Specialist
Executive at real estate investment company
Agenda
- Vonovia’s (ETR: VNA) ability to withstand a challenging economic environment
- Valuation trends and haircuts against fair value within disposals
- Exposure to Adler (ETR: ADL) and developments
- Financing stream evolution and changes in yield and hurdle rates, plus loan-to-value ratios
Questions
1.
German real estate companies are trading around 50% of their net asset value per share. How do you expect this dynamic to evolve? Can you envisage valuations coming down to market pricing, or could this be an instance of overreaction by markets?
2.
How short is the structural supply shortage for German residential assets? Is there a way to quantify this?
3.
You mentioned that construction typically takes 18 months. What’s the typical lead time on the regulatory red tape pre-construction?
4.
Do you expect any new German regulation that could negatively impact Vonovia and other German real estate players?
5.
In what time frame would you see the new environmental-focused regulation?
6.
Do any post-merger risks or complexities still remain from Vonovia’s 2021 Deutsche Wohnen acquisition? Was it the correct time to purchase and merge with the latter?
7.
You mentioned that Vonovia’s debt slightly increased post-acquisition. I think the company has a target to reduce its net debt EBITDA below 15x in 2023 or by the end of 2023. Is this achievable?
8.
Could Vonovia’s size and scale lead to it winning more attractive financing terms, if needed?
9.
How well-positioned is Vonovia to withstand an unfavourable outlook over the next 12-18 months? How do you envisage the macro outlook impacting the company?
10.
Do you expect Vonovia to continue to hold the Adler exposure? How much headline risk is there for Vonovia?
11.
What does the Vonovia-Adler relationship look like? Are they on good terms, or is there potentially some friction or deterioration forming?
12.
What’s the probability of Vonovia divesting away from the Adler exposure in 2023?
13.
Vonovia is experiencing rising OPEX and internal costs. In its Q3 2022 report, maintenance increased 2.1% and OPEX increased 4.9%. How is the company managing these costs? Could it rein in these rises?
14.
How might Vonovia’s rising costs read through and impact its funds from operation, which increased 4.2% in Q3 2022? What percentage decline or slowdown could we see in H1 2023?
15.
How much of the rising OPEX could Vonovia pass on to tenants? What levers are available for the company to pull?
16.
Vonovia is slowing down its CAPEX in renovation and energy-improved buildings, which, I think, LEG is planning to do as well. How might that impact Vonovia’s growth? Can the company raise prices despite renovations?
17.
In terms of financing cost, debt maturity and shareholder value creation, when might Vonovia’s dividend start to recover?
18.
How might Vonovia’s debt and capital structure evolve in H1 2023? What actions might the company take to manage its outstanding debt?
19.
Where do you envisage yields trending across Vonovia’s portfolio?
20.
Where do you expect discount rates to trend? How have higher interest rates impacted Vonovia’s metrics?
21.
Where do you expect Vonovia’s loan-to-value ratio to trend towards the end of 2023? You said that you cannot see that much negative pressure, especially on the portfolio’s residential real estate side, or on the valuation side. The company’s loan-to-value decreased by 200bps between 31 December 2021 and 30 September 2022. Vonovia’s most recent loan-to-value ratio is 43.4%, and its targeted range is 40-45%. The company would obviously rather have it at the lower end of this range.
22.
You mentioned earlier that there could be a very slight or marginal uptick in valuation across Vonovia’s portfolio. Is that correct?
23.
What might be the key headwinds and tailwinds for Vonovia in 2023?
24.
Is there anything relevant that we haven’t covered regarding Vonovia?
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