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29 Financial Assets

Financial Assets

Dec. 31, 2020

Dec. 31, 2021

in € million

non-current

current

non-current

current

Non-consolidated subsidiaries

1.5

2.4

Other investments

309.7

374.6

Loans to other investments

33.3

33.2

Securities

4.9

5.2

Other non-current loans

11.3

511.8

563.1

Receivables from finance leases

23.7

Other current financial receivables from financial transactions

499.6

Derivatives

22.4

0.4

65.8

0.6

383.1

0.4

1,016.7

1,063.3

Accounting Policies

Financial assets are recognized in the balance sheet when Vonovia becomes a contracting party of the financial instrument. A financial asset is derecognized when the contractual rights to the cash flows from a financial asset expire, or the financial asset is transferred and Vonovia neither retains control nor retains material risks and rewards associated with ownership of the financial asset.

In accordance with IFRS 9, the classification of financial assets takes into account both the business model in which financial assets are held and the characteristics of the cash flows of the assets in question. These criteria determine whether the assets are measured at amortized cost using the effective interest method or at fair value.

With regard to the business model criterion, all financial investments at Vonovia are to be assigned to the “hold to collect” model pursuant to IFRS 9.4.1.2(a). Whenever financial investments are categorized as equity instruments, Vonovia has exercised the irrevocable option to state future changes to the fair value in other comprehensive income in equity. Gains and losses recognized in other comprehensive income are never reclassified from total equity to the income statement on their disposal.

The carrying amount of financial assets corresponds to maximum risk of loss as of the reporting date.

Other investments comprise the Vesteda Residential Fund FGR, Amsterdam, in the amount of € 193.5 million (Dec. 31, 2020: € 160.2 million) and OPPCI JUNO, Paris, in the amount of € 109.7 million (Dec. 31, 2020: € 110.7 million).

The loans to other investments not yet due relate to a loan to the property fund DB Immobilienfonds 11 Spree-Schlange von Quistorp KG.

The increase in other non-current loans is connected, on the one hand, with the takeover of a Lombard loan in the amount of some € 250 million, which was issued to Aggregate Holdings S.A. by a banking consortium in the period until October 7, 2021 and that is secured by means of 26.6% of shares in the Adler Group.

Vonovia also concluded a call option for 13.3% of the shares in Adler-Group S.A. with a term of eighteen months with Aggregate Holding.

As the two transactions are linked economically and depend on each other, they are considered as a linked transaction in accordance with IFRS.

There was a positive fair value of € 20.2 million for the call option at the time of addition. The fair value of the Lombard loan granted therefore came to € 229.8 million.

In line with the IFRS 9 classification model, subsequent measurement was at fair value through profit and loss for the call option and at amortized cost for the Lombard loan. The conditions required under IFRS 9 for measuring the loan at amortized cost were sufficiently checked and fulfilled by means of the “Business Model Test” and the “SPPI test.”

As of December 31, 2021 the subsequent measurement of the call option results in positive net interest from the valuation of € 6.1 million. The positive fair value of this option is recognized under derivatives in the amount of € 26.3 million.

Amortization within net interest of € +3.3 million was applied to the Lombard loan based on the amortized cost approach using the effective interest method. In addition, and in line with IFRS 9.5.5, as of the reporting date the lifetime expected credit losses (ECL) of € 15.9 million were recognized affecting net income within impairment losses on financial assets. The expected credit losses were calculated in accordance with the IFRS 9 general approach. As there was no significant increase in credit risk as of the reporting date, the calculations were performed on the basis of a twelve-month probability of default in line with IFRS 7.35M. Subsequently, the criterion of a significant increase in credit risk pursuant to IFRS 9.5.5.7. will be reviewed on every reporting date. As of the reporting date, the Lombard loan was therefore recognized in the amount of € 217.2 million.

On the other hand the non-current loans include loan receivables from the QUARTERBACK Immobilien Group based on standard market conditions in the amount of € 261.8 million.

The majority of other non-current loans are held with the QUARTERBACK Immobilien Group as the counterparty.

The expected credit losses for the loans granted to the QUARTERBACK Immobilien Group totaling € 806.5 million were calculated based on the general approach under IFRS 9. These credit losses were not recognized in the balance sheet as they are not considered to be material.

The loans generally include a risk concentration. As there was no significant increase in credit risk as of the reporting date, the calculations were performed on the basis of a twelve-month probability of default in accordance with IFRS 7.35M. As a result, these loans are recognized at their face value as of the reporting date.

The receivables from finance leases were added to the Group as part of the acquisition of Deutsche Wohnen. Receivables from the letting of certain broadband cable networks totaled € 23.7 million as of the reporting date, with interest income of € 0.3 million. The debt maturity profile of the receivables is as follows:

Debt maturity profile of receivables from finanace leases

in € million

Dec. 31, 2020

Dec. 31, 2021

Nominal value of outstanding lease payments

28.2

thereof due within one year

thereof due between one and two years

3.5

thereof due between two and three years

3.6

thereof due between three and four years

3.0

thereof due between four and five years

3.0

thereof due after more than five years

15.1

plus unguaranteed residual values

0.2

less unrealized financial income

-4.7

Present value of outstanding lease payments

23.7

Other non-current financial receivables from financial transactions include time deposits and short-term financial investments in highly liquid money market funds that have an original term of more than three months.

In addition to the call option, non-current derivatives include positive market values from cross currency swaps in the amount of € 35.2 million (Dec. 31, 2020: € 18.4 million), together with positive market values in the amount of € 4.3 million (Dec. 31, 2020: € 4.0 million) from other interest rate derivatives. Due to the high prepayment fees, embedded derivatives from loan termination rights were no longer recognized as of the reporting date. The positive fair value of the previous year in the amount of € 3.6 million was derecognized accordingly in profit or loss.