Vonovia moves into Dutch housing market, issues €1.2bn bonds

Germany’s largest housing company Vonovia SE has bought a a 2.6% stake in Dutch residential investor Vesteda Residential Fund, in its first step into the Dutch residential property market.

Vonovia said this is its first step into the Dutch residential property market, “creating a basis for developing a better understanding of the local market as well as gaining practical first-hand experience”, as it said. The price paid was not disclosed.

The Dutch company was founded in 1998 as a spin-off from the assets of the ABP pension fund, and has been run as an open-ended property fund since then. It owns around 27,300 residential units in the "highly attractive" Randstad region, which also includes Amsterdam and Rotterdam, said Vonovia. The typical rental price for the units would be €750- €1,200 per month, valuing the portfolio at €7.8bn, and generating gross annual rental income of €329m.

Vonovia has made clear for a while that its priority non-German markets for expansion are Sweden, Austria, the Netherlands, and France. In 2018 it bought a 10% stake in French residential-real estate portfolio Fonciere Vesta. On the Netherlands deal, CEO Rolf Buch said in a statement, “Certainly a 2.6% is only a small step into the Dutch housing market. But we now have an ideal starting position if there are further opportunities.”

Vonovia’s portfolio is currently worth around €53.2bn. To help fund its expansion into Germany’ neighbouring countries, the company recently placed two unsecured corporate bonds with an aggregate volume of €1.2bn.

Part of the funds will be used for the early repayment of diverse loans in Sweden related to the acquisition of housing group Hembla last year.

Helene von Roeder, Vonovia’s CFO, said: "With debt markets back in very favorable territory after considerable volatility in the wake of the COVID-19 crisis, we seized this window of opportunity to execute on our financing strategy for Hembla. This transaction once again clearly demonstrates investors’ strong support of Vonovia and their firm belief in our highly robust business model.”

The bond issuance was 4 times oversubscribed with strong demand coming from more than 300 investors. The 6-year note with a coupon of 0.625% and the 10-year note with a coupon of 1.00% are congruent with Vonovia’s debt profile, with maturities evenly distributed over an average duration of about 8 years.

Vonovia’ said its capital structure and liquidity position remain very comfortable with no financial maturities until December 2020, when an unsecured corporate bond of €750m (1.625% coupon) will expire.