Embattled Vonovia raises €3.7bn in disposals, targets further €13bn

by

There aren't many large residential portfolio transactions in Germany at the moment, but there are SOME, mostly featuring the very biggest players. As a general rule those who don't have to sell aren't selling, but one of those companies needing to raise money quickly is the listed Vonovia, Germany's (and Europe's) biggest residential property owner.

The heavily-indebted Vonovia is actively looking to slim down its residential holdings to meet debt and refinancing obligations. Its most recent divestment is a packet of new-build projects in Berlin for €357m to CBRE Investment Management. Many of the 1,200 properties in the sale, in 16 buildings across three different location in the city, are still in the construction stage, but due for completion in mid-2024. Vonovia said the sales price was "slightly under book value".

A few days earlier Vonovia closed on the sale of a further 1,213 apartments to the city of Dresden's WiD Wohnen in Dresden municipal housing company for €87.8m, along with some as yet undeveloped land. The land has capacity for up to 1,800 further apartments. "Nothing will change for the tenants", the company said. "Vonovia is selling the apartments at a fair price, and we achieved a good deal for all parties."

Just prior to that, Vonovia sold 30% of a northern German portfolio for €1bn to private equity group Apollo. The 31,000 properties are located mainly in Lübeck, Kiel and Bremen, with the Lübeck and Kiel units being old legacy apartments from the original Pirelli holdings which subsequently got bought up by Vonovia-subsidiary BUWOG. The deal mirrors a deal earlier this year between the same partners for a minority stake in Vonovia's Südewo portfolio, centred in Stuttgart, and includes an option for Vonovia to repurchase the stake under certain conditions.

Also, back in May, Vonovia completed a separate transaction with CBRE Investment Management for €560m for a portfolio of 1,350 apartments - in new-built multi-family units, two in Berlin, two in Munich and one in Frankfurt.

All these transactions exceed the €2bn of sales originally envisaged by Vonovia for this year. CEO Rolf Buch said the company had actually sold apartment and minority stakes to the value of €3.7bn, "against all expectations". Sales since August alone amount to €1.7bn, he confirmed, at close to book prices.

Looking ahead to further sales, Buch said he had identified €13bn worth of further disposals for various 'packet' sales of assets which "don't fit optimally" in the Vonovia portfolio. At the end of Q2 Vonovia took a write-down on the value of its holdings of about €2.7bn.

Presenting Vonovia's figures for the first nine months of the year, Buch highlighted how the company's figures reflected developments on the German residential market as a whole. Vonovia's rental income rose by 7% to €1.8bn, reflecting the buoyant rental market across the country. But higher costs, including financing costs, left the company with a €3.8bn loss after devaluing its holdings by 6.3% to €88.7bn. This compares with a profit of €2.2bn at the same time last year.

Buch said the company's LTV ratio was now 45%, meeting its own internal 'target corridor' of 40-45%. "We are now at the upper end of our target corridor with our LTV, but we're not going to stop pushing ahead with our disposal programme with the same intensity as we've been pursuing it up to now", he said. Next year will again be a tough year, he said, with a moderate decrease in the operating FFO. But the ongoing program of disposals will at least ensure that the company can avoid going back to the market for a capital increase. Vonovia can be "the rock of stability in a turbulent market", he added.