Vonovia issues €850 million bond to finance social projects

Vonovia, Germany’s largest residential landlord, has issued a social bond with a total volume of €850 million and a maturity of 10 years, which will be used to finance social projects. The unsecured bond was 4.8 times oversubscribed.

Philip Grosse, CFO, Vonovia

“This ten-year social bond is a proof that we can combine our social responsibility with our excellent access to capital markets,” said Philip Grosse, chief financial officer, Vonovia. “Ours was the only euro bond on the market, and we took advantage of the very strong market environment opportunistically. The result is a qualitatively very strong order book with more than 250 orders and a slightly negative new issuance premium.”

The social bond is in compliance with the company’s sustainable finance framework, as  defined in February 2022, and has a coupon of 4.25%. Vonovia had issued its first social bond two years ago.

The social projects financed by the bond will include occupancy-based apartments for low-income households, as well as privately financed apartments in Berlin that provide access to affordable housing with a rent of at least 15% below the local comparable rent. The funds from the social bonds will also be used for low-barrier apartments, which will be modernised to better meet the needs of an ageing society.

“Our unsecured financing is fully financed until Q3 2025,” said Grosse. “We are therefore already using this bond to plan our liquidity from Q3 2025.”

Vonovia also said that at the end of March the rating agency Fitch gave the group a BBB+ rating with a stable outlook. This was the first time that the agency had rated Vonovia.

According to the analysts, Vonovia’s rating benefited from the stability of the regulated rental housing market in Germany, very high demand for apartments, inflation protection in the rent indexes and a very high occupancy rate of around 98%.