Vonovia : Focus on climate strategy and social responsibility – Vonovia off to a good start in 2021

Results as of March 31, 2021

• Sustainability performance index at 104.8 %. Progress through CO2 reduction, senior-friendly building upgrades and customer satisfaction.
• Integration of Hembla completed; Sweden portfolio shows efficiency of management platform.
• Moving towards climate neutrality for existing buildings:
  Energy Center of the Future opened in Bochum.
• Social responsibility: right to claw back foregone rents up to € 10 million waived in Berlin after ruling of the German Federal Constitutional Court.
• Corporate vaccination campaign fully planned.
• Forecast for 2021 confirmed.

Bochum, May 4, 2021 - Vonovia SE ('Vonovia') got off to a good start in 2021. The Bochum-based housing company has widened its measures to contain the Covid 19 pandemic and is strongly committed to providing relief in the tight housing market.

'Our business model,' says CEO Rolf Buch, 'continues to be crisis-proof and resilient. This makes it all the more important for us to support our customers as much as we can, especially during Covid. We continue to be committed to the protection of our tenants, without reservations. At the same time, we are careful not to lose sight of our other responsibilities: There is a shortage of new homes. Our ageing society needs senior-friendly housing. And climate change needs viable solutions.'

Vonovia pursues ambitious climate protection targets

The German Federal Constitutional Court has now ruled that the legal requirements for reducing greenhouse gases from 2030 have not been defined with sufficient clarity.

Vonovia already committed itself to a binding climate roadmap last year, defining specific annual milestones. 'We are already very ambitious in this respect,' says Buch. The aim is to ensure climate neutrality for all its current buildings by 2050, while also achieving energy efficiency for an average of around 3% of its property portfolio each year. On average, the cost allocation will be between € 1.24 and € 2.00 per square meter.

Overall, the company's sustainability performance index (SPI), a non-financial indicator that tracks Vonovia's sustainability strategy, stood at 104.8% in the first quarter. The positive result was mainly due to carbon savings, increased customer satisfaction and a large number of senior-friendly building upgrades. Consequently, Vonovia converted more than 2,650 residential units between January and March 2021 so that they are suitable for senior citizens.

Vonovia only opened its Energy Center of the Future (EZZ) in the Bochum suburb of Weitmar at the end of April. At least 60% of all locally required energy is now being generated here, using a carbon-neutral method. In addition, Vonovia is working with various Fraunhofer Institutes on the creation of an innovative neighborhood with sector coupling and reduced energy consumption. The aim is to make the energy supply environmentally and economically efficient and to apply the resulting insights throughout Germany.

Energy upgrades and existing technology alone are not enough to reduce the share of carbon dioxide in current buildings and thus to move towards climate neutrality, nor would this be economically viable.

This is why Vonovia is focusing on closing this gap through in-depth research and technical innovation.

'Neighborhoods must be understood as central to any transformation in terms of transport, energy and climate protection. Hence, electricity produced locally by solar panels should be tax-free,' states Buch.

Where carbon pricing is concerned, Vonovia is continuing to advocate a split between tenants and landlords, based on energy efficiency classes (A+ to H) for buildings: The lower the class, the higher the landlord's share. 'This would create the necessary investment incentives to make buildings more energy-efficient,' says Buch.

Continued financial stability - strong result in Sweden

Total Segment Revenue rose from € 998.8 million in the first quarter of 2020 to € 1,145.5 million (up 14.7 %) in the first quarter of 2021.

In financial terms, Vonovia got off to a robust start in the 2021 financial year. The Adjusted EBITDA Total rose to € 506.1 million between January and March 2021, an increase which was 11.0% higher than during the same period last year (January to March 2020: € 456.1 million). The Adjusted EBITDA Rental was € 403.1 million (January to March 2020: € 381.1 million).

The results were particularly supported by positive contributions from Vonovia's residential portfolio in Sweden. Rolf Buch: 'Following the successful integration of the Hembla portfolio in Sweden, it is now obvious for the first time that Vonovia's scalable model also works in comparable markets internationally.' By applying a standardized platform, it is possible to further reduce the management costs of each residential unit while also ensuring a sustainable increase in synergy effects. Vonovia confirms the announced financial and operational synergies of ca. € 30 million for 2021 and expects a run rate of € 36 million starting in 2022.

Another growth segment was that of Housing-Related Services (Value-add), with an earnings contribution of € 45.8 million (January to March 2020: € 37.2 million). Vonovia expanded not only its repair services, but especially also its cable TV, residential environment, insurance and metering services, as well as energy supplies.

In the same period Vonovia increased its Group FFO (operating income) by 14.1 % to € 382.9 million (January to March 2020: € 335.5 million). A positive effect could be observed, in particular, from organic growth through construction and modernization as well as from Recurring Sales.

As demand continues to be high, the residential property portfolio was almost fully let by the end of the first quarter of 2021. The vacancy rate at the end of March 2021 was 2.8 % - exactly the same as 12 months earlier. Vonovia has widened its digital services for tenants entering into new rental agreements, so that tenants can now conclude them entirely online, using the Vonovia customer app. Due to current market conditions, rents increased by 0.7 % from January to March 2021 (same period in 2020: 1.0 %). Investments in housing (modernization) led to a 1.7% rent increase (January to March 2020: 2.3 %), while investments in construction and adding extra floors created an additional 0.6% (same period in 2020: 0.6%).

Investments at a high level

In all, Vonovia invested € 379.9 million in maintenance, modernization and construction (for its own portfolio) between January and March 2021 (same period in 2020: € 414.5 million). While maintenance during the first three months of 2021 was € 135.7 million and thus 10.3% above the same period last year (€ 123.0 million), modernization dropped to € 165.1 million (same period in 2020: € 208.1 million). This decrease was mainly due to less investment in Berlin and also, in a number of cases, restrictions during the Covid-19 pandemic. Construction between January and March 2021 accounted for € 79.1 million, which was 5.2 % less than during the same period last year (€ 83.4 million).

In this context, Vonovia continues to apply two central instruments to shield tenants from excessive financial pressure: a hardship management policy and a policy of exempting tenants over 70 from unaffordable rent increases. At the end of March 2021, Vonovia's average monthly rent (excluding utilities) was € 6.98 per square meter.

Covid tests and corporate vaccination campaign

Over 90% of all office staff are continuing to work flexibly from home. Since March 2021, Vonovia has been running rapid lateral flow tests at its head office canteen, providing fast testing on a regular basis. All employees are given the opportunity to be tested at least twice a week. Staff in the various regions can also use the home tests that are given to them, or go to any of the local test centers with whom Vonovia cooperates. 'I'm proud of the entire Vonovia team. Our workforce has been exemplary in the way they're handling the situation, and they're showing outstanding commitment,' Buch emphasizes.

Furthermore, Vonovia has taken all the necessary steps to convert the test center into a vaccination center at short notice. 'As soon as the vaccines announced by the German government arrive in June this year, our company doctors can start vaccinating our workforce. It will be voluntary, of course,' says Buch, 'and anyone living in the same households will also be offered vaccination.'

Particular focus on social responsibility

Vonovia aims to meet the interests of all stakeholders. As soon as the German Federal Constitutional Court had declared that Berlin's rent freeze was unconstitutional, Vonovia announced that it would waive any right to claw back foregone rent. 'We don't want people in Berlin to suffer financial distress because of a wrong political decision,' Rolf Buch explained. For the company, this means waiving up to € 10 million in foregone rent. 'The Court's decision alone won't solve the challenges that Berlin is facing in the housing market. I'm worried about Berlin,' says Buch. 'In the long run, the only way to solve this problem is by building additional housing.'

Vonovia is continuing to press ahead with its construction activity. In the first quarter of 2021 Vonovia built 379 residential units - three times more than during the same quarter last year. It is also building some urgently needed residential units that are publicly funded. One type of raw material that is increasingly being used is wood, which is both sustainable and suitable for modular construction.

Highly flexible financing strategy

During the first quarter of the year Vonovia issued its first € 600 million Green Bond. This ten-year bond bearing 0.625 % interest is continuing the company's sustainability strategy. Together with the € 500 million bond issued in January with a maturity of 20 years, Vonovia has created a highly flexible basis for financing. The Loan-to-Value (LTV) ratio was 39.1 % at the end of March 2021, i.e. 0.3 percentage points below the level at the end of 2020.

At the end of the first quarter of 2021, the EPRA NTA, the key performance indicator for the net asset value, was € 35,772.9 million - 0.8% higher than the value at the end of 2020, € 35,488.6 million. The EPRA NTA has been mirroring the increase in equity. The EPRA NTA per share increased from € 62.71 at the end of 2020 to € 63.22 at the end of the first quarter of 2021.

Forecast confirmed

Given the strong start to Vonovia's new financial year and its resilient business model, the company has confirmed the forecast for 2021.

In 2021, Vonovia is planning to invest between € 1,300 million and € 1,600 million in modernization and construction. Total Segment Revenue is expected to be within a range of approximately € 4,900 million to € 5,100 million, and the Adjusted EBITDA Total between € 1,975 million and € 2,025 million. As a result, Vonovia is expecting its Group FFO to rise between € 1,415 million and € 1,465 million. At the same time, Vonovia reckons that its Sustainability Performance Index will be around 100 % in relation to various indicators such as carbon savings from existing buildings and customer satisfaction.

Interim Statement for the First Quarter of 2021:
DE: https://reports.vonovia.de/2021/q1/de
EN: https://reports.vonovia.de/2021/q1/en

You can find further information, photos and footage in the press section.

2021 Financial Calendar:

August 6, 2021: Interim Financial Report for 2021
November 4, 2021: Interim Statement for the first nine months of 2021