Real estate devalued
Vonovia writes a loss of over six billion euros
March 14, 2024, 8:44 p.m
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The real estate market is in a deep crisis. This has a significant impact on the business figures of the Bochum industry leader. The dividend for shareholders should still be slightly higher than in the previous year. In the future it will be calculated differently.
The crisis on the real estate market has pushed industry leader Vonovia deep into the red. The Bochum-based group reported a loss of around 6.7 billion euros last year after its real estate was devalued, as it announced. CEO Rolf Buch wants to keep the money together and part with real estate packages in order to reduce the debt ratio (LTV). This rose to 47.3 percent last year – the target is actually a maximum of 45 percent. Nevertheless, the shareholders should receive a dividend of 0.90 euros – five cents more than last year. However, the group wants to change its dividend policy in the future.
The real estate industry is struggling with the consequences of high interest rates and skyrocketing construction costs. Hardly any new apartments are being built anymore. In addition, there have been hardly any major transactions for a long time – this makes it difficult for many market participants to assess what the real estate holdings in their books are really worth. This fuels further uncertainty. Real estate prices fell. Many project developers went bankrupt. For real estate groups, the devaluation of inventories is causing some severe losses. As a result, dividends were reduced in series or eliminated entirely.
Bottom reached?
The head of Vonovia’s smaller competitor LEG Immobilien, Lars von Lackum, said that 2023 would be an “annus horribilis” for the industry. At LEG, the devaluations in 2023 caused a loss of around 1.5 billion euros. At Hamburg-based TAG Immobilien the loss totaled 410.9 million euros, at Grand City Properties it amounted to 638 million euros. However, LEG Immobilien is already looking forward to better times. “For LEG, the peak of the real estate crisis is over,” said Lackum at the beginning of the week.
“The voices in the industry are getting louder that the values may have already bottomed out,” said Buch. “Once the market has stabilized, we will again focus more on increasing our earnings,” he announced. Vonovia has around 546,000 apartments. The group had to devalue the portfolio by 6.6 percent in the first half of the year and by 4.2 percent in the second half of the year.
In operational business, Vonovia was able to increase rental income in 2023, and the vacancy rate was around two percent. However, income from operating business (Group FFO) fell to 1.8 billion euros due to interest rate developments. From 2024 onwards, Vonovia also wants to use adjusted earnings before taxes (adjusted EBT) as the central key figure, which is intended to replace group FFO. For the financial year, Vonovia expects adjusted Ebitda to be in a range of 2.55 to 2.65 billion euros, and adjusted EBT is expected to be in a range of 1.70 to 1.80 billion euros, the group announced.