Vonovia SE

XETRA:VNA

Earnings Call Transcript 2018-Q1

[Operator]

Dear ladies and gentlemen, welcome to the Vonovia SE Q1 2018 Analyst and Investor Call. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Rene, who will lead you through this conference. Please go ahead.

[Rene Hoffmann, Head of Investor Relations]

Thank you, Marcelle, and welcome, everybody, to our conference call. Your hosts today are CEO, Rolf Buch; and CFO, Stefan Kirsten. We're in different locations today, so please bear with us in case we have a slight delay at one point or another. Rolf and Stefan will lead through the Q1 result presentation first, and immediately thereafter through the presentation on our tender offer for the Swedish residential company Victoria Park.Following the 2 presentations, we will be glad to take your questions. I assume you have all had a chance to download both presentations. Just to be sure, the Q1 presentation is available on our IR website in the section the Latest Publications. The presentation on the tender offer for Victoria Park is available on our transaction website, which you can find in the section Transactions on our IR website. And with that, let me hand you over to Rolf.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Yes. Hello to everybody, also a warm welcome from my side first to our Q1 earning call and later to our Swedish residential play, Victoria Park. As always, I will guide you a little bit through the highlight and then we will talk about the Q1 results and what does this mean for our guidance. And we will have also some housekeeping topics. And afterwards, we will talk about Sweden. So to the highlights. I think you have seen that we have had a very strong operational results for the Q1, which also gives a very good indication for the full year. Rental growth is up by 4.2% year-on-year, the rental operating expenses have reduced by 21.3%. I think, probably, some of you are surprised by this big reduction, it's actually not a surprise because this is now the impact of the synergies of conwert, which also means, of course, that you will see next year, we will be probably surprised of the impact of synergies made by BUWOG. As adjusted EBITDA operation is up by 5.2% and the EBITDA operation is, of course, because of the lower cost increasing to 89.9% from 88.6%. Consequently, FFO 1 increased by 11.6% on a year-on-year basis, and the BUWOG -- to explain you the BUWOG is we have the change of control as of 26 of March, so the balance sheet includes the BUWOG in the Q1 reporting from the accounts. It does not include the profit and loss. Vonovia took the stake in BUWOG as of April 30. Our stake in BUWOG was -- in April 30 is of 77.4%. Operational integration already started. The German BUWOG operation will be fully integrated, as you know it from us, by the end of the year 2018. That's why you will see the synergies in the beginning of 2019. And because of the very good performance of the first quarter, we have increased our 2018 FFO 1 guidance more than 7% to EUR 1.30 billion to EUR 1.50 billion, EUR 40 million of this is just resulting on a better operating business in Vonovia, and 30% is the net contribution from BUWOG, but I think Stefan will go in much more detail to explain you as a pitch. On the next page, as you know, this is my most favorite slide, and this is a slide which is most important for me. At this time, you can see that we have less rental volume, because we sold so much in the last year. Due to the significant rent increase, our rental income is more or less stable at plus EUR 1.1 million. But even at the stable and increased, our EBITDA operations by EUR 15.6 million and due to better refinancing, the FFO even by EUR 25.4 million. So normally, I show you that the rental income is passed through 100% to the bottom line. In this quarter, it was the fact that we passed so much more than the increase in the top-bottom line. Keep in mind that we will stop selling in the beginning of next year, because when everything is sold, then you could see this kind of a much more drastic than you can see it here.And with this, I hand over to Stefan.

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

Thank you, Rolf. A very warm welcome from me, by the way for the last time, to a quarterly call. All the numbers I'm presenting to you today are ex BUWOG except when I mention it separately. I'm now at Page 5, our rental growth number. What you can see if you compare the year-on-year numbers for Q1 2018 with Q1 2017, it's a growth of 80 basis points and this growth of 80 basis points stems completely from modernization. Just as a quick reminder, we have 3 sources of rental growth in an organic way. The market-driven rental growth, which oscillates around 1.6% a year as you can see here already; the modernization-driven growth, which does not [increte] the square footage or, let's say, the number of contracts, that's the more precise definition, but is driven by the modernization programs, which we run; and space creation, which creates new space, new tenants, new contracts. We have already, in Q1 2018, 4.2% of organic growth. Space creation is naturally low because of weather conditions in the first quarter. Just as a quick reminder, our guidance for the year is 4.6% to 4.8%, based on 2017 investment numbers, that's very important. The investment numbers of x minus 1. We will confirm the guidance for this year as well as the investment volume for this year. So you can assume safely in 2019, a number organically above 5%. Let's move to Page 6. Our EBITDA margin expansion. Rolf mentioned already the elimination of conwert cost was, of course, reducing our cost base in the year -- in the first quarter. This is out of the 2 percentage points of the EBITDA margin, approximately half. You see our annual cost per unit numbers, these will drop further, and don't be surprise if you see a number below EUR 500 at the end of Q1 -- of 2018. If you go on the right-hand side, the Value-add Business has EUR 2 million less profit contribution in the first quarter. This is not a slowing down. This is very simply the way how we calculate this business. We have become more finely attuned in some of the aspects of it, and therefore, reallocated some cost, reallocated some profitability. We stick to our general guidance that this will deliver EUR 120 million contribution of this year. We have just become better in accounting it, not in running it, but it's running completely on track. Our adjusted EBITDA operations have a delta of EUR 15.6 million, EUR 6 million to EUR 7 million come from conwert, EUR 1 million from rent, EUR 2 million from maintenance, the rest from miscellaneous aspects of the business. So the story about improving EBITDA margins is not really changing. Page 7. FFO 1 per share, it's up 7.9%. It's less up than the 11.6% FFO 1 in total, but that has a lot to do with creating new shares through the scrip dividend in conwert and GAGFAH this year. Our interest expense for the FFO is significantly improving. This is the benefit from refinancings in 2017, so we had EUR 16 million from EBITDA, EUR 9 million from financing, therefore, EUR 25 million FFO 1. You will see the noncontrolling interests. At the moment here, it's still slightly increasing in the balance sheet. They're increasing more on the outstanding BUWOG shareholders, because we only own 77% for the time being.Capitalized maintenance. Pure phasing issue, no new policy, nothing special to talk about. So in principle, the numbers here, are again, good, but in line with what you all expected.On Page 8, we're talking about adjusted NAV. Most important message, no revaluation in Q1, so we will have a partial revaluation for the big part of the company after Q2, which we are -- Rene will announce this later. I think published on the 31 August, but no revaluation in Q1. Our NAV per share is down 1.1%. This is as expected, because we've got BUWOG in an old debt deal, therefore, we were actually expecting EUR 0.40 -- well, EUR 0.40 or EUR 0.42 is rather irrelevant. What is important is the EUR 38.07, because the EUR 38.07 is a threshold for us whether or not to propose a scrip dividend. And you will see later that our supervisory board has approved yesterday that we will offer the same choice as last year on the dividend between cash and scrip.On Page 9. We, for once again, included the maturity profile and debt profile. There are 2 reasons for that: One is that, Olaf Weber, our Head of Treasury and I are at the moment on a nondeal-related debt roadshow, which we didn't want to shift just because we have a couple of issues here, but also to show you that our refinancing program with a secured loan extension by 10 years and 200 basis points left EUR 500 million with Berlin help was successful. 2 EUR 500 million tranches in January, 3 EUR 500 million and 1 EUR 600 million tranche in March. An active CP program plus acquisition bridges is not derailing or putting out of balance our maturity profile.You see in the debt structure a certain dominance of bonds. This is natural as long as we have the commercial securities purchasing program from the ECB. You see our loan-to-value number, I'll address that later. Unencumberance is slightly coming down. This is a BUWOG effect because BUWOG is nearly 100% incumbent in its financing. Average cost of debt is safely below to the 2% mark and we have increased our weighted average maturity. There was, by the way, end of March, when we took control of BUWOG, a technical note, which we send out, so that you can calibrate your models, what the -- what debt has allocated to BUWOG and how the interest numbers move there.Let's move to Page 10. Page 10 is our loan-to-value calculation, with which most of you agree. We are at the moment at 45.5%. This is outside of our comfort zone. Our comfort zone is 40% to 45%. If you include the perpetual hybrid to this, it would be even at 48%. Let's assume we take that 45.5%, which is our definition, and we will finance BUWOG, the outstanding shares with 100% debt, we would end up at around 47%, and this would call for mitigates like more year compression, asset sales, not getting all the shares in, et cetera. So the company is clearly committed to reach its target zone again, about the financing of the Victoria Park we'll talk later.Let's talk about our investment clusters on Page 11. This chart is, unfortunately, a little bit misleading. You know that we are running our budget round usually in summer, and therefore, we're reclustering all our respective units. Until then, BUWOG's German properties are all in operate. So we haven't distinguished what is operatable, what is investable, what is privitizable, everything has been categorized in operate, and we will do this exercise during the course of this summer.So if we say that only half of our portfolio with 217,281 flats is investable, this is understating it. That -- but the key indication is that we have enough room for the next years to have our modernization program, which is very successful applied. So the opportunities are plentiful.And with that, back to Rolf, please.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Thank you, Stefan. So the next page, Page 12, I think looks very familiar for you. I don't have to go too much in detail. I just wanted to confirm you have that this Value-add Business will deliver at least EUR 120 million of adjusted EBITDA this year, and please keep in mind, I will repeat it again and again, but I think also my colleagues from LEG are now repeating it, it's valued 0, the NAV calculation.So we will go on, we will develop new solutions. I think we have the right pipeline. I think, today, we should not spend too much on this because we have enough other things to discuss. On the next page is also home keeping. You've seen that we also have been very successful in the first quarter and the privatization, and sell portfolio is always a nonstrategic portfolio. Sell portfolio is the one which we want to sell because we don't like the excess privatization portfolio. It's the portfolio where we sell individual apartments because we get as a significant margin. Our privatization margin remains strong with 27.6% as you can see in the slide. We have done 2 small portfolio transactions for privatization portfolios so where we are selling the not only 1 apartment by 1 but in the package. If you -- if suit this, the figure would be 32.8%, so very comparable to the figure to Q1. Keep in mind that we have seen a significant value uplift also on this portfolio by the year-end valuation, so you see that -- and a very high-demand for this type of apartment is completely intact. For your information, we have close to 14,000 apartments left in the privatization portfolio, so enough for the next years to come. Our sale portfolio, we are disposing all noncore assets, normally with a target range of 0 value uplift. In the first quarter, we have gone a significant higher uplift of 15.9% over the Q2 effect that we have sold 2 significant packages, because we are using the high-market liquidity and the high demand and the mark-up cost to get rid of this portfolio as fast as possible. As Stefan has showed you earlier, only 10,000 units are left in our sell portfolio, so we think that we could close this portfolio nearly to the end of the year, and this means that we do not have negative disposals effect on the FFO from the next year onward. And with this, Stefan, you will give the guidance.

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

It's guidance time and housekeeping. Due to the avalanche effect we have confronted you with, I will talk you very slowly through the guidance so that we avoid misunderstandings. Let's take the guidance without BUWOG, Vonovia as it is, because -- what -- no, let's take it as it is. Organic rent growth, we stick to our guidance 4.6% to 4.8%, Q1 4.2% as you have already seen. Vacancy end of period, smaller than 2.5%. It's more and more difficult to squeeze the vacancy number for very simple and obvious reasons, it's already at the technical minimum. Rental income, we see EUR 10 million more rental income. The lightest guidance number was from November. We've seen our reality kicking in. This is at this time of the year, so let's see how the year progresses. Again, this is without BUWOG. FFO 1, and now I'm taking the number without BUWOG, we would like to add EUR 40 million to the guidance. So it will end up between EUR 1 billion to EUR 1.20 billion on Vonovia stand-alone. This will lead at the existing number of 485 million shares to an FFO 1 per share between EUR 2.06 and EUR 2.10.Maintenance, we have no new indications. Modernization, we can confirm, and I'm sure, end of August, we will show you the completion ratios again as last year. Privatization, we stick to our target. Fair value step-up, you've just seen the numbers, which Rolf was presenting, 30% noncore opportunistic. Now comes a number which I like a lot, which is only 5% step-up in the sell portfolio, but it gives you a clear indication that the year compression story and the value increasing story in Germany is not over if even our sell portfolio delivers 5%. Dividend per share on the numbers I've just mentioned has [began] 70% of FFO 1.So this is Vonovia as it is. What can we tell you about BUWOG at the moment? Well, what we know for sure is the interest expenses, and what we may know a little bit is actually an FFO contribution. And this is a guesstimate and you -- please remember, what we did last year when we were talking about conwert, we gave you an outside in-view and then we hardened the number once we had the accounting policies aligned, et cetera. Keep in mind that we took control on BUWOG only on the 26 of March, so we have only the balance sheet and the quarterly numbers. We have to get used to their definitions, they have a different business year, et cetera. So our first guesstimate on BUWOG is that it adds another EUR 30 million of FFO contribution, and this is in very rough numbers, approximately EUR 60 million of FFO contribution for FFO 1 and approximately, EUR 30 million of interest cost which we have. I think our number is EUR 34 or EUR 33 million, which is what we allocated to the nondevelopment part -- to the core part of BUWOG. If you accept these numbers, it will end up at an FFO of EUR 0.01 per share between EUR 2.12 and EUR 2.16. So I hope I made clear, Vonovia, alone, significant increase in the guidance. BUWOG overlay, lower quality of data. But again, EUR 30 million contribution this year net. Next year, as Rolf said, we will have a full year in. We will have synergies realized, et cetera, et cetera, so the number will, of course, look different next year. Why am I dancing so much around the issue? Let's have a look at Page 15. When we IPO-ed, the FFO 1 was the basis for our dividend level. Why? Because we said all other FFOs coming in we should use for capital recycling, so that they see the equity portion of our modernization program.Since then, the company has tripled in its size, partly internationalized and receives income streams from completely different corners like FFOs from disposals in Germany, disposals in Austria and in future also from development. These are, at the moment, ignored in the current dividend policy, and we have therefore, set up a project to revisit these FFO definitions and the way how we want to communicate to the market.Knowing us and knowing that we will simulate our 5-year plan first with it, if we change anything, you will hear about it early November with our Q3 numbers. But at the moment, we stick to the guidance which we have, even if it is, to a certain degree, imperfect with the world which has changed around us.Good. Housekeeping. Page 16, Annual General Meeting. Annual General Meeting will take place in Bochum on May 9. By the way, this will also be the handover between me and Helene von Roeder. We will offer you a choice of a scrip dividend and a cash dividend. Cash dividend proposal at EUR 1.32 is already out. This is what the Annual General Meeting will agree upon. Afterwards, the time line is that on May 11, we will give the rights issue dividend announcement in the start of the subscription period. You will then have to decide until May 28, with final reference prices and subscription prices published on May 25.Cash dividend recipients will receive on June 7. Share dividend, a week later, because it takes a bit of time to create these shares. Just as a reminder, we were the most successful scrip dividend last year in Germany with a 50% acceptance, and I'm very much looking forward to giving you, as investors, the same choice this year again.Page 17, tender offer for Victoria Park that was a little bit of our May surprise. We will come to the more detailed presentation later, so allow me to skip this one here.Page 18, BUWOG. We own 77.4% already. We have 99.8% of the convertibles in, which we translated already into shares. The mandatory second acceptance period ends June 18, that's very important. And there we will see whether or not we reach the 90% threshold or not. We are able to realize our communicated synergies on the basis of the current stake already, the current stake is fully financed through and this is the technical order, which I was referring to with EUR 3.6 billion of cash stemming mainly from our bonds. Our operational integration is well on track. It started end of March, was taking control. BUWOG's German operation -- operating business is expected to be fully completed by the end of this year. Tomorrow, we have an extraordinary general meeting in Vienna, where hopefully, Rolf, I and some colleagues of ours will be voted into the supervisory board of BUWOG, so also, show legally that BUWOG is now a group company. You may have also seen that Mr. Riedl will become a new colleague of us after the AGM and join our management board. Mr. Eckert, the current Chairman of BUWOG will join our supervisory board. That is, of course, dependent on the shareholders' vote. So BUWOG is fully on track as conwert was before, and we keep on going there.Thank you, and back to Rolf.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Thank you, Stefan. So to wrap it up before we are coming to Sweden. I think you have seen and this is a very stabling element that our operation remains very strong, and we had a strong start in the year which makes us very positive for the full year and for the years which will come. As Stefan mentioned, the story of increasing EBITDA margin is not over, and that's why we are able to give you an increased guidance, which reflects our full strong business fundamentals. BUWOG integration, as Stefan mentioned, is fully on track and we'll deliver its results mainly in the year 2019, so please don't be surprise if you still see a significant cost of action in the year 2019. And with the parameters of its communicated strategy, Vonovia is continuing to see shareholder value creation in Germany, which is our core market, but also as described on the last summer in some selective European Metropolitan areas. And with this, I think I'll pass on to the next presentation, which is called tender offer for Swedish residential player Victoria Park. I'm going immediately to Page 2, to give you executive summary. So what happened in the last 5 years? And I think this is important to understand because what we want to do in Sweden is actually what we have done in Germany in the last 5 years to sum it up. And then, of course, I'll go a little bit more in detail. We have today a company that stand on the 94,000 units and it cost asset value of EUR 39 million. Since IPO in 2013, I think you have seen Vonovia working on a scale to build a scalable business models and you've seen in the presentations our cost per unit, which is actually showcases the KPI for scalability is really going down. And at the same time, we have established an efficient large scale modernization platform. I think we have talked a lot about this in the last 5 years. We have developed a meaningful dynamic going Value-add Business, and we have acquired, in the meantime, 280,000 units, including BUWOG. And of course, very important, we have developed a diversified funding structure and the diversification of our funding mix. Since summer last year, actually, I think we have started to exploit opportunities in some other European Metropolitan area. However, this is not required in our in-flex cities, and we have told you in summer that there is actually 3 interesting countries: France, because of its size; Sweden, because of its proximity towards the German regulation; and the Netherlands because of its proximity to BUWOG. And of course, we have started, as you know, the partnership with SME, [indiscernible] in France, to understand the French market better, and we have acquired meanwhile, but this is more German acquisition, conwert-related BUWOG in Austria. Sweden, as a residential market, is very similar in terms of regulation operating framework in Germany. In Sweden, you find like in Germany, a mixture of private company, private-listed companies and municipality companies. You haven't seen in, like in Germany, a strong urbanization trend in mainly 3 big cities such as Stockholm, Malmo and Gothenburg. And you have in these cities, especially, a significant supply and demand imbalance, especially in the part of the buildings which are for normal people. And you have a strong increase of population in cities, which actually has a strong pipe pressure on this type of product. That's why we see this, this is an effective investment opportunity and don't forget one thing that Stefan mentioned on the end of the page, there was a EUR 1 million home program in Sweden between 65 and 75, so you might wonder why is this relevant in the year 2018. It is very relevant, because at this time, Sweden actually constructed around 25% to 30% of its full housing stock in only 10 years. And now more important, this housing stock has technically the same house -- it's the same structure -- the park needs to be constructed by the same companies and then the German -- East German housing stock which we operate, for example, successfully in place [indiscernible].And now the news is coming that actually this stock is now, because it was condensed in a very short period, it's now coming to modernization potential also in a very short period. And that's why we do not see only similar buildings, we do not see similar challenges, we do not see only similar advantages, but we also see the effect that in Sweden municipality companies are selling significant portfolios to private companies to have enough money to invest in the remaining, so that's why there is a much better acquisition possibility for smaller portfolios, which was Victoria Park was using in the past. And we normally have built and effectively -- we were following actually Victoria Park's business model for the last 12 months, and we have seen that there is a same trend in them like in us but they are doing a much faster renovation speed and so -- and they can increase rent a little bit more than we can do in Germany. They have a qualified portfolio of 14,000 units actually in these 3 big cities, so Stockholm, Gothenburg and Malmo. I think there has been some managers in place which have done really which obviously no executive has ever done, they have well understood the market and they have prepared actually a best-in-class platform to develop on further now, and this is actually, also from our point of view, can become the market consolidator in the future for the next 10 years. This -- we, of course, -- we have always announced that we have to meet all Vonovia's acquisition criteria. And so as you know, there is, first of all, strategic fit as we increase our strategy to European Metropolitan cities. I think Malmo, Gothenburg and Stockholm fits very well. I have talked a lot about the building substance, which fits 100% of our building substance so we don't have to really rethink anything. We can use all the things that we have learned in the German buildings, in the Swedish building. Of course, you know, we have 2 very hard criteria, which is NAV-accretive or neutral and FFO-accretive for the Vonovia shareholders by share and this is both achieved, as you will see later, and of course, we have to finance the transaction as rating neutral, and also there, Stefan will give you some more impact. So the transaction actually, of course, the timing was not completely made by us. On the 1 April, as you know, Starwood Capital has made an unsolicited offer by -- of to Vonovia Park for SEK 34 and this offer was rejected by the supervisory board of Victoria Park. In the same time, we were made aware of the situation by advisers of Victoria Park, and we were asked to make -- to think about an alternative bid. And so we made actually a cash offer for our SEK 38 for our Class A and B shares and a cash offer of SEK 316 for the preference shares, which we do not have a significant magnitude. The implied value of our offer is around SEK 17.8 billion, based on the cash consideration. The offer will have a minimum acceptance threshold of more than 50%, so that we can control the company. The independent bid committee of the board of Victoria Park has recommended the offer. The Chairman, Peter Strand, who was one of the architect of the company, who just moved to this German city was the CEO before and other board members has to decide to give us an irrevocable as part of the offer. I am in agreement with Peter Strand, if shareholders accept that he will stay Chairman and we also like very much the CEO, so we are really building -- he ends as CFO, so we're really building on a very strong management team. And we have irrevocables and call options in place of 37.3% of the voting rights, which is significant more than what Starwood has. On Page 4, I think you will see a little bit of the story you have seen on this page, our 4 main pillars of the strategy plus deliver acquisition part. You have seen that we have increased, from 2013 to 2017, the EBITDA margin by 12.4 percentage points. You see that Victoria Park is in the magnitude of Vonovia in the year 2013. And of course, I'm not giving a guidance for the next years, but I think, my assumption is that we also will continue to do the same what we have done in Germany and increase EBITDA margin in the next years. The same as the financing mix in 2013 as this was the IPO time. In the beginning of 2013, Stefan turned over, everything was secured, but inclusively on the IPO time, 56 was secured and we moved it to 21. Vonovia -- Victoria Park is now on still 88 secured. So I think also here is some potential to get better and keep up financing, keep in minds that our margin of cost is 1.5% and their cost of debt is 2%. Portfolio management, we have looked exactly what they are doing in the housing modernization, which is exactly what we're doing, what we call optimized apartment. They're doing more or less the same. I was there with Klaus, our COO, we've really looked in detail what they are doing and we think maximum, they have the same quality that we do, probably, Klaus thinks we have a little bit better, but I don't think we should go into this discussion. At least, they are spending -- we are spending for the same amount, 30% lower cost per unit, which actually shows you also the scalability of purchasing is an important factor, and I think we can at least partly repeat this in Sweden. And then of course, Value-add Business, they started also to do some Value-add Business, which is very attractive you see today in after 5 years of doing it. We are at 8% of full EBITDA contribution, they're only at 1%. So I think there's enough indicators that with our help, this great management team can develop and repeat our success story in Sweden, and of course, as you know, we have indicated 277,000 units in the last year. This was of course as part of the scale business, so also there, I think in Sweden there's enough potential to grow the company. So overall, this is what everybody wants. We want to repeat the success of -- I have to be very clear also, we have not calculated the FFO and NAV calculation neither any synergies, so if this is successful, it will be highly accretive for our shareholders in the next years.Talking a little bit about the market. I think some of you already have seen the Swedish market. There is the same demand and supply pattern than in Germany. High rent, high demand for rental units. Production costs are going up, so I can really repeat what the -- I told you about Germany, production costs are going up that's why it's more difficult to afford an apartment. And we have historically low vacancy, for example, we have done the due diligence in Victoria Park, actually we were not even able to see an empty apartment because all apartments were full, so we really had to go to apartments where sitting tenants are living, it was even a new experience for me. And we have also the housing market and rental cost, you can see there is a significant rental cost in other types of room and post-regulation, the municipality companies, as I already said, are selling now down their stock to finance the rebuild of the modernization of the remaining stock, so there is also significant potential. And because of the production cost is significantly increasing, actually the value of the buildings automatically increasing as well.On the next page, I'm describing again the EUR 1 million program. I think I have described it already in the summary. Half of this stock is located in the city of Stockholm and Gothenburg and Malmo, 70% of the stock is today suitable for renovation, which is, of course, a huge challenge with a huge opportunity for the industry. This will take the industry roughly 10 to 20 years. And as you can imagine, I am convinced that this can only be done as an industrialized modernization department, like our 4 tiers. So that's why I think we have all the knowledge in place. We know exactly what to do to handle this mess in Sweden and to handle the mess also and the cost -- to receive the cost efficiency. On the lower part of the slide you see actually the 3 main big cities are actually the cities where you have to look on. This is where the Swedish people are living.Also, coming back to our March M&A, so acquisition. Of course, in this slide, you see that there is a significant part of the whole housing stock owned by private rental market. So it's already on the private side. I also told you that there's apartments and municipalities, which are selling down their housing stock, so this is different and actually better than in Germany. And you see that there is also a possibility to consolidate and to accept a better efficiency game in the future. But, of course, now our first step is to actually get control on the 50-plus share on Victoria Park, then to help the management team to get more profit from our knowledge and our experience and our cost structure and then probably later, we can also follow an opportunistic cost strategy in Sweden to repeat the story of Vonovia in Germany.I think on the next page, you see what was impressive because of this high speed of modernization, which is much faster than in Germany. They have shown a CAGR on EPRA NAV of 66%, and of course, if you look at the business plan, because this EPRA NAV cost is coming completely from performance, modernization and following rental increase, you can see this CAGR will continue in the next year. This is just a matter of mathematic and not a matter of facts. So that's why I see people deliver a strong course on FFO and NAV, and don't admit it nicely, but it is unfortunately the case that this company is going faster than Vonovia in terms of NAV per share and FFO per share. So Vonovia Park has a proven business model, as you can see on Page 9. They have -- significant potential for renovations left, 70% still for renovation. And they receive a 40% rent increase, so their regulation seeming is a little bit better than what we can achieve in Germany. The CAGR of 60% EPRA NAV I've already talked about, and what is very important for us and for them is that they have understood, like us, that it is very important that you are this company and this size and this portfolio, that you take your social responsibility very serious. So they have done as we are doing, as you have seen also lot of social investment and to increase residential area attractive as business. So there's all the same approach is what you have seen in Vonovia in the last years. So you can see the same things, and I think this is very good because we don't have to convince people. And I think this was also the reason why the management preferred Vonovia as a shareholder, because they believe that they can continue their right way, which might be more difficult with private equity. And on the lower right side, you see that actually they're doing the same. We are doing what they are doing at today's 30% more expensive than we are doing in Germany. Of course, I know there is a higher VAT in Sweden than in Germany, and of course, they have lower purchasing power, but this, we can help probably in the future. So if you're seeing on Page 10 on the left side, we see the elements Vonovia (sic) [Victoria] Park has already accomplished. They are doing an optimized apartment program like ours, they have a value-enhancing renovation strategy, they have close relationship with tenant associations and municipalities and they have called the company by acquisition in the last year. What we will bring to the table is industrialization and standardization, financing, optimized apartment with lower cost, the same program but lower cost. And programs like upgrade building, neighborhood development and space creation, value-add strategy, and of course, the willingness to consolidate the Swedish market, if possible despite of low acquisition to take. And with this, I hand over to Stefan, who will go into more specifics.

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

Yes. A few numbers on Page 11. You will see that our market capitalization will, of course, increase. We'll talk little later about financing. This is something which we will feed with equity. The reasons will come in a second. Rental income, more than a EUR 100 million more. FFO contribution, of course, a very early stage to think about, close to EUR 40 million more. You know what's striking? When you look at under these German, Austria and Swedish flag that, except for the cost per unit where we don't know why we calculate everything correctly, we know just it's bigger than ours, all these numbers look very similar. Germany has, from the multiples, from the in-place code rent, from the vacancy rate, more similarities with Sweden than with Austria actually. And buying Victoria Park at the 17.5x multiple is also quite interesting for us. On the valuation side, you see, again, EUR 1,300 per square meter for Austria, EUR 1,400 for Sweden, EUR 1,450 for Germany. So when Rolf says that the whole environment is very similar to what we know in Germany, we can add that the numbers that is also the same thing. So let me go through the data again from a perspective of a Victoria Park shareholder and also from a perspective of how to finance the whole matter. The financial terms are clear, SEK 38 for Class A and Class B shares, and SEK 316 for the pref equity shares. The enterprise value equivalent is EUR 1.7 billion. This shows to various premier with LEG have Class A, Class B or preference shares. It's a 22.3% premium to the last reported EPRA NAV. Keep in mind that the Swedish company has a very high NAV trajectory. It's still a 12% premium to the Starwood offer. Ladies and gentlemen, you've seen us acquiring a lot. It's actually great to be invited once and not kicking in the door, so I must actually say, we liked it to be called into it, the independent bid committee of the board of Victoria Park has recommended the offer. Rolf has already articulated the views, and the current chairman is one of the irrevocables we are having. We are having 37.3% of the voting rights, nearly 32% of the shares. What's important for us, you know that Starwood has something like 30%. We are not going into a bidding war here, this would not be Vonovia style. And therefore, we have a minimum acceptance threshold of more than 50% and have to see that we come to a decent arrangement with everybody else who has stock out there.Sweden has 1 -- I think, 2 peculiarities. One is that you can do a due diligence on a listed company, which you couldn't do, for instance, in Austria or in Germany in a meaningful way. And the second one is that your offer is valid at the moment when you announce it not when you put the paper out. So that's one of the reasons why we had the necessary bridge financing in place this morning already. And by the way, we have a contingent hedging plan also in place since this morning, so that the offer is from that perspective, financed. You have seen over the last 2 years that with conwert and BUWOG, we're in the range of EUR 8 billion to EUR 8.5 billion enterprise value debt finance to acquisitions. So don't be surprised that in connection with this transaction, we expect to raise equity, approximately EUR 1 billion. Timing is dependent, of course, on market conditions. This transaction, and this is on Page 13 already, meets all our acquisition criteria. But I have to make you aware where it's tight and where it's not. So from a strategic fit, we like it a lot, and I don't want to repeat myself or Rolf. He has shown very clearly where we are on these things. Let's keep in mind, and these were questions we had today in our one-on-one meetings and over our lunch, whatever we invest in Sweden or in Austria, our core market is and stays Germany, and we will not leave out any opportunities to invest thereto if it fits to our strategy. The FFO per share accretion is between EUR 0.01 and EUR 0.02 for the first full year of consolidation, so that's the year 2019. On the NAV, we see the same. We will be marginally by EUR 0.01 dilutive if we would take the NAV of 2018.They have strong NAV growth, therefore, we believe first full year, we could justify with 2019. So this is in line with our transaction parameters. We haven't asked the rating agencies in a rating evaluation service because the transaction is from a size not big enough, but it has no impact from our calculations on the rating or on the outlook. We have informed, of course, the rating agencies yesterday evening after close of play so that they are not getting surprised. We had a business due diligence, and we were able to validate our business plan for Victoria Park. And as Rolf stated, there are no synergies included in the numbers we're giving you at the moment. So the worst day is the first day, and from that moment onward, it improves. We believe that it's at least NAV-neutral and FFO-accretive, so we are happy with that and this is calculated on enterprise value 50-50 equity and debt. So all in all, I must actually say, we are very happy with having an acquisition like this one abroad. And I would like to focus your attention on Page 14, which is the transaction timeline. 3 May is today, we will need a good 3 weeks to get the offer ready and start the acceptance period. Good news is that acceptance is not too long. So 18 of June, end of acceptance period, 3 days later, publication of outcome. 28 June, because cash offer payment and settlement, which means, if we are successful, which I'm expecting at the end of Q2, we have Victoria Park already in our books. That concludes my remarks. For the wrap-up, back to Rolf.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Thank you very much, Stefan. So as I think we have shown you that we have done an attractive offer for the Victoria Park shareholders, offering them significant transaction premium, and I think this is also the reason why they're supported by the management board and also by the chairman and by the Supervisory Board. We are meeting all acquisition criteria, which is of course, important because this is, in reality, our first real international expansion because I consider the acquisition in Austria more or less German-Austrian acquisition. Here we are doing a real outside Germany acquisition. So that's why I see this is our first step into Sweden into -- outside Europe -- outside Germany. I think that Sweden is the best country for us to start this because this is a country where we have the most similarity. You know that I like the French market, but the French market will take much longer, and that's why I think it is the best possibility for us to show that we can also generate value outside Germany. Of course, that's why we are lucky that we got this possibility, because Starwood has made the offer and that's why we start actually the process. And I think we will help now book Victoria Park to become a leading company in the market up to spot, they are already leading up to spot and to even come better. And probably follow the same success story that we have done in the last 8 or 10 years, so that's why I hope in 5 years from now, you will look back in Sweden and say this was the year 2018 and now in '23, we have achieved the same achievement and the same success what you have seen with Vonovia in 2013.And with this, I hand over to Rene.

[Rene Hoffmann, Head of Investor Relations]

Thank you very much Rolf. And we are good to go in the Q&A then, Martha. If you can please start the Q&A session.

[Operator]

[Operator Instructions] The first question is from Thomas Neuhold from Kepler Cheuvreux.

[Thomas Neuhold, Head of Research of Austria]

I have a couple of questions, and I think it's best to take them one by one. Firstly, wanted to start with the operation outlook for Victoria Park. Can you provide us with more details on all the potential for revenue growth of Victoria Park in the next couple of years? It seems that on the one hand there's still a lot of modernization potential and the turnover in the portfolio seems relatively high. So how quickly you think you can rollout the modernization strategy? Secondly, on Page 19 of the Victoria presentation, there's a chart showing that there's a potential to build up to 3,000 additional units. Can you already comment on potential plans how quickly to rollout these additional units? And on the cost of Victoria Park, you mentioned that some of the costs are significantly higher than Vonovia's costs. Can you give us already some indication how quickly and how strongly you can bring down costs? And if it's possible in the long run to get close to the EBITDA margin level Vonovia is currently having? And then I have a couple of other questions.

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

So probably, Thomas, I will start and probably Stefan can help me. Of course, you know Victoria Park is a listed company. So we have seen the business books for the next year but, of course, we cannot disclose it because we are under NDA. What I think is fair to assume that they continue to do the same modernization [ speed ] than they have done in the last years which also translates and actually for the same type of development, of course, which you can see on Page 8, which I think is a fair assumption as this is an assumption, I think, also given to them by the management for the stock market. So keep in mind, we have not put any synergies and any cost reductions in our calculation and we are still FFO-accretive. So I think that's why we have not disclosed and we have not committed to any FFO potential, so what I am telling you now is that I told you I think in the presentation that there is approximately 30% of capital spending which we are spending to modernize an apartment, where we are 30% cheaper than Victoria Park today. Of course, keep in mind the VAT in Sweden is 25% so a little bit higher than what we know in Germany, so a part is just VAT [ token ] but the rest is just purchasing [ token ] there. I think we can help, but again we have not put anything in writing. Then of course in Victoria Park, you see the same tenement like in the German one, they have also built the buildings and in between there is a lot of land. So actually, they have found and actually as we do, so they have actually land for around 3,000 empty new flats and they are going in process to build this so this is more or less our space creation program which you know from Vonovia, but I don't want to commit in the moment because I'm not a shareholder on the speed of Victoria Park for this Value-add process or space creation program, but here you also see the same tenement. And of course, there we can think if we are also doing these [prefabbed] buildings, which then of course can add additional value. But this is all potential. It is still too early. And the last question, I think I forgot now what the question was.

[Thomas Neuhold, Head of Research of Austria]

No, about the cost development. But I understand that you cannot give more specifics. Okay.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Keep in mind we are here and this is -- I think also we are going international so it is more difficult for us to predict synergies, so that's why we developed the case that we are saying we are not calculating the synergies to explain the case. And now, I think we have a lot of upside potential, which is I think much better for our shareholders than if we have downside potential. So now we have to try to start again and to work on this and this can probably come to positive surprises in the next years. But I think it would not have been good to put these synergies in already to calculate the purchasing price because these synergies are, of course -- there's more uncertainty than if I buy a portfolio in German.

[Thomas Neuhold, Head of Research of Austria]

Understood. Okay. The next question is on BUWOG and especially on the development business. BUWOG seems to have quite a strong and attractive development pipeline and in good locations. Can you give us an update how the integration of the development business of BUWOG could impact your development strategy? Do you want to increase your midterm development pipeline? Is [build] to sales still a core portion of the business model of BUWOG in the long run? Or do you want to rather focus on building more apartments in your existing portfolio?

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

I think -- I know the BUWOG development portfolio very well, so at times Rene explained it to me. You know that he will continue to be responsible for it because he is the one in our board who knows development best. So that's why he will be responsible beside Austria for the whole development activities. Yes, if we find land -- if we find potential we will expand the development business because it's a relatively attractive business. And yes, if feasible, then we will do more for old. But this was actually happening already in BUWOG. So this is not a change in the strategy probably. What is a slight change in the strategy is that BUWOG was forced to sell because for liquidity and of course now the development in BUWOG is not forced to sell just to get the cash, and I think there Vonovia has enough cash to finance this relatively small development business. So now we can do what is best for Vonovia. As you know, in all big cities, we have this 1/3, 1/3, 1/3 rule today in Germany. So you have to build 1/3 for [indiscernible] and 1/3 for free rent and 1/3 for privatization. This will stay, you cannot stop the privatization piece because this is subsidizing actually the rest of the show so we will continue to also build for sell. But of course, again, I repeat myself, we are trying to do the best for the company and not the best for the cash -- short-term cash flow needs. In Austria, the business model is a little bit different. Actually here, you are building, you are accepting a lower rent, that's why you see the rental yield in Austria is smaller than in Germany. But the big uplift comes later because they are selling the apartments later with 60% premium to the book value. So in the end, it's all build and this book value and lower rent actually lowers the book value and you will realize. So in theory, and this is what we want to do, and this is what BUWOG did in the past, you always have to build as many apartments as we are selling so we keep a constant flow and then, of course, we are coming to the debate about the recurring FFO in this business because when you look on the FFO only in Austria, and just looking on the rental FFO is probably a little bit jumping too fast because you a continuous inflow of cash by disposing the apartments, of course, under the condition that you construct the same amount of apartments every year that you are selling. Does this answer your question, Thomas?

[Thomas Neuhold, Head of Research of Austria]

Yes, I understood.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

We have use -- we have now two cases, I in person was in contact with mayor to help actually move our property to get construction permission or to participate in competitions for new land, because I know the systems are sometimes [ tough ] to be the last one who gets -- actually who can realize actually the development. So I think this helps. It makes me -- it's for me a lot of fun, I'm learning here new, so I'm happy to have Daniel on my side because he can help me when I'm making mistakes. But together, I think we can develop further. And of course, this is also very positive impact on our reputation with the mayor. Because if you are coming to the mayor and saying I'm helping you to make your city nicer, I'm helping you to build and I am taking the responsibility that there is also enough apartments for rent because there's a lot of business. I think this is a very good proposal for the mayor and this is something that we should not ignore, which is also very helpful as well. But in addition to it, the buildings they're building are great. It's really fun, they're looking nice and emotionally, it's fun. But this is probably less for investors.

[Thomas Neuhold, Head of Research of Austria]

Okay. The next question is regarding your comments on Slide 15 about your dividend policy and then composition of various cash flow streams. Is it fair to assume that you might consider starting paying out of the part of the cash flow generated by developments and asset disposals as dividends in the long run?

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

No, that's not fair to consider. We just wanted to make you aware that our world has become more complicated. Until further notice, we stick to our current policy. And I really don't want to predetermine also the thoughts which Helene has on the matter. Therefore, please keep the current dividend policy in place. This is just a heads up that we started to think there is -- there are no results out there, and we have to calculate this through very -- very much in detail. I'm grateful for the question that I can clarify that.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Probably let me add one reflection. You know that in BUWOG, they have this [ recurring ] FFO and they were mixing actually all FFOs. I am sticking to the principle that the market knows FFO 1 and FFO 1 is very well defined. It's EBITDA coming from rental business, which we have there forever, minus related finance costs and minus tax [ until it leads ] to the FFO 1. The other FFOs which are coming from, for example, disposals of assets, which we are building in Austria, so we're building every year the same amount and we are selling the same amount. It's not FFO 1 and we don't want to call it FFO 1, but it has a sense of coming every year as long as you construct. Then you have disposals in Germany where we are selling out of the stock, which is diminishing but it's diminishing over the next 10 or 15 years. So this is not forever, but it's for a longer term. And then we have disposal and then we have FFO coming out of disposing noncore units, which is for a very short-term because you are disposing it, and one day it's over because you don't have any noncore units left. And then you have FFO from development, which is probably more similar to the Austrian where you are building and you are selling. So this is a debate what we have, we're saying it can just not look on Vonovia only on the FFO out of the pure rental business and consider this as the only measurement of the success of the company. We have other FFOs which are also turning into be more important. We don't want to change the definition, but I think we have to come to profound discussion in Germany together with Helene and [my boss]. And then to you, how we actually describe what we are doing, how we are being as maximum transparent as we can. And in the end, of course, there might be some people arguing saying here guys, if you can show that the FFO is coming every year, why you are not paying dividend on this? But this is then later after we have explained and after we have made it clear that we can come to this discussion and this will happen at the end of the year.

[Operator]

The next question is from Robert Woerdeman, Kempen.

[Robert Woerdeman, Research Analyst]

One question on Sweden and what house prices have done over the past decade. I think it's fair to state that the Swedish house prices have increased faster than for the rest of Europe. Therefore, one could argue there is little room left for additional value growth. I was just wondering what your view is on this.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

It's a funny debate. It's the same debate we had in France. In France, you told me that the houses are so expensive and then you're talking about inner circle of Paris. I think it seems to me from my time 1 year in the Supervisory Board of D. Carnegie that house prices you are talking about is [indiscernible houses for rent to own. We are talking here about the price to flat to rent. And here as you can see and I think Stefan has shown it to you on Page 11, it's very easy. The rent is more or less the same than in Germany, a little bit higher. The cost per square meter, and this is after all these imminent or reality existing rental price, is a little bit lower than in Germany. This leads to a lower multiple for the same type of substance, for the same type of building, for the same type of underlying stability, for the same type of underlying economical stability of the company, of the same type of legal stability of the company. So I personally, if I look to this figure, I cannot see there is a higher stock price for this type of product in Sweden. I'm actually considering in Sweden this type of apartment is cheaper than in Germany.

[Robert Woerdeman, Research Analyst]

Okay, that's very clear. Then I ...

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

I'm not saying that the general trend of individual houses and high cost flat at the center of Stockholm are following a different route, I just don't know about this, because this is not my product. I'm not telling you what is the price of the future shopping center in Stockholm. I have no idea about it.

[Robert Woerdeman, Research Analyst]

Okay, that's clear. So you mentioned that 70% still needs to be renovated a couple of times. Would you be able to run us through the potential value creation here? And what you have been applying in your underwriting of the deal? I'm talking in terms of what is the yield on completion that you expect? You mentioned also yourself, a 40% uplift. But how much needs to be invested to actually get that 40% uplift? If you could give us some guidance here, that would be much appreciated.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

I think you’ll recall the best referral because then I'm not coming at a critical situation to refer to the published figures of Victoria Park. As they show very interestingly that the unlevered yield, and unlevered yield shows the modernization of 7, there unlevered yield is a 8, so they are delivering a little bit even if the apartments are cheaper, they are delivering a little bit higher unlevered yield than we do, and they show actually that they have an auto finance because they have a value uplift of 40%, it's all coming from their figures and that's why they actually have an auto financing function for what they are spending in the business. But it's all very well described in the Victoria Park presentation, so please have an understanding I'm not even a shareholder, I should not comment on what this Victoria Park is doing. But this is very similar. It’s not like in Germany it's 8 and you have the same [tenants]. And what is important and probably it's more difficult to understand is that this rent for the newly renovated apartment is agreed with the tenant association, so you will see rental growth also on this apartment in the next year, which not all players in Sweden are doing but Victoria Park is doing it.

[Robert Woerdeman, Research Analyst]

Okay. That's helpful. Great. With the focus on Sweden now, is it -- what is the position now with the partnership of SNI? Is that temporarily on hold? Or what is your view?

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Very good question. Thank you very much for the question. Partnership with SNI is up and running. I think we, as a company, even if I personally like France very much, we have already made clear that France is a longer story, of course, assuming element in France is a much bigger market than Sweden. So for the long-term we cannot exclude France in our thinking. Remember the big size of the Paris region. As you know, but also as you know, in France to be a big player, so I'm not talking about small tax cases, but a big player you need to change of regulation because today we are not allowed to own this type of product which we are, for example, talking in Sweden, or we could only but we cannot distribute it and which is actually we are not allowed to own. So that's why, in France, together with SNE (sic) [ SNI ] and there's a lot of other people we are lobbying to get the legislation change because this will lead, of course, to much more massive increase on potential as this would lead actually to remarket opportunity for Vonovia, but it will take a little bit longer. So we are spending no money in France except some meetings and some lobbying. I'm very positive about what my discussions with the politicians even in the end that one day they will change. But of course, this is quite a question because they have to move one step forward. So they moved a lot of steps and there's one step missing, which allows actually the nonsocial housing companies to sell to private whole blocks. Today, they are allowed to sell apartments, but not blocks. This element is changing. There will be a huge market in France. As we know politicians takes a while and also in Germany it took us a while from '82 to '89 to get rid of the nonprofit housing market. We are not putting France away, what we always said that France probably should not expect a big move in France immediately. And in Sweden, we have no restriction. We can work in a completely same competitive environment to Germany so this is a different story.

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

Unfortunately, in Sweden there's only living 10 million people and there is competition, but it's…

[Robert Woerdeman, Research Analyst]

Okay. That's great. Well, you know D. Carnegie very well. What is the biggest difference between D. Carnegie and Victoria Park? And why have you chosen to go for Victoria Park and, for instance, not D. Carnegie? Is that...

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

We are having [indiscernible] I'm sitting here, I'm the CEO of Vonovia, so I probably cannot tell you anything what I have got from my role of supervisory board of D. Carnegie. So please allow me that I'm not commenting D. Carnegie. But to answer your question very simply, D. Carnegie is not for sale and Victoria Park was not for sale until the 1st of April, and then they called us if we want to buy them. So this is actually what I think we call white knife -- white night and this is what we have done.

[Robert Woerdeman, Research Analyst]

Okay. To put it differently, if D. Carnegie was up for sale, would you also consider buying D. Carnegie then? If they were...

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

I tell you very clear, if you take our 4 plus 1 strategy which we have in Germany, I would support the management of Victoria Park to explain -- apply exactly the same strategy, which also means plus 1, which is [indiscernible] by acquisition and this means actually acquiring to a very strict full set of criteria, which I think is very important. They should look for acquisition and they should not exclude anything what we are also doing. This is the same what we are doing in Germany. Does this answer the question?

[Robert Woerdeman, Research Analyst]

Absolutely.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

And of course over the next month and then following the next 2 years, the potential which you can get from municipality is huge.

[Operator]

We have received another question from Christopher Fremantle, Morgan Stanley.

[Christopher Richard Fremantle, Executive Director]

I just wanted to ask about rental growth and the organic rental growth guidance. Firstly, just -- can you just clarify that the reason you have chosen not to add in the rental growth guidance for BUWOG is just because the deal has not completed and you're very early in that process of getting inside the company? And just confirm that you intend to provide some organic rental growth guidance that incorporates BUWOG when that transaction completes? That's my first question. And then secondly, you talked a lot about NAV growth at Victoria Park. I wonder if you can talk more about organic rental growth for that sort of portfolio. How it compares to the rental growth trajectory that you have in the existing portfolio -- the existing German portfolio that you own? So what is it going to do to your rental growth readings? And just reassure us that it's not because the rental growth is dilutive to that number.

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

I would like to take both. Okay, on BUWOG, I can confirm both statements you made. We don't have enough in-depth insight to have a fully-fledged guidance ready from BUWOG. We have to align the time axis, we have to align the definitions, and this will take time. So you will get a fully-fledged guidance when we come out with the Q2 numbers, and that's the reason why we haven't included in our rental growth number. With regard to Victoria Park, as Rolf just pointed out, we don't even have one single piece of stock. Do us a big favor, it's a listed company, they are publishing the same stuff and being under NDA, we'll not also discuss our business plans to you. So you have to live with what's in the presentation. Sorry, that's a bit disappointing, but I think it's fair.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Only to add one thing for the future. Of course, we will disclose separate rental growth for Austria and a separate rental growth for Sweden. This is a matter of fact, because as I explained, Austrian rental growth will have a different rental growth dynamic, but also different privatization uplift dynamic. So that's why we have to differentiate both. So we should not show our privatization uplift in a mixed way, Austria and Germany, and this is the same for the rental growth. Of course, what we will include is the Austrian portfolio of BUWOG and the local conwert remaining portfolio on Austria because this is the same market. So what you will see rental growth by country, of course, this is a matter of fact. And we will report -- in addition, we will, of course, report Austria in a different segment, so you will see the full [ show ] for the Austrian segment. Because all KPIs which we are reporting, including cost per unit, including EBITDA margins, has to be separately reported for Austria and for Sweden, of course.

[Operator]

We have received another question from Georg Kanders, Bankhaus Lampe.

[Georg Kanders, Investment Analyst]

I have one question regarding the contribution from the Value-add Business because it's been going down, and you mentioned that you have changed your cost benefit allocation to the segment. Is it right to assume that without this change, there would have been growth in the EBITDA contribution? Or are there seasonal effects due to probably winter and just modernization works?

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

No seasonal effects, you're absolutely right. What we have done is we have changed the way how we allocate costs to specific tasks when they're modernized or maintained. The German word would be [Foreign Language] so we are cutting -- we are slicing in a finer way. Of course, there would have been growth because we are delivering a 20% growth on the whole year, so it's mainly affecting…

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

To be very concrete, the difference, if you would assume exactly the same method, would be about EUR 10 million more.

[Operator]

There are no more questions, I hand back to Rene.

[Rene Hoffmann, Head of Investor Relations]

Thanks very much, Martha, and thanks, everybody, for dialing in. Before I hand back to Stefan for final comments today, let me remind you that our Q2 numbers will be out on August 31. And with that, back to you, Stefan.

[Artur Stefan Kirsten, Former CFO & Member of the Executive Board]

Ladies and gentlemen, dear friends, I must actually say this sweetened endeavor is opening a new chapter for Vonovia today. And for me, a professional chapter is here to close. I'm stepping down on the 9th of May, as you know, after the AGM. And I must tell you what an absolute pleasure and privilege to serve in this company for 7.5 years. There are a couple of stations in there like the grand restructuring, the IPO, moving the financing base to unsecured, becoming Germany's market leader, going into Europe, just to mention a few. I would like to take the opportunity to thank you all -- all stakeholders and all colleagues who accompanied me. The sell-side, the buy-side, the investors, so not only ours side, the banks, agencies, including rating agencies, media, I nearly always felt well treated. Helene von Roeder will join us in due course after the AGM. We've worked together in the last months to get her acquainted with the company. Has a lot of trust, intelligence, more charm than I have, definitely. She's the best successor I can wish for, and I would like to ask you to extend your trust to her as you have extended your trust to me over the last years. With that, I'd like to wish you a good day, and all the best for Vonovia, its people, all of you here on the line and your loved ones. Thank you very much.

[Rolf Eberhard Buch, Chairman of the Management Board & CEO]

Thank you, Stefan. I think that I have one more to add that I think was important that I also have to thank you here in front of the public, so we will have a lot of talking still going on in the next week. But I also think that not only us but all the audience here on the phone will miss you and miss you not only for your very profound knowledge and your detailed analysis that you're doing but also sometimes of your flappy remarks, which will always entertain, and of course was high-quality, but also entertaining. And that's why, of course, this company will be a little bit more boring without you and less entertaining. But we will promise that we will do our best, Stefan, to at least keep feeling a little bit that we will not everything will change without you in this presentation. So thank you very much, Stefan, and thank you very much for the audience as well to support Stefan. And I can remember a lot of very heavy debates that we had about [indiscernible] and all these things and you treated us well. Thank you very much.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.