21 Investment Properties

in € million

 

 

 

 

 

As of Jan. 1, 2016

 

23,431.3

Additions

 

304.8

Capitalized modernization costs

 

518.8

Grants received

 

-1.2

Transfer from property, plant and equipment

 

14.1

Transfer to property, plant and equipment

 

-27.1

Transfer from assets held for sale

 

0.1

Transfer to assets held for sale

 

-230.8

Disposals

 

-317.0

Net income from fair value adjustments of investment properties

 

3,236.1

Revaluation of assets held for sale

 

51.2

As of Dec. 31, 2016

 

26,980.3

 

 

 

As of Jan. 1, 2015

 

12,687.2

Additions due to business combinations

 

9,817.9

Additions from the acquisition of the Franconia portfolio

 

298.1

Additions

 

41.8

Capitalized modernization costs

 

433.5

Grants received

 

-0.7

Other transfers

 

22.3

Transfer from property, plant and equipment

 

0.7

Transfer to property, plant and equipment

 

-4.0

Transfer from assets held for sale

 

0.1

Transfer to assets held for sale

 

-859.4

Disposals

 

-381.4

Net income from fair value adjustments of investment properties

 

1,323.5

Revaluation of assets held for sale

 

51.7

As of Dec. 31, 2015

 

23,431.3

The additions in 2016 include € 13.9 million (2015: € 1.5 million) in construction costs for new construction activities.

In the amount of € 51.6 million (2015: € 39.4 million), the investment properties contain leased assets that are defined as finance leases according to IAS 17 and are treated as if they were the Group’s economic property. These relate to the Spree-Bellevue (Spree-Schlange) property in Berlin. The property has been leased from DB Immobilienfonds 11 Spree-Schlange von Quistorp KG until 2044. The lease agreement includes an obligation to pay compensation for loss of use as agreed by contract. At the end of 2028, each fund subscriber is entitled to return his share to the property fund at a fixed redemption price. If all of the fund investors make use of this option, Vonovia is obliged to acquire the property at a fixed purchase price after deduction of borrowings. If more than 75% of the shares are returned in this way, Vonovia has a call option for the purchase of all fund shares. Details of minimum lease payments are given under note [32] Non-derivative Financial Liabilities.

For the investment properties encumbered with land charges in favor of various lenders, see note [32] Non-derivative Financial Liabilities.

Directly Attributable Operating Expenses

from investment properties amounted to € 1,542.4 million during the fiscal year (2015: € 1,414.6 million). Operating expenses directly relating to these properties amounted to € 236.8 million during the fiscal year (2015: € 226.4 million). These include expenses for , ancillary costs that cannot be passed on to the tenants, personnel expenses from the caretaker and craftsmen’s organizations, and income from the capitalized internal expenses. The capitalized internal expenses relate to the work performed by the Group’s own craftsmen’s organization and the management costs for major modernization projects.

Long-Term Leases

Vonovia as a lessor has concluded long-term leases on commercial properties. These are non-cancelable operating leases. The minimum future lease receipts from these leases are due as follows:

in € million

 

Dec. 31, 2016

 

Dec. 31, 2015

 

 

 

 

 

Total minimum lease payments

 

62.1

 

42.9

Due within 1 year

 

18.5

 

8.7

Due in 1 to 5 years

 

40.5

 

19.1

Due after 5 years

 

3.1

 

15.1

As part of IFRS accounting, the fair values of the real estate portfolios were determined in accordance with IAS 40.

Fair Values

The value of the entire portfolio of residential properties was determined on the basis of the International Valuation Standard Committee’s definition of market value. Portfolio premiums and discounts, which can be observed when portfolios are sold in market transactions, were not included. Nor were time restrictions in the marketing of individual properties. Vonovia determines in accordance with the requirements of IAS 40 in conjunction with IFRS 13.

Vonovia values its portfolio using a method known as 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. The income mainly comprises expected rental income (current in-place rent, market rents as well as their development) taking vacancy losses into account. These are derived for each location from the latest rent indices and rent tables (Empirica and IVD), as well as from studies on spatial prosperity (Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR), Prognos, empirica, Bertelsmannstiftung, etc.).

On the cost side, maintenance expenses and administrative costs are taken into account in accordance with the II. Berechnungsverordnung and inflated in the reporting period (II. BV; German Regulation on Calculations for Residential Buildings in Accordance with the Second Housing Construction Law, stipulating how economic viability calculations for accommodation are to be performed). Further cost items are, for example, ground rents, non-allocable ancillary costs and rent losses. carried out in the housing stocks are factored in by decreasing the current maintenance expenses and adjusting market rents.

On this basis, the forecast cash flows are calculated on an annual basis and discounted to the date of valuation as the net present value. In addition, 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. The discount rate applied reflects the market situation, location, type of property, special property features (e.g. inheritable building rights, rent restrictions), the yield expectations of a potential investor and the risk associated with the forecast future cash flows of the property. The present value calculated in this way is reconciled to the market value by deducting standard market transaction costs, such as real estate transfer taxes, agent and notary costs.

The commercial properties in the portfolio are mainly small commercial units for the supply of the local residential area. Different cost approaches were used to those for residential properties, and the discount rates were adjusted to reflect the market specifics.

The valuation is, in principle, performed on the basis of homogeneous valuation units. These meet the criteria of economically cohesive and comparable land and buildings. They include:

  • Geographical location (identity of the microlocation and geographical proximity)
  • Comparable types of use, building class, construction year class and condition of property
  • Same property features such as rent restrictions, inheritable building rights and full or part ownership

The Vonovia portfolio also contains development areas and land areas with inheritable building rights that make up less than 1% of the total value. The development areas are valued using a comparable method on the basis of the local standard land value. Deductions are taken into account, in particular for the readiness for construction and potential use as well as for likelihood of development and the development situation. Inheritable building rights granted are valued in the same way as the property portfolio using a DCF method. The input parameters here are the duration and amount of ground rent and the value of the land.

Vonovia determined the fair values as of December 31, 2016, in its in-house valuation department on the basis of the methodology described above. The property assets are also assessed by the independent property appraiser CBRE GmbH. The contractually fixed remuneration for the valuation report is based on a tender and is not linked to the valuation results. The market value resulting from the external review deviates from the internal valuation result by less than 0.1%.

The real estate portfolio of Vonovia is to be found in the items investment properties, property, plant and equipment (properties used by the company itself) and assets held for sale. The fair value of the real estate portfolio comprising residential buildings, commercial properties, garages and parking spaces as well as undeveloped land and any inheritable building rights granted was € 27,115.6 million as of December 31, 2016 (Dec. 31, 2015: € 24,157.7 million). This corresponds to a net initial yield of 4.0% (Dec. 31, 2015: 4.5%) for the developed land, an in-place-rent multiplier of 17.6 (Dec. 31, 2015: 15.4) and fair value per m2 of € 1,264 (Dec. 31, 2015: € 1,054).

The material valuation parameters for the investment properties (level 3) are as follows as of December 31, 2016, broken down by regional markets*:

 

 

Valuation results**

 

Valuation parameters investment properties (Level 3)

Dec. 31, 2016
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
(per m2 p.a.)

 

Market rent
(per m2 p.a.)

 

Market rent increase

 

Stabilized vacancy rate

 

Discount rate

 

Capitalized interest rate

*

For explanatory information on the regional markets, please refer to the chapter on portfolio structure in the management report

**

Fair value of the developed land excluding € 103.0 million for undeveloped land, inheritable building rights granted and other, thereof € 93.4 million investment properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Berlin

 

3,448.3

 

0.6

 

13.0

 

3,434.7

 

245

 

13.78

 

6.57

 

1.3%

 

1.7%

 

4.6%

 

3.3%

Rhine Main Area (Frankfurt, Darmstadt, Wiesbaden)

 

3,099.8

 

7.0

 

4.8

 

3,088.0

 

266

 

13.98

 

8.21

 

1.4%

 

1.3%

 

5.5%

 

4.1%

Rhineland (Cologne, Düsseldorf, Bonn)

 

2,847.4

 

2.5

 

4.7

 

2,840.1

 

262

 

13.54

 

7.26

 

1.3%

 

2.0%

 

5.5%

 

4.2%

Dresden

 

2,438.6

 

0.0

 

5.5

 

2,433.1

 

231

 

14.24

 

6.07

 

1.2%

 

2.3%

 

5.6%

 

4.5%

Southern Ruhr Area (Dortmund, Essen, Bochum)

 

2,370.7

 

4.5

 

4.0

 

2,362.2

 

259

 

13.09

 

5.85

 

1.1%

 

2.8%

 

6.0%

 

5.0%

Hamburg

 

1,733.2

 

0.7

 

2.6

 

1,729.9

 

252

 

14.24

 

7.47

 

1.2%

 

1.5%

 

5.1%

 

4.1%

Munich

 

1,651.9

 

6.3

 

2.5

 

1,643.1

 

255

 

13.69

 

10.15

 

1.5%

 

0.9%

 

5.0%

 

3.5%

Stuttgart

 

1,584.7

 

6.1

 

7.8

 

1,570.9

 

264

 

13.98

 

8.15

 

1.4%

 

1.6%

 

5.5%

 

4.2%

Northern Ruhr Area (Duisburg, Gelsenkirchen)

 

1,290.8

 

3.1

 

4.1

 

1,283.6

 

261

 

13.27

 

5.54

 

0.9%

 

4.0%

 

6.0%

 

5.4%

Hanover

 

1,027.1

 

1.1

 

1.3

 

1,024.8

 

252

 

13.77

 

6.44

 

1.2%

 

2.1%

 

5.7%

 

4.5%

Kiel

 

861.2

 

0.0

 

2.9

 

858.3

 

251

 

14.24

 

6.14

 

1.2%

 

1.8%

 

5.7%

 

4.8%

Bremen

 

761.6

 

0.2

 

3.9

 

757.5

 

255

 

13.05

 

5.87

 

1.3%

 

2.8%

 

5.5%

 

4.3%

Westphalia (Münster, Osnabrück)

 

588.9

 

0.1

 

1.1

 

587.7

 

254

 

13.53

 

5.92

 

1.1%

 

2.4%

 

5.8%

 

4.8%

Freiburg

 

493.3

 

0.8

 

1.7

 

490.8

 

261

 

14.12

 

7.58

 

1.4%

 

1.2%

 

5.0%

 

3.7%

Leipzig

 

260.7

 

0.5

 

0.5

 

259.8

 

246

 

13.21

 

5.82

 

1.2%

 

3.7%

 

5.6%

 

4.5%

Other strategic locations

 

1,882.5

 

5.4

 

3.2

 

1,873.9

 

264

 

13.59

 

6.66

 

1.2%

 

2.2%

 

5.6%

 

4.4%

Total strategic locations

 

26,340.7

 

38.9

 

63.5

 

26,238.3

 

254

 

13.69

 

6.73

 

1.3%

 

2.2%

 

5.5%

 

4.2%

Non-strategic locations

 

671.9

 

22.1

 

1.2

 

648.6

 

261

 

13.08

 

5.15

 

0.9%

 

5.7%

 

6.0%

 

5.3%

Total

 

27,012.6

 

61.0

 

64.7

 

26,886.9

 

255

 

13.66

 

6.66

 

1.2%

 

2.4%

 

5.5%

 

4.3%

 

 

Valuation results*

 

Valuation parameters investment properties (Level 3)

Dec. 31, 2015
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
(per m2 p.a.)

 

Market rent
(per m2 p.a.)

 

Market rent increase

 

Stabilized vacancy rate

 

Discount rate

 

Capitalized interest rate

*

Fair value of the developed land excluding € 70.5 million for undeveloped land, inheritable building rights granted and other, thereof € 61.8 million investment properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Berlin

 

2,709.2

 

5.7

 

1.6

 

2,701.9

 

242

 

13.40

 

6.35

 

1.3%

 

1.8%

 

5.3%

 

4.0%

Rhine Main Area (Frankfurt, Darmstadt, Wiesbaden)

 

2,708.4

 

4.9

 

2.8

 

2,700.7

 

262

 

13.84

 

7.94

 

1.3%

 

1.4%

 

5.8%

 

4.5%

Rhineland (Cologne, Düsseldorf, Bonn)

 

2,460.9

 

1.4

 

2.3

 

2,457.2

 

257

 

13.53

 

6.97

 

1.3%

 

2.0%

 

5.8%

 

4.6%

Dresden

 

2,108.7

 

0.0

 

0.0

 

2,108.7

 

233

 

13.73

 

5.65

 

1.4%

 

2.5%

 

5.9%

 

4.7%

Southern Ruhr Area (Dortmund, Essen, Bochum)

 

2,169.1

 

3.0

 

4.3

 

2,161.7

 

255

 

13.00

 

5.58

 

1.0%

 

3.0%

 

6.0%

 

5.2%

Hamburg

 

1,455.3

 

0.4

 

1.3

 

1,453.5

 

248

 

14.21

 

7.22

 

1.3%

 

1.5%

 

5.7%

 

4.7%

Munich

 

1,292.4

 

5.0

 

2.1

 

1,285.4

 

251

 

13.59

 

10.11

 

1.4%

 

0.9%

 

5.6%

 

4.3%

Stuttgart

 

1,355.3

 

1.7

 

6.3

 

1,347.3

 

264

 

13.58

 

8.07

 

1.3%

 

1.5%

 

5.8%

 

4.5%

Northern Ruhr Area (Duisburg, Gelsenkirchen)

 

1,245.5

 

12.7

 

2.7

 

1,230.1

 

257

 

13.13

 

5.33

 

0.9%

 

4.3%

 

6.0%

 

5.4%

Hanover

 

877.8

 

2.3

 

0.6

 

874.9

 

251

 

13.65

 

6.08

 

1.2%

 

2.6%

 

5.9%

 

4.9%

Kiel

 

719.5

 

0.5

 

2.5

 

716.5

 

246

 

14.01

 

5.73

 

1.1%

 

1.8%

 

6.2%

 

5.3%

Bremen

 

630.9

 

0.0

 

2.3

 

628.6

 

250

 

12.81

 

5.61

 

1.2%

 

3.1%

 

5.9%

 

4.9%

Westphalia (Münster, Osnabrück)

 

513.9

 

0.3

 

0.6

 

513.0

 

249

 

13.29

 

5.51

 

1.1%

 

2.3%

 

6.0%

 

5.1%

Freiburg

 

389.8

 

0.0

 

1.5

 

388.3

 

257

 

14.08

 

7.41

 

1.3%

 

1.1%

 

5.8%

 

4.5%

Leipzig

 

234.2

 

0.9

 

0.5

 

232.7

 

249

 

12.80

 

5.74

 

1.1%

 

4.5%

 

5.8%

 

4.9%

Other strategic locations

 

1,655.0

 

4.4

 

1.3

 

1,649.3

 

261

 

13.35

 

6.37

 

1.2%

 

2.4%

 

5.9%

 

4.8%

Total strategic locations

 

22,525.7

 

43.1

 

32.7

 

22,449.9

 

251

 

13.48

 

6.45

 

1.2%

 

2.3%

 

5.8%

 

4.7%

Non-strategic locations

 

1,561.5

 

641.4

 

0.5

 

919.6

 

254

 

12.88

 

4.93

 

0.9%

 

5.7%

 

6.1%

 

5.5%

Total

 

24,087.2

 

684.5

 

33.2

 

23,369.5

 

252

 

13.41

 

6.28

 

1.2%

 

2.7%

 

5.8%

 

4.7%

The same inflation rate, namely 1.5%, has been applied across the portfolio. This led overall to net income from adjustments of € 3,263.1 million in the 2016 fiscal year (2015: € 1,323.5 million).

Sensitivity Analyses

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

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 payment flows, which is then reflected in adjusted amounts recognized for discounting and capitalized interest rates. The effects do not, however, 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 housing stock, in seller and buyer behavior, political decisions and developments on the capital market.

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

 

Change in parameters

Regional market

 

Management costs residential

 

Maintenance costs residential

 

Cost increase/inflation

 

Market rent

 

Market rent increase

 

Stabilized vacancy rate

 

Discounting and capitalized interest rates

Dec. 31, 2016

 

-10%/+10%

 

-10%/+10%

 

-0.5%/+0.5% points

 

-2.0%/+2.0%

 

-0.2%/+0.2% points

 

-1%/+1% points

 

-0.25%/+0.25% points

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Berlin

 

0.7/-0.7

 

2.3/-2.3

 

5.2/-5.2

 

-2.4/2.4

 

-7.7/9.0

 

1.9/-1.9

 

8.6/-7.4

Rhine Main Area (Frankfurt, Darmstadt, Wiesbaden)

 

0.6/-0.6

 

1.8/-1.8

 

2.9/-3.1

 

-2.2/2.2

 

-5.6/6.3

 

1.4/-1.6

 

6.5/-5.8

Rhineland (Cologne, Düsseldorf, Bonn)

 

0.6/-0.6

 

2.0/-2.0

 

3.4/-3.5

 

-2.2/2.2

 

-5.6/6.4

 

1.7/-1.7

 

6.5/-5.7

Dresden

 

0.8/-0.8

 

2.6/-2.6

 

4.3/-4.4

 

-2.4/2.3

 

-5.8/6.4

 

2.0/-2.0

 

6.1/-5.5

Southern Ruhr Area (Dortmund, Essen, Bochum)

 

1.0/-1.0

 

2.8/-2.9

 

4.2/-4.4

 

-2.5/2.4

 

-5.4/6.0

 

2.1/-2.1

 

5.4/-4.9

Hamburg

 

0.6/-0.6

 

2.1/-2.1

 

3.8/-3.9

 

-2.2/2.2

 

-6.2/7.0

 

1.5/-1.8

 

7.1/-6.2

Munich

 

0.4/-0.4

 

1.4/-1.4

 

3.3/-3.5

 

-2.0/2.0

 

-6.7/7.7

 

1.0/-1.5

 

8.3/-7.2

Stuttgart

 

0.5/-0.5

 

1.8/-1.8

 

3.4/-3.3

 

-2.2/2.2

 

-5.8/6.6

 

1.6/-1.6

 

6.7/-5.9

Northern Ruhr Area (Duisburg, Gelsenkirchen)

 

1.1/-1.1

 

3.3/-3.3

 

4.6/-4.7

 

-2.6/2.6

 

-5.3/5.8

 

2.3/-2.3

 

5.0/-4.6

Hanover

 

0.8/-0.8

 

2.5/-2.5

 

3.8/-3.9

 

-2.3/2.3

 

-5.5/6.2

 

2.0/-1.9

 

6.0/-5.3

Kiel

 

0.9/-0.9

 

2.7/-2.7

 

4.1/-4.2

 

-2.3/2.4

 

-5.5/6.2

 

2.0/-2.0

 

5.8/-5.1

Bremen

 

0.9/-0.9

 

2.8/-2.8

 

4.9/-5.0

 

-2.3/2.2

 

-6.1/6.8

 

2.0/-2.1

 

6.4/-5.7

Westphalia (Münster, Osnabrück)

 

0.9/-0.9

 

3.0/-3.0

 

4.4/-4.6

 

-2.3/2.3

 

-5.6/6.2

 

2.1/-2.1

 

5.7/-5.1

Freiburg

 

0.6/-0.6

 

1.9/-2.0

 

3.7/-3.8

 

-2.3/2.3

 

-6.6/7.5

 

1.5/-1.7

 

7.4/-6.5

Leipzig

 

0.9/-0.9

 

2.7/-2.8

 

4.6/-4.8

 

-2.7/2.6

 

-6.1/6.7

 

2.1/-2.2

 

6.0/-5.5

Other strategic locations

 

0.8/-0.8

 

2.3/-2.3

 

3.8/-3.9

 

-2.3/2.3

 

-5.7/6.4

 

1.8/-1.9

 

6.2/-5.5

Total strategic locations

 

0.7/-0.7

 

2.3/-2.3

 

4.0/-4.1

 

-2.3/2.3

 

-6.0/6.8

 

1.8/-1.9

 

6.7/-5.9

Non-strategic locations

 

1.2/-1.2

 

3.7/-3.7

 

5.4/-5.4

 

-2.6/2.6

 

-5.5/6.1

 

2.5/-2.5

 

5.1/-4.7

Total

 

0.7/-0.7

 

2.3/-2.3

 

4.0/-4.1

 

-2.3/2.3

 

-6.0/6.8

 

1.8/-1.9

 

6.6/-5.9

 

 

Change in parameters

 

Change in parameters

Regional market

 

Management costs residential

 

Maintenance costs residential

 

Cost increase/inflation

 

Market rent

 

Market rent increase

 

Stabilized vacancy rate

 

Discounting and capitalized interest rates

Dec. 31, 2015

 

-10%/+10%

 

-10%/+10%

 

-0.5%/+0.5% points

 

-2.0%/+2.0%

 

-0.2%/+0.2% points

 

-1%/+1% points

 

-0.25%/+0.25% points

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Berlin

 

0.7/-0.7

 

2.4/-2.3

 

4.2/-4.3

 

-2.3/2.3

 

-6.3/7.2

 

1.7/-1.8

 

6.9/-6.0

Rhine Main Area (Frankfurt, Darmstadt, Wiesbaden)

 

0.6/-0.6

 

1.8/-1.8

 

2.8/-2.9

 

-2.2/2.2

 

-5.1/5.7

 

1.0/-1.6

 

5.9/-5.3

Rhineland (Cologne, Düsseldorf, Bonn)

 

0.6/-0.7

 

2.1/-2.1

 

3.2/-3.4

 

-2.1/2.1

 

-5.0/5.6

 

1.5/-1.7

 

5.9/-5.3

Dresden

 

0.9/-0.9

 

2.7/-2.7

 

4.4/-4.5

 

-2.5/2.5

 

-5.8/6.4

 

1.9/-1.9

 

6.0/-5.4

Southern Ruhr Area (Dortmund, Essen, Bochum)

 

1.0/-1.0

 

3.1/-3.1

 

4.4/-4.5

 

-2.5/2.4

 

-5.2/5.7

 

2.1/-2.1

 

5.2/-4.7

Hamburg

 

0.6/-0.6

 

2.1/-2.1

 

3.2/-3.3

 

-2.1/2.1

 

-5.1/5.6

 

0.8/-1.7

 

6.0/-5.4

Munich

 

0.4/-0.5

 

1.5/-1.5

 

2.8/-3.0

 

-1.9/1.9

 

-5.3/5.9

 

0.4/-1.5

 

6.9/-6.1

Stuttgart

 

0.5/-0.6

 

2.2/-1.8

 

2.8/-4.3

 

-2.1/2.1

 

-5.1/5.8

 

1.2/-1.5

 

6.0/-5.4

Northern Ruhr Area (Duisburg, Gelsenkirchen)

 

1.2/-1.1

 

3.4/-3.4

 

4.7/-4.8

 

-2.6/2.6

 

-5.2/5.8

 

2.2/-2.2

 

5.0/-4.5

Hanover

 

0.8/-0.9

 

2.6/-2.7

 

3.8/-4.0

 

-2.4/2.3

 

-5.1/5.6

 

1.9/-1.9

 

5.5/-5.0

Kiel

 

0.9/-0.9

 

2.8/-2.8

 

3.9/-4.0

 

-2.4/2.4

 

-5.0/5.5

 

1.9/-1.9

 

5.1/-4.6

Bremen

 

0.9/-0.9

 

2.9/-2.9

 

4.5/-4.6

 

-2.2/2.2

 

-5.3/5.9

 

1.9/-1.9

 

5.5/-5.0

Westphalia (Münster, Osnabrück)

 

1.0/-1.0

 

3.1/-3.1

 

4.2/-4.3

 

-2.1/2.1

 

-4.5/5.0

 

1.9/-2.1

 

5.3/-4.8

Freiburg

 

0.6/-0.6

 

2.0/-2.0

 

3.0/-3.2

 

-2.2/2.2

 

-5.3/6.0

 

0.9/-1.6

 

5.9/-5.3

Leipzig

 

1.0/-1.0

 

2.8/-2.8

 

4.4/-4.5

 

-2.6/2.6

 

-5.5/6.1

 

2.0/-2.0

 

5.5/-4.9

Other strategic locations

 

0.8/-0.8

 

2.4/-2.4

 

3.6/-3.8

 

-2.3/2.3

 

-5.3/5.9

 

1.5/-1.8

 

5.7/-5.1

Total strategic locations

 

0.8/-0.8

 

2.4/-2.4

 

3.7/-3.9

 

-2.3/2.2

 

-5.3/6.0

 

1.5/-1.8

 

5.9/-5.3

Non-strategic locations

 

1.3/-1.3

 

3.8/-3.8

 

5.4/-5.4

 

-2.6/2.6

 

-5.2/5.7

 

2.4/-2.4

 

4.9/-4.5

Total

 

0.8/-0.8

 

2.5/-2.5

 

3.8/-4.0

 

-2.3/2.3

 

-5.3/5.9

 

1.6/-1.8

 

5.9/-5.2

Contractual Obligations

In connection with major acquisitions, Vonovia entered into contractual obligations or assumed such obligations indirectly via acquired companies, among other things in the form of Social Charters, which could limit its ability to freely sell parts of its portfolio, increase rents or terminate existing rent agreements for certain units and which, in the event of a breach, could give rise to substantial contractual penalties in some cases. Moreover, when acquiring and financing some of the properties in the portfolio, Vonovia also entered into an obligation to spend a certain average amount per square meter on maintenance and improvements.

After a certain period of time, these obligations often cease to apply either in full or in part. As of December 31, 2016, around 199,000 units in Vonovia’s portfolio were subject to one or several contractual restrictions or other obligations.

  • Sale restrictions: As of December 31, 2016, around 60,000 units were subject to sale restrictions (excl. occupancy rights). Around 40,000 of these units cannot be freely sold before a certain date. Sale restrictions like these include a full or partial ban on the sale of units and provisions requiring the consent of certain representatives of the original seller prior to sale.
  • Preemptive rights on preferential terms: Around 7,000 units can only be sold if the tenants are offered preemptive rights on preferential terms. This means that Vonovia is obliged to offer these tenants the units at a price that is up to 15% below the price that could be achieved by selling the units in question to third parties.
  • Restrictions on the termination of rent agreements: Around 74,000 units are affected by restrictions on the termination of rent agreements. These restrictions include notice to vacate for personal use and notice to vacate for appropriate commercial utilization. In some cases, units are covered by a lifelong ban on the termination of rent agreements.
  • Expenses for minimum maintenance and restrictions on maintenance and modernization measures: Around 137,000 units are subject to a requirement to spend a weighted average of at least € 13.40 per square meter on maintenance and modernization every year. Furthermore, around 145,000 units are affected by restrictions relating to modernization and maintenance measures, which are designed to prevent changes in socio-economic tenant composition (i.e., to prevent luxury modernization). Some of the restrictions to prevent luxury modernization have been agreed on a permanent basis.
  • Restrictions on rent increases: Restrictions on rent increases (including provisions stating that “luxury modernization” measures are subject to approval) affect around 102,000 units. These restrictions could prevent Vonovia from realizing the rent that could potentially be generated from the units in question.

In many cases, in the event that all or part of a portfolio is transferred or individual units are sold, the aforementioned obligations are to be assumed by the buyers, who are in turn subject to the obligation to pass them on to any future buyers.

Under structured financing programs, Vonovia is subject to fundamental restrictions on the use of excess property disposal proceeds, such restrictions being particularly in the form of mandatory minimum capital repayments. Excess cash from property management is also restricted to a certain extent.

Due to their structure and content, the aforementioned contractual obligations have either no effect or no significant effect on the values of the investment properties.

Rental Income
Rental income refers to the current gross income for rented units as agreed in the corresponding rent agreements before the deduction of non-transferable ancillary costs.
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.
Fair Value
Valuation pursuant to IAS 40 in conjunction with IFRS 13. The estimated value of an asset. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
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 handicapped-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.
Fair Value
Valuation pursuant to IAS 40 in conjunction with IFRS 13. The estimated value of an asset. The fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
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.