The Company

Vonovia manages a housing stock of around 358,000 apartments in almost all of Germany’s attractive cities and regions. It also manages a portfolio of around 23,000 units in Austria and approximately 14,000 in Sweden. The total comes to around € 44.2 billion, with net assets based on the definition coming to approximately € 26.1 billion (EPRA European Public Real Estate Association). In addition to its own apartments, Vonovia manages around 84,000 apartments for third parties. This makes Vonovia one of the leading residential real estate companies in Germany, Austria and Sweden, albeit with a very low market share of around 1.5% in Germany due to the highly fragmented nature of the market. Vonovia also holds a minority stake in a portfolio perviously held by the French railway operator SNCF.

Vonovia’s roots and those of its predecessor companies extend back into the 19th century and lie in not-for-profit housing and housing for factory workers in Germany’s Ruhr region. Deutsche Annington and GAGFAH, for example, were originally set up to build apartments for the workforce: They were housing companies and cooperatives that built low-cost housing for workers, salaried employees and civil servants. Many of the housing developments built in that era were model projects of the time and are now covered by preservation orders. Living in what were known as “workers’ settlements” was about much more than just affordable living space. The residents were colleagues and neighbors; they worked and lived together.

The age structure of Vonovia’s 358,000 or so German properties shows that around 69% were built between 1945 and 1980 and around 15% originate from the period before the Second World War, while around 16% were built after 1980. Of these, approximately 1% were built after the year 2000.

Vonovia’s history also, however, includes a phase which was characterized by “private equity investors,” as public-sector and private-sector employers started to withdraw from the management of company-owned apartments as part of the trend towards increasing privatization and liberalization within the real estate market. The German housing market as a whole underwent change. The investors found themselves faced with the challenge of pursuing their business model with an outdated housing stock for which maintenance and modernization measures were long overdue; their business model did not ultimately achieve the success they had hoped for and and investment in the housing stock was cut back even further. This was a partial cause of serious housing defects, which resulted in persistent complaints being lodged by tenants and damage to the housing companies’ reputation.

Against the backdrop of the debate on how to limit climate change, it is important to note that Germany’s total housing stock has a significant influence on greenhouse gas emissions, accounting for around 35% of the final energy consumption, and that the commitment made by the Federal Republic of Germany under the United Nations Paris Agreement on climate change can only be realized by taking substantial energy-efficient to overhaul properties that are in need of modernization to begin with. The renovation rate for residential buildings in Germany currently stands at around 1%, considerably lower than the political target of 2%. (Reference is made to Vonovia’s Sustainability Report at this point).

Vonovia is just as committed to achieving the targets set out in the Paris Agreement on climate change and reaching the energy-efficient modernization rate of 2% as it is to tackling the need to preserve the building stock in the long term and to provide modern and affordable living space that meets tenant needs. Political stakeholders and the real estate industry alike have to apply sound judgment as they attempt to strike a balance between the need for modernization, the legitimate commercial interests of private-sector landlords and the public perception of the acute housing situation.

As Germany’s largest real estate company, Vonovia believes that it has a particular responsibility towards its customers, but also towards society and its shareholders. In order to live up to this responsibility, it is extremely important to take not only economic but also ecological and social aspects into account when making entrepreneurial decisions. This is why Vonovia addresses the latest developments and trends head on and is committed to intensive dialog with a whole range of stakeholders.

As Germany’s leading residential real estate company, Vonovia maintains close dialog not only with customers, but also with numerous other stakeholder groups that are important for the company’s development. These mainly include its employees, investors, suppliers and service providers, as well as social interest groups, including non-governmental/non-profit organizations. We also use our sustainability reporting to meet these stakeholders’ expectations in terms of information.

As a modern service company, Vonovia focuses on customer orientation and, as a result, on the satisfaction of its customers, namely its tenants. Being able to offer tenants affordable and attractive homes, combined with one-stop property-related services, remains a prerequisite for the company’s successful development.

Vonovia’s business model is based on the rental of good-quality, modern and, most importantly, affordable living space, the development and construction of new apartments, both for its own portfolio and for sale to third parties, and the provision of housing-related services. These housing-related services mainly relate to cable TV, bathroom renovations in response to tenant requests, automated meter reading and senior-friendly apartment modernization. This is supported by our caretakers and by our craftsmen’s and residential environment organization.

With our efficient organizational model, optimized processes, a clear focus on service, and, as a result, on our tenants, and a clear investment strategy, we are laying the foundation for a sustainable economic management while safeguarding our legitimate interests as a private-sector company.

A balanced mix of services provided by the central service center and by regional caretakers working on-site as well as by our company’s own technical and residential environment organization ensures that our tenants’ concerns are attended to in a timely, straightforward and reliable manner. This plays a key role in ensuring that our customers feel that they have good support in their residential environment.

In addition to its successful long-term and modern property management, Vonovia also develops the real estate portfolio through targeted acquisitions and sales. The goals associated with new portfolios acquisitions include strengthening its overall regional presence, realizing operational and financial economies of scale and optimizing structures. In addition, Vonovia will be using development measures, densification and vertical expansion to build an increasing number of new apartments in order to meet the rising demand for living space in metropolitan areas in particular.

Fair Value
Valuation pursuant to IAS 40 in conjunction with IFRS 13. The estimated value of an asset. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
EPRA (European Public Real Estate Association)
The European Public Real Estate Association (EPRA) is a non-profit organization that has its registered headquarters in Brussels and represents the interests of listed European real estate companies. Its mission is to raise awareness of European listed real estate companies as a potential investment destination that offers an alternative to conventional investments. EPRA is a registered trademark of the European Public Real Estate Association.
Maintenance covers the measures that are necessary to ensure that the property can continue to be used as intended over its useful life and that eliminate structural and other defects caused by wear and tear, age and weathering effects.
Modernization Measures
Modernization measures are long-term and sustainable value-enhancing investments in housing and building stocks. Energy-efficient refurbishments generally involve improvements to the building shell and communal areas as well as the heat and electricity supply systems. Typical examples are the installation of heating systems, the renovation of balconies and the retrofitting of prefabricated balconies as well as the implementation of energy-saving projects, such as the installation of double-glazed windows and heat insulation, e.g., facade insulation, insulation of the top story ceilings and basement ceilings. In addition to modernization of the apartment electrics, the refurbishment work upgrades the apartments, typically through the installation of modern and/or accessible bathrooms, the installation of new doors and the laying of high-quality and non-slip flooring. Where required, the floor plans are altered to meet changed housing needs.