Economic Development in the First Three Months of 2023

Key Events During the Reporting Period

The two relevant megatrends for us, (i) mounting demand for homes in urban conurbations and (ii) a focus on energy efficiency, particularly in existing buildings, are becoming increasingly important for our business model and in our strategy, also, and particularly, in the current volatile situation on the financial markets and in light of the war in Ukraine. This means that Vonovia is establishing an excellent position for itself looking ahead to the medium and long term, too.

In order to be able to address the key challenges, namely the shortage of housing and climate change, in a targeted manner, Vonovia expanded its strategic partnership with GROPYUS AG in the first quarter of 2023. The investment will support the development of innovative products for sustainable, affordable, wood-hybrid construction and the digitalization of residential buildings in particular.

All in all, our operating business developed in line with our expectations in the first quarter. The sustained stable demand for homes supports the operational basis of our business, particularly in our core Rental segment.

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 means stable cash flows and, as a result, a stable basis for the income from our portfolio.

The changes in overall financial market conditions are prompting market players to revise their return criteria due to the higher interest rates, impacting investment decisions both at Vonovia itself and at potential transaction partners. This means that the higher interest rates also have a potential impact on the assessment of business models and the valuation of assets, i.e., holdings measured at fair value and goodwill.

Despite demand being there in principle, general transaction activity is currently muted due to these negative influencing factors from the financial markets. In spite of there being no significant transaction volume, Vonovia believes, on account of dedicated market contacts in relation to its own portfolio, that it is appropriate to carry out a write-down amounting to approx. 4% on the portfolio as a whole as of the end of the first quarter. A regular valuation will be performed as of June 30, 2023.

On March 7, 2023, the Bochum public prosecutor's office notified Vonovia that, due to search measures that had to be conducted in the context of an investigation, former and current technical employees were being investigated due to suspected corruption. The persons under suspicion may also have caused damage for Vonovia by overriding and circumventing controls and compliance policies.

Vonovia is cooperating fully with the work of the investigating authorities. It is not currently possible to arrive at any conclusive assessment regarding the amount of the damage. Looking at 2022, it is estimated to come to a maximum of 1% of the order volume awarded by Vonovia. The auditing firm Deloitte and a law firm have been commissioned to perform a forensic assessment of all the facts of the case.

In the first quarter of the year, Vonovia sold its 10% stake in the French company Vesta SAS for a net amount of € 95.7 million, marking its withdrawal from the French market. 

In addition to the opportunities and risks set out in the combined management report for the 2022 fiscal year, there were no significant changes in the assessment of the overall risk position at the end of the first quarter of 2023.

After the first quarter (publication dated April 26, 2023), Vonovia has reached an agreement with an investment vehicle that is advised and managed by Apollo Capital Management L.P. to a direct equity holding of 34.5%, resp. indirect participation of 27.6%, of a selected portfolio comprising around 21,000 residential units in the German federal state of Baden-Württemberg. The transaction values the portfolio at around € 3.3 billion (excluding liabilities and cash funds) and the net consideration amounts to around € 1.0 billion. The transaction is scheduled to be closed by the end of May/beginning of June. The investment vehicle, AP Sunrise S.à.r.l., is financed by holding companies, insurers and other long-term investors that are advised and managed by Apollo Capital Management L.P.