Germany’s largest housing company is reportedly close to selling its care division, which is currently valued at €800 million in Vonovia’s books. This deal is crucial for the Bochum-based company’s strategic plans.
After several challenging years, Rolf Buch, the CEO of Vonovia, is returning to optimism. When he announced the latest financial figures for Germany’s largest housing company a few weeks ago, he stated, “Vonovia has put the crisis behind it.” However, he intends to stick to his plan to reduce the company’s portfolio. This year, the DAX-listed company plans to sell properties worth €1.5 billion.
A major deal seems to be on the horizon. Reportedly, an agreement to sell parts of the care division, which is housed within Vonovia’s subsidiary Deutsche Wohnen, is expected to be reached this summer. This information comes from the Handelsblatt, which cites sources within financial circles. Industry experts had already hinted at a possible sale in conversations with WirtschaftsWoche a few months ago, though details were scarce at that time.
The catch: According to Handelsblatt information, the real estate package is not expected to be sold in its entirety but rather in several tranches. Both Vonovia and Deutsche Wohnen have declined to comment on the market rumors, according to the report.
This deal would be important for Vonovia for several reasons. First, the Bochum-based company decided two years ago to divest from the care segment. Vonovia acquired this division through its takeover of Deutsche Wohnen in 2021, but it never really fit into the company’s housing-focused strategy.
The sales campaign is underway
Additionally, a sale would bring substantial cash into Vonovia’s coffers. The care division is valued at €800 million in the books. If the sale goes through, it would be one of the largest transactions of the year. In early May, Vonovia raised nearly €750 million by selling a package of 4,500 apartments to the city of Berlin.
The sales campaign appears to be working, and Buch’s plan seems to be on track. Vonovia accumulated a significant amount of debt during the low-interest era and has since imposed austerity measures on itself. Recently, the company reported a Loan-to-Value (LTV) ratio of 48.2 percent, indicating the extent of its debt relative to the value of its properties.
Vonovia’s problem is that when central banks raised interest rates to combat high inflation, the company had to devalue its housing portfolio—by 14.2 percent between 2021 and 2023, reducing its value to €83.9 billion. As a result, the LTV ratio increased. A high level of debt can be disadvantageous when taking out loans. Therefore, two years ago, Vonovia set a goal to sell properties worth €13 billion.
Market recovery boosts optimism
Operationally, Vonovia has been performing well even during the real estate crisis, with its rental business booming. However, the bottom line includes not only rental income but also the value changes of the properties. During the real estate boom of previous years, rising house and apartment prices continually boosted Vonovia’s profits. With the interest rate hike, this dynamic reversed, leading to billions in losses.
However, the financial statements now show that the real estate crisis is having less of an impact on Vonovia. In the first half of the year, the company still posted a loss of €529 million. But this loss was significantly lower than in the same period last year when Vonovia recorded a loss of €4.1 billion. Vonovia remains optimistic and has confirmed its annual forecast. Adjusted EBITDA is expected to be at the upper end of the range, between €2.55 and €2.65 billion. Vonovia is benefiting from the financial streamlining through sales and the gradually easing real estate market. Since the beginning of the year, Vonovia has only had to devalue its property portfolio by 1.7 percent to €82.5 billion.
The stock market also seems to believe in Vonovia’s return to growth. Over the past year, the stock has gained about 50 percent in value, more than twice as much as the DAX. Recently, the stock was trading at around €30. However, for some investors, this is only a small consolation. Those who bought Vonovia shares at the record high in 2021 are still nearly 50 percent in the red.
