Corporate strategy and group management

Competitive strengths and corporate strategy

The size and quality of our property portfolio, the concentration on core and growth regions, and the quality of the management and staff ensure a good market position for us. This results on the one hand in a sustained increase in value from the existing property portfolios. On the other hand, we want to increase our holdings through selective acquisitions.

Some of the competitive advantages of Deutsche Wohnen AG are:

  • an attractive property portfolio with strong rental income in two fast-growing core regions in Germany: Berlin and Frankfurt / Rhine-Main,
  • competence, experience, and market knowledge of the management teams and staff,
  • access to the various potential sellers of residential property and new property portfolios,
  • integration competence and scalability of the company platform,
  • realisation of increases in rental income through strategic asset and portfolio management.

A comprehensive restructuring phase followed the acquisition of the GEHAG Group, in the context of which we created a competitive and scalable platform. In addition, we were able to substantially reduce the debt position of the Group.

The focus of the next step will be on growth and increase in value. Deutsche Wohnen sees itself as an active manager of residential units ranging from the middle to the upper price segments, situated at economically attractive locations with above-average rent development potential of the current gross rent. Our business strategy aims to make use of this potential, and thus increase the value of the company. For example, we raise the rent in the context of adjustments to the rent index, new leases at market rents, or through modernisation measures in the core portfolio. The implementation of this strategy is strongly determined by the core portfolio structure (location, condition, share of price-free holdings, year of construction, etc.) and the resulting guiding principles.

In this context, we count on:

  • the focus on the residential property management of our own holdings in growth regions in Germany
  • realisation of the rent developmental potential of the current gross rent and vacancy rate reduction in the core portfolio
  • growth through targeted acquisitions
  • single privatisation and core portfolio adjustment geared towards value
  • optimisation of the financing structure specifically by reducing financial liabilities

In addition, we continuously review our process and cost structures in order to increase profitability.

Group Management

It is the top company objective of Deutsche Wohnen to optimise the shareholder value and generate a strong cash flow. The central planning and controlling systems of the company are constructed and aligned accordingly.

Group management takes place taking the respective special characteristics of our segments into account. In the residential property management segment, the key performance indicators for management are the development of the rent per m2 and of the vacancy rate, differentiated according to core portfolios and / or regions. This also includes the size and result of the new leases and the development of the expenses related to leasing such as maintenance, marketing and operating costs, and rental shortfall. All parameters are evaluated weekly and / or monthly and compared with detailed budget estimates. This allows the development of measures and / or strategies that increase rental income potentials within controlled expenditure development and thus result in a constant improvement of the operative results. This established system makes it possible to identify property portfolios with less development potential for disposals, but also to determine short-term potentials for the company from core portfolio acquisitions.

In the disposals segment, we regulate the number of units to be sold via the average sales prices per square meter and the margin as difference between book value and average sales price. In this process, the determined values are matched with the target figures.

Within the framework of regular reporting, the portfolio management reports to the Management Board on the development of the essential parameters in comparison with the targeted figure, divided according to locations and / or subsidiaries.

The other operative expenditures such as personnel and administration expenses and the nonoperative magnitudes such as financial expenses and taxes are also part of the central planning and controlling system together with the monthly report to the Management Board. Here, the current development is drawn up to be compared with the targeted figures, as well.

The financial expenditures have considerable significance, because they have fundamental influence on the Group results as well as on the cash flow development. The control of the financial expenses is the responsibility of the treasury division within the holding. It is directly responsible to the Management Board. An active and up-to-date management of the loan liabilities, together with permanent market monitoring, makes a constant optimisation of the financial earnings possible. The cash is planned in a rolling 18-month cycle and arranged and controlled on a daily basis.

In the segment nursing and residential care homes, we generate internal growth primarily through increases in rent and reductions in vacancy levels and/or new leases (in the residences/residential care business) and through increases in accommodation and treatment charges and in occupancy (in the area of in-patient care facilities). Rents and care payments in all KATHARINENHOF® facilities range in the upper third of the respective regional market average. Reporting to the Management Board also takes place monthly.

In order to measure the cash flow obtained through the operative business activity and to align it with the plan, we use the adjusted profit before tax (EBT) and the funds from operations (FFO) as parameters. In this process, the Group's EBIT presents the initial value for determining the FFO, which is increased or reduced by financial expenses/returns that do not affect liquidity, and tax expenses/returns.

By means of the monthly reporting, the Management Board and the speciality departments can evaluate the economic development of the Group and compare it to the values of the previous month and the previous year and the targeted figures in a timely manner. Furthermore, the expected development is thus determined on the basis of a projected forecast. Opportunities, but also negative developments, can thus be identified in the short term and measures for the utilisation and / or preventative steps can be deduced.

Sustainability

Against the backdrop of a lasting business policy, Deutsche Wohnen is involved on various levels, e.g. in social projects in the estates, in the cultural area for the Bruno Taut heritage, and with ecological measures in the holdings.

In the context of our involvement, we promote social initiatives and projects in our holdings. With our support, the German aid organisation Malteser Hilfsdienst, for example, opened a neighbourhood centre in Berlin's Gropiusstadt. For the day-care centre "Kiddies Daycare", we restored a former commercial property in the housing estate Waldsiedlung in a comprehensive manner appropriate for children. With these measures, we want to contribute to making the living environment more attractive for our tenants.

We maintain our cultural roots with the traditional GEHAG Forum. Since 1988, 140 artists have already presented their works here. In addition, as owner of three of the UNESCO world heritage estates, we advocate their preservation and modernisation according to standards for the protection and preservation of historic monuments.

Last but not least, we also make an ecological contribution with the energetic rehabilitation of our holdings. In the sense of the long-term value increase of our core portfolio, we check on an ongoing basis which ecological measures can be implemented under the aspects of environmental protection and economic viability.

We continued our efforts to further increase the energy efficiency in the holdings also in 2009. For example, several inefficient heating systems were replaced by modern combined heat and power district heating connections. Through this, we make a sustainable contribution to the protection of the environment. The Federal High Court of Justice also confirms our efforts in a decree. In it, projects that lead to primary energy savings are recognised as modernisation measures. Based on these positive experiences, we will continue our commitment also in the coming years.

My Annual Report

Growth and increase in value are the focus of the company strategy

EBT and FFO as central key performance indicators