Vonovia SE

This report does not constitute a rating action. Overview Key strengths Key risks Very large portfolio of income-generating residential property assets worth about €85.7 billion as of June 30, 2026. High reliance on Germany and its economy (and some exposure to Austria and Sweden), which poses a rent affordability risk and where regulatory pressure could increase. Good asset locations in regions that enjoy supportive economic and sociodemographic trends, mostly in Germany (88% of asset value), Sweden (8.5%), and Austria (3.5%). We expect a relatively high, albeit declining, debt-to-EBITDA ratio of 15x-17x (excluding revenue from recurring sales and developments) in 2026-2028. Strong track record of positive like-for-like rental income growth, supported by a highly diversified asset and tenant base, high occupancy

...Vonovia's updated financial policy targets will maintain financial headroom and flexibility, supporting its current rating level. As part of its 2025 results, the company revised its financial policy target to a loan-to-value (LTV) ratio of about 40%, net debt to EBITDA of below 12x, and EBITDA interest coverage comfortably above 3x, to be reached by the end of 2028. This compares with previous targets of 40%-45% LTV, 14x-15x net debt to EBITDA, and at least 3.5x EBITDA interest coverage. This demonstrates its commitment to a more conservative balance sheet and lower leverage, while adjusting to a sustainably higher interest rate environment. We understand that the company aims to reach its targets mainly through asset disposals and the sale of non-strategic equity participation. As of June 30, 2026, the S&P Global Ratings-adjusted ratio of debt to debt plus equity stood at 56.8% (slightly up from 56.0% year-end 2025 and well improved from 59.9% at year-end 2024). We expect debt to debt...

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