Vonovia : 9M Report 2023

VONOVIA SE

INTERIM STATEMENT FOR THE THIRD QUARTER OF 2023

Interim

Statement

Q3

Key Figures

Financial Key Figures* in € million		9M 2022		9M 2023	Change in %	12M 2022
Total Segment Revenue		4,606.3		4,232.3	-8.1	6,256.9
Adjusted EBITDA Total		2,110.1		2,010.0	-4.7	2,763.1
Adjusted EBITDA Rental		1,685.3		1,803.3	7.0	2,233.5
Adjusted EBITDA Value-add		125.3		73.3	-41.5	126.7
Adjusted EBITDA Recurring Sales		112.8		51.6	-54.3	135.1
Adjusted EBITDA Development		122.1		28.0	-77.1	183.2
Adjusted EBITDA Care		64.6		53.8	-16.7	84.6
Group FFO		1,577.8		1,446.0	-8.4	2,035.6
thereof attributable to non-controlling interests		62.0		69.6	12.3	91.3
Group FFO after non-controlling interests		1,515.8		1,376.4	-9.2	1,944.3
Group FFO per share in €**		1.98		1.78	-10.1	2.56
Income from fair value adjustments of
investment properties		3,137.6		-6,318.9	-	-1,269.8
EBT		3,379.7		-5,343.6	-	-732.7
Profit for the period		2,211.7		-3,808.9	-	-669.4
Cash flow from operating activities		1,488.9		1,282.7	-13.8	2,084.3
Cash flow from investing activities		923.2		-584.1	-	938.2
Cash flow from financing activities		-2,483.0		-1,044.2	-57.9	-3,145.1
Total cost of maintenance, modernization and
new construction	1,739.8	1,021.7	-41.3	2,300.7
thereof for maintenance expenses and capitalized
maintenance		594.8		493.4	-17.0	856.2
thereof for modernization		631.3		358.7	-43.2	837.4
thereof for new construction		513.7		169.6	-67.0	607.1
Key Balance Sheet Figures/Financial Covenants		Dec. 31, 2022		Sep. 30, 2023	Change in %
in € million
Fair value of the real estate portfolio		94,694.5		88,693.7	-6.3
EPRA NTA		45,744.5		41,148.3	-10.0
EPRA NTA per share in €**		57.48		50.51	-12.1
LTV (%)		45.1%		46.8%	1.7 pp
Net Debt/EBITDA		15.8x		16.1x	0.3x
ICR		5.5x		4.4x	-1.1x
Non-financial Key Figures*		9M 2022		9M 2023	Change in %	12M 2022
Number of units managed		621,396		618,679	-0.4	621,303
thereof own apartments		549,010		547,998	-0.2	548,524
thereof apartments owned by others		72,386		70,681	-2.4	72,779
Number of units bought		910		63	-93.1	969
Number of apartments sold		18,598		1,713	-90.8	19,760
thereof Recurring Sales		1,853		958	-48.3	2,710
thereof Non Core/other		16,745		755	-95.5	17,050
Number of new apartments completed		1,543		1,799	16.6	3,749
thereof own apartments		907		1,292	42.4	2,071
thereof apartments for sale		636		507	-20.3	1,678
Vacancy rate (in %)		2.1		2.1	-	2.0
Monthly in-place rent in €/m²		7.47		7.67	2.7	7.49
Organic rent increase (in %)		3.3		3.8	0.5 pp	3.3
Number of employees (as of Sep. 30/Dec. 31)		15,851		15,798	-0.3	15,915

• Previous year's figures for 2022 comparable according to current key figure definition/segmentation for 2023.
• Based on the shares carrying dividend rights on the reporting date.

Vonovia SE Interim Statement for the Third Quarter of 2023

Contents

Economic Development In the First Nine Months of 2023

2 Overview

4 Vonovia SE on the Capital Market

1. Business Development in the First Nine Months of 2023

1. Business Outlook

Condensed Consolidated Interim Financial Statements

1. Consolidated Income Statement
2. Consolidated Statement of Comprehensive Income
3. Consolidated Balance Sheet

28 Consolidated Statement of Cash Flows

Information

30 Portfolio Information

32 Financial Calendar, Contact

Contents

1

Business

Development in

the First Nine

Months of 2023

Overview

• High demand for rental apartments, positive rental price development and the realization of synergies promote positive economic development in the core Rental segment.
• Virtually full occupancy of portfolio of residential properties.
• Inflation, interest rate and construction cost trends put the brakes on investment and real estate sales.

2 Overview

4 Vonovia SE on the Capital Market

7 Economic Development in the First Nine Months of 2023

21 Business Outlook

2	Vonovia SE Interim Statement for the Third Quarter of 2023

Sustained Earnings

Group FFO*

inmillion

1,577.8

‡ˆ‰……

1,446.0

‡ˆ"‰…

-Œ‹'%

‡ˆ………

Š‰…

‰……

‡‹'Œ

-‡…‹‡%

‡‹ŠŒ

"‰…

…

'M"…""

'M"…"†

GroupFFOpershare()

• Based on the new 2022 definition without elimination of IFRS 16 e•ect and results of assets accounted for using the equity method.

Maintenance and Modernization

Investments

inmillion

	631.3
	594.8
513.7	493.4
		358.7
		169.6
	M	M
Maintenance	Modernization	New construction

Organic Rent Growth

Vacancy

Organic Rent Increase

Vacancy Rate

in%

in%

pp

3.8

3.3

2.1

pp

2.1

M

M

Sep

Sep

Net Assets	Fair Value of the Real Estate Portfolio
EPRA NTA	Fair Value

inmillion				inmillion
	45,744.5	-%			94,694.5	-%
	41,148.3	88,693.7
	•	-%
	Dec		Sep		Dec	Sep
EPRANTApershare

Business Development in the First Nine Months of 2023 - Overview

3

Vonovia SE on the Capital Market

Shares in Vonovia

The capital markets are continuing to focus on the outlook for the macroeconomic environment and, as a result, on interest rates in particular. There would appear to be an emerging consensus that the interest rate hikes are over, or at least almost over, but that interest rates will presumably remain at an elevated level for longer than originally expect- ed. The question as to which central bank interest rate policies will ultimately result in a recession or will manage to achieve a soft landing will only be answered later on down the line, and the answer could also vary regionally.

Changes in the EURO STOXX 50 were announced at the beginning of September, and Vonovia's shares lost their index membership.

The broad-based DAX (+10.5%) and EuroStoxx 50 (+10.0%) indices reported positive performance. While the real estate sector as a whole, and German residential real estate stocks in particular, showed signs of improvement in the first nine months, the EPRA Europe Index lost 7.0%.

In this exceptionally difficult market, shares in Vonovia gained ground, trading at € 22.81 at the end of the third quarter, up by 3.6% on the closing price for 2022.

We are still observing an ever-wider gap between capital market expectations on the one hand, and what remains relatively stable development on the residential real estate market on the other. While the capital market still appears to be pricing in a marked correction, the residential property markets in which we operate remain relatively robust. The less pronounced real estate value adjustments are also countered by higher rents and much shorter supply.

As a result, we remain confident that the fundamental conditions in our markets will ensure positive development in the long run. These include, in particular, the favorable relationship, from an owner's point of view, between supply and demand in urban regions as well as the structural momentum on the revenue side.

Vonovia's market capitalization amounted to around € 18.6 billion as of September 30, 2023.

4	Vonovia SE Interim Statement for the Third Quarter of 2023

Share Price Development

Vonovia SE		DAX		FTSE EPRA Europe		EURO STOXX 50	Source: FactSet

in %

	Feb. 2023	Mar. 2023	Apr. 2023	May 2023	June 2023	July 2023	Aug. 2023	Sep. 2023
Jan. 2023

Shareholder Structure

The chart displayed below shows the voting rights pursuant to Sections 33 and 34 of the German Securities Trading Act (WpHG) as notified by the shareholders in relation to the current share capital. It is important to note that the number of voting rights reported could have changed within the respective thresholds without triggering an obligation to notify the company.

Major Shareholders (as of September 30, 2023)

3.0%	DWS Investment	71.5% Other Free Float
4.0% APG
6.9%	BlackRock

14.6% Norges Bank

Based on the German stock exchange's definition of free float, only the interest held by Norges Bank (Ministry of Finance on behalf of Norway) does not count toward the free float. This means that 85.4% of Vonovia's shares were in free float on September 30, 2023.  The underlying voting rights notifications and corresponding financial instruments reported by shareholders or other instruments pursuant to Sections 38 and 39 WpHG can be found online.

In line with Vonovia's long-term strategic focus, we believe that the majority of its investors also have a long-term focus. The company's investors include pension funds, sovereign wealth funds and international asset managers in particular. There are also a large number of individual shareholders, although they only represent a small proportion of the total capital.

Business Development in the First Nine Months of 2023 - Vonovia SE on the Capital Market

5

Investor Relations Activities

Annual General Meeting

Vonovia SE is committed to a transparent, ongoing dialogue with its shareholders and potential investors. We continued with our road shows and meetings in the first nine months of 2023, both as virtual and face-to-face events. We took part in a total of 19 investor conferences and organized 15 road- show days.

In addition, numerous one-on-one meetings, video con­ ferences and conference calls were held with investors and analysts to keep them informed of current developments and special issues. The following topics in particular dominated the meetings held in the first nine months of 2023: interest rates, inflation, rising rents, energy prices, capital structure and sustainability.

Vonovia's eighth Capital Markets Day was held as a purely face-to-face event in Bochum on September 28, 2023. With an emphasis on the topic of rental price development, approximately 50 of our international analysts and investors took part in breakout sessions on the implementation of rent increases, regulatory issues and Vonovia's approach to sustainable, intelligent and interconnected housing. The event was rounded off with a property tour of our Ener- giesprong projects in Bochum and Witten.

We will continue to communicate openly with the capital market. Various road shows, conferences and participation in investor forums have already been planned. Information can be found in the Financial Calendar on our   Investor

The Annual General Meeting of Vonovia SE was held as a virtual event on May 17, 2023. The shareholders approved all of the resolution proposals put forward by the Supervisory Board and the Management Board as required. They also formally approved the actions of the Supervisory Board and the Management Board for the 2022 fiscal year with a large majority in each case.

The Annual General Meeting approved the dividend proposal of € 0.85 made by the Supervisory Board and the Management Board, which corresponds to a dividend yield of 3.9 % based on the closing price for 2022 of € 22.02. Shareholders were free to choose between a cash dividend and a scrip dividend. 44.87% opted for a dividend in the form of shares. 

A total of 68.08% of the company's share capital was represented. 

Analyst Assessments

As of September 30, 2023, 24 international analysts were publishing research studies on Vonovia. The average target share price was € 29.32. Of these analysts, 67% issued a "buy" recommendation, with 21% issuing a "hold" recommendation and 12% a "sell" recommendation.   

Share Information (as of September 30, 2023)

Relations website.

First day of trading

Subscription price

Total number of shares

Share capital

ISIN

WKN

Ticker symbol

Common code

Share class

Stock exchange

Market segment

Indices

July 11, 2013

• 16.50 | € 14.71*
  814,644,998
• 814,644,998
  DE000A1ML7J1
  A1ML7J
  VNA 94567408
  Registered shares with no par value Frankfurt Stock Exchange Regulated market

DAX 40, DAX 50 ESG, Dow Jones Sustainability Index Europe, STOXX Global ESG Leaders, EURO STOXX ESG Leaders 50, FTSE EPRA/ NAREIT Developed Europe and GPR 250 World

• TERP-adjusted.

6	Vonovia SE Interim Statement for the Third Quarter of 2023

Economic Development in the First Nine Months of 2023

Key Events During the Reporting Period

The operating business developed as expected overall in the first nine months of the 2023 fiscal year. The high demand for residential real estate, positive rental price development and synergies realized as part of the Deutsche Wohnen integration process promoted positive development in our core Rental business.

In addition, the customer satisfaction values in the reporting period confirmed our efforts in property management and, together with the low vacancy rate, provided a solid foundation for our business. At the same time, this means positive cash flows and, as a result, a stable basis for the income from our real estate portfolio.

The other business segments were significantly negatively affected by inflation, in particular by the marked uptick in construction costs, as well as by the higher interest rates in the reporting period. The investment volume was slashed accordingly and no additional new construction projects were started, as they would not be profitable in the current environment.

The higher interest rates also had an impact on potential transaction partners and translated into lower sales in the Recurring Sales segment and projects in the development to sell area.

There were also effects on the assessment of business models and the valuation of assets, i.e., holdings measured at fair value and goodwill. In the first half of 2023, a total value adjustment of around € 6.4 billion was recognized for investment properties. The value of the investment properties as of September 30, 2023, adjusted to reflect invest- ments, amounts to around € 86.1 billion. Goodwill and the trademark rights for the Development cash-generating unit

were also written off in full in the amount of € 204.8 million back in the first half of the year.

In the first quarter of 2023, Vonovia had sold its 10% stake in the French company Vesta SAS for a net amount of

• 95.7 million, marking its withdrawal from the French market. 

In the publication dated April 26, 2023, Vonovia, through an investment vehicle that is advised and managed by Apollo Capital Management L.P., agreed to a direct minority stake of 34.5%, or an indirect participation of 27.6%, in a selected Südewo portfolio comprising around 21,000 residential units in the German federal state of Baden-Württemberg.   The net consideration amounts to around € 1.0 billion. The transaction was closed in the second quarter of 2023.

On May 4, 2023, Vonovia and Deutsche Wohnen reached an agreement with funds managed by CBRE Investment Management on the sale of five properties in Berlin, Munich and Frankfurt with a total of 1,350 apartments and a purchase price of around € 560 million. The properties are three newly constructed properties belonging to the company's old stock and two new construction projects that are in the final phase of construction.

The Annual General Meeting held on May 17, 2023 resolved to pay a dividend for the 2022 fiscal year in the amount of

• 0.85 per share. As in previous years, shareholders were offered the option of choosing between being paid the dividend in cash or being granted new shares. During the subscription period, shareholders holding a total of 44.87 % of the shares carrying dividend rights opted for the scrip dividend instead of the cash dividend. As a result, 18,795,001 new shares were issued using the company's authorized capital for a total of € 303,539,266.15. The total amount of the dividend distributed in cash therefore came to
• 372,933,231.30.

Business Development in the First Nine Months of 2023 - Vonovia SE on the Capital Market | Economic Development in the First Nine Months of 2023 7

The Annual General Meeting also voted on the election of eight Supervisory Board members. Dr. Daniela Gerd tom Markotten was elected as a new Supervisory Board member. As planned, the size of the Supervisory Board was reduced from twelve to ten members. The Supervisory Board elected Clara C. Streit as its Chair at its inaugural meeting.

Effective October 1, 2023, Ruth Wehrhahn assumed responsibility for Vonovia's new HR executive division and is now a member of the Management Board of Vonovia SE.

Following the close of the third quarter, Vonovia reached an agreement with an investment vehicle, which is advised and managed by Apollo Capital Management L.P., on an equity investment of around 30% in a selected portfolio of around 31,000 units in Northern Germany (signed on October 27, 2023). The net consideration amounts to around € 1.0 billion before transaction costs. The transaction is expected to close on December 31, 2023. The investment vehicle is financed by investment companies, insurance companies and other long-term investors, which are advised and managed by Apollo Capital Management L.P.

In addition, the Mayor of Dresden, Dirk Hilbert, and Rolf Buch, CEO of Vonovia SE, jointly announced in Dresden on October 27, 2023 that the City of Dresden will acquire 1,213 apartments from Vonovia. In addition, Vonovia is selling undeveloped land covering an area of around 12 hectares to the state capital. This includes development sites with capacity for up to around 1,800 additional apartments in the future. The new owner will be the wholly-owned municipal subsidiary Wohnungsgesellschaft WiD Wohnen in Dresden GmbH & Co. KG (WiD). Completion of the purchase agreement is subject to the approval of the City Council of ­Dresden. The total price for the entire package is € 87.8 million.

On March 7, 2023, the Bochum public prosecutor's office notified Vonovia, as reported, that, due to search measures that had to be conducted in the context of an investigation, former and employees who were at that time still current technical employees were being investigated due to suspected corruption. The persons under suspicion may also have caused damage for Vonovia by overriding and circumventing controls and compliance policies.

Vonovia continues to cooperate fully with the work of the investigating authorities. The auditing firm Deloitte and the law firm Hengeler Mueller have been commissioned to perform a forensic assessment of all the facts of the case. It is not currently possible to arrive at any conclusive assessment regarding the amount of any damages. Looking at 2022, it is estimated to come to a maximum of 1% of the order volume awarded by Vonovia. 

8	Vonovia SE Interim Statement for the Third Quarter of 2023