Business Outlook

Vonovia can report positive business development in the first nine months of the 2020 fiscal year despite the coronavirus pandemic. The operating segments Rental, Development and Recurring Sales are showing positive development. A small decline in the Value-add segment is mostly due to effects of the coronavirus.

The forecast for the 2020 fiscal year was based on the accounting principles used in the consolidated financial statements and the adjustments described elsewhere in the Group management report. The forecast does not take account of any larger acquisitions of real estate portfolios.

Our forecast for the 2020 fiscal year is based on determined and updated corporate planning for the Vonovia Group as a whole, and considers current business developments, the acquisitions of Hembla and Bien-Ries, possible opportunities and risks, and the expected impacts of the coronavirus pandemic. It also includes the key overall macroeconomic developments and the economic factors that are relevant to the real estate industry and our corporate strategy. These are described in the chapter “Environmental Developments” of the interim financial report for the first half of 2020. Beyond this, the Group’s further development remains exposed to general opportunities and risks.

We expect that the coronavirus pandemic will not have any significant impact on the key operational and financial figures of any of the operating segments, and therefore will have no impact on future business development. We are currently observing stable demand for rental apartments and no negative impact on market values as a result of the coronavirus pandemic. We therefore assume that adjusted EBITDA total will be within the range of our most recently published guidance.

At the end of January 2020, the Berlin House of Representatives passed the Act on Rent Controls in the Housing Sector in Berlin (referred to in short as “rent freeze”). This came into force in February 2020. It remains disputed whether the law is constitutional. Assuming that the rent freeze is found to be constitutional, future rental income or rental development will have to be reduced for the period leading up to, and including, 2025. This could have a negative impact on fair values. Likewise, it cannot be ruled out that declining vacancy rates and fluctuation as well as lower return requirements of investors (yield compression) will subsequently have a compensatory effect on fair values. There is no evidence of any impact on fair values at present.

We also expect that the most recently published Group FFO target within the range will be reached toward the upper end of the projected range.. In addition, we expect the value of our company to increase further in 2020 and predict a moderate increase in Adjusted NAV per share before taking into account further market-related changes in value. Based on the first preliminary indicators, we expect to see an effect from the valuation of investment properties and capitalized modernization costs in the form of an increase in value of between € 2.3 billion and € 2.9 billion in total compared with June 30, 2020.

The following table, which presents material and selected key figures, provides an overview of our forecast and an outlook for 2021. This outlook assumes that a carbon tax may be allocable in accordance with the Ordinance on Operating Costs (BetrKV).

Bochum, October 27, 2020

The Management Board