Vonovia shares drop as $7 billion loss lays bare German property crisis

By Tom Sims and Matthias Inverardi

FRANKFURT (Reuters) -Shares in Vonovia dropped 6% on Friday after Germany's largest landlord reported its biggest loss ever for 2023, in the latest sign of stress in the real estate sector.

German property firms are undergoing a major change of fortune after an end to the cheap money era that fuelled a decade-long boom, hitting the likes of Vonovia hard.

The 6.76 billion euro ($7.36 billion) loss is more than ten times the size of the 669.4 million euros loss for 2022, and the two consecutive periods in the red mark a reversal from years of steady profits during the boom years.

The loss came as Vonovia wrote down the value of its more than 500,000 apartments by 10.7 billion euros, or 11.4%, reducing its portfolio value to 84 billion euros.

"The collapse of valuations is the worst we have ever seen," Chief Executive Officer Rolf Buch told journalists in a hastily arranged call on Thursday evening.

He noted signs of stabilisation, but added: "I am not a prophet."

Jefferies analysts said the results left them "scratching our heads", while Baader analysts called them a "mixed bag".

Vonovia's shares have underperformed Germany's benchmark DAX index since the European Central Bank in 2022 began swiftly raising interest rates to stamp out inflation.

Vonovia said it would pursue further apartment sales to reduce its debt.

The figures highlight a sector-wide crisis marked by insolvencies, a drop in transactions, falling prices and a decline in construction jobs.

Germany's 670 billion euro property industry is a critical pillar of its economy, contributing one in 10 jobs, nearly a fifth of output, and eclipsing its famous car sector, according to the ZIA industry association.

LEG Immobilien and TAG Immobilien, two of Vonovia's top domestic rivals, also reported annual losses this week, giving a combined loss of 8.7 billion euros for the three companies.

($1 = 0.9189 euros)

(Reporting by Tom Sims and Matthias InverardiEditing by Madeline Chambers and Mark Potter)