The German government is imposing more and more requirements on the energy efficiency of buildings although the war in Ukraine and economic sanctions against Russia have fuelled persistent price increases during the first quarter of 2022, according to Vonovia's CEO Rolf Buch.
‘Materials are getting more expensive, and supply chains are getting longer. Also, the shortage of skilled workers has meant that projects are progressing more slowly than planned, noted Vonovia’s CEO Rolf Buch. ‘The political demands are moving further and further away from reality. We need new housing, our energy-efficient upgrading needs to proceed at high speed, and we need to succeed in our transition to sustainable energy. At the same time, there is a lack of materials, labour and mandatory parameters. The capital market is reacting to the situation in Europe, and rising interest rates are dampening the investment climate. We can't just ignore these things,’ said Buch.
According to the German Federal Statistical Office, by the end of 2021, the construction price index for residential buildings had already risen significantly by 14.4%.
‘Prices are rising rapidly,’ Buch added, ‘not just for energy, and inflation has never been so high since the 1970s, while interest rates are also rising.’
Despite these challenges, Vonovia has confirmed its guidance for revenue, EBITDA and Group FFO for the 2022 financial year. These indicators are projected to be at least 20% higher than in 2021. Segment Revenue Total is likely to be between €6.2 and 6.4 bn, and Vonovia is expecting its Adjusted EBITDA Total to range between €2.75 and €2.85 bn. This will also cause an increase in its Group FFO within a range of €2.0 and €2.1 bn.
Contrary to the guidance issued in mid-March, Vonovia is forecasting an investment volume of €1.3 to €1.5 bn in modernisation and new builds. ‘We are continuing to pursue our climate roadmap, focusing above all on energy-efficient modernisation in our building stock for the rest of the year, and we’ve earmarked €1.0 to €1.1 bn for this purpose. However, macro-economic developments have prompted us to refocus our construction investments,’ noted Buch.
Vonovia is planning to spend €0.3 billion to €0.4 bn on new builds within its own stock. Additionally Vonovia has planned development to sell projects with a value of around €900 mln. Vonovia will therefore continue to pursue its planned volume of new builds, but will make a larger proportion available to the market than in previous years.
Vonovia is continuing to focus on a transition to sustainable energy in its existing buildings. As the company continues to pursue its climate roadmap, its existing stock will apparently be nearly climate-neutral by 2045. During the first three months of this year, the company already carried out energy-efficient modernisation on more than 1,500 flats.
At the same time, energy sources in Vonovia’s neighbourhoods are being converted to local green electricity at high speed. ‘Moving to sustainable energy is not just a matter of climate protection. It also means achieving the important goal of independence from the international energy market. The truth is, however, that with the current price development, energy-efficient modernisation and conversion will also become more expensive. This mustn’t be allowed to stifle landlords, but – above all – it mustn’t have an unacceptable impact on tenants. It’s important that they shouldn’t be overburdened financially. Tenants are already facing major supplementary payments on heat and electricity right now. Moreover, we’ll be seeing a deferred impact of inflation on rental fees,’ added Buch.
The use of sustainable building materials is becoming more and more relevant. Buch: ‘A climate-neutral building stock can only be achieved if we build responsibly and use sustainable, resource-friendly construction materials. The entire housing and property industry has a major social responsibility on this issue. Vonovia is determined to make an active contribution to sustainable construction and housing.’
During the first quarter of 2022, Vonovia continued to integrate Deutsche Wohnen as planned. The refinancing of the merger was completed by the end of March 2022. In the same month, Vonovia fully repaid the bridging loan of around €20 bn, of which it had drawn down around €11.5 bn.
‘We are now focused on bringing the two companies together under one roof, and we’re nicely on track. We’re not considering further acquisitions right now,’ concluded Buch, ‘and this also goes for Adler.’
