In order to reduce debt, the real estate group Vonovia is putting apartments worth around 13 billion euros up for grabs. This is intended to make the company more crisis-proof in difficult times in the industry.
Vonovia boss Rolf Buch wants to make the Vonovia real estate group weatherproof in the midst of the industry crisis with sales worth billions. The background is the currently high interest rates, which are causing refinancing costs to rise. The entire real estate industry is struggling with the consequences of high interest rates, skyrocketing construction costs and high inflation are causing problems for companies. Hardly any new apartments are being built anymore.
In addition, for a long time there were hardly any major transactions on the market – this makes it difficult for many market participants to assess what the corporations’ real estate holdings are really worth. This fuels further uncertainty.
64 billion euros in debt
Vonovia had to write down the value of its portfolio in the second quarter due to falling real estate prices. In the first half of the year, the minus in valuation totaled around 6.4 billion euros. This was also reflected in the figures after nine months. Vonovia posted a period loss of 3.8 billion euros. A year ago there was a profit of around 2.2 billion euros. Vonovia has debts of around 64 billion euros.
Buch wants to significantly reduce this debt and keep the money together. Today he said that Vonovia has already achieved around 3.7 billion euros in sales revenue this year through sales and investments by partners in individual apartment packages, including 1.7 billion euros since August. There were hardly any discounts. Further sales are planned.
More sales to follow
As a result of the sales, the debt ratio (LTV) is 45 percent and therefore within the company’s target range of 40 to 45 percent, emphasized Buch. LTV refers to the ratio of the loan amount to the market value of the real estate portfolio.
“Although we have reached the upper edge of the target corridor for LTV, we will not stop continuing the sales program with the same intensity as before,” emphasized Buch in a telephone conference. There is still a lot to sell because it doesn’t fit the Vonovia real estate portfolio perfectly. This will certainly help the company reduce its debt even further. After years of expansion, Vonovia wants to sell around 66,000 apartments with a total value of around 13 billion euros.
No Capital increase?
According to the book, Vonovia will also be burdened with the consequences of high interest rates in the coming year. The company therefore expects a moderate decline in profit from operations (FFO) in 2024, the manager said today. However, the group will probably be able to avoid a capital increase, which is usually not very popular with investors.
Vonovia can be “the stable rock in a turbulent market,” said the CEO. Shareholders generally do not appreciate a capital increase because the new shares dilute their own share in the company and the company’s profits.