Group’s Business Development

In the 2016 fiscal year, we were able to maintain our leading market position and continue with our successful business strategy. All of our key operating figures showed excellent development and we made very good progress with the services that we offer our customers.

One thing became clear this year: looking at the issue of housing from an all-encompassing angle has proven to be the right course of action. Our strategy of focusing on our customers and their needs is paying off. Our services are being well received by our customers, as the results in the Extension segment show.

We are in a very good position overall when it comes to customer satisfaction. In order to achieve our objective of boosting customer satisfaction, we expanded our customer service team to include an office in Dresden at the beginning of the year. In the summer, our colleagues from Bochum, Mülheim and Essen moved into the new customer service center in Duisburg. This was a key step to make our entire customer service team fit for the future. Having two state-of-the-art, strong locations allows us to improve the organization of operating procedures so that we can serve our customers better. This will also make it easy for our customers to contact us, even during peak times.

Our housing stock continued to increase in value in the 2016 fiscal year. This is due, for one thing, to the fact that our investments are bearing fruit. We have invested around one billion euros in our housing stocks since the IPO, significantly improving the quality of our apartments and buildings. For another, our active portfolio management is having a very positive impact. Acquisitions in fast-growing regions such as Baden-Württemberg and Bavaria give us an even greater presence in locations that offer potential. At the same time, we used sales to significantly reduce the proportion of properties located in less attractive regions.

In social policy terms, developments on the real estate market were one of the key issues of the year. Many people are currently moving to the country’s major cities. At the same time, refugees are increasingly looking for apartments in the metropolises. As the biggest landlord, we are aware of our responsibility and are providing municipalities with pragmatic assistance in the allocation of apartments.

New apartments, however, also need to be built. We have taken a good look at how we can build new and affordable apartments at a low cost. We believe that the standardized construction method offers a good solution. This is why, as well as adding extra stories to existing buildings, we successfully completed a new construction pilot project using series construction in Bochum and launched an ambitious new construction program. Modular construction allows us to keep construction costs down and offer apartments at affordable rents. We are convinced that quality and cost awareness are not mutually exclusive and that we can live up to a special social responsibility by making new, affordable living space available. Our innovative new building solutions are our way of underpinning the role in which we see ourselves, namely as a company that provides impetus for the industry as a whole.

These measures allowed us to further reinforce our leading nationwide position in the German real estate industry in the 2016 fiscal year, which puts us in a good starting position for the coming year. Further challenges await us in 2017, challenges that we can certainly rise to with the measures described above and the outstanding commitment shown by our employees.

Key Events

In the first quarter of 2016, we incorporated a real estate portfolio comprising 2,417 units into our portfolio with effect from January 1, 2016. The properties in this portfolio are spread across six federal states, with around 40 % of them located in Baden-Württemberg.

On February 9, 2016, the public takeover offer that we made to the shareholders of Deutsche Wohnen AG came to an end. At this time, fewer Deutsche Wohnen AG shareholders had voted in favor of the takeover offer made by Vonovia than would have been necessary in accordance with the takeover conditions, meaning that the takeover did not come to fruition.

With effect from March 31, 2016, we sold a real estate portfolio comprising 13,570 residential units to the LEG Group.

In the second quarter of 2016, we optimized our portfolio by making further block sales accounting for a volume of 2,913 units. The largest block sale comprised 1,486 apartments, largely in northern Germany, and was realized with effect from June 30, 2016.

We moved into the premises for our local customer service operations at our new location in Dresden, with around 300 employees working in an office covering a total area of roughly 3,100 m2.

In the context of our financing activities in the 2016 fiscal year, the interest rate hedging transactions concluded in October 2015 were terminated in accordance with the corresponding contracts.

With effect from June 10, 2016, we issued bonds in the amount of € 1.0 billion as part of our EMTN program.

In the third quarter of 2016, we executed several key financing transactions and announced that we would be making a public takeover offer to the shareholders of conwert Immobilien Invest SE, Vienna.

In July 2016, the euro bond issued in July 2013 in the amount of € 700 million was then repaid on schedule.

In August 2016, the CMBS financing which originates from the takeover of GAGFAH and amounted to € 1.8 billion was repaid prematurely.

On September 5, 2016, Vonovia published its intention to make the shareholders of conwert a takeover offer for the acquisition of all shares in conwert.

In September 2016, a floating rate note worth € 500 million was issued as part of a private placement under the EMTN program.

In the third quarter of 2016, we also moved into our second central customer service center in Duisburg, which offers space for around 650 employees who had previously worked in a number of different locations.

We also sold 1,204 units in Bavaria as part of a block sale.

In the fourth quarter of 2016, we launched our public takeover offer for conwert’s shares on November 17, 2016. In line with the conditions set out in the offer document, Vonovia is offering a cash payment of € 16.16 for each share in conwert. As an alternative, Vonovia is offering 0.496645 new shares in Vonovia for each share in conwert. This corresponds to the originally announced exchange ratio of 74 shares in Vonovia for every 149 shares in conwert. By the reporting date, 71.54% of shareholders had accepted the offer. This means that the takeover efforts were successful and the integration of conwert can begin as scheduled during 2017.

On November 28, 2016, the second CMBS financing which originates from the takeover of GAGFAH and amounted to € 597 million was repaid prematurely.

On December 6, 2016, bonds worth € 1.0 billion with a maturity of eight years and a coupon of 1.25% were issued. The proceeds were used to finance the cash component of the conwert acquisition.

Strategic
The “Strategic” subportfolio contains locations that offer development potential that is above average and for which we are pursuing a value-enhancing property management strategy.