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HOWOGE Wohnungsbaugesellschaft mbH: positive operating result with continued strategic growth

Berlin, 25^th April 2024. HOWOGE Wohnungsbaugesellschaft can look back on a successful financial year. The municipal housing company presented its IFRS annual financial statement for 2023 today. Despite the continuing challenges in the market environment, HOWOGE has not left the path of strategic growth and has increased its holdings to around 76,400 units by completing the construction of just under 1,000 rental apartments. Taking into account the cash items taxes on earnings and financial expenses, FFO (funds from operations) was, at around EUR 200 million, only slightly lower than the level for the previous year. The loan-to-value ratio (LTV) was at around 32 per cent as of 31^st December 2023. As HOWOGE managing director Ulrich Schiller explains, “Despite difficult conditions, HOWOGE completed the year successfully. In view of the high demand for affordable housing, we are continuing on our path of manageable growth. An important precondition for this continued growth is the modification of the cooperation agreement with the State of Berlin last year, which allows us to implement a moderate increase in rents. This makes it possible for us to continue to meet our social responsibilities.”

Katharina Greis, HOWOGE managing director: “HOWOGE is in a sound financial position. We have a diversified capital structure and an established system for managing our liabilities proactively. We have, for example, already ensured ahead of time the refinancing of the corporate bond that is due for repayment in November 2024.”

Financial development

HOWOGE posted a positive operating result for the financial year 2023. Earnings from lettings and leasing rose by 3.4 per cent to EUR 385.2 million due to the growth in our portfolio from new builds.

Despite rising costs particularly for maintenance and staff, the adjusted EBIDTA, at EUR 257.2 million, remained more or less stable (2022: EUR 268.1 million). The downward adjustment of around 10 per cent in the value of our portfolio, which was due to market developments, led to an increase in the loan-to-value ratio (LTV) of around 4 percentage points to 32.1 per cent (housing segment: 29.6 per cent). However, the LTV is still clearly within our target corridor of below 50 per cent. The fair value of the HOWOGE portfolio, including building plots and school buildings, was around EUR 12.6 billion as of 31^st December 2023.

To secure the financial independence and the conservative risk profile of the company, HOWOGE attaches great importance to its long-term-oriented and diversified financing structure. Since 2021, the company has had issuer ratings from the two international rating agencies Standard and Poor’s and Fitch of A and AA- respectively - with both agencies attesting a stable outlook. These ratings were confirmed most recently in the summer of 2023 and are a reflection of the good creditworthiness of the company.

HOWOGE’s Debt Issuance Programme (DIP) with an overall volume of EUR 4 billion enables the company to issue corporate bonds at short notice.

The company carried out only small-scale refinancing and borrowing in the financial year 2023. The average weighted interest rate of currently 1.1 per cent is significantly below current market interest rates. The average residual term for all financial liabilities was approximately eight years as of the balance sheet date. In the current financial year, the refinancing of a corporate bond in an amount of EUR 500 million is scheduled. The company has already made use of the recent fall in interest rates to secure the relevant interest rate conditions.

Growth and portfolio development

As of 31^st December 2023, HOWOGE had 76,392 apartments and 1,150 commercial units in its portfolio. Accordingly, there are more than 150,000 residents living in HOWOGE’s holdings. At 1.5 per cent as of 31^st December 2023, the vacancy rate - based on floor space - continued to be low. At EUR 6.42 per square metre, the annual average rent was significantly lower than market rents. More than 64 per cent of new lettings during 2023 went to persons with a certificate of eligibility for public housing.

In 2023, the number of staff at HOWOGE rose by approximately 13 per cent to 1,121. The main reason for this increase was the founding of HOWOGE Reinigung GmbH. This new company broadens the range of services provided by HOWOGE and, since July 2023, it has been responsible for cleaning work in part of the property portfolio. These cleaning services will be rolled out systematically to include the entire portfolio.

The growth in the company’s holdings of around 1,000 units in 2023 resulted from the completion of new-build projects. For example, HOWOGE completed just under 170 apartments right by Rummelsburg Bay in the borough of Lichtenberg. It also completed an integrated housing project with 120 apartments in Ohlauer Straße in Friedrichshain-Kreuzberg and 280 student apartments in Treptow-Köpenick.

Despite the difficult market environment, HOWOGE was able to start work on the construction of around 980 apartments in 2023. In the current financial year, the company plans to complete around 1,000 new-build apartments.

HOWOGE is also pursuing its growth strategy by acquiring portfolios of existing properties. Accordingly, HOWOGE is purchasing PRIMA Wohnbauten Privatisierungs-Management GmbH (PRIMA) with 4,495 apartments in the Berlin boroughs of Lichtenberg and Treptow-Köpenick from Vonovia SE. Together with Berlinovo Immobilien Gesellschaft mbH, it is also purchasing from Vonovia SE the company Stadtentwicklungsgesellschaft Buch mbH (SEG Buch). These strategic acquisitions at a purchase price of EUR 700 million constitute an overall package. The transfer of shares in the companies will take place as of 1^st January 2025.

As part of Berlin’s school building campaign, HOWOGE is responsible for building and refurbishing a total of 38 school buildings. In April 2024, HOWOGE handed over to the borough of Lichtenberg the largest school building in this campaign with two secondary schools for almost 1,600 pupils. Currently, five schools with almost 4,200 places are under construction, and work will begin on two further schools with almost 1,400 places.

Publication of sustainability report

Parallel to its financial statements, HOWOGE has also published its sustainability report (https://nachhaltigkeit.howoge.de/) today.

In 2023, HOWOGE developed a climate strategy. The aim of this strategy is to achieve climate-neutral holdings by 2045. This means that the holdings will emit less than 3 kg of CO₂ per square metre per year. To achieve this goal, the three levers of energy-efficient refurbishment, innovative system technology and switching to different forms of energy were identified. Currently, the CO₂ emissions of HOWOGE’s holdings are 17.45 kg per square metre per year (2022) whilst the energy intensity is 100.57 kWh per square metre per year (2023). In future, HOWOGE will develop further courses of action to achieve this new climate goal. In this context, an important building block for climate-neutral housing is the expansion of photovoltaic units. In 2023, HOWOGE installed photovoltaic units with an overall peak output of 1,003 kW and a capacity to generate a total of 1,524 megawatt hours of CO₂-free electricity and to save around 632 tonnes of CO₂. HOWOGE’s entire photovoltaic units generate a peak output of 3,073 kilowatts. Over 4,000 tenant households are currently being supplied with this locally generated green electricity. In the years up to 2033, it is planned to install photovoltaic units on every suitable HOWOGE building. To achieve this, the company is investing around EUR 71 million.

Since 2021, HOWOGE has also been reporting in accordance with the criteria of the EU Taxonomy Regulation (a classification system for green economic activities) and, for the second year in a row, it can show taxonomy conformity for certain economic activities. The key figures have developed positively in comparison to the previous year. For example, the taxonomy-aligned value for turnover was 25.0 per cent, for OpEx (operating expenses) 25.3 per cent and for CapEx (capital expenditure) 22.7 per cent.

As a municipal housing company, HOWOGE focuses not only on climate protection but also on social engagement in its neighbourhoods. In 2023, a total of 134 initiatives and institutions received financial support. Together with expenditure on its own projects and on participations in partner projects, HOWOGE’s investment in social engagement amounted to around EUR 2.2 million in the financial year 2023.

Outlook

For the financial year 2024 HOWOGE expects that market conditions will continue to stabilise and that its operating results will develop positively. Thanks to its robust capital structure, HOWOGE is in a strong position. For its business operations, the company anticipates an FFO in the range of EUR 180 to 200 million.

About HOWOGE

HOWOGE Wohnungsbaugesellschaft mbH is one of the six publicly owned housing companies belonging to the State of Berlin. With a housing portfolio of approximately 76,400 apartments (as of 31^st December 2023), the company is one of the largest landlords in Germany. In the medium to long term, HOWOGE intends to expand its housing portfolio, particularly through new builds, to around 100,000 apartments. As part of the Berlin school building campaign, HOWOGE is also taking on for the State of Berlin the refurbishment of existing schools and the building of new ones.

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To the extent that this announcement contains forward-looking statements, such statements do not represent facts and are characterised by the words “expect”, “believe”, “estimate”, “intend”, “aim”, “assume” or similar expressions. Such statements express the intentions, opinions or current expectations and assumptions of HOWOGE Wohnungsbaugesellschaft mbH and are based on current plans, estimates and forecasts which HOWOGE Wohnungsbaugesellschaft mbH has made to the best of its knowledge, but which do not claim to be correct in the future. Forward-looking statements are subject to risks and uncertainties that are difficult to predict and usually cannot be influenced by HOWOGE Wohnungsbaugesellschaft mbH. It should be kept in mind that the actual events or developments may differ materially from those contained in or expressed by such forward-looking statements.