Vonovia Se · XETR:VNA
Vonovia — FY2021 Earnings Presentation
68 slides from Vonovia's earnings presentation, Mar 18, 2022
Slide 1: FY 2021 Earnings Call
FY 2021 Earnings Call. March 18, 2022
Slide 2: Agenda
Agenda 1. Preface pages 2-8 2. FY 2021 Results & Business Update pages 9-34 3. Appendix pages 35-68 Mar. 18, 2022 2
Slide 3: Five Key Observations
1. Five Key Observations Preface Context in Light of Current Equity Market Sentiment Consistent growth since IPO • Earnings (FFO p.s.) + 13% CAGR. 1 Growth • DPS +13% CAGR. • Value (NTA p.s.) + 18% CAGR. We are highly confident in our ability to continue to deliver earnings and value growth. 7.5%
Slide 4: Sustainable Performance
1. Sustainable Performance Preface Vonovia Delivers Consistent Earnings, Dividend and Value Growth FFO and Dividend growth EPRA NTA growth 13% CAGR (2013-2022E) 17% CAGR (2013-2021A) FFO p.s. EPRA NTA p.s. DPS 2.642 66.7 58.8 2.23 2.11 2.15 1.93 48.7 1.78 1.661 42.1 1.53 1.58 1.47 36.1 1.35 1.22 1.2
Slide 5: 7.5% Average Combined Organic Return p.a.
1. 7.5% Average Combined Organic Return p.a. Preface Dividend Yield Plus Organic Asset Value Growth Dividends Organic Asset Value Growth ~70% payout ratio Annual growth from rent increase Increased DPS every year since IPO and investments Excluding yield compression 20% Yield Compression Div
Slide 6: Undemanding Equity Valuation Metrics
1. Undemanding Equity Valuation Metrics Preface Current Sentiment Has Led to Record-low Equity Valuation Levels FFO yield Dividend yield NTA premium/discount 5.8% 9% 5.5% 4.7% 4.1% 3.6% 3.3% -8% -32% Vonovia Vonovia current European Real Vonovia Vonovia current European Real Vonovia Vonovia current
Slide 7: Vonovia Is Not A Bond Proxy
1. Vonovia Is Not A Bond Proxy Preface Vonovia’s Growing Earnings Deliver an Increasing “Coupon” Widely held perception that Vonovia is a bond proxy and that the spread between bond yields and asset yields is key for the investment However, Vonovia is an operating company that delivers not only an t
Slide 8: Vonovia Offers Best Access to Residential Assets
1. Vonovia Offers Best Access to Residential Assets Preface Asset Class Remains Highly Attractive and Vonovia Is the Best-in-class Platform to Invest Regulated • Assets in the direct market continue to sell at substantial premia. residential • Structural supply/demand imbalance is the dominant drive
Slide 9: Agenda
Agenda pages 2-8 2. FY 2021 Results & Business Update pages 9-34 pages 35-68 Mar. 18, 2022 9
Slide 10: Agenda FY 2021 Results and Business Update
2. Agenda FY 2021 Results and Business Update FY2021 Results 11 Highlights 12-18 Segment Results 19-21 Valuation & EPRA NTA 22 Reporting and Disclosure Changes Starting Q1 2022 23-24 LTV & Financing 25-30 ESG Update 31 Deutsche Wohnen Integration 32-33 Guidance 2022 34 Wrap-up Mar. 18, 2022 FY 2021
Slide 11: Highlights
2. Highlights FY2021 Results • Adj. EBITDA Total €2,269m (+18.8%). • Group FFO €1,672m (+24.0%). • Total Segment Revenue €6.2bn – €6.4bn. • Dividend proposal for 2021 €1.66 per share • Adj. EBITDA Total €2.75bn – €2.85bn. (+€0.08 y-o-y). • Group FFO €2.0bn – €2.1bn. 2021 • SPI 109%. 2022 • DPS ca. 7
Slide 12: Segment Overview
2. Segment Overview FY2021 Results High Absolute Growth; VNA-Stand-alone Targets also Achieved see page 22 for future Group FFO definition €m (unless indicated otherwise) 2021 2020 Delta Total Segment Revenue Vonovia stand-alone 2021 excl. Total Segment Revenue 5,179.9 4,370.0 18.5% DWNI €4,872.2m (
Slide 13: Rental Segment
2. Rental Segment FY2021 Results Organic Growth and Efficiencies Drive Adj. EBITDA Rental excl. DWNI Largely unchanged portfolio volume for 2021. Rental revenue by geography • Rental revenue driven by organic rent growth mostly from 5% investments; 15% • Operating expenses down and Adj. EBITDA Opera
Slide 14: Rental Segment
2. Rental Segment FY2021 Results Operating KPIs excl. DWNI • • Organic Organic rentrent growth of 3.5% growth year-on-year. of 3.8% year-on-year; 3.2% excluding the one- Organic rent growth (y-o-y, %) • Low off vacancy effect levels as areversal from the result of ofunbroken the Berlindemand for our
Slide 15: Value-add Segment
2. Value-add Segment FY2021 Results Internal and External Revenue Growth Continues excl. DWNI • External (+€7m) and internal (+€54m) revenue side of Value-add Segment fully on track with continued expansion of value-add activities including multimedia, residential environment, smart metering and ene
Slide 16: Recurring Sales Segment
2. Recurring Sales Segment FY2021 Results Unbroken Demand for Individual Condos Reflects Strong Fundamentals excl. DWNI • Stable fair value-step-ups on the back of higher disposal volumes. • The Recurring Sales Segment comprises of single-unit sales from • 2021 Recurring Sales positively impacted by
Slide 17: Development Segment
2. Development Segment FY2021 Results Increase in Both Development Channels excl. DWNI • Development-to-sell increase driven by a large project with a global Development to sell (by revenue) exit in Austria. • Development-to-hold contribution above prior year with increased fair value and gross prof
Slide 18: Development Segment
2. Development Segment FY2021 Results Vonovia‘s Contribution towards Reducing the Housing Shortage excl. DWNI New rental apartments for our own portfolio (to hold) New apartments for disposal (to sell) • 1,373 units completed in 2021 (including floor additions). • 827 units completed in 2021. • Tota
Slide 19: Valuation
2. Valuation FY2021 Results Strong Value Growth in 2021 • Value growth across the entire portfolio with the highest gains in Sweden 2021 fair value evolution (+21.0%), followed by Germany (+13.9%) and Austria (+5.0%). 0.4 97.8 89.4 8.2 • The Vonovia stand-alone valuation resulted in a total value gr
Slide 20: Valuation
2. Valuation FY2021 Results Broad-based Value Growth Across All Markets. Sweden Particularly Strong. excl. DWNI Fair Value1 2021 Total Fair Value Regional Market Value growth from performance, YC and investments (l-f-l) (€m) Growth (l-f-l) Berlin 8,965 8.1% Rhine Main Area 5,606 14.3% Southern Ruhr
Slide 21: EPRA NTA
2. EPRA NTA FY2021 Results +13.5% Increase y-o-y see page 22 for future NTA definition €m Dec. 31, Dec. 31, Delta (unless indicated otherwise) 2021 2020 Total equity attributable to Vonovia €8.1bn new equity and €2.3bn value creation (net of €0.5bn 33,287.1 23,143.9 43.8% shareholders dividend payou
Slide 22: Reporting & Disclosure Changes Starting Q1 2022
2. Reporting & Disclosure Changes Starting Q1 2022 FY2021 Results Additional Transparency and Improved Comparability • Vonovia has been adding back purchaser’s costs for the Hold Portfolio as part of the NTA, treating purchaser’s costs similar to deferred taxes, as both are directly linked to the (n
Slide 23: LTV & Net Debt/EBITDA Multiple
2. LTV & Net Debt/EBITDA Multiple FY2021 Results Pro forma LTV of 44.0% Including the Effect of the January 2022 Berlin Disposals €m Dec. 31, Dec. 31, (unless indicated otherwise) 2021 2020 Delta +€10.1bn DWNI debt Non-derivative financial liabilities 47,229.5 24,084.7 +96% +€3.5bn bridge financing
Slide 24: Debt Structure
2. Debt Structure FY2021 Results Smooth Maturity Profile and Diverse Funding Mix €m • Diverse funding mix with no more than 11% of debt maturing 5,500 annually. 5,000 4,500 • Combination of LTV, fixed/hedged debt ratio and maturity profile 4,000 remains key in overall funding strategy. 3,500 3,000 •
Slide 25: New Sustainable Bond Finance Framework
2. New Sustainable Bond Finance Framework FY2021 Results €21bn Eligible Assets for Green Bonds and Social Bonds Vonovia has published a Sustainable Finance Framework to cover both Green Bonds and Social Bonds and Green assets €21bn Social assets to reflect the broad nature of its sustainability ambi
Slide 26: Sustainability Performance Index (SPI)
2. Sustainability Performance Index (SPI) FY2021 Results Measurable Targets for Non-financial KPIs excl. DWNI • Vonovia has established the SPI with SPI 2021 2021 2022 Medium-term Targets Actuals Initial Targets Targets quantitative, non-financial metrics to measure sustainability performance in 38.
Slide 27: New Climate Path for Accelerated CO2 Reduction
2. New Climate Path for Accelerated CO2 Reduction FY2021 Results Science-based Decarbonization Roadmap with Measurable Interim Targets excl. DWNI • Accelerated decarbonization with near CO2 neutrality as early as 2045. • Following CRREM MFH 1.5 degree pathway. • Including Scope 1, 2 and 3.3. CO2 int
Slide 28: Ukraine
2. Ukraine FY2021 Results Vonovia Stands with the People of Ukraine and Is Helping Refugees For more than 75 years after the end of World War II, Europe has mostly been a guarantor for peace, stability, security and prosperity. Taking a We are appalled by the war in Ukraine and deeply saddened by th
Slide 29: Increasing Energy Prices
2. Increasing Energy Prices FY2021 Results No Financial Risk for Vonovia But A Social Challenge • Energy prices have been rising faster than rents for years, and this Price evolution (%) for net cold rent, electricity, and energy (Germany)1 development has accelerated drastically in recent weeks. •
Slide 30: Inflation & Rents
2. Inflation & Rents FY2021 Results 2/3 of Rent Growth de facto Inflation-protected; 1/3 Correlated With Inflation Sources of Vonovia rent growth Rent growth from investments • Investment-driven rent growth is the result of passing on a certain percentage of the investment amount. • Higher costs lea
Slide 31: Deutsche Wohnen Integration
2. Deutsche Wohnen Integration FY2021 Results Timeline & Synergies Integration project underway and fully on track Estimated synergy phasing (€m) • Constructive cooperation on both sides. Final synergy estimate expected for Q2 2022; analysis so far confirms • Project organization and day-to-day inte
Slide 32: Initial Guidance 2022
2. Initial Guidance 2022 FY2021 Results Total Revenue, Adj. EBITDA, and Group FFO expected to grow >20% Underlying portfolio for 2022 is ca. 21k units smaller than in 2021. Estimated impact on Group FFO of ca. €75m (€0.10/share). 2021 Actuals Initial Guidance 2022 Mid-Term Outlook Total Segment Reve
Slide 33: Group FFO per Share
2. Group FFO per Share FY2021 Results Substantial Growth Ahead Following Transition Year 2021 • The closing of the Deutsche Wohnen transaction and the subscription rights issue in Q4 distort the 2021 Group FFO per share (eop shares) and result in a 4% y-o-y decline, driven by only one quarter contri
Slide 34: Wrap-up
2. Wrap-up FY2021 Results Compelling track record of earnings & value growth and organic returns. Undemanding equity valuation with FFO yield, dividend yield and EPRA NTA discount at record levels. Operating business incl. DW integration fully on track. Residential market fundamentals remain very su
Slide 35: Appendix
Agenda 3. Appendix pages 35-68 Mar. 18, 2022 35
Slide 36: Appendix
3. Appendix Appendix 37-44 Portfolio 45-49 ESG 50-51 Finance 52-54 M&A 55-58 Residential Markets 59-60 Vonovia Shares 61-65 Miscellaneous 66 Financial Calendar Mar. 18, 2022 FY 2021 Earnings Call 36
Slide 37: Scalable B-to-C Business Beyond the Bricks
3. Scalable B-to-C Business Beyond the Bricks Appendix Implementation of Vonovia Business Model in Comparable Markets • Vonovia has developed an operating platform and a unique business model for the efficient management of large residential portfolios in regulated environments. • We are convinced t
Slide 38: Regional Markets
3. Regional Markets Appendix Balanced Exposure to Relevant Growth Regions Fair value1 In-place rent Regional Markets Average rent Residential Organic rent Multiple Purchase power Market rent (Dec. 31, 2021) (€m) (€/sqm) Residential Vacancy Total Residential (€/sqm/ growth (in-place index (market inc
Slide 39: Urban Quarters
2. Urban Quarters FY2021 Results Focus Point for Maximum Environmental and Social Impact excl. DWNI In residential real estate, a neighborhood, or urban quarter, is usually defined as a cohesive urban structure that is considered by its inhabitants as a self-contained area. It is the predominant agg
Slide 40: Climate Path Requires New Portfolio Clustering
2. Climate Path Requires New Portfolio Clustering FY2021 Results Operate and Invest Cluster Have Become Obsolete excl. DWNI • Majority of historical investment decisions were made on a building level, and the Strategic Portfolio was clustered into Operate and Invest. • Decarbonizing the portfolio un
Slide 41: Portfolio Cluster
3. Portfolio Cluster Appendix Focus on Urban Quarters and Urban Clusters Fair value1 Residential In-place rent Portfolio Cluster (€bn) % of total (€/sqm) units (€/sqm/month) (Dec. 31, 2021) Urban Quarters Collection of >150 apartments in one micro location. Investment strategy: deep renovation and c
Slide 42: Long-term Support from Megatrends
3. Long-term Support from Megatrends Appendix Urban Areas with Long-term Supply/Demand Imbalance excl. DWNI Vonovia Market view Portfolio evolution (Germany) Growing and shrinking regions2 65% • ~70k non-core apartments sold since IPO in 2013. % Aggregate • The German Federal Office for Construction
Slide 43: Investment Program for Organic Growth
3. Investment Program for Organic Growth Appendix Investments Address Three Megatrends and Safeguard Long-term Organic Growth Investment program evolution (€m) 2,300 (midpoint) 1,489 1,344 1,398 1,139 779 472 Optimize New construction Upgrade Building 356 Apartment to hold 172 71 Neighborhood Develo
Slide 44: Investment Program Funding (Illustrative)
3. Investment Program Funding (Illustrative) Appendix Investment Volume Is Calibrated to Maintain LTV Target Range + Adj. EBITDA Rental • Comprehensive investment program to drive organic growth + Adj. EBITDA Value-add and portfolio improvements. + Adj. EBITDA Recurring Sales • Size of investment pr
Slide 45: Serving a Fundamental Need in a Highly Relevant Market
3. Serving a Fundamental Need in a Highly Relevant Market Appendix Our Business Is Deeply Rooted in ESG All of our actions have more than just an economic dimension and require adequate stakeholder reconciliation. • We provide a home to more than 1 million people from ca. 150 nations. • CO2 emission
Slide 46: Megatrends
3. Megatrends Appendix Three Dominant Megatrends in Residential Real Estate Urbanization Climate Change Demographic Change % of population living in cities % of modernized housing units % of population above/below 65 years 87% ~3% ~3% Germany W. Europe 84% 21% 20% 31% 29% 79% 77% ~1% 79% 80% 69% 71%
Slide 47: United Nations Sustainability Development Goals
3. United Nations Sustainability Development Goals Appendix Vonovia Has A Meaningful Impact on 8 SDGs We consider 8 of the 17 United Nations Sustainability Development Goals (SDG) to be material to our business activities and aligned with our sustainability strategy. We expect to have positive impac
Slide 48: Recognition of ESG Performance
3. Recognition of ESG Performance Appendix ESG Ratings and Indices ESG Ratings • Upgraded in both ratings in 2021 • Risk rating within 1st percentile of global rating universe • Ranked 27 out of universe of 14,749 companies globally • Ranked 3 out of 1,045 companies within Real Estate group 6.7 ESG
Slide 49: Corporate Governance
3. Corporate Governance Appendix AGM, Supervisory Board, Management Board • The duties and authorities of the three governing bodies derive from the SE Regulation, Annual General Meeting (AGM) the German Stock Corporation Act and the Articles of Association. In addition, • Shareholders can exercise
Slide 50: Bond Covenants
3. Bond Covenants Appendix Substantial Headroom for All Covenants Current level Bond covenants Required level (Dec. 31, 2021) LTV <60% 44% (Total financial debt / total assets) Secured LTV <45% 12% (Secured debt / total assets) ICR >1.8x 5.8x (LTM Adj. EBITDA / LTM net cash interest) Unencumbered as
Slide 51: Bonds & Ratings
3. Bonds & Ratings Appendix Name Tenor & Coupon ISIN Amount Issue Price Coupon Final Maturity Date Rating Moodys Scope S&P Bond 028E (EMTN) 30 years 1.625% DE000A3MP4W5 € 750m 97.903% 1.625% 01 Sep 2051 A3 A- BBB+ Bond 028D (EMTN) 11 years 0.750% DE000A3MP4V7 € 1,250m 99.455% 0.750% 01 Sep 2032 A3 A
Slide 52: M&A Philosophy
3. M&A Philosophy Appendix Growing through Acquisitions Makes Sense – But Only at the Right Price Acquisition philosophy Acquisition criteria • Increased scale delivers efficiencies, performance and value growth. • In principle, any acquisition in our core markets makes sense – but Strategic Rationa
Slide 53: Portfolio Evolution
3. Portfolio Evolution Appendix Execution of Strategy as Market Consolidator and Player of Scale Portfolio evolution Dec. 31, 2021 (‘000 units) Major transactions 474 565 5 Synergies Target Units (‘000) Strategic rationale (over-) delivered Deutsche Wohnen adding scale and additional 2014 11 exposur
Slide 54: Acquisition Track Record
3. Acquisition Track Record Appendix Value Accretion in Acquired Portfolios Larger acquisitions Fair Value per sqm Year Deal Residential units # TOP Locations @ Acquisition Dec. 31, 2021 ∆ Berlin, Hamburg, Cologne, DEWAG 11,300 € 1,344 € 3,108 131% Frankfurt 2014 VITUS1 20,500 Bremen, Kiel € 807 € 2
Slide 55: Residential Market Fundamentals (Germany)
3. Residential Market Fundamentals (Germany) Appendix Household Sizes and Ownership Structure Growing number of smaller households Fragmented ownership structure • While the overall population in Germany is expected to slightly decline, the • Germany is the largest housing market in Europe with ~42m
Slide 56: Supply/Demand Imbalance
3. Supply/Demand Imbalance Appendix Gap May Become Even Larger • Vonovia considers the structural supply/demand imbalance in urban areas to be Age group distribution in Germany2 the most relevant driver of residential property values. million • A meaningful improvement to this imbalance is not in si
Slide 57: Long-term Structural Support (Germany)
3. Long-term Structural Support (Germany) Appendix Positive Fundamentals excl. DWNI Urbanization1 • Long-term structural support from 100% 80 • Insufficient levels of new construction 75% 78% 84% 75 80% 68% 70 • Urbanization driving supply/demand imbalance in 60% 65 60 urban areas 40% 55 50 20% • Hi
Slide 58: Long-term Structural Support (Sweden)
3. Long-term Structural Support (Sweden) Appendix Positive Fundamentals Urbanization1 • Long-term structural support from 100% 93% 13 88% 84% • Insufficient levels of new construction 80% 11 66% • Urbanization driving supply/demand imbalance in 60% 9 40% 7 urban areas 20% 5 • High replacement costs
Slide 59: Liquid Large-cap Stock
3. Liquid Large-cap Stock Appendix Total Performance since IPO EuroStoxx 50 35 Stoxx 600 M-DAX S-DAX 30 DAX 380 25 +260% Share price (rebased to 100) Vonovia market cap (€bn) 20 280 +77% +52% 15 +46% 10 180 5 80 0 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Jan-14 Jan-15 Jan-16 Ja
Slide 60: Vonovia Shares
3. Vonovia Shares Appendix Basic Data and NOSH Evolution Norges First day of trading July 11, 2013 11,1% No. of shares outstanding 776.6 million BlackRock Free float 88.9% 9,0% ISIN DE000A1ML7J1 4,0% APG Ticker symbol VNA Share class Registered shares with no par value Main listing Frankfurt Stock E
Slide 61: Rental Portfolio ca. 21k Smaller in 2022
3. Rental Portfolio ca. 21k Smaller in 2022 Appendix Calculation of Dissynergies Units 21,043 Rental Income (€m) 115 EBITDA (€m) 92 FFO (€m) 75 Shares (m) 776.6 Est. FFO p.s. loss (€/share) 0.10 Disposals include Recurring Sales and disposal to City of Berlin. Mar. 18, 2022 FY 2021 Earnings Call 61
Slide 62: EPRA NRV
3. EPRA NRV Appendix +22.0% Increase y-o-y €m Dec. 31, Dec. 31, Delta (unless indicated otherwise) 2021 2020 IFRS Equity attributable to shareholders 33,287.1 23,143.9 43.8% Deferred tax in relation to FV gains of investment property 20,053.3 11,947.8 67.8% FV of financial instruments1 28.6 54.9 -47
Slide 63: History of Vonovia
3. History of Vonovia Appendix We Have Built a Responsible European Leader 2021 2020 Acquisition of second largest Climate path for player, Deutsche 2018 CO2 neutrality by Wohnen Opportunistic 2045 2013 until expansion into 2018 selected IPO in 2013 European Building the European Consolidation Profe
Slide 64: Consistent Strategy Execution since IPO
3. Consistent Strategy Execution since IPO Appendix Business Built for Long-term Growth IPO Today Rental & Value-add (efficient, scalable B-to-C operating business). Business Rental and condo sales Development (profitable business & our answer to supply/demand imbalance). Scope Recurring sales (trac
Slide 65: Valuation Process
3. Valuation Process Appendix Discount Rate Not Directly Linked to Interest Rates, but Derived from Market Prices Rental Portfolio Development Segment / Projects • As required by the individual valuation principle under IFRS, the valuation is • Vonovia values building plots and development projects
Slide 66: IR Contact & Financial Calendar
3. IR Contact & Financial Calendar Appendix https://investors.vonovia.de Contact Financial Calendar 2022 Rene Hoffmann (Head of IR) Mar 22-23 Vonovia Full Year Roadshow (partially virtual) Primary contact for Sell side, Buy side +49 234 314 1629 Mar 24 BOFA EMEA Real Estate CEO Conference, London re
Slide 67: Disclaimer
3. Disclaimer Appendix This presentation has been specifically prepared by Vonovia SE and/or its affiliates (together, “Vonovia”) for internal use. Consequently, it may not be sufficient or appropriate for the purpose for which a third party might use it. This presentation has been provided for info
Slide 68: For Your Notes
3. For Your Notes Appendix Mar. 18, 2022 FY 2021 Earnings Call 68