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Vonovia SE: 9 Month Results 2018: Operating Result Increases in Reporting Period; Vonovia to Adjust its Modernization Strategy as of 2019 in a Move to Accommodate its Tenants (news with additional features)

DGAP-News: Vonovia SE / Key word(s): 9 Month figures/Real Estate

06.12.2018 / 07:01
The issuer is solely responsible for the content of this announcement.

Results as of September 30, 2018
Operating Result Increases in Reporting Period;
Vonovia to Adjust its Modernization Strategy as of 2019 in a Move to Accommodate its Tenants: No Comprehensive Energy-Efficient Modernization Measures Costing More Than EUR 2 per Square Meter

- Vonovia increases operating result (FFO 1) in the first nine months of 2018.

- Expenses for maintenance up by around 18 %: Expenses of around EUR 410 million expected for 2018 as a whole.

- Positive outlook for 2018 as a whole and for 2019.

- Vonovia will not be implementing any comprehensive energy-efficient modernization projects in 2019/2020; costs passed on to tenants will not exceed EUR 2 per square meter. This will reduce the investment volume for energy-efficient modernization by 40 %.

- Investment capacity for 2019 increased overall; volume of EUR 1.3 billion to EUR 1.6 billion expected; Vonovia to reallocate its investments and build more of the smaller and senior-friendly apartments that are urgently required.

Bochum, Germany, December 6, 2018 - Business at Vonovia SE ("Vonovia") showed positive development between January and September 2018. Vonovia thus increased its FFO 1 (funds from operations; profit from operations after interest and taxes; without BUWOG), for example, by 12.7 % as against the same period of 2017 to EUR 778.2 million (9M 2017: EUR 690.5 million). This performance can be attributed primarily to the earnings contribution made by Victoria Park in Sweden, an improved financial result, the continued high demand for apartments and the low vacancy rate.
FFO 1 per share rose by 5.6 % to EUR 1.50 (H1 2017: EUR 1.42).

The adjusted EBITDA Value-add Business (craftsmen and housing-related services such as condominium administration, cable TV and metering services) came to EUR 90.7 million in the first nine months of 2018, an increase of 19.3 % year-over-year (9M 2017: EUR 76.0 million). FFO 1 interest expense was around 13 % lower than in the same period of the previous year at EUR 189.2 million (9M 2017: EUR 216.5 million).

Investments in Energy-Efficient Modernization Cut by 40 %

"We conducted an extensive analysis of our portfolio from an energy efficiency perspective a few years ago and concluded that we would have to perform fundamental modernization measures on properties from the 1950s, 1960s and 1970s, in particular, in order to cut CO² emissions. We have pursued a systematic approach and we are able to achieve the high standards required under the German Energy Saving Ordinance (EnEV) without any problems. We have, however, found that there is a lack of acceptance for extensive energy-efficient modernization measures and that many tenants are also not in a financial position to bear the cost of the associated rent increases. As our focus is on our customers, we have reviewed our contribution to energy-efficient refurbishment. We have decided not to realize the costly modernization projects that we had planned for our 2019/2020 program where these measures would result in a rent increase of more than EUR 2 per square meter. This means that we are cutting our investments in energy-efficient refurbishment by 40 %. We are reducing our renovation rate from the current level of 5 % to 3 %, which is still in line with the German government's climate protection objective," says Rolf Buch, CEO of Vonovia. The nationwide rate stands at around 1 %.

Vonovia Guarantees: Tenants Will Not to be Forced to Move Out

"We can guarantee: None of our tenants will be forced to move out due to modernization measures," says Rolf Buch. As far as its ongoing projects are concerned, Vonovia is promising to review in detail all cases in which its tenants report social or economic hardship and to be accommodating in its approach. Significant funds have been made available for this purpose. By the end of the year, 24 additional staff members will have been recruited across Germany to provide personal support, focusing exclusively on hardship management on-site.
Vonovia is also working continuously on improving its dialogue with its tenants. The company will be holding more tenant assemblies before extensive modernization work starts, and tenant consultation sessions will be organized while the measures are ongoing so that any questions can be clarified on-site. In addition, the formal announcement of the modernizations, which will be sent out well before any work begins, will contain a clear reference to the hardship management system.

New Climate Protection Concept Being Developed

"We are aware that, in the attempt to strike a balance between climate protection and tenant protection, we have made a decision to prioritize our tenants. But these are precisely the sort of solutions that climate protection needs," continues Rolf Buch. As a result, concepts are being developed under the leadership of Klaus Freiberg, the member of the Management Board responsible for operating business at Vonovia, in a quest to help find solutions to the major challenges facing the housing industry, including questions of affordability, climate protection, the use of space and modern living environments.

Vonovia's portfolio currently comprises around 400,000 residential units, with around 23,000 located in Austria and 14,000 in Sweden. The company also manages around 84,000 apartments for third parties. The apartment vacancy rate fell to 2.7 % (September 30, 2017: 2.9 %). Rental income came to EUR 1,287.6 million (excl. BUWOG). Rent rose by 1.5 % due to market-related factors. The investments made in the quality of Vonovia's buildings and apartments resulted in a further increase in rent of 2.5 %. New construction and vertical expansion added 0.1 % to rental growth. The average monthly rent per square meter in Vonovia's German portfolio came to EUR 6.45.

New Construction of Urgently Needed Apartments in Cities

Vonovia plans to have completed construction on around 600 apartments by the end of the year, and construction on another 1,000 will have been started or commissioned. These apartments have an average size of 60 to 70 square meters. The company is also investing in senior-friendly apartment conversion. "This is our way of supporting the trend towards smaller apartments that respond to the market demand and building precisely those apartments that society most urgently needs to alleviate the shortage of apartments in cities," says Rolf Buch.

In 2019, Vonovia plans to increase the volume to up to 2,900 apartments. "The overall conditions, however, mean that building new apartments is not an easy undertaking at present," says Buch. "We need faster planning and construction permit procedures, streamlined construction legislation and greater construction capacity."

Neighborhood Development Driven Forward

Vonovia remains committed to sustainable neighborhood development. In Essen, the company has set up a shared living facility for ten dementia sufferers as part of a collaboration with the nursing care service provider Humanika. "This is another important issue that we are tackling," says Buch. "Growing old doesn't have to translate into a binary choice between staying in one's own home and moving into a nursing home. There are many concepts that offer an option between the two. We must expand and promote these to ensure that we have a sustainable nursing care system going forward." Vonovia is planning to offer dementia facilities in other locations as well.

Positive Outlook for 2019; Planned Dividends of EUR 1.44 per Share for 2018

Given the strong operating performance in the first nine months of 2018, Vonovia is confirming its forecast for the year as a whole. The company expects to achieve FFO 1 of between EUR 1.05 billion and EUR 1.07 billion (including BUWOG). This is likely to put the FFO 1 at around 15 % above the previous year's figure (2017: EUR 920.8 million). Vonovia plans to propose a dividend in the amount of EUR 1.44 per share at the Annual General Meeting in May 2019. This corresponds to an increase of EUR 0.12 over 2017 and to a dividend yield of 3.4 % based on the closing price on November 30, 2018. In 2019, Vonovia expects to generate FFO (including BUWOG) of between EUR 1.14 billion and EUR 1.19 billion.

The investment volume for 2018 as a whole is likely to amount to around EUR 1 billion, with the expenses for maintenance borne by Vonovia alone set to rise to around EUR 410 million (2017: around EUR 346.2 million). The company's investments will increase considerably in 2019 to a volume of around EUR 1.3 billion to EUR 1.6 billion. Vonovia has, however, reallocated its investments and will be upping its investments in new construction, senior-friendly apartment conversion and projects in Sweden considerably. The company will be reducing its energy-efficient modernization measures in Germany by 40 % from 2019 onwards.

The 2018 9M report:
Further information can be found in the Press Section.

2018/2019 Financial Calendar

March 7, 2019: Publication of 2018 Annual Report
May 7, 2019: Interim Report for the first three months of 2019
May 16, 2019: Annual General Meeting
August 2, 2019: Interim Financial Report for 2019
November 5, 2019: Interim Report for the first nine months of 2019

Key Figures (without BUWOG unless otherwise indicated)

Financial Key Figures in EUR million   9M 2017   9M 2018   Change
in %
  12M 2017
Rental income   1,249.4   1,287.6   3.1   1,667.9
Adjusted EBITDA Operations   922.1   976.2   5.9   1,224.2
Adjusted EBITDA Rental   865.9   912.0   5.3   1,150.0
Adjusted EBITDA Value-add Business   76.0   90.7   19.3   102.1
Adjusted EBITDA Other   -19.8   -26.5   33.8   -27.9
Income from disposal of properties*   951.2   673.6   -29.2   1,206.4
Adjusted EBITDA Sales   81.3   87.0   7.0   110.8
Adjusted EBITDA   1,003.4   1,063.2   6.0   1,335.0
EBITDA IFRS*   945.5   1,075.4   13.7   1,271.8
thereof adjusted EBITDA BUWOG   -   91.8   -   -
FFO 1   690.5   778.2   12.7   920.8
FFO 1 per share in EUR**   1.42   1.50   5.6   1.90
Net income from fair value adjustments of investment properties*   1,164.7   1,386.7   19.1   3,434.1
Profit for the period*   1,205.2   1,399.0   16.1   2,566.9
Maintenance and modernization   752.8   935.1   24.2   1,124.8
thereof for maintenance expenses and capitalized maintenance   244.2   278.7   14.1   346.2
thereof for modernization (incl. new construction)   508.6   656.4   29.1   778.6
Key Balance Sheet Figures in EUR million   Sep. 30, 2017   Sep. 30, 2018   Change
in %
  Dec. 31, 2017
Fair value of the real estate portfolio*   30,948.1   41,948.6   35.5   33,436.3
Adjusted NAV*   16,263.5   20,967.2   28.9   18,671.1
Adjusted NAV per share in EUR**   33.53   40.47   20.7   38.49
LTV in %*   42.4   45.1   2.7 pp   39.8
Non-financial Key Figures   9M 2017   9M 2018   Change
in %
  12M 2017
Number of units managed*   413,703   484,363   17.1   409,275
thereof own apartments*   350,134   400,735   14.5   346,644
thereof apartments owned by others*   63,569   83,628   31.6   62,631
Vacancy rate in %   2.9   2.7   -0.2 pp   2.5
Monthly in-place rent (German portfolio) in EUR/m²   6.19   6.45   4.2   6.27
Number of employees (as of Sep. 30/Dec. 31)*   8,378   9,876   17.9   8,448
EPRA Key Figures in EUR million   Sep. 30, 2017   Sep. 30, 2018   Change
in %
  Dec. 31, 2017
EPRA NAV*   19,195.3   24,467.1   27.5   21,284.6
EPRA NAV per share in EUR**   39.57   47.23   19.4   43.88


* All values without BUWOG except key figures specifically marked with *
** Based on the shares carrying dividend rights on the reporting date: Sep. 30, 2018: 518,077,934, Sep. 30, 2017: 485,100,826, Dec. 31, 2017: 485,100,826

About Vonovia

Vonovia SE is Europe's leading housing company. Vonovia currently owns around 400,000 residential units in all attractive cities and regions in Germany, Austria and Sweden. An additional 84,000 or so third-party-owned apartments are also managed by Vonovia. Its portfolio is worth approximately EUR 41.7 billion. As a modern service company, Vonovia focuses on customer orientation and tenant satisfaction. Offering tenants affordable, attractive and livable homes is a prerequisite for the company's successful development. Accordingly, Vonovia makes long-term investments in the maintenance, modernization and senior-friendly conversion of its properties. The company is also creating more and more new apartments by realizing infill developments and adding to existing buildings.

The company, which is based in Bochum, has been listed on the stock exchange since 2013 and on the DAX 30 since September 2015. Vonovia SE is also listed on the international indices STOXX Europe 600, MSCI Germany, MSCI Germany, GPR 250 and EPRA/NAREIT Europe. Vonovia has a workforce of approximately 9,900 employees.

Additional Information:
Approval: Regulated Market/Prime Standard, Frankfurt Stock Exchange
Common code: 094567408
Registered headquarters of Vonovia SE: Bochum, Germany, Bochum Local Court, HRB 16879
Business address of Vonovia SE: Universitätsstrasse 133, 44803 Bochum, Germany

This press release has been issued by Vonovia SE and/or its subsidiaries solely for information purposes. This press release may contain statements, assumptions, opinions and predictions about the anticipated future development of Vonovia ("forward-looking statements") that reproduce various assumptions regarding, e.g., results derived from Vonovia's current business or from publicly available sources that have not been subject to an independent audit or in-depth evaluation by Vonovia and that may turn out to be incorrect at a later stage. All forward-looking statements express current expectations based on the current business plan and various other assumptions and therefore come with risks and uncertainties that are not insignificant. All forward-looking statements should not therefore be taken as a guarantee for future performance or results and, furthermore, do not necessarily constitute exact indicators that the forecast results will be achieved. All forward-looking statements relate solely to the day on which this press release was issued to its recipients. It is the responsibility of the recipients of this press release to conduct a more detailed analysis of the validity of forward-looking statements and the underlying assumptions. Vonovia accepts no responsibility for any direct or indirect damages or losses or subsequent damages or losses, as well as penalties that the recipients may incur by using the press release, its contents and, in particular, all forward-looking statements or in any other way, as far as this is legally permissible. Vonovia does not provide any guarantees or assurances (either explicitly or implicitly) in respect of the information contained in this press release. Vonovia is not obliged to update or correct the information, forward-looking statements or conclusions drawn in this press release or to include subsequent events or circumstances or to report inaccuracies that become known after the date of this press release.

Additional features:

Document title: Results as of September 30, 2018 Operating Result Increases in Reporting Period; Vonovia to Adjust its Modernization Strategy as of 2019 in a Move to Accommodate its Tenants

06.12.2018 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.

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