Result from residential property management

The following overview shows important operational figures as of the reporting dates:

  12/31/2009 12/31/2008
Housing units 49,026 50,489
thereof DB 14 2,622 2,622
Living space and usable space 3,085,713 3,184,411
Fair value per m2 living space and usable space in EUR 894.7 881.0
thereof DB 14 912.9 907.5
Debt position per m2 living space and usable space in EUR 561.6 633.4
thereof DB 14 855.7 873.6
Rent per m2 in EUR 5.26 5.10
thereof DB 14 5.51 5.41
Vacancy rate in % 4.2 5.9
thereof DB 14 4.3 5.5
Maintenance and service charges per m2 / year in EUR 9.74 11.56
Capex per m2 / year in EUR 4.29 8.97

The portfolio of Deutsche Wohnen includes 49,026 housing units, 470 business units, and 15,553 garages / parking places. Deutsche Wohnen holds a 34.0 % share of DB 14. These properties are to be fully consolidated on the basis of extensive guarantee promises with respect to the fund:

  Residential Commercial Parking
  Units   Rent Vacany Units   Units
    m2 k EUR/ m2 rate   m2 k  
Core portfolio 37,546 2,264 5.33 2.7 % 380 68 9,842
thereof Berlin 21,908 1,312 5.23 1.5 % 250 35 1,847
thereof
Frankfurt / Main
3,658 217 6.83 2.0 % 44 16 1,808
Disposal 8,858 562 4.89 10.3 % 61 5 3,096
Single privatisa-
tion
4,347 288 5.43 8.3 % 16 2 1,655
Adjustment 4,511 274 4.32 12.9 % 45 4 1,441
Own properties 46,404 2,826 5.24 4.1 % 441 73 12,938
DB 14 2,622 179 5.51 4.3 % 29 8 2,615
Total properties 49,026 3,004 5.26 4.2 % 470 81 15,553

enlarge zoom

  Residential Commercial Parking
  Units   Rent Vacany Units   Units
    m2 k EUR/ m2 rate   m2 k  
Core portfolio 37,546 2,264 5.33 2.7 % 380 68 9,842
thereof Berlin 21,908 1,312 5.23 1.5 % 250 35 1,847
thereof
Frankfurt / Main
3,658 217 6.83 2.0 % 44 16 1,808
Disposal 8,858 562 4.89 10.3 % 61 5 3,096
Single privatisa-
tion
4,347 288 5.43 8.3 % 16 2 1,655
Adjustment 4,511 274 4.32 12.9 % 45 4 1,441
Own properties 46,404 2,826 5.24 4.1 % 441 73 12,938
DB 14 2,622 179 5.51 4.3 % 29 8 2,615
Total properties 49,026 3,004 5.26 4.2 % 470 81 15,553

Our core portfolio (80 % of own properties) is located in the metropolitan areas Berlin and Frankfurt/Main as well as in the regions Rhine-Main, Koblenz and surrounding area, Rheintal-Süd, and Brandenburg. In the course of the tenant turnover, we realise partly significant rent increases, especially in Berlin and Frankfurt/Main, but also in the Rhine-Main area. We therefore focus on these markets regarding acquisitions.

The remaining residential areas of the core portfolio provide solid results; these structures are characterised by high lease rates with comparatively low potential for rent increases.

The disposal property includes all housing units that are sold individually predominantly to occupants desirous of becoming owners (4,347 housing units), and the holdings that are offered on the market strategically in small packages (4,511 housing units).

From leasing of the holdings, we generated a contribution margin amounting to EUR 151.0 million (previous year: EUR 147.8 million):

  2009 2008
  EUR m EUR m
Potential gross rental income 205.1 208.9
Vacancy loss etc. – 14.5 – 17.0
Gross rental income 190.6 191.9
Non-recoverable expenses – 6.5 – 3.4
Maintenance – 30.1 – 36.8
Marketing – 0.8 – 0.5
Others – 2.2 – 3.3
Contribution margin 151.0 147.8

In spite of asset erosion due to sell-offs, we were able to increase the results through an improved earnings and cost structure. In the last 24 months, we lost current gross rent in the amount of EUR 8.3 million (annualised) due to disposals. We were able to overcompensate them through rent increases of EUR 10.1 million (annualised).

The potential gross rental income comprises the following:

  2009 2008
  EUR m EUR m
Residential rents 190.6 193.7
Commercial rents 5.9 6.0
Garages / parking places 4.7 5.0
Current subsidies 3.9 4.1
  205.1 208.9

Just under 93 % of our rental income results from the leasing of housing units. As of the reporting date, the average residential rent is at EUR 5.26 per m2 (2008: EUR 5.10 per m2), i.e. we were able to raise it by 3.1 % compared to the previous year. In 2009, we generated rent increases especially on the basis of index adjustments (1.4 %) and tenant turnover (1.0 %).

Broken down into the portfolio clusters, this looks as follows:

    Rent EUR/m2  
  12/31/2009 12/31/2008 Development
Total 5.26 5.10 3.1 %
Core portfolio 5.33 5.16 3.3 %
of which Berlin 5.23 5.02 4.2 %
of which Frankfurt 6.86 6.71 2.2 %
Disposal 4.89 4.80 2.0 %
DB14 5.51 5.41 1.9 %

Berlin stands out with a rent increase of 4.2 % and a share in the total growth of just under 75 %. Berlin also takes an exceptional position in the rent increases resulting from the tenant turnover:

Amount of lease contracts becoming effective 2009
  Units   Rent EUR/m2   Potential against  
    Ø total Ø previous
lease
Ø new lease Total Previous
lease
Total 5,023 5.26 5.32 5.85 11.2 % 10.0 %
thereof price-free 4,117 5.31 5.42 6.09 14.7 % 12.4 %
thereof price-free Berlin 2,304 5.16 5.05 5.84 13.2 % 15.6 %

In the course of follow-up leases, we consistently make use of the available market potentials. The average rent from new leases in the price-free holdings at EUR 6.09 per m2 exceeded that under the previous tenancy agreements by 12.4 % - in Berlin even 15.6 %.

We were able to reduce the losses from vacancy loss etc by 15 % from EUR 17.0 million to EUR 14.5 million compared to the previous year:

  2009 2008
  EUR m EUR m
Vacancy loss 12.4 15.1
Depreciation, amortisation and impairment losses from rental claims 1.7 1.6
(in % of gross current gross rents) 0.6 % 0.6 %
Reduced rent 0.3 0.3
  14.5 17.0

The write-off on rental claims (rent plus unsettled additional expenses) remain at a very low level and losses are unchanged at 0.6 %.

We improved the vacancy rate in the past financial year to 4.2 % and thus by 29 % compared to December 2008:

  12/31/2009 12/31/2008 Development
Total 4.1 % 5.9 % – 29.9 %
Core portfolio 2.7 % 4.2 % – 35.3 %
of which Berlin 1.5 % 2.8 % – 45.1 %
of which Frankfurt 2.3 % 4.4 % – 46.7 %
Disposal 10.3 % 12.8 % – 19.4 %
DB14 4.3 % 5.5 % – 21.7 %

Especially in the two most important markets Berlin and Frankfurt/Main (68 % of the core portfolio), the vacancy rate has reached full occupancy level with 1.5 % and 2.3 % respectively. But also the structural vacancy rate, above all in the free float property in Brandenburg and Rhineland-Palatinate, is declining. The share of housing units that have been vacant for longer than 12 months was reduced by 408 to 1,290 units. Taking into account the rent increases and/or reductions in the vacancy rate carried out in the last two years, we were able to increase the current gross rents in the total properties by 8.2 %, in Berlin by 12.1 %:

Development of the current gross rent
Development of the current gross rent (Bar chart) enlargeenlarge

Calculation: (potential gross rent - vacancy loss)/total living space

The maintenance and service charges of EUR 30.1 million comprise the following:

  EUR m EUR/m2
Maintenance below EUR 1,000 (system providers) 10.3 3.33
Repairs 9.2 2.96
Residential Property Act provisions 2.1 0.70
Consecutive tenant change 8.5 2.75

In the past year, we spent on average EUR 9.74 per m2 p.a. for the current management and thus reduced the costs by EUR 6.7 million or 18 % compared to the previous year. The combination and central awarding of services to five partner companies operating nationwide (system providers) contributed substantially to the increase in efficiency of the organisational processes. In line with our philosophy, we reduced the current expenses in favour of lasting investments (improvements of housing value).

My Annual Report

Increase of the operating result by 2.3 %

Increase of average residential rent by 3.1 %

Average rent of new leases EUR 6.09 per m2

Improvement of the vacancy rate by 30 %

Increase of the current gross rents by 8.2 %