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Financial statements

12 Investment property

  

2019

 

2018

At the beginning of the year

 

941,431

 

863,337

First time adoption IFRS16

 

8,343

 

-

Transfers from investment property under construction

18,672

 

21,482

 

Acquisitions

8,652

 

53,518

 

Other capital expenditure

7,105

 

2,356

 

Total investments

 

34,429

 

77,356

Transfers to investment property under construction

 

-

 

(12,898)

Disposals

 

(27,553)

 

(1,240)

Net gain (loss) from fair value adjustments on investment property (like for like)

3,280

 

18,786

 

Net gain (loss) from fair value adjustments on investment property

816

 

(3,910)

 

In profit or loss

 

4,096

 

14,876

In other comprehensive income

 

-

 

-

Transfers out of level 3

 

-

 

-

Movement of right of use ground leases

 

23

 

-

Total investment property (level 3)

 

960,769

 

941,431

Lease incentives

 

4,726

 

4,155

At the end of the year

 

965,495

 

945,586

The Fund’s investment properties are valued by external valuation experts on a quarterly basis. The external valuation expert is changed every three years. On 31 December 2019, these properties were revalued by independent professionally qualified valuation experts who hold a recognised relevant professional qualification and had recent experience in the locations and categories of the investment properties valued. The carrying values of investment property as at 31 December 2019, and 1 January 2019, are in line with the valuations reported by the external valuation experts.

Since the accounting effect of lease incentives granted is included under non-current assets the recognised amount € 4.7 million (2018: € 4.2 million) is deducted from the total fair value of investment properties.

The right of use of land is included as an integrated part of the Investment property. To compare the externally appraised values of the Investment property the lease liabilities are deducted from the Total investment property value.

 

2019

2018

Investment Property

965,495

945,586

Less: lease liabilities

(8,516)

-

Valuation as per valuation report

956,979

945,586

The specifications of acquisitions, other capital expenditure and the disposals are set out below.

Investments

2019

2018

Experience

8,235

17,058

Convenience

105

30,422

Other

7,417

8,394

Total Investments

15,757

55,874

Disposals

2019

2018

Experience

(474)

-

Convenience

(12,360)

-

Other

(14,719)

(1,240)

Total disposals

(27,553)

(1,240)

The investment property was sold with a negative result of € 0.7 million.

The significant assumptions with regard to the valuations are set out below.

2019

    
 

Experience

Convenience

Other

Total

Current average rent (€/m²)

371

219

172

236

Market rent (€/m²)

386

206

156

228

Gross initial yield

3.9%

6.3%

7.9%

5.4%

Net initial yield

3.8%

5.7%

5.8%

4.7%

Current vacancy rate (VVO m²)

1.7%

3.3%

8.4%

4.9%

Average financial vacancy rate

1.5%

2.3%

7.0%

3.3%

Long-term growth rental rate

1.5%

1.4%

1.3%

1.4%

Risk free (NRVT)

   

0.4%

2018

    
 

Experience

Convenience

Other

Total

Current average rent (€/m²)

365

203

179

229

Market rent (€/m²)

388

201

158

224

Gross initial yield

3.9%

6.2%

8.3%

5.5%

Net initial yield

3.6%

4.9%

6.3%

4.5%

Current vacancy rate (VVO m²)

1.4%

4.6%

10.1%

6.2%

Average financial vacancy rate

1.8%

4.2%

8.0%

4.6%

Long-term growth rental rate

0.9%

0.8%

0.4%

0.8%

Risk free (NRVT)

   

0.5%

The net valuation gain (loss) for the year included a positive fair value adjustment of € 18.1 million (2018: € 31.6 million) relating to investment properties that are measured at fair value at the end of the reporting period.

Direct operating expenses recognised in profit or loss include € 0.1 million (2017: € 0.1 million) relating to vacant investment property.

Investment property includes buildings held under finance leases. The carrying amount is € nil (2018: € nil).

Sensitivity analysis

The appraisal of the portfolio implies a net initial yield of 4.7% (2018: 4.5%). If the yields used for the appraisals of investment properties on 31 December 2019 had been 100 basis points higher (2018: 100 basis points higher) than was the case at that time, the value of the investments would have been 15.6% lower (2018: 16.9% lower). In this situation, the Fund’s shareholders’ equity would have been € 160 million lower (2018: € 170 million lower).

The table below presents the sensitivity of the valuation to changes in the most significant assumptions.

  

2019

 

2018

Change rental rates

-5%

5%

-5%

5%

Value of the investment property change

(40,329)

56,161

(47,279)

47,279

  

2019

 

2018

Change net initial yield

– 25 bps

+ 25 bps

– 25 bps

+ 25 bps

Value of the investment property

61,588

(40,383)

55,079

(115,183)

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