38 Total Equity

Accounting Policies

Other comprehensive income includes changes in total comprehensive income not affecting net income except that resulting from capital transactions with equity holders (e.g., capital increases or dividend distributions). Vonovia includes under this item unrealized gains and losses from the fair value measurement of equity instruments and derivative financial instruments that are designated as cash flow hedges. The item also includes actuarial gains and losses from defined benefit pension commitments as well as certain currency translation differences.

The other reserves contain cumulative changes in equity not affecting income. At Vonovia, the effective portion of the net change in the fair value of cash flow hedging instruments, the equity instruments at fair value as well as currency translation differences are recognized in other comprehensive income.

The other reserves from cash flow hedges and from currency translation differences can be reclassified. When the underlying hedged item of the cash flow hedge affects net income, the reserves attributable thereto are reclassified to profit or loss. If a foreign business is disposed of, the reserves attributable thereto are reclassified.

Development of the Subscribed Capital

in €

As of Jan. 1, 2021		565,887,299.00
Capital increase against non-cash contributions on May 17, 2021 (scrip dividend)		9,370,028.00
Capital increase against cash contributions on December 2, 2021		201,340,062.00
As of Dec. 31, 2021		776,597,389.00

Development of the Capital Reserves

in €

As of Jan. 1, 2021		9,037,861,361.33
Premium from capital increase for scrip dividend on May 17, 2021		460,939,787.40
Premium from capital increase on December 2, 2021		7,879,165,876.50
Transaction costs on the issue of new shares (after allowing for deferred taxes)		-93,372,009.30
Withdrawal from capital reserve		-1,826,175,134.25
Other changes not affecting net income		10,481.30
As of Dec. 31, 2021		15,458,430,362.98

Cash Capital Increase

On November 21, 2021 the Management Board of Vonovia SE, with the consent of the Supervisory Board, decided to carry out a fully subscribed capital increase with subscription rights for the existing shareholders of Vonovia. The shares were issued in exchange for cash contributions. To this end, the share capital of Vonovia was increased by € 201,340,062.00 from € 575,257,327.00 to € 776,597,389.00, partially using the 2021 authorized capital. This was achieved by issuing 201,340,062 new no-par-value registered shares, each accounting for € 1.00 of the share capital and carrying dividend rights as of January 1, 2021.

During the subscription period, the existing shareholders of Vonovia were offered a total of 201,340,062 new no-par-value registered shares at a subscription price of € 40.00 per new share. By the end of the subscription period on December 7, 2021 subscription rights had been exercised for 198,508,119 new shares, corresponding to a subscription rate of 98.59% of the new shares. The remaining 2,831,943 new shares were issued to institutional investors at € 49.50 per share through a private placement. The increase was entered in the commercial register on December 2, 2021.

Dividend

The Annual General Meeting held on April 16, 2021 resolved to pay a dividend for the 2020 fiscal year in the amount of € 1.69 per share, € 956.3 million in total.

As in previous years, shareholders were offered the option of choosing between being paid the dividend in cash or being granted new shares. During the subscription period, shareholders holding a total of 49.18% of the shares carrying dividend rights opted for the scrip dividend instead of the cash dividend. As a result, 9,370,028 new shares were issued using the company’s authorized capital pursuant to Section 5b of the Articles of Association (“2018 authorized capital”) at a subscription price of € 50.193, i.e., a total amount of € 470,309,815.40. The total amount of the dividend distributed in cash therefore came to € 486,039,719.91.

Authorized Capital

By way of a resolution of the Annual General Meeting on April 16, 2021 the 2018 authorized capital was canceled. A further resolution at this same Annual General Meeting created new authorized capital in the amount of € 282,943,649.00. On the basis of this resolution, the Management Board is authorized, with the consent of the Supervisory Board, to increase the company’s share capital by up to € 282,943,649.00 once or several times on or before April 15, 2026 by issuing up to 282,943,649 new registered no-par-value shares in return for cash contributions and/or contributions in kind (2021 authorized capital). Shareholders shall be granted a subscription right. Shareholder subscription rights can be excluded. As part of the capital increase with subscription rights on December 2, 2021 the authorized capital was utilized in the amount of 201,340,062 shares, meaning that 2021 authorized capital stands at € 81,603,587.00 as of December 31, 2021.

Conditional Capital

By way of a resolution of the Annual General Meeting on April 16, 2021 the 2018 conditional capital was canceled. In order to serve the authorization, passed by the Annual General Meeting of April 16, 2021 to issue convertible bonds, bonds carrying option rights, participating rights, and participating bonds, 2021 conditional capital was created. On the basis of the resolution of this Annual General Meeting, the share capital is conditionally increased by up to € 282,943,649.00 through the issuing of 282,943,649 new no-par-value registered shares carrying dividend rights.

Retained Earnings

As of December 31, 2021 retained earnings amounted to € 16,925.9 million (Dec. 31, 2020: € 13,368.2 million). This figure includes actuarial gains and losses of € -93.4 million (Dec. 31, 2020: € -117.2 million), which cannot be reclassified and therefore may no longer be recognized in profit or loss in subsequent reporting periods.

Other Reserves

Changes in other comprehensive income during the period in the amount of € 0.7 million (2020: € 153.9 million) are mainly the result of currency translation differences due to changes in the exchange rate for the Swedish krona against the euro, as well as the offsetting development of equity instruments at fair value in other comprehensive income and the cash flow hedges.

Equity Attributable to Hybrid Capital Investors

In December 2014, Vonovia issued a hybrid bond with a nominal volume of € 1.0 billion via a subsidiary, Vonovia Finance B.V., Amsterdam/Netherlands (issuer). This subordinated hybrid bond was of unlimited duration and could only be terminated by Vonovia on certain contractually fixed dates or occasions.

The hybrid bond was terminated and repaid as of December 2021.

Pursuant to IAS 32, the hybrid bond was classified as equity in full. The interest payments to be made to the bondholders were recognized directly in equity.

Non-Controlling Interests

Shares of third parties in Group companies are recognized under non-controlling interests.

Non-controlling interests increased by € 2,571.7 million in the 2021 fiscal year, from € 686.3 million as of January 1, 2021 to € 3,258.0 million as of December 31, 2021. This increase is chiefly due to the acquisition of the Deutsche Wohnen Group, with the addition of non-controlling interests in the amount of € 2,436.6 million, which, in turn, are primarily due to the 12.64% of Deutsche Wohnen SE shares not tendered to Vonovia SE.

Adjusted EBITDA Development

The Adjusted EBITDA Development includes the gross profit from the development activities of “to sell” projects (income from sold development projects less production costs) and the gross profit from the development activities of “to hold” projects (fair value of the units developed for the company’s own portfolio less incurred production costs) less the operating expenses from the Development segment.

Adjusted EBITDA Deutsche Wohnen

The Adjusted EBITDA Deutsche Wohnen is calculated by deducting the operating expenses of the Deutsche Wohnen segment and the carrying amount of properties sold from the segment revenue of the Deutsche Wohnen Group.

Adjusted EBITDA Recurring Sales

The Adjusted EBITDA Recurring Sales compares the proceeds generated from the privatization business with the fair values of assets sold and also deducts the related costs of sale. In order to disclose profit and revenue in the period in which they are incurred and to report a sales margin, the fair value of properties sold, valued in accordance with IFRS 5, has to be adjusted to reflect realized/unrealized changes in value.

Adjusted EBITDA Rental

The Adjusted EBITDA Rental is calculated by deducting the operating expenses of the Rental segment and the expenses for maintenance in the Rental segment from the Group’s rental income.

Adjusted EBITDA Total

Adjusted EBITDA Total is the result before interest, taxes, depreciation and amortization (including income from other operational investments and intragroup profits) adjusted for effects that do not relate to the period, recur irregularly and that are atypical for business operation, and for net income from fair value adjustments to investment properties. These non-recurring items include the development of new fields of business and business processes, acquisition projects, expenses for refinancing and equity increases (where not treated as capital procurement costs), IPO preparation costs and expenses for pre-retirement part-time work arrangements and severance payments. The Adjusted EBITDA Total is derived from the sum of the Adjusted EBITDA Rental, Adjusted EBITDA Value-add, Adjusted EBITDA Recurring Sales, Adjusted EBITDA Development and Adjusted EBITDA Deutsche Wohnen.

Adjusted EBITDA Value-add

The Adjusted EBITDA Value-add is calculated by deducting operating expenses from the segment’s income.

COSO

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is a private-sector U.S. organization. It was founded in 1985. In 1992, COSO published the COSO model, an SEC-recognized standard for internal controls. This provided a basis for the documentation, analysis and design of internal control systems. In 2004, the model was further developed and the COSO Enterprise Risk Management (ERM) Framework was published. Since then, it has been used to structure and develop risk management systems.

Covenants

Requirements specified in loan agreements or bond conditions containing future obligations of the borrower or the bond obligor to meet specific requirements or to refrain from undertaking certain activities.

EPRA Key Figures

For information on the EPRA key figures, we refer to the chapter on segment reporting according to EPRA.

EPRA NTA

The presentation of the NTA based on the EPRA definition aims to show the net asset value in a long-term business model. NTA stands for Net Tangible Assets. The equity attributable to Vonovia’s shareholders is adjusted by deferred taxes, real estate transfer tax and other purchasers’ costs in relation to the existing portfolio and the fair value of derivative financial instruments after taking deferred taxes into account. Stated goodwill and other intangible assets are also deducted.

European Public Real Estate Association (EPRA)

The European Public Real Estate Association (EPRA) is a non-profit organization that has its registered headquarters in Brussels and represents the interests of listed European real estate companies. Its mission is to raise awareness of European listed real estate companies as a potential investment destination that offers an alternative to conventional investments. EPRA is a registered trademark of the European Public Real Estate Association.

European Public Real Estate Association (EPRA)

Fair Value

Fair value is particularly relevant with regard to valuation in accordance with IAS 40 in conjunction with IFRS 13. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.

Fair Value

GAV

The Gross Asset Value (GAV) of the recognized real estate investments. This consists of the owner-occupied properties, the investment properties including development to hold, the assets held for sale and the development to sell area. In the latter, both residential properties for which a purchase contract has been signed and those with the intention to sell – i.e., a purchase contract has not yet been signed – are included.

GAV

Group FFO

Group FFO reflects the recurring earnings from the operating business. In addition to the adjusted EBITDA for the Rental, Value-add, Recurring Sales and Development segments, Group FFO allows for recurring current net interest expenses from non-derivative financial instruments as well as current income taxes. This key figure is not determined on the basis of any specific international reporting standard but is to be regarded as a supplement to other performance indicators determined in accordance with IFRS.

Maintenance

Maintenance covers the measures that are necessary to ensure that the property can continue to be used as intended over its useful life and that eliminate structural and other defects caused by wear and tear, age and weathering effects.

Maintenance

Vacancy Rate

The vacancy rate is the number of empty units as a percentage of the total units owned by the company. The vacant units are counted at the end of each month.

Vacancy Rate

The vacancy rate is the number of empty units as a percentage of the total units owned by the company. The vacant units are counted at the end of each month.

Vacancy Rate

The vacancy rate is the number of empty units as a percentage of the total units owned by the company. The vacant units are counted at the end of each month.

Vacancy Rate

The vacancy rate is the number of empty units as a percentage of the total units owned by the company. The vacant units are counted at the end of each month.

LTV Ratio (Loan-to-Value Ratio)

The LTV ratio shows the extent to which financial liabilities are covered. It shows the ratio of non-derivative financial liabilities pursuant to IFRS, less foreign exchange rate effects, cash and cash equivalents less advance payments received by Development (period-related), receivables from disposals, plus purchase prices for outstanding acquisitions to the total fair values of the real estate portfolio, fair values of the projects/land currently under construction as well as receivables from the sale of real estate inventories (period-related) plus the fair values of outstanding acquisitions and investments in other real estate companies.

Rental Income

Rental income refers to the current gross income for rented units as agreed in the corresponding lease agreements before the deduction of non-transferable ancillary costs. The rental income from the Austrian property portfolio additionally includes maintenance and improvement contributions (EVB). The rental income from the portfolio in Sweden reflects inclusive rents, meaning that the amounts contain operating and heating costs.

Rental Income

Modernization Measures

Modernization measures are long-term and sustainable value-enhancing investments in housing and building stocks. Energy-efficient refurbishments generally involve improvements to the building shell and communal areas as well as the heat and electricity supply systems. Typical examples are the installation of heating systems, the renovation of balconies and the retrofitting of prefabricated balconies as well as the implementation of energy-saving projects, such as the installation of double-glazed windows and heat insulation, e.g., facade insulation, insulation of the top story ceilings and basement ceilings. In addition to modernization of the apartment electrics, the refurbishment work upgrades the apartments, typically through the installation of modern and/or accessible bathrooms, the installation of new doors and the laying of high-quality and non-slip flooring. Where required, the floor plans are altered to meet changed housing needs.

Modernization Measures

Monthly In-place Rent

The monthly in-place rent is measured in euros per square meter and is the current gross rental income per month for rented units as agreed in the corresponding rent agreements at the end of the relevant month before deduction of non-transferable ancillary costs divided by the living area of the rented units. The rental income from the Austrian property portfolio additionally includes maintenance and improvement contributions (EVB). The rental income from the portfolio in Sweden reflects inclusive rents, meaning that the amounts contain operating and heating costs.

The in-place rent is often referred to as the “Nettokaltmiete” (net rent excl. ancillary costs such as heating, etc.). The monthly in-place rent (in € per square meter) on a like-forlike basis refers to the monthly in-place rent for the residential portfolio that was already held by Vonovia 12 months previously, i.e., portfolio changes during this period are not included in the calculation of the in-place rent on a like-forlike basis. If we also include the increase in rent due to new construction measures and measures to add extra stories, then we arrive at the organic increase in rent.

Monthly In-place Rent

Sustainability Performance Index (SPI)

Index to measure non-financial performance. Vonovia’s sustainable activities are geared towards the top sustainability topics that we have identified, which are bundled in the Sustainability Performance Index. The Customer Satisfaction Index (CSI) is included in the calculation of the Sustainability Performance Index. The CSI is determined at regular intervals in systematic customer surveys conducted by an external service provider and shows the effectiveness and sustainability of our services for the customer. Other indicators used in the Sustainability Performance Index are the carbon savings achieved annually in housing stock, the energy efficiency of new buildings, the share of accessible (partial) modernization measures in relation to newly let apartments, the increase in employee satisfaction and diversity in the company’s top management team.

Sustainability Performance Index (SPI)

Non-core Disposals

We also report on the Other segment, which is not relevant from a corporate management perspective, in our segment reporting. This includes the sale, only as and when the right opportunities present themselves, of entire buildings or land (Non-core Disposals) that are likely to have below-average development potential in terms of rent growth in the medium term and are located in areas that can be described as peripheral compared with Vonovia’s overall portfolio and in view of future acquisitions.

Rating

Classification of debtors or securities with regard to their creditworthiness or credit quality according to credit ratings. The classification is generally performed by rating agencies.

Rating

Classification of debtors or securities with regard to their creditworthiness or credit quality according to credit ratings. The classification is generally performed by rating agencies.

Rating

Classification of debtors or securities with regard to their creditworthiness or credit quality according to credit ratings. The classification is generally performed by rating agencies.

Rating

Classification of debtors or securities with regard to their creditworthiness or credit quality according to credit ratings. The classification is generally performed by rating agencies.

Recurring Sales

The Recurring Sales segment includes the regular and sustainable disposals of individual condominiums from our portfolio. It does not include the sale of entire buildings or land (Non-core Disposals). These properties are only sold as and when the right opportunities present themselves, meaning that the sales do not form part of our operating business within the narrower sense of the term. Therefore, these sales will be reported under “Other” in our segment reporting.

Fair Value Step-up

Fair value step-up is the difference between the income from selling a unit and its current fair value in relation to its fair value. It shows the percentage increase in value for the company on the sale of a unit before further costs of sale.

Fair Value Step-up

Cash-generating Unit (CGU)

The cash-generating unit refers, in connection with the impairment testing of goodwill, to the smallest group of assets that generates cash inflows and outflows independently of the use of other assets or other cash-generating units (CGUs).

Cash-generating Unit (CGU)