Deutsche Wohnen Se · XETR:DWNI
Deutsche Wohnen — FY2015 Earnings Presentation
42 slides from Deutsche Wohnen's earnings presentation, Mar 18, 2016
Slide 1: Full year results 2015
Deutsche Wohnen AG » Full year results 2015 Conference Call, 18 March 2016 1
Slide 2: Table of content
» Table of content 1 Highlights and financials 2015 2 Portfolio update and outlook 3 Strategy and guidance 4 Appendix 2
Slide 3: Highlights FY-2015
» Highlights FY-2015 Financials Portfolio & valuation KPI FY-2015 FY-2014 KPI FY-2015 FY-2014 EPRA NAV (undiluted) in EUR m 7,762.4 5,326.0 Number of residential units 146,128 147,105 in EUR/ share1) 23.01 17.86 In-place rent in EUR/ sqm 5.89 5.69 FFO I in EUR m 303.0 217.6 Like for like rental grow
Slide 4: Significant increase of EPRA NAV per share by 29%
» Significant increase of EPRA NAV per share by 29% in EUR m 31/12/2015 31/12/2014 NAV per share undiluted in EUR 23.01 Equity (before non-controlling interests) 6,653.5 4,692.9 17.86 + 29% Fair values of derivative financial 14.51 44.8 144.9 + 23% instruments Deferred taxes (net) 1,064.1 488.2 EPRA
Slide 5: Strong dynamics in Core+ driven by EUR 1.7bn value uplift
» Strong dynamics in Core+ driven by EUR 1.7bn value uplift FV FV FV FV Multiple in- Multiple Multiple Regions (31/12/2014) (31/12/2015) (31/12/2014) (31/12/2015) Change in % place rent in-place rent market rent EUR m EUR m EUR/sqm EUR/sqm (31/12/2014) (31/12/2015) (31/12/2015) Strategic Core and gr
Slide 6: Strong earnings and cash contributions from letting
» Strong earnings and cash contributions from letting in EUR m FY-2015 FY-2014 Capex & Maintenance Current gross rental income 634.0 626.3 Maintenance in EUR/sqm Modernization in EUR/sqm 19.98 Non-recoverable expenses (12.7) (13.8) 16.51 15.03 Rental loss (6.3) (8.9) 10.53 4.67 6.92 Maintenance (86.
Slide 7: Growing prices as demonstrated by disposal business
» Growing prices as demonstrated by disposal business Disposals Privatization Institutional sales Total with closing in 2015 2014 2015 2014 2015 2014 No. of units 1,908 2,016 7,497 2,099 9,405 4,115 Proceeds (EUR m) 187 161 487 97 674 258 Price in EUR per sqm 1,394 1,181 952 734 n/a n/a Earnings (EU
Slide 8: Best in class EBITDA margin of ~72%
» Best in class EBITDA margin of ~72% in EUR m FY-2015 FY-2014 Development of cost ratio1) 17.3% Earnings from Residential Property Management 519.2 505.8 14.4% 11.8% Earnings from Disposals 68.9 52.4 Earnings from Nursing and Assisted Living 15.6 16.3 Segment contribution margin 603.7 574.5 FY-2013
Slide 9: Profit increased to EUR 1,2bn (+34%)
» Profit increased to EUR 1,2bn (+34%) in EUR m FY-2015 FY-2014 in EUR m FY-2015 FY-2014 EBITDA (adjusted) 523.9 475.3 Interest expenses (127.0) (183.4) Depreciation (5.7) (6.1) In % of gross rents ~20% ~29% At equity valuation 1.8 (0.5) Non-cash interest expenses (9.5) (3.0) (136.5) (186.4) Financi
Slide 10: Operational improvements and acquisitions drive FFO growth
» Operational improvements and acquisitions drive FFO growth in EUR m FY-2015 FY-2014 FFO per share development in EUR EBITDA (adjusted) 523.9 475.3 0.78 0.93 1.16 Earnings from Disposals (68.9) (52.4) 0.22 0.18 + 25% At equity valuation 1.8 (0.5) + 15% 0.13 Interest expense/ income (126.1) (182.4)
Slide 11: Conservative long term capital structure with <1.8% interest costs
» Conservative long term capital structure with <1.8% interest costs Rating A- / A3; stable outlook Low leverage, long maturities and best in class rating 38% (43% pro forma announced LTV Flexible financing approach to optimize financing costs acquisitions) Currently ~100bps funding advantage
Slide 12: Strong generation of total shareholder return
» Strong generation of total shareholder return Development of dividend in EUR per share Development of EPRA NAV (undiluted) in EUR per share 0.54 23.01 0.44 17.86 +3.8% +2.5% +2.3% 0.34 14.51 12.48 0.21 2012 2013 2014 2015 2012 2013 2014 2015 Leading to strong shareholder return Summary 5.69 EUR
Slide 13: Portfolio update and outlook
» Portfolio update and outlook 13
Slide 14: Portfolio update 2015 – focused and concentrated
» Portfolio update 2015 – focused and concentrated Strategy cluster Residential units % of total In-place rent1) L-f-l growth Rent potential2) Vacancy measured by 31/12/2015 31/12/2015 31/12/2015 fair value EUR/sqm/month in % in % in % Strategic core and 143,173 99% 5.92 3.6% 19.0% 1.7% growth regio
Slide 15: Active AM approach optimised overall quality of portfolio
» Active AM approach optimised overall quality of portfolio 2015 2013 pro forma Change Portfolio bridge Total 150,219 160,725 7.0% Letting Privatisation Block Sale Non-Core Core+ 129,147 135,293 4.8% 4,932 Letting 114,552 129,209 12.8% 2,394 4,882 Privatization 6,963 3,771 -45.8% 5,018 Block Sale 7,
Slide 16: Focused and increasing investments into the portfolio
» Focused and increasing investments into the portfolio FY-2015 FY-2014 Investment split FY-2015 Trend EUR m EUR m EUR m EUR/ sqm Maintenance 86.1 88.8 Ongoing maintenance (expensed through p&l) 65.4 7.17 (incl. repairs) Modernization 96.0 64.1 (capitalized on balance sheet) Re-letting 48.1 5.28 Tot
Slide 17: Strong outlook for NAV growth in Core+ markets
» Strong outlook for NAV growth in Core+ markets Development of asset values will further decouple from rents 6 1 Targeted capex & High demand modernization meets low supply Key drivers of Liquid High portfolio 5 NAV transaction 2 quality Growth market Attractive rent Increasing development replacem
Slide 18: Demand and supply situation will tighten further in Berlin
1 » Demand and supply situation will tighten further in Berlin Further increase of Berlin‘s population and … while new construction not suffcient to address households is forecasted … supply and demand imbalance population in million 40 new construction new households1) In k units/ households 35 ~5%
Slide 19: Berlin characterized by excess demand – driving prices
2 » Berlin characterized by excess demand – driving prices Purchase prices in Berlin show continous upward … resulting in significant yield compression trend … (EUR/sqm) Purchasing price multiples for dwellings in Berlin (x), average +1.8% Existing/Berlin New/Berlin 22 +2.4% 3.800 +2.3% +3.4% +2.9%
Slide 20: Replacement costs continue to increase
3 » Replacement costs continue to increase Examples for development of Berlin land values in Construction costs are steadily increasing EUR/ sqm over the last 3 years construction cost index +90% 1,000 109.7 110 530 +2.5% Central location (Kreuzberg) +3.8% +2.3% 100 90 88.5 + Average location (Trept
Slide 21: Rental upside in Berlin leads to value growth over time
4 » Rental upside in Berlin leads to value growth over time Development of new letting rents Berlin rents have the highest catch-up potential 10 EUR 14 14.00 9 EUR 12 8.99 10 11.60 8 EUR 8.55 10.73 10.20 +3.4% +2.4% +2.9% +2.3% 8.02 +3.0% +1.8% 9.50 8 8.86 7 EUR 7.50 8.99 7.67 7.62 6 6 EUR 6.59 5.84
Slide 22: High quality Berlin portfolio with significant value potential
5» High quality Berlin portfolio with significant value potential Location Residential units1) In-place rent in New Letting Rent FV in Share in units Vacancy cluster 31/12/2015 EUR/sqm Rent2) Potential2) EUR/sqm Hot Spot 34,035 31.7% 6.30 7.90 25.3% 1.7% 1,597 Growth 44,524 41.4% 5.89 7.05 19.7% 1.6
Slide 23: Targeted investment program to crystalize inherent value upside
6 » Targeted investment program to crystalize inherent value upside Location Residential 2016-2019 Capex in Current in-place rent Rent FV in Mid term market cluster units targeted capex EUR/sqm (EUR/ sqm) potential EUR/sqm expectation (EUR/sqm) ● Hot Spot ~ 5,500 180m ~ 700 5.77 ~ 60 % 1,450 3,500 ●
Slide 24: Strategy and guidance
» Strategy and guidance deutsche-wohnen.com ‘ ) a Deutsche Wohnen 24
Slide 25: Clear focus on value creation: internal growth, bolt-on acquisitions, long-term financing
» Clear focus on value creation: internal growth, selected bolt-on acquisitions and efficient long-term financing Capitalizing on strong fundamentals in our strategic core and Key financing principles growth regions Clear commitment to continue successful internal growth • Re-letting crystallizi
Slide 26: Guidance - base case
» Guidance - base case1) Mid-term 2015 2016e Main drivers perspective5) EPRA NAV per share Capex upgrade, rent development, further yield 23.01 25 – 26 (undiluted)2)3) compression expected based on market evidence Addition of 15k units on a net base and l-f-l rent FFO I in EUR m 303 >360 growth (EUR
Slide 27: Q&A
»Q&A deutsche-wohnen.com vr) a Deutsche Wohnen 27
Slide 28: Appendix
» Appendix deutsche-wohnen.com ‘ ) a Deutsche Wohnen 28
Slide 29: Strong cash flow generation
» Strong cash flow generation 2014 2015 FFO I after minorities as reported 217.6 303.0 Mandatory amortization (81.0) (47.9) Capitalized investments (64.1) (96.0) Adj. corporate free cash flow (CFCF) excl. disposals 72.5 159.1 FFO adjustments (EBITDA) as reported1) (20.8) (58.9) CFCF excl. disposals
Slide 30: Attractive FFO contribution despite 51% sale of operational platform
» Attractive FFO contribution despite 51% sale of operational platform in EUR m FY-2015 FY-2014 31/12/2015 Facilities Places Income Greater Berlin 12 1,442 Nursing 53.3 55.4 Saxony 7 475 Living 6.1 6.0 Others 1 131 Other 7.7 6.8 In total 20 2,048 Total income 67.1 68.2 Costs Average occupancy Nursin
Slide 31: Overview of portfolio as at 31 December 2015
» Overview of portfolio as at 31 December 2015 31/12/2015 Residential Area 1) In-place Rent Vacancy Fair Share in FV 5) Multiple Yield Multiple Yield 2) 3) 4) units rent potential Value terms of in-place market (FV) FV rent rent # K sqm EUR/sqm % % EUR m % EUR/sqm % % Strategic core and 143,173 8,66
Slide 32: Portfolio split and strategic focus for investment decisions
» Portfolio split and strategic focus for investment decisions Strategy cluster Residential Area % of total units In-place Rent Vacancy Multiple in- Multiple 1) 2) 3) units rent Potential 31/12/2015 place rent market rent 31/12/2015 K sqm EUR/sqm in % in % Total 146,128 8,856 100% 5.89 18.6% 1.8% 18
Slide 33: Portfolio valuation changes by cluster
» Portfolio valuation changes by cluster 1) 1) FV FV Multiple in-place FV FV Multiple Multiple market Regions (31/12/2014) (31/12/2014) rent (31/12/2015) (31/12/2015) in-place rent rent EUR m EUR/sqm (31/12/2014) EUR m EUR/sqm (31/12/2015) (31/12/2015) Strategic Core and growth 9,635 1,074 15.6 11,5
Slide 34: Like-for-like overview of portfolio as at 31 December 2015
» Like-for-like overview of portfolio as at 31 December 2015 Like-for-like Residential units In-place In-place in % Vacancy Vacancy in % 2) 2) 31/12/2015 rent rent 31/12/2015 31/12/2014 # 31/12/2015 31/12/2014 EUR/sqm EUR/sqm y-o-y in % in % y-o-y Letting portfolio1) 129,015 5.95 5.75 3.6% 1.4% 1.7%
Slide 35: Acquisitions 2015 – regional split
» Acquisitions 2015 – regional split Residential Share/ in-place Vacancy Market Purchase Purchase Multiple Multiple units units rent rent price price in-place market rent rent Cluster % EUR/ sqm % EUR/sqm EURm EUR/sqm Total 21,691 100.0% 5.67 2.2% 6.83 1,704.0 1,292 18.9 15.8 Core+ Greater Berlin 11
Slide 36: Balance sheet
» Balance sheet Assets Equity and Liabilities in EUR m 31/12/2015 31/12/2014 in EUR m 31/12/2015 31/12/2014 Investment properties 11,859.1 9,611.0 Total equity 6,872.0 4,876.1 Other non-current assets 614.3 600.6 Financial liabilities 3,780.4 4,779.0 Deferred tax assets 325.5 351.7 Convertibles 965.
Slide 37: Deconstructing l-f-l rental growth
» Deconstructing l-f-l rental growth Drivers of rental growth Considerations Rental cap Berlin 3.5% 3.1% 0.1% Rental cap regulations have been in place in Berlin since 0.1% June 2015 2.5% 0.1% Deutsche Wohnen is actively managing the portfolio; there is 2.2% limited impact on re-letting rents 2.
Slide 38: Portfolio structure – characteristics meeting strong demand
» Portfolio structure – characteristics meeting strong demand Apartment size Year of construction 30.6% >= 75 sqm, < 40 sqm, 29.1% 19% 11% 18.3% 18.6% 40 to < 55 65 to < 75 sqm, 29% sqm, 18% 3.1% 0.4% 55 to < 65 sqm, 23% <= 1918 1919 - 1950 - 1970 - 1980 - >= 2000 1949 1969 1979 1999 Rental restrict
Slide 39: The Berlin-portfolio at a glance
» THE BERLIN-PORTFOLIO AT A GLANCE Reinickendorf Pankow # 8,917 5.86 1.8% # 8,727 6.31 1.2% Mitte Friedrichshain-Kreuzberg # 3,347 5.97 1.3% # 7,782 5.80 2.1% Lichtenberg # 8,740 5.92 1.0% Spandau # 11,529 5.67 1.8% Marzahn-Hellersdorf # 14,878 5.19 1.7% Charlottenburg-Wi
Slide 40: Overview of Management Stock Option Program
» Overview of Management Stock Option Program In addition to a market customary fixed compensation, the member of the Management Board receive a variable short-term compensation based on individual targets and a variable long-term compensation For the variable long-term compensation a stock opti
Slide 41: Disclaimer
» Disclaimer This presentation contains forward-looking statements including assumptions, opinions and views of Deutsche Wohnen or quoted from third party sources. Various known and unknown risks, uncertainties and other factors could cause actual results, financial positions, the development or the
Slide 42: Deutsche Wohnen AG
Deutsche Wohnen AG Registered Office Berlin Office Pfaffenwiese 300 Mecklenburgische Straße 57 65929 Frankfurt/ Main 14197 Berlin Phone: +49 30 897 86 5413 Fax: +49 30 897 86 5419 © 2016 Deutsche Wohnen AG