Vonovia’s Rent Rise Can’t Mask the Sinking Feeling from Higher Interest Costs

Vonovia Q1: rental EBITDA rises 6.3%, but financing costs cut adjusted profit 7.2%. Stock down 23% YoY; aims to delever and refinance €1.6B this year.

Vonovia posted a textbook case of operational resilience in the first quarter, yet the mounting toll of higher financing costs left its bottom line trailing. The German housing giant saw its core rental business churn out consistent growth, but the market is paying far more attention to the liability side of the balance sheet.

Shares edged up 0.72 percent on Monday to close at €22.45, with an even stronger intraday gain of 1.48 percent taking the stock to €22.62. The short-term relief, however, does little to change a grim picture: the stock has lost 6.92 percent since the start of the year and is down 23.25 percent over the past twelve months, trading well below its 200-day moving average of €25.39.

Rental momentum remains solid. Average monthly rents climbed 3.8 percent year-on-year to €8.46 per square metre, while organic rental growth reached 4.0 percent. The Rental segment delivered a 6.3 percent increase in adjusted EBITDA to €629.7 million, even as the portfolio shrank by around 4,000 units. Occupancy stayed tight at 97.7 percent, and the collection rate of 99.6 percent underscores that tenants are continuing to pay on time.

The broader push into ancillary services added further shine. The Value-add division – covering tradesman services and energy sales – saw adjusted EBITDA surge more than 30 percent to €50.1 million. Chief executive Luka Mucic has pointed to these businesses as an increasingly important complement to pure letting.

The real drag sits on the financing side. Adjusted EBITDA across the group nudged up 1.4 percent to €711.6 million, but the profit that actually reaches shareholders tells a different story. The adjusted net financial result deteriorated by 12 percent to minus €205.6 million, pushing the adjusted profit attributable to Vonovia’s owners down 7.2 percent to €365.6 million. On a per-share basis, adjusted earnings fell from €0.48 to €0.43.

Chief financial officer Philip Grosse highlighted during an analyst call that the conflict in the Middle East has added to market volatility, pushing ten-year refinancing costs to just under 4.5 percent. That is a critical threshold for a company facing a looming wall of maturities. Vonovia needs to refinance roughly €1.6 billion this year, with approximately €5 billion due in each of the following two years.

Balance-sheet relief remains the key priority. The loan-to-value ratio eased to 45.1 percent, and the leverage multiple inched down from 13.8x to 13.7x adjusted EBITDA. The company is targeting a leverage ratio below 12x and a loan-to-value of roughly 40 percent by the end of 2028. Asset sales, privatisations, and the disposal of stakes are expected to underpin that deleveraging.

The net tangible asset value stood at €46.57 per share at the end of March, a considerable premium to the current stock price and a signal of the deep discount the market is applying. Vonovia did not conduct a full portfolio revaluation in the first quarter.

The full-year outlook remains unchanged. Management continues to target adjusted EBITDA in a range of €2.95 billion to €3.05 billion and adjusted group profit of €1.4 billion to €1.5 billion. Organic rental growth is forecast at 4.2 percent. The board has proposed a dividend of €1.25 per share, which will be voted on at the annual general meeting in Bochum on 21 May 2026. The agenda also includes the election of Dr. Anne-Marie Großmann-Minkwitz to the supervisory board.

DZ Bank analysts assign a fair value of €33 per share and maintain a positive rating. For the moment, however, Vonovia remains a tale of two speeds: operational fundamentals are stable, but the path of interest rates and the sheer scale of upcoming refinancing needs will determine whether the current share price discount begins to close.