Vonovia SE

Overview Key strengths Key risks Very large portfolio of income-producing residential property assets, worth about €88.7 billion as of Sept. 30, 2023. High reliance on Germany and its economy, despite some exposure to Austria and Sweden. Good asset localization in regions that enjoy supportive economic and sociodemographic trends, mostly in Germany (89% of asset value), Sweden (8%), and Austria (3%). Rising affordability risk in the German residential market due to rising inflation and rents, which could lead to political pressure to introduce further tenant-friendly regulation. Strong track record of like-for-like rental income growth, supported by a highly diversified asset and tenant base, continuously high occupancy rates, and long tenant stays. A relatively high, albeit declining, debt-to-EBITDA ratio of 15-17x (excluding

...Vonovia's sale of a second 1 billion stake, among other asset disposals, provides additional credit cushion, but devaluation is still weighing on its high debt-to-debt-plus-equity ratio. On Nov. 3, 2023, Vonovia announced a total of 3.7 billion signed disposals year-to-date, well exceeding its 2 billion disposal target for 2023. This includes a 1 billion sale of minority stake in a portfolio of 3.8 billion assets in northern Germany, to be completed in first-quarter 2024. A previous 1 billion stake sale (about 30% of shares) in Sndewo (3.3 billion assets) was completed in April 2023. In line with the first transaction, we view the class B shares as common equity (see "Vonovia SE's 1 Billion Stake Sale Will Cushion Credit Ratios And Fuel Liquidity," published April 28, 2023). After the second transaction, about 8% of the company's property portfolio will be subject to 30% minority interest, where Vonovia will no longer accrue the full benefits of those asset¦s cash flows. We still view both...

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