Vonovia Annual Report 2023

39 Provisions

Provisions

	Dec. 31, 2022 (adjusted)		Dec. 31, 2023
in € million	non-current	current	non-current	current

Provisions for pensions and similar obligations	512.5	–	512.4	–
Other provisions for taxes (excl. deferred taxes)	–	49.6	–	32.9
Other provisions
Environmental remediation	25.0	–	14.4	–
Personnel obligations	24.2	14.7	45.4	17.0
Miscellaneous other provisions	94.0	173.7	34.7	153.0
Total other provisions	143.2	188.4	94.5	170.0
Total provisions	655.7	238.0	606.9	202.9

Provisions for Pensions and Similar Obligations

Accounting Policies

When valuing the provisions for pensions, the company pension obligations are determined using the projected unit credit method pursuant to IAS 19 “Employee Benefits,” whereby current pensions and vested pension rights as of the reporting date as well as expected future increases in salaries and pensions, are included in the valuation. An actuarial valuation is performed at every reporting date.

The amount shown in the balance sheet is the total present value of the defined benefit obligations (DBO) after offsetting against the fair value of plan assets.

Actuarial gains and losses are accounted for in full in the period in which they occur and recognized in retained earnings as a component of other comprehensive income and not in profit or loss. The actuarial gains and losses are also no longer recognized affecting net income in subsequent periods.

Service cost is shown in personnel expenses. The service cost is the increase in the present value of a defined benefit obligation resulting from employee service in the reporting period.

The interest expense is recognized in the financial result. Interest expense is the increase during a period in the present value of a defined benefit obligation that generally arises due to the fact that the benefit obligation is one period closer to being discharged.

Reinsurance contracts that qualify as plan assets have been taken out to cover the pension obligations toward particular individuals. Where the value of those reinsurance contracts exceeds the related pension obligations, the excess is recognized as an asset and shown under other assets.

Obligations from joint defined benefit multi-employer plans at Versorgungsanstalt des Bundes und der Länder (VBL), a pension institution of the Federal Republic of Germany and the Federal States, are stated, in line with IAS 19.34, in the same way as obligations from defined contribution plans. The data and information required for recognition as defined benefit plans for accounting purposes are not available (in particular information on the individual vested rights and the plan assets assigned to the member company), meaning that the plan is treated as a defined contribution plan in line with IAS 19.34.

Vonovia has pension obligations towards various employees which are based on the length of service.

Vonovia pays contributions to state pension insurance providers under defined contribution pension systems based on statutory provisions. The current contribution payments are reported as social security contributions under personnel expenses in the amount of € 52.1 million (2022: € 51.3 million).

Defined benefit and defined contribution obligations – for which Vonovia guarantees a certain level of benefit – are financed through provisions for pensions. Vonovia has taken out reinsurance contracts for individual people.

Generally, they are pension benefits that depend on the final salary with percentage increases depending on the number of years of service.

The pension commitments cover 6,524 (December 31, 2022: 7,657) vested rights. The increase results mainly from first-time inclusion of the participants in the deferred compensation scheme that was newly agreed in 2021 in the pension valuation.

The new “BAV 2021” deferred compensation scheme applies as standard for all defined employee groups within the Vonovia Group in Germany (current number of participants: 1,482). In addition to deferred compensation, the employer subsidies (matching contributions) are also contributed to the new employee retirement benefit plan. The matching contributions made in each case correspond to the amount of the deferred compensation contribution made, and are limited to 1% of the employee’s monthly gross basic salary.

Executives currently working for companies belonging to Vonovia have the opportunity to participate in the “Pension Instead of Cash Remuneration” model (Versorgungsbezüge anstelle von Barbezügen) (eligible persons: 1,790, including persons no longer active). Retirement, invalidity and surviving dependent benefits in the form of a lifelong pension are offered under this deferred compensation model. The retirement benefits can also be paid out as a one-time capital sum.

Overview of the most important basic data for existing pension plans (all of which have already been closed):

Overview basic date for existing pension plans

	VO 1/VO 2 Veba Immobilien	VO 60/VO 91 Eisenbahnges.	Bochumer Verband

Type of benefit	Retirement, invalidity and surviving dependent benefits	Retirement, invalidity and surviving dependent benefits	Retirement, invalidity and surviving dependent benefits
Pensionable remuneration	Final salary	Final salary	Not applicable
Max. pension level	Yes	Yes	Depends on individual grouping
Total pension model based on final salary	Yes	No	No
Net benefit limit incl. state pension	None	Yes	None
Gross benefit limit	Yes	None	None
Adjustment of pensions	Section 16 (1, 2) BetrAVG	Section 16 (1, 2) BetrAVG	Adjustment every 3 years by Bochumer Verband (Manage- ment Board resolution)
Supplementary periods	Age of 55	Age of 55	Age of 55 (half)
Legal basis	Works agreement	Works agreement	Commitment to executives in individual contracts
Number of eligible persons	336	706	350

	VO 1991/VO 2002 Gagfah	VO guideline Gagfah M	VO 2017 VBL-Ersatzversorgung

Type of benefit	Retirement, invalidity and surviving dependent benefits	Retirement, invalidity and surviving dependent benefits	Retirement, invalidity and surviving dependent benefits
Pensionable remuneration	Salary for September of each year	Final salary	Salary of each year
Max. pension level	Module p.a.	Yes	Module p.a.
Total pension model based on final salary	No	Yes	No
Net benefit limit incl. state pension	None	None	None
Gross benefit limit	None	Yes	None
Adjustment of pensions	1% p.a.	Section 16 (1, 2) BetrAVG	1% p.a.
Supplementary periods	Age of 55	Age of 55	None
Legal basis	Works agreement	Works agreement	Individual agreement
Number of eligible persons	1,100	323	116

The current pensions according to the classic pension benefit regulations of Bochumer Verband are adjusted in line with Section 20 of those regulations. Section 20 is a rule which is based on Section 16 (1,2) of the German Occupational Pensions Improvement Act (BetrAVG) but which, according to a ruling of the Federal Labor Court of Germany, is an independent rule. Other company pensions are reviewed and adjusted under the terms of the agreement according to Section 16 (1,2) BetrAVG. On every review date, the development of the cost of living since the individual retirement date is reviewed and compensated for. Only in the aforementioned deferred compensation model is the option, available since January 1, 1999, used to raise the current pensions every year by 1% (Section 16 (3) No. 1 BetrAVG). No further risks are seen.

The company has decided to use the internal financing effect of the provisions for pensions and only to back a relatively small portion of the pension obligations with plan assets. Reinsurance policies have been taken out for former Management Board members against payment of a one-time insurance premium in order to provide additional protection against insolvency; these reinsurance policies were pledged to the eligible persons. They constitute plan assets, which are offset against the gross obligation. The fair value of the reinsurance policies for individual persons is higher than the extent of the obligations towards the respective person. This surplus of the fair values of the assets over the obligation is shown under non-current other assets. The conclusion of further personal liability insurance reinsurance policies is not planned.

Pension plan obligations and the expenses necessary to cover these obligations are determined using the projected unit credit method prescribed by IAS 19. Both pensions known on the reporting date and vested rights as well as expected future increases in salaries and pensions are included in the measurement. The following actuarial assumptions were made at the reporting date – in each case related to the end of the year and with economic effect for the following year.

Actuarial Assumptions

in %	Dec. 31, 2022	Dec. 31, 2023

Actuarial interest rate	3.73	3.17
Pension trend	2.19	2.25
Salary trend	3.00	3.00

In order to take into account the extraordinary inflation prevalent as of the reporting date, a one-time increase of 5.45% (December 31, 2022: 8%) was applied to current pensions for the calculation of pension obligations.

The 2018 G mortality tables of Prof. Dr. Klaus Heubeck have been taken for the biometric assumptions without any changes.

The defined benefit obligation (DBO) developed as follows:

Defined benefit obligation (DBO)

in € million	2022	2023

DBO as of Jan. 1	711.8	539.8
Interest expense	7.7	19.6
Current service cost	16.0	9.1
Actuarial gains and losses:
Experience-based adjustment of the obligation	31.3	-7.1
Changes in the financial assumptions	-196.9	34.6
Transfer	0.1	–
Benefits paid	-30.2	-27.0
Transfer into discontinued operations	–	-27.8
DBO as of Dec. 31	539.8	541.2

The present value of the pension obligation is divided among the groups of eligible persons as follows:

Value of the defined benefit obligation

in € million	Dec. 31, 2022	Dec. 31, 2023

Active employees	97.9	94.5
Former employees with vested pension rights	85.5	93.0
Pensioners	356.4	353.7
DBO as of Dec. 31	539.8	541.2

Plan assets primarily comprise pension liability insurance reinsurance contracts and long-term contributions made by Vonovia, which are managed by trustees, in the context of the deferred compensation scheme that was closed in the 2021 fiscal year. The following table provides a breakdown of the plan assets:

Breakdown of the plan assets

in %	Dec. 31, 2022	Dec. 31, 2023

Shares	4.00	5.73
Fixed-interest securities	0.00	4.50
Cash assets	0.00	1.68
Insurance contracts	96.00	88.09

The fair value of the plan assets has developed as follows:

Fair value of the plan assets

in € million	2022	2023

Fair value of plan assets as of Jan. 1	28.3	28.7
Return calculated using the actuarial interest rate	0.2	1.0
Actuarial gains:
Income from plan assets not already included in interest income	0.2	0.1
Benefits paid	-1.6	-1.7
Employer contributions	1.6	1.9
Fair value of plan assets as of Dec. 31	28.7	30.0

The actual return on plan assets amounted to € 1.1 million during the fiscal year (2022: € 0.4 million).

The net liability recognized in the balance sheet developed as follows:

Net pension obligation

in € million	2022	2023

Net pension obligation as of January 1	683.6	511.1
Interest expense	7.4	18.5
Current service cost	16.0	9.1
Actuarial gains and losses:
Experience-based adjustment of the obligation	30.1	-7.1
Changes in the financial assumptions	-195.7	34.6
Income from plan assets not already included in interest income	-0.2	-0.1
Transfer	0.1	–
Employer contributions	-1.6	-1.9
Benefits paid	-28.6	-25.3
Transfer into discontinued operations	–	-27.8
Net pension obligation as of January 31	511.1	511.1

The following table shows a reconciliation of the defined benefit obligation to the pension obligation recognized in the balance sheet:

Reconciliation of the defined benefit obligation to the pension obligation recognized in the balance sheet

in € million	Dec. 31, 2022	Dec. 31, 2023

Present value of funded obligations	33.5	42.0
Present value of unfunded obligations	506.3	499.1
Total present value of defined benefit obligations	539.8	541.1

Fair value of plan assets	-28.7	-30.0
Net liability recognized in the balance sheet	511.1	511.1

Other assets to be recognized	1.4	1.3
Provisions for pensions recognized in the balance sheet	512.5	512.4

In 2023, actuarial losses of € 27.5 million (excluding deferred taxes) were recognized in other comprehensive income (2022: actuarial gains of € 165.8 million).

The weighted average term of the defined benefit obligations is 12.82 years (December 31, 2022: 12.5 years).

The following table contains the estimated, undiscounted pension payments of the coming five fiscal years and the total of those in the subsequent five fiscal years:

Projected, undiscounted pension payments of the coming five fiscal years and the total of those in the subsequent five fiscal years

in € million		Projected pension payments

2024		31.7
2025		31.2
2026		31.4
2027		31.0
2028		30.5
2029–2033		150.6

Sensitivity Analyses

An increase or decrease in the material actuarial assumptions would have led to the following defined benefit obligation, providing the other assumptions did not change:

Material actuarial assumptions effects on the DBO

in € million		Dec. 31, 2022	Dec. 31, 2023

Actuarial interest rate	Increase of 0.5%	507.7	509.5
	Decrease of 0.5%	575.1	576.4
Pension trend	Increase of 0.25%	549.7	550.3
	Decrease of 0.25%	529.0	531.0

An increase in life expectancy of 4.8% would have resulted in an increase in the DBO of € 21.9 million as of December 31, 2023 (December 31, 2022: € 17.8 million). This percentage rise corresponds to a one-year increase in the life expectancy of a man who was 65 at the reporting date.

If several assumptions are changed simultaneously, the cumulative effect is not necessarily the same as if there had been a change in just one of the assumptions.

The provisions for pensions include € 2.5 million (December 31, 2022: € 2.6 million) for pension obligations which were transferred to third parties as part of an assumption of debt and which relate to vested rights and the payment of current pensions. A corresponding non-current receivable relating to the reimbursement of these payments is shown under miscellaneous other assets.

Other Provisions

Accounting Policies

Other provisions are recognized when there is a present obligation, either legal or constructive, vis-à-vis third parties as a result of a past event if it is probable that a claim will be asserted and the probable amount of the required provision can be reliably estimated. Provisions are discounted if the resulting effect is material. The carrying amount of discounted provisions increases in each period to reflect the passage of time and the unwinding of the discount is recognized within interest expense. The discount rate is a pre-tax rate that reflects current market assessments.

Provisions for restructuring expenses are recognized when the Group has set up and communicated a detailed formal plan for restructuring and has no realistic possibility of withdrawing from these obligations.

Provisions for onerous contracts are recognized when the expected benefits from a contract are lower than the unavoidable cost of meeting the obligations under the contract. The provision is stated at the lower of the present value of the fulfillment obligation and the cost of terminating the contract, i.e., a possible indemnity or fine for breach or non-fulfillment of contract.

Provisions are reviewed regularly and adjusted to reflect new information or changed circumstances.

The provisions for pre-retirement part-time work arrangements are basically to be classified as other long-term employee benefits that are to be accrued over the employees’ service periods.

The assets of the insolvency policy to secure fulfillment shortfalls arising from pre-retirement part-time work arrangements are offset against the amounts for fulfillment shortfalls contained in the provisions for pre-retirement part-time work arrangements.

A contingent liability is a possible obligation toward third parties that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events or a present obligation that arises from past events for which an outflow of resources is not probable or the amount of which cannot be estimated with sufficient reliability. According to IAS 37, contingent liabilities are not generally recognized.

Development of Other Provisions During the Fiscal Year

Development of Other Provisions during the Fiscal Year

in € million	As of Jan. 1, 2023	Changes in scope of consolidation	Additions	Reversals	Netting plan assets	Interest accretion to provisions	Revaluation from currency effects	Transfer	Transfer into discontinued operations	Utilization	As of Dec. 31, 2023

Other provisions
Environmental remediation	25.0	–	–	-0.3	–	0.5	–	-9.3	0.4	-1.9	14.4
Personnel obligations	39.0	–	44.2	-0.8	0.0	0.2	–	3.4	-1.2	-22.4	62.4
Miscellaneous other provisions	267.7	0.0	55.4	-86.4	–	3.8	0.0	14.4	-3.1	-64.1	187.7
	331.7	0.0	99.6	-87.5	0.0	4.5	0.0	8.5	-3.9	-88.4	264.5

Development of Other Provisions During the previous year

Development of Other Provisions during the Previous Year

in € million	As of Jan. 1, 2022	Changes in scope of consolidation	Additions	Reversals	Netting plan assets	Interest accretion to provisions	Revaluation from currency effects	Transfer	Utilization	As of Dec. 31, 2022 (adjusted)

Other provisions
Environmental remediation	36.6	–	–	-0.5	–	-2.2	–	-7.3	-1.6	25.0
Personnel obligations	123.4	–	70.0	-5.0	-0.2	–	-0.7	-71.2	-77.3	39.0
Outstanding trade invoices	267.2	–	–	–	–	–	–	-267.2	–	–
Miscellaneous other provisions	248.6	0.0	58.8	-22.1	–	1.6	-0.1	21.3	-40.4	267.7
	675.8	0.0	128.8	-27.6	-0.2	-0.6	-0.8	-324.4	-119.3	331.7

Reversals of provisions are generally offset against the expense items for which they were originally established.

The provisions for environmental remediation primarily refer to site remediation of locations of the former Raab Karcher companies. Remediation has either already begun or an agreement has been reached with the authorities as to how the damage is to be remedied. The cost estimates are based on expert opinions detailing the anticipated duration of the remediation work and the anticipated cost.

The personnel obligations are provisions for pre-retirement part-time work arrangements, provisions for bonuses, severance payments not relating to restructuring and other personnel expenses. The other personnel expenses include a provision for the long-term incentive plan (LTIP) determined in accordance with IFRS 2 of € 9.1 million (December 31, 2022: € 9.3 million) (see [F49] Share-based Payments).

The material individual cost items under miscellaneous other provisions include costs associated with legal disputes in the amount of € 49.3 million (December 31, 2022: € 39.4 million), litigation costs in the amount of € 38.0 million (December 31, 2022: € 20.0 million), costs associated with company tax audits in the amount of € 2.3 million (December 31, 2022: € 7.3 million) and provisions for other contractually agreed guarantees in the amount of € 2.3 million (December 31, 2022: € 3.9 million).

The Group expects to settle the lion’s share of the provision over the coming year.

Adjusted EBT

Adjusted EBT is the Group’s leading indicator of profitability as of 2024. The IFRS profit for the period is reconciled to earnings before taxes (EBT). This EBT is adjusted to reflect special effects based on the definition that has applied to date (effects that do not relate to the period, recur irregularly or are atypical for business operations). The net financial result is also adjusted to reflect non-cash and actuarial valuation effects that recur irregularly. The further adjustments to reflect the effects of IAS 40 measurement, writedowns, other (Non Core/Other result), net income from non-current financial assets accounted for using the equity method and effects from residential properties held for sale produce the Group’s Adjusted EBT.

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 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.

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 that are not proving profitable (MFH Sales).

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)

Net Debt/EBITA

Net Debt/EBITDA reflects average adjusted net debt in relation to the Adjusted EBITDA Total.

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.

Operating Free Cash-Flow

The Adjusted EBT will be used as a basis for a reconciliation to the Operating Free Cash Flow (OFCF) as the leading indicator of internal financing. Depreciation and amortization will be added to Adjusted EBT, and the liquidity contribution made by the Recurring Sales segment, as well as the change in working capital, will be taken into account. Capitalized maintenance and dividend payments made to parties outside of the Group, as well as income tax paid, are subtracted from this figure. This operating free cash flow is a measure of the Group’s operational capacity to generate cash surpluses and, as a result, of its internal financing power.

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)

Non-core