Economic Development of Vonovia SE

(Reporting on the basis of the German Commercial Code [HGB])

Foundation

Vonovia SE has been entered in the commercial register of Bochum Local Court under HRB 16879 since 2017. Vonovia SE was established as Deutsche Annington Immobilien GmbH on June 17, 1998, with its registered headquarters in Frankfurt am Main, to serve as an acquisition vehicle for the purchase of residential properties by financial investors.

Following its initial listing in 2013 and further successful acquisitions over the course of time, it now forms the Vonovia Group together with its subsidiaries and is one of the leading German, Austrian and Swedish residential real estate management companies. Following the successful integration of the BUWOG Group, Vonovia also ranks among the leading real estate developers in Germany and Austria. Deutsche Wohnen SE and its subsidiaries have also been part of the Vonovia Group since September 2021.

Vonovia SE performs the function of the management holding company within the Vonovia Group. In this function, it is responsible for determining and pursuing the overall strategy and implementing it in the form of the company’s goals. It performs property management, project development, financing, service and coordination tasks for the Group. Furthermore, it is responsible for the management, control and monitoring system as well as risk management. To carry out these management functions, Vonovia SE also maintains service companies to which it has outsourced selected functions, allowing it to realize corresponding harmonization and standardization effects, as well as economies of scale.

The description of the company’s net assets, financial position and results of operations is based largely on the reporting of the Vonovia Group. The net assets, financial position and results of operations of Vonovia SE as the management holding company are ultimately determined by the assets of the Group companies and their ability to make sustainable positive contributions to earnings and generate positive cash flows. The company’s risk profile is therefore largely the same as the Group’s. The preceding reporting for the Group of Vonovia SE therefore also expresses the company’s position.

The Vonovia SE annual financial statements have been prepared in accordance with the provisions of the German Commercial Code (HGB) taking into account the supplementary regulations of the German Stock Corporation Act (AktG) and the SE Regulation. As a listed company, Vonovia SE is classed as a large corporation.

The annual and consolidated financial statements as well as the combined management report are published in the business register.

Overview of Business Development in 2025

The residential real estate sector is still faced with complex overall conditions characterized by high demand for housing and homes that are in short supply, also due to an insufficient number of real estate development projects. Demand is being driven to a considerable degree by migration and sociological aspects, while supply is being influenced primarily by higher construction costs, regulatory issues related to construction, and interest rates.

Also in light of the current overall conditions, the successful strategy defined at the time of the company’s IPO has been analyzed to identify the key value drivers and create a more targeted management system.

At the beginning of the 2025 fiscal year, the extraordinary Annual General Meetings of Vonovia SE and Deutsche Wohnen SE on January 24 and 23, 2025 approved the control and profit and loss transfer agreement between Vonovia SE and Deutsche Wohnen SE dated December 15, 2024. On June 30, 2025, a court settlement pursuant to Section 278 (6) of the German Code of Civil Procedure (ZPO) was reached with all of the parties involved in the action for annulment brought against the resolution passed by the extraordinary Annual General Meeting of Vonovia SE regarding the approval of the conclusion of the control and profit and loss transfer agreement, the creation of the 2025 conditional capital and the corresponding amendment of the Articles of Association to include an Article 6a, ending the action for annulment by court order. As the control and profit and loss transfer agreement took effect upon entry into the commercial register on August 1, 2025, Deutsche Wohnen SE will, in the future, transfer its total annual profit to Vonovia SE, or Vonovia SE will cover any losses incurred by Deutsche Wohnen SE. This profit and loss transfer obligation will apply for the first time to the fiscal year that is ongoing at the time the control and profit transfer agreement is entered into Deutsche Wohnen SE’s commercial register.

Under the terms of the control and profit and loss transfer agreement, Vonovia SE undertakes to purchase shares from Deutsche Wohnen SE shareholders and exchange them for shares in Vonovia, with an exchange ratio of 1 : 0.7947. By December 31, a total of 15,842,652 shares in Deutsche Wohnen SE had been exchanged for 12,594,898 new shares in Vonovia SE as part of this transaction.

On September 30, 2024, 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 are to hold a total stake of 51% in this company. Vonovia’s cash inflow from this transaction amounts to around € 1 billion. The agreement was closed on July 29, 2025.

The operating rental business of Vonovia SE and its subsidiaries went largely to plan, and proved successful, in the 2025 fiscal year. While the Value-add segment closed 2025 better than planned, the results reported by the Development and Recurring Sales segments fell short of expectations. Vonovia was nevertheless able to report a satisfactory transaction volume in 2025, despite the difficult overall conditions.

The nursing care activities performed under the Deutsche Wohnen umbrella were subjected to a strategic analysis as part of the merger, with the outcome that these activities were no longer to be part of Deutsche Wohnen’s strategy and, as a result, were to be sold. In the 2024 fiscal year, the nursing care activities under the Katharinenhof umbrella, encompassing 27 nursing care properties, were sold. A sales contract was signed in January 2025 for those nursing care activities under the “nursing and assisted living” umbrella.

The Annual General Meeting held on May 28, 2025, resolved to pay a dividend for the 2024 fiscal year in the amount of € 1.22 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 35.53% of the shares carrying dividend rights opted for the scrip dividend instead of the cash dividend. As a result, 12,768,562 new shares were issued using the company’s authorized capital for a total of € 356,728,085.16. The total amount of the dividend distributed in cash therefore came to € 647,152,483.36.

Results of Operations of Vonovia SE

The company regularly generates income from the charging of the services it provides, from income from investments in the form of distributions from Group companies and income from the transfer of profits. Profit-and-loss transfer agreements exist indirectly with, among other entities, real estate holding companies and service companies, which themselves generate income by charging the real estate companies for the services they have provided. 

The income from investments collected is based on the net profit of the subsidiaries that is eligible for distribution, which is, in turn, calculated based on the accounting standards set out in the German Commercial Code (HGB). The main difference between these standards and the IFRS Accounting Standards lies in the fact that, under IFRS accounting, the fair value principle has more of an impact than the cost principle and the realization principle do under HGB accounting.

Expenses relate largely to personnel and administrative expenses associated with the management holding function, as well as to losses to be compensated for in connection with profit-and-loss transfer agreements.

The financial result is characterized by group financing, impairment losses on non-current financial assets and the result from profit-and-loss transfer agreements.

Business development in 2025 and, as a result, the annual profit are once again dominated by special effects. These relate to higher income from profit transfers, lower loss transfers, the reversal of impairments on non-current financial assets and expenses linked to structuring measures. As a result, Vonovia SE closed the 2025 fiscal year with net income of € 505.8 million.

If other operating income is adjusted to reflect the gains from the reversal of impairment losses in the amount of € 4.1 million (previous year: € 850.5 million) and other operating expenses are adjusted to reflect structuring measures of € 63.5 million (previous year: € 146.2 million), then the result before financial result and tax came to € 77.5 million, down by around € 31.6 million on the prior-year figure of € 45.9 million.

To improve comparability of operating trends, gross profit is adjusted for reversals of impairment losses as special effects, which amounted to a total of € 4.1 million in fiscal year 2025 (previous year: € 850.5 million).

The gross profit adjusted for reversals of impairment losses decreased from € 146.1 million to € 120.5 million in fiscal year 2025 compared to the previous year, representing a decline of € 25.6 million on the prior-year figure.

Compared to the previous year, the result from profit transfer and loss compensation increased by € 680.8 million to € 1,282.5 million (previous year: € 601.7 million).

The balance of other interest income and similar income as well as interest expenses and similar expenses deteriorated by € 26.0 million from € -752.4 million to € -778.4 million during fiscal year 2025. This was primarily due to higher interest expenses to third parties as a result of increased bond volumes.

Revenue increased by € 17.9 million from € 263.6 million in 2024 to € 281.5 million in the past year due to higher fees charged under agency agreements. This also fueled an increase in the cost of materials from purchased services.

Other operating income fell by around € 878.0 million to € 28.2 million (previous year: € 906.2 million). Write-ups on shares in affiliated companies in the amount of € 4.1 million (previous year: € 850.5 million) were recognized within other operating income in the fiscal year. This item also includes income from repayment waivers in the amount of € 3.5 million (previous year: € 31.8 million). This decline is primarily attributable to changes in the subsidy landscape. In the past, Vonovia applied for low-interest loans with repayment grants for energy-efficient modernizations and new constructions, particularly through KfW subsidy programs. However, these programs are no longer available.

Expenses for purchased services increased by € 19.8 million, largely in line with the higher fees charged due to an increase in internally purchased services in the context of the integration of the Deutsche Wohnen Group.

Personnel expenses increased by € 7.1 million in 2025, climbing from € 39.8 million to € 46.9 million in the current fiscal year, primarily due to higher additions to provisions for the Long-term Incentive Plan (LTIP), additions to provisions for pensions, and provisions for special payments.

Other operating expenses fell by € 76.7 million from € 338.3 million in the previous year to € 261.6 million. This drop can be attributed primarily to lower expenses in connection with restructuring measures. These declined from € 146.2 million in the previous year by € 82.7 million to € 63.5 million in fiscal year 2025. In addition to the declining expenses for restructuring measures, expenses from repayment waivers also decreased compared with the previous year, falling by € 25.9 million to € 3.3 million (previous year: € 29.2 million).

Expenses from repayment waivers decreased in line with income from repayment waivers, as the KfW loans centrally raised by Vonovia SE are passed on to subsidy-eligible subsidiaries.

The financial result improved by € 561.0 million to total net income of € 656.3 million. This can be explained largely by the marked improvement in income from profit-and-loss transfer agreements resulting from profits at subsidiaries fueled by effects associated with write-ups and the sale of shares in affiliated companies.

Tax in 2025 came to tax income of € 49.3 million compared with a tax expense of € -38.6 million in 2024. Taxes in the fiscal year under review include deferred tax income of € 88.2 million (previous year: tax expense of € -27.3 million). This is primarily due to the assumption of deferred taxes of Deutsche Wohnen SE owing to the conclusion of the control and profit and loss transfer agreement between the companies in 2025.

Vonovia SE closed the 2025 fiscal year with net income of € 505,755,362.92. 5% or € 25,287,768.15 of this net income for the year is allocated to the legal reserve in accordance with Section 150 (2) AktG. After offsetting the remaining amount of € 480,467,594.77 against the profit carried forward from the prior year of € 96,119,431.50, the Management Board withdrew a further € 548,412,973.73 from capital reserves, resulting in a net profit for the 2025 fiscal year of € 1,125,000,000.00.

The Management Board and the Supervisory Board propose to the Annual General Meeting that, of the profit of Vonovia SE for the 2025 fiscal year of € 1,125,000,000.00, an amount of € 1,060,270,481.250 on the 848,216,385 shares of the share capital as of December 31, 2025 (corresponding to € 1.25 per share) be paid as a dividend to the shareholders, and that the remaining amount of € 64,729,518.75 be carried forward to the new account or be used for other dividends on shares carrying dividend rights at the time of the Annual General Meeting and which go beyond those as of December 31, 2025.

Net Assets and Financial Position of Vonovia SE

On September 30, 2024, the company reached an agreement with Apollo Capital Management L.P. to establish a company that is to hold 20% of the shares in Deutsche Wohnen SE. The company, Delphinus SubCo GmbH, was established and 20% of the shares in Deutsche Wohnen SE sold in the 2024 fiscal year.

In the third quarter of 2025, an indirect sale of 51% of the shares in Delphinus SubCo GmbH to Apollo Capital Management L.P. was completed for a purchase price of approximately € 1.0 billion. The shares in Delphinus SubCo GmbH were then reclassified from shares in affiliated companies to non-current equity investments in the course of the 2025 fiscal year.

As the control and profit and loss transfer agreement between Vonovia SE and Deutsche Wohnen SE took effect upon entry into the commercial register on August 1, 2025, Deutsche Wohnen SE will, in the future, transfer its total annual profit to Vonovia SE, or Vonovia SE will cover any losses incurred by Deutsche Wohnen SE. This obligation to transfer profits and assume losses shall apply for the first time in the 2025 fiscal year.

This process involved 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.

By December 31, 2025, 15,842,652 shares in Deutsche Wohnen SE had been exchanged for 12,594,898 new shares in Vonovia SE as part of the exchange offer. This corresponds to 4.0% of the share capital of Deutsche Wohnen. This reduced shares in affiliated companies by € 388.4 million.

The company’s assets, liabilities and financial position are characterized by net receivables from, and loans and liabilities to, affiliated companies amounting to € 2,034.2 million in favor of Vonovia SE, debt financing of € 30.8 billion and shares in affiliated companies of € 31.0 billion. The company’s non-current assets in the amount of € 39,651.4 million (December 31, 2024: € 39,622.6 million) are largely characterized by non-current financial assets in the amount of € 39,615.0 million (December 31, 2024: € 39,593.0 million).

Within other securities under current assets, the investment associated with a commercial paper program in the amount of € 150.0 million (previous year: € 0.0 million) is reported. All in all, the increase in cash and cash equivalents can be traced back to more stringent requirements regarding the minimum liquidity that the company has to keep available.

Provisions came to € 566.1 million at the end of the year (December 31, 2024: € 315.7 million), with € 102.1 million attributable to provisions for pensions (December 31, 2024: € 101.1 million) and € 63.2 million attributable to tax provisions (December 31, 2024: € 39.9 million). Other provisions were up by € 226.2 million, mainly due to the provision for cash settlement options from conversion rights in the amount of € 143.7 million (December 31, 2024: € 0.0 million) and the recognition of provisions for restructuring measures in the amount of € 163.9 million (December 31, 2024: € 96.7 million).

Total equity had increased by € 247.0 million to € 4,871.2 million by the end of the fiscal year. This was due, on the one hand, to the profit for the period amounting to € 505.8 million less the cash dividend of € 647.2 million. On the other hand, the issuance of new shares from the conditional capital increase as part of the exchange of Deutsche Wohnen SE shares contributed € 388.4 million to the increase in equity.

The € 1,001.5 million increase in bonds to € 23,789.5 million at the end of 2025 is due primarily to the placement of two convertible bonds with a total volume of € 1.3 billion on May 13, 2025. The first bond in the amount of € 650.0 million will mature in May 2030 and does not bear any periodic interest. The second bond – also with a volume of € 650.0 million – will fall due in May 2032 and has a coupon rate of 0.875% p.a. The first convertible bond can be converted into shares in Vonovia as of November 21, 2029, and the second convertible bond as of November 21, 2031. 

As part of the initial recognition process, a discount of € 143.7 million was capitalized, with the opposite effect, for the conversion right, which corresponds to the difference between the settlement amount of the liability and the amount paid out, which is attributable to the pure bond. This discount will be reversed gradually, affecting net income, over the bond term. An amount of € 14.3 million was reversed, affecting net income, in the reporting period, such that the remaining discount, as a prepaid expense, still amounts to € 129.4 million (recognized within other receivables and other assets).

Employees of Vonovia SE

In the 2025 fiscal year, an average of 136 employees (2024: 154) were employed at the company, 127 of whom were full-time employees and nine of whom were part-time.

Opportunities and Risks for Vonovia SE

The likely development of Vonovia SE in the 2025 fiscal year depends to a considerable extent on the development of the Group as a whole and its opportunity and risk situation. This situation is set out in the Group’s opportunity and risk report, meaning that the statements set out there in regard to the opportunity and risk situation of the Group also apply to the annual financial statements of Vonovia SE prepared in accordance with German commercial law, where the risks can have an impact on the valuation of long-term financial assets and on the amount of the results of subsidiaries collected/compensated for.

Significant Events After the Balance Sheet Date

In November 2025, a nominal outstanding volume of EMTN bonds, amounting to € 559.6 million, was repurchased. The remaining nominal volume of approximately € 217 million was called early in December 2025 and repaid on January 15, 2026.

On January 23, 2026, Vonovia issued a bond of CHF 150.0 million (approximately € 160 million) with a term of 8.75 years and a coupon of 1.5516% (3.797% after currency hedging).

On February 5, 2026, Vonovia issued a bond denominated in Swedish krona of SEK 1,500 million (approximately € 140 million) in three tranches with maturities of 3 and 5 years. Two tranches are floating rate, and Vonovia pays a fixed coupon of 3.052% for the 3-year maturity and 3.53% for the 5-year maturity after currency hedging. The third tranche, with a 5-year term, carries an originally fixed coupon of 3.504%.

On January 30, 2026, Vonovia entered into a bilateral credit line agreement with Skandinaviska Enskilda Banken (SEB) and Swedbank for € 200.0 million with a 2-year term (including extension options).

On February 18, 2026, Vonovia concluded a private placement of JPY 10,000.0 million (approximately € 54 million) with a 10-year term. The coupon is 2.94% or 4.08% after currency hedging.

Forecast for Vonovia SE

Since the company’s net assets, financial position and results of operations are determined solely by the ability of the Group companies to make positive earnings contributions and generate positive cash flows in the long term, we refer at this point to the Forecast Report for the Group. The most important financial performance indicator for the annual financial statements of Vonovia SE is the annual result.

The company’s result for 2025 is influenced to a significant degree by special effects due to impairment losses, and the reversal of impairments recognized on investments and shares in affiliated companies. Without taking these special effects into account, Vonovia would report an adjusted operating loss running into the mid-double-digit millions for 2025, in line with the company’s forecast.

The results for the 2026 fiscal year will once again be characterized by the results of subsidiaries collected/compensated for on the basis of income from investments and profit-and-loss transfer agreements, income from services, personnel and administrative expenses, and the financial result.

All in all, we expect the company to report a net loss in the mid-double-digit million range in the 2026 fiscal year, excluding special effects. For the transferred result of Deutsche Wohnen SE, the company expects an amount in the low double-digit million range.

Statement of the Management Board on the Economic Situation

The net assets, financial position and results of operations of the company are positive, particularly given the solid financing, the resulting balanced maturity profile and the financing flexibility gained through the rating-backed bond financing with a view to both organic and external growth. The ongoing improvements to the property management processes, the expansion of the Value-add segment, Recurring Sales and a value-adding development business promote ongoing improvements in profitability and enterprise value. Developments in Germany are complemented by equally positive developments in Sweden and Austria.