Vonovia Se · XETR:VNA
Vonovia — Q1 2022 Earnings Presentation
55 slides from Vonovia's earnings presentation, May 5, 2022
Slide 1: Q1 2022 Earnings Call
Q1 2022 Earnings Call. May 5, 2022
Slide 2: Agenda
Agenda 3 Highlights 4-14 Is Inflation Really A Threat or Is It Actually A Friend? 15-22 Segment Reporting 23 EPRA NTA 24-25 LTV, Net debt/EBITDA Multiple, Financing 26-28 Investment Program 29 Update on Adler Stake 30 Guidance 31 Priorities in a New Environment with Increased Cost of Capital 32 Wrap
Slide 3: Highlights
Highlights • €729.7m Adj. EBITDA Total (+44.2%); +10.1% excl. DWNI. • At least 3.3% organic rent growth. • €564.0m Group FFO (+44.4%); • ~3,300 units recurring sales volume (+300). +7.7% excl. DWNI. 2022 • Discretionary investment program: Q1 2022 • €0.73 Group FFO p.s. (+12.3%). Guidance • €1.0bn -
Slide 4: Four Areas Where Inflation Is Relevant for Vonovia
Four Areas Where Inflation Is Relevant for Vonovia Is Inflation Really A Threat or Is It Actually A Friend? Rent Market rent growth follows inflation with a time lag. Index rents can accelerate that development. growth Investments-driven rent growth is de facto inflation protected. Close to 80% of t
Slide 5: Mietspiegel Basics
Mietspiegel Basics Germany’s Social Market Economy Instrument for the Residential Rental Market • Residential lease agreements are usually evergreen Ownership distribution of the ca. 23m rental apartments (Germany) contracts (Vonovia‘s average duration of a lease agreement is >13 years). • In the ab
Slide 6: Mietspiegel & Inflation
Mietspiegel & Inflation Close Correlation by Design High inflation times in the 1970s Low inflation times of past 20+ years Rent growth of GdW With continued growth for construction prices, 16% Rents 16% Rents members (Association of rents for new apartments, property values, and 14% Inflation 14% I
Slide 7: Index Rents Become Attractive in Times of Increasing Inflation
Index Rents Become Attractive in Times of Increasing Inflation Vonovia Stand-alone with ~140k Apartments Suitable for Index Rents following Turnover Legal background Index rent potential at Vonovia Index rents (governed by §557b of the German Civil Code) Subsidized; • can be adjusted annually based
Slide 8: 2022 Mietspiegel Updates
2022 Mietspiegel Updates Substantial Upward Revisions • Vonovia is exposed to 203 different Mietspiegel. Top 8 Mietspiegel for Vonovia portfolio 2022 YTD • In addition to the actual market data, Mietspiegel can be influenced by the specific data set used or by 0% 2% 4% 6% 8% 10% 12% 14% methodologic
Slide 9: No General Affordability Issues Expected
No General Affordability Issues Expected Increasing Salaries & Wages and Comprehensive Government Support Increasing salaries & wages Federal government support Minimum wage level increased to €12/hour as of In the context of the Housing Benefits Reform, the +22% Automatic 10/2022 government introdu
Slide 10: P&L Inflation Risk Is Very Manageable
P&L Inflation Risk Is Very Manageable Organic Rent Growth Overcompensates Inflation Risk Rental Segment • Organic rent growth represents a powerful hedge against cost inflation, as high margins in the operating business mean inflation can only hit a small cost basis. Illustrative example • Less gene
Slide 11: Interest Rates and Inflation
Interest Rates and Inflation Rising Interest Rates with Very Limited Immediate Effect; Real Rates at Record Low Average cost of total debt Evolution of spread between bund yields and inflation1 Long maturity profile is a hedge against increasing financing Real rates deep in negative territory while
Slide 12: Resi Prices Have Shown No Real Weakness in 50 Years
Resi Prices Have Shown No Real Weakness in 50 Years Only Period of Slight Decline Came During High Vacancy Phase OECD House Price Index Germany (2015=100) and vacancy rate 160 9% 140 8% 7% 120 6% 100 5% 80 4% 60 3% 40 Period of high vacancy following Period of low 2% construction boom after vacancy
Slide 13: Resi Prices Have Been Moving Alongside Construction Prices for 50 Years
Resi Prices Have Been Moving Alongside Construction Prices for 50 Years Strong Correlation between House Prices and Construction Costs House price and construction price indices (2015=100) 180 160 140 120 100 80 60 40 20 0 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 19
Slide 14: Vonovia's Fair Values and Rents Are Substantially Below Market
Vonovia’s Fair Values and Rents Are Substantially Below Market Data Points on Prices for Condos & New Constructions and Rent Levels Asset prices Rent levels Substantial gap between Vonovia fair values and prices Substantial gap between Vonovia rent levels and market for condos and new constructions.
Slide 15: Segment Overview
Segment Overview Double-digit FFO p.s. Growth • High absolute growth driven by Deutsche Wohnen €m (unless indicated otherwise) Q1 2022 Q1 2021 Delta contribution in Q1 2022. • Vonovia stand-alone growth also fully intact Total Segment Revenue 1,633.4 1,145.5 42.6% Adj. EBITDA Rental 406.8 403.1 0.9%
Slide 16: Rental Segment
Rental Segment Rental Performance Well on Track excl. DWNI • Slightly smaller portfolio volume (ca. 5k units) in Q1 2022 Rental revenue by geography compared to prior year. 5% • Organic growth from rental growth and vacancy reduction 15% Germany partially offset by slightly higher maintenance and op
Slide 17: Rental Segment
Rental Segment Operating KPIs excl. DWNI • Organic rent growth of 3.9% year-on-year; 3.3% Organic rent growth (y-o-y, %) 3.9 excluding the one-off effect from the reversal of the Berlin 3.3 0.7 3.0 rent freeze law. 0.7 0.6 1.6 excluding one-off • Continuously low vacancy levels as a result of unbrok
Slide 18: Update CO2 Tax (Germany)
Update CO2 Tax (Germany) Estimated Aggregate Impact of ca. €40m until 2026 Burden sharing between tenants & landlords Estimated CO2 tax payments Vonovia (€m, incl. DWNI)1 • Burden sharing to start 01/2023. • Analysis confirms that current plans are more beneficial • Cost allocation based on a buildi
Slide 19: Value-add Segment
Value-add Segment Internal and External Revenue Growth Continues excl. DWNI • External and internal revenue side of Value-add Segment on track with continued expansion of value-add activities including multimedia, residential environment, smart metering and energy. • Q1 2022 income partially benefit
Slide 20: Recurring Sales Segment
Recurring Sales Segment Fair Value Step-up of 47% excl. DWNI • Q1 2022 Adj. EBITDA only slightly below prior year in spite • Recurring Sales comprise of single-unit sales from of significantly lower sales volume. • a defined sub-portfolio of ca. 24k units in Germany for • Fair value step-up increase
Slide 21: Development Segment
Development Segment Increased Volume and Gross Margins excl. DWNI • Contribution from development less linear than other Development to sell (by revenue) segments due to project nature of the business. • Q1 2022 included a larger to-sell project. • Increased gross margins compared to prior year both
Slide 22: Development Segment
Development Segment Focus to Shift Significantly towards Development to Sell excl. DWNI • 777 units completed in Q1 2022 (266 to hold and 511 to Geographic split of development pipeline sell). Sweden 9% • Total long-term pipeline of ca. 49k apartments. Austria 13% • Development costs between €3.0k -
Slide 23: EPRA NTA
EPRA NTA +1.2% Increase y-o-y (Based on New Definition excl. Purchaser’s Costs) • New definition ignores purchaser’s costs and adds back full amount of deferred tax (88% for Vonovia (Hold Portfolio) and 100% for DWNI). • Q1 valuation1 by way of a model update of portfolio data and input parameters o
Slide 24: Debt Structure
Debt Structure Smooth Maturity Profile and Diverse Funding Mix €m • Diverse funding mix with no more than 11% of debt 5,500 maturing annually. 5,000 • Combination of ND/EBITDA, LTV, fixed/hedged debt ratio 4,500 4,000 and maturity profile remains key in overall funding 3,500 strategy. 3,000 • Well-b
Slide 25: LTV & Net Debt/EBITDA Multiple
LTV & Net Debt/EBITDA Multiple Net Debt EBITDA Multiple Set to Decline from YE2022E Peak Level through EBITDA Growth • No material changes in Q1. €m (unless indicated otherwise) Mar. 31, 2022 Dec. 31, 2021 Delta • Main changes due to repayment of outstanding bridge Non-derivative financial liabiliti
Slide 26: Investment Program
Investment Program Discretionary Investments in Megatrends Program evolution (€m) Space Creation Upgrade Building Optimize Apartment 2022E guidance reduced from 1,489 1,400 1,398 (midpoint) €2.3bn 1,344 (mid point) to 1,139 €1.4bn (mid point) by 779 shifting from development to 472 hold to 356 Neigh
Slide 27: Discretionary Investment Program
Discretionary Investment Program Varying NIYs due to Different Payback Periods but Double-digit IRRs across All Investments • Historic cost of capital rendered all investments attractive, Net initial yield (static) both on NIY and on IRR metric. = Incremental EBITDA / investment • Increased cost of
Slide 28: Illustrative Organic Funding
Illustrative Organic Funding Portfolio Investments to Be Funded with Retained Earnings After Dividend + Recurring Sales Cash • Increased cost of capital requires review of funding sources Group FFO and capital allocation. - 70% cash dividend payment • The basic premise is that the absolute debt leve
Slide 29: Update on Adler Stake
Update on Adler Stake Vonovia Is Not A Buyer of Adler Shares But There Is No Need for Quick Decisions Our involvement began with an opportunistic decision that gave us a strategic optionality. Given our Financial increased cost of capital and commitment to not add additional debt in the current envi
Slide 30: Guidance 2022 Update
Guidance 2022 Update Increase for Organic Rent Growth and Recurring Sales Volume; Decrease in New Construction to Hold Initial Guidance 2022 Guidance 2022 Update Mid-Term Outlook Total Segment Revenue €6.2bn - €6.4bn €6.2bn - €6.4bn growing Rental Revenue €3.1bn - €3.2bn €3.1bn - €3.2bn growing upwa
Slide 31: Priorities in a New Environment with Increased Cost of Capital
Priorities in a New Environment with Increased Cost of Capital Immediate and Near-term Actions Business • Based on fundamental megatrends: urbanization, climate change, demographic change. • Portfolio focused on urban areas with long-term positive fundamentals. model intact • ESG firmly anchored in
Slide 32: Wrap-up
Wrap-up Operating business incl. DWNI integration fully on track. Environment in our residential markets remains highly favorable. Inflationary environment expected to be positive for asset valuation. Inflation to gain traction in rent growth albeit with a delay due look-back-period and average effe
Slide 33: Appendix
Appendix 34-39 Portfolio 40-43 Megatrends and ESG 45-46 Bonds, Ratings, and Covenants 47-50 Residential Market Fundamentals 51-52 Shares 53 Financial Calendar 54 Disclaimer May 5, 2022 Q1 2022 Earnings Call 33
Slide 34: Regional Markets
Regional Markets Balanced Exposure to Relevant Growth Regions Fair value1 In-place rent Regional Markets Average rent Residential Organic rent Multiple Purchase power Market rent (Mar. 31, 2022) (€m) (€/sqm) Residential Vacancy Total Residential (€/sqm/ growth (in-place index (market increase foreca
Slide 35: Urban Quarters
Urban Quarters 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 aggregation level whe
Slide 36: Portfolio Cluster
Portfolio Cluster Focus on Urban Quarters and Urban Clusters Fair value1 Residential In-place rent Portfolio Cluster (€bn) % of total (€/sqm) units (€/sqm/month) (Mar. 31, 2022) Urban Quarters 35.6 55% 2,396 236,879 7.12 Urban Clusters 14.2 22% 2,439 88,366 7.50 Strategic 49.7 77% 2,408 325,245 7.22
Slide 37: Long-term Support from Megatrends
Long-term Support from Megatrends 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. % • The German Federal Office for Construction and Urban Development
Slide 38: Valuation
Valuation Statutory Auditor’s Materiality Threshold Required Valuation in Q1 • Vonovia’s statutory auditor, KPMG, has defined an annual value Q1 valuation change of €750m (<1% of fair value) as material and has requested a • The 20 largest locations in Germany, quarterly valuation if this threshold
Slide 39: Valuation Process
Valuation Process 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 on the basis
Slide 40: Serving a Fundamental Need in a Highly Relevant Market
Serving a Fundamental Need in a Highly Relevant Market 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. Commitment to E S Responsi
Slide 41: Megatrends
Megatrends 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% Germany W.
Slide 42: United Nations Sustainability Development Goals
United Nations Sustainability Development Goals 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 impacts particula
Slide 43: Recognition of ESG Performance
Recognition of ESG Performance 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 Risk Rating
Slide 44: Corporate Governance
Corporate Governance AGM, Supervisory Board, Management Board • The duties and authorities of the three governing bodies derive from the SE Annual General Meeting (AGM) Regulation, • Shareholders can exercise their voting rights (One Share, One Vote). the German Stock Corporation Act and the Article
Slide 45: Bonds & Ratings
Bonds & Ratings Name Tenor & Coupon ISIN Amount Issue Price Coupon Final Maturity Date Rating Moodys Scope S&P Green Bond 030B (EMTN) 5 years 3mS+140bps XS2368364449 SEK 750m 100.000% 3mS+140bps 08 Apr 2027 A3 A- BBB+ Social Bond 030A (EMTN) 2 years 3mS+95bps XS2368364522 SEK 500m 100.000% 3mS+95bps
Slide 46: Bond Covenants
Bond Covenants Substantial Headroom for All Covenants Current level Bond covenants Required level (Mar. 31, 2022) LTV <60% 45% (Total financial debt / total assets) Secured LTV <45% 13% (Secured debt / total assets) ICR >1.8x 5.9x (LTM Adj. EBITDA / LTM net cash interest) Unencumbered assets >125% 1
Slide 47: Residential Market Fundamentals (Germany)
Residential Market Fundamentals (Germany) Household Sizes and Ownership Structure Growing number of smaller households Fragmented ownership structure • While the overall population in Germany is expected to slightly decline, • Germany is the largest housing market in Europe with ~42m housing the num
Slide 48: Supply/Demand Imbalance
Supply/Demand Imbalance 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 sight: • build
Slide 49: Long-term Structural Support (Germany)
Long-term Structural Support (Germany) 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% • High replaceme
Slide 50: Long-term Structural Support (Sweden)
Long-term Structural Support (Sweden) 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 0% 3 1950 20
Slide 51: Liquid Large-cap Stock
Liquid Large-cap Stock Total Performance since IPO EuroStoxx 50 40 Stoxx 600 35 M-DAX S-DAX DAX 380 30 Share price (rebased to 100) Vonovia market cap (€bn) +200% 25 280 +73% 20 +43% +42% 15 180 10 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 Jan-17 Jan-
Slide 52: Vonovia Shares
Vonovia Shares 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% 8,8% ISIN DE000A1ML7J1 APG 4,0% Ticker symbol VNA Share class Registered shares with no par value Main listing Frankfurt Stock Exchange Mark
Slide 53: IR Contact & Financial Calendar
IR Contact & Financial Calendar https://investors.vonovia.de Contact Financial Calendar 2022 Rene Hoffmann (Head of IR) May 5 3M 2022 Results Primary contact for Sell side, Buy side +49 234 314 1629 May 6 Q1 Roadshow, Frankfurt rene.hoffmann@vonovia.de May 9/10 Q1 Roadshow, Toronto & New York Stefan
Slide 54: Disclaimer
Disclaimer 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 information purp
Slide 55: For Your Notes
For Your Notes May 5, 2022 Q1 2022 Earnings Call 55