Economic Development in the First Nine Months of 2024
Key Events During the Reporting Period
The core Rental business was characterized by a high level of demand for rental apartments and a positive rent trend in the first nine months of 2024. With a vacancy rate of 2.1% at the end of the first quarter of 2024 (end of the third quarter of 2023: 2.1%), Vonovia’s residential real estate portfolio was virtually fully occupied.
The second and third quarters of 2024 saw higher real estate transaction volumes and a bottoming out of real estate values. The ECB key rate cuts favored transactions, particularly in the Recurring Sales and Development segments.
The Customer Satisfaction Index (CSI) was 3.4 percentage points above the value seen in the previous year in the third quarter of 2024. On average, the level of customer satisfaction in 2024 to date has increased by 2.8 percentage points as against the year 2023 as a whole.
On September 18, 2024, Vonovia SE and Deutsche Wohnen SE initiated a process to conclude a control and profit and loss transfer agreement between the two companies. This process will involve Vonovia making an offer to external shareholders of Deutsche Wohnen SE to acquire their shares in return for compensation in the form of newly issued shares in Vonovia SE, or to grant the remaining shareholders of Deutsche Wohnen SE an annual compensation payment for the term of the agreement. The necessary approval is to be obtained at extraordinary general meetings organized by the companies in January 2025.
On September 30, Vonovia and Apollo agreed to establish a company that is to hold 20% of the shares in Deutsche Wohnen SE. In addition to Vonovia, with a 49% stake, long-term investors advised by Apollo hold a total stake of 51% in this company. Vonovia’s cash inflow from this transaction will amount to just over € 1 billion.
In September 2024, Vonovia also concluded purchase agreements to acquire land to build on from the QUARTERBACK Immobilien Group. The land it owns leaves Vonovia well positioned for future development projects that will help to alleviate the shortage of housing. In the same context, selective purchase agreements were also concluded to acquire property management units from QUARTERBACK Immobilien AG via Deutsche Wohnen. This transaction has a total volume of around € 500.0 million. These transactions are scheduled to have been closed by December 31, 2024.
Further transactions in order to acquire land to build on are planned up to the end of 2024. Additional purchase contracts with a volume of around € 275.0 million have already been signed in this respect following the September 30, 2024, reporting date.
The loan receivables from the QUARTERBACK Immobilien Group included in the financial assets have been offset against the outstanding purchase price components within the scope of these transactions.
Vonovia assumes that the outstanding receivables following the closing of the transactions will not be recoverable and has therefore recognized a corresponding impairment loss in the third quarter of 2024 of € 153.2 million on these receivables and of € 26.2 million on the interest receivables included.
The impairment loss recognized in interest receivables relates to the interest income already collected in the first six months of 2024, but not yet paid. The impairment loss recognized for this interest income is shown netted against the interest income.
The additional impairment loss recognized for loan receivables is shown in the line item “Impairment losses on financial assets” in the consolidated income statement.
In August 2024, Vonovia sold eleven development projects for € 488.0 million to a fund launched by HIH Invest. Further Quarterback Immobilien AG project developments were also sold to the fund for € 142.0 million. Vonovia has an equity share in the fund. These contracts have not yet been closed.
After the third quarter of 2024, Vonovia successfully sold ten additional development projects for around € 516 million to a fund launched by HIH Invest on October 14 and 15, 2024.
In the context of ongoing legal disputes with a social insurance provider, the German Federal Labor Court (Bundesarbeitsgericht) supported the legal view taken by the social insurance provider on October 23, 2024. This resulted in the probability of occurrence being reassessed. As a result, provisions of € 69.0 million were set up in the third quarter of 2024 for a back-payment of contributions to the social insurance provider. Further provisions of around € 71.0 million were set up for direct payments to employees.
In the context of the endeavors to sell the Care segment, contracts were concluded after the end of the third quarter of 2024 for the sale of a total of 27 nursing care properties and the sale of the Katharinenhof nursing care business on October 2, 2024.
In the first six months of 2024, Vonovia successfully concluded a notarized sales contract for around 1,970 residential units and six commercial units on July 26, 2024. The purchase price of around € 300 million is slightly higher than the carrying amounts of the properties sold recognized at the time of the negotiations.
A notarized sales contract for a portfolio in Berlin was successfully concluded on April 23, 2024. The transaction executed with two state-owned Berlin housing construction companies will see around 4,500 residential units with a value of around € 700 million being sold as part of a share deal. The transaction is expected to be closed on December 31, 2024.
A bond in the amount of € 328.6 million was repaid as scheduled on January 15, 2024.
On January 18, 2024, Vonovia issued an unsecured GBP 400.0 million (approx. € 465.1 million) bond with a twelve-year term and a 5.5% coupon (4.55% after currency hedging).
On February 14, 2024, Vonovia issued another unsecured bond with a volume of CHF 150.0 million (approx. € 159.3 million), a five-year term and a 2.565% coupon (4.16% after currency hedging).
In January and February 2024, several drawdowns were made under the Commercial Paper Program, with a total volume of € 500.0 million.
On March 28, 2024, an amount of € 150.0 million was disbursed under a secured financing agreement concluded with Ergo in December 2023.
With a total volume of € 138.7 million, two secured bullet loans were repaid on March 31, 2024.
On April 8, 2024, a € 336.1 million bond was repaid as scheduled.
A further bond, denominated in Swedish krona and with a volume of SEK 500.0 million (around € 48.5 million), was repaid as scheduled on April 8, 2024.
On April 10, 2024, Vonovia issued a € 850.0 million unsecured social bond with a 4.25% coupon and a ten-year term.
Vonovia placed a bond with a volume of SEK 750.0 million (approx. € 66.9 million) with a two-year term as part of a private placement on June 19, 2024. The bond is a floating-rate bond (3M STIBOR plus 1.30% margin; 4.51% after interest and currency hedging) and is structured as a social bond.
On August 6, 2024, Vonovia took out secured financing with Hamburg Commercial Bank in the amount of € 135.0 million with a maturity of seven years. The amount was disbursed on August 28, 2024.
On August 26, 2024, Vonovia issued a CHF 235.0 million (€ 247.8 million) bond with a seven-year term. The coupon is 2.000% p.a. (or 3.897% p.a. after currency hedging).
On September 9, 2024, Vonovia took out a loan in the amount of € 110 million with a ten-year term with Münchener Hypothekenbank. The loan was disbursed on September 12, 2024.
A bond in the amount of € 278.3 million was repaid as scheduled on September 16, 2024.
On September 26, 2024, Vonovia issued an SEK 500.0 million (€ 44.3 million) bond with a four-year term. The bond is a floating-rate bond (3M STIBOR plus 142 basis points).
Following the end of the third quarter of 2024, a € 150.0 million tranche was disbursed on October 15, 2024, under a loan agreement with the European Investment Bank that Vonovia had taken out in 2022.
The Annual General Meeting held on May 8, 2024 resolved to pay a dividend for the 2023 fiscal year in the amount of € 0.90 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 30.93% of the shares carrying dividend rights opted for the scrip dividend instead of the cash dividend. As a result, 8,207,927 new shares were issued using the company’s authorized capital for a total of € 226,785,023.01. The total amount of the dividend distributed in cash therefore came to € 506,395,475.19.
From the 2024 fiscal year onwards, a modified management system has been introduced. This uses the Adjusted EBT indicator and is thus more clearly focused on profitability and internal financing. In the future, this performance indicator will also serve as the key parameter for Vonovia’s dividend policy. The Adjusted EBT will be used as a basis for a reconciliation to the operating free cash flow (OFCF) as the leading indicator of internal financing. This operating free cash flow is a measure of the Group’s operational capacity to generate cash surpluses and, as a result, of its internal financing power.
On March 28, 2024, the rating agency Fitch awarded Vonovia an investment grade rating for the first time: BBB+ with a stable outlook. As positive factors, its analysis emphasizes the stability of the regulated rental housing market in Germany, the strong level of demand for residential units and Vonovia’s very high level occupancy rate (98%).