Vonovia Response to the Berlin Government's Plans for an Absolute Rent Ceiling in Berlin
Bochum, Germany, August 26, 2019 - In response to the plans for an absolute rent ceiling ("Mietenobergrenze") apparently to be included in the rent freeze law ("Mietendeckel") that is currently being drafted by the Berlin Department for Urban Development and Housing on behalf of the Berlin State Government ("Senat"), Vonovia makes the following announcement:
Implementing such a rent ceiling, which would be based on construction year and which would ignore location and certain building characteristics, is de facto the abolishment of the rent index ("Mietspiegel"), which is part of and governed by the German Civil Code.
As we have said on prior occasions, we believe that a rent freeze in general and the planned rent ceiling in particular will exacerbate the problem of insufficient supply of new housing, prevent much needed investments in energy efficiency and senior friendly apartment refurbishments and make the problem worse for anyone looking for a place to rent in Berlin.
If the plans for the rent ceiling, as reported in the press over the weekend, were to become part of the final rent freeze law expected to be enacted in January 2020, we would expect the following consequences for our portfolio:
The 2019 guidance remains unchanged as the current financial year is expected to not be impacted by the planned Berlin-specific legislation.
For 2020, as a consequence of potentially having to reduce current rental levels down to the respective rent ceiling levels, we may see a one-off rental income reduction for our portfolio in Berlin of approximately EUR20m-EUR25m, which represents approx. 10% of our rental income in Berlin and approx. 1% of our total rental income (each based on annual rental income numbers as of H1 2019). This impact may be further mitigated by being able to apply certain premiums for modernizations made in prior years. Given Vonovia's unparalleled track record of energy-efficient modernization and senior-friendly refurbishments, we would expect to see an above-average benefit from this effect, even though it is not possible to quantify it at this point in time.
Going forward, we expect to redirect modernization funds that had originally been earmarked for Berlin largely or entirely to other regions within our portfolio so as to not lose any impact from our overall investment program. Furthermore, we will continue to run our value-add strategy also in Berlin and are optimistic that this segment will continue to be attractive for our tenants and possibly become an even more meaningful contributor to our business.
With regards to the valuation of our Berlin portfolio it will not be possible to estimate the impact, if any, until there is sufficient transaction evidence.
We remain convinced that the rent freeze law planned by the Berlin State Government is unconstitutional. This legal view aside, a rent freeze law would be going in the wrong direction and in no way solve the problem for tenants in Berlin or for the tens of thousands of people who move or want to move to Berlin every year.
As the supply-demand-imbalance would become even more pronounced under a rent freeze legislation, we are convinced that the longer-term underlying fundamentals of the Berlin housing market will become even more attractive compared to the currently already attractive environment. Hence, we do not intend to change our strategy and will be monitoring the market very closely for opportunities to buy smaller distressed Berlin portfolios.
Vonovia SE is Europe's leading private residential real estate company. Vonovia currently owns around 396,700 residential units in all attractive cities and regions in Germany, Austria and Sweden. It also manages around 79,000 apartments. Its portfolio is worth approximately EUR 47.4 billion. As a modern service provider, Vonovia focuses on customer orientation and tenant satisfaction. Offering tenants affordable, attractive and livable homes is a prerequisite for the company's successful development. Accordingly, Vonovia makes long-term investments in the maintenance, modernization and senior-friendly conversion of its properties. The company is also creating more and more new apartments by realizing infill developments and adding to existing buildings.
The company, which is based in Bochum, has been listed on the stock exchange since 2013 and on the DAX 30 since September 2015. Vonovia SE is also listed on the international indices STOXX Europe 600, MSCI Germany, MSCI Germany, GPR 250 and EPRA/NAREIT Europe. Vonovia has a workforce of more than 10,000 employees.
Approval: Regulated Market/Prime Standard, Frankfurt Stock Exchange
Common code: 094567408
Registered headquarters of Vonovia SE: Bochum, Germany, Bochum Local Court, HRB 16879
Business address of Vonovia SE: Universitaetsstrasse 133, 44803 Bochum, Germany
This press release has been issued by Vonovia SE and/or its subsidiaries solely for information purposes. This press release may contain statements, assumptions, opinions and predictions about the anticipated future development of Vonovia ("forward-looking statements") that reproduce various assumptions regarding, e.g., results derived from Vonovia's current business or from publicly available sources that have not been subject to an independent audit or in-depth evaluation by Vonovia and that may turn out to be incorrect at a later stage. All forward-looking statements express current expectations based on the current business plan and various other assumptions and therefore come with risks and uncertainties that are not insignificant. All forward-looking statements should not therefore be taken as a guarantee for future performance or results and, furthermore, do not necessarily constitute exact indicators that the forecast results will be achieved. All forward-looking statements relate solely to the day on which this press release was issued to its recipients. It is the responsibility of the recipients of this press release to conduct a more detailed analysis of the validity of forward-looking statements and the underlying assumptions. Vonovia accepts no responsibility for any direct or indirect damages or losses or subsequent damages or losses, as well as penalties that the recipients may incur by using the press release, its contents and, in particular, all forward-looking statements or in any other way, as far as this is legally permissible. Vonovia does not provide any guarantees or assurances (either explicitly or implicitly) in respect of the information contained in this press release. Vonovia is not obliged to update or correct the information, forward-looking statements or conclusions drawn in this press release or to include subsequent events or circumstances or to report inaccuracies that become known after the date of this press release.
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