.3 | -96.7 | -0.6 | -145.0 | ||||
Consolidation*** | -73.1 | -6.5 | -91.1 | -88.7 | ||||
Group FFO | 1,577.8 | 1,446.0 | -8.4 | 2,035.6 | ||||
Group FFO after non-controlling interests | 1,515.8 | 1,376.4 | -9.2 | 1,944.3 | ||||
- *In the course of the fourth quarter of 2022, the Deutsche Wohnen segment was dissolved and transferred to the Rental, Value-add, Recurring Sales, Development and Care segments. Previous year’s values for 9M 2022 updated accordingly.
- **Excluding capitalized interest on borrowed capital in 9M 2023 of € 0.5 million (9M 2022: € 0.0 million), 12M 2022: € 2.5 million.
- ***Thereof intragroup losses in 9M 2023: € +6.6 million (intragroup profit 9M 2022: € -22.6 million), 12 M 2022 intragroup losses: € +4.8 million, gross profit Development to hold in 9M 2023: € -13.1 million (9M 2022: € -50.5 million), 12M 2022: € -93.3 million.
As of September 30, 2023, Vonovia managed a portfolio comprising 547,998 of its own residential units (September 30, 2022: 549,010), 165,123 garages and parking spaces (September 30, 2022: 163,727) and 8,737 commercial units (September 30, 2022: 8,858). 70,681 residential units (September 30, 2022: 72,386) are also managed for third parties.
Details on Results of Operations by Segment
Rental Segment
At the end of September 2023, the portfolio in the Rental segment had a vacancy rate of 2.1% (end of September 2022: 2.1%), meaning that it was nearly fully occupied.
The segment revenue in the Rental segment increased by 2.0% (9M 2022: 1.5%) from € 2,363.7 million in the first nine months of 2022 to € 2,411.6 million in the first nine months of 2023. Of the segment revenue in the Rental segment in the 2023 reporting period, € 2,068.2 million is attributable to rental income in Germany (9M 2022: € 2,014.1 million), € 255.2 million to rental income in Sweden (9M 2022: € 267.6 million) and € 88.2 million to rental income in Austria (9M 2022: € 82.0 million). Organic rent growth (twelve-month rolling) totaled 3.8% (9M 2022: 3.3%). The current rent increase due to market-related factors came to 2.0% (9M 2022: 1.0%) and the increase from property value improvements translated into a further 1.1% (9M 2022: 1.6%). All in all, this produces a like-for-like rent increase of 3.1% (9M 2022: 2.6%). New construction and vertical expansion also contributed 0.7% (9M 2022: 0.7%) to organic rent growth.
The average monthly in-place rent within the Rental segment at the end of September 2023 came to € 7.67 per sqm compared to € 7.47 per sqm at the end of September 2022 (including Deutsche Wohnen). The monthly in-place rent in the German portfolio at the end of September 2023 came to € 7.58 per sqm (September 30, 2022: € 7.36 per sqm including Deutsche Wohnen), with a figure of € 9.78 per sqm (September 30, 2022: € 9.93 per sqm) for the Swedish portfolio and € 5.42 per sqm for the Austrian portfolio (September 30, 2022: € 5.05 per sqm). The rental income from the portfolio in Sweden reflects all-inclusive rents, meaning that the amounts contain operating, heating and water supply costs. The rental income from the Austrian real estate portfolio additionally includes maintenance and improvement contributions (EVB).
We adapted our modernization, new construction and maintenance strategy to reflect the current overall financial conditions in the 2023 fiscal year. The overview below provides details on maintenance, modernization and new construction.
Maintenance, Modernization and New Construction
Maintenance, Modernization and New Construction* | ||||||||
in € million | 9M 2022 | 9M 2023 | Change | 12M 2022 | ||||
Expenses for maintenance | 326.5 | 311.2 | -4.7 | 443.6 | ||||
Capitalized maintenance | 268.3 | 182.2 | -32.1 | 412.6 | ||||
Maintenance measures | 594.8 | 493.4 | -17.0 | 856.2 | ||||
Modernization measures | 631.3 | 358.7 | -43.2 | 837.4 | ||||
New construction (to hold) | 513.7 | 169.6 | -67.0 | 572.5 | ||||
Modernization and new construction measures | 1,145.0 | 528.3 | -53.9 | 1,409.9 | ||||
Total cost of maintenance, modernization and new construction | 1,739.8 | 1,021.7 | -41.3 | 2,266.1 | ||||
- *Without Care segment, 9M 2022 adjusted to the new structure.
In the first nine months of 2023, operating expenses in the Rental segment were down by 15.6% on the figures for the first nine months of 2022, from € 351.9 million to € 297.1 million. This is due primarily to synergies achieved as part of the integration of Deutsche Wohnen. All in all, the Adjusted EBITDA Rental came to € 1,803.3 million in the first nine months of 2022, up by 7.0% on the prior-year value of € 1,685.3 million.
Value-add Segment
Developments in the Value-add segment were dominated by the new overall conditions for our own craftsmen’s organization. The reduced volume of modernization work, general price increases for construction services and materials, as well as productivity losses due to smaller-scale investments and increased costs due to a change to new technology (switch from gas heating to heat pumps) had a negative impact on economic development.
All in all, revenue from the Value-add segment came to € 904.7 million in the 2023 reporting period, down by 4.6% on the value of € 947.9 million seen in the first nine months of 2022. External revenue from our Value-add activities with our end customers in the first nine months of 2023 were up by 4.1 % on the first nine months of 2022, from € 91.2 million to € 94.9 million. Group revenue fell by 5.5% in the first nine months of 2023 from € 856.7 million in the first nine months of 2022 to € 809.8 million.
Operating expenses in the Value-add segment in the first nine months of 2023 were up by 1.1% on the figures for the first nine months of 2022, from € 822.6 million to € 831.4 million.
Adjusted EBITDA Value-add came to € 73.3 million in the first nine months of 2023, down significantly on the figure of € 125.3 million reported for the first nine months of 2022.
Recurring Sales Segment
In the Recurring Sales segment, income from the disposal of properties in the first nine months of 2023 was down to € 209.1 million, 49.4% lower than the 2022 value of € 413.5 million due to volume-related factors, with 958 units sold (9M 2022: 1,853), 657 of which were in Germany (9M 2022: 1,455) and 301 of which were located in Austria (9M 2022: 398). Income of € 126.5 million is attributable to sales in Germany (9M 2022: € 307.8 million) and € 82.6 million to sales in Austria (9M 2022: € 105.5 million).
The fair value step-up for Recurring Sales came in at 42.9% in the first nine months of 2023, down slightly on the comparative value of 44.5% for the first nine months of 2022. This was due primarily to lower step-ups for sales in Germany.
Selling costs in the Recurring Sales segment came in at € 11.2 million in the first nine months of 2023, down by 22.8% on the value of € 14.5 million seen in the first nine months of 2022. This is largely due to the lower sales volume. Adjusted EBITDA Recurring Sales came in at € 51.6 million in the first nine months of 2023, down considerably on the value of € 112.8 million seen in the first nine months of 2022.
In the 2023 reporting period, 755 residential units from the Non Core/Other portfolio (9M 2022: 16,745) were also sold as part of our portfolio adjustment measures, with proceeds totaling € 133.7 million (9M 2022: € 2,704.0 million). At 7.3%, the fair value step-up for Non Core/Other disposals in the 2023 reporting period was higher than for the same period in the previous year (1.4%).
Development Segment
Economic development in the Development segment was hit primarily by the increased construction costs and interest rates in the reporting period.
In the “Development to sell“ area, a total of 507 units were completed in the first nine months of 2023 (9M 2022: 636 units), 380 in Germany (9M 2022: 60 units) and 127 in Austria (9M 2022: 576 units). Income from the disposal of development properties to sell came to € 267.9 million in the first nine months of the 2023 fiscal year (9M 2022: € 466.0 million), with € 227.7 million attributable to project development in Germany (9M 2022: € 222.8 million) and € 40.2 million attributable to project development in Austria (9M 2022: € 243.2 million). The decline in Austria was chiefly due to a lower notarization volume compared to the previous year. The resulting gross profit for “Development to sell” came to € 34.5 million in the first nine months of 2023 with a margin of 12.9% (9M 2022: € 94.0 million, margin of 20.2%).
In the “Development to hold” area, a total of 1,292 units were completed in the first nine months of 2023 (9M 2022: 907 units), of which 822 were in Germany (9M 2022: 807 units), 296 in Austria (9M 2022: 0 units) and 174 in Sweden (9M 2022: 100 units). In the “Development to hold” area, a fair value of € 218.3 million was achieved in the 2023 reporting period (9M 2022: € 204.7 million). € 107.6 million of this amount was attributable to project development in Germany (9M 2022: € 204.7 million), with € 84.2 million attributable to project development in Austria (9M 2022: € 0.0 million) and € 26.5 million attributable to project development in Sweden (9M 2022: € 0.0 million). The resulting gross profit for “Development to sell” came to € 13.1 million in the first nine months of 2023 with a margin of 6.0% (9M 2022: € 50.5 million, margin of 24.7%).
Development operating expenses came to € 23.1 million in the first nine months of 2023, down by 7.2% on the value of € 24.9 million seen in the first nine months of 2022. The Adjusted EBITDA Development amounted to € 28.0 million in the 2023 reporting period (9M 2022: € 122.1 million).
Care Segment
The Care segment developed as expected in the first nine months of 2023. At the end of the third quarter of 2023, there were still 72 care properties in the Rental portfolio, 71 of which were still owned by Vonovia.
Segment revenue came to € 217.2 million in the first nine months of 2023, 4.4% higher than the value of € 208.0 million for the first nine months of 2022.
Expenses for maintenance came to € 4.5 million in the 2023 reporting period (9M 2022: € 4.7 million).
Operating expenses in the Care segment amounted to € 158.9 million in the first nine months of 2023, as against € 138.7 million in the first nine months of 2022. The increase in 2023 can be traced back first and foremost to higher staff and energy costs, as well as delayed adjustments to long-term care insurance payments and one-off payments associated with the COVID pandemic in the previous year.
The Adjusted EBITDA Care came in at € 53.8 million in the 2023 reporting period, down by 16.7% on the prior-year value of € 64.6 million.