Risks Related to Financing
Ensuring a balanced and sustainable financing approach focusing on security as well as extensive access to the equity and debt capital markets at all times is extremely important for Vonovia’s business development. This orientation is also reflected in the risks identified in relation to financing. The number of risks in the “financing” category rose from 12 at the end of 2020 to 14 at the end of 2021.
In addition to the three amber risks referred to above, namely “failure to fulfill obligations (from bonds, secured loans, transactions)," “unfavorable interest rate developments” and “amendments to the German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz) due to share deals," there are additional green risks relating to financing that are not of any material significance to Vonovia’s business development.
Failure to comply with key financial figures or the assessment of our market positioning could result in Vonovia losing its current ratings (S&P: BBB+/Positive; Scope: A-/Stable; Moody’s: A3/Stable). Given our financing strategy and the prerequisite that acquisition decisions cannot have any impact on our rating, we believe that this risk is associated with a low amount of loss and is very unlikely to materialize.
Factors such as a significant rating downgrade or a reluctance among institutional investors to invest due to market-related factors, as was the case, for example, during the financial crisis, or a poorer reputation due to the public debate on affordable housing, could result in restricted access to the bond market. We currently assess this risk as being associated with an amount of loss of € 250–500 million, but believe that it is very unlikely to materialize.
Vonovia is also exposed to the risk of losing sustainable financing. Sustainable “green” financing is becoming increasingly relevant. Failure by Vonovia to meet its sustainability targets, for example, could jeopardize the basis for this financing. We currently assess this risk as being associated with an amount of loss of € 25–100 million, but believe that it is very unlikely to materialize.
Vonovia is also exposed to a liquidity risk in its ongoing business activities. We have established extensive liquidity management processes in response to this risk. We currently assess this risk as being associated with a low amount of loss and believe that it is very unlikely to materialize. Vonovia also has a sufficient working capital facility available at all times and enjoys access to short-term money market securities. This means that, as of the reporting date, Vonovia SE has sufficient cash and cash equivalents and short-term financing options to guarantee the ability to pay of all Group companies at all times