Business Development in the First Half of 2023
Key Events During the Reporting Period
All in all, our operating business developed in line with our expectations in the first half of the year. The sustained high 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 positive 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.
In the second quarter of 2023, a value adjustment of around € 2.8 billion was recognized for investment properties, which corresponds to a total value adjustment of around € 6.4 billion for the first half of 2023. The value of investment properties came to around € 85.7 billion as of June 30, 2023. Goodwill and the trademark rights for the Development cash-generating unit were written off in full in the amount of € 204.8 million.
In the publication dated April 26, 2023, Vonovia reached an agreement with with an investment vehicle, advised and managed by Apollo Capital Management L.P., for a direct minority stake of 34.5%, or an indirect participation of 27.6%, in 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 was closed in the second quarter of 2023. The investment vehicle, AP Sunrise S.à r.l., is financed by insurance companies and other long-term investors. Vonovia will use the proceeds for liability management, with a positive impact on its LTV, the ratio of net debt to EBITDA and the ICR.
The transaction values the Südewo portfolio at € 3.3 billion on a debt free and cash free basis, implying a discount below 5% to its fair value as of December 31, 2022, and below 6% to the fair value as of June 30, 2022. Vonovia retains a long-term call-option to repurchase the participation at an IRR of 6.95%–8.30% (including dividends received) without an obligation to exercise the option. Vonovia will continue to control, operate, and consolidate the portfolio, which comprises more than 21,000 residential units in locations across the state of Baden-Württemberg.
On May 4, 2023, Vonovia and Deutsche Wohnen reached an agreement with funds managed by CBRE Investment Management on the sale of five properties in Berlin, Munich and Frankfurt with a total of 1,350 apartments and a purchase price of around € 560 million. The properties are three newly constructed properties belonging to the company’s stock and two new construction projects that are in the final phase of construction.
In the first quarter of 2023, Vonovia had also 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.
The Annual General Meeting held on May 17, 2023 resolved to pay a dividend for the 2022 fiscal year in the amount of € 0.85 per share. 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 44.87 % of the shares carrying dividend rights opted for the scrip dividend instead of the cash dividend. As a result, 18,795,001 new shares were issued using the company’s authorized capital for a total of € 303,539,266.15. The total amount of the dividend distributed in cash therefore came to € 372,933,231.30.
The Annual General Meeting also voted on the election of eight Supervisory Board members. Dr. Daniela Gerd tom Markotten was elected as a new Supervisory Board member. As planned, the size of the Supervisory Board was reduced from twelve to ten members. The Supervisory Board elected Clara C. Streit as its Chair at its inaugural meeting.
On March 7, 2023, the Bochum public prosecutor’s office notified Vonovia, as reported, 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 still cooperating fully with the work of the investigating authorities. The auditing firm Deloitte and the law firm Hengeler Mueller have been commissioned to perform a forensic assessment of all the facts of the case. It is not currently possible to arrive at any conclusive assessment regarding the amount of any damage. Looking at 2022, it is estimated to come to a maximum of 1% of the order volume awarded by Vonovia.