Vonovia Annual Report 2024

51 Additional Financial Instrument Disclosures

Additional Financial Instrument Disclosures – Fiscal year

		Amounts recognized in balance sheet in accordance with IFRS 9
Measurement categories and classes: in € million	Carrying amounts Dec. 31, 2024	Amortized cost	Fair value affecting net income	Fair value recognized in equity without re- classification	Hedge accounting – no classi- fication in accordance with IFRS 9	Amounts recognized in balance sheet in acc. with IFRS 16	Fair value Dec. 31, 2024	Fair value hierarchy level

Assets
Cash and cash equivalents
Cash on hand and deposits at banking institutions	1,756.7	1,756.7					1,756.7	n.a.
Trade receivables	584.6	584.6					584.6	n.a.
Financial assets
Finance lease receivables	77.1					77.1		n.a.
Loans to other investments	49.7	49.7					55.0	2
Other non-current loans	5.8	5.8					5.8	2
Other non-current loans to associates and joint ventures	522.0	522.0					522.0	2
Securities	333.6	327.2		6.4			333.6	1
Other investments	271.6			271.6			271.6	3
Derivative financial assets
Cash flow hedges – no classification in accordance with IFRS 9	20.7		-0.8		21.5		20.7	2
Call option on equity instruments	731.0		731.0				731.0	3
Stand-alone interest rate swaps and interest rate caps	36.4		36.4				36.4	2

Liabilities
Trade payables	530.2	530.2					530.2	n.a.
Bonds	24,410.7	24,410.7					22,317.8	1
Other non-derivative financial liabilities	18,240.3	18,240.3					17,417.4	2
Derivatives and put options
Purchase price liabilities from put options/rights to reimbursement	311.2	311.2					232.2	3
Stand-alone interest rate swaps and interest rate caps	19.8		19.8				19.8	2
Cash flow hedges – no classification in accordance with IFRS 9	40.9		9.9		31.0		40.9	2
Lease liabilities	675.7					675.7		n.a.
Liabilities from tenant financing	150.6	150.6					150.6	n.a.
Liabilities to non-controlling interests	208.8	208.8					208.8	n.a.

Additional Financial Instrument Disclosures – Previous year

		Amounts recognized in balance sheet in accordance with IFRS 9
Measurement categories and classes: in € million	Carrying amounts Dec. 31, 2023	Amortized cost	Fair value affecting net income	Fair value recognized in equity without re- classification	Hedge accounting – no classi- fication in accordance with IFRS 9	Amounts recognized in balance sheet in acc. with IFRS 16	Fair value Dec. 31, 2023	Fair value hierarchy level

Assets
Cash and cash equivalents
Cash on hand and deposits at banking institutions	1,374.4	1,374.4					1,374.4	n.a.
Trade receivables	593.2	593.2					593.2	n.a.
Financial assets
Finance lease receivables	15.7					15.7		n.a.
Loans to other investments	187.6	187.6					191.5	2
Other non-current loans	21.6	21.6					21.6	2
Other non-current loans to associates and joint ventures	682.9	682.9					682.9	2
Securities	324.0	318.1		5.9			324.0	1
Other investments	321.7			321.7			321.7	3
Derivative financial assets
Cash flow hedges – no classification in accordance with IFRS 9	8.9		-2.8		11.7		8.9	2
Call option on equity instruments	838.0		838.0				838.0	3
Stand-alone interest rate swaps and interest rate caps	63.8		63.8				63.8	2

Liabilities
Trade payables	493.4	493.4					493.4	n.a.
Bonds	24,428.7	24,428.7					21,386.5	1
Other non-derivative financial liabilities	18,468.4	18,468.4					17,087.8	2
Derivatives and put options
Purchase price liabilities from put options/rights to reimbursement	316.2	316.2					220.9	3
Stand-alone interest rate swaps and interest rate caps	10.6		10.6				10.6	2
Cash flow hedges – no classification in accordance with IFRS 9	48.7		0.1		48.6		48.7	2
Lease liabilities	673.2					673.2		n.a.
Liabilities from tenant financing	154.1	154.1					154.1	n.a.
Liabilities to non-controlling interests	198.4	198.4					198.4	n.a.

The section below provides information on the financial assets and financial liabilities not covered by IFRS 9:

Employee benefits in accordance with IAS 19: gross presentation of right to reimbursement arising from transferred pension obligations in the amount of € 2.0 million (December 31, 2023: € 2.5 million).
Amount by which the fair value of plan assets exceeds the corresponding obligation of € 1.7 million (December 31, 2023: € 1.5 million).
Provisions for pensions and similar obligations: € 499.8 million (December 31, 2023: € 512.4 million).

The following table shows the assets and liabilities that are recognized in the balance sheet at fair value and their classification according to the fair value hierarchy:

Assets and liabilities

in € million	Dec. 31, 2024	Level 1	Level 2	Level 3

Assets
Investment properties	78,343.1			78,343.1
Financial assets
Non-current securities	6.4	6.4
Other investments	271.6			271.6
Assets held for sale
Investment properties	1,498.7		1,498.7
Derivative financial assets
Cash flow hedges	20.7		20.7
Call option on equity instruments	731.0			731.0
Stand-alone interest rate swaps and caps	36.4		36.4
Liabilities
Derivative financial liabilities
Cash flow hedges	40.8		40.8
Stand-alone interest rate swaps and caps	19.8		19.8



in € million	Dec. 31, 2023	Level 1	Level 2	Level 3

Assets
Investment properties	81,120.3			81,120.3
Financial assets
Non-current securities	5.9	5.9
Other investments	321.7			321.7
Assets held for sale
Investment properties	313.1		313.1
Derivative financial assets
Cash flow hedges	8.9		8.9
Call option on equity instruments	838.0			838.0
Stand-alone interest rate swaps and caps	63.8		63.8
Liabilities
Derivative financial liabilities
Cash flow hedges	48.7		48.7
Stand-alone interest rate swaps and caps	10.6		10.6

Accounting Policies

In general, Vonovia measures its investment properties on the basis of the discounted cash flow (DCF) methodology (Level 3). The material valuation parameters and valuation results can be found in chapter [D27] Investment Properties.

The investment properties classified as assets held for sale are recognized at the time of their transfer to assets held for sale at their new fair value, the agreed purchase price (Level 2).

Securities are generally measured using the quoted prices in active markets (Level 1).

All investments in equity instruments that do not relate to associates or call options to buy back shares (Level 3) are measured at fair value in other comprehensive income. The Group’s primary aim is to hold its investments in equity instruments in the long term for strategic purposes. Measurement is at Level 3, as the share price of the relevant investments and the partly underlying cash flows are not directly observable. They are measured either directly via the share price or using a discounted cash flow model.

The fair value of the bonds listed on the market is calculated based on the market prices that apply on the reporting date (Level 1).

The fair value of the other non-derivative financial liabilities is calculated by means of a discounted cash flow (DCF) model. In addition to the tenor-specific EURIBOR/STIBOR rates (3M; 6M), Vonovia’s own credit risk is also used here (Level 2).

For the measurement of derivative financial instruments, cash flows are first calculated and then discounted. In addition to the tenor-specific EURIBOR/STIBOR rates (3M; 6M), the respective credit risk is taken as a basis for discounting. Depending on the expected cash flows, either Vonovia’s own credit risk or the counterparty risk is taken into account in the calculation.

As part of the valuation of the cross currency swaps, the USD cash flows were converted into EUR using the EUR/USD FX forward curve, after which all EUR cash flows are discounted using the 6M EURIBOR curve (Level 2).

The amount of the estimated impairment loss on cash and cash equivalents was calculated based on the losses expected over a period of twelve months.

No financial instruments were reclassified to different hierarchy levels vis-à-vis the comparative period.

Due to the current interest rate environment (and the return to more positive market values as a result), counterparty risk premiums were relevant for the interest rate swaps in the consolidated financial statements alongside Vonovia’s own credit risk. As with Vonovia’s own risk, they are derived from rates observable on the capital markets and ranged from 10 to 200 basis points, depending on the residual maturities. Vonovia’s own risk premiums were trading at between 55 and 195 basis points on the same cut-off date, depending on the maturities. Regarding the positive market values of the cross currency swaps in CHF, a counterparty risk of between 90 and 123 basis points was taken into account. With regard to the negative market values of the cross currency swaps in GBP, a risk of 164 basis points assumed by Vonovia itself was taken into account.

The fair values of the cash and cash equivalents, trade receivables and other financial receivables approximate their carrying amounts at the reporting date owing to their mainly short maturities. It was determined that the cash and cash equivalents have a low risk of default due to the external ratings and short residual maturities and that there is no need for any material impairment of cash and cash equivalents.

Net results according to measurement category – Fiscal year

					From subsequent measurement
in € million	From interest	Income from other non-current loans	Measurement of call options	Dividends from other investments	Impairment losses	Expected credit loss: Other non-current loans to associates	Derec- ognized receiv- ables	Derec- ognized liabili- ties	Financial result affecting income 2024	Measure- ment of cash flow hedges	Measure- ment of financial instruments categorized as equity instruments	Total financial result 2024

2024
Debt instruments carried at (amortized) cost	87.1	17.2			-32.9	-375.2	4.3		-299.5			-299.5
Derivatives measured at FV through P&L	-20.8		-107.0						-127.8			-127.8
Effective hedge accounting – no classification in accordance with IFRS 9										11.2		11.2
Equity instruments measured at FVOCI without reclassification				32.2					32.2		23.7	55.9
Financial liabilities measured at (amortized) cost	-849.8							0.1	-849.7			-849.7
	-783.5	17.2	-107.0	32.2	-32.9	-375.2	4.3	0.1	-1,244.8	11.2	23.7	-1,209.9

Net results according to measurement category – Previous year

					From subsequent measurement
in € million	From interest	Income from other non-current loans	Measure- ment of call options	Dividends from other invest- ments	Impair- ment losses	Expected credit loss: Other non-current loans to associates	Derec- ognized receiv- ables	Derec- ognized liabilities	Financial result affecting income 2023	Measure- ment of cash flow hedges	Measure- ment of financial instruments categorized as equity instruments	Total financial result 2023

2023
Debt instruments carried at (amortized) cost	227.5	60.6			-15.6	-12.0	-1.7		258.8			258.8
Derivatives measured at FV through P&L	-3.1		90.0						86.9			86.9
Effective hedge accounting – no classi- fication in accordance with IFRS 9										-93.0		-93.0
Equity instruments measured at FVOCI without reclassification				22.1					22.1		-28.5	-6.4
Financial liabilities measured at (amortized) cost	-764.9							1.3	-763.6			-763.6
	-540.5	60.6	90.0	22.1	-15.6	-12.0	-1.7	1.3	-395.8	-93.0	-28.5	-517.3

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

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.

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)

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.