A successful first half-year 2024 – HOWOGE focuses on further growth and expands its in-house services

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HOWOGE Wohnungsbaugesellschaft mbH: A successful first half-year 2024 – HOWOGE focuses on further growth and expands its in-house services

Berlin, 29^th August 2024. HOWOGE Wohnungsbaugesellschaft mbH can look back on a successful first half-year and is on course to achieve its goals for the financial year 2024. In the first six months of the year, the publicly owned Berlin company was able to lay the groundwork for further growth and for an expansion of its strategy for providing more services in-house. In the first half-year 2024, the holdings of HOWOGE grew by approximately 240 apartments due to new builds and comprised around 76,700 units as of 30^th June 2024.

The business results of the first half-year 2024 were also positive. Compared to the first half-year of the previous year, there was an increase in FFO (Funds From Operations) to EUR 105.6 million. At 29.3 per cent, the loan-to-value ratio (LTV) excluding school construction as of 30^th June 2024 was at the same level as it was at the end of the last financial year.

As managing director Ulrich Schiller explains, “Market conditions are still challenging. Despite this, we were able to complete more than 200 new-build apartments and started working on around a further 150. In the first half-year, we were also able to notarise the acquisition of around 4,500 apartments and of extensive building land reserves. With the takeover of ATOZ Facility Solutions GmbH as of 1^st August 2024, we are also making important progress in expanding our in-house services.” Katharina Greis, managing director of HOWOGE, adds, “Our sound capital structure provides the necessary basis for us to react to opportunities on the market even in these challenging times. Indeed, our ability to do this is reinforced by the confirmation of our credit ratings. In May, HOWOGE issued a Social Bond for the first time in its history with a volume of EUR 300 million. This issuance ensures that a large part of the financing costs of our most recent portfolio acquisition is already covered.”

Financial development

In the first half-year 2024, HOWOGE generated a positive operating result. Accordingly, earnings from lettings and leasing rose as a result of both routine rent adjustments and growth in our holdings from new builds by 4.8 per cent to EUR 201.1 million (H1 2023: EUR 191.9 million). The adjusted EBITDA was EUR 139.3 million (H1 2023: EUR 131.8 million). Taking into account the cash items net interest expenses and income tax expenses, FFO, at EUR 105.6 million, was around 6 per cent higher compared with the first half-year 2023.

Following a real estate valuation, the fair value of the portfolio was reduced by around one per cent. Including investments and additions to our holdings through new builds, the fair value as of 30^th June 2024 was approximately EUR 12.6 billion (FY 2023: EUR 12.6 billion). At 29.3 per cent as of 30^th June 2024, the loan-to-value ratio (LTV) for residential holdings compared to the end of the financial year 2023 remained stable.

HOWOGE has a diverse portfolio of financial instruments and a sound capital structure with a balanced profile of maturity dates for its loans. Its first-class creditworthiness was recently confirmed by the rating agencies S&P (A) and Fitch (AA-) - in each case with a stable outlook.

With regard to financing, HOWOGE is on the right track. The refinancing of the corporate bond in a nominal amount of EUR 500 million that is due for repayment in the 4^th quarter of 2024 has already been secured.

In May 2024, HOWOGE issued a Social Bond for the first time. This bond becomes due for repayment on 5^th June 2030. With a volume of EUR 300 million, it ensures that a large part of the funding of our most recent portfolio acquisition has been covered.

Growth and portfolio development

As of 30^th June 2024, HOWOGE’s portfolio comprised 76,684 apartments and 1,151 commercial units. At 1.2 per cent, the vacancy rate in our residential holdings - based on floor space - continued to be at a low level. Despite the increase from EUR 6.46 per square metre (31^st December 2023) to EUR 6.70 per square metre, the average net cold rent of the residential units continues to be significantly below market rents. This rise in the average rent resulted from planned additions through new builds and from moderate rent increases for existing apartments. These increases were made on the basis of the cooperation agreement between the state-owned housing companies and the State of Berlin.

In accordance with its growth strategy, HOWOGE expands its holdings through new-builds and acquisitions. Thus, the company was able to complete three new-build projects with a total of 238 apartments in the first half-year. It was also able to make a start on construction work on two projects with a total of 139 apartments. Currently, around 2,400 apartments are under construction.

In the context of a package acquisition from Vonovia SE in April of this year for a purchase price of EUR 700 million, HOWOGE acquired PRIMA Wohnbauten Privatisierungs-Management GmbH (PRIMA) with 4,495 apartments and - together with Berlinovo Immobilien Gesellschaft mbH - the Stadtentwicklungsgesellschaft Buch mbH (SEG Buch), with which HOWOGE extended its building land reserves. The transfer of the companies’ shares is agreed to take place by 1^st January 2025.

As of 1^st August 2024, the acquisition of ATOZ Facility Solutions GmbH with around 170 employees was completed. By taking this step, HOWOGE is systematically pursuing its strategy of expanding its in-house services and will now be directly responsible for the facility management of parts of its portfolio.

In addition to creating and maintaining affordable housing, an important goal of the company is to achieve climate-neutrality for its entire holdings.  A lighthouse project in Lichtenberg is currently underway. Here, HOWOGE is converting a 63-metre-high, double residential tower block with 296 apartments into a low-energy building. The aim of this refurbishment is to increase the energy efficiency of the building significantly so that it meets the standards of a KfW efficiency house type 55EE. This project in Rhinstraße is currently the largest of more than 40 ongoing refurbishment projects.

In addition, as part of Berlin’s school building campaign, HOWOGE is taking on for the State of Berlin, in particular, the construction of new secondary school buildings and major refurbishments of existing schools. In the spring of 2024, HOWOGE completed the largest school building project in Berlin and handed over to the borough of Lichtenberg two schools with a total of 1,600 places. Currently, seven schools with around 5,500 places are under construction.

Outlook

After a successful first six months, HOWOGE confirms its outlook for its business operations and continues to anticipate an FFO of EUR 180 to 200 million for the year 2024.

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 76,700 apartments (as of 30^th June 2024), 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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