After two years of stabilizing its balance sheet, Germany’s largest real estate group Vonovia is shifting gears towards a growth strategy, focusing on increased investment and expanding its operations.
Vonovia is reviving its Development, Value-add, and Recurring Sales segments, which were scaled back in recent years, which are expected to contribute 20-25% to adjusted EBITDA by 2028, alongside the core Rental segment, contributing a total of €500-700 mln. The landlord aims to generate an adjusted EBITDA of €3.2 to €3.5 bn by 2028, representing an increase of around 30% compared to 2024.
Rolf Buch, CEO of Vonovia, commented: ‘Our core business is performing exceptionally well, with nearly all our apartments occupied. Key financial indicators are tracking as expected, and we anticipate reaching all our 2024 targets at the upper end of expectations. Our property values and investment grade rating remain stable, and we have already exceeded our business target for 2024. We are confidently looking ahead to 2025 and beyond, which is why we are now shifting towards growth and increased investment.’
He added: ‘We have reduced the proportion of buildings with poor energy ratings in efficiency classes G and H in our portfolio to a marginal 2.9% and are increasingly embracing renewable energies. In addition, Vonovia intends to leverage its decades of expertise to acquire stranded assets and bring them up to modern standards.’
Vonovia is taking steps to reduce construction costs, enabling it to resume its new construction program, with plans to add 3,000 apartments. It plans to launch new construction projects in Berlin and Vienna in 2025 and build Austria's largest timber residential construction in Salzburg, known as the Südtiroler Quartier.
To optimize construction costs, Vonovia is focusing on minimizing underground parking, optimizing energy standards, and increasing the use of modular construction. The company has identified potential for 70,000 new apartments across Germany and Austria, through the utilization of vacant land, densification, and the addition of floors to existing buildings.
Buch commented: ‘These measures will enable us to continue offering affordable rental fees for middle-income households. We also welcome the government’s plans for Type E buildings, as this will further simplify and accelerate construction in Germany.’
Since the start of 2024, Vonovia has actively pursued a strategy of selling portfolios and portfolio stakes. In mid-October, the company sold ten development projects to a fund managed by HIH Invest for approximately €516 mln. These asset sales have generated approximately €4 bn in additional cash flow since the beginning of the year, bringing the company's pro forma debt down to 46.0%, slightly above the target range of 40% to 45%. Operating Free Cash Flow saw a significant increase of 38.6% compared to the first nine months of 2023, reaching approximately €1.4 bn.
Between January and September 2024, Vonovia invested a total of €1.05 bn in existing properties and new construction, completing 2,409 apartments.
Vonovia is aiming for a 30% increase in EBITDA by 2028, driven primarily by the expansion of its business segments, with new construction, value-added residential services, and sales expected to contribute 20-25% of the total. The company plans to double its annual investments in climate action initiatives, technological innovation, and new construction by 2028.
