Vonovia Se · XETR:VNA
Vonovia — Investor Presentation (January 2019)
70 slides from Vonovia's investor presentation, January 2019
Slide 1: Company Presentation
Company Presentation January 2019
Slide 2: Agenda
Agenda 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Vonovia At A Glance 3 Business Update 7 Residential Market Update 23 Appendix 30 Company Presentation – January 2019 page 2
Slide 3: Vonovia At A Glance
Vonovia At A Glance 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Largest listed European residential real estate company with more than 400k Sweden (Stockholm, apartments. Austria Gothenburg, (mostly Malmö) Value creation across the full residential real estate
Slide 4: 4+1 Strategy Has Evolved into 4+2 Strategy
4+1 Strategy Has Evolved into 4+2 Strategy 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Reputation & Customer Satisfaction Property 79.6% 82.2% 84.8% 87.0% 88.6% Management Mergers & Traditional 5 Acquisitions 830 1 Efficient 754 645 570 526 operations of 2013 2
Slide 5: Value Creation Across the Full Life Cycle
Across the Full Life Cycle 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Vonovia’s business model has evolved to encompass value creation across the full residential real estate life cycle of our assets BUILD MANAGE SELL Construction of new Recurring Sales apartm
Slide 6: Agenda
Agenda 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Vonovia At A Glance 3 Business Update 7 Residential Market Update 23 Appendix 30 Company Presentation – January 2019 page 6
Slide 7: Highlights
Highlights 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Organic rent growth of 4.1 % y-o-y. Operations Operating expenses reduced by 9.4% as a result of eliminating the double cost structure from (excl. Buwog) conwert included for the first 6 months of 2017 as w
Slide 8: KPI Growth in spite of Smaller Portfolio and Higher NOSH
Excluding Buwog KPI Growth in spite of Smaller Portfolio and Higher NOSH 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Rental income slightly up 3.1% on an almost 2% smaller but higher quality portfolio. Adjusted EBITDA Operations up 5.9% because of substantially
Slide 9: Rent Growth Drivers
Excluding Buwog and Victoria Park Rent Growth Drivers 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Positive rent growth trajectory (Germany only) Rent growth drivers (last 12M) 9M 2018 9M 2017 Delta 2013 2014 2015 2016 2017 2018E 2019E Market driven 1.6% 1.6% 1.
Slide 10: Outlook FY2018 valuation
Outlook FY2018 valuation 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Commentary Value growth drivers (€m) Vonovia stand-alone FY2018 value growth 4,450 – 4,750 estimated to be €4,125m – €4,375m (+13% y-o-y 4,229 350-380 (H2) (mid-point)). ~510 (H2) 695 FY ~855
Slide 11: Increasingly Diverse Value-add Business with Growing Contribution
Excluding Buwog and Victoria Park Increasingly Diverse Value-add Business with Growing Contribution 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Concept Value-add and NAV Insourcing of services to ensure maximum process NAV does not account for Vonovia’s Value-a
Slide 12: LTV Remains in Comfort Zone
LTV Remains in Comfort Zone 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix LTV as of September 30, 2018 was 45.1%. Against the background of the stable cash flows and the strong fundamentals in our portfolio locations we see continued upside potential for our prop
Slide 13: Smooth Maturity Profile with Diverse Funding Mix
Smooth Maturity Profile with Diverse Funding Mix 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Debt maturity profile (€m) 3,000 3.5% Current refinancing rate (10 years) 2,500 3.0% 2.5% 2,000 2.0% 1,500 1.5% 1,000 1.0% 500 0.5% 0 0.0% 2018 2019 2020 2021 2022 2023
Slide 14: 2018 Guidance Confirmed
2018 Guidance Confirmed 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix 2017 Actuals 2018 Guidance (from Aug.) Final 2018 Guidance Incl. 9 months Buwog & 6 months Victoria Park Organic rent growth (eop) 4.2% ~4.4%1 ~4.4%1 Vacancy (eop) 2.5% <2.5% <2.5% Rental Incom
Slide 15: Evolution of Modernization and New Construction Investments
Evolution of Modernization and New Construction Investments 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix The supply/demand imbalance in urban areas and the conflict between the need for energy efficiency modernization of Germany’s housing stock and affordability
Slide 16: Increasing Dividend Capacity
Increasing Dividend Capacity 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Reconciliation between FFO1 2018E and Group FFO 2019E (€m) +ca. 10% 130 1,650 - - 1,520 160 1,700 ~-510 - 1,420 +127 1,540 - -12 -20 ~370 1,440 1,140 - 1,050 1,190 - 1,070 FFO1 2018E Inter
Slide 17: Initial Guidance 2019 – New Structure
Initial Guidance 2019 – New Structure 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Initial 2019 Guidance y-o-y vs. 2018 Organic rent growth (eop) ~4.4% Rental Income (€m) 2,020 – 2,070 Recurring Sales (# of units) ~2,500 FV step-up Recurring Sales ~30% Group FFO
Slide 18: European Activities Update
European Activities Update 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Cautious step-by-step approach to minimize risk. Currently ca. 10% of the portfolio are located outside Germany. We will continue to monitor the German market and our defined European target
Slide 19: Agenda
Agenda 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Vonovia At A Glance 3 Business Update 7 Residential Market Update 23 Appendix 30 Company Presentation – January 2019 page 19
Slide 20: Update on German Regulation
Update on German Regulation 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix “Mietrechtsanpassungsgesetz” (legislation passed by German parliament on Nov 29, 2018 and in effect since January 1, 2019) Regulation Impact Modernization allocation to be reduced from 11%
Slide 21: German Residential – Landlords Benefit from Structural Imbalance between Supply and Demand
German Residential – Landlords Benefit from Structural Imbalance between Supply and Demand 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix New supply falls short of demand Consensus estimates see a current shortage of around 1 million apartments in urban areas. Thr
Slide 22: IR Contact & Financial Calendar
IR Contact & Financial Calendar Contact Financial Calendar Jan 14-15, 2019 German Investment Seminar, NYC Rene Hoffmann Jan 16, 2019 Management Roadshow, USA Head of Investor Relations Jan 21, 2019 KeplerCheuvreux German Corporate Conference, Frankfurt Vonovia SE Jan 31, 2019 Bankhaus Lampe German E
Slide 23: Agenda
Agenda 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Vonovia At A Glance 3 Business Update 7 Residential Market Update 23 Appendix 30 Company Presentation – January 2019 page 23
Slide 24: Appendix
Appendix 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Pages Content 25-38 9M Results – Additional Data 39-41 Investment Case Studies 42-46 Financing 47-49 Acquisitions 50 Fair Value per sqm Evolution 51 Portfolio Evolution 52-54 Additional Residential Market Dat
Slide 25: Continued EBITDA Margin Expansion
Excluding Buwog Continued EBITDA Margin Expansion 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Adj. EBITDA Operations is up 5.9% to €976.2m. EBITDA Operations margin (excl. maintenance) expanded to 91.3%. Adj. EBITDA Operations margin and cost per unit €m 9M 201
Slide 26: Continued FFO1 Growth
Excluding Buwog Continued FFO1 Growth 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Driven by better operational performance and lower interest expenses, FFO1 was up 12.7% y-o-y or 5.6% per share (eop) on the basis of 6.8% more issued shares. €m 9M 2018 9M 2017 D
Slide 27: Continued NAV Growth
Continued NAV Growth 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Adj. NAV is up 12.3% ytd or 5.1% per share in spite of 6.8% more issued shares. €m Sep 30, Dec 31, (unless indicated otherwise) 2018 2017 Is Adj. NAV a good proxy for the value of a diverse operat
Slide 28: Reconciliation IFRS Profit to FFO
Reconciliation IFRS Profit to FFO 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix €m (unless indicated otherwise) 9M 2018 9M 2017 Delta IFRS PROFIT FOR THE PERIOD* 1,399.0 1,205.2 16.1% Financial result1 296.5 218.2 35.9% Income taxes* 728.8 663.8 9.8% Depreciation
Slide 29: IFRS P&L
IFRS P&L 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix €m (unless indicated otherwise) 9M 2018 9M 2017 Delta Income from property letting 1,954.8 1,753.9 11.5% Other income from property management 39.7 34.0 16.8% Income from property management 1,994.5 1,787.9 1
Slide 30: IFRS Balance Sheet (1/2 – Total Assets)
IFRS Balance Sheet (1/2 – Total Assets) 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix €m Sep 30, 2018 Dec 31, 2017 Delta Assets Intangible assets 3,601.1 2,637.1 36.6% Property, plant and equipment 237.9 177.6 34.0% Investment properties 41,265.0 33,182.8 24.4% F
Slide 31: IFRS Balance Sheet (2/2 – Total Equity and Liabilities)
IFRS Balance Sheet (2/2 – Total Equity and Liabilities) 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix €m Sep 30, 2018 Dec 31, 2017 Delta Equity and liabilities Subscribed capital 518.1 485.1 6.8% Capital reserves 7,181.8 5,966.3 20.4% Retained earnings 9,100.8 8,
Slide 32: Sales – Steady Cash Flow at Attractive Margins
Excluding Buwog Sales – Steady Cash Flow at Attractive Margins 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Total sales volume in 9M 2018 was 9,331 residential units (prior-year period: 8,304), of which 1,666 from Recurring Sales (prior-year period: 1,704) and 7
Slide 33: Continued FFO1 Growth in 2019
Continued FFO1 Growth in 2019 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix FFO1 Reconciliation 2018 to 2019 (€m) Ca. -€20m net effect from acquisitions and disposals 1,520 - 1,420 +127 1,540 ~-410 - -12 ~370 1,440 -20 1,110 - 1,050 1,130 - 1,070 1,030 - 1050 FFO
Slide 34: Evolution of the Business Require a Fresh Look at Performance Metrics
Evolution of the Business and Additional Revenue Streams Require a Fresh Look at Performance Metrics 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix The business has substantially evolved since the IPO in 2013 and today encompasses value creation Why interest and t
Slide 35: How Recurring are Recurring Sales to Retail Customers?
How Recurring are Recurring Sales to Retail Customers? 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix In contrast to opportunistic sales, portfolio clean-up sales or large asset sales known from other sectors, recurring sales (“privatization”) are a robust and gra
Slide 36: All Strategic Markets Show Upward Potential
All Strategic Markets Show Upward Potential 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Fair value1 In-place rent Average rent Reversionary Organic rent Regional Market (€m) (€/sqm) Residential Living area Vacancy Total Residential Residential growth Multiple g
Slide 37: Invest Cluster Offers Long-Term Organic Growth Potential
Invest Cluster Offers Long-Term Organic Growth Potential 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Austria Sweden Sell 53% of portfolio in Invest Cluster and earmarked for Recurring value-enhancing investments in the next years Sales Operate Non-core sales al
Slide 38: Maintenance
Maintenance 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix €12.79/sqm1 €m 9M 9M Delta (unless indicated otherwise) 2018 2017 €11.03/sqm1 3.51 2.35 Expenses for maintenance 202.2 192.2 5.2% Capitalized maintenance 76.5 52.0 47.1% 9.28 8.68 Total 278.7 244.2 14.0% M
Slide 39: Case Study Optimize Apartment
Case Study Optimize Apartment 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Description Examples Target: one standard for all apartments before after Low price through standardization Modernization work mainly includes: Installation of new bathrooms with low barr
Slide 40: Case Study Upgrade Building
Case Study Upgrade Building 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Description Example – Dortmund, Töpferstraße Modernization work typically includes (KfW 152): Replacement of heating system before Replacement of windows Insulation of roof, facade, basemen
Slide 41: Case Study Space Creation
Case Study Space Creation 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Description Example – Bochum, Kaulbachstraße Construction methods : modular and conventional exterior view Moduls of steel, wood or concrete Current projects in Bochum, Cologne, Dresden, Brem
Slide 42: Cyclicality of Debt Instruments Requires Diversification
Cyclicality of Debt Instruments Requires Diversification 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Debt-Issuances in the European Real Estate Sector 2005 – 2018 YTD (€bn) 3,000 2,500 37 GRF-1 33 33 Q2/13 30 2,000 GRF-2 Taurus Q4/13 Q1/13 24 22 22 21 Volume (€
Slide 43: Vonovia's House of Debt Financing
Vonovia‘s House of Debt Financing 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Asset Specials Backed Securities Commercial Structured Mortgage- EMTN Bank Loans Loans Papers Unsecured Secured Instruments Instruments Development Debt Liquidity and Working Capital
Slide 44: Decision Tree Financing Sources
Decision Tree Financing Sources 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Volume & Financing sources Liquidity LTV Debt Equity Unencum- berance Secured Unsecured Structured Senior Syndicated Convertible Rights Mortgage Mortgage CMBS Bond Hybrid ABB Loan Bond
Slide 45: Covenants and KPIs (September 30, 2018)
Covenants and KPIs (September 30, 2018) 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Bond KPIs Covenant Level Sep 30, 2018 LTV <60% 42% Total Debt / Total Assets Secured LTV <45% 12% Secured Debt / Total Assets ICR1 >1.80x 5.4x Last 12M EBITDA / Last 12M Interes
Slide 46: Bonds / Rating
Bonds / Rating 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Corporate Investment grade rating as of 2018-08-02 Rating agency Rating Outlook Last Update Standard & Poor’s BBB+ Stable 02 Aug 2018 Bond ratings as of 2018-08-02 Final Maturity Name Tenor & Coupon ISI
Slide 47: Acquisitions – Opportunistic but Disciplined
Acquisitions – Opportunistic but Disciplined 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Acquisition pipeline (‘000 units) Acquisition criteria 340 2013: Dewag+ Vitus (~41 k)* No quantitative acquisition target. 2015: Gagfah (~140 k)* No management incentive fo
Slide 48: Update Integration Buwog and Victoria Park
Update Integration Buwog and Victoria Park 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Buwog Victoria Park Buwog squeeze out effective as of Nov 16, 2018; 100% of Buwog shares Vonovia exercises control via its seats on the Board and sets the now owned by Vonovi
Slide 49: Acquisition Track Record
Acquisition Track Record 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Larger acquisitions Fair Value In-place rent Residential Year Deal units TOP Locations @ Acquisition Sep 30, 2018 ∆ @ Acquisition Sep 30, 2018 ∆ # Berlin, Hamburg, DEWAG 11,300 1,344 2,065 54%
Slide 50: Conservative Valuation Levels
Conservative Valuation Levels 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix In-place values are still way below replacement values, in spite of accelerating valuation growth in recent years. Vonovia (German portfolio) – fair value per sqm (€; total lettable area)
Slide 51: Substantial Reduction of Portfolio Locations
Substantial Reduction of Portfolio Locations 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix 03/2015 (incl. Südewo) 12/2016 12/2017 Strategic Portfolio 818 locations 665 locations 577 locations ~400 locations Vonovia location High-influx cities (“Schwarmstädte”). F
Slide 52: German Residential – Safe Harbor and Low Risk
German Residential – Safe Harbor and Low Risk 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Rental regulation safeguards high degree of stability Contrary to most other jurisdictions such as the USA, rental growth in Germany is regulated and not directly linked t
Slide 53: German Residential – Favorable Fundamentals
German Residential – Favorable Fundamentals 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Growing number of smaller households Fragmented ownership structure While the overall population in Germany is expected to Germany is the largest housing market in Europe wi
Slide 54: German Residential – Favorable Fundamentals
German Residential – Favorable Fundamentals 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Urbanization trend across Europe Increasing affordability in Germany Cities across Europe are on the rise and the population Affordability in Germany is higher than France,
Slide 55: Liquid Large-cap Stock
Liquid Large-cap Stock 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Shareholder Structure (September 30, 2018) Share Information First day of trading July 11, 2013 7.9% Number of shares outstanding 518.1 million 6.9% Free float based on Deutsche Börse 93.1% defi
Slide 56: Vonovia History
Vonovia History 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Seed portfolios of today‘s Vonovia have origin in public housing provided by government, large employers and similar landlords with a view towards offering affordable housing. At beginning of last deca
Slide 57: Reconciliation of Shares Outstanding
Reconciliation of Shares Outstanding 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Date NOSH Comment (million) December 31, 2016 466.0 March 31, 2017 468.8 conwert acquisition June 30, 2017 476.5 Scrip dividend September 30, 2017 485.1 Gagfah cross-border merger
Slide 58: No Correlation between Interest Rates and Asset Yields
No Correlation between Interest Rates and Asset Yields 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Valuation methodology for German residential properties is primarily based on market prices for assets – not on interest rates While market prices are affected by
Slide 59: Three Valuation Layers with Different Volatilities
Three Valuation Layers with Different Volatilities 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix High degree of stability and predictability of underlying business (layer 1) and portfolio valuation (layer 2) is not reflected in share price development (layer 3),
Slide 60: Management Board Compensation - Overview
Management Board Compensation - Overview 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Management Board compensation is based on three pillars Fixed Remuneration Bonus / STIP LTIP (incl. Pension) • Monthly fixed compensation paid • Criteria/Targets: FFO1, adj. •
Slide 61: Management Board Compensation – Bonus / STIP
Management Board Compensation – Bonus / STIP 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Bonus / STIP Targets set by Supervisory Board FFO1 target Personal targets Adj. NAV/share target EBITDA Sales target 40% agreed with SVB 15% 15% 30% Bonus cap at predeter
Slide 62: Management Board Compensation – LTIP
Management Board Compensation – LTIP 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix LTIP Annually granted long-term remuneration component in the form of virtual shares (“performance shares”) 4 years performance period Targets set by SVB (equally weighted) Final n
Slide 63: Impressions
Impressions 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Dortmund Berlin Bielefeld Essen Dortmund Bremen Freiburg Dresden Munich Frankfurt Malmö Vienna Company Presentation – January 2019 page 63
Slide 64: Optimize Apartment
Optimize Apartment 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Company Presentation – January 2019 page 64
Slide 65: Upgrade Building
Upgrade Building 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Company Presentation – January 2019 page 65
Slide 66: Modular Construction
Modular Construction 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Company Presentation – January 2019 page 66
Slide 67: Modular Construction
Modular Construction 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Company Presentation – January 2019 page 67
Slide 68: Disclaimer
Disclaimer 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. 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
Slide 69: For Your Notes
For Your Notes 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Company Presentation – January 2019 page 69
Slide 70: For Your Notes
For Your Notes 1. Vonovia At A Glance 2. Business Update 3. Residential Market Update 4. Appendix Company Presentation – January 2019 page 70