Report on Economic Position

Key Events During the Reporting Period

The overall conditions on the market, which have undergone lasting changes, in particular rising interest and inflation rates coupled with heightened uncertainty in the commodity markets and supply chains that remain disrupted, create a highly complex environment for corporate management.

The operating business was positive overall in 2022. The Adjusted EBITDA Total increased by around 23%. EBITDA in the Rental, Recurring Sales and Care segments showed positive development. Adjusted EBITDA in the Development segment was almost on a par with the previous year. Adjusted EBITDA in the Value-add segment dropped by around 18%. All in all, moderate effects resulted from the Ukraine war and the coronavirus pandemic. These effects related primarily to the procurement of raw materials.

As of December 31, 2022, Vonovia’s portfolio was virtually fully occupied with a vacancy rate of 2.0%. The Customer Satisfaction Index (CSI) was 0.2 percentage points below the value seen in the previous year in the fourth quarter of 2022. Looking at the average for the year as a whole, however, customer satisfaction increased by 1.0 percentage points year-on-year.

The high customer satisfaction values confirm our efforts in property management and, together with the low vacancy rate, provide a solid foundation for our business. At the same time, this also means stable cash flows and, as a result, a stable basis for the income from our residential properties.

We remain convinced that the challenges associated with megatrends have not changed and that, in the housing industry, these can best be solved by thinking and acting in terms of neighborhoods.

As a result, the lion’s share of the portfolio in Germany consists of neighborhoods that we have grouped together as urban quarters. The remaining existing buildings largely comprise smaller clusters of buildings and solitary properties that we have grouped together as urban clusters. Even though, unlike urban quarters, urban clusters do not relate to entire neighborhoods, they are also managed using the same long-term asset and property management strategies based on our operating platform.

The latest portfolio analysis led to the creation of the additional MFH Sales portfolio alongside the sales portfolio for non-strategic holdings (Non Core) and Recurring Sales within the strategic cluster. This new portfolio is to be used primarily for internal financing. The corresponding income will be reported together with Non Core as part of the Non Core/Other segment going forward.

As a result of the higher interest rates, there was a further increase in the cost of capital, meaning that impairment losses amounting to € 1,040.3 million in total were recognized on goodwill and the trademark rights in the nursing and assisted living sector. Impairment losses of € 330.7 million were also recognized on investments accounted for using the equity method as of December 31, 2022. On the other hand, the increase in the discount rate for the measurement of pension provisions translated into actuarial gains.

The bridge facility taken out in connection with the acquisition of a majority stake in Deutsche Wohnen was valued at € 3,490.0 million at the beginning of 2022 and was repaid in full as of March 1, 2022.

In the second quarter of 2022, two bonds worth € 500 million each were repaid, one of which was repaid early. Commercial papers in the amount of a further € 500 million were repaid as planned.

In November 2022, Vonovia issued a social and a green bond in a combined amount of € 1.5 billion with an average term of 6.3 years and an average interest rate of 4.875%. The proceeds were used to buy back bonds totaling some € 1.0 billion early, with maturity dates in 2023 and 2024.

2022 was also dominated by the integration of Deutsche Wohnen, the aim being to use standardized processes and systems, leverage synergy potential and create shared legal conditions for cooperation. This cooperation aims to use Vonovia’s management and development platform to leverage benefits through harmonization and standardization effects and economies of scale.

The Annual General Meeting held on April 29, 2022, resolved to pay a dividend for the 2021 fiscal year in the amount of € 1.66 per share. In a year-on-year comparison, this corresponds to an increase of € 0.08 – taking into account the increased number of shares due to the capital increase following the takeover of Deutsche Wohnen. As in previous years, shareholders were offered the option of choosing between being paid the dividend in cash or being granted new shares. During the subscription period, shareholders holding a total of 47.85% of the shares carrying dividend rights opted for the scrip dividend instead of the cash dividend. As a result, 19,252,608 new shares were issued using the company’s authorized capital for a total of € 616,815,055.10. The total amount of the dividend distributed in cash therefore came to € 672,336,610.64.

At its meeting on December 8, 2022, the Supervisory Board of Vonovia SE decided unanimously that Clara-Christina Streit should assume the position of Chair of the Supervisory Board following the Annual General Meeting on May 17, 2023. She would therefore succeed Jürgen Fitschen, who will not stand again for election on account of the age limit in place at Vonovia.