BOCHUM (dpa-AFX) - Germany's largest residential real estate group Vonovia is raising money by selling a stake in a real estate portfolio. The company will sell the minority stake in its Südewo portfolio for one billion euros, the DAX-listed group announced in Bochum on Wednesday. The buyer is a company managed by Apollo. The money came from insurance companies and other long-term investors. The transaction values the Südewo portfolio at 3.3 billion euros. This does not include debt and cash. This represents a discount of less than 5 percent on Südewo's valuation as of December 31, 2022.

The news was very well received on the stock market. The share gained 4.3 percent to 19.37 euros in the late morning as the Dax leader. One trader said the sale was going in the right direction. Like the papers of all real estate companies, Vonovia's shares have also lost considerable value due to rising interest rates. The share price has fallen by almost 12 percent since the turn of the year and by more than 40 percent in the past twelve months.

The company has a long-term option to buy back the stake, Vonovia further announced. However, there is no obligation to exercise it. Vonovia will continue to control, manage and consolidate the portfolio, which comprises more than 21,000 residential units at locations in Baden-Württemberg. The transaction is expected to be completed by the end of May.

The proceeds will generate about half of Vonovia's targeted free cash inflow from asset disposals for the current year, it said. A total of two billion euros in cash is expected to flow in from the sale of properties, for example, in 2023. Vonovia intends to use the money to reduce its debt. This should reduce the so-called LTV, the ratio of the loan amount to the fair value of the real estate portfolio, by one percentage point to 44.1 percent.

After years of expansion, Vonovia wants to part with around 66,000 apartments with a total value of around 13 billion euros. However, investors are increasingly holding back on buying real estate due to rising interest rates. "The market has not come to a complete standstill, but it is laborious," company CEO Rolf Buch had said as recently as March when presenting the balance sheet. In January and December, he said, there had been little interest in buying, but there was currently more demand again. Last year, Vonovia sold 19,760 apartments, including some above book value.

Due to the sharp rise in construction and financing costs, Vonovia is not planning any new construction projects for the time being. However, the projects already under construction are to be completed. In 2023, Vonovia will still complete 3450 apartments, Buch had said. "New construction that leads to reasonable rents is simply not economically mogible in the current situation," he had added./mne/men/jha/