Vonovia ETR: VNA reported higher first-half operating earnings in its core rental and value-add businesses, while sales-related segments remained pressured by market conditions. Management reaffirmed its 2026 guidance and 2028 targets, while cautioning that reaching the upper half of its adjusted EBITDA and adjusted EBT guidance could be challenging if the current environment continues to weigh on development and recurring sales activity.
CEO Luka Mucic said the first half of 2026 was marked by “strong operational performance in our core business,” progress on asset disposals and proactive financial management. The company refinanced about €4.4 billion year-to-date, substantially reduced 2027 refinancing requirements to roughly €3 billion, and recorded €700 million of disposals during the first half.
Core rental and value-add earnings rise
Adjusted EBITDA in Vonovia’s rental segment rose 3.5% year over year to approximately €1.27 billion, despite the portfolio having about 5,000 fewer units than a year earlier. Rental revenue increased 3.4% to nearly €1.8 billion, while the end-of-period vacancy rate remained low at 2.3% and collections of rent and ancillary expenses were nearly 100%.
Organic rent growth was 3.6% in the first half. CFO Philip Grosse said the figure reflected timing effects associated with rent-index implementations in Berlin and Dresden. The Berlin Mietspiegel was implemented during the third quarter, while the prior-year comparison included the impact of the Dresden Mietspiegel.
Vonovia reduced its expectation for 2026 organic rent growth by 20 basis points to around 4%, primarily due to a more measured implementation of the Berlin rent index. Mucic said the company applied a 4.8% increase in Berlin rather than the 6.9% increase indicated by the new Mietspiegel, citing affordability and political considerations. He said the remaining potential had not been foregone and could be implemented later.
Management maintained its target of roughly 5% organic rent growth by 2028. Grosse said Vonovia continues to see a substantial gap between in-place rents and market rents, while investment-driven rent increases are expected to grow as capital spending increases.
The value-add segment delivered the strongest growth among the operating divisions. Revenue rose 9.4% to €800 million, while adjusted EBITDA climbed 28% to more than €128 million. The performance was driven by higher contributions from the company’s craftsman organization and energy business, including work supported by higher investment volumes.
Grosse said the result demonstrated the operating leverage available when internal capabilities are utilized more fully. Value add accounted for about 9% of adjusted EBITDA in the first half, already within Vonovia’s 2028 target range of 9% to 12%.
Sales and development activity remains back-end loaded
Recurring sales generated adjusted EBITDA of €39 million, slightly above the prior-year level, even as the number of units sold fell to roughly 690 from 1,134 a year earlier. Revenue was €157 million, and the fair-value step-up on transactions increased to 44% from 29% in the first half of 2025.
Grosse said individual apartment sales continued to demonstrate the embedded value of the portfolio. Austria remained particularly profitable, with gross margins slightly above 70%, while Germany generated margins of close to 30% in the first half.
Management attributed the lower sales volume partly to phasing effects, as the prior-year period benefited from transaction signings made late in 2024. Mucic said July reservation activity had been encouraging, though he noted that the fourth quarter is historically the most significant period for recurring sales.
Development adjusted EBITDA declined to €20 million from approximately €57 million a year earlier. However, the prior-year figure included a €53 million contribution from a large land sale. Excluding that transaction, management said both the first half and second quarter were stronger than the corresponding periods in 2025.
Development-to-sell revenue fell 23% to €162 million, while gross profit was €30 million and the gross margin was just under 19%. Vonovia expects further disposals, including selected land sales and a potential larger portfolio exit, in the second half. The company maintained its objective for development to contribute 4% to 5% of adjusted EBITDA by 2028, although management described the market environment as challenging and said project selection and construction-cost reductions remain critical.
Disposals, refinancing and leverage plan
Vonovia’s €700 million of first-half disposals included roughly €330 million of non-core assets, about €160 million of recurring sales, and an agreement for the preferred redemption of its Vesteda minority stake for approximately €200 million. Mucic said the Vesteda stake is expected to be redeemed at a modest discount of around 8%, potentially at the beginning of 2027.
The company’s non-core portfolio includes about €1.8 billion of German assets, including nursing and commercial properties, as well as a newly designated €800 million Swedish non-core portfolio. Mucic said the Swedish assets are mainly outside the company’s core urban markets of Stockholm, Gothenburg and Malmö.
At the end of June, loan-to-value stood at 46%, net debt to EBITDA was 14 times, and interest coverage was 3.6 times. Management said these measures were affected by the second-quarter dividend payment but had improved year over year. Vonovia continues to target loan-to-value of around 40%, net debt to EBITDA below 12 times and interest coverage comfortably above three times by year-end 2028.
The company reported like-for-like property value growth of 1.1% excluding investments and 1.8% including investments. Its portfolio fair value stood at €81.8 billion at the end of June, with an initial gross yield of 4.3%.
Guidance maintained, with caution on upper-end earnings delivery
Vonovia reaffirmed 2026 guidance for rental revenue of €3.45 billion to €3.55 billion, adjusted EBITDA of €2.95 billion to €3.05 billion, adjusted EBT of €1.9 billion to €2.0 billion, and adjusted shareholder earnings of €1.4 billion to €1.5 billion.
Mucic said continued macroeconomic pressure on sales-related businesses could make the upper half of the adjusted EBITDA and adjusted EBT ranges difficult to achieve. However, he said adjusted shareholder earnings could still land comfortably in the upper half of its range in that scenario because lower sales volumes would also reduce tax payments.
“The core rental business remains a rock-solid foundation,” Mucic said, adding that value add continues to scale and that disposals will support the company’s deleveraging objectives while preserving long-term value creation potential.
About Vonovia (ETR:VNA)
Vonovia SE operates as an integrated residential real estate company in Europe. It operates through four segments: Rental, Value-Add, Recurring Sales, and Development. The company offers property management services; property-related services; and value-added services, including maintenance and modernization of residential properties, craftsmen and residential environment organization, condominium administration, cable TV, metering, energy supply, and insurances services. It also engages in the sale of individual condominiums and single-family houses; and project development activities.
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