2022 Financial Year

Vonovia’s economic development is robust and adapting to changes in its general environment

• Segment revenues up 19.9%, EBITDA up 22.6% and FFO up 20.1%
• Customer satisfaction at record level; virtually no loss of rental income; vacancy rate at all-time low
• Focus on active financial management and capital discipline
• AGM: Proposed dividend of €0.85 per share for 2022
• Social responsibility: Active support for refugees and initiatives against homelessness
• Overall stable forecast for 2023

Bochum, 16 March 2023 – Vonovia SE (“Vonovia”) can look back to a very successful 2022 financial year. Operating within a challenging environment, the company recorded a positive year-on-year development in corporate KPIs. Vonovia successfully completed the integration of Deutsche Wohnen. Tenant satisfaction rose to its highest level since the survey began, and the vacancy rate dropped to an all-time low. There was virtually no loss of rental income. Furthermore, the company continued to follow its defined climate roadmap and invested in energy efficiency improvements to its existing portfolio. In 2022, the carbon intensity in the German portfolio was 33 kilograms of CO2 per square meter, compared with 38.4 kilograms a year earlier.

At the same time, Vonovia prepared for the new parameters of the 2023 financial year. The effects of the attack on Ukraine, rising interest rates, high costs of construction, a shortage of skilled labour and a cut in subsidies presented immense challenges to the housing sector.

“The consequences of this terrible war in Europe prompted central banks around the world to raise their interest rates faster than ever before. Our business model with its long-term robustness in a regulated market reacted to such changes with a time lag, and this also had an impact on some of our key figures,” says Rolf Buch, CEO of Vonovia. “In the medium and long term, the mega-trends that support our business model will become more pronounced: the increasingly unmet demand for housing and the focus on climate protection.”

Proposed dividend of €0.85 per share

Vonovia’s business model is intact. “We are expecting to see robust developments on the earnings side. However, we need to find the right balance between two different expectations among our shareholders. One group of shareholders would like to see continuity in their dividends, while others are calling for special capital discipline. Both are equally important,” says Rolf Buch. “It is the prerogative of our shareholders to decide on the dividend, and so we are convinced that our proposal is reasonable.”

The Management Board and the Supervisory Board will propose a dividend of €0.85 per share to the shareholders at the virtual AGM on 17 May 2023. Shareholders will again be able to choose between a scrip dividend and a classic cash dividend. The Management Board and the Supervisory Board are generally upholding a dividend policy with a payout ratio of approx. 70% of Group FFO after minority interests.

2022: Positive business developments

Despite a challenging market environment, Vonovia’s economic performance was positive in the 2022 financial year.

By the end of 2022, Vonovia had successfully completed the integration of Deutsche Wohnen. The resulting synergy effects will be higher than expected. By 2024, they will be €105 million as planned, with an additional €30 million p.a. from 2025 onwards.

Total segment revenues rose by 19.9% to around €6.3 billion in the 2022 financial year. Rental EBITDA was €2.2 billion (2021: €1.8 billion). Over the same period, the total EBITDA increased by 22.6% to around €2.8 billion (2021: €2.3 billion). The increase was due to two factors: the merger with Deutsche Wohnen and investments in new and existing buildings. The four business segments Recurring Sales, Development, Value-add and Nursing contributed €529.6 million to the result (2021: €475.9 million).

The Group FFO, the leading indicator for sustainable profitability, grew by 20.1% to approx. €2.0 billion. “As in the previous year, our FFO is within the projected range of our forecast. Given the current challenging environment, this is a considerable achievement and a good indication of the resilience of our business model,” says Rolf Buch.

One in 10 new tenancies were given to Ukrainian nationals

 The war in Ukraine triggered large-scale movements of refugees. As a leading housing company in Europe, Vonovia has been providing refugees with residential units both quickly and easily. “It is harrowing to see people fleeing their home country and having to leave everything behind. For us, it goes without saying that we should help them and offer them a safe home. And so about one in ten new tenancies were given to Ukrainian nationals in 2022,” says Rolf Buch.

At the same time, Vonovia remains committed to helping homeless people and supporting numerous nationwide initiatives in Germany, including a specific project under the Housing First principle. This prestigious programme, which is based on a Scandinavian model, aims primarily to provide homeless people with residential units and only then to deal specifically with some of their other day-to-day issues.

Customer satisfaction at record level

One of the foundations of Vonovia’s positive economic development is its focus on long-term relationships with tenants. Satisfaction among Vonovia’s tenants rose by 1.3 percent in the 2022 financial year, reaching its highest level since the survey was first conducted. There was virtually no loss of rental income. In particular, customers appreciated the company’s digital services. The My Vonovia app was downloaded more than 550,000 times and currently has 155,000 active users.

Vonovia also successfully continued its proven hardship management scheme in 2022, making special hardship arrangements for nearly 600 households throughout the year. Since the scheme was introduced in 2018, more than 4,400 tenants have been supported in this way.

Throughout 2022, consumers in Europe suffered under an increasing strain caused by high energy prices. Vonovia provides comprehensive advice to tenants, especially when payments are in danger of becoming too difficult for them. Possible solutions can be found jointly, on a case-by-case basis, including payments in instalments, deferrals and help in dealing with the authorities.

Progress in energy efficiency improvements of existing buildings

As before, Vonovia continued to invest systematically in energy efficiency improvements of its properties in 2022. During the year under review, the company invested around €2.3 billion in its own portfolio, including approx. €840 million in energy efficiency. Vonovia’s refurbishment rate of 1.9 % (excluding Deutsche Wohnen) was slightly below the previous year’s level of 2.3%. Nevertheless, Vonovia is continuing to pursue its defined climate roadmap, envisaging a virtually climate-neutral building stock by 2045.

Over the last few years, the company has already gained a head start in upgrading energy efficiency within its existing portfolio. Only 1.6% of Vonovia’s buildings were in energy efficiency class H at the end of the year, while 3.4% were in class G. This means that Vonovia’s properties are far below Germany’s national average, whereby, according to Agora Energiewende, 7% of all buildings are in class H and 9% in class G.

Under its current upgrade strategy, Vonovia is focusing on measures with the greatest possible impact on its carbon footprint and on tenants’ end-of-year balances covering both rental and utility fees. In 2022, the carbon intensity in the German portfolio was 33 kilograms of CO2 per square meter, compared with 38.4 kilograms a year earlier. This is a decrease of 14 %. Above all, Vonovia is continuing to focus on changing its energy sources. One major component on the company’s climate roadmap is the increasing use of heat pumps and solar panels in existing buildings. In 2022, over 500 roofs on Vonovia’s existing buildings were fitted with 220 photovoltaic systems. The aim is to equip 30,000 roofs with solar panels by 2050. “It would be great if we could convert even more of our existing buildings to heat pumps and expand the provision of direct green electricity to our tenants. Things could be accelerated if there were faster approval and acceptance procedures,” says Buch.

Vonovia’s social and environmental efforts are reflected in its Sustainability Performance Index (SPI). In 2022, it reached 103%, mainly due to a high level of customer satisfaction and significant reductions in carbon emissions. It meant that, yet again, the company exceeded its own targets.

Focal areas in the construction of new buildings

 Last year, Vonovia completed an overall total of 3,749 new residential units (2021: 2,200 units). The war in Ukraine did of course also impact new builds. However, construction was made very difficult by rising prices for materials and higher financing costs. “Right now, it’s impossible to create new housing with affordable rental fees – which is why, for the time being, we will concentrate on building projects that are already under way,” says Rolf Buch. “In 2023, Vonovia will complete around 3,450 residential units out of 10,000 that are currently under construction. However, we’ve postponed starting any new projects, because, as property developers, we need robust parameters and planning security. This is another reason why we are asking the German government to simplify things and to take the initiative in making it attractive for private companies to engage in new building projects.”

Vonovia will continue to invest in sustainability and digitisation. Vonovia recently entered into a cooperation agreement with the PropTech company GROPYUS, thus strengthening their collaboration in affordable, sustainable new construction and computerised building management. “Over the next few months, we’re going to prepare all the projects where we’ve postponed construction to the point that we can get going as soon as we’ve got more clarity of the costs,” says Buch. Vonovia’s long-term potential is 60,000 new residential units.

Focus on active financial management

At 45.1%, the company’s loan-to-value ratio (LTV) was slightly lower than before (2021: 45.4%). The higher interest rate compared with previous years impacted the cost of refinancing in the entire property sector. “In this challenging environment, we benefit from our policy of actively driving forward our financial management at all times,” says Philip Grosse, Chief Financial Officer of Vonovia. The last time that Vonovia successfully placed sustainable social and green bonds on the market, totalling €1.5 billion, was in November, which enabled the company to refinance existing bonds and reduce other liabilities. The rating agencies Moody’s and Standard & Poor’s confirmed Vonovia’s high credit rating and robust outlook by awarding a Baa1 and BBB+, respectively. On average, financing costs were 1.5%, with liabilities having a term of 7.4 years.

Assets virtually stable throughout the year

As at the reporting date of 31 December 2022, Vonovia owned an overall total of around 549,000 residential units in Germany, Austria and Sweden. Its portfolio in Germany represented a market share of about 2.1%.

In December 2021, the market value of the total portfolio – adjusted for sales, purchases and new builds - was €95.4 billion; in December 2022, it was €94.7 billion and thus roughly at the level of the previous year. The decline in value of around €1.3 billion was due to the general development of the market. The increase in value in the first half of 2022 was followed by a decline of 3.9% in the second half. Due to investments in energy-efficient modernisation, the residential property portfolio performed positively in the full year, at 0.5%. At the end of the 2022 financial year, the EPRA NTA net asset value – the market value minus debt - was around €46 billion and thus 6% below the year-end value of 2021.

Despite the challenging general conditions in today’s housing market, the structural value drivers for residential real estate are still intact. In the face of intense demand and stagnating supply, urban conglomerations are continuing to experience a lack of affordable housing. “We’ve got hardly any vacant flats,” says Rolf Buch, “yet we’re continuing to see a very high demand, especially in attractive urban areas. The demand is particularly high for our high-quality residential units.” At 2.0%, Vonovia’s vacancy rate on the reporting date of 31 December 2022 was lower than ever before in its entire history.

The market-driven increase in rental fees was 1.0%. The average monthly rent across Vonovia’s portfolio in Germany was €7.4 per square metre.

Overall stable forecast for 2023

Overall, Vonovia is optimistic about the future and is expecting the market environment for residential properties to pick up again in the medium term. The structural drivers in the housing market will remain intact. “We are confident that we will maintain our robustness and use it positively in the interest of all our stakeholders,” says Rolf Buch.

Demand for housing will continue to rise in 2023, but the market environment will remain challenging. Vonovia is expecting to see a further increase in revenue. For the financial year, Vonovia is forecasting to increase total segment revenues to a level between €6.4 billion and €7.2 billion. The EBITDA is likely to range between €2.6 and 2.85 billion and the FFO between €1.75 and €1.95 billion. In the Development segment, the company is expecting to see a significant decline in EBITDA due to the lower level of new construction activity. Vonovia is expecting to spend around €850 million on upgrading and new builds.

*Business figures 2018 - 2020 as reported, prior-year values 2021 comparable according to current key-figure definition/segmentation 2022.

** Based on the shares carrying dividend rights on the reporting date, prior-year values 2018 - 2020 TERP-adjusted (1.067).

*** Excluding Deutsche Wohnen.

The full annual report can be found at the following web addresses:

https://report.vonovia.de/2022/q4/de/

https://report.vonovia.de/2022/q4/en/

Further details, photographic material and video footage can be found in the Press section.

About Vonovia

Vonovia SE is Europe’s leading private residential real estate company. Vonovia currently owns more than 549,000 residential units in all attractive cities and regions in Germany, Sweden and Austria. It also manages around 72,800 apartments. Its portfolio is worth approximately € 95 billion. As a modern service provider, Vonovia focuses on customer orientation and tenant satisfaction. Offering tenants affordable, attractive and livable homes is a prerequisite for the company’s successful development. Therefore, Vonovia makes long-term investments in the maintenance, modernization and senior-friendly conversion of its properties. The company is also creating more and more new apartments by realizing infill developments and adding to existing buildings.

The company, which is based in Bochum, has been listed on the stock exchange since 2013. Since September 2015 Vonovia has been a constituent in the DAX 30 (today DAX 40) and since September 2020 in the EURO STOXX 50. Vonovia SE is also a constituent of additional national and international indices, including DAX 50 ESG, Dow Jones Sustainability Index Europe, STOXX Global ESG Leaders, EURO STOXX ESG Leaders 50, FTSE EPRA/NAREIT Developed Europe, and GPR 250 World. Vonovia has a workforce of approximately 15,900 employees.

Additional Information:

Approval: Regulated Market/Prime Standard, Frankfurt Stock Exchange

ISIN: DE000A1ML7J1

WKN: A1ML7J

Common code: 094567408

Registered headquarters of Vonovia SE: Bochum, Germany, Bochum Local Court, HRB 16879

Business address of Vonovia SE: Universitaetsstrasse 133, 44803 Bochum, Germany

This press release has been issued by Vonovia SE and/or its subsidiaries solely for information purposes. This press release may contain statements, assumptions, opinions and predictions about the anticipated future development of Vonovia (“forward-looking statements”) that reproduce various assumptions regarding, e.g., results derived from Vonovia’s current business or from publicly available sources that have not been subject to an independent audit or in-depth evaluation by Vonovia and that may turn out to be incorrect at a later stage. All forward-looking statements express current expectations based on the current business plan and various other assumptions and therefore come with risks and uncertainties that are not insignificant. All forward-looking statements should not therefore be taken as a guarantee for future performance or results and, furthermore, do not necessarily constitute exact indicators that the forecast results will be achieved. All forward-looking statements relate solely to the day on which this press release was issued to its recipients. It is the responsibility of the recipients of this press release to conduct a more detailed analysis of the validity of forward-looking statements and the underlying assumptions. Vonovia accepts no responsibility for any direct or indirect damages or losses or subsequent damages or losses, as well as penalties that the recipients may incur by using the press release, its contents and, in particular, all forward-looking statements or in any other way, as far as this is legally permissible. Vonovia does not provide any guarantees or assurances (either explicitly or implicitly) in respect of the information contained in this press release. Vonovia is not obliged to update or correct the information, forward-looking statements or conclusions drawn in this press release or to include subsequent events or circumstances or to report inaccuracies that become known after the date of this press release.