Deutsche Wohnen AG.» Full year results Conference Call, 18 March PDF

Deutsche Wohnen AG» Full year results 2015 Conference Call, 18 March » Table of content 1 Highlights and financials Portfolio update and outlook 3 Strategy and guidance 4 Appendix 2 » Highlights

Please download to get full document.

View again

of 42
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.

Spiritual/ Inspirational

Publish on:

Views: 32 | Pages: 42

Extension: PDF | Download: 0

Deutsche Wohnen AG» Full year results 2015 Conference Call, 18 March » Table of content 1 Highlights and financials Portfolio update and outlook 3 Strategy and guidance 4 Appendix 2 » Highlights FY-2015 Financials KPI FY-2015 FY-2014 EPRA NAV (undiluted) in EUR m 7, ,326.0 in EUR/ share 1) FFO I in EUR m in EUR/ share 2) FFO yield on NAV 4.1% 4.2% Dividend in EUR/ share 3) Dividend yield on NAV 2.4% 2.5% Adj. EBITDA (excl. disposals) 4) Adj. EBITDA yield on NAV 5.9% 7.9% Adj. EBITDA margin 71.8% 67.5% Financing LTV 38% 51% Avg. interest rate ~1.8% ~2.5% Portfolio & valuation KPI FY-2015 FY-2014 Number of residential units 146, ,105 In-place rent in EUR/ sqm Like for like rental growth 3.5% 2.4% Vacancy rate 1.8% 2.2% Fair value of portfolio in EUR m 11,721 9,785 in EUR/ sqm 1,282 1,062 Yield on in-place rent 5.5% 6.5% Acquisitions signed (units) 21,691 3,079 Price in EUR/ sqm 1,292 1,228 Yield on in-place rent 5.3% 5.4% Total shareholder return 2015 Dividend/ share + NAV growth/ share in EUR 5.69 in % of NAV % 1) Based on total shares outstanding (FY-15: 337.4m); FY-14 figure scrip adjusted; 2) Based on weighted average shares outstanding (FY-15: 320.9m; 3) 2015 dividend subject to AGM approval; 4) Adjusted for one-off effects excluding disposals 3 » Significant increase of EPRA NAV per share by 29% in EUR m 31/12/ /12/2014 NAV per share undiluted in EUR Equity (before non-controlling interests) 6, ,692.9 Fair values of derivative financial instruments % % Deferred taxes (net) 1, EPRA NAV (undiluted) 7, ,326.0 Shares outstanding in m EPRA NAV per share in EUR (undiluted) /12/ /12/ /12/2015 EPRA NAV per share (undiluted) Effects of exercise of convertibles ) EPRA NAV (diluted) 8, ,1 LTV development in % Shares diluted in m EPRA NAV per share in EUR (diluted) % - 11% 51.0% - 25% 38.0% Goodwill GSW (535.1) (535.1) Shares outstanding in m Adj. NAV per share (undiluted) /12/ /12/ /12/2015 LTV development 1) Current strike price: EUR and EUR corresponds to ~32.7m shares 4 » Strong dynamics in Core + driven by EUR 1.7bn value uplift Regions Strategic Core and growth regions FV (31/12/2014) EUR m FV (31/12/2015) EUR m FV (31/12/2014) EUR/sqm FV (31/12/2015) EUR/sqm Change in % Multiple inplace rent (31/12/2014) Multiple in-place rent (31/12/2015) Multiple market rent (31/12/2015) 9,635 11,591 1,074 1,296 21% Core + 8,819 10,697 1,108 1,347 22% Thereof Greater Berlin 7,273 8,950 1,101 1,360 24% Core % Non-Core % Total 9,785 11,721 1,062 1,282 21% Revaluation of EUR ~1.7bn or EUR 219 per sqm leading to a multiple expansion by 2.6x to 18.1x Main contribution from assets in Berlin with EUR ~1.6bn which are now valued at 1,360 EUR/sqm Yield compression is underpinned by portfolio transactions 2015 in Berlin at rent multiples of 20x Current FV per sqm represents ~50% of replacement costs 5 » Strong earnings and cash contributions from letting in EUR m FY-2015 FY-2014 Current gross rental income Non-recoverable expenses (12.7) (13.8) Rental loss (6.3) (8.9) Maintenance (86.1) (88.8) Others (9.7) (9.0) Earnings from Residential Property Management Capex & Maintenance Maintenance in EUR/sqm Modernization in EUR/sqm FY-2013 FY-2014 FY-2015 Personnel, general and administrative expenses (44.3) (45.2) Net Operating Income (NOI) NOI margin 74.9% 73.5% NOI in EUR / sqm / month NOI margin improved 73.5% 74.9% in EUR m FY-2015 FY-2014 Net operating income (NOI) % Cash interest expenses (122.2) (179.6) Cash flow from portfolio after cash interest expenses FY-2013 FY-2014 FY-2015 Improved NOI margin at stable maintenance levels is the prove for operational efficiency 6 » Growing prices as demonstrated by disposal business Disposals Privatization Institutional sales Total with closing in No. of units 1,908 2,016 7,497 2,099 9,405 4,115 Proceeds (EUR m) Price in EUR per sqm 1,394 1, n/a n/a Earnings (EUR m) Gross margin 41% 44% 8% 20% 16% 33% Cash flow impact (EUR m) Disposal business as a strong contributor to NAV growth and contributed cash flows of EUR ~460m in 2015 Disposal of a Berlin city-border portfolio with c. 900 units for an implied multiple of 23x 1) (c. EUR 1,390 per sqm 1) ) signed in Q4 underpins value upside Portfolio optimization finalized 1) Incl. investment needs estimated by Deutsche Wohnen 7 » Best in class EBITDA margin of ~72% in EUR m FY-2015 FY-2014 Development of cost ratio 1) Earnings from Residential Property Management Earnings from Disposals % 14.4% 11.8% Earnings from Nursing and Assisted Living Segment contribution margin Corporate expenses (74.7) (90.5) Other operating expenses/income (64.0) (29.5) FY-2013 FY-2014 FY-2015 Cost Ratio (corporate expenses divided by gross rental income) Development of adj. EBITDA margin EBITDA Other one-off income (0.2) 0.0 One-off costs for transactions % 75.9% 66.3% 67.5% 71.8% 82.6% One-off costs for restructuring FY-2013 FY-2014 FY-2015 EBITDA (adjusted) adj. EBITDA Margin (excl. disposals) adj. EBITDA Margin (incl. disposals) Significant step-up of adj. EBITDA margin by 6.7pp (incl. disposals) and 4.3pp (excl. disposals) driven by improvement of NOI and reduction of corporate expenses EBITDA margins underpin strength of portfolio and operating platform at unchanged maintenance levels 1) 2013 pro forma GSW 8 » Profit increased to EUR 1,2bn (+34%) in EUR m FY-2015 FY-2014 EBITDA (adjusted) Depreciation (5.7) (6.1) At equity valuation 1.8 (0.5) Financial result (net) (135.6) 1) (185.4) 1) EBT (adjusted) Valuation properties 1, Other one-off income One-off costs for transactions (47.5) (5.6) One-off costs financing (58.7) (82.2) Restructuring & Reorganization (11.6) (15.2) Valuation SWAP and convertible bonds (213.7) (111.5) EBT 1, ,021.5 Current taxes (28.0) (16.9) Deferred taxes (552.6) (115.3) Profit 1, Profit attributable to the shareholders of the parent company 1, in EUR m FY-2015 FY-2014 Interest expenses (127.0) (183.4) In % of gross rents ~20% ~29% Non-cash interest expenses (9.5) (3.0) (136.5) (186.4) Interest income Financial result (net) (135.6) (185.4) Unsolicited offer from Vonovia SE: EUR ~33m LEG transaction: EUR ~10m Conwert transaction: EUR ~5m Mainly breakage costs for debt refinancing Mainly redundancy payments (GSW integration) Thereof EUR 3.1m from valuation of derivatives and (EUR 216.8m) from convertible bonds, resulting from positive share price performance Market value of convertible bonds (31/12/2015): EUR 965m Earnings per share 2) ) Adjusted for Valuation of SWAPs and convertible bonds; 2) Based on weighted average shares outstanding (FY-15: m; FY-14: m) 9 » Operational improvements and acquisitions drive FFO growth in EUR m FY-2015 FY-2014 FFO per share development in EUR EBITDA (adjusted) Earnings from Disposals (68.9) (52.4) At equity valuation 1.8 (0.5) % % 0.22 Interest expense/ income (126.1) (182.4) Income taxes (21.5) (16.5) Minorities (6.2) (5.9) FFO I Earnings from Disposals FFO II FY-2013 FY-2014 FY-2015 FFO I Earnings from disposals DPS development in EUR FFO I per share in EUR 1) FFO I yield on EPRA NAV 4.1% 4.2% % % 0.54 Dividend per share 2) FFO II per share in EUR 1) FY-2013 FY-2014 FY-2015 FFOI per share increased by 25% yoy while leverage was reduced by 13pp to 38% 1) Based on weighted average shares outstanding (FY 2015: m; FY 2014: m); 2) 2015 dividend subject to AGM approval 10 » Conservative long term capital structure with 1.8% interest costs Rating LTV A- / A3; stable outlook 38% (43% pro forma announced acquisitions) ICR 1) 4x Ø maturity ~9 years % secured bank debt 77% % unsecured debt 23% Ø interest cost Key financial principles 1.8% ( 80% hedged) LTV: 35-45% fully flexible regarding secured or unsecured financing Low leverage, long maturities and best in class rating Flexible financing approach to optimize financing costs Currently ~100bps funding advantage of secured debt vs. unsecured Latest acquisition financed with 1% for 10 years via bank loan market (volume: EUR 500m) Quality portfolio leads to optimized financing terms No significant maturities until and including 2019, thereafter maturity profile evenly spread Convertible bonds accounted 100% as debt Base case LTV 2016 40% expected Balanced maturity profile with no significant debt maturities in the next 4 years Bank debt Convertible bonds Corporate bond ) adjusted EBITDA/ interest expenses 11 » Strong generation of total shareholder return Development of dividend in EUR per share Development of EPRA NAV (undiluted) in EUR per share % % +2.5% Leading to strong shareholder return 5.69 EUR 3.79 EUR 32.0% 2.37 EUR 26.1% 19.0% in % of NAV Total shareholder return in EUR/ share Summary Top line growth via acquisitions and operational improvements as well as refinancing/ debt paydown translates into FFO growth (CAGR : 24%) Beeing invested in the right markets delivers NAV growth over time, based on strong fundamental trends (CAGR : 37%) Via targeted modernization projects, further improvement of rents and capital growth NAV growth results in further LTV reduction and improvement of the risk profile 12 » Portfolio update and outlook 13 » Portfolio update 2015 focused and concentrated Strategy cluster Residential units % of total measured by fair value In-place rent 1) 31/12/2015 EUR/sqm/month L-f-l growth in % Rent potential 2) 31/12/2015 in % Vacancy 31/12/2015 in % Strategic core and growth regions 143,173 99% % 19.0% 1.7% Core + 127,774 91% % 21.2% 1.7% Core 15,399 8% % 9.6% 2.0% Non-core 2,955 1% 4.79 n/a n/a 6.3% Total 146, % % 18.6% 1.8% Total (pro forma) 3) 160, % 5.89 n/a 18.2% 1.8% Thereof Berlin 107,515 70% 5.88 n/a 19.3% 1.7% Strong market fundamentals especially in Core + markets underpin highly attractive growth and value creation Further rent potential in Core + regions of more than 20% despite introduction of the rental cap in Berlin Vacancy rate in portfolio declined by 40bps over 12 months to c. 1.8% 1) Contractually owed rent from rented apartments divided by rented area; 2) Unrestricted residential units (letting portfolio); rent potential = New-letting rent compared to in-place rent (letting portfolio); 3) Including signed acquisitions and disposals with transfer of ownership after 31/12/ » Active AM approach optimised overall quality of portfolio pro forma Change Portfolio bridge Total 150, , % Letting Privatisation Block Sale Non-Core Core + 129, , % Letting 114, , % Privatization 6,963 3, % Block Sale 7,632 2, % Core 16,054 20, % Letting 13,920 19, % Privatization 2,053 1, % Block Sale % Non-Core 5,018 4, % 5,018 7,713 9, ,472 4,932 2,394 4, ,517 Clean up 1, % other 3,789 4, % pro forma Core+: Block sale in Berlin (out of GSW) finished, remaining block sale units mainly from recent acquisitions Core: Very successful on-going privatization, strong uplift in Letting portfolio (esp. Kiel) Non-Core: Clean up nearly finished, opportunistic disposal of the other units 15 » 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 (expensed through p&l) Modernization (capitalized on balance sheet) Total Total EUR/ sqm 1) Capitalization rate 52.7% 41.9% Ongoing maintenance (incl. repairs) Re-letting Capex/ Modernization Total investment ~25-30 In 2015 we have invested c. EUR 20 per sqm in our portfolio; while maintenance expenses remained stable we have significantly increased our modernization expenses by c. 50% Our-re-letting strategy generates average return on investment of c. 15% and we have proven our ability to manage the rental cap as demonstrated by the l-f-l rental growth of 4% in Berlin Our EUR 400m modernization program is well on track and made up more than half of 2015 modernization investments; value enhancing modernizations are a priority and are expected to increase in the coming years 1) Based on the quarterly average area 16 » Strong outlook for NAV growth in Core + markets Development of asset values will further decouple from rents 6 1 Targeted capex & modernization High demand meets low supply 5 High portfolio quality Key drivers of NAV Growth Liquid transaction market 2 Attractive rent development Increasing replacement costs In k units/ households 1» Demand and supply situation will tighten further in Berlin Further increase of Berlin s population and households is forecasted ~5% increase until population in million Source: Senatsverwaltung für Stadtentwicklung und Umwelt (population forecast) while new construction not suffcient to address supply and demand imbalance new construction new households +3.8% ~80k units of supply shortage in 4 years +2.5% Source: Amt für Statistik Berlin Brandenburg/ IBB housing market report ) The general trends of urbanisation and migration are unchanged and continue to create demand for housing Vacancies decreased in Berlin from 5.8% in 2005 to 1.9% in 2014 Increase of population and households is continuing: For Berlin +5% population growth until 2020 expected, with large share of young and educated people Currently ~82% of households 2 persons in Berlin, expected to increase to ~87% until 2030 Realized new construction remains far below demand (~15k realistic supply vs. ~25k p.a. needed) The newly built apartments are mainly in the higher end of the market or for privatization 1) Refugees not considered 18 2» Berlin characterized by excess demand driving prices Purchase prices in Berlin show continous upward trend (EUR/sqm) Existing/Berlin New/Berlin resulting in significant yield compression Purchasing +1.8% price multiples for dwellings in Berlin (x), average +2.9% +2.3% +3.4% +2.4% Source: bulwiengesa AG; RIWIS Source: bulwiengesa AG; RIWIS In Berlin transaction volume of EUR 5bn in 2015 equalling ~51,000 apartments (+60% vs 2014) Variety of foreign and domestic investors are looking increasingly for product Own portfolio disposals with broad range of bidders underpin depth of market and price development Liquidity of market and excess demand in combination with lack of product as key drivers for price development 19 3» Replacement costs continue to increase Construction costs are steadily increasing Examples for development of Berlin land values in EUR/ sqm over the last 3 years construction cost index Central location (Kreuzberg) Average location (Treptow) % % +3.8% +70% 1, % Suburb location (Marzahn) % 220 Source: Amt für Statistik Berlin Brandenburg Source: Gutachterausschuss Berlin (GAA) Construction costs are steadily rising partially as a result of high regulatory requirements (energy efficiency) Land values increased in last 3 years between 90% for central locations and 70% for suburb locations as a result of the dynamic demand situation and little availability of land reserves Current replacement costs of 2,500 EUR/ sqm (exluding land) are significantly above current asset valuation of Deutsche Wohnen (1,360 EUR/sqm) in Berlin 20 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 9 EUR 8 EUR 7 EUR 6 EUR 5 EUR % +1.8% % +2.3% +3.4% +2.4% EUR Munich Frankfurt/ Main Hamburg Cologne Berlin New letting rents in Berlin (EUR/sqm) new letting EUR/sqm Mietspiegel EUR/sqm Source: CBRE Source: Mietspiegel; bulwiengesa AG RIWIS, CBRE Berlin still offers a significant gap between existing rents and new letting rents Berlin with strong development of key economics (2015: employment growth +1.8%, GDP +2.2% vs 1.7% in Germany) but offers still significant catch-up potential versus other metropolitan areas The existing rent potential of Deutsche Wohnen portfolio in Berlin amounts currently to ~EUR 80m and will crystalize over time into NAV growth Tenant turnover expected to remain stable at 7% p.a. which is 2pp lower than in times with relaxed housing demand Like for like rental growth of ~3% p.a. on average expected (despite rent regulation) 21 5» High quality Berlin portfolio with significant value potential Location cluster Residential units 1) 31/12/2015 Share in units In-place rent in EUR/sqm New Letting Rent 2) Rent Potential 2) Vacancy FV in EUR/sqm Hot Spot 34, % % 1.7% 1,597 Growth 44, % % 1.6% 1,349 Stable 28, % % 1.8% 1,158 Total 107, % % 1.7% 1,375 Hot Spot: City centre, trendy northeast & wealthy southwest Fastest and strongest growing areas Strategy: upgrade to create new product and redensification Growth: The green cityedge areas Continuously growing areas Further rent development upside Strategy: focused modernization Stable: The big outskirt settlements Moderate rent development Stable cash generation Strategy: necessary maintenance and modernization Hot Spots Growth Stable No DW units 1) Including acquisitions and disposals with transfer of ownership after 31/12/2015; 2) for unrestricted residential units 22 6» Targeted investment program to crystalize inherent value upside Location cluster Residential units targeted capex Capex in EUR/sqm Current in-place rent (EUR/ sqm) Rent potential FV in EUR/sqm Mid term market expectation (EUR/sqm) Hot Spot ~ 5, m ~ ~ 60 % 1,450 3,500 Growth ~ 8, m ~ ~ 45 % 1,350 2,500 Stable ~ 2,000 55m ~ ~ 40 % 900 1,500 Total 1) ~ 15, m ~ ~ 50 % 1,370 2,500 New Construction Up to 600 units in Westend Hidden Pearls Upgrade to premium estates 1,400 units in Prenzlauer Berg & Co. Creating a new product Modernization and redensification 3,000 units in Kreuzberg Sustainable Cashcow Energetic modernization 1,200 units in Hellersdorf Enhancing Value Focused modernization 3,500 units in Britz 1) Total includes targeted modernization and capex investments in Berlin (excluding rest of the portfolio and potential new construction) 23 » Strategy and guidance 24 » Clear focus on value creation: internal growth, selected bolt-on acquisitions and efficient long-term financing Internal Growth Capitalizing on strong fundamentals in our strategic core and growth regions Clear commitment to continue successful internal growth Re-letting crystallizing market rents (rent potential 20% for 75% of letting portfolio) Established EUR 400m investment program to upgrade portfolio and realize inherent value Continuous optimization of platform efficiency Key financing principles Maintain quality investment grade rating, currently A3/A- LTV range of 35-45% / ICR 3.5x External Growth No attractive consolidation and acquisition opportunities in the listed segment Selected bolt-on acquisitions with strong anchor in Core + Concentrated portfolio in critical size allowing efficient management Continued application of stringent acquisition criteria Scarcity of acquisition opportunities as a challenge to the sector demands increased importance of asset management expertise and internal growth High share of secured bank financing to optimize interest cost with long-term and balanced maturity profile Continuation of strategy: Focus on Core + regions, concentrated portfolios and solid financing structure 25 » Guidance - base case 1) e Main drivers Mid-term perspective 5) EPRA NAV per share (undiluted) 2)3) FFO I in EUR m 303 360 Dividend per share 3) 0.54 ~0.70 LTV 38%/43% 4) 40% Capex upgrade, rent development, further yield compression expected based on market evidence Addition of 15k units on a net base and l-f-l rent growth (EUR ~50m in total), interest cost savings (EUR ~10m) Higher FFO I, payout ratio increased from 60% to 65% Valuation uplift from capex and further yield compression Targeted privatizations of ~2,000 units in 2016 provide attractive income stream Streamlining of portfolio successfully executed, further opportunistic institutional sales possible but depending on pricing 1) Without acquisitions and opportunistic portfolio disposal; 2) Excluding any changes in goodwill impairment and valuation of financial instruments; 3) Based on currently outstanding shares; 4) Pro forma acquisitions; 5) relative perspective to individual KPI 26 » Q & A 27 » Appendix 28 » Strong cash flow generation FFO I after minorities as reported Mandatory amortization (81.0) (47.9)
Related Search
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks