Group’s Business Development

Business Development in 2023 – An Overview

All in all, our operating business developed in line with our expectations in the 2023 fiscal year. High demand for homes and rising rents supported the operational basis of our business, the core Rental segment.

We invested a total of around € 0.8 billion (2022: € 1.4 billion) in our own portfolio for new construction and modernization measures in the 2023 fiscal year, and around € 0.7 billion (2022: € 0.9 billion) in maintenance. We completed 1,309 apartments (2022: 2,071) as part of our new construction measures. We also completed 1,116 apartments that are intended for sale (2022: 1,678).

The table below provides an overview of the development of our most recently forecast performance indicators for 2023 and the target achievement level for these indicators including discontinued operations in the 2023 fiscal year.

The sale of the Care business activities has since been initiated and the Management Board of Deutsche Wohnen expects this segment to be sold before December 2024. Accordingly, the majority of the Care segment is presented as discontinued operations. A small part of the Care segment, with a business volume of around € 23 million in segment revenue, was transferred to the Rental segment. Specifically, this relates to rental income for 25 properties operated by third parties.

In addition, at the end of the fourth quarter of 2023, the presentation of contributions to earnings made by the Development to hold sales channel was adjusted within the Development segment. In the future, all earnings contributions made by Development to hold will be recognized in the valuation results, i.e., outside of segment revenue and Adjusted EBITDA.

The previous year’s figures were adjusted accordingly.

The key performance indicators for the continuing operations are therefore as follows.

In the 2023 fiscal year, total segment revenue (continuing operations) came to € 5,151.1 million, down by 7.5% on the value for the previous year (€ 5,566.2 million). 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.

The Adjusted EBITDA Total (continuing operations) amounted to € 2,583.8 million in the 2023 fiscal year (2022: € 2,606.1 million). With the exception of the Rental segment, all other segments reported a drop in Adjusted EBITDA due to market conditions. Adjusted EBITDA Rental rose by 6.5%, from € 2,254.3 million in 2022 to € 2,401.7 million in 2023. The Adjusted EBITDA in the Value-add segment came to € 105.5 million in 2023, 16.7% below the prior-year figure of € 126.7 million. The Adjusted EBITDA Recurring Sales fell from € 135.1 million in 2022 to € 63.4 million in 2023. The Adjusted EBITDA Development came to € 13.2 million 2023, down considerably on the prior-year figure of € 90.0 million.

Group FFO (continuing operations) amounted to € 1,801.6 million in the 2023 financial year (2022: € 1,981.6 million). This corresponds to a Group FFO per share of € 2.23 (2022: € 2.51). The Group FFO interest expense came to € 619.6 million in 2023, up by 25.8% on the prior-year value of € 492.6 million. Current income taxes FFO came in at € 180.3 million in 2023, 32.0% higher than in the previous year (€ 136.6 million). At € 17.7 million, intragroup losses in 2023 were up on the prior-year value of € 4.7 million.

The EPRA NTA per share in 2023 came in at € 46.82, down by 18.5% on the prior-year value of € 57.48. The development in the net asset value figure was due primarily to the net income from fair value adjustments of investment properties of € -10,651.2 million in 2023 (2022: € -1,177.6 million). The distribution of the cash dividend of € 372.9 million in 2023 (2022: € 672.4 million) and the issue of new shares as part of the scrip dividend also had an impact on this key figure.

The Sustainability Performance Index stood at 111% in the 2023 fiscal year (2022: 103%). This was helped along in particular by the reduction of CO₂ intensity, the development of the average primary energy requirements of new construction and (partial) modernization measures to make apartments fully accessible, and high levels of employee satisfaction.

Statement of the Management Board on the Economic Situation

The net assets, financial position and results of operations of the Group are stable, particularly given the solid financing, the resulting balanced maturity profile and the financing flexibility gained through the rating-backed bond financings. The ongoing improvements to the property management processes and the use of new digital software solutions promote ongoing improvement in profitability.