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15 Investment Properties

Investment Properties

in € million

As of Jan. 1, 2022

94,100.1

Additions

529.5

Capitalized modernization costs

611.5

Grants received

-3.6

Transfer from down payments made

35.5

Transfer to assets held for sale

-250.3

Disposals

-90.6

Net income from fair value adjustments of investment properties

3,115.9

Revaluation of assets held for sale

38.3

Revaluation from currency effects

-345.9

As of Jun. 30, 2022*

97,740.4

As of Jan. 1, 2021

58,071.8

Additions due to business combinations

28,181.7

Additions

792.3

Capitalized modernization costs

1,124.2

Grants received

-2.7

Transfer to property, plant and equipment

-12.6

Transfer from property, plant and equipment

11.6

Transfer from real estate inventories

20.0

Transfer to real estate inventories

-27.4

Transfer to assets held for sale

-1,221.6

Other transfers

-0.5

Disposals

-167.7

Net income from fair value adjustments of investment properties

7,393.8

Revaluation of assets held for sale

87.4

Revaluation from currency effects

-150.2

As of Dec. 31, 2021*

94,100.1

  1. * The values as of Jun. 30, 2022 include assets of € 1,286.8 million (Dec. 31, 2021: € 1,270.2 million) that are measured using the acquisition cost model, as their fair value cannot be measured reliably on a continuing basis. As a result of the reassessment of expected income and construction costs, an impairment loss in the amount of € 119.4 million on these portfolios was recognized as of June 30, 2022.

Fair Values

Vonovia determines fair value in accordance with the requirements of IAS 40 in conjunction with IFRS 13. We refer to the detailed information set out in the consolidated financial statements for 2021.

Vonovia measures its portfolio in Germany, Austria and now also for the first time its portfolio in Sweden internally on the basis of the discounted cash flow (DCF) method. Under the DCF methodology, the expected future income and costs of a property are forecast over a period of ten years and discounted to the date of valuation as the net present value. Furthermore, the terminal value of the property at the end of the ten-year period is determined using the expected stabilized net operating income and again discounted to the date of valuation as the net present value. In addition, the valuation of the portfolio in Austria is based on the assumption of sales strategies for the recurring sales of apartments for a subportfolio. Attainable revenues are calculated based on sales prices for comparable apartments (market approach) and are reported in the appropriate period in the DCF model. In order to take the sales potential into account, the DCF detailed period is extended to 100 years for the Austrian portfolios and no terminal value is used.

Due to the market momentum recognized in the first half of 2022, Vonovia decided, following the valuation for the first quarter, to perform a new valuation on the 20 German locations that account for the largest fair value shares. The list of the locations to be valued was extended to include three additional German locations in which considerable changes in value had been observed. In addition, the ten locations in Sweden with the largest fair value shares were valued, as was Vienna in Austria. The selection includes the lion’s share of the portfolio, accounting for roughly three quarters of the total fair value.

The value developments and values for the real estate assets in Germany and Austria were subjected to a plausibility check performed by the experts CBRE GmbH (Vonovia portfolio) and Jones Lang LaSalle SE (Deutsche Wohnen portfolio). They confirmed that the portfolio value as of June 30, 2022, is plausible and consistent with the market. The plausibility of the internal valuation was assessed by an external valuation conducted by Savills Sweden SE. The market value resulting from the external report deviates from the internal valuation result by 0.1%.

For the part of the portfolio that was not revalued, the valuation from the end of 2021 is applied again, with updates to reflect capitalization.

The real estate portfolio of Vonovia is to be found in the items investment properties, property, plant and equipment (owner-occupied properties), real estate inventories, contractual assets and assets held for sale. The fair value of the portfolio comprising residential buildings, commercial properties, garages and parking spaces, project developments, as well as undeveloped land and any inheritable building rights granted was € 98,811.2 million as of June 30, 2022 (Dec. 31, 2021: € 97, 845.3 million). This corresponds to a net initial yield for the developed land (excluding the Deutsche Wohnen subportfolio) of 2.5% (Dec. 31, 2021: 2.6%). For Germany, this results in an in-place-rent multiplier of 28.9 for the Vonovia portfolio excluding Deutsche Wohnen (Dec. 31, 2021: 28.0) and a fair value per m² of € 2,508 (Dec. 31, 2021: € 2,401 per m²). The in-place-rent multiplier for the Austrian portfolio comes to 26.3 (Dec. 31, 2021: 26.5) and a fair value per m² of € 1,709 (Dec. 31, 2021: € 1,674 per m²), while the in-place-rent multiplier for Sweden amounts to 20.8 (Dec. 31, 2021: 20.6) and a fair value per m² of € 2,395 (Dec. 31, 2021: € 2,475 per m²).

The net initial yield for the developed land in the subportfolio comprising Deutsche Wohnen’s stock comes to 2.1% (Dec. 31, 2021: 2.1%), which corresponds to a market value of € 3,120 per m² (Dec. 31, 2021: € 2,894 per m²) and an in-place-rent multiplier of 35.0 (Dec. 31, 2021: 33.5).

The inflation rate applied to the valuation procedure comes to 1.5%. For the Austrian portfolio, a sales strategy with an average selling price of € 2,349 per m² was assumed for 51.5% of the portfolio.

Net income from the valuation of investment properties amounted to € 3,115.9 million in the first half of 2022 (H1 2021: € 3,698.6 million).

The material valuation parameters for the investment properties (Level 3) in the real estate portfolio are as follows as of June 30, 2022, broken down by regional markets/shown separately for the portfolio of Deutsche Wohnen: Explanatory information on the prior-year figures can be found in the 2021 Annual Report of Vonovia SE.

Material valuation parameters for the investment properties (level 3) – As of June 30, 2022

Valuation results*

Valuation parameters for investment properties (Level 3)

Regional market

Fair value (in € million)

thereof assets held for sale (in € million)

thereof owner-occupied properties (in € million)

thereof investment properties (in € million)

Manage­ment costs residential (€ per residential unit p.a.)

Main­tenance costs total residential (€/m² p.a.)

Market rent residential (€/m² per month)

Market rent increase residential

Stabilized vacancy rate residential

Discount rate total

Capitalized interest rate total

June 30, 2022

Berlin

8,667.9

74.6

6.5

8,586.7

267

14.18

8.10

1.8%

1.0%

3.9%

2.2%

Rhine Main Area

5,670.6

7.2

10.2

5,653.1

287

14.11

9.68

1.8%

1.0%

4.2%

2.6%

Southern Ruhr Area

5,657.2

5.8

9.9

5,641.5

281

12.83

7.32

1.4%

2.6%

4.2%

2.9%

Rhineland

4,965.3

12.2

5.9

4,947.2

284

13.81

8.55

1.6%

1.7%

4.4%

2.9%

Dresden

4,789.3

0.0

7.7

4,781.6

253

14.04

6.78

1.6%

2.4%

4.3%

2.9%

Hamburg

3,859.6

2.9

4.7

3,851.9

272

14.57

8.91

1.6%

1.3%

4.0%

2.5%

Kiel

3,335.2

5.9

5.6

3,323.8

275

14.92

7.90

1.6%

1.7%

4.2%

2.8%

Munich

2,847.4

7.0

6.5

2,833.9

276

14.27

12.20

1.9%

0.6%

4.3%

2.6%

Stuttgart

2,609.8

3.1

2.2

2,604.6

286

14.86

9.52

1.8%

1.2%

4.5%

2.8%

Hanover

2,512.8

1.8

2.7

2,508.3

274

14.11

7.88

1.6%

1.9%

4.3%

2.9%

Northern Ruhr Area

2,195.8

3.9

7.0

2,184.8

281

13.28

6.56

1.1%

3.3%

4.6%

3.7%

Bremen

1,613.9

0.6

2.7

1,610.6

280

13.34

7.25

1.6%

2.2%

4.2%

2.8%

Leipzig

1,302.1

1.1

1.5

1,299.5

266

14.98

7.00

1.6%

2.6%

4.1%

2.8%

Westphalia

1,288.6

0.2

2.2

1,286.2

279

13.33

7.59

1.5%

2.1%

4.3%

3.0%

Freiburg

791.1

0.3

1.5

789.3

282

15.45

8.85

1.6%

0.9%

4.2%

2.7%

Other strategic locations

3,623.2

3.2

6.1

3,613.9

281

14.25

7.89

1.5%

2.3%

4.6%

3.2%

Total strategic locations

55,729.7

129.8

82.9

55,516.9

275

13.99

8.04

1.6%

1.9%

4.2%

2.7%

Non-strategic locations

215.1

13.0

0.0

202.0

316

15.18

7.89

1.5%

2.1%

4.6%

3.2%

Vonovia Germany

55,944.8

142.8

83.0

55,718.9

275

13.99

8.04

1.6%

1.9%

4.2%

2.7%

Vonovia Sweden**

7,322.7

0.0

0.0

7,322.7

n.a.

n.a.

10.04

1.7%

1.4%

5.0%

3.3%

Vonovia Austria**

2,954.3

6.8

51.2

2,896.4

n.a.

19.69

5.79

1.5%

2.4%

5.2%

n.a.

Deutsche Wohnen

27,162.4

4.6

55.0

27,102.8

270

15.02

8.25

1.8%

1.2%

4.1%

2.4%

  1. * Fair value of the developed land excluding € 5,427.1 million for development, undeveloped land, inheritable building rights granted and other; € 4,346.0 million of this amount relates to investment properties. The investment properties balance sheet item also includes the present value in connection with payments for right-of-use assets in the amount of € 353.6 million.
  2. ** The valuation methods used for the portfolio in Austria and Sweden provide valuation parameters that are only partially comparable. Administrative and maintenance expenses are not shown separately.

Material valuation parameters for the investment properties (level 3) – Previous year

Valuation results*

Valuation parameters for investment properties (Level 3)

Regional market

Fair value (in € million)

thereof assets held for sale (in € million)

thereof owner-occupied properties (in € million)

thereof investment properties (in € million)

Manage­ment costs residential (€ per residential unit p. a.)

Main­tenance costs total residential (€/m² p. a.)

Market rent residential (€/m² per month)

Market rent increase residential

Stabilized vacancy rate residential

Discount rate total

Capitalized interest rate total

Dec. 31, 2021

Berlin

8,964.6

817.4

6.4

8,140.8

265

14.12

8.08

1.8%

1.0%

4.1%

2.3%

Rhine Main Area

5,605.9

17.6

10.2

5,578.1

286

14.03

9.67

1.8%

1.1%

4.3%

2.6%

Southern Ruhr Area

5,267.0

9.7

9.5

5,247.9

279

12.78

7.27

1.5%

2.6%

4.3%

3.0%

Rhineland

4,963.1

152.3

5.7

4,805.1

283

13.73

8.52

1.6%

1.8%

4.5%

2.9%

Dresden

4,656.1

0.4

7.6

4,648.1

251

14.03

6.74

1.6%

2.4%

4.4%

2.9%

Hamburg

3,611.8

3.3

4.5

3,604.1

271

14.49

8.78

1.6%

1.3%

4.1%

2.7%

Kiel

3,005.5

1.5

5.1

2,998.8

273

14.93

7.75

1.6%

1.6%

4.5%

3.0%

Munich

2,742.7

7.9

6.3

2,728.5

275

14.14

12.03

1.9%

0.6%

4.4%

2.6%

Stuttgart

2,551.9

3.2

2.1

2,546.6

286

14.73

9.50

1.8%

1.2%

4.5%

2.9%

Hanover

2,392.3

3.1

2.6

2,386.6

273

14.06

7.77

1.6%

2.0%

4.3%

2.9%

Northern Ruhr Area

2,179.9

8.1

7.0

2,164.8

281

13.29

6.56

1.1%

3.3%

4.6%

3.7%

Bremen

1,484.2

0.5

2.5

1,481.3

278

13.32

7.21

1.6%

2.1%

4.4%

3.0%

Leipzig

1,229.6

8.9

1.4

1,219.3

265

14.93

6.88

1.6%

2.7%

4.3%

2.9%

Westphalia

1,173.3

0.9

2.0

1,170.4

277

13.32

7.48

1.5%

2.0%

4.6%

3.3%

Freiburg

788.7

0.9

1.5

786.3

282

15.45

8.84

1.6%

0.9%

4.2%

2.7%

Other strategic locations

3,611.2

3.5

6.1

3,601.6

282

14.26

7.89

1.5%

2.3%

4.6%

3.2%

Total strategic locations

54,227.8

1,039.2

80.5

53,108.3

274

13.94

8.00

1.6%

1.9%

4.4%

2.8%

Non-strategic locations

236.6

16.4

220.2

314

15.05

7.67

1.5%

2.8%

4.6%

3.2%

Vonovia Germany

54,464.5

1,055.7

80.5

53,328.3

274

13.95

7.99

1.6%

1.9%

4.4%

2.8%

Vonovia Sweden**

7,386.0

7,386.0

n.a.

n.a.

10.59

2.0%

0.8%

5.3%

3.2%

Vonovia Austria**

2,932.5

9.7

50.0

2,872.8

n.a.

19.72

5.80

1.7%

2.4%

5.2%

n.a.

Deutsche Wohnen

27,628.7

1,633.3

25,995.4

299

13.49

9.31

1.3%

1.4%

4.0%

2.8%

  1. * Fair value of the developed land excluding € 5,433.6 million for development, undeveloped land, inheritable building rights granted and other; € 4,141.1 million of this amount relates to investment properties. The investment properties balance sheet item also includes the present value in connection with payments for right-of-use assets in the amount of € 376.5 million.
  2. ** The valuation methods used for the portfolio in Austria and Sweden provide valuation parameters that are only partially comparable. Administrative and maintenance expenses are not shown separately.

Sensitivity Analyses

The sensitivity analyses performed on Vonovia’s real estate portfolio show the impact of value drivers dependent upon market developments. Those influenced in particular are the market rents and their development, the amount of recognized administrative and maintenance expenses, cost increases, the vacancy rate and interest rates. The effect of possible fluctuations in these parameters is shown separately below for each parameter by regional market.

Interactions between the parameters are possible but cannot be quantified owing to the complexity of the interrelationships. The vacancy and market rent parameters, for example, can influence each other. If rising demand for housing is not met by adequate supply developments, then this can result in lower vacancy rates and, at the same time, rising market rents. If, however, the rising demand is compensated for by a high vacancy reserve in the location in question, then the market rent level does not necessarily change.

Changes in the demand for housing can also impact the risk associated with the expected cash flows, which is then reflected in adjusted discounting and capitalizing rates. However, the effects do not necessarily have to have a favorable impact on each other, for example, if the changes in the demand for residential real estate are overshadowed by macroeconomic developments.

In addition, factors other than demand can have an impact on these parameters. Examples include changes in the portfolio, in seller and buyer behavior, political decisions and developments on the capital market.

Due to the special situation in Sweden, where changes in inflation will have a considerable impact on future rent increases, it has been assumed that at least one-third of any change in inflation will spill over into rental growth.

The table below shows the percentage impact on values in the event of a change in the valuation parameters. The absolute impact on values is calculated by multiplying the percentage impact by the fair value of the investment properties.

Change in parameters for the investment properties – As of June 30, 2022

Change in value as a % under varying parameters

Change in value as a % under varying parameters

Management costs residential

Maintenance costs residential

Cost increase/ inflation

Market rent residential

Market rent increase residential

Stabilized vacancy rate residential

Discounting and capitalized interest rates total

Regional market

-10%/10%

-10%/10%

-0.5%/+0.5% points

-2%/+2%

-0.2%/+0.2% points

-1%/+1% points

-0.25%/+0.25% points

June 30, 2022

Berlin

0.5/-0.5

1.6/-1.6

5.7/-5.8

-2.4/2.4

-10.5/13.1

1.4/-1.5

13.4/-10.6

Rhine Main Area

0.4/-0.4

1.3/-1.3

3.5/-3.7

-2.3/2.3

-8.2/9.8

1.0/-1.5

10.6/-8.7

Southern Ruhr Area

0.7/-0.7

2.0/-2.0

5.3/-5.4

-2.5/2.5

-8.5/10.1

1.9/-1.6

9.8/-8.2

Rhineland

0.5/-0.5

1.6/-1.6

4.1/-4.2

-2.4/2.3

-8.0/9.5

1.6/-1.5

9.9/-8.3

Dresden

0.7/-0.7

2.1/-2.1

5.4/-5.5

-2.5/2.5

-8.4/10.0

1.8/-1.8

10.0/-8.4

Hamburg

0.5/-0.5

1.6/-1.6

4.6/-4.7

-2.3/2.4

-9.1/11.2

1.2/-1.5

11.7/-9.4

Kiel

0.7/-0.7

2.0/-2.0

5.1/-5.2

-2.4/2.4

-8.5/10.1

1.8/-1.6

10.0/-8.4

Munich

0.3/-0.3

1.0/-1.0

3.4/-3.5

-2.1/2.1

-8.6/10.3

0.7/-1.1

11.6/-9.5

Stuttgart

0.4/-0.4

1.4/-1.4

3.5/-3.6

-2.3/2.3

-7.9/9.1

1.3/-1.4

9.7/-8.2

Hanover

0.6/-0.6

1.8/-1.8

4.7/-4.7

-2.4/2.4

-8.2/9.7

1.7/-1.6

9.9/-8.3

Northern Ruhr Area

1.0/-1.0

2.7/-2.7

5.3/-5.3

-2.6/2.6

-7.1/8.1

2.1/-2.1

7.5/-6.5

Bremen

0.7/-0.7

2.0/-2.0

5.8/-5.8

-2.4/2.4

-8.8/10.6

1.8/-1.5

10.5/-8.6

Leipzig

0.7/-0.7

2.3/-2.2

6.0/-6.0

-2.5/2.5

-8.8/10.6

1.8/-1.8

10.4/-8.6

Westphalia

0.7/-0.7

2.0/-2.0

4.9/-4.9

-2.4/2.4

-8.0/9.5

1.7/-1.4

9.3/-7.9

Freiburg

0.5/-0.5

1.7/-1.7

4.1/-4.3

-2.4/2.3

-8.4/9.9

1.1/-1.6

10.2/-8.5

Other strategic locations

0.6/-0.6

1.9/-1.9

4.2/-4.3

-2.4/2.4

-7.4/8.6

1.7/-1.7

8.7/-7.4

Total strategic locations

0.6/-0.6

1.7/-1.7

4.7/-4.8

-2.4/2.4

-8.6/10.3

1.5/-1.6

10.6/-8.7

Non-strategic locations

0.6/-0.6

1.9/-1.9

4.2/-4.4

-2.2/2.2

-7.2/8.4

1.6/-1.6

9.1/-7.6

Vonovia Germany

0.6/-0.6

1.7/-1.7

4.7/-4.8

-2.4/2.4

-8.6/10.3

1.5/-1.6

10.6/-8.7

Vonovia Sweden*

n.a.

n.a.

3.4/-3.7

-2.7/2.7

-7.0/8.2

0.6/-1.2

8.4/-7.2

Vonovia Austria*

n.a.

0.3/-0.3

0.4/-0.5

-0.4/0.4

-1.0/1.1

0.9/-0.9

4.8/-4.3

Deutsche Wohnen

0.5/-0.5

1.6/-1.6

5,1/-5.1

-2.3/2.2

-9.5/11.7

1.4/-1.6

12.3/-9.9

  1. * The valuation methods for the portfolio in Austria and Sweden use valuation parameters that are only partially comparable. Administrative and maintenance expenses are not shown separately.

Change in parameters for the investment properties – Previous year

Change in value as a % under varying parameters

Change in value as a % under varying parameters

Management costs residential

Maintenance costs residential

Cost increase/ inflation

Market rent residential

Market rent increase residential

Stabilized vacancy rate residential

Discounting and capitalized interest rates total

Regional market

-10%/10%

-10%/10%

-0.5%/+0.5% points

-2%/+2%

-0.2%/+0.2% points

-1%/+1% points

-0.25%/+0.25% points

Dec. 31, 2021

Berlin

0.5/-0.5

1.6/-1.6

5.5/-5.5

-2.4/2.4

-10.0/12.4

1.4/-1.7

12.7/-10.2

Rhine Main Area

0.4/-0.4

1.3/-1.3

3.5/-3.6

-2.3/2.3

-8.2/9.7

1.0/-1.5

10.5/-8.6

Southern Ruhr Area

0.7/-0.7

2.0/-2.0

5.1/-5.1

-2.5/2.5

-8.1/9.5

1.9/-1.8

9.3/-7.8

Rhineland

0.5/-0.5

1.6/-1.6

4.0/-4.1

-2.4/2.3

-7.9/9.2

1.6/-1.7

9.6/-8.1

Dresden

0.7/-0.7

2.1/-2.1

5.4/-5.4

-2.5/2.5

-8.3/9.8

1.8/-1.8

9.8/-8.2

Hamburg

0.5/-0.5

1.7/-1.7

4.5/-4.6

-2.4/2.3

-8.7/10.5

1.2/-1.6

11.0/-8.9

Kiel

0.7/-0.7

2.0/-2.0

4.8/-4.9

-2.4/2.4

-7.9/9.3

1.8/-1.8

9.2/-7.8

Munich

0.3/-0.3

1.1/-1.1

3.4/-3.5

-2.1/2.1

-8.4/10.1

0.7/-1.4

11.3/-9.3

Stuttgart

0.5/-0.5

1.4/-1.4

3.4/-3.6

-2.3/2.3

-7.8/9.0

1.3/-1.6

9.6/-8.1

Hanover

0.6/-0.6

1.9/-1.9

4.7/-4.7

-2.4/2.4

-8.1/9.5

1.7/-1.7

9.6/-8.1

Northern Ruhr Area

1.0/-1.0

2.7/-2.7

5.3/-5.3

-2.6/2.6

-7.1/8.1

2.1/-2.1

7.5/-6.5

Bremen

0.7/-0.7

2.0/-2.0

5.4/-5.4

-2.4/2.4

-8.3/9.8

1.8/-1.8

9.7/-8.1

Leipzig

0.7/-0.7

2.3/-2.3

5.8/-5.8

-2.5/2.5

-8.5/10.1

1.8/-1.8

9.9/-8.3

Westphalia

0.7/-0.7

2.0/-2.0

4.6/-4.7

-2.4/2.3

-7.5/8.8

1.7/-1.8

8.6/-7.3

Freiburg

0.5/-0.5

1.7/-1.7

4.1/-4.3

-2.4/2.3

-8.4/9.9

1.1/-1.6

10.2/-8.5

Other strategic locations

0.6/-0.6

1.9/-1.9

4.2/-4.3

-2.4/2.4

-7.4/8.7

1.7/-1.7

8.7/-7.4

Total strategic locations

0.6/-0.6

1.8/-1.8

4.6/-4.7

-2.4/2.4

-8.3/9.9

1.5/-1.7

10.2/-8.4

Non-strategic locations

0.6/-0.6

2.0/-2.0

4.4/-4.5

-2.3/2.3

-7.2/8.4

1.6/-1.7

9.0/-7.6

Vonovia Germany

0.6/-0.6

1.8/-1.8

4.6/-4.7

-2.4/2.4

-8.3/9.9

1.5/-1.7

10.2/-8.4

Vonovia Sweden*

n.a.

n.a.

1.3/-1.3

-3.0/3.0

-1.3/1.3

0.8/-1.3

7.8/-6.8

Vonovia Austria*

n.a.

0.3/-0.3

0.4/-0.5

-0.4/0.4

-1.0/1.1

0.9/-0.9

4.9/-4.4

Deutsche Wohnen

0.6/-0.6

1.3/-1.3

4.0/-4.0

-1.3/1.3

-7.0/8.2

1.2/-1.6

10.3/-8.5

  1. * The valuation methods for the portfolio in Austria and Sweden use valuation parameters that are only partially comparable. Administrative and maintenance expenses are not shown separately.