56 Cash Flow Hedges and Stand-alone Hedging Instruments

On the reporting date, the nominal volume of cash flow hedges held in euros amounts to € 1,412.9 million (December 31, 2024: € 764.0 million). Interest rates on hedging instruments are between 1.505% and 3.513% with original swap periods of between 2.0 and 20 years.

In connection with the issue of a floating rate 2NC1 bond in the amount of € 750.0 million, Vonovia concluded a corresponding interest rate swap simultaneously on April 14, 2025. After interest rate hedging, the coupon for one year is 2.89%.

The forward starting interest rate swap remaining from 2024 was settled in cash as of January 14, 2025 in line with the contractual terms. The bank reimbursed € 0.9 million.

In the reporting year, Vonovia SE also concluded a further five cross currency swaps (CCS), four of which were included in hedge accounting. Two hedging transactions relate to SEK, two to AUD and one to NOK. The nominal value hedged for what are now eight foreign currency transactions managed in hedge accounting corresponds to a volume of € 1,485.9 million as of December 31, 2025 (December 31, 2024: € 891.4 million). The CCS for two nominal values hedged in Swedish krona of SEK 200.0 million and SEK 350.0 million, which corresponds to a volume of around € 50.8 million (December 31, 2024: € 30.5 million), remained as stand-alone swaps.

With the exception of two transactions, the euro interest rate swaps with hedge accounting are reported with negative market values as of the reporting date.

For one hedging instrument that is maintained within what is known as passive hedge accounting, interest income of € 1.2 million was reclassified in the reporting year in line with the expected cash flows from the underlying hedged item (December 31, 2024: interest expenses of € 3.0 million). This reduced the value frozen in other comprehensive income to € 11.0 million (December 31, 2024: € 12.2 million).

All derivatives are included in netting agreements with the issuing banks. No economic or accounting offsetting was performed in the reporting year.

Key parameters of the interest rate swaps were as follows:

Key parameters of the cross currency swaps were as follows:

As of the reporting date, Deutsche Wohnen Group recognized 14 stand-alone interest rate swaps, five with a floor. The nominal value hedged came to € 749.0 million as of December 31, 2025 (December 31, 2024: € 848.8 million); three transactions result in a negative market value of € 5.3 million (December 31, 2024: € 7.9 million), while the positive market values of the other interest rate swaps total € 16.6 million (December 31, 2024: € 24.1 million).

The nominal volume hedged in relation to a current total of 15 stand-alone interest rate swaps at BUWOG came to € 609.2 million as of December 31, 2025 (December 31, 2024: € 559.5 million); positive market values totaling € 25.1 million (December 31, 2024: € 11.5 million) were offset by negative market values totaling € 1.3 million (December 31, 2024: € 2.4 million).

On the reporting date, the Victoriahem Group recognized six stand-alone interest rate swaps, two of which were portfolio hedges. The nominal value hedged in Swedish krona came to € 825.5 million as of December 31, 2025 (December 31, 2024: € 845.9 million); positive market values totaling € 0.0 million (December 31, 2024: € 0.8 million) were offset by negative market values totaling € 10.2 million (December 31, 2024: € 9.1 million).

All in all, the positive market values of cash flow hedges from interest rate derivatives in the amount of € 4.8 million (December 31, 2024: € 3.4 million) were offset in the reporting year by negative market values of € 15.3 million (December 31, 2024: € 24.4 million).

In the case of the cross currency swaps, the positive market values of € 16.4 million (December 31, 2024: € 10.9 million) were offset by negative market values of € 24.6 million (December 31, 2024: € 15.5 million).

At the same time, positive market values from stand-alone interest rate derivatives were recognized in the amount of € 41.8 million (December 31, 2024: € 36.4 million) and were offset in the reporting year by negative market values of € 17.0 million (December 31, 2024: € 19.8 million).

The positive deferred interest balance across the board came to € 8.3 million in the reporting year (December 31, 2024: € 5.5 million).

In the reporting year, after allowing for deferred taxes, negative cumulative ineffectiveness for cash flow hedges amounted to € -0.3 million (2024: € 0.2 million), meaning that net interest deteriorated by € 0.5 million) (2024: € 0.5 million).

The designation of the cash flow hedges as hedging instruments is prospectively determined on the basis of a sensitivity analysis, retrospectively on the basis of the accumulated dollar offset method. The fair value changes of the hedged items are determined on the basis of the hypothetical derivative method. In the reporting year – as in the prior year – the impact of default risk on the fair values is negligible and did not result in any adjustments of the balance sheet item.

The derivatives in the form of long-term call options to buy back shares, which were recognized in the previous year in the amount of € 731.0 million, were adjusted, with recognition in profit and loss, to € 671.0 million in the reporting year. For details on the call options, please refer to the chapter entitled [D28] Financial Assets.

In May 2025, Vonovia placed two convertible bonds with a total volume of € 1,300 billion. The bonds, each worth € 650.0 million, will mature in May 2030 and May 2032. The bonds can either be converted into shares in Vonovia or settled in cash. The bond terms and conditions are such that the convertible bonds are treated as debt capital. For accounting purposes, the conversion rights are separated from the debt transaction and measured separately as a derivative. The option components are reported under derivative financial liabilities. Upon initial recognition not affecting net income, the value of the derivative came to € 143.7 million. The value came to € 79.4 million as of December 31, 2025. The change in value was recognized affecting net income in the amount of € 64.3 million in interest expense from derivative measurement.

The impact of the cash flow hedges (after income taxes) on the development of other reserves is shown below:

The impact of the cash flow hedges (after income taxes) on total comprehensive income is shown below:

On the basis of the valuation as of December 31, 2025, Vonovia used a sensitivity analysis for all swaps to determine the change in equity (after income taxes) given a parallel shift in the interest rate structure of 50 basis points in each case:

A further sensitivity analysis for the CCS showed that a change in the foreign currency level of -0.5% (+0.5%) would lead, after allowance for deferred taxes, to a change in the other reserves not affecting net income of € -5.7 million (or € 5.5 million) (2024: € -2.7 million (or € 2.8 million)), while ineffectiveness affecting net income in the amount of € 0.0 million (or € -0.0 million) (2024: € 0.0 million (or € -0.6 million)) would result at the same time.

The conversion rights were also subjected to a sensitivity analysis in which we started by shifting the implicitly derived volatility by +/-100bps in each case, which would result in a change in equity affecting net income of € -4.1 million/ € +4.0 million, taking deferred taxes into account. The second step involved adjusting the share price as of December 31, 2025 by +5%/-5%, which would result in a change in equity affecting net income of € -9.0 million/€ +7.9 million, taking deferred taxes into account.

A final sensitivity analysis revealed that, for a minority of variable-rate loans not designated as hedges, a parallel shift in the interest structure of 50 basis points in each case would have an effect in the income statement of € 19.8 million (or € -19.8 million), as against an effect of € 15.9 million (or € -15.9 million) in the previous year.