Vonovia SE

The stable outlook reflects our view that Vonovia will maintain a robust and stable cash flow, supported by strong market fundamentals in Germany for ongoing demand for affordable housing, and to a lesser degree in Austria and Sweden. This should enable the company's EBITDA interest coverage to remain well above 2.4x for at least the next two years. We also expect the company to integrate any future transactions successfully, in line with its track record, while ensuring a sufficient liquidity cushion. We anticipate that Vonovia will finance any potential acquisitions with enough equity to maintain debt to debt plus equity well below 60%, and stay within its publicly stated financial policy (reported LTV of 40%-45%). We could consider a negative

...Vonovia SE's operations have experienced very little disruption from COVID-19. The company's portfolio has shown high resilience to the pandemic's impact, with nearly no effect on rent collection compared with previous years (roughly 99% rent collection). We continue to view the residential real estate sector as one of the most resilient to the pandemic (see "COVID-19: Implications For European Real Estate Investment, As Tenants Begin To Suspend Rent Payments," published March 26, 2020), with very limited impact on rents and valuations so far (3.1% and 9.4% like-for-like growth, respectively, as of Dec. 31, 2020, including rental income from new developments). We assume Vonovia will continue generating organic like-for-like rental income growth during 2021 of 2.5%-3%, mainly reflecting modernization and new construction. We believe rental income growth from in-place tenants will remain flat. We also assume valuations for the company's assets will remain positive, conservatively at 2%-4%...

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