Report on Economic Position

Key Events During the Reporting Period

2021 remained dominated by the coronavirus pandemic, both at work and beyond. Vonovia’s business model has, however, proven to be robust and resilient throughout the entire coronavirus pandemic. As the pandemic is still not having any considerable impact on its net assets, financial position and results of operations, Vonovia can also report positive business development in 2021. Customer satisfaction increased further during the pandemic, with the customer satisfaction index (CSI) improving by 1.3 percentage points in the fourth quarter of 2021, putting it 3.2 percentage points higher than the average for the previous year.

The 2021 fiscal year was also largely dominated by the public takeover offer submitted by Vonovia to the shareholders of Deutsche Wohnen SE and the associated financing measures.

Whereas the first takeover offer of June 23, 2021 did not reach the necessary threshold, the second attempt – with an offer of € 53.00 per share submitted on August 23, 2021 – resulted in the acquisition of 87.36% of shares and therefore acquisition of the majority of Deutsche Wohnen SE.

In parallel with the first public takeover offer, Vonovia had acquired 66,057,759 shares in Deutsche Wohnen, or around 18.36% of the share capital and voting rights, by June 30, 2021. This stake was increased to 21.89% by July 21, 2021. By the time the second public takeover offer was made on August 23, 2021 Vonovia had increased its holding in Deutsche Wohnen to 107,967,639 shares or around 29.99%. These shares were purchased via the stock exchange and on the basis of bilateral agreements.

On September 13, 2021 Vonovia announced that it would be waiving all terms and conditions of acceptance for the takeover offer for shares in Deutsche Wohnen. This meant that all the closing conditions – in particular the minimum acceptance threshold – ceased to apply, and the acceptance deadline was extended by two weeks until October 4, 2021. As of September 30, 2021 Vonovia held 50.38% of the share capital entered in the commercial register on September 30, 2021 (less 3,362,003 shares held by Deutsche Wohnen SE, for which the voting rights cannot be exercised). Thus Vonovia held the majority of the voting rights and had obtained control. At the end of the second tender period, Vonovia ultimately held 87.36% of the shares.

This means that the Deutsche Wohnen Group was included by way of full consolidation in Vonovia’s consolidated financial statements for the first time as of September 30, 2021. Due to the close proximity of the acquisition date to the time of preparation of these financial statements, the purchase price allocation can only be made on a provisional basis as of the current reporting date. With its first-time consolidation as of September 30, 2021 the Deutsche Wohnen Group is included in the year-end business figures for a period of three months. This means that any comparison with the previous year is only of limited informational value.

In order to finance the transaction, Vonovia had concluded bridge financing with a banking consortium in a total amount of around € 20 billion. After Vonovia had already placed five bonds with a total volume of € 4 billion with an average interest rate of 0.6875% on June 16, 2021 it placed another bond on September 1, 2021 with a total volume of € 5 billion and an average interest rate of 0.49%.

On December 2, 2021 Vonovia also successfully completed a capital increase with subscription rights on a significant scale of some € 8.1 billion.

These financing measures went hand in hand with a repayment of the bridge financing, which was still valued at € 3,490.0 million as of December 31, 2021.

The rating agencies S&P, Moody’s and Scope confirmed their ratings when the takeover was completed. In December 2021, S&P raised its rating outlook for Vonovia from BBB+ “stable” to BBB+ “positive.” The Moody’s rating is A3 stable and the Scope rating is A- stable.

The Annual General Meeting held on April 16, 2021 resolved to pay a dividend for the 2020 fiscal year in the amount of € 1.69 per share (corresponding to € 1.58 per TERP-adjusted share). As in previous years, shareholders were offered the option of choosing between being paid the dividend in cash or being granted new shares. During the subscription period, shareholders holding a total of 49.18% of the shares carrying dividend rights opted for the scrip dividend instead of the cash dividend. As a result, 9,370,028 new shares were issued using the company’s authorized capital at a subscription price of € 50.193, i.e., a total amount of € 470,309,815.40. The total amount of the dividend distributed in cash therefore came to € 486,039,719.91.

Based on an agreement reached with the Berlin State Government on the sale of selected portfolios to municipal housing companies in Berlin, the contract with HOWOGE, degewo and berlinovo on the sale of 14,750 residential and commercial units from Vonovia’s and Deutsche Wohnen’s portfolios was concluded on September 17, 2021. The benefits and encumbrances will be transferred in 2022.

During the 2021 fiscal year, the company once again forged ahead with the digitalization of its entire value chain and took systematic measures to further refine its business model in line with sustainability criteria.

2022 will be dominated by the integration of the Deutsche Wohnen Group.