Economic Development in the First Nine Months of 2023
Key Events During the Reporting Period
The operating business developed as expected overall in the first nine months of the 2023 fiscal year. The high demand for residential real estate, positive rental price development and synergies realized as part of the Deutsche Wohnen integration process promoted positive development in our core Rental business.
In addition, the customer satisfaction values in the reporting period confirmed our efforts in property management and, together with the low vacancy rate, provided 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 real estate portfolio.
The other business segments were significantly negatively affected by inflation, in particular by the marked uptick in construction costs, as well as by the higher interest rates in the reporting period. The investment volume was slashed accordingly and no additional new construction projects were started, as they would not be profitable in the current environment.
The higher interest rates also had an impact on potential transaction partners and translated into lower sales in the Recurring Sales segment and projects in the development to sell area.
There were also effects on the assessment of business models and the valuation of assets, i.e., holdings measured at fair value and goodwill. In the first half of 2023, a total value adjustment of around € 6.4 billion was recognized for investment properties. The value of the investment properties as of September 30, 2023, adjusted to reflect investments, amounts to around € 86.1 billion. Goodwill and the trademark rights for the Development cash-generating unit were also written off in full in the amount of € 204.8 million back in the first half of the year.
In the first quarter of 2023, Vonovia had 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 the publication dated April 26, 2023, Vonovia, through an investment vehicle that is advised and managed by Apollo Capital Management L.P., agreed to a direct minority stake of 34.5%, or an indirect participation of 27.6%, in a selected Südewo portfolio comprising around 21,000 residential units in the German federal state of Baden-Württemberg. The net consideration amounts to around € 1.0 billion. The transaction was closed in the second quarter of 2023.
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 old stock and two new construction projects that are in the final phase of construction.
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.
Effective October 1, 2023, Ruth Wehrhahn assumed responsibility for Vonovia’s new HR executive division and is now a member of the Management Board of Vonovia SE.
Following the close of the third quarter, Vonovia reached an agreement with an investment vehicle, which is advised and managed by Apollo Capital Management L.P., on an equity investment of around 30% in a selected portfolio of around 31,000 units in Northern Germany (signed on October 27, 2023). The net consideration amounts to around € 1.0 billion before transaction costs. The transaction is expected to close on December 31, 2023. The investment vehicle is financed by investment companies, insurance companies and other long-term investors, which are advised and managed by Apollo Capital Management L.P.
In addition, the Mayor of Dresden, Dirk Hilbert, and Rolf Buch, CEO of Vonovia SE, jointly announced in Dresden on October 27, 2023 that the City of Dresden will acquire 1,213 apartments from Vonovia. In addition, Vonovia is selling undeveloped land covering an area of around 12 hectares to the state capital. This includes development sites with capacity for up to around 1,800 additional apartments in the future. The new owner will be the wholly-owned municipal subsidiary Wohnungsgesellschaft WiD Wohnen in Dresden GmbH & Co. KG (WiD). Completion of the purchase agreement is subject to the approval of the City Council of Dresden. The total price for the entire package is € 87.8 million.
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 employees who were at that time still 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 continues to cooperate 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 damages. Looking at 2022, it is estimated to come to a maximum of 1% of the order volume awarded by Vonovia.