HOWOGE Wohnungsbaugesellschaft mit beschränkter Haftung: HOWOGE Wohnungsbaugesellschaft continues on growth course and can look back on a successful financial year 2022

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HOWOGE Wohnungsbaugesellschaft continues on growth course and can look back on a successful financial year 2022

• Approximately 8,300 apartments acquired and integrated into the company’s holdings
• More than 1,600 new-build apartments completed
• Increase in adjusted EBITDA of approximately 24 per cent to EUR 268.1 million
• At EUR 213.6 million, FFO approximately 18 per cent above level of previous year

Berlin, 27^th April 2023. HOWOGE Wohnungsbaugesellschaft mbH presented its Consolidated IFRS  Financial Statements for 2022 today and continues on its growth course despite the difficult market environment. “2022 was without doubt a challenging year, characterised by inflation, interest rate rises and the energy crisis,” explains HOWOGE managing director Ulrich Schiller. “As a state-owned company, we continue to meet our social responsibilities in times of crisis and to ensure affordable housing. With around 1,600 new-build apartments last year alone, we achieved approximately 10 per cent of the entire growth in housing stock in Berlin. At the same time, we succeeded in integrating our acquisition of approximately 8,300 apartments and around 200 commercial units into our portfolio. This means that HOWOGE’s holdings have grown within one year by 15 per cent to approximately 75,400 apartments. This is a course that, in principle, we wish to continue on in future.”

Increase in operating result

From a commercial perspective, HOWOGE takes a positive view overall of the business year just completed. As a result of the growth of its holdings, HOWOGE was able to achieve an increase in adjusted EBITDA of around 24 per cent to EUR 268.1 million (2021: EUR 216.1 million). Taking into account financial expenditure and taxes on earnings, FFO (Funds from operations) was EUR 213.6 million - an increase of approximately 18 per cent compared with the previous year.

The annual consolidated year-end result in the amount of EUR 82.2 million was significantly lower than the figure for the previous year (EUR 668.4 million). The main reason for this lower annual surplus was the negative result of EUR -198.6 million arising from the valuation of HOWOGE’s property portfolio, a decline in value attributable to the rise in interest rates.

As at 31^st December 2022, the Loan-to-Value ratio (LTV) was around 28 per cent, a figure that is significantly below the upper limit of 50 per cent, which the company has set itself.

Capital structure and capital market orientation

To ensure its financial independence and its conservative risk profile HOWOGE has a financing structure that is both long-term and diversified. The issuers’ ratings, which were published in 2021, from the international rating agencies Standard & Poor’s and Fitch of A (S&P) and AA- (Fitch) - both with a stable outlook - were confirmed most recently in the summer of 2022 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 further corporate bonds - even at short notice. In addition, HOWOGE is able to enter into long-term financing in the form of bonded loans, which helps to further diversify its financing portfolio.

In the business year 2022 there were only small-scale borrowing and refinancing measures. At around one per cent, the weighted average rate of interest for existing financial liabilities in the reporting year was significantly below current market interest rates. As at the reporting date, the average residual term for all financial liabilities was approximately nine years. And in the current year, there are no significant maturity dates due. Because of HOWOGE’s good liquidity situation, the buy-back of corporate bonds in a volume of EUR 40-50 million prior to maturity is being considered as part of the company’s overall financial strategy. “HOWOGE is in a strong financial position and has a sound capital structure,” explains Katharina Greis, HOWOGE managing director. “This is a solid basis for the company’s continued expansion.” Katharina Greis joined the management board of HOWOGE after Thomas Felgenhauer left the company last year at his own request. Since 1^st April 2023, Katharina Greis has been responsible for the areas of financing and controlling, legal and procurement, HR  and accounting.

Growth and portfolio

As at 31^st December 2022, the portfolio of HOWOGE consisted of 75,419 residential units, 1,141 commercial units and 17,115 other units. At 1.6 per cent as at 31^st December 2022, the vacancy rate, which is calculated on the basis of floor space, remained at a low level, and the average rent in 2022 was, at EUR 6.36 per square metre, significantly below market rents. Pursuant to its cooperation agreement with the State of Berlin, HOWOGE lets new-build and existing apartments according to fixed requirements with regard to rent levels and is bound by a quota for allocating apartments to tenants with a housing eligibility certificate. Accordingly, more than 64 per cent of all newly let apartments (excluding new-build apartments since 2013) in the company’s holdings went to people entitled to such a certificate.

As at 1^st January 2022, the transfer of risks and rewards was completed for 8,267 apartments and 233 commercial units which HOWOGE had acquired from Deutsche Wohnen and Vonovia in 2021. In 2022 these acquisitions were fully integrated into HOWOGE’s holdings.

In the area of new-builds, HOWOGE succeeded once again in making a valuable contribution, completing the construction of 1,612 residential units in 2022. In so doing, HOWOGE achieved the highest figures for new-builds in the reporting year since the company was formed in 1990. Despite the difficult market environment at the moment, HOWOGE plans to complete approximately 1,200 new-build apartments in the current business year. In 2022, HOWOGE invested a total of around EUR 390 million in repairs, refurbishment and new-builds.

Sustainability report published

In parallel with its financial figures, HOWOGE has also published its sustainability report (www.howoge.de/nachhaltigkeit) today. Sustainability is a key part of our business activity. HOWOGE has refined its sustainability strategy with an updated materiality analysis and revised sustainability goals. The company works strategically in the following four fields of action of sustainability: corporate governance, new construction and portfolio, neighborhoods, and teamwork. The company continues to work systematically towards achieving the goal of a climate-neutral portfolio in 2045. The individual steps towards this goal are currently being developed in a climate strategy. Here, our focus is not only on climate-friendly new-builds and the energy-efficient modernisation of existing buildings but also on the generation of renewable energy using the actual buildings themselves. As Ulrich Schiller explains, “At 218 Frankfurter Allee we built a 22-floor residential property according to the building efficiency standard KfW-55 in just two years. In a pilot project, it is planned to instal four miniature wind turbines on the roof of the high-rise building which will produce a share of the electrical energy needed by the building. In addition, we are now at the planning stage for creating a climate-neutral supply of heating and hot water for an estate in our existing portfolio and we will also be making significant investments to expand our solar energy park.”

Currently, HOWOGE has 46 solar energy plants. In 2022 alone, they generated 1,120 MW/h of climate-neutral electricity, thus saving approximately 470 tonnes of CO₂. During the next 10 years, it is planned to increase this capacity by a factor of 20, which will mean a capacity to supply around 21,000 households.

An important part of the company’s strategy is also its social commitment. Accordingly, HOWOGE supports charitable projects and associations in its estates. In 2022 the company invested around EUR 2.3 million in this area.

When it comes to building new schools and refurbishing existing ones, HOWOGE also plays an active role as a partner in Berlin’s school building campaign. Currently, it is planned to build 25 new schools and to refurbish 13 school campuses. When it comes to new school buildings, the preparatory work over several years is now starting to show visible results. This means that by the end of 2023 five schools - providing approximately 4,500 additional places for pupils – will be under construction.

Outlook / Forecast

For the business year 2023, HOWOGE anticipates a decline in results due to current market conditions, i. e. higher costs caused by inflation and interest rate rises that cannot be compensated for by increases in rents. It  remains to be seen to what extent increases in interest rates may lead to a depreciation of property values. Here too, however, HOWOGE is in a strong position because of its sound capital structure. For its business operations, HOWOGE anticipates an FFO of more than EUR 180 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 75,400 apartments, 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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