Dear ladies and gentlemen, welcome to the conference call of Vonovia SE regarding the final results of 2021. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by the zero on your telephone for operator assistance. May I now hand over to Rene, who will lead you through this conference. Please go ahead.
Thank you, Martin, and welcome to our earnings call. Your hosts today are CEO Rolf Buch and CFO Philip Grosse. I assume you have all had a chance to download the presentation. In case you have not, please go to our website and you'll find it under Latest Publication. If you have not yet had a chance to look at the presentation, you will find that it has two parts. The first one is a bit of a broader picture, and the second one is what I think is a comprehensive set of results. Rolf and Philip will now lead you through this presentation. Of course, we'll be happy to answer your questions afterwards. With that, let me hand you over to Rolf.
Thank you, Rene, and also from my side, a warm welcome to all of you. Rene said already we have a part of broader view, and is the reason because it's now we are starting our 10th year of existence on the stock market, and our industry follows not only quarterly or yearly results, but a longer term focus and longer term trends. That's why I think it is helpful to understand what happens in the last years. Since our IPO in 2013, FFO per share was growing with a CAGR of 13%. NTA or former NAV per share was growing with a CAGR of 18%. This gives actually a 15% annual return or a 7.5% average organic return, if you exclude the yield compression per annum.
This, I think, is the first and very important message in the future. This trend, I see no reason why it should change in the future, even if we are not giving you a long-term guidance. Today, we see a very undemanding equity valuation. We see at the moment the highest discount to NTA ever, which is wider than in the COVID-19 low point, which is above 30%. We see the highest FFO yield since IPO, which is 5.8%, and we see a higher dividend yield than in real estate Europe average. I often read that Vonovia is a bond proxy. I don't think this is true. We are an operating company. Looking only on rental yields is probably not correct. It is better to look on FFO yields.
The gap between the 10-year bond and the FFO yield is more than 600 basis points. This is also a record high number. It seems to me in the capital markets to be hardwired that there is a link between interest rates and values. We have argued for the last nine years that there might be different drivers. For example, the value is driven by the imbalance between supply and demand for a basic product. The economic rationale is clear. If there is more demand than supply, normally prices are not decreasing but increasing, and this is what we have seen in the last years. There's a second element. We see significant construction cost inflation, and therefore the new buildings will be more expensive. There is no reasoning for widening the gap between new buildings and existing buildings.
It is clear that as new buildings get more expensive, also existing buildings will get more expensive. See, if you buy all this, you still have not valued the value of the platform. The implied fee for asset and property management implied in our company is 0.2% of cost asset value, while others, like fund operators or some peers, charge only 0.5% for asset management only, or between 0.5% and 1% in general. I think this is a lot of good reasons to buy Vonovia because we agree with a lot of analysts saying this stock is, in the moment, very cheap. To go more in detail on this analysis, let's start with page four. We have delivered, and you can see that this is a constant growth. It was not a hockey stick.
We have delivered a 13% CAGR of FFO per share and dividend per share in the last years. The trajectory is very clear. It will continue actually drawing like with a ruler in the future. The same picture on values. Our NTA has grown by 17% CAGR since IPO, and in light of the ongoing favorable fundamentals and organic growth creation, we expect further value growth in the coming years. I repeat, there is no reason why the trend should change. Let's move on the second point, yields on page five. The share price is one thing, but of course, this is impacted not only by our performance, but by macroeconomics and political news flow. Let's ignore the overall capital markets perception for a moment and look at what we can influence as management.
Vonovia delivered a combined organic annual return via dividend yield and organic value growth of 7.5%. If you include yield compression, it was even closer to 15%. The organic growth potential is embedded in the gap between the regulated rent and the long-term upside trajectory based on releasing rents and rents for new construction. Also, this will go on like in the past. On to page six. In the light of the continuous growth and the yield that we have delivered, the current equity valuation looks rather undemanding. We are currently trading at 5.8% FFO yield compared to an average of 4.7% between 2013 and 2021. The average for the European listed sector is 5.35%, and I would argue that the risk profile is not really comparable.
Similar picture on the dividend yield. Our current yield is 4.1% versus 3.3% on average in the past and 3.6% for the listed real estate sector. Finally, NTA. Between the IPO and the end of last year, we were trading on average 9% premium to last reported NTA. Currently, we are trading at 32% discount to 2020 EPRA's NTA, while the European real estate sector is trading at an 8% discount to 2021 NTA. It seems to me a firmly held belief that Vonovia is a real estate company, and that's why it is a bond proxy. There is so much focus on how our cross-asset yield compare to the bond yield and how large or small the gap between these two are at a given time.
As you can see in the left-hand chart, the gap of real bond yields has not fluctuated all that much during the last five years and is currently widening again. What matters much more is the fact that we are an operating company which delivers not just an initial asset yield, but an earnings yield. On the basis of our 2022 FFO guidance, the spread between the earnings yield and the real 10-year bond yield is higher than ever before and is more than 800 basis points. Finally, before we get to the 2021 results, let's take a minute and reflect on what all this means going forward. This is page eight. We all see that assets in the direct market continue to be sold at a sustainable premium. Again, no surprise to us, given the main driver is supply and demand.
Don't forget, our product is not a discretionary product that you can choose not to consume. It satisfies a fundamental need of which there is no real alternative. As long as this is the case, in the urban market, it will not change for a long time. I cannot see a scenario where price came down. It just makes no economic sense as long as demand exceeds supply. Add to this, the increasing need for modernization and energy efficiency, and it becomes pretty obvious that the environment of our business will remain highly supportive because it is shaped by long-term megatrends that are not driven by other cyclical changes. With the energy price inflation we are currently seeing, the need for modernization and decarbonization is further magnified. That means that we are in a very sweet spot with our overall business.
Vonovia offers best-in-class access to the attractive sector. We are the ESG leader with a committed decarbonization pathway for CO2 neutrality by 2045. Adequate stakeholder reconciliation is firmly anchored in our business, and therefore, there is no doubt that it is becoming increasingly recognized by the public and by lawmakers. We have a proven track record for scale and efficiencies. We have developed a fully integrated management platform to cover the full residential life cycle. This is very obvious if you look at our attractive implied asset and property management fees of 0.2% compared to 0.5%-1%, plus additional property management fee for non-listed real estate companies. This is a pretty good offer to our shareholders.
With this, I close the general broader section, and we are now coming to the highlights for the year, annual year 2021. I'll start with the highlights on page 11, and Philip then will go with you so the different segment results and financial. The 2021 results includes Deutsche Wohnen's contribution for Q4, but on a standalone target, we have fully delivered on our guidance. Our EBITDA is up 19%. Group FFO is up 24% in absolute numbers and slightly down on a per share basis as we had all the shares from the rights issue, but only one quarter of Deutsche Wohnen. We are proposing a dividend of EUR 1.66, up EUR 0.6 . The Sustainability Performance Index, SPI, was 109%, especially thanks to good progress in CO2 reduction and customer and employee satisfaction.
The total value cost for Vonovia, excluding Deutsche Wohnen, was EUR 8.2 billion, or 14.3% like-for-like. The EPRA NTA was EUR 66.73, +13.5%, which includes the full effect of the subscription rights issue. The LTV is at 44%. The Deutsche Wohnen I ntegration is now part of our normal operating business and will be completed by the end of this year. So far, no material surprises, and we do not expect any going further. Deutsche Wohnen's NTA was EUR 54.39 at year-end compared to our EUR 53 offer price. This also looks good. For 2022, we are guiding more than 20% growth for revenue, EBITDA, and group FFO. On ESG, let me just highlight our updated climate path for CO2 neutrality is now already by 2045.
Well, we will see this later in the presentation. Over to you, Philip.
Thank you, Rolf. Also a warm welcome from my side, which is actually my first investor call in my new role. I have to say, after a period of silence, I'm very happy to continue the dialogue with all of you and yeah, explain the developments and attractiveness of the resi sector and discuss it with you. Now, over to the presentation, moving to page 12 with an overview on our 2021 earnings. The table includes the Deutsche Wohnen contribution. As you can see on the right-hand side, all key numbers, however, are also very much in line with the Vonovia standalone guidance.
On group FFO, we of course have the distortion, as Rolf mentioned, between the fully loaded shares, including the rights issue and the absolute number, that is three-quarters of Vonovia standalone. In that sense, 2021 clearly is a transition year, and when we get to the guidance and the FFO outlook, you will see that the trajectory is on its way, and it will be apparent that we deliver also on a per share basis, very decent growth. Let's go to the segments on the next few pages, all of which, by the way, are excluding Deutsche Wohnen, because until the integration is complete and all numbers actually come from the same system, we will report Deutsche Wohnen as a separate segment in terms of EBITDA contribution in our 2022 reporting. I will start with the largest segment, which of course is rental.
This is on page 13 of the slide deck. On a largely unchanged portfolio, we increased revenues by 3.3%, and maintenance actually grew by a similar magnitude. At the same time, and that is good, operating expenses were down some 7%, and that has resulted in an EBITDA contribution, which is 6% up in a year-on-year comparison. You can see the increased efficiency of our German platform also by looking at the EBITDA margin and cost per unit on the bottom right-hand side of the slide. Here, margin up some 160 basis points year-on-year and cost per unit down some 15%. On to the operating key performance indicators on page 14.
Here, the reported organic rent growth was 3.8%, but that includes the one-off effect from reversing the impact of the unconstitutional rent-freeze law in Berlin. The true number you should focus on, and by the way, also compare it with our guidance, is 3.2%. The composition of that is 1% from market rent growth, 1.6% from modernization investments, so our optimize and upgrade building programs, and 0.6% from new construction. Vacancy at the end of 2021, very low, 2.2%, continues to be driven almost exclusively by investments, and in light of the supply-demand imbalance in our markets we observe, it is safe to assume that the vacancy rate will continue to remain at around the current level.
On maintenance, we saw on the previous page that maintenance expenses were much in line with the prior quarter. Capitalized maintenance, however, was up some EUR 2.40 per sq m, as we continue to remain on the side of caution when it comes to keeping our assets in good shape. Our maintenance levels, as you know, have been running high compared to the peer group, and we are in line or even higher than the municipal owners. Our efficiency is key, which enables us to afford higher spending and make sure that our assets are very well taken care of. This is a bit of a saving for us, I would say, if we ever felt the need to trim maintenance because of cost inflation or otherwise, I think we have quite a buffer that we can work on.
Let's go to the value add segment on page 15. We continue to see good revenue growth in this segment. External revenue is up 14%, internal revenue is up 5%. The value add story is very much intact. What we saw, however, in 2021 that was COVID-19 caused the implementation of numerous safety measures, which typically come at some cost, and also resulted in a high level of sick leave, illness, and quarantines. Combined with the general shortage of labor, we had to rely much more on our external partners. The positive impact of our higher internal margins was absorbed by the need to bring in more external support. In addition, what we have also seen is price increases, in particular for the procurement of energy.
While this is being passed through to our tenants, the compensation will only occur with some time delay. Those two effects, in the end, were responsible that we saw a slight decline in EBITDA contribution. With the top line intact, I would not read too much into that. I do expect that we will see good EBITDA growth in this segment again in the running year. Page 16, we see the results of our third segment, recurring sales, our privatization business. Just like in all other areas, we continue to see very strong momentum in the demand for our condominiums. We sold 12% more units compared to the prior year, and both revenues and fair values were up some 25%.
We were able to compensate the increased valuation level for a similar step up of slightly below 40% in line with the last year. Bottom line, EBITDA contribution was EUR 114 million, 23% more than 2020. Also outside this segment, we sold some 700 non-core units, plus some land, at a fair value step up of 50%, which was contributing EUR 10 million to other earnings, so outside the EBITDA lines. It's, by the way, a very stable business. With a large portfolio of almost 50,000 units we have condominiumized. We actually have sufficient product for the next 15 years based on the current run rate. Nice addition to our business. Page 17 for development.
By now, you will be used to the fact that our fourth segment is a bit chunkier than the other three, so there may always be some volatility between the quarters. We see this in the develop to sell part, where we had a very large and very attractive block exit in Q4, contributing actually more than EUR 50 million to gross profit. With that, it helped to increase the overall develop to sell revenue by 70%. Since the margin was considerably higher than last year, the gross profit more than doubled in 2021. Volumes were also higher in the develop to hold part. Here too, the top line increased faster than the underlying cost, driving the gross profit and gross profit margin.
In spite of some higher operating expenses, the bottom line, EBITDA contribution was up 70% or EUR 188 million. On page 18, we take a look at the long-term potential in our development segment. To be clear, this for now is still excluding the development pipeline of Deutsche Wohnen. We have completed 1,373 units to hold, 827 units to sell. To be very precise here, you will not be surprised if I tell you that we still face some challenges when it comes to building new apartments. Red tape in the preparation construction process. Slow process overall to obtain building permits, bottlenecked in construction capacity and of course, the not in my backyard challenge. All of that is obviously not a good message for someone whose DNA is the development business.
It does, however, bode very well for someone like us, where development is an addition to the main business of owning and operating a large portfolio. Clearly, with the levels of completion we see not just for us, but across the market, we are currently now nowhere near to where we would need to be in terms of demand. That, given the recent developments, has even accelerated. In terms of our long-term pipeline, these are big numbers. Don't change much from one quarter to the next. In total, we are looking to close to 50,000, with 40,000 earmarked as develop to hold and some 9,000 units earmarked as develop to sell. For this year, we expect to complete about 3,600 units to hold and to sell. On the next slide, on our valuation result.
This is page 19. As you can see, total value growth was EUR 8.2 billion for Vonovia standalone. It's an increase of 14.3% like for like. The breakdown is 4.7% from performance, 8.2% from yield compression, 1.4% from investments. Against that backdrop, the true number in terms of like for like is, after deducting for the investments, 12.9%. This is the number I'm focusing on. With that, 2021 was the second-best year behind 2016 in terms of value growth, which we have actually seen. When we look at the KPIs, Vonovia, again, on a standalone basis, is now valued at 28x net cold rent, EUR 2,400 per sq m in Germany.
That appears rather conservative when we look at transaction comparables or replacement costs. We are sharing some more details on different geographies on page 20. I don't want to go through all the markets. By and large, it's a pretty homogeneous picture, especially if you look beyond a one-year timeframe. What I want to point out is Sweden. Here we saw a total value growth of 21%. Some catch-up effects given that inflation adjustments have occurred only with a certain time delay. I think we feel pretty good about our exposure in the Swedish market. Let's go to EPRA NTA on page 21. Obviously here with a strong valuation gain that was an important driver. The other ones are the Deutsche Wohnen transaction and the rights issue.
If you start with the total equity, we have some EUR 10 billion more. Yes, that's the impact of the rights issue, but also our profitability of EUR 2.3 billion, net of the EUR 0.5 billion cash dividend payout. Deferred taxes are up from the valuation gains, obviously, on which we booked respectively the deferred taxes, but also the contribution from Deutsche Wohnen. Similar to Q3 numbers, we only include 50% of the Deutsche Wohnen deferred taxes at this point, versus some 90% for the Vonovia to hold portfolio. Against that backdrop, the EPRA NTA per share is probably some EUR 3 per share understated, given that most of the product we bought is for longer term to hold.
You can also see that, the goodwill has come down, as a consequence of the impairment we saw following the strong valuation gains in 2021 in various regions in Germany, but also in Sweden. The remaining goodwill we have, and that is outside the value add segment and the development segment, is some EUR 1 billion. If we are right about further valuation uplift in 2022, this should disappear anytime soon. For one last time, you will see that the purchase cost, in the NTA, and I will get to that on the next slide.
The EPRA NTA per share growth on this definition, so the old definition for 2021 was 13.5%, which does not seem all that bad in a year where we did the largest equity raise in real estate history at a price level where many felt it would be massively dilutive. Yeah, I'm sure you already picked up on some of the previous slides, but let me give you a bit more detail on disclosure changes you should expect starting in Q1 2022, and this is now on page 22. First, on EPRA NTA. You are all aware that Vonovia has been adding back transaction costs for the historic portfolio, essentially treating them similar to deferred taxes, as both are related to the disposal of assets.
I personally believe that the comparability with the peer group is a very important argument, and it is helpful for many reasons when companies from the same sector are aligned on key metrics. This is why we have decided to eliminate that line item from the EPRA NTA calculation starting next quarter. Please also note that we will include, as to my comment on the previous page, the Deutsche Wohnen deferred taxes with 100%, not 50%. The net effect you will see in 2022, and that is based on 2021 numbers, though, is a per share decline in EPRA NTA of around EUR 4. Second, on group FFO, I would like to be very clear.
The Group FFO has been and will continue to be the relevant KPI to measure the recurring economic performance of the group. Having said that, we acknowledge the market's desire to break out minorities from this number, and this is why we're starting again next quarter that we will be adding two lines below the Group FFO, minorities and Group FFO after minorities. The minorities will include all minorities, also from Deutsche Wohnen, even though this is a non-cash minority as long as Deutsche Wohnen will not pay any dividends. It will be the Group FFO after minorities that we will use as a basis for the dividends. The payout ratio will remain at the 70% you are familiar with. Finally, and that is also to further increase alignment with the peer group.
We will no longer eliminate IFRS 16 effects from the group FFO. In 2021 numbers, by the way, an effect of roughly EUR 37 million. Moving to page 23, that is on LTV. Things are very much in line here as well. Net debt is up with the original Deutsche Wohnen debt, plus the EUR 10 billion we raised last year. The EUR 3.5 billion remaining bridge facility, by the way, was fully repaid on March 1st this year. On the value side, we added more than EUR 30 billion assets from Deutsche Wohnen and had the valuation uplift both from Vonovia and Deutsche Wohnen.
If we include the impact of the disposal to the city of Berlin, which closed in January this year, pro forma LTV is at a comfortable level of 44% at year-end, and therefore in line with our target range as we have promised. However, when we look at the EBITDAR multiple, 14.4x at the end of 2021, that will increase. All things equal, because this number is the average of the last 12 months, so it still includes lower debt volumes. On a look-through basis, we will move towards 16x. I do not want to draw a hard line, I think 16x net debt to EBITDAR is probably at the very high end of what I feel comfortable with.
That will make it difficult for us to lever up further against yield compression. On page 24, we have our debt structure and the charts, and 2021 column do include Deutsche Wohnen. Maturity profile remains very balanced, combined with a fixed hedged ratio of debt and the funding mix. I do feel comfortable at this point. Speaking of funding mix, you may have seen that we have issued a EUR 1 billion promissory note a couple of weeks ago to further diversify our lender base. We have also updated our sustainable finance framework, which now also cover social bonds in addition to green bonds, and a couple of more details are on the next page. Yeah. What we wanted to do is to broaden the eligible portfolios for sustainable financing.
The new framework, as I said, now also covers social bonds. We have also made further improvements, and we are now proud to say that the new framework is aligned with the EU Taxonomy rules as well as the standards of the International Capital Market Association. We have received, as you would expect, a second party opinion, in this case, by ISS. The total amount of eligible assets at this point is some EUR 21 billion, and that is already net of financing with a breakdown by purpose and geography on the right-hand side. That, by the way, does not yet include the social assets of Deutsche Wohnen, so I expect this asset pool to even increase further in 2022 as part of the integration. With that, Rolf, back to you.
Thank you, Philip. It is good to learn and to see that you are keeping the same discipline on our financial discipline, especially focusing everybody in the company on the net debt to EBITDAR multiple. That's why nobody gets crazy surprises. Let's go on with page 26. I think most of you are now familiar with the Sustainability Performance Index, SPI. As you have seen, not only our operating and financial performance is strong, we also are very successful in our non-financial performance. Our overall target achievement for the SPI was 109% versus the target of 100%. It was the good progress in CO2 reduction, in customer satisfaction and employee satisfaction that drove this performance.
For 2022, we have set new targets and calibrated them to a target achievement rate of 100%. You also will find the medium- and long-term targets until 2025 in the right-hand column. On page 27, we are very proud to present our new and accelerated science-based climate path. It is based on an asset-by-asset analysis and represents a roadmap for CO2 neutrality until 2045. There are, as you know, three key levers. First, a combined deep renovation. This is energy-efficient modernization that we have done during the many years now. Our average rate is about 3%, which is slightly above what is required to reach the targets on the Paris Climate Agreement and of the European Union. Keep in mind that the average rate in Germany is only 1%.
Deep renovation alone will not bring us to CO2 neutrality. We are replacing conventional heating with hybrid systems and heat pumps. We are putting photovoltaic on all sustainable roofs. This will be our 30,000 roof program. We will also install our own local heating networks in our urban quarters, and they will be powered with renewable energy. We exploit the energy sector transmission towards district heating and clean electricity, and thereby replace fossil fuels in our entire portfolio. I think this is more urgent and more important than ever before, if you look what happens in the east of Europe. Of course, it would be too easy to just say we will be CO2 neutral by 2045.
Not only do you need to explain how you will get there, you also need annual and interim targets so people can follow your, and make you accountable for the progress. This is why the climate path is so important for us. The climate path was developed together with Fraunhofer Institutes, and it is modeled alongside the CRREM 1.5 degree path for multifamily houses. Page 28 brings me to a very troubling subject. For more than 75 years, Europe has been a guarantor for peace, stability, security, and prosperity. Now we have to witness the horrible events in Ukraine. We are deeply saddened by the tragedy the war has brought on the people of Ukraine. We condemn the Russian aggression, and we stand with the Ukrainian people during these very difficult times. Our workplace and our neighborhoods are a great example for peaceful coexistence.
We are proud of our employees from more than 70 nations, including Ukraine and Russia. In our urban quarters, people from more than 150 nations are living peacefully together. It is possible to live peacefully together. Of course, we want to help. The best way for us to do is that we can do best, provide housing and make sure that the process is as smooth as, and easy as possible. This is why we coordinated the relaunch of the dedicated online platform, the so-called Wohnraumkarte, in cooperation with the North Rhine-Westphalian state government and the Association of German Housing Companies to provide housing for Ukraine refugees. This platform provides local governments exclusive and easy access to vacant apartments available for refugees. This enabled a streamlined and coordinated matching of apartments with people in need.
Several housing companies are joining in the effort and have also listed the available apartments on the platform. Let's move on to page 29. Helping the people in Ukraine and looking after the best for the refugees is the most important thing that we can do now. At the same time, we must not lose sight of a problem that has been growing for some time, and that is actually being magnified these days. Energy prices have been increasing much faster than rent for a long time now. Of course, the conflict with Russia has accelerated the development. Apart from the humanitarian tragedy, the war in Ukraine has also shown very clearly the importance of secure energy provision, responsible energy consumption, and renewable energy generation.
Of course, the financial risk from rising energy prices sits fully with the tenants, because energy costs are, at least in Germany, a pass-through. It would be too easy to say this is not our problem. As a responsible landlord, there are two things we need to make sure. First, when tenants get the ancillary bill for 2022 and 2023, some will find it is very difficult to pay the higher energy cost. Just like with COVID-19, we will be prepared to agree on payment deferrals and installment payment to assist any tenant who is struggling to pay the energy bill. Second, and even more important, we need to continue the progress of our climate paths. Reducing the energy consumption in our portfolio, increasing the use of renewable energy, and decreasing our dependency on fossil fuels is the best protection against rising energy costs.
Of course, our biggest impact in the fight against climate change. This is a long-term effort, and Vonovia is very well positioned to manage this challenge successfully. Not every owner will be able to make the transition, and that will generate further opportunities in the future. Coming to inflation. There is a widely held notion that in a higher inflation environment, German resi is not a good place to be, because we cannot pass on inflation through higher rents. Actually, this is just simply not true. First, 2/3 of our rent growth are investment driven. Because the rent increase is a function of the yield on cost, a higher investment amount because of inflation means higher rents. The inflation risk does not sit with the landlord.
Of course, affordability is relevant, but there is plenty of headroom, especially in an environment where there is inflation and salary increases. Second, and maybe more important, it is true that there is no direct link between inflation and market rent costs. There is a strong correlation, as market rent costs follow inflation with the time lag. Yes, we have seen a long period in Germany where we have not seen massive inflation, and that's why we have not seen massive rental costs. It should not come as a surprise. When inflation is high and drives up construction prices, rents of our new construction, property values, and general prices, including salary and wages, then it is clear that even in a regulated rent like the Mietspiegel cannot ignore the development and cannot remain on the current level.
Instead, it is bound to follow inflation in the medium to long term as higher salaries and wages and higher rents for new apartments and reletting finds their way into the data set of the Mietspiegel. We have looked back, actually, to the periods of high inflation, where you have to look back in Germany in the 1970s. While it is of course not completely comparable, history is a good guide. In the 1970s, when inflation and interest rates were high, the average rent growth for members of the German Association of Housing Companies was double-digit. These were nonprofit companies. There is clearly a correlation between rents and general cost inflation. On page 31, we will talk about Deutsche Wohnen. We have spoken a lot about Deutsche Wohnen in 2021.
Between our initial offer in May and the completion of the rights issue in December, it was clearly the dominating topic. The integration of Deutsche Wohnen will now be a major topic for us this year, but we do not expect similar surprises and news flows like during the transaction phase. The integration is a bread and butter business and is fully under our control. Our team who is managing this integration has successfully completed seven integrations before, and this is the same on the Deutsche Wohnen side. They know exactly what they have to do and when it has to be done. So far, we have not seen any material surprises, and we do not expect any going forward. We will update you on the synergy assessment in Q2.
For now, we are sticking with our original target of EUR 105 million EBITDA. After finalizing the organization concept towards the end of H1, H2 will see the implementation of the target organization, which in turn will be completed by the end of the year. From 2023 onward, the operational and financial processes will go live, and the integration is completed. I have said it often in the past, but maybe it is a good opportunity to repeat it. It goes without saying that we will protect and respect minority shareholders' rights in everything that we do. The structure of minority ownership is by no means new to us. There are clear rules, and we know exactly how to play them.
Trust me, there is an intrinsic motivation because not only do minority shareholders look closely to make sure that everything is clear, so do tax authorities. You really don't want to mess up with them because they can put you into prison. One thing is also clear. Vonovia owns 88% of Deutsche Wohnen and will not support any action that is not in our advantage. With this, back to Philip.
Yeah. Thank you. To close up the presentation, a couple of words on guidance. That is on page 32. I think no need to go through all the line items. Key message really is that top line revenue, EBITDA, and group FFO are all expected to grow by more than 20%. Please bear in mind that the 2022 portfolio will be a bit smaller, 21,000 units, and that accounts for an FFO impact of roughly EUR 75 million or EUR 0.10 per share. What you also see, and that should not come as a surprise, investments will go up. That's good news. It will go up to EUR 2.1 billion-EUR 2.5 billion, and that is simply a function of the combined investments of the enlarged Vonovia and Deutsche Wohnen portfolio.
Very briefly on the last page before we dive into Q&A. This is on my initial comment on the transition year, 2021. If you look at 2021 in terms of FFO per share, we had all the shares but only one quarter of Deutsche Wohnen in our FFO, and that is why you see a small decline in the last year. If you put aside 2021 and look at the growth rate between 2020 and 2022, you see 18% growth over these two years and even 23% if you were to include the synergies on a run rate basis. With that, I hand it over back to Rolf for some closing remarks.
Yeah. Thank you, Philip. My summary for today's call is this. First, Vonovia has a compelling track record of earning and value growth and organic returns. The current equity valuation seems to me undemanding, with FFO yields, dividend yields, and NTA discount at record levels. Second, our operating business, including Deutsche Wohnen integration, is fully on track. The residential market fundamentals remain very positive. Macroeconomic developments have very limited impact, and this gives us high visibilities on future growth potential. Third, we are the sector's ESG leader with a committed decarbonization pathway for CO2 neutrality by 2045. This gives us future growth potential and a lot of political support. With this, thank you very much.
Thanks, Rolf. Thanks, Philip. I will hand it back to Martin, the moderator, to open the Q&A for us, please.
Thank you. We will now begin our question- and- answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. We have a first question. It's from Marc Mozzi, Bank of America. The line is now open for you.
Thank you. Very good afternoon, all. Well done for this presentation and with this new, more transparent financial indicators.
My question will be essentially around leverage from here. The first one is your net debt to EBITDA calculation at 14x the same as the one calculated by credit agencies? And if not, what will be the credit agency number? My second question will be a follow-up of that one. To me, it seems like effectively, as you said, 14x on your calculation, which is probably closer to 18x on my calculation, net debt to EBITDA is far too high, and that's a driver for the share price to re-rate. And what are your intentions in terms of de-leveraging from here?
Nursing homes, developments, the 25,000 units you've been indicating as potentially for sale in June last year at the time of the bid on Deutsche Wohnen. Can we have an update on that? Final question also related to leverage. What are your options right now with the 21% stakes you have in Adler? Thank you.
Okay. I guess the first two questions are for me, Marc. The last is probably on Rolf. On the leverage side, yes, as I said, on a look-through basis, based on our definition of adjusted EBITDA, we will be slightly above 16x net debt to EBITDA. Rating agencies look a little bit different on EBITDA metrics. What they do deduct, in essence, is the EBITDA contribution of our development business, plus the EBITDA contribution of our recurring sales business. That actually is an analysis I do not share.
In particular, recurring sales, as I was making that mention in my presentation, is really for the long term, given that we have product for the next 15 years based on our current run rate, to monetize the spreads we see in markets which are characterized by supply, demand and balance. As such, monetize on the spread between our book values and market prices in the private market. But also 16x net debt to EBITDA is probably somewhat at the high end of what I consider appropriate. Against that backdrop, the topic is not so much about deleveraging at that stage. That also depends on cash we generate from potential opportunities, and there's nothing for now we can talk about in detail.
It requires discipline on our investment program that we at least remain in these areas.
Probably, Marc, to add a little bit. The question of the disposal of the healthcare business is, of course, a decision which has to be taken by the Deutsche Wohnen Management Board and not by Vonovia. You know my opinion, that in the context of the overall balance sheet, EUR 1.5 billion business, which is very different, seems probably to be too small. That's why I think we as Vonovia would support the Deutsche Wohnen Management Board to take a disposal decision. Anyhow, the Deutsche Wohnen Management Board is probably well advised not to make it public before it is done. That's why I think this is a clear answer on where Vonovia as a shareholder of Deutsche Wohnen stands. The second is Vonovia is also shareholder of Adler.
As you have mentioned, we own around 20% of Adler. We have all, theoretically all options. Having said this and looking on our stock price and the questions on debt to EBITDA, it is probably not the moment to speculate about further acquisitions. You know us, we have been a long-time shareholder in other listed real estate companies. When the time is right, we will take the decisions.
Thank you very much.
The next question is by Jaap Kuin of Kempen. The line is now open for you.
Good afternoon. Thanks. My first one is on guidance. As you indicate, a minority should be deducted and you also mentioned the IFRS 16 adjustment. Could you maybe give us an indication for your FFO guidance 2022 adjusted for those two items? That will be my first question. Then, maybe you could talk a bit about cost inflation. What is the impact not only in 2022 but also in 2023, given the fact that you probably have a lot of kind of pre-contracted prices, but that's a bit more marginal impact on maintenance CapEx? What's kind of the like for like percentage increase in the money you have to spend? Maybe in the same way, talk through the impact on modernization economics.
What this does for your projects that will be started from now onwards. Thanks.
Should I take the last question first, and then this is about the inflation. First of all, yes, you are right. In the new construction prices are contracted for 2022. We see a significant construction price index rise of more than 14%. We saw it in the last quarter, which will probably be also what we expect for the next periods. In construction, this is not really an issue because the whole inflation is also taking place in the assets, saying that the prices for newly built apartments is growing with the same speed. That's why it's actually not an issue. We can pass on the inflation because of higher prices.
In the maintenance, you know that we as Vonovia have spent probably in the last years more maintenance what was really necessary. If we would see massive inflation, we would probably just keep the maintenance on the same level of today because we have actually put some money in the savings box by doing more maintenance. In the end, keep in mind that we are very well inflation protected because of our craftsmen organization. The construction cost index does not show up immediately in our cost structure.
Yeah. On your question on guidance, I will try to give you some guidance. I mean, first of all, the effects of IFRS 16 reversal are already embedded in the guidance. I mentioned before that the effect for 2021 is roughly EUR 37 million. That however also only includes a quarter of Deutsche Wohnen contribution to this effect. So on a full year basis you can assume roughly EUR 50 million, which form part of our guidance. On the second point, I need to be a bit cautious because we haven't yet provided an FFO guidance on the Deutsche Wohnen side. But if you do a rough calculation, Deutsche Wohnen guided for an FFO of EUR 550 million for the last year.
If you deduct the impact of the Berlin deal, and I think Deutsche Wohnen guided also for an FFO impact of roughly EUR 80 million. You have a rough estimate of what the FFO contribution of Deutsche Wohnen could be, and then mathematically apply the 87% ownership, the 70% payout ratio, and that will account for the vast majority of the minorities we will deduct for the running year.
Thanks. Yeah. That's pretty logical.
Maybe if I could just come back to the previous one, so on cost inflation. I think I appreciate the answer on maintenance. That makes sense. But I guess also on the modernization programs, there's a lot of materials costs that you cannot control as much. Let's say what in terms of yield compression, on the yield on cost expectations, what should we take into account for the coming years if the current situation persists? Thanks.
You know, I don't want to be cynical now, but inflation on the cost is actually good news for our returns because you know the modernization is a fixed percentage of the cost we invest. We put on the existing rent.
If the cost is increasing, we pass on actually inflation, and we get, literally an 8% yield on a bigger amount. This is technically completely inflation protected, and that's why this was my argument why a big part of our rental cost is actually technically inflation protected. This is not a risk by inflation. All right. That's also because you're always well into the limits of the maximum sq m increases. You're saying you can always pass on the additional cost. Yes. You know, we have set a limit of EUR 2 per sq m. The legal limit is EUR 3. We have today in the press announcement said that in cases where we have massive cost reduction in heating, we even will go above the EUR 2.
Our average is EUR 1.36, so we still have enough room. We open today the possibility to increase and to speed up replacement of organic fuels that we also were ready to go above EUR 2 in the future. Yeah. There is no issue there. Yeah. No, I think that's very helpful. I think that's very good to know. I'm likely over asking here, but given I have to call still, could you maybe detail your kind of feeling with regards to maybe playing with the balance sheet and a bit and saying, "Well, you know, this discount is too much.
We're gonna maybe sell a bit of assets and buy back shares." Because, yeah, You've made a big point about the shares being too cheap. How do you feel about addressing that actively? We, as we said, as in last time, if we are in summer still on this level, we have to answer the questions. There is different alternatives. One, as you mentioned, you can sell assets and buy back shares. You need a clear understanding what does this impact or how does this impact your business. You can sell assets and invest it in highly accretive investments. This is alternative. Other alternative, you can think about models, selling a part of your assets but operating it. All these combinations are thinkable.
Let's give us a few times, and then we will come up with answers. I think it is not good to announce it before we have a clear picture.
All right. Thank you very much.
The next question is by Jonathan Kownator, Goldman Sachs. The line is now open.
Hi, Jonathan Kownator. Thank you very much for taking my question. I just wanted to come back to investments and actually regulation as well. The first thing is, obviously, you're now getting EUR 2.1 billion-EUR 2.5 billion of investment, which, if I understand correctly, is the natural aggregation of Deutsche Wohnen and Vonovia. You're also separately talking about an acceleration of your path for sustainability and net zero. Obviously also given the current situation, there may be strong motivation to further invest in your portfolio to accelerate the energy transition. Bearing that in mind, did you expect further subsidies from the regulations? How are we doing there?
From the EUR 2.1 billion-EUR 2.5 billion level, is there even a possibility, obviously with your net debt will be in check somehow, but could you look to even accelerate that given the need for the energy transition in Germany? That's my question. Obviously the corollary to that is if you have further details on the evolution of the regulation, the warm rent concept from investments, that would be helpful. Thank you.
To be very clear, the high cost of energy actually makes our energy modernization, even from a tenant perspective, a very high return investment. It should not be meant cynical. Because what we were challenging in the past was warm rent neutrality. This gas price is not an issue anymore. Literally the tenant is saving money if we are doing modernization, which of course increases our possibility of increasing of rent because it's much less difficult. You are pointing to a very important point. This is actually not regulation, but actually the support. I think we see at the moment that the German government understands that we all together has made a massive mistake in the past by being dependent on Russian gas.
We are aware that we cannot change it immediately, but I think the political feeling is that we should change it as fast as possible. The easiest way to get less dependent on gas is to reduce the consumption of gas. There's two fields actually where we use gas. One is for the industry and the other is for heating of our buildings. That's why I think it is clear that we will have massive support by the government to replace gas heating systems. Yes, there might be a possibility that we increase investments in energy efficiency and especially heating systems, which are even today one of the best performing parts of our investments.
If this is topped up with more subsidies, probably the biggest challenge will be to get enough material, because heat pumps, modern heating, combined heating gas systems are a very rare resource, and we probably need all our purchasing power to get enough of this. That's why I'm not able to give you a guidance for 2022, but this will probably make us revise our programs in 2023 to speed up because this is high yielding investments.
Jonathan, let me also add additional commentary from my side on the acceleration and the size of the investment program. What we have done for 2022 is to basically also look at what investments we can do based on our dividend policy, but also based on the cash we free up from the recurring sales and development business, in particular, in order to invest without further jeopardizing our capital structure. That's the number we put forward. What it does not say is as to how we may change, in light of what is coming, the composition of investments between upgrade buildings, in particular, and develop to hold, develop to sell business.
I think this is the question mark, and we have to watch the evolution of what may or may not come.
Just to be clear on that last comment, thank you, it was very helpful. Given what you have just said, if you were to change the mix within your investment guidance, do you think that would result in a higher return or a lower return? I.e., is it normally-
No, in a higher return.
Higher return. Okay.
Yeah. We would not change to get a lower return. The only option is to get a higher return. This is under the condition that we get the material and we get the subsidy support.
Any idea from the government as to timing or any more details? Obviously, there was the very recent plan already announced, but very vague.
It's only four weeks, and I think we were fighting for three weeks that the German government does not stop the gas pipeline, the remaining gas pipeline, in connection from Russia. They have now decided not to stop it. It was a long four weeks. That's why I think we are not clear what will happen. I think the directive is very clear. We have to get rid of the dependency on gas. The most important impact is to consume less, but I think the German government has not a clear idea how they will do it.
We, of course, because of the higher energy costs, a lot of investments. It's now even a good payback for our tenants because the energy cost is so high, and if we are replacing now old systems with new ones, this would be a good deal for the tenants. It would make it much easier for us to realize this. Probably a better outcome, but of course, it should not be cynical because this is an issue for all our tenants to pay higher energy cost bills.
Sure, of course. Thank you.
The next question is by Andres Toome, Green Street Advisors. The line is now open for you.
Hi, good afternoon. Two questions. First of all, wanted to touch upon your investment program, and obviously you've been growing at a rate of around 3%-4% per annum in terms of your organic rent growth. Now investments keep on going up every year. How would that impact your like-for-like growth going forward?
Technically, we are actually at the moment, investment is just based on the bigger portfolio. The rental cost of what we are guiding in absolute figure is getting bigger. If you're referring to the question before, if we would go above the investment we are doing, of course, then the rental cost will go. If this is, which it will be, if we are going forward with a higher investment, this will even over proportional go because it's an over proportional yield which we will deliver with investments.
My second part, in terms of thinking about the green CapEx or energetic modernizations, you did mention that you can get a yield on cost generally around 8%. Does that apply to those energetic modernizations as well? It seems to be a bit of a contrast with peers who are guiding at a lower level, but you seem pretty optimistic in terms of
So you are le-
How do you?
You are legally allowed to pass up 88% actually. It is probably better to say up to 8% because and sometimes you are passing on a little bit less, and you are legally allowed to make it easier to get it through and do not have too much discussion with the tenants. Having said that, the cost for energy is so high. This is actually what I referred to, saying that's why it makes it a little bit easier for us to pass on to the tenants. The pressure on reducing what we are legally allowed to is probably becoming a little bit smaller.
What is probably a good guidance for your modeling for upgrade buildings and optimize apartment programs, on average, you can expect a yield on cost of 5%. It's getting a bit more complex if you look at the more complex longer-term refurbishments of entire neighborhoods and/or development that's multi-year. That usually also goes hand in hand with a fairly significant value uplift, which is why the internal rate of return is the better metric to focus on, and for that, 7%-8% is a good proxy as to what you can expect.
Thank you. Maybe one add-on as well in terms of financing costs. Unsecured bond market obviously has seen financing rates increase quite a lot in recent months. I'm just wondering, what are you seeing in the debt financing market with German banks at the moment?
Yeah, I mean, a side note, I think we hit a good window with our promissory note where we outplaced the bond curve and achieved an average coupon of 1.1%. But that's the past. Yeah, look, I mean, in the unsecured bond market for 10 years, you are these days, and that is without a new issue premium, talking almost 2%. So the picture has changed. If I look at swap rates in the secured banking market, that's a bit more stable. I would say some 10 basis points inside of what we see in the unsecured market, roughly 80 basis points plus the spread.
You are at roughly 180 basis points for 10 years in a secured banking market these days.
Thank you very much.
In a broader sense, no big issue for 2022. I don't expect any impact of the change in the financing environment. We have, as you know, a balanced and long-term maturity profile. These changes, and that's kind of a natural hedge, will only affect our P&L with a certain time delay.
Thank you.
The next question is by Kai Klose, Berenberg. The line is now open for you.
Yes, hello, good afternoon. I've got two quick questions on page 18 of the presentation regarding the development activities. Could you just indicate we had around 1,400 units being completed while the target completion level was around 1,500 units. What was the reason for the slightly lower completion levels? Second question, for 2022, you're guiding for targeting 3,600 total completions. What is the split between develop to hold and to sell? Thank you.
On your first question, this is actually us somewhat maneuvering profits. We pushed out one project developed to hold into next year. It was a decision on purpose. The second question, we have decided to give no further guidance on as to the split you can expect going forward between to hold, to sell.
To be very.
No, we are very clear. We are doing today, even if it's development to hold projects, we are doing all, every apartment with a single land register. Theoretically, if you have a development to hold, you can switch it to development to sell. Sell it as individual units, which is the traditional way how Vonovia is doing it. This depends if we have better investment opportunities than the development to hold, we are changing to development to sell and using the money for the better investment opportunity.
Many thanks.
Thank you.
The next question is by Thomas Rothäusler, Deutsche Bank. The line is now open for you.
Afternoon, everybody. Just two questions. One is on property valuation. I mean, one of your peers said to expect the value uplift in the first half of this year, roughly in the same magnitude as in the previous year. I mean, would you also be willing to provide a rough idea here?
As I have said, we are not giving you a guidance, but if you see inflation, so it's now coming back to if you see inflation in construction costs by 14%, it is not completely crazy that you see similar inflation on new builds at least. Thus there's no reason why new build should grow in values while existing are not growing in values. This is I think what exactly explains the value uplift of the year 2021. We do not see any change in the development of cost, in development of inflation in 2022, at least not for the negative side. That's why it seems to me logical that we will see similar development in the year 2022. Again, we are responsible to manage our business.
We are responsible to manage FFO and to have in the right locations. This is why we are not guiding a value cost because this is a market and other people could guide it much better than we do. To be very clear, we do not see any indication that there is a change in trend.
Okay. Second question is on rent table growth. I mean, you point to a correlation to inflation and provide rather upbeat examples like I think was Hanover rent table +10%. On the other hand, we have dampening effects like political pressure and also tighter regulations. What rent table growth do you expect in the current inflation environment looking ahead, and by when?
To be very clear, there is no further change of the rent table calculation for this period of this government, because nothing more is coming. This is very simple. We are looking backwards six years. That's why of course, if inflation is coming in, it is only with 1/6 of this effect you will see during the years, or if the rent table is coming every second or third year, it will be seen only in a half or if it becomes three years half of the effect in the next rent table. Which is actually, if you can see in our slide, which is stabilizing the rental cost.
You have sometimes years where the inflation is very low and the rental cost is higher, and then you see years where inflation is very high and the rental cost is lower. What you see on the very long term, and that's why you have to look backwards in the 1970s, that in times where you have a longer period, high inflation, also rent is inflating. Which is very simple because, first of all, for new-built apartments and fully modernized apartments, there's even no mid-price rental. This is a full calculation of the construction price divided by the multiple, this is the rent. This is of course impacting the rent inflation table in this category immediately.
There is, in the most rent tables, a correlation between if you have new buildings in one part of the city, actually the whole rental level in the city goes up because it's considered as a better quality city. The rental table for the newly constructed buildings also has an impact on the existing rental table. There is, of course, a balance where if you have to pay so much for a new apartment, the apartment, which is probably five years old, also, people will be ready to pay more because the gap between a new apartment and an existing apartment, fully modernized, is given by market. It's not given by a regulator.
That's why you will see step by step in the rental table, if the new build construction rent is increasing because of inflation, you will see the impact in all categories of the rental table, directly or indirectly, because the gap is the same. Then in the end, if you have high inflation, and I think you only will see a longer-term high inflation under the conditions that salaries will also increase. Because if salaries are not increasing, then inflation will come to a dead end very soon. Assuming that salaries are actually following inflation, then the affordability is less an issue and the ability of politicians to allow further rental costs is normal, is easy for them. There's another aspect.
While Vonovia, because of our modernization program, we can and we are partly inflation protected, municipality companies are not inflation protected because their percentage of rent of the normal organic rental cost of total rental cost is much higher. If you want to have municipality companies to grow construction speed, you have to allow them to raise rents. Otherwise, you cannot generate the money because they have no capital market where they can get money from. This means a politician in a high inflation environment will even push probably one day for higher inflation. The whole political issue, having an inflation in the rent table of 7%, while inflation is 1%, is gone. If you have an inflation of 5%, having a rent table of 10%, which is for two years, is not an issue anymore.
Mm-hmm.
That's why it is clear, that's why it's so important to look backward for a longer period where we have seen higher inflation, and there you can see it happening. What is not happening is that inflation goes up in 2022, you will immediately see it in mid-2022 or 2023. You will probably see it in mid-2023 or 2024, but not immediately. There is a small delay, which is not an issue if you look on a longer run period.
Okay, maybe a last one. I mean, you point to undemanding stock valuation for Vonovia. I mean, what could be a trigger, in your view, for this to change?
I have learned from you, actually, not from you personally, but from you as an investor society, that we should look on our KPIs which we can influence, and I think it's you who is doing the stock price. I would not give you any advice. I would just say, I consider this a very cheap stock, and it's a good idea to buy it.
I have some good ideas for a research report you could write. Okay, great. Thank you.
The next question is by Christopher Fremantle, Morgan Stanley. The line is now open for you.
Hi, good afternoon. I have two questions. The first is on CapEx, and the second is on scrip dividend. On CapEx, I know there have been some other questions on this, and I know you have given some good guidance on the overall CapEx envelope for next year. I'm just trying to get a better sense of how profitable, how value creative your overall CapEx is or not. When I look at page 61 in your presentation, you say you spent EUR 1.3 billion in investment in 2021, so that's 2.3% of your gross portfolio valuation at the end of 2020. This year you're guiding to EUR 2.3 billion, also around 2.5% of your portfolio value.
Yet your rental growth contribution from investment is also somewhere around 2.5%. You're spending 2.5% to augment your rental growth by 2.5%. To me, that doesn't sound very value creative. Can you just give us a little bit more color on how value creative and the overall blended yield on that CapEx? Because either the rental growth from this CapEx spending is going to mean your organic rent growth is going to accelerate in 2023 and 2024, or the blended yield on CapEx is a lot lower than the numbers that you're quoting. If you can just give us a little bit more color on that, please. Then the second question is on scrip dividend.
You spent a lot of time in the presentation talking about your discount to NTA. Clearly, your dividend, doing a scrip dividend at these prices, is going to be very dilutive to your NTA, I should say. How do you see that? Does it concern you, that? Or are you simply going to do a scrip dividend because it would help you from a liquidity point of view? Thank you.
For the scrip dividend, a very easy answer. The second one is a little bit more complex, but for the scrip dividend, very easy answer is, there is no decision taken. I think it's also much too early. You know that the Supervisory Board has decided on the scrip dividend based on the proposal made by the Management Board the day before the annual meeting. This is still a few weeks to go. In general, I think, there's arguments for and against the scrip dividend at this situation. Scrip dividend is by definition a subscription rights issue. So it is, everybody is actually getting rewarded, so it's by definition, not dilutive in the sense if shareholders participate in scrip dividend.
We have seen a lot of our investors which like to have a scrip dividend. I also understand your point that if a management team thinks that the value of the stock is very little, that this might be not a good moment to issue stock. This is simply as it is, but we have not taken the decision, and we have to look actually where we are when we have to take the decision.
Yeah. Let me try your first point you've raised. It's always a bit complex because you have in many of the investments two elements, which is A, rental increases, which you can measure by yield on cost metric, and B, fair value uplift. And the latter is in particular relevant for new construction. If I were to make a back of the envelope calculation, you look actually at the like-for-like rental growth excluding new construction, that's roughly 1.6%.
If you measure that vis-à-vis what we have invested in upgrade apartments and optimized apartments, bearing in mind that the portion of the upgrade apartments is actually also value accretive because it belongs to more complex refurbishment programs, also with a value uplift, you will arrive at the 4.5%-5% I've been guiding to before in terms of yield on cost. The second, you can't really read through our numbers because part of our revaluation gain we are accounting for is investment driven. That is forming part of what we actually realize in the development business, is what we realize in terms of complex refurbishments as additional value uplift on top of what we have capitalized.
Here, the best guidance I can give is to point to the 7%-8% IRR. You can assume for complex refurbishments that are typically roughly three-year programs for new development, even if it's longer.
I think this also helps. I have mentioned at the beginning that if you look at the total shareholder return without yield compression, we are actually in the past always about 7.5%. This is actually also translating into this.
Perhaps I can ask it in a different way. How, when you look at the assets on which you have spent CapEx, what is the difference in value uplift for those assets versus the ones on which you have not been spending non-maintenance CapEx? Can you split that out, or maybe that's one to take offline.
Rough estimate is 20%-25% more uplift on the assets where we have invested, while the others.
That's great. Thank you.
The next question is by Manuel Martin, ODDO BHF. The line is now open.
Hello, gentlemen. Thank you for taking my questions. Actually two questions, maybe one by one. The first question would be on a bit more supply chain related. I mean, the repercussions of the Ukraine conflict on supply chains might be quite obvious. Do you see some critical points in supply chain when it comes to your refurbishment or construction business? Maybe you could give us some color on that, please.
Yes, there is some material coming from Ukraine, which is actually impacting windows, and doors, and some others. Yes, there is an impact. It is not the same magnitude what we see in energy, so completely different magnitude. At the moment, we have the information that we are not impacted directly, so it is probably a little bit more work for our purchasing department. But we have no issues directly with material coming from Ukraine. But we notice that this is an issue in the market.
Okay.
It's always the same. We are probably the last who will recognize it in our supply pattern because we will be the last one which will be kicked out from the customer list.
Okay, understood. My second question would be on the substitution of gas. Well, I think this is a story which might take some time, but as a substitution for gas, I asked you, I think, the question once. The alternative of hydrogen might that be a plan that you are following, or do you have an update on your hydrogen efforts for us?
First of all, the main substitute for gas will be solar power and heat pumps. This is the only solution which is left over because wood pellet heating is a second option, but it's a very niche market. This is the way. Actually, we are using hydrogen to store the electricity because electricity on the roof is not necessarily produced in the same moment where you need it for the heat pumps. That's why this is one experiment which we are doing, which is successfully running, but of course is still or was under the old heating fuel cost still not a good return. That's why it was a pilot.
It might change or it will change if the gas price stays where it is. There's other alternatives where you actually store the heated water, which might be also an alternative. In this context, yes, we are using H2. What we think is probably a little bit too early and we should not rely on it, is that one day we will replace gas directly with H2 and in a gas heating system will just burn H2. H2 at the moment is much too expensive for this and will be needed for other areas like steel production. We need to think or the only solution which is left is actually heat pumps in combination with electricity or solar panels.
Okay.
We are very successful. By chance, it was just a chance. We were not aware because, you know, we all in Germany, we thought that gas is a solution for the next 10 years. We were not aware that what we are doing, what we have done in Bochum was exactly at the right moment. We are up and running with a heat pump driven heating system. It was actually invented because we find that the long term it's necessary. Now we have to speed it up and to get it ready for as many apartments as we can.
Okay, thank you.
There we are coming, of course, to the situation where we get the heat pumps from, where we get the people who can install it. We have a lot of labor shortage and a lot of material shortage in this respect. Nothing to do with Ukraine, but just because we are not the only one who need to change the heating systems.
Okay. I see.
We are well positioned. We are well positioned, better positioned than anybody else. Still it's a challenge.
No, that's good to hear because a lot of people bought new gas heating systems in the last year. That's really unlucky, I must say. Okay, thanks.
There are no further questions for the moment, and so I hand back to Rene.
Yeah. Thanks very much, Martin, and thanks everyone for joining. We're looking forward to continuing this dialogue with you in the coming days and weeks. I have the impression that there's quite a lot to talk about. Rolf Buch, Philip Grosse, and I will be on the road for a few days now, meeting with investors, which is actually pretty exciting. For a few of our roadshow days, we'll even have real meetings with real people. No Zoom, no Webex or any of that. Let's hope that is just the start for more to come. As always, the team and I are available today and in the coming days and weeks for any questions, inquiries you may have. Please do not hesitate to reach out to us. That's it from our side for today.
Have a great afternoon, have a great weekend, and stay safe, happy and healthy. Thanks.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.