30 Financial Assets Accounted for Using the Equity Method
As of the reporting date, Vonovia held interests in 26 joint ventures and eight associates (December 31, 2021: 26 joint ventures and seven associates).
The change is due to control of 20.5% of the shares in Adler Group S.A., which were previously held by Aggregate Holdings Invest S.A., passing to Vonovia as part of a debt recovery action on February 22, 2022.
The shares had been pledged to secure a loan that Vonovia had granted on October 7, 2021, to replace a bank loan of Aggregate Holdings Invest S.A.
At the time of the debt recovery action, the shares in the Adler Group had been reported at their market value of € 251.4 million as investments in associates accounted for using the equity method.
As the value of the assets offered in the form of the call option of € 25.3 million and the other loan of € 215.3 million was lower than the value of the shares acquired, taking into account costs and interest this resulted in a negative difference of € 9.4 million, which was disclosed as other operating income in profit or loss.
As current information is not yet available, no adjustments were made in connection with the remeasurement of the assets and liabilities.
As of June 30, 2022, an impairment loss of € 160.6 million was recognized for the shares in the Adler Group as part of an ad hoc impairment test. The development of the Adler Group’s share price was identified as a triggering event within the meaning of IAS 28.
The adjustment based on the equity method, taking into account the pro rata total comprehensive income of the Adler Group of € -152.7 million for the period from March 31, 2022, to September 30, 2022, was made as of December 31. Taking into account the existing investment carrying amount of € 90.8 million, the adjustment was only made in the amount of the investment carrying amount. The value recognized for the non-current equity investment amounts to € 0.0 million as of December 31, 2022.
The impairment loss and the income adjustment were recognized in the consolidated income statement under net income from non-current financial assets accounted for using the equity method.
Vonovia also holds 40% of the non-listed QUARTERBACK Immobilien AG with registered office in Leipzig, which was classed as an associate as of December 31, 2022. QUARTERBACK Immobilien AG is a project developer with operations throughout Germany focusing on the central German region. The investment strengthens Vonovia’s development business.
Vonovia also holds interests in eleven (December 31, 2021: eleven) non-listed financial investments of QUARTERBACK Immobilien AG, with equity interests of between 44% and 50% (QUARTERBACK property companies), that were classified as joint ventures.
The 40% stake in the non-listed QUARTERBACK Immobilien AG and QBI’s eleven non-listed financial investments in which Vonovia holds a stake of between 44% and 50% in each case was adjusted on the basis of the financial information as of December 31, 2022, that was available on the preparation cut-off date.
The total purchase price was definitively allocated to the acquired assets and liabilities as of September 30, 2022 and did not result in any major adjustments.
Financial information of QBI and the QUARTERBACK property companies
in € million | Dec. 31, 2021 QUARTERBACK Immobilien AG (adjusted) | Dec. 31, 2022 QUARTERBACK Immobilien AG | Dec. 31, 2021 QUARTERBACK- property companies | Dec. 31, 2022 QUARTERBACK- property companies | |||||
Non-current assets | 774.3 | 764.0 | 234.3 | 229.5 | |||||
Current assets | |||||||||
Cash and cash equivalents | 112.7 | 104.9 | 15.7 | 21.1 | |||||
Other current assets | 1,133.6 | 1,510.3 | 567.9 | 589.3 | |||||
Total non-current assets | 1,246.3 | 1,615.2 | 583.6 | 610.4 | |||||
Total non-current liabilities | 769.9 | 841.6 | 111.9 | 86.6 | |||||
Total current liabilities | 908.7 | 1,186.2 | 462.2 | 510.3 | |||||
Non-controlling interests | 40.9 | 42.5 | 11.9 | 12.0 | |||||
Equity (100%) | 301.1 | 308.9 | 231.9 | 231.0 | |||||
Group share in % | 40% | 40% | 44% to 50% | 44% to 50% | |||||
Group share of net assets in EUR | 120.4 | 123.6 | 108.8 | 106.6 | |||||
Group adjustments | -1.6 | -49.5 | -4.6 | -5.4 | |||||
Goodwill | 128.6 | – | |||||||
Carrying amount of share in joint venture | 247.4 | 74.1 | 104.2 | 101.2 | |||||
Revenues | 205.9 | 311.1 | 60.3 | 59.0 | |||||
Change in inventories | 631.3 | 302.2 | 24.0 | 17.7 | |||||
Interest income | 4.3 | 20.6 | 9.1 | 8.4 | |||||
Depreciation and amortization | -3.0 | -4.3 | -0.2 | -0.2 | |||||
Interest expenses | -48.3 | -78.2 | -17.1 | -23.2 | |||||
Income taxes | -13.7 | -18.1 | -1.9 | -0.6 | |||||
Total gain and comprehensive income for the fiscal year (100%) | 16.5 | 7.8 | 7.2 | -3.1 | |||||
The at-equity adjustment of the investments in the QUARTERBACK Group results in a negative result of € 8.5 million as of December 31, 2022 (Q4 2021: € 3.7 million).
As of June 30, 2022, an impairment loss of € 120.8 million was recognized for QUARTERBACK Immobilien AG as part of an ad hoc impairment test. The increased cost of capital was identified as a triggering event within the meaning of IAS 28. Due to the final purchase price allocation, the associated reassessment was used for the impairment test as of June 30, 2022. This produced an adjusted impairment loss of € 167.8 million retroactive to June 30, 2022. No further need for impairment was identified as part of the regular impairment test as of December 31, 2022.
The impairment loss identified was recognized in the consolidated income statement under net income from non-current financial assets accounted for using the equity method.
In addition to these investments, Vonovia also holds interests in 21 (December 31, 2021: 21) other entities that are accounted for using the equity method and are currently of minor importance; quoted market prices are not available.
Within other non-current equity investments, a need for impairment of € 2.3 million was identified for one non-current equity investment as part of the regular impairment test as of December 31, 2022.
The following table shows, in aggregated form, the carrying amount and the share of profit and other comprehensive income of these companies:
Aggregated information to other entities
The interests were adjusted for these entities provided that corresponding financial information was available.
With regard to the other 21 entities, Vonovia has no significant financial obligations or guarantees with respect to joint ventures and associates.
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 Care
The Adjusted EBITDA Care is calculated by deducting maintenance expenses and operating costs from the segment revenue.
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 (Earnings Before Interest, Taxes, Depreciation and Amortization)
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 Care.
Adjusted EBITDA Total (Earnings Before Interest, Taxes, Depreciation and Amortization)
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 Care.
Adjusted EBITDA Total (Earnings Before Interest, Taxes, Depreciation and Amortization)
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 Care.
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 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 NAV 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 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)
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.
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
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
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
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.
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
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.
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, Development and Care 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.
ICR (Interest Coverage Ratio)
The interest coverage ratio is the ratio of Adjusted EBITDA Total to net cash interest.
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
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
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
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.
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, as well as loans to companies with holdings of real estate and land.
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
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.
MFH Sales
We also report on the Other segment, which is not relevant from a corporate management perspective, in our segment reporting. This portfolio involves the sale of multifamily homes largely located outside of our urban quarters.
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.
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
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
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
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.
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)
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.
Non-core
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) 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.
Recurring Sales
The Recurring Sales segment includes the regular and sustainable disposals of individual condominiums and single-family houses from our portfolio. It does not include the sale of entire buildings or land (MFH Sales/Non Core). 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
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.
Cash-generating Unit (CGU)
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.