Economic Development in the First Nine Months of 2021

Key Events During the Reporting Period

On June 23, 2021, Vonovia made a public takeover offer to the shareholders of Deutsche Wohnen SE to purchase all shares in the company at a price of € 52.00 per share. Pursuant to the notification published on July 26, 2021, the offer was not accepted by a majority. On August 1, 2021, Vonovia announced that it wanted to make another takeover offer.

On August 23, 2021, Vonovia made another public takeover offer to the shareholders of Deutsche Wohnen SE to purchase all shares in the company at a price of € 53.00 per share. The offer was made in consultation with Deutsche Wohnen SE after having been previously approved by the German Federal Financial Supervisory Authority (BaFin) on August 5, 2021.

In parallel with the first public takeover offer, Vonovia had acquired 66,057,759 shares in Deutsche Wohnen, or around 18.36% of the share capital and voting rights, by June 30, 2021. This stake was increased to 21.89% by July 21, 2021. By the time the second public takeover offer was made on August 23, 2021, Vonovia had increased its holding in Deutsche Wohnen to 107,967,639 shares or around 29.99%. These shares were purchased via the stock exchange and on the basis of bilateral agreements.

On September 13, 2021, Vonovia announced that it would be waiving all terms and conditions of acceptance for the takeover offer for shares in Deutsche Wohnen. At the end of the resulting first acceptance period on October 4, 2021, Vonovia was able to secure a majority, or 62.67%, of the shares in Deutsche Wohnen SE. On the reporting date of September 30, 2021, Vonovia held 50.38% of the shares, i.e., a majority of the share capital and voting rights, meaning that it had obtained control.

Therefore the Deutsche Wohnen Group will be included in Vonovia’s consolidated financial statements for the first time as of September 30, 2021. As the date of control coincides with the reporting date, Deutsche Wohnen SE and its subsidiaries are included in the balance sheet as of September 30, 2021. Since the transaction was concluded close to the date of initial recognition, the purchase price allocation/calculation of goodwill was only provisional.

For the period from July 21 until September 30, 2021, the Deutsche Wohnen Group is, based on Vonovia’s significant influence, included in the consolidated financial statements as of September 30, 2021, as an associate using the equity method and with a corresponding earnings contribution for two months.

As the second tender period was still ongoing as of September 30, 2021, the transaction is being treated in line with the anticipated acquisition method, meaning that the potential remaining purchase obligation of € 9.6 billion is to be included as a liability.

In order to finance the transaction, Vonovia had concluded bridge financing with a banking consortium in a total amount of around € 20 billion. After Vonovia had already placed a total of five bonds with a total volume of € 4 billion with an average interest rate of 0.6875% and an average term of 9.5 years on June 16, 2021, it placed another bond on August 26, 2021, with a total volume of € 5 billion, an average interest rate of 0.49% and an average term of 10.3 years. This was associated with a reduction in the bridge financing to € 17 billion.

Based on an agreement reached with the Berlin State Government on the sale of selected portfolios to municipal housing companies in Berlin, the agreement with HOWOGE, degewo and berlinovo on the sale of 4,250 residential units from Vonovia’s portfolio was concluded on September 17, 2021. The benefits and encumbrances will be transferred in 2022.

Vonovia’s business model has proven to be robust and resilient throughout the coronavirus pandemic. As the pandemic is still not having any considerable impact on its net assets, financial position and results of operations, Vonovia can also report positive business development in the first nine months of 2021. Customer satisfaction actually increased significantly during the pandemic. The customer satisfaction index (CSI), for example, is up by 3.3 percentage points in a year-on-year comparison, putting it 2.6 percentage points higher than the average for the previous year.

Vonovia had already issued two innovative debt instruments in the first quarter of 2021. These include a fully digital registered bond in the amount of € 20 million with a maturity of three years and a green bond with a total volume of € 600 million, a term of 10 years and an annual interest rate of 0.625%. By doing this, the Group is pursuing its own sustainability strategy and using the green bond in particular to supplement the conventional debt instruments in its financing strategy.