Vonovia

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Discussion: Vonovia

Irregularities

March 20, 2023: Police raided Vonovia's offices on suspicion of fraud, breach of trust, bribery and corruption. Over 40 premises were searched in Baden-Württemberg, Hamburg, Saxony and North Rhine-Westphalia. Addditionally, four arrests were made. Westdeutscher Rundfunk and Süddeutsche Zeitung news agency estimates that at least two of its employees recived bribes of close to half a million euros in 10 year period in return for awarding contracts to certain companies which either inflated prices of housing or did no work at all. Following the allegations, Vonovia commissioned Deloitte to investigate it.

Disposals

September 6, 2023: According to insiders, Vonovia has started preparations for the partial sale of 18,000 apartments belonging to its subsidiary, Buwog. Buwog bought the apartments in 2014 for 900 million euros. It is estimated that Vonovia could get around 3 billion euros from the sale.

May 10, 2023: Vonovia offered a series of sweeteners to have Apollo purchase its 30% of portfolio. Apollo will get around 70% of the dividends and will not pay asset-management fees. This will take the discount to 30% of the book value, way above the 5% discount announced by the company when closing the deal. The revelation casts a shadow on the deal that suggested that pricing was firming and confidence was returning to the German property market. -Chief Executive Officer Rolf Buch said during the earnings call that Apollo was getting higher dividends from the portfolio because it "has no minority protection rights in the deal." He added that the sale included a call option that will allow Vonovia to buy the assets back at a price that caps the private equity firm’s return, meaning it could claw the properties back at a discount in future. Vonovia also sold properties to CBRE Investment Management for €535 million after taxes and transaction costs, reflecting a discount of 11%.

April 26, 2023: Vonovia to sell its Suedewo residential portfolio to U.S. investor Apollo for 1 billion euros ($1.10 billion). Suedewo portfolio is currently valued at 3.3 billion euros, a 5% discount to its fair value in December 31. Vonovia targets to generate 2 billion euros free cash flow from its portfolio sales. In summer, it earmarked properties worth 13 billion euros for sale.

Regulatory Environment

June 26, 2023: Vonovia believes that the Commission's conclusion that the state of Berlin could enact expropriation legislation is not feasible due to;

• Substantial constitutional hurdles.
• Economics surrounding compensation.
• Investments relating to new constructions(€100bn p.a.) cannot be met by the government alone.
• Energy efficient modernization investment(€120bn p.a.) will also not be shouldered by the government alone.

The commission is expected submit its report on Wednesday, June 28.