alstria office REIT Annual Report 2007

FY2007 Annual Report · alstria office REIT

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ANNUAL REPORT 2007

THE FIRST GERMAN REIT.
FOUNDED: 711 DAYS AGO.

> Key Figures

> Letter from the Board

COMPANY PROFILE

TABLE OF CONTENT

KEY FIGURES

LETTER FROM THE BOARD

STRATEGY

ALSTRIA STOCK

CORPORATE GOVERNANCE REPORT

GROUP MANAGEMENT DISCUSSION AND ANALYSIS

REPORT FROM THE SUPERVISORY BOARD

REPORT FROM THE MANAGEMENT BOARD

FINANCIAL STATEMENT TABLES

NOTES

115 COMPENSATION REPORT

118 VALUATION REPORT

126 LIST OF ALL PROPERTIES

134 AUDITORS' REPORT

135 REIT DECLARATION

136 FINANCIAL CALENDER

137 IMPRINT

Investment property portfolio valued at
EUR 1,694 MIO

Net Asset Value per share of more than
EUR 15.55

Sole focus on Germany,
FIRST GERMAN REIT

Sole focus on offices, PURE PLAY

Unique COMPETITIVE ADVANTAGE
in acquisitions

Buy and manage strategy, long term
VALUE CREATION

Unique approach of the
TENANT RELATIONSHIP

| 2 | alstria Annual Report 2007

> Key Figures

> Letter from the Board

KEY FIGURES

(in EUR k)

2007

2006

Change in %

Revenues and Earnings
Revenues
Net Rental Income
EBITDA
Consolidated net profit
Fund From Operations (FFO)

Assets
Investment properties
Total assets
Equity
Net Asset Value

G-REIT Key Figures
G-REIT equity ratio in %
Revenues plus other income
from investment properties in %
NAV per share in EUR
Earnings per share in EUR
Dividend per share in EUR

ISIN
Symbol
Prime Sector
Industry Group
Market Segment
Indices
Number of Shares
Share Capital (notional)
Market Capitalisation (Dec 28)
Free Float

82,552
76,192
85,911
52,811
31,540

30,063
28,358
51,656
14,533
-3,518

1,693,718
1,835,520
870,876
870,876

1,289,536
1,344,676
397,599
397,599

174.6 %
168.7 %
66.3 %
263.4 %
996.5 %

31.3 %
36.5 %
119.0 %
119.0 %

51 %

31 %

21 pp

100 %
15.55
1.15
0.51

100 %
na
na
na

0 pp
na
na
na

DE000A0LD2U1
AOX
Financial Services
Real Estate
Prime Standard, Frankfurt
S-DAX, EPRA, German REIT Index, S&P/Citigroup Global REIT Index
56,000,000
EUR 56,000,000
EUR 574,000,000
46 %

82,6

1,289,5

INVESTMENT PROPERTIES
(in EUR m)

1,693,7

➡

+31 %

REVENUES
(in EUR m)

➡

30,0

+175 %

2006

2007

2006

2007

FUNDS FROM OPERATIONS (FFO)
(in EUR m)

NET ASSET VALUE
(in EUR m)

31,5

➡

870,9

➡

397,6

+119 %

-3,5
2006

>1000 %

2007

2006

2007

CONSOLIDATE NET PROFIT
(in EUR m)

52,8

➡

14,5

+263 %

G-REIT EQUITY RATIO

51 %

➡

+20 pp

31 %

2006

2007

2006

2007

| 4 | alstria Annual Report 2007

alstria Annual Report 2007 | 5 |

> Key Figures

> Letter from the Board

LETTER FROM THE BOARD

Dear Shareholders, Ladies and Gentlemen,

Time goes by quickly when you are passionate and
explore new ground. It has been 711 days since the birth
of alstria as a EUR 25,000 GmbH. And those 711 days
have been filled with innovation, passion, and important
events for alstria.

Keep it simple
It all started with a limited number of simple ideas that
could all be summarised in one word: Focus. Focus on
one asset class, offices. Focus on one country, Germany.
Focus on value creation and asset management. Focus
on tenant relationship management.

It took us 711 days to move from the idea to reality. With
a EUR 1.9 billion portfolio of pure office buildings and
a unique and focused tenant base, alstria is today
among the top three German listed commercial property
companies and the only office pure play. We did stay
focused on the target.

Make it sustainable
In each of the 711 days of alstria’s life we have made sure
that the growth we were pursuing was sustainable over
time. We have first of all created a unique, solid office
portfolio with long term predictable cash flows and still
significant asset management and tenant relationship
opportunities. This was done through the first 346 days.

It was only when we had hedged any potential downside
that we started acquiring portfolios with additional asset
management and organic growth opportunities. In the
last 365 days, our targeted acquisitions have allowed us to
increase the vacancy in the portfolio from 2.4 % to 6.5 %
representing more than 60,000 sqm to be let.

Seize the opportunity
The German REIT law was introduced 4 days prior to the
IPO of alstria. It took us another 187 days to elaborate and
achieve the conversion process. Although we never ran a
race, we are proud to be the first company to be able to
benefit from the tremendous advantage offered by this
legislation. The REIT legislation offers us tax transparency,
which will translate into more liquidity of our portfolio
over time. It takes away a number of significant tax risks
which are inherent to German property companies. And
it gives us a unique competitive advantage in terms of
acquisition, as it allows sellers to benefit from a 50 %
capital gain tax exemption if they sell their assets to alstria.

Execute the business plan but mind the gap
We stood still. For almost 200 days. We stepped out of
the investment market as we felt that the prices were
moving into unsustainable levels. We did our homework,
monitored the market, and stepped in again once the REIT
status was achieved, using it to enhance the economics
of the sales and leasebacks we have executed. We have
invested a total of EUR 527 million in 365 days. At an

average initial gross yield of 6.4 %. Way above the
average. Thanks to the competitive edge of REITs and to
strict investment discipline.

Adapt to a changing environment
The promises made in the course of the IPO have been
delivered. The next step would have been to raise an
additional EUR 250 to 300 million in order to continue
with the acquisition plan. We, however,
took into
consideration the changing environment and decided not
to pursue a route that would dilute our shareholders by
a double digit number. And we are very comfortable
about this. It took us 711 days to build ourselves a unique
position in the German property market and to etch out
a unique competitive advantage in the acquisition field
for alstria. We can wait another 180 days, or 200 or
more for the market to re-open. No one can take this
opportunity away from us. As no one can get where we
are today.

Stay focused
Our existing portfolio offers substantial opportunities to
grow organically, which we are going to take advantage
of in 2008. Our specific approach to the tenant relationship
is one of our core operational focuses as it is what makes
alstria different from other office property owners. We
expect our revenues to grow from 80 million to 95 million
and our fund from operations from EUR 30 millions to
EUR 40 million in the next 365 days. We also expect to

divest some of the assets that are mature from an asset
management perspective, and to recycle the capital into
our portfolio. Active management is the key for success in
the German office real estate sector. This was our view
711 days ago still is today.

Olivier Elamine
Chief Executive Officer

Alexander Dexne
Chief Financial Officer

| 6 | alstria Annual Report 2007

alstria Annual Report 2007 | 7 |

FOUNDED: 711 DAYS AGO.
GROWN: 2 NEW CORE TENANTS
PER QUARTER.

LONG TERM PARTNERSHIP – OUR VIEW ON TENANTS
Even the best organizations in the world have a very limited view on what
their office needs will be two or three years down the road. Change in
legislation, local elections, new businesses taken on board, others being
divested, services outsourced or services merged might change the whole
picture all over again. So, although lease contracts are fixed, the probability is
high that today’s requirements will not fit tomorrow’s needs. WE SEE THE
FLEXIBILITY REQUIREMENT OF OUR TENANTS AS A UNIQUE OPPORTUNITY
TO BRING ADDITIONAL VALUE THAT WILL BENEFIT BOTH PARTIES.

We are convinced the changes in the occupational needs over the lifetime of
a lease agreement constitute a huge opportunity. Can we help our tenants to
find additional space within our existing portfolio? Can we support our tenants
to focus activities in one site and thus use office space more efficiently? We are
creating repeated business with key customers, understanding their needs and
adapting to it. WE ARE NOT ONLY RENTING SPACE, WE ARE ADDING VALUE
TO OUR TENANT´S ORGANIZATION. This might be an old way of looking at
customer relationship. IT IS A NEW WAY OF MANAGING REAL ESTATE.

FOUNDED: 711 DAYS AGO.
GROWN: 53 SQM OF
GERMAN OFFICE SPACE PER HOUR.

FOCUS ON GERMAN OFFICE PROPERTIES
While a lot of real estate companies are trying to diversify out of there home
markets, or are looking to diversify into different asset classes, we are proud of
being focused: PURE OFFICE BUILDINGS IN GERMANY, NOTHING MORE,
BUT NOTHING LESS. We are convinced there is great virtue of being focused.
Focused, to be successful with our operations as you can only manage to
the perfection what you know to perfection. Focused, in order to offer our
shareholders a pure risk exposure that will allow them to perfectly diversify their
portfolio. We have chosen to focus on the largest European economy and the
largest European office property market.
This market offers great
opportunities and we are here to capture them. THIS IS WHY ALSTRIA WILL
CREATE VALUE. Staying focused.

FOUNDED: 711 DAYS AGO.
GROWN: 552 DAYS
TILL REIT CONVERSION.

REIT BENEFITS
The key concept of a REIT is a very straight forward one: A REIT provides
its shareholders with access to tax transparent cash flows from real estate
investments. BUT BEYOND BEING TAX TRANSPARENT what is the benefit of
investing in REITS. REITs provide investors with HIGH AND REGULAR PAYOUTS.
REITs are more liquid than closed end funds and in countries where REITs have
been around for a longer time they have generally outperformed all other
types of real estate investments like open ended funds or “classical” public real
estate companies. For us at alstria, to be a REIT means that all our management
decisions are free of corporate income tax and trade tax considerations, a fact
that in our view allows for much more efficient and value orientated decisions.

For corporate sellers of real estate, REITs will be the preferred partners over the
next years, because REITs can offer the so called exit tax benefit. The exit tax
benefit implies that organizations selling to a REIT can cut the tax burden on the
realized profit by 50 %. This provides alstria with A UNIQUE COMPETITIVE
ADVANTAGE IN FUTURE ACQUISITIONS. All these characteristics make the
German REIT a very attractive status to many constituencies. We are convinced
the German REIT, like in so many other countries, will be the dominating
structure for public real estate companies in the future. This is one of the
reasons why alstria is proud that we have been the FIRST REIT IN GERMANY.

| 12 | alstria Annual Report 2007

alstria Annual Report 2007 | 13 |

FOUNDED: 711 DAYS AGO.
GROWN: RANG THE BELL TWICE.

ALSTRIA STOCK

Stock markets in general
Stock markets were characterised by a substantial degree
of volatility in 2007. In the first half of the year, the DAX
rose to a near all-time high of 8,151 in the middle of July.
Uncertainties caused by the so called “sub-prime crisis” led
to a downward swing of the DAX in the subsequent
months. Following a recovery in October, the DAX closed
with a 22 % year-on-year gain. The MDAX and the SDAX
generally followed this trend too. The recovery in these
indices, however, did not reach the same level as in the
DAX. The MDAX closed 5 % higher and the SDAX 7 %
lower as compared to the beginning of the year.

Real estate stocks
The development of real estate stocks was completely
detached from the development of the stock markets
in general. After a number of successful years for real
estate equity, 2007 turned out to be a very difficult year
for real estate stocks. The EPRA indices for Germany and
Europe lost 41 % and 34 % respectively, and it was
virtually impossible for individual companies to withstand
that trend.

Development of alstria’s share price
alstria’s share started with an IPO price of EUR 16.00 on
April 2, 2007. Following a peak level of EUR 16.67 in the
middle of June 2007, the second half of the year was
marked by a persistent downward trend. In mid-November,
the share reached its lowest level of the year at EUR
9.51.alstria’s share price suffered from the turmoil on the
financial markets almost as much as our peer group and
is now trading at a significant discount to the net asset
value. Thereafter, the share price recovered somewhat to
a price of EUR 11.44 at the beginning of December. The
year-endclosing price of the alstria share was EUR 10.25,
which isequivalent to a loss of 37 %. In the same period
the EPRA GERMANY lost 41 % and EPRA EUROPE 35 %.
On November 6, alstria’s management board decided to
execute a share buy-back programme. This programme
uses the authorisation provided by the shareholders of the

company at the last annual general meeting in 2007.
Under this authorisation alstria intends to acquire up
to 2.5 % of its share capital between now and September
2008 via the Frankfurt stock exchange (XETRA). For
the time being it is intended to hold the acquired shares
as treasury stock and eventually use them according
the shareholders meeting.
to the authorisation of
Potential uses may include using the shares in future
acquisition projects.

SHARE DATA

AOX
A0LD2U

DE000A0LD2U1

Stock ID code
Securities identification
number
ISIN – International Securities
Identification code
Common code
Reuters symbol
Bloomberg symbol
Market segment
Indices

Trading floors

Designated Sponsors

No. of shares outstanding
as at Dec. 31

028600810
AOX.DE
AOX GY
Prime Standard
SDAX, EPRA,
German REIT Index
XETRA, Frankfurt (Prime Standard);
Open Market in Berlin, Hamburg,
Munich, Stuttgart
Deutsche Bank AG;
JP Morgan
55,326,195
(56,000,000 less
673,805 own shares)

Coverage by analysts
Being the first German REIT-AG, alstria is actively
accompanied by a number of financial
journalists and
financial analysts from renowned investments banks. In a
number of reports, alstria’s strategy and real estate portfolio
were analysed.

| 14 | alstria Annual Report 2007

alstria Annual Report 2007 | 15 |

THE FOLLOWING INVESTMENT BANKS
REPORTED ON ALSTRIA

Bankhaus Lampe KG

Deutsche Bank
JP Morgan
Kempen & Co
M.M. Warburg (MMW)

Sebastian Hein
Frank Neumann
Martin Praum
Osmaan Malik
Remco Simon
Ralf Dibbern

Intense investor relations activities
In 2007 alstria’s investor relations activities focussed on
informing investors, financial analysts and the business
press about alstria’s development specifically, but also
about the general characteristics of a German REIT-AG. In
addition to our press and analyst conferences, we had
numerous interviews with investors and journalists at
home and abroad, and presented the company at the
following investor conferences:

IN 2007, ALSTRIA WAS PRESENTED AT THE
FOLLOWING INVESTOR CONFERENCES

IPO
On April 2, 2007, alstria successfully completed an initial
public offering (IPO). With an issue size of 16 million
increase and gross proceeds of
shares from a capital
EUR 256 million, the alstria IPO was the most sizeable
equity market transaction in the German real estate sector
in 2007. The IPO marked another significant milestone in
the recent history of the company.

Shareholder structure
As of December 31, 2007 Captiva 2 Alstria Holding S.à.r.l.
held a 54 % stake in alstria office REIT-AG. Morgan Stanley,
Stichting Pensioenfonds and Cohen & Steers held more
than 3 % each. The remainder of the shares are defined
as free float. At the balance sheet date, alstria held 1.2 %
own shares as a result of the buy-back programme.

SHAREOLDER STRUCTURE BY INVESTOR

46,0 %

May 31

May 2-3

April 24-25

June 29-30

Welt LB German Real Estate Day,
New York
14. Handelsblatt Annual Conference
"Immobilienwirtschaft 2007", Berlin
HVB German Financials Conference,
Stockholm
Sal Oppenheim Real Estate
Conference, Zurich
September 6-7
EPRA Annual Conference, Athens
September 10-11 GRI Europe Summit 2007, Paris
HSH Nordbank Transatlantic
September 19
Investor Conference, New York
EXPO Real, Munich
Real Estate Share Initiative
Hamburg
Open day at the Hamburg
Stock Exchange, Hamburg
November 12-14 German Equity Forum, Frankfurt

October 8-10
October 25-26

November 10

54,0 %

Captiva 2 Alstria Holding S.à.r.l.
Free Float

Dividend payment
The management board and the supervisory board will
be submitting a proposal at the Annual General Meeting
to pay out a dividend of app. EUR 0.52 per share
outstanding for the 2007 financial year. The total amount
paid out in dividends will be EUR 28,4 million.

SHARE PRICE 2007 DEVELOPMENT
April 2, 2007 EUR 16.00 indexed to 100

120

110

100

Apr. 07

June 07

Aug. 07

Oct. 07

Dec. 07

alstria office REIT-AG
EPRA Europe

EPRA Germany
SDAX

KEY FIGURES PER SHARE
in EUR (if not stated otherwise)

2007 high
2007 low
IPO price
Opening price
Year end/closing price
Weighted average number of shares outstanding
Average trading volume in shares (XETRA)
Average market capitalisation (in EUR m)
Total numbers of shares outstanding as at Dec. 31, 2007
Dividend per share as at Dec. 31, 2007
Cash flow per share from operating activities
NAV per share as at Dec. 31, 2007

2007

16.67
9.51
16.00
16.30
10.25
46,081,858
77,080
763.2
55,326,195
0.51
0.23
15.55

| 16 | alstria Annual Report 2007

alstria Annual Report 2007 | 17 |

CORPORATE GOVERNANCE REPORT

alstria’s management and supervisory board are aware of
the company’s responsibilities towards its shareholders,
employees and business partners. For the purpose of a
value-oriented corporate management, alstria has therefore
implemented the German Corporate Governance Code to
a great extent, thereby surpassing legal provisions. The
recommendations and proposals made by a commission
set up by the German Federal Government
include
internationally and nationally accepted standards regarding
the good and responsible management of companies.

Corporate Governance principles provide regulations for
the following areas:

• they describe the major rights of the shareholders
• they define clear management principles and the
respective responsibilities for the individual company
bodies

• they regulate the interaction between these bodies
• they demand straightforward and transparent

communication with the public

• they require conscientious, reliable accounting and

auditing

Corporate Governance Code and compliance
declaration
The official compliance declaration of alstria’s management
and supervisory board is accessible on our website
(at www.alstria.com). With regard to a few individual
items alstria has, after thorough deliberation, decided not
to comply with the code. These items are specified in the
declaration. The reasons for non-compliance are stated
in the declaration. The implementation of Corporate
Governance at alstria means amongst others:

Relations with the company’s shareholders
alstria office REIT-AG respects the rights of shareholders
and guarantees the exercise of these rights to the best of
its ability within the given statutory framework.
In
particular, these rights include the free purchase and the

free sale of shares, equal voting rights for each share (one
share - one vote), participation in the annual shareholders’
meeting and exercise of the voting right and appropriate
fulfilment of one’s need for information.

Communication with the public
When relaying information to people outside the
enterprise, the management board observes the principles
of transparency, promptness, openness, comprehensibility
and the due equal treatment of shareholders.

Management board
The management board as a whole, as well as each
individual board member, will conduct the enterprise’s
business with the due care and diligence of a precise and
conscientious management board member in accordance
with governing law, the articles of association, and the
rules of procedure for the management board. The
management board manages the enterprise on its own
responsibility.
in the
enterprise’s best interests and is committed to developing
sustainable enterprise value.

is obliged to act

In doing so,

Supervisory board
It is the task of the supervisory board of alstria office
REIT-AG to appoint the management board members,
to regularly advise it and to supervise and support
the management and the achievement of alstria’s
long-term goals.

Cooperation between the management board
and the supervisory board
The management board and the supervisory board
cooperate closely to the benefit of the enterprise. The
chairman of
the supervisory board keeps in regular
contact with the management board, especially with
the Chief Executive Officer. The management board
coordinates the enterprise’s strategic alignment with the
supervisory board and discusses with it the current state
risk
of strategy implementation and the company’s

management at regular intervals. For transactions of
fundamental importance, the supervisory board specifies
in the rules of procedure for the supervisory board that
they are subject to the supervisory board’s approval. This
includes decisions or measures that fundamentally change
the company’s assets, financial or earnings situation.

Remuneration of management and supervisory
board members
Remuneration of management and supervisory board
members is reported on pages 115 and 117 of the annual
report.

The information is
individualised and itemised. The
management board members’ remuneration comprises
fixed and variable components, as well as performance
incentives to increase the value of the company in the
long term. The long-term compensation components
consist of stock options. The intention of this is to create
performance incentives geared towards lasting corporate
success. The targets that form the basis of these incentives
may not be changed subsequently.

and

chairmanship

receive a fixed
The supervisory board members
Both
deputy
compensation.
chairmanship of
the supervisory board as well as
membership in the audit committee and chairmanship
of the audit committee are taken into account in the
evaluation of the supervisory board members’ scope of
activities. Membership in other committees is not taken
into account.

Reporting and audit of annual financial
statements
alstria informs shareholders and third parties regularly by
means of consolidated financial statements and by means
of interim reports during the financial year. Consolidated
reporting complies with the International Financial
Reporting Standards (IFRS).

For corporate law purposes (calculation of dividend,
financial statements are
creditor protection), annual
prepared in accordance with national
regulations
(German Commercial Code). The consolidated financial
statements are reviewed by the auditors and by the
supervisory board. The audit committee of the supervisory
board issues the audit assignment and concludes a fee
agreement with the auditors. The auditor participates in
the audit committee’s discussions of the annual financial
statements and consolidated financial statements and
reports the basic audit results.

Stock option programme and similar
securities-based incentive systems

Stock option programme
The stock option programme provides for the issuance
of option rights to the company’s management board
members. The exercise price to be paid for the subscription
to an alstria share upon exercise of option rights, which
were granted in 2007, amounts to 100 % of the offer price
at which the company’s shares were sold in the course of
their IPO on the Frankfurt stock exchange (EUR 16). The
exercise price for options to be granted in future will be
100 % of the arithmetic means of the XETRA trading’s final
auction of alstria’s shares on the Frankfurt stock exchange
on the last ten trading days before the options have been
issued (“Issue Date”).

The holders of subscription rights cannot exercise the
option rights before expiration of a waiting period of
two years starting from the Issue Date of the respective
option right. The option rights may only be exercised if
the current stock exchange price of the company’s shares
exceeds the stock exchange price of the company’s shares
on the Issue Date by 20 % or more for at least seven non
subsequent trading days prior to the exercise of the option
right. The option rights have a term of seven years.

| 18 | alstria Annual Report 2007

alstria Annual Report 2007 | 19 |

Employee participation programme
The employee participation programme provides for the
issuance of convertible profit participation certificates
to the employees of alstria and to the employees of
companies in which alstria, directly or indirectly, holds a
majority interest. Members of the management board are
not considered employees of alstria.

The nominal amount of each certificate is EUR 1. Under
the programme, up to 500,000 certificates in an aggregate
nominal amount of up to EUR 500,000 may be issued.
Up to now, 3,600 certificates have been issued.

Each certificate will be converted into one non-par value
bearer share of alstria if the current stock exchange price
exceeds the stock exchange price of alstria’s shares on the
issuance date by at
least seven non-
subsequent trading days prior to the mandatory conversion
date. The certificates will only be converted if the beneficiary
pays the conversion price and at the mandatory conversion
date is still employed with alstria or a subsidiary. The
maximum term of each certificate is five years.

least 5 % on at

Directors’ dealings
The following transactions were executed in 2007 and
reported to alstria:

Under Sec. 15a of the Securities Trading Act (Wertpapier-
handelsgesetz), the management and supervisory board
members of alstria office REIT-AG, as well as persons
who have a close relationship with such members (family
members) are obligated to report trading in alstria shares.
In addition to the purchase and sale of alstria shares, any
transactions in securities relating to alstria shares (e.g. the
sale of purchase of options on alstria shares) have to be
reported. The company has to be notified about such
transactions within five working days and has to publish
inapplicable if
them immediately. This obligation is
the total value of these transactions does not exceed
EUR 5,000 during one calendar year.

the direct or

Directors’ share ownership details pursuant to no.
6.6 German Corporate Governance Code
the German Corporate Governance Code
No. 6.6 of
indirect ownership of
recommends that
shares of the company or related financial instruments such
as derivatives by a member of the supervisory board or of
the management board shall be disclosed if it amounts to
more than 1 % of the issued shares of the company. If the
total owned by all members of the supervisory board and
members of the management board amounts to more than
1 % of the issued shares of the company, ownership should

DIRECTORS’ DEALINGS IN 2007

Name of the Board Member
Function
Classification of the share

Olivier Elamine
Member of the Management Board
Share

ISIN

Place

Transaction

Transaction
Date

Price per
Share in EUR

Number
of Shares

Deal
Volume

DE000A0LD2U1
DE000A0LD2U1
DE000A0LD2U1
DE000A0LD2U1
DE000A0LD2U1

Xetra
Xetra
Xetra
Xetra
Xetra

Purchase
Purchase
Purchase
Purchase
Purchase

25.07.2007
10.08.2007
14.08.2007
19.10.2007
21.11.2007

13.89
13.20
12.22
12.75
10.48

2,650
1,200
1,200
2,000
1,000

36,808.5
15,840
146,664
25,500
10,480

be disclosed for management board members as a group
and for supervisory board members as a group.

law and commercial real estate law, the company believes
that he is sufficiently qualified to act as chairman of the
audit committee.

No member of the management board or the supervisory
board directly or indirectly owns more than 1 % of the
alstria office REIT-AG subscribed capital. The entire
holdings of all members of the management board and
supervisory board do not exceed 1 % of the shares issued
by the company.

Non-compliance with the recommendations of
the German Corporate Governance Code
alstria complies with the recommendations of
the
“Government Commission German Corporate Governance
Code” as published on June 14, 2007 for the time being
with the following exceptions and intends to further
comply with the recommendations to the same extend:

DEDUCTIBLE IN THE CASE OF D&O INSURANCES, NO. 3.8.
With regard to the D&O insurance effected for
the
management and supervisory board of alstria office REIT-AG,
no deductable has been agreed. Both the management
and supervisory board believe that the sense of responsibility
applied in fulfilment of
their duties is fully guaranteed
without any such deductible.

POSSIBILITY OF LIMITATION (CAP) ON STOCK
OPTIONS, NO. 4.2.3.
The supervisory board has not agreed a cap on the stock
option programme for the management board in the
event of extraordinary and unforeseeable developments.
For any future stock option programmes and similar
systems, there will be a discussion as to whether a Cap
should be agreed.

SPECIALIST KNOWLEDGE AND EXPERIENCE OF THE
CHAIRMAN OF THE AUDIT COMMITTEE NO. 5.3.2.
The chairman of the audit committee is not a professional
accountant. Nevertheless, due to his comprehensive
professional expertise as a lawyer regarding commercial

NOMINATION COMMITTEE, NO. 5.3.3.
The supervisory board did not
form a nomination
committee. As the supervisory board of alstria with six
members is comparatively small, the management and
supervisory board see no need to establish a nomination
committee.

PERFORMANCE-RELATED COMPENSATION FOR
MEMBERS OF THE SUPERVISORY BOARD, NO. 5.4.7.
The members of the supervisory board do not receive a
performance-related remuneration in addition to their fixed
remuneration. The reason for the deviance from the code
in this regard is the relatively small size of the company.

ACCESSIBILITY OF CONSOLIDATED FINANCIAL
STATEMENTS AND INTERIM REPORTS, NO. 7.1.2.
For practical reasons, the consolidated financial statements
and interim reports are publicly accessible within the legally
stipulated time frame but a couple of days later than the
recommended time frame given by the code.

All other recommendations of the German Corporate
Governance Code have been implemented in their
entirety. alstria has appointed a corporate governance
representative within the company to report amendments
to an implementation of
the German Corporate
Governance Code to the management and supervisory
boards at least once a year. In this way we ensure the
continuous observance of these principles in our company.
By means of analysis, supervision and transparency,
alstria lays the foundations for fair and efficient corporate
management. This will remain our standard in the future
as well.

| 20 | alstria Annual Report 2007

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FOUNDED: 711 DAYS AGO.
GROWN: CREATED ONE JOB EVERY
TWO MONTHS

GROUP MANAGEMENT DISCUSSION
AND ANALYSIS

transparent for corporate income and trade tax purposes.
Except for changing the tax status, the REIT conversion
does not imply any changes in the overall strategy of
alstria. alstria remains internally managed and continues
to be focussed on the acquisition and the management of
German office properties. It is alstria´s objective to closely
collaborate with its tenants to create a close and long-term
partnership. The preferred route for external growth is to
execute sale and lease back transactions which offer the
sellers an exit tax benefit.

Portfolio overview
In 2007, alstria acquired investment properties for a total,
all-in cost of EUR 527 million. Out of these transactions,
approximately EUR 310 million closed in 2007, while the
remainder of the contracts is expected – subject to certain
conditions - to close in the first months of 2008. The
average initial yield on the 2007 acquisitions was 6.4 %.
The attractive yields in 2007 were supported by the fact
that alstria was able to make extensive use of the exit tax
benefit in the acquisitions after the REIT conversion.

Economic conditions
The year 2007 was characterised by high volatility in the
equity markets. Driven by the sub prime crisis specifically
the general market sentiment towards real estate stocks
deteriorated in the course of the year. Despite these
the overall
developments in the financial markets,
fundamental
business
environment
continued to be very positive: The German economy
grew by approximately 2.6 % with continued positive
effects on the employment market. The strong economic
fundamentals generally fuelled a continuing strong
demand for office space in Germany. Also, the direct
investment market for office properties reached a record
volume of around EUR 311 billion, emphasising the
uninterrupted, strong interest of international
investors
in the German market.

alstria’s

for

Strategy and structure
On October 11, 2007, alstria was registered as the first
German REIT-AG. The REIT status implies that, effective
retroactively from January 1, 2007, alstria will be fully

Frankfurt am Main

1 Jones Lang LaSalle: Capital Markets Newsletter

”1. und 2. Halbjahr 2007“, page 2.

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KEY METRICS OF 2007 ACQUISITIONS

THE KEY METRICS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS: 1

Date

Portfolio

REIT
Benefit

All-In-Cost

230.0
11.3
3.1
REIT Conversion
60.8
111.3
53.0
55.0

yes
yes
yes

Passing
Rent

14.6
0.9 1
vacant

3.8
7.7
3.3
3.3

Gross
Yield

6.3 %
7.9 %

6.3 %
6.9 %
6.2 %
6.0 %

Vacancy

Metric

11 %
80 %
100 %

12 %
13.5 %
3.2 %
0.0 %

Number of properties
Market Value (EUR bn)
Passing Rent (EUR m/annum)
Valuation yield
Approximate lettable area (k sqm)
Vacancy (% of lettable area)
WAULT (years)

Value

72
1.7
91
5.4 %
816
6.1 %
11.3

Aurora
Munich
Hamburg

MFI
Bilfinger Berger
HUK Coburg
Berlin

Jan
May
Aug
Oct
Nov
Dec
Dec
Dec

Total

524.5

33.6

6.4 %

12.5 %

One of the key characteristics of the alstria portfolio is the
stringent focus on a set number of key tenants. Accordingly,
in 2007 our Top 5 tenants accounted for more than 75 %
of our total revenues. Also, our clear focus on one asset
class, i.e. offices, is nicely reflected in our 2007 portfolio.
Of our total lettable area, 94% is dedicated to offices.

As of the balance sheet date, alstria’s portfolio held 72 office
buildings with approximately 816,000 square metres of
lettable area and a vacancy rate just short of 6 %. The
portfolio is valued at a yield of 5.4 % and the remaining
average unexpired lease term is around 11 years.

TOTAL PORTFOLIO BROKEN DOWN BY USAGE

ALSTRIA’S CORE TENANTS 2007

3 %

2 %

1 %

94 %

1 %

4 %

11 %

41 %

Office
Retail

Residential
Other

16 %

City of Hamburg
Daimler AG
Barmer
Siemens AG

22 %

Rheinmetall AG
City of Hanover
Other

It is alstria’s strategy to give our investors exposure to the
total German office market, not only to the 5 or 6 main
centres. The reason is simply that, in the past, many of the
so called subcenters have quite frequently outperformed
the office hot spots like Frankfurt or Munich. In the execution
of this strategy, however, it is of utmost importance to us
that the properties we do acquire fit the demands of their
specific markets. Consequently, the typical exposure we
would have in Dresden, Dortmund or Mannheim would
still be somewhat lower than our exposure in Hamburg,
Dusseldorf or Berlin.

On the operations side our low vacancy rate (approximately
4 % of the portfolio, or 30,000 square metres), has remained
stable since the beginning of the year. The increase to
6.1%, as reflected in the year end numbers, was only
driven by the inclusion of the Bamler Servicepark asset as
of December 31, 2007. New vacancy which came up in
2007 was successfully compensated by new lease-up,
which represents more than 70 new leases for a total
lettable area of around 7,000 square metres.

OMV OF INVESTMENT PROPERTIES

Hamburg

Berlin

Hanover

Potsdam

Magdeburg

Detmold

Essen

Dortmund

Wuppertal
Dusseldorf

Cologne

Bonn

Halle

Leipzig

Dresden

Erfurt

Zwickau

Jena

Wiesbaden

Frankfurt

Darmstadt

Manheim

Wuerzburg

Nurnberg

Stuttgart

Augsburg

Munich

higher than 100 M EUR
from 50 to 100 M EUR
from 25 to 50 M EUR

from 10 to 25 M EUR
from 5 to 10 M EUR
from 1 to 5 M EUR

1 Seller rent guaranty

1 For full details of the portfolio see pages 126-133

| 24 | alstria Annual Report 2007

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EARNINGS POSITION

When comparing the financial year
figures of 2006
versus 2007, it is important to note that the 2006 figures
only reflect eleven months and only seven months of
business activities. Moreover, the 2006 figures reflect only
the pro rata revenues of the Primo and Juna Portfolio as
well as the Daimler property.

SUMMARY OF THE INCOME STATEMENT

The following table shows the key operating figures of the
audited income statements for the financial year 2007 and
the business period 2006:

(in EUR k)

Revenues
Net rental Income
Net operating result

2007

% of
rev.

Jan. 20 -
Dec. 31, 06

% of
rev.

Change

82,552
76,192
75,162

100.0
92.3
91.0

30,063
28,358
51,656

100.0
94.3
171.8

52,489
47,834
23,506

Pre-Tax Income (EBT)

48,133

58.3

18,623

61.9

29,510

Consolidated Profit for the Year

52,811

64.0

14,533

48.3

38,278

Strong operating performance in 2007 -
Revenues at EUR 82,552k
For
revenues were at
the financial year 2007,
EUR 82,552k. Real estate operating expenses were
8.1 percent of revenues or EUR 6,674k. Net rental income
for 2007 was EUR 76,192k.

total

A net gain from fair value adjustment of EUR 19,256k was
recorded for 2007. The revaluation of investment properties
contributed EUR 11,170k and the revaluation of financial
derivatives EUR 8,086k to this result.

Operating expenses and net income influenced
by REIT conversion effects
The REIT conversion had a number of short-term impacts
on the results, which are mainly reflected in the operating
expenses and the income tax line. Operating expenses
were affected by app. EUR 480k of one-time expenses
incurred for advisory services in relation to the REIT
conversion. The most significant impact relates to the
reversal of all deferred taxes in the balance sheet, which
creates a P&L income effect of EUR 7,356k. At the same
time, an accrual for a conversion tax charge of EUR 5,100k
was recorded.

A summary of the REIT conversion- related P&L effects is
provided in the following table:

REIT CONVERSION

(in EUR k)

Expense
effects

Income
effects

Advisory services
Reversal of deferred
tax assets
Reversal of deferred
tax liabilities
Conversion tax expense

480

12,513

5,100

19,869

Total

18,093

19,869

Administrative
and
expenses, personnel
other operating expenses are EUR 12,788k for the year.
Accordingly, total recurring operating expenses (disregarding
REIT conversion-related expenses) are 14.9 % of
total
revenues (compared to EUR 5,690k or 18.9 % for 2006).

expenses

The net operating result is EUR 75,162k for 2007
(2006: EUR 51,656k).

Hamburg

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Funds from operations at EUR 0.56 per share
Funds from operations (FFO) were EUR 31,540k for 2007
compared to a negative amount of EUR 3,518k in 2006.

As a result, FFO per share was at EUR 0.56 in the financial
year 2007.

FUNDS FROM OPERATIONS

(in EUR K)

Pre-tax income (EBT)
less financial result
plus non-cash expenses

2007

Jan. 20 -
Dec. 31, 2006

48,133
-35,115
2,663

18,623
-33,033
0

Change

29,510
-2,082

EBITDA

85,911

51,656

34,255

less net gain from fair value adjustments
on investment property
less net gain from fair value adjustments
on financial derivatives
plus financial result

11,170

8,086
-35,115

22,871

-11,701

-730
-33,033

8,816
-2,082

Funds from operations (FFO)

31,540

-3,518

35,058

FFO is not a measure of operating performance or liquidity under generally accepted accounting principles, in particular IFRS, and should not be
income or cash-flow measures as determined in accordance with IFRS. Furthermore, no
considered as an alternative to the Company’s
standard definition exists for FFO. Thus,
the FFO or measures with similar names as presented by other companies may not necessarily be
comparable to the Company’s FFO.

EBITDA is not a measure of operating performance or liquidity under generally accepted accounting principles, in particular IFRS, and should not be
considered as an alternative to the Company’s
income or cash-flow measures as determined in accordance with IFRS. Furthermore, no
standard definition exists for EBITDA. Thus, EBITDA or measures with similar names as presented by other companies may not necessarily be comparable
to the Company’s EBITDA.

FINANCIAL RESULTS BREAKDOWN

(in EUR k)

Syndicated Loan -
interest and similar costs
Shareholder Loan -
interests and similar costs
Interest income
Registration of
land changes
Other

Total

2007

-41,580

-1,307
6,184

-232
1,820

-35,115

Net profit for the year of EUR 52,811k
The resulting earnings before tax are EUR 48,133k for the
financial year 2007 (2006 EUR 18,623k). Tax gains from
consolidation and the elimination of deferred taxes
because of G-REIT conversion lead to a positive tax result
of EUR 4,678k. Consolidated net profit is EUR 52,811k for
2007 compared to EUR 14,533k for 2006.

Earnings per share are EUR 1.15 for 2007.

Hedging instruments
The net gain from fair value adjustments on the financial
derivatives is driven by the development of the yield curve
at the end of 2007. The fact that our debt exposure is fully
hedged fixes the current overall cost of debt
for the
existing portfolio at 4.3 %. An overview of the composition
of the fair values is given in the following table:

HEDGING INSTRUMENTS BREAKDOWN

(in EUR k)

Dec. 31, 2007

Swap - 3.6165 %
Swap - 3.1925 %
Cap - 4.0000 %
Cap - 3.8000 %
Cap - 3.8000 %
Cap - 4.9000 %

Total

18,939
3,761
1,811
961
604
1,126

27,202

Financial result
alstria has a EUR 1.139 billion syndicated loan facility
in place which was arranged by J.P. Morgan, Natixis
and HSH Nordbank. This facility has presently been
utilised to EUR 927 million. The facility is used by alstria
to partially finance the current investment property base
as well as future acquisitions. The interest
rate on
syndicated loan is based on the three-month
this
EURIBOR floating rate plus a spread dependent on the
average lease length of the property portfolio and the
loan to value ratio. For economic as well as for G-REIT
compliance reasons, alstria is committed to maintaining
a G-REIT equity ratio of 45 % or above.

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FINANCIAL AND ASSET POSITION

RISK AND OPPORTUNITY REPORT

The equity and liability side of the balance sheet reflects
a total equity position of EUR 870.876k with an equity
ratio of 47 %, which is up 18 percentage points from 29 %
at the beginning of the year. The G-REIT equity ratio,
which is defined as total equity divided by investment
properties, is 51 % (the minimum requirement for G-REIT
compliance of 45 %).

The long term loan position is EUR 927,456k, up from
EUR 833,391k at the prior year’s end. The main changes
in the long-term loan position over the reporting period
were, firstly, the repayment of the loan for Juna Property
GmbH & Co. KG of EUR 162 million. The debt portion of
EUR 109 million was drawn down from the syndicated
loan facility and the remainder was contributed by
the shareholders into capital
the
refinancing of
the “Alte Post” and “Grosse Bleichen”
properties led to the increased utilisation of the syndicated
loan facility by EUR 52,250k. The third instalment for the
Aurora Portfolio was financed by a draw down from the
syndicated loan facility of EUR 110,500k.

reserves. Secondly,

liabilities are EUR 37,188k, which is mainly
Current
related to trade payables, payables for VAT settlement and
accrued interest which will become due under
the
syndicated loan agreement within one year.

Cash position of EUR 103,036k
The cash flow from operating activities was at EUR 12,674k
mainly driven by the strong operating performance.

The cash flow from investing activities was influenced by
the strong acquisition activity for office property in the
second half year. The instalments of the purchase price for
the Aurora Portfolio equalling EUR 221,000k have the
most significant impact on the cash flow from investing
activities. The purchase of Bamler Servicepark in the fourth
quarter resulted in a cash outflow of EUR 60,762k.

The cash flow from financing activities
the
substantial capital restructuring which was undertaken
during the period and includes the gross proceeds
from the IPO of EUR 256,000k.

reflects

As a result, alstria closes the financial year 2007 with a
cash position of EUR 103,036k (2006: EUR 24,304k).

Together with the refinancing via the syndicated loan
facility, this enables alstria to meet payment obligations
for the acquisitions agreements entered into in the last
quarter of 2007.

Equity ratio of 47.4 %, NAV per share EUR 15.55
– G-REIT equity ratio at 51.4 %
The total investment property value is EUR 1,693,718k as
compared to EUR 1,289,536k at the beginning of the year:

CHANGE IN INVESTMENT PROPERTY
(in EUR m)

Investment properties
as at Dec. 31, 2006
Changes in consolidated group
Acquisitions
Disposals
Revaluations
Prepayments

1,289.54
95.00
293.45
-3.53
11.17
8.09

Investment properties
as at Dec. 31, 2007 (audited)

1,693.72

Risk management
alstria has implemented a structured risk management and
early warning system in accordance with Section 91 (2) of
the German Stock Corporation Act (AktG). All risks are
recorded, evaluated and monitored on a quarterly basis.
Our risk identification process allows the early identification
of sources for any potential new risks on an ongoing basis.
Risk mitigation measures are defined in order to undertake
any necessary steps to circumvent
the identified risks,
i.e. to diversify, manage or avoid risk. For alstria, risk
management means the targeted securing of existing and
future potential for success as well as improving the quality
of the planning process of the company. The risk management
is organisationally assigned to the controlling group. A risk
report is prepared by the risk manager and directly reported
to the Management Board.

Those risks are divided into four categories:

• strategic risks;
• operational risks;
• compliance risks;
• financial risks

All material risks to the future development of the company’s
position and performance are described in this chapter
as identified in accordance with alstria’s risk management
system.

Strategic risks
Strategic risk management mainly consists of the application
of guidelines contained in the investment policy, asset
management policy and rules of management of the
relationship with the Group's core tenants.

Operational risks
alstria's operational risk management refers to property-
specific risks and general business risks. This includes,
among others, vacancy risk,
the creditworthiness of
tenants and the risk of falling market rents. The Company

uses various early warning indicators to monitor these
risks. Rent projections, vacancy analyses, the control of the
duration of lease contracts and termination clauses as well
as ongoing insurance checks are meant to help identify
potential dangers and risks.

Compliance risks
G-REIT LEGISLATION
alstria is registered in the commercial register as a REIT
stock. The new REIT segment allows alstria to offer high
visibility to investors and differentiate itself as a REIT on the
capital market.
In order to qualify for becoming and
staying a G-REIT, certain requirements have to be met. The
most relevant of those are the following: The G-REIT must
be a stock corporation listed on an organised market and
its statutory seat and management must be in Germany.
The registered share capital must be at least EUR 15 million
with all shares being voting shares of the same class. The
free float must be at least 15 percent and no investor may
directly hold 10 percent or more of the shares, or shares
which represent 10 percent or more of the voting rights.
Furthermore, at least 75 percent of the assets must consist
of real estate and at least 75 percent of the gross income
must be generated from real estate. At least 90 percent
of
the annual profits under German GAAP must be
distributed to the shareholders and the G-REIT’s equity
may not fall short of 45 percent of the fair value of its real
estate assets as recorded under IFRS rules. REIT stock
corporations are fully exempted from German corporate
income tax and German trade tax. Sellers who offer real
estate to alstria may, subject to certain conditions, benefit
from the so called exit tax - a 50 percent relief on income
and corporate income tax respectively, as well as the trade
tax payable on capital gains.

CAPITAL MANAGEMENT
Capital management activities are aimed at maintaining
the Company’s classification as a REIT in order to support
its business activities and maximise shareholder value.

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The Company manages its capital structure and makes
adjustments in response to changes in economic conditions.
In order to maintain or adjust the capital structure, the
Group can make a capital repayment to its shareholders or
issue new shares. No changes were made to the aims,
guidelines and processes as at December 31, 2007 and
December 31, 2006.

The capital structure is monitored by the Company using
the Key Performance Indicators
for
classification as a REIT. The REIT equity ratio, being the
ratio of equity to investment property,
is the most
important KPI. According to the Group’s strategy, the REIT
equity ratio must be between 45 % and 55 %.

relevant

(KPI)

LEGAL RISKS
The company is not sued in the course of any individual
or other kind of legal dispute.

A lawsuit is filed against a competitor because of the
breach of trademark law.

Because the Company is the party taking the legal action,
there are no risks out of legal files.

the alstria Group and its

Financial risks
As a result of the IPO, an appropriate credit facility and the
incorporation of
financial
partners, the financing risk of the Company is limited
.
The financial
instruments mainly used by the Group are
bank loans and derivative financial instruments. The main
purpose of the bank loans is to finance the business
activities of alstria.

Derivative financial instruments include interest swaps and
caps. The purpose of these derivative financial instruments
is to hedge against interest risks arising from the Company’s
business activities and its sources of financing. The main risks
arising from the Group’s financial instruments are cash flow

interest rate risks and liquidity risks. The Group is not
exposed to any significant credit risks.

Interest rate risk
Interest rate risk results from market variations in interest
rates. These affect the amount of interest expenses in the
financial year and the market value of derivative financial
instruments used by the Company.

alstria's hedging policy uses a combination of plain vanilla
swaps and caps in order to limit the exposure of the
Company to interest rate fluctuations, but still provide
enough flexibility to allow the disposal of real estate
assets, avoiding any cost
linked to an over-hedged
situation. The interest base for the financial liability (loan)
is the 3-month EURIBOR, which is adjusted every three
months. A number of different derivative financial
instruments were acquired to manage the interest
the derivative financial
expense.
instruments is based on the life of the borrowings. The
derivative financial instruments relate to interest swaps in
which the Company agrees to exchange with contracting
partners, at specified intervals, the difference between
fixed and variable interest rate amounts calculated by
reference to an agreed upon notional principal amount.
In addition, interest caps were acquired; here the interest
is capped at a set maximum. If the maximum interest rate
is exceeded, the difference between the actual
interest
rate and the cap rate is paid out.

The maturity of

Liquidity risk
Cash management is one of the core processes of alstria.
The company assesses its cash on a daily basis. A cash
is used to prevent any liquidity risk. This
forecasting tool
liquidity planning tool uses the expected cash flows from
business activities and the maturity of
the financial
investments as a basis for analysis.

focussing on the

rates fluctuations and inflation, rental
income and thus
the valuation of the property can be adversely affected.
Regional diversification of
the investment portfolio,
individual
consequent
needs and tight monitoring of the market (broker reports)
are taken as risk mitigation procedures. Furthermore,
the real estate of alstria
the market values of all
is determined at
the
financial year by neutral,
internationally recognised
valuation companies.

least annually at

the end of

tenant’s

Counterparty risk
alstria hedges a portion of its risk by using third-party
instruments (interest rate derivatives, property insurances
and others). alstria's counterparties in those contracts are
internationally recognised institutions which are rated by
the main rating agencies. alstria reviews the rating of its
counterparties on an annual basis in order to mitigate any
risk of default.

the consideration of ecological matters often also results in
lower operating expenses.

Employees
As at December 31, 2007, alstria employed 20 people
(December 31, 2006: 4). The yearly average of employees
has been 15 (previous year: 4).

Compensation report
Management board members’ compensation comprises
a fixed and a variable component linked to the company’s
operating performance.

In addition to their bonus the members of the management
board receive share options as a long-term incentive
component of remuneration.

The members of the supervisory board receive a fixed
remuneration.

Overall assessment
No risk to the company’s continued existence can be
identified from past or future events. Sufficient precautions
have been taken against identifiable risks.

The compensation report, containing details of
the
principles for the definition of the management board and
supervisory board remuneration, is laid out in the appendix
to the notes to financial statement.

Opportunities of the Group
Being one of only two German REITs constitutes a
substantial opportunity for alstria. This situation provides
alstria with a distinct competitive advantage in the direct
investment markets because alstria can offer corporate
sellers of office real estate the so called exit tax benefit.

Quality and environmental management
It is the aim of alstria to meet the high quality demands
tenants and simultaneously to decrease the
of our
environmental
responsible asset
management.

through our

impact

Company group and dependent company report
II S.à.r.l., Luxembourg, holds a majority
Captiva Capital
interest in alstria. According to Section 290 HGB we are
required to prepare consolidated statements and a Group
management report comprising the group companies
controlled by the Group. Apart from this, alstria office
REIT-AG and all associated companies as stated in the
notes are consolidated in the alstria Group.

According to the majority interest in alstria of Captiva
Capital
II S.à.r.l, Luxembourg, we issued a separate
dependent company report with affiliated companies,
the German Stock
in accordance with Sec. 312 of
Corporation Act (AktG). This report includes the following
statement:

Valuation risks
Based on influence factors like economic changes, interest

In the course of this, economic and ecological matters are
not regarded as contradictory, but as complementary, as

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”We herewith declare that, to the best of our knowledge
at the time which legal transactions have been entered
in or measures were undertaken or omitted,
the
Company received adequate compensation and was not
disadvantaged by any measures or transaction.”

of 5.1 % and an indirect shareholding of another 48.9 %
through its wholly-owned subsidiaries.

Holders of shares with privileges
No shares exist granting privileges of controlling power.

Disclosure requirements in accordance with
sections 289 (4), 315 (4) HGB for the financial
year 2007 and explanatory report of the
management board

Nature of voting rights control if employees
have a share in capital and do not directly
exercise their right of control
This constellation does not exist within the company.

Composition of subscribed capital, voting rights
and privileges
As per the closing date December 31, 2007, the company’s
share capital was EUR 56,000,000, divided into
56,000,000 notional no par-value shares. Each share
represents one vote in the general meeting. There are no
restrictions on voting rights. The company did not issue
any shares granting privileges of controlling power.

Restrictions on disposal of shares or voting rights
There are no restrictions as to the disposal of shares or the
use of voting rights.

Shareholders with an interest of at least 10 %
As per the closing date December 31, 2007, the company
did not know of any shareholders whose direct interest
exceeded 10 % of
the share capital. Captiva Capital
Partners II S.C.A. has an indirect shareholding of approxi-
mately 54 % in alstria.

Before alstria converted into a REIT, Captiva 2 Alstria
Holding S.à.r.l., a wholly-owned subsidiary of Captiva
Capital Partners II S.C.A., was holding a direct shareholding
of approximately 54 % in the company. In September
2007, Captiva 2 Alstria Holding S.à.r.l. transferred interests
of 9.78 % each to its 100 % subsidiaries Captiva Alstria
S.à.r.l., Captiva Alstria 1 S.à.r.l., Captiva Alstria 2 S.à.r.l.,
Captiva Alstria 3 S.à.r.l. and Captiva Alstria 4 S.à.r.l. Therefore,
Captiva 2 Alstria Holding S.à.r.l. holds a direct shareholding

Authority of the management board regarding
repurchasing and issuance of shares
1. authorised capital
The articles of association authorise the management
board to increase the share capital with the approval
of the supervisory board until March 14, 2012 by issuing
new bearer shares against contributions in cash and/
or kind once or repeatedly up to a total amount of
EUR 27,500,000.00.

2. conditional capital
items
The company disposes of three conditional capital
(Sec. 192 et seqq. German Stock Corporation Act(AktG)),
which are regulated in Sec. 5 (5-7) of the articles of
association.

a) conditional capital I
The share capital is conditionally increased by up to EUR
17,500,000.00 by issuing up to 17,500,000 new no-par
value bearer shares with an entitlement to a share of
profits from the beginning of the financial year of their
issuance. The conditional capital increase shall be carried
out only to the extent that conversion or option rights
are exercised by holders of conversion or option rights
attached to bonds which alstria or its subsidiary companies
have issued against cash payments in accordance with the
resolution of the general meeting of March 15, 2007, or
that conversion obligations under such bonds are fulfilled,
and only insofar as no other methods of performance are

total of ten percent of the share capital until September
14, 2008. The shares acquired and other own shares that
are in the possession of or to be attributed to the company
pursuant to sec. 71 a et seq. AktG must altogether, at no
point in time, account for more than ten percent of the
share capital.

Appointment and dismissal of management
board and supervisory board members
The management board consists of one or more members,
which are appointed and dismissed in accordance with
sec. 84 AktG by the supervisory board.

Amendments to the articles of association are made
pursuant to sec. 179 and 133 AktG. The supervisory board
is also authorised, without a resolution by the shareholders
meeting, to make changes in and amendments to the
articles of association that merely affect the wording.

Change of control clauses in key agreements
entered into by the company
No such clauses exist.

Compensation agreements with management
board and supervisory board members in the
case of a takeover bid
No such agreements exist.

These provisions comply with the statutory requirements
comparable listed
and are common practice by
enterprises. They are not indented to hinder potential
takeover bids.

used in serving these rights. The management board is
authorised to determine further details of the conditional
share capital increase.

b) conditional capital II
The company’s share capital is conditionally increased by
an amount of up to EUR 2,000,000.00 by the issuance of
up to 2,000,000 no-par value bearer shares. The purpose
of the conditional capital increase is to grant shares to the
holders of subscription rights (stock options) which are
issued in accordance with the authorisation of the annual
general meeting held on March 15, 2007 by the company.
The conditional capital increase is only carried out insofar
as the holders of the stock options exercise their stock options
and no own shares of the company are used for servicing.

The new shares will participate in the company's profits
from the beginning of the business year in which they
come into existence as a result of the exercise of the stock
options.

c) conditional capital III
The share capital is conditionally increased by an amount
of up to EUR 500,000.00 by the issuance of up to
500,000 non-par value bearer shares. The purpose of the
conditional capital
increase is to grant shares to the
holders of certificates which are issued by the company
in accordance with the authorisation of
the annual
general meeting held on March 15, 2007. The conditional
insofar as issued
capital
certificates are converted into shares of the company and
no own shares are used for servicing the certificates.

increase is only carried out

The new shares will participate in the company's profits from
the beginning of the business year in which they come into
existence as a result of the conversion of certificates.

3. Purchase of own shares
The shareholders’ meeting on March 15, 2007 authorised
the management board to acquire own shares up to a

| 34 | alstria Annual Report 2007

alstria Annual Report 2007 | 35 |

> Earnings Position

> Financial and Asset Position

> Risk and Opportunity Report

> 2008 Outlook

> Report from the Supervisory Board

> Report from the Management Board

2008 OUTLOOK

REPORT FROM THE SUPERVISORY BOARD

The acquisitions of
the Bilfinger Berger and the HUK
Coburg portfolio as well as the acquisition of the property
in Berlin, Darwinstraße are expected - subject to certain
conditions precedent being met - to close in the first
months of 2008. These acquisitions will
increase the
alstria portfolio to a total of 91 properties and will raise
lettable area to 945,000 square metres. The
the total
weighted average unexpired lease term of the portfolio
will then be 10.4 years.

It was important for alstria to execute these acquisitions
without compromising our strict focus. After the 2007
acquisitions, 94 % of our portfolio will still be dedicated to
office space and our Top 5 tenants will still account for
70 % of our revenues.

year 2008 to be around EUR 95 million, resulting in an
operating income (FFO) of EUR 40 million for the year.
Again, the envisioned dividend payout in 2009 will be
based on the 2008 FFO result.

Metric

Number of properties 1
MV (EUR b)
Passing rent (EUR m/annum) 2
Valuation yield
Approximate lettable area (k sqm)
Vacancy (% of lettable area)
WAULT (years)

Value

91
1.90
105
5.5 %
945
6.5 %
10.40

ALSTRIA’S NEW TENANT STRUCTURE IN 2008

PORTFOLIO BY USAGE IN 2008

Supervision of the Company’s management
During the reporting year, the supervisory board supervised
the company’s management in accordance with statutory
law and the articles of association and within the scope of
its meetings and by means of further reports provided by
the management board both verbally and in writing,
informed itself regularly and in detail on the situation and
the development of the company, important commercial
operations and the risk management. The management
board informed the supervisory board about events of
importance also in between meetings;
fundamental
furthermore the chairman of the supervisory board and
the chairman of the management board had information
and consultation talks on a regular basis. In some of its
meetings, the supervisory board discussed single topics
with external legal and financial experts.

94 %

3 %

2 %

1 %

Office
Retail
Residential
Other

36%

21%

1 %
2 %

3 %

6 %

9 %

14 %

City of Hamburg
Daimler
Barmer
Bilfinger Berger

Siemens
Deutsche
Rentenersicherung
Rheinmetal

HUK
City of Hanover
Other

Including the 2007 acquisitions, we assume that our total
portfolio will be valued at around EUR 1.9 billion. The
annualised passing rent of
the total portfolio will be
around EUR 105 million p.a. Based on these parameters,
the management of alstria expects total revenues for the

1 For full details of the portfolio see pages 126-133
2 As of Dec. 31, 2007

The market situation, development of the company and
internal organisation were addressed on each regular
supervisory board meeting during the reporting period.
the supervisory board debated important
Moreover,
specific matters which are material
the further
the company and decided on legal
development of
transactions and measures in which it
is obliged to
participate in accordance with statutory provisions, the
articles of association, and the rules of procedure of the
management board or the rules of procedure of the
supervisory board. This applies
to the
company’s budget planning.

in particular

for

In 2007, the supervisory board had eight meetings in
plenary session. Additionally, one decision was made by
way of circular resolution. All supervisory board members
attended nearly each and every meeting personally. No
member of the supervisory board missed more than two
supervisory board meetings.

Focal points of discussion
The focal points of the supervisory board meetings were,
in addition to the initial public offering of the company’s

shares in April 2007 and the company’s conversion into
a German REIT-Stock Corporation in October 2007,
important acquisitions such as the Bilfinger & Berger
portfolio, the HUK Coburg portfolio or the mfi asset. The
supervisory board appointed Alexander Dexne as Chief
Financial Officer and dealt with the resignations of Dres.
Robert Hannemann and Michael Börner-Kleindienst. The
supervisory board further resolved on an employee profit
participation programme and a stock option programme
for the management board as well as rules of procedure
for the management board, the supervisory board and
the audit committee, which reflect the recommendations
of the German Corporate Governance Code.

the supervisory board,

inter alia, was
Furthermore,
concerned with the annual and consolidated financial
statements as of December 31, 2007, the agenda for the
2008 AGM and the corporate and budget planning for
the financial year 2008.

Members of the supervisory board
At the beginning of the reporting period the supervisory
board only had three members, John van Oost as chairman,
Daniel Quai and Stephan Fritsch. Stephan Fritsch resigned
from his office, effective from the end of the extraordinary
shareholders meeting on January 16, 2007. The
extraordinary shareholders meeting resolved to enlarge
the supervisory board by means of amendments to
the articles of association from three to six members
and elected Richard Mully as a new member of
the supervisory board effective from the end of
the
extraordinary shareholders meeting. The shareholders
meeting further
Stuhlmann,
Dr. Christian Olearius and Dr. Johannes Conradi effective
from February 15, 2007, when the enlargement of the
supervisory board became effective upon registration with
the commercial register. Effective from April 01, 2007
Alexander Stuhlmann was appointed as chairman of the
supervisory board. From that day on John van Oost was
vice-chairman of the supervisory board.

appointed Alexander

| 36 | alstria Annual Report 2007

alstria Annual Report 2007 | 37 |

> Earnings Position

> Financial and Asset Position

> Risk and Opportunity Report

> 2008 Outlook

> Report from the Supervisory Board

> Report from the Management Board

Committees of the supervisory board
The supervisory board constituted four committees during
the reporting period. The chairmen of such committees
informed the plenary meetings about the work of the
committees.

The supervisory board constituted the audit committee
effective February 15, 2007 and elected Dr. Johannes
Conradi as chairman, Daniel Quai and Dr. Christian
Olearius as members. The members of the audit committee
the auditor’s necessary
handle issues of accounting,
independence, the issuing of the audit mandate, the
determination of auditing focal points and the fee
agreement as well as issues of risk management and
compliance. The audit committee had two meetings in
the reporting period.

On March 15, 2007, the supervisory board created a
special committee, to which it delegated the adoption of
all resolutions relating to the initial public offering of the
company’s shares. The members of the special committee
were John van Oost as chairman, Alexander Stuhlmann
and Richard Mully. The special committee took three
resolutions by way of telephone conference.

On June 14, 2007, the supervisory board established a
special committee for discussion and resolution regarding
the possible acquisition of an important portfolio. The
members of the committee were Alexander Stuhlmann as
chairman, Richard Mully and Dr. Christian Olearius. The
special committee had one session on June 14, 2007.

On September 5, 2007, the supervisory board created an
investment committee which deals with acquisitions and
disposals of assets, provided that the consideration does
not exceed EUR 100,000,000. Beyond that amount, the
supervisory board will decide in plenary session. The
members of the investment committee are John van Oost
as chairman, Alexander Stuhlmann and Richard Mully. The
investment committee approved two real estate acquisitions

in 2007 and resolved by way two telephone conference
and one circular resolution.

Audit of annual and consolidated financial
statements
PricewaterhouseCoopers Aktiengesellschaft Wirtschafts-
prüfungsgesellschaft, branch Berlin, audited the annual
ﬁnancial statement and the management report of alstria
office REIT-AG as well as the consolidated financial statement
and the consolidated management report for the business
year beginning January 1, 2007 and ending December 31,
2007 prepared by the management board and provided
them with an unqualiﬁed audit opinion. The audit committee
monitored the auditors’ work and independency and
determined the focal points for the audit.

The annual
financial statement and the management
report of alstria office REIT-AG, the consolidated financial
statement and the consolidated management report, the
recommendation for the profit appropriation as well as
the auditors’ reports produced by PricewaterhouseCoopers
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, branch
the
Berlin, were made available to all members of
supervisory board. The supervisory board has reviewed
these documents prepared by the management board.

The documents were comprehensively dealt with in the
meetings of the audit committee held on March 5, 2008
and the supervisory board held on March 25, 2008. The
auditor attended the meeting of the audit committee and
gave an account of the results of his audit. After the audit
the
committee reported the results of his meeting,
supervisory board has affirmatively taken note of
the
results of the audit. No objections had to be raised.

The supervisory board has affirmatively taken note of the
annual financial statement and the management report
the consolidated financial
of alstria office REIT-AG,
statement, the consolidated management report and the
recommendation for the profit appropriation prepared by

the management board. In accordance with the result of
its own review, the supervisory board has approved the
annual financial statements and the consolidated financial
statements. No objections had to be raised. Thus, the
2007 annual financial statements for alstria office REIT-AG
have been adopted.

Moreover, the management board presented the report
on relations to affiliated companies pursuant to sec. 312
German Stock Corporation Act (AktG) to the supervisory
board. Likewise, the auditor’s report prepared thereto by
PricewaterhouseCoopers Aktiengesellschaft Wirtschafts-
prüfungsgesellschaft, branch Berlin, was presented to the
supervisory board. Both reports were also communicated
to each member of the supervisory board. The audit
opinion of the auditor reads as follows:

“In regards to our duty bound audit and assessment, we
certify that,

1.
2.

the actual details of the report are correct,
in regards to the legal transactions which are listed
in the report, the services of the company have not
been inadequately high or disadvantages have been
counterbalanced,
the provisions listed in the report do not provide any
circumstances for a considerably different evaluation
the one given by the management board.”

The supervisory board also reviewed this report by the
management board and has affirmatively taken note of
the report prepared thereto by the auditor. In accordance
with the final result of its own review, the supervisory
board approves the statement of the management board
regarding the report pursuant to sec. 312 (3) AktG.

Risk management and compliance
The audit committee monitored the further implementation
of the risk management system, assured itself of the efﬁciency
of the system and addressed the major risks according to

such a system with the auditors and the management
board. The audit committee discussed compliance issues
with the management board on a regular basis.

Corporate governance
In 2007, the supervisory board also dealt with the company’s
fulﬁlment of the recommendations of the German Corporate
Governance Code. In March 2008 the management board
and the supervisory board issued the annual statement
of compliance in accordance with sec. 161 AktG. The
management board and the supervisory board have
declared that the company followed and will
follow the
recommendations of the German Corporate Governance
Code and which of the recommendations have not been
followed and will not be followed. Each member of the
supervisory board discloses any possible conflict of interest
to the supervisory board and abstains from voting on the
respective resolutions. When the company participated in
the bidding process for an important portfolio and Dr. Conradi
was the legal advisor for the seller he asked not to receive
any information or documentation regarding this project
and announced not to able to participate in the respective
consultations. Therefore, the supervisory board established
a special committee for discussion and resolution regarding
this bidding process. When the supervisory board
makes decisions regarding contracts with supervisory board
the member
members pursuant
concerned does not participate in the decision.

to sec. 114 AktG,

The supervisory board would like to thank all
employee and the management board for
dedication and successful work in 2007.

the
their

Hamburg, March 25, 2008

Alexander Stuhlmann
Chairman of the supervisory board

| 38 | alstria Annual Report 2007

alstria Annual Report 2007 | 39 |

> Earnings Position

> Financial and Asset Position

> Risk and Opportunity Report

> 2008 Outlook

> Report from the Supervisory Board

> Report from the Management Board

REPORT FROM THE MANAGEMENT BOARD

FINANCIAL STATEMENT TABLES

attention. This integrated system is supplemented by the
appropriate selection and training of qualified employees.
The result of all this is a secure basis that guarantees that
the course of business is represented in a way that
corresponds to the actual situation.

In accordance with the decision made in the shareholders’
meeting,
PricewaterhouseCoopers Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft, Berlin, an independent
auditing company, has audited the consolidated financial
statements and the group MD&A. The supervisory board
reviewed the consolidated financial statements, the group
MD&A and the audit
thoroughly. The audit
report
committee of
the supervisory board discussed these
documents in the presence of the auditor. The results of
this review can be found in the supervisory board report
(see p.37) of this annual report).

Hamburg, March 18, 2008

The preparation of these consolidated financial statements
and the information contained in the management’s
discussion & analysis (MD&A)
is the responsibility of
the management board of alstria office REIT-AG. The
consolidated accounts are drawn up on the basis of the
International Financial Reporting Standards (IFRS), as
the EU, and the additional
applicable throughout
requirements of German commercial
law pursuant to
Sec. 315a (1) German Commercial Code (HGB). The
management board of
that
these consolidated financial statements reflect all of the
adjustments that are necessary for the portrayal of the
assets, financial and income position at the end of the
period ending in December 2007. These consolidated
statements contain certain estimates and
financial
assumptions by the management board that influence the
figures specified in the financial statements. The group
MD&A was
is
required by the HGB.

supplemented with information that

the company believes

the deployment of

With the help of an effective internal risk management
system,
reliable software and a
standardised operating system, we ensure that all activities
within the company are performed in compliance with
existing authorisations and that all business transactions
are documented and processed with maximum care and

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2007

(in EUR k)

Notes

2007

Jan. 20 -
Dec. 31, 2006

Revenues
Income less expenses from passed on operating expenses
Real estate operating costs

Net Rental Income

Net gain from fair value adjustments on investment property
Administrative expenses
Personnel expenses
Other operating income
Other operating expenses

Net Operating Result

Financial Income
Financial Expenses
Net gain/loss from fair value adjustments on financial derivatives
Other financial expenses

12.1
12.2
12.3

12.8
12.4
12.5
12.6
12.7

12.8
12.8
12.8

82,552
314
-6,674

30,063
-17
-1,688

76,192

28,358

11,170
-9,251
-3,532
588
-5

22,871
-5,523
0
6,117
-167

75,162

51,656

6,184
-38,683
8,086
-2,616

128
-23,006
-730
-9,425

-27,029

-33,033

48,133

18,623

Olivier Elamine
Chief Executive Officer

Alexander Dexne
Chief Financial Officer

Financial result

Pre-Tax Income (EBT)

Income tax income/expense

12.9

4,678

-4,090

Consolidated Profit for the Year

52,811

14,533

Attributable to: Shareholder

52,811

14,533

Earnings per share in EUR
basic, for profit for the year attributable to
ordinary equity holders of the parent
diluted, for profit for the year attributable to
ordinary equity holders of the parent

1.15

13.95

| 40 | alstria Annual Report 2007

alstria Annual Report 2007 | 41 |

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2007

ASSETS (in EUR k)

Notes

2007

2006

Equity and Liabillities (in EUR k)

Notes

2007

2006

Non-Current Assets
Investment property
Property, plant and equipment
Intangible assets
Deferred tax assets

Total Non-Current Assets

Current Assets
Trade receivables
Accounts receivable from affiliates
Derivatives
Tax receivables
Other receivables
Cash and cash equivalents

10.1
10.2
10.3
11.5

10.4

10.4
10.4
10.4
10.5

1,693,718
1,494
359
0

1,289,536
0
0
12,513

1,695,571

1,302,049

2,646
77
27,202
1.949
5,039
103,036

99
0
14,563
0
3,661
24,304

Total Current Assets

139,949

42,627

Equity
Share capital
Capital surplus
Treasury shares
Retained earnings

Total Equity

Non-Current Liabilities
Long-term loans, net of
current portion
Deferred tax liabilities
Other liabilities

Total Non-Current Liabilities

Current Liabilities
Short-term loans
Trade payables
Payables to affiliates
Profit participation rights
Liabilities of current tax
Other current liabilities

Total Current Liabilities

Total Liabilities

11.1

11.2
11.5
11.3

11.2
11.3

18
11.3
11.3

56,000
754,647
-7,115
67,344

8,000
375,066
0
14,533

870,876

397,599

927,400
0
56

813,466
19,869
56

927,456

833,391

8,936
3,068
15
5
5,332
19,832

1,712
5,363
82,471
0
0
24,140

37,188

113,686

964,644

947,077

Total Assets

1,835,520

1,344,676

Total Equity and Liabilities

1,835,520

1,344,676

| 42 | alstria Annual Report 2007

alstria Annual Report 2007 | 43 |

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2007

(in EUR k)

Notes

Share
capital

Capital
surplus

Treasury
shares

Retained
earnings

Total
Equity

As of January 1, 2007

8,000

375,066

As of January 1, 2007

14,533

397,599

Changes in fiscal year 2007
Consolidated profit for the year
Changes in the consolidated group
Valuation shareholder loan
Deferred taxes
Share-based payments
Contributions to share capital
Contributions to capital surplus (IPO)
Transaction costs of issue of shares
Acquisition of treasury shares
Other Contributions to capital surplus

0
0
0
0
0
48,000
0
0
0
0

0
-5,531
447
200
813
0
240,000
-11,038
0
154,690

0
0
0
0
0
0
0
0
-7,115
0

52,811
0
0
0
0
0
0
0
0
0

52,811
-5,531
447
200
813
48,000
240,000
-11,038
-7,115
154,690

As of December 31, 2007

11.1

56,000

754,647

As of December 31, 2007

-7,115

67,344

870,876

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD FROM JANUARY 20 TO DECEMBER 31, 2006

(in EUR k)

As of January 20, 2006

Changes in fiscal year 2006
Consolidated profit for the year
Changes in the consolidated group
Valuation shareholder loan
Deferred taxes
Share-based payment
Contributions to share capital
Contributions to capital surplus
Transaction costs of issue of shares
Acquisition of treasury shares
Other contributions to capital surplus

Notes

Share
capital

0
0
0
0
0
7,975
0
0
0
0

Capital
surplus

0
8,763
1,576
0
0
0
364,727
0
0
0

As of January 20, 2006

As of December 31, 2006

8,000

375,066

As of December 31, 2006

Treasury
shares

Retained
earnings

Total
Equity

0
0
0
0
0
0
0
0
0
0

14,533
0
0
0
0
0
0
0
0
0

14,533
8,763
1,576
0
0
7,975
364,727
0
0
0

14,533

397,599

| 44 | alstria Annual Report 2007

alstria Annual Report 2007 | 45 |

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2007

(in EUR k)

Cash flows from operating activities
Consolidated profit for the year

Non-cash:
Unrealized net gain from fair value adjustments
Interest income
Interest expense
Result from income taxes
Other non-cash income (-)/expenses (+) and IPO-costs
Gain (-) on disposal of fixed assets
Depreciation and impairment of fixed assets
Increase (-) in trade receivables and other assets
that are not attributed to investing or financing activities
Decrease (-)/increase (+) in trade payables and other liabilities
that are not attributed to investing or financing activities

Affecting payment:
Interest received
Interest paid
Income tax paid

2007

Jan. 20-
Dec. 31, 06

52,811

14,533

-19,256
-6,184
38,683
-4,678
2,663
-175
348

-3,607

-22,792

6.184
-29,374
-1,949

-22,141
-128
23,006
4,090
0
0
0

-1,000

-1,717

128
-18,876
-3

Cash flows from operating activities

12,674

-2,108

Cash flow from investing activities
Purchase of investment properties
Proceeds from investment properties
Purchase of fixed assets
Acquisition of a subsidiary

-291,640
3,700
-2,114
-16,444

-1,054,222
0
0
-17,415

Cash flows used in investing activities

-306,498

-1,071,637

(in EUR k)

Cash flow from financing activities
Cash received (+) from equity contributions
Cash paid (-) for the acquisition of treasury shares
Cash received (+) from the issue of bonds and borrowings
Cash paid (-) for the acquisition of derivative financial instruments
Cash paid (-) for the redemption of bonds and borrowings
Cash paid (-) for transaction costs
Cash paid (-) for IPO costs

2007

Jan.20-
Dec. 31, 06

305,008
-7,115
332,124
-1,804
-243,262
-355
-12,040

374,365
0
1,366,005
-11,631
-625,180
-5,510
0

Cash flows used in financing activities

372,556

1,098,049

Cash and cash equivalents at the end of the period
Change in cash and cash equivalents (subtotal of 1 to 3)
Effect of changes in consolidated group on cash and cash equivalents
Cash and cash equivalents at the beginning of the period

78,732
0
24,304

24,304
0
0

Cash and cash equivalents at the end of the period

103,036

24,304

Composition of cash and cash equivalents
Cash
Securities

103,036
0

24,304
0

Cash and cash equivalents at the end of the period

103,036

24,304

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NOTES

Contents
1.
2.
3.

Corporate Information
Basis of Preparation
Changes in Accounting Policy
and Disclosures
Basis of Consolidation
Consolidated Group
Key Judgments and Estimates
Seasonal or Economic Effects on Business
Summary of Significant Accounting Policies
Segment Reporting

4.
5.
6.
7.
8.
9.
10. Notes to the Consolidated Balance Sheet

– Assets

10.1 Investment Property
10.2 Property, plant and equipment
10.3 Intangible assets
10.4 Receivables
10.5 Cash and Cash Equivalents
11. Notes to the Consolidated Balance Sheet

– Equity and Liabilities

11.1 Equity
11.2 Financial Liabilities
11.3 Trade Payables and Other Liabilities
11.4 Trust Assets and Liabilities
11.5 Deferred Taxes
11.6 Liabilities of Current Tax
12. Notes to the Consolidated

Income Statement

12.1 Revenues
12.2 Income From Passed on
Operating Expenses
12.3 Expenses From Passed on
Operating Expenses
12.4 Administrative Expenses
12.5 Personnel Expenses

48
50

53
54
55
61
62
63
69

70
70
73
75
77
79

80
80
83
85
86
86
86

86
86

87
87
87

12.6 Other Operating Income
12.7 Other Operating Expenses
12.8 Financial and Valuation Result
12.9 Income Taxes
13. Other Notes
13.1 Compensation of Management Board

and Supervisory Board

13.2 Commitments and contingencies
13.3 Consolidated Cash Flow Statement
14.
14.1 Preliminary Remarks
14.2 Remuneration of Key

Related Party Relationships

Management Personnel

14.3 Related Party Transactions
15.
Earnings per Share
16. Dividends Proposed
17.
18. Convertible Profit Participation

Employees

19.
20.
21.

Rights Program
Financial Risk Management
Financial Instruments
Significant Events after the End of the
Reporting Period

22. Utilization of Exempting Provisions
23. Disclosures Pursuant to

Wertpapierhandelsgesetz
[German Securities Trading Act]
24. Declaration of Compliance Pursuant to

Sec. 161 AktG [“Aktiengesetz”:
German Stock Corporation Act]
25.
Auditor’s Fees
26. Management Board
27.
28. Management Compliance Statement

Supervisory Board

87
88
88
89
90

90
90
91
91
91

92
92
96
97
97

97
98
103

105
105

106

111
111
111
111
114

1. Corporate Information
The consolidated ﬁnancial statements of alstria ofﬁce REIT-AG,
formerly Alstria Office AG (hereinafter also referred to as
the “Company” or “alstria office REIT-AG”) as of December
31, 2007 were authorized for issue by resolution of the
management board on March 18, 2008.

alstria office REIT-AG was transformed into a German Real
Estate Investment Trust (G-REIT) in fiscal year 2007. The
Company was registered as a REIT corporation (hereinafter
also referred to as “REIT-AG”) in the commercial register on
October 11, 2007; the company name was changed to
alstria office REIT-AG.

REIT-AGs are fully exempt from German corporate income
tax and trade tax. Hence, alstria office REIT-AG has
been exempt
from tax with retrospective effect since
January 1, 2007.

The Company is a real estate property company in the
meaning of the G-REIT Act. Pursuant to Section 2 of its Articles
of Association, the Company’s objective is the acquisition,
the management, the operation and the sale of owned real
estate property as well as the holding of participations in
enterprises, which acquire, manage, operate and sell
owned property. All the aforementioned objectives are subject
to the conditions of the G-REIT Act legislation.

The Company is a stock corporation which was founded
in Germany and has its registered office in Hamburg. The
Company is registered in the commercial register at
the local court of Hamburg under HRB No. 99204.
The Company’s address is Fuhlentwiete 12, D-20355
Hamburg, Germany.

The fiscal year ends on December 31 of each calendar year.

With effect as of October 1, 2007 the respective general
partners withdrew from the following German GmbH &
Co. KGs:

Alstria Erste Hamburgische Grundbesitz GmbH & Co. KG,
Hamburg
Alstria Neunte Hamburgische Grundbesitz GmbH & Co.
KG, Hamburg
Alstria Zehnte Hamburgische Grundbesitz GmbH & Co.
KG, Hamburg
Alstria Elfte Hamburgische Grundbesitz GmbH & Co. KG,
Hamburg
Alstria Zwölfte Hamburgische Grundbesitz GmbH & Co.
KG, Hamburg
Alstria Dreizehnte Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg
Alstria Vierzehnte Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg
Alstria Fünfzehnte Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg
Alstria Sechzehnte Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg
Alstria Siebzehnte Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg
Alstria Achtzehnte Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg
Alstria Neunzehnte Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg
Alstria Zwanzigste Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg
Alstria Einundzwanzigste Hamburgische Grundbesitz
GmbH & Co. KG, Hamburg and
Juna Property GmbH & Co. KG, Hamburg.

Therefore these GmbH & Co. KGs ceased to exist and the
assets and liabilities were automatically transferred to
alstria office REIT-AG, in accordance with Sec. 738 BGB
(Anwachsung).

Furthermore, the following general and limited partner
companies

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Verwaltung Alstria Zweite Hamburgische Grundbesitz
GmbH, Hamburg
Verwaltung Alstria Neunte Hamburgische Grundbesitz
GmbH, Hamburg
Verwaltung Alstria Zehnte Hamburgische Grundbesitz
GmbH, Hamburg
Verwaltung Alstria Elfte Hamburgische Grundbesitz
GmbH, Hamburg
Verwaltung Alstria Zwölfte Hamburgische Grundbesitz
GmbH, Hamburg
Verwaltung Alstria Dreizehnte Hamburgische Grundbesitz
GmbH, Hamburg
Verwaltung Alstria Erste Hamburgische Mobilien GmbH,
Hamburg
JUNA Beteiligungs GmbH, Hamburg, and
JUNA Verwaltungsgesellschaft mbH, Hamburg

were merged with alstria office REIT-AG as of October 1,
the transfer agreements dated
2007 on the basis of
August 21, 2007. The transaction was entered into the
commercial register on October 1, 2007 and became
commercially effective on January 1, 2007.

After the merger the following investments in subsidiaries
still exist:

2. Basis of Preparation
The consolidated financial
statements have been
prepared on a historical cost basis except for investment
instruments
property (land and buildings) and financial
that have been measured at fair value.
The consolidated financial statements are presented in
Euros. All values are rounded to the nearest thousand
(EUR k) except when otherwise indicated.

These consolidated financial statements are financial
the period from January 1, 2007 to
statements for
December 31, 2007. As the Company was founded on
January 20, 2006,
the figures for 2007 can only be
compared with those of the prior-year to a limited extent.
items are summarized in the
For the sake of clarity,
consolidated balance sheet and income statement and
commented on in the notes to the financial statements
.
Assets and liabilities are classified as non-current - for items
due in more than one year - or current.

The consolidated ﬁnancial statements of alstria ofﬁce REIT-AG
and its subsidiaries (the “Group”) have been prepared in
accordance with the International Financial Reporting
Standards (IFRS) of the International Accounting Standards

Capital

Share capital
interest % Dec. 31, 07 EUR k

Net loss/
profit in 07 EUR k

Verwaltung Alstria Sechste
Hamburgische Grundbesitz GmbH, Hamburg
Alstria Sechste Hamburgische
Grundbesitz GmbH & Co. KG, Hamburg
Alstria IV. Hamburgische
Grundbesitz GmbH & Co. KG, Hamburg
Alstria VII. Hamburgische
Grundbesitz GmbH & Co. KG, Hamburg

100.00

51.00

100.00

6,501

5,043

11,589

-7

-6

-4,935

-3,689

Board (IASB) including the interpretations of the standards
(IFRIC). All IFRS and IFRIC were observed as adopted and
prescribed by the EU.

alstria office REIT-AG did not prematurely adopt
the
following standards that were revised and published by
the IASB in 2006 and 2007 and 2008 respectively, but
only became mandatory for fiscal years beginning on or
after January 1, 2009:

• IFRS 8 ”Operating Segments” replaces IAS 14 ”Segment
Reporting”. However,
standard issued in
this
November 2006 has not been taken into consideration.
The application is not expected to result
in any
impact on the financial position or
significant
performance of the Group.

• IAS 23 “Borrowing Costs” was issued in March 2007 as
it has not yet been adopted
revised version, but
by EU. The standard requires the capitalisation of
borrowing costs when such costs relate to a qualifying
asset. A qualifying asset is an asset that necessarily
takes a substantial period of time to get ready for its
intended use or
In accordance with the
transitional requirements in the Standard, the Group
will adopt this as a prospective change. The application
is not expected to result in any significant impact on
the financial position or performance of the Group.

sale.

• IAS 1- “Presentation of Financial Statements” was issued
in September 2007 as revised version, but
it has
not yet been adopted by EU. The standard requires a
couple of changes in equity, income statement and
other presentation subjects. The application is not
expected to result in any significant impact on the
financial position or performance of the Group.

vesting conditions only concerns the requirement to
provide services and performance conditions. On the
other hand, it also extends the regulations on the
accounting treatment of premature cancellation of
share-based payment plans to include cancellation by
employees. The transitional provisions provide for
retrospective application of the new regulation. As
the opinion expressed by the IASB corresponds to the
accounting method used by the group up to now,
application of
this new regulation does not have
any effect on the financial position or performance of
the Group.

• IAS 32 “Financial Instruments: Presentation” and IAS 1
“Presentation of Financial Statements” were issued in
February 2008 as revised versions but were not yet
been adopted by the EU. The revision mainly concerns
the classification of puttable shareholder contributions
as equity or financial liabilities. The previous regulation
forced entities in some cases to report the entity’s
liabilities as a consequence of
capital as financial
statutory termination rights on the part of
the
shareholder. In future, such shareholder contributions
are to be classified as equity insofar as settlement at
fair value is agreed and the contributions made
constitute the most subordinated claim to the net
assets of the entity. The transitional provisions provide
for retrospective application of the new regulation.
The new regulation is not expected to significantly
impact
the
shareholder contributions in the consolidated financial
statements.

the disclosure or measurement of

alstria office REIT-AG did also not prematurely adopt the
following standards that were revised and published by
the IASB in 2008, but only became mandatory for fiscal
years beginning on or after July 1, 2009:

• IFRS 2 “Share-based Payment” was issued in January
2008 as revised version, but it has not yet been adopted
by the EU. The revision clarifies that the definition of

• IFRS 3 “Business Combinations” was issued in January
it has not yet been

2008 as revised version but

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interests when control

adopted by the EU. The standard was subject
to
comprehensive revision as part of the IASB and FASB
convergence project. The significant revisions relate in
particular to the introduction of an option for the
measurement of minority interests between the
purchased goodwill method and the full goodwill
method, in which the entire goodwill of the acquired
entity must be recognized,
including that part
attributable to minority interests. Other important
aspects include the revaluation to profit or loss of
initially
existing capital
obtained (business combination achieved in stages),
mandatory accounting for contingent consideration
at
the date of acquisition and the recognition of
transaction costs in profit or loss. The transitional
provisions provide for prospective application of the
new regulation. As the Group is planning to continue
using the purchased goodwill method for future
the new regulation will
business combinations,
not have any effect. The revaluation for business
combination achieved in stages and the mandatory
recognition of contingent considerations at the time
of acquisition will mean that the goodwill recognized
will tend to be higher.

The revisions primarily

• IAS 27 “Group and Separate Financial Statements” was
issued in January 2008 as revised version but it has
not yet been adopted by the EU. The revisions are
a product of the joint project by IASB and FASB to
revise accounting regulations relating to business
combinations.
relate to
accounting for shares not involving control (minority
interests) that will
in the
group’s losses and for transactions that lead to loss of
control of a subsidiary and the effects of which are to
be recognized in profit or loss. In contrast, the effects
of disposal of shares that do not lead to loss of control
should be recorded directly in equity. The transitional
provisions that generally require retrospective application
of revisions made, provide for prospective application

in future participate in full

in the cases listed above. Application of
this new
regulation is not expected to result in any significant
impact on the financial position or performance of
the Group.

the following IFRIC interpretations

In addition, alstria office REIT-AG did not prematurely
that were
adopt
revised and published by IFRIC in 2006 and 2007,
respectively, but only became mandatory for fiscal years
beginning on or after January 1, 2008:

• IFRIC Interpretation

“Service Concession
12
Arrangements” was issued in November 2006, but it
has not been yet adopted by EU. This Interpretation
applies to service concession operators and explains
how to account for the obligations undertaken and
rights received in service concession arrangements.
No member of the Group is an operator and hence
this Interpretation will have no impact on the Group.

• IFRIC Interpretation 13 “Costumer Loyality Programmes”
was issued in June 2007, but it has not been yet
adopted by EU. This Interpretation requires customer
loyalty award credits to be accounted for as a separate
component of the sales transaction in which they are
granted and therefore part of the fair value of the
consideration received is allocated to the award
credits and deferred over the period that the award
credits are fulfilled.
that
interpretation will have no impact on the
this
Group's financial statements as no such schemes
currently exist.

The Group expects

• IFRIC Interpretation 14 IAS 19 – “The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and
their Interaction” was issued in July 2007, but it has
not been yet adopted by EU. This Interpretation
provides guidance on how to assess the limit on the
amount of surplus in a defined benefit scheme that
can be recognised as an asset under IAS 19 Employee

Benefits. The Group expects that this Interpretation
will have no impact on the financial position or
performance of the Group.

alstria office REIT-AG did prematurely adopt
IFRIC
Interpretation 11 IFRS 2 – “Group and Treasury Share
Transactions” as of January 2007, in so far as it applies to
consolidated financial statements. This interpretation
requires arrangements whereby an employee is granted
rights to an entity’s equity instruments to be accounted for
as an equity-settled scheme, even if the entity buys the
instruments from another party, or
the shareholders
provide the equity instruments needed.

alstria office REIT-AG will apply the abovementioned
standards and interpretations from the date on which its
application becomes binding.

Furthermore, additional standards and interpretations
have been adopted, the application of which has no
material effects for alstria office REIT-AG.

3. Changes in Accounting Policy and Disclosures
The accounting policies adopted are consistent with those
of the previous financial year except as follows:

The Group has adopted the following new and
amended IFRS and IFRIC interpretations during the year.
Adoption of these revised standards and interpretations
did not have any effect on the financial performance
or position of the Group. They did however give rise to
additional disclosures, including in some cases, revisions
to accounting policies.

• IFRS 7 Financial Instruments: Disclosures

• IAS 1 Amendment

- Presentation of Financial

Statements - Capital Disclosures

• IFRIC 9 Reassessment of Embedded Derivatives

• IFRIC 8 Scope of IFRS 2

• IFRIC 10 Interim Financial Reporting and Impairment

The principal effects of these changes are as follows:

IFRS 7 FINANCIAL INSTRUMENTS: DISCLOSURES
This standard requires disclosures that enable users of the
financial statements to evaluate the significance of the
Group's financial instruments and the nature and extent of
instruments. The new
risks arising from those financial
disclosures are included throughout
the financial
statements. While there has been no effect on the financial
position or results, comparative information has been
revised where needed.

IAS 1 PRESENTATION OF FINANCIAL STATEMENTS - CAPITAL
DISCLOSURES
This amendment requires the Group to make new disclosures
to enable users of the financial statements to evaluate the
Group's objectives, policies and processes for managing
capital. These new disclosures are shown in Note 19.

IFRIC 8 SCOPE OF IFRS 2
This interpretation requires IFRS 2 to be applied to
any arrangements in which the entity cannot identify
specifically some or all of the goods received, in particular
where equity instruments are issued for consideration
which appears to be less than fair value. As equity
instruments are only issued to the management board
and employees in accordance with the stock option
program and the convertible profit participation rights
program, respectively, the interpretation had no impact
on the financial position or performance of the Group.

IFRIC 9 REASSESSMENT OF EMBEDDED DERIVATIVES
IFRIC 9 states that the date to assess the existence of an
embedded derivative is the date that an entity first
becomes a party to the contract, with reassessment only
that significantly
if

there is a change to the contract

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modifies the cash flows. As the Group has no embedded
derivative requiring separation from the host contract, the
interpretation had no impact on the financial position or
performance of the Group.

Subsidiaries are fully consolidated from the date of
acquisition, i.e. the date on which the group obtains
control. Inclusion in the consolidated financial statements
ends as soon as the parent ceases to have control.

5. Consolidated Group
The following subsidiaries are included in the consolidated
financial statements:

IFRIC 10 INTERIM FINANCIAL REPORTING AND
IMPAIRMENT
The Group adopted IFRIC Interpretation 10 as of January 1,
2007, which requires that an entity must not reverse an
impairment
interim
period in respect of goodwill or an investment in either
an equity instrument or a financial asset carried at cost.
As the Group had no impairment
losses previously
reversed, the interpretation had no impact on the financial
position or performance of the Group.

recognised in a previous

loss

4. Basis of Consolidation
The consolidated financial
statements comprise the
financial statements of alstria office REIT-AG and its
subsidiaries as of December 31, 2007. The financial
statements of the subsidiaries are prepared for the same
reporting year as for the parent company, using consistent
accounting policies.

Subsidiaries are entities where group controls
their
business policies. Among other criteria it is possible to
exercise control with more than 50 % of voting rights.

All intragroup balances, transactions, income and expenses
and profits and losses resulting from intragroup transactions
that are recognized in the carrying amounts of assets are
eliminated in full.

In accordance with IFRS 3, all business combinations are
stated using the purchase method. The recognized assets
and the acquired liabilities are measured in full at their fair
value regardless of the ownership interest. The carrying
values on the date on which control over the subsidiary
was obtained are relevant. Any remaining debit difference
is
reassessment, any
remaining credit difference is recognized immediately as
profit (“lucky buy”). In the periods following the business
combination, the disclosed hidden reserves and charges
are carried forward, amortized or released depending on
the treatment of the corresponding assets.

recognized as goodwill. After

The Company generally applies IFRS 3 to account for
transactions under common control. However,
for
transactions under common control, any credit and debit
resulting from capital consolidation are
differences
recognized as an increase or decrease in capital surplus.

Group entity

Share in
voting rights

Date of
formation/
acquisition

Acquisition
Costs EUR k

Verwaltung Alstria Sechste Hamburgische
Grundbesitz GmbH, Hamburg
Alstria Sechste Hamburgische Grundbesitz
GmbH & Co. KG, Hamburg
Alstria IV. Hamburgische Grundbesitz
GmbH & Co. KG, Hamburg
Alstria VII. Hamburgische Grundbesitz
GmbH & Co. KG, Hamburg

100 %

4/1/2007

51 %
94 %
6 %
94 %
6 %

4/1/2007
3/31/2007
6/30/2007
3/31/2007
6/30/2007

0
2,095
154
12,942
860

The following business combinations and formations took
place between January 1, 2007 and December 31, 2007:

• During the reporting period, alstria office REIT-AG
acquired a 94 % interest in Verwaltung Alstria Vierte
Hamburgische Grundbesitz GmbH, Hamburg, and
Verwaltung Alstria Siebte Hamburgische Grundbesitz
GmbH, Hamburg.

• In addition, Verwaltung Alstria Vierte Hamburgische
Grundbesitz GmbH and Verwaltung Alstria Siebte
respectively,
Hamburgische Grundbesitz GmbH,
acquired an interest of 1 % in Alstria Vierte Hamburgische
Grundbesitz S.à.r.l. & Co. KG, Hamburg, and Alstria
Siebte Hamburgische Grundbesitz S.à.r.l. & Co. KG,
Hamburg, respectively, from its general partner, and
therefore expanded their interests in these companies
to 100 %. Thereafter, the general partner withdrew
from the partnerships, and, as a consequence, the
partnerships ceased to exist and the assets and liabilities
were automatically transferred to Verwaltung Alstria
Vierte Hamburgische Grundbesitz GmbH and

Verwaltung Alstria Siebte Hamburgische Grundbesitz
GmbH, respectively, in accordance with Sec. 738 BGB
(Anwachsung) with effect as of March 31, 2007.

• On June 28, 2007, the conversion of Verwaltung
Alstria Vierte Hamburgische Grundbesitz GmbH and
Verwaltung Alstria Siebte Hamburgische Grundbesitz
GmbH into Alstria IV. Hamburgische Grundbesitz
GmbH & Co. KG and Alstria VII. Hamburgische
Grundbesitz GmbH & Co. KG, respectively, became
effective. Thereafter, alstria office REIT-AG acquired the
remaining interest of 6 % in Alstria IV. Hamburgische
Grundbesitz GmbH & Co. KG and Alstria VII.
Hamburgische Grundbesitz GmbH & Co. KG with
effect from June 30, 2007.

• With effect as of April 1, 2007 Verwaltung Alstria
Sechste Hamburgische Grundbesitz GmbH transferred
a limited partner’s interest of Alstria Sechste Hamburgi-
sche Grundbesitz S.à.r.l. & Co. KG amounting to EUR
9,600 to Alstria Hanseatische Grundbesitz Holding S.à.r.l.
and another limited partner’s interest of EUR 10,200 to

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alstria office REIT-AG. Furthermore, the general partner
Alstria Hanseatische Grundbesitz S.à.r.l. transferred its
capital contribution of EUR 200 to Alstria Hanseatische
Grundbesitz Holding S.à.r.l. As a result Verwaltung Alstria
Sechste Hamburgische Grundbesitz GmbH ceased to be
limited partner and alstria office REIT-AG became limited
in Alstria Sechste
partner with 51 % of
Hamburgische Grundbesitz S.à.r.l. & Co. KG. Regarding
the transfers of these interests no purchase prices were
paid since the capital contribution is still outstanding and
the net asset value of the KG amounts to EUR 0.

the interest

• In addition, alstria office REIT-AG acquired a 100 %
interest in Verwaltung Alstria Sechste Hamburgische
Grundbesitz GmbH from Alstria Hanseatische
Grundbesitz Holding S.à.r.l. effective from April 1, 2007.

• By shareholder’s resolution of Alstria Sechste Hambur-
gische Grundbesitz S.à.r.l. & Co. KG dated April 1,
2007, Verwaltung Alstria Sechste Hamburgische
Grundbesitz GmbH joined Alstria Sechste Hamburgische
Grundbesitz S.à.r.l. & Co. KG as general partner
without capital contribution and without participation
in losses and profits of the KG. At the same time Alstria
Sechste Hamburgische Grundbesitz S.à.r.l. & Co. KG
was
renamed to Alstria Sechste Hamburgische
Grundbesitz GmbH & Co. KG.

• alstria office REIT-AG acquired 100 % of

JUNA
Beteiligungs GmbH from Captiva 2 JUNA Holding
S.à.r.l. The transaction was notarized on July 30, 2007.
JUNA Beteiligungs GmbH holds a 5.1 % share in JUNA
Property GmbH & Co. KG, the company holding the
West (Barmer Ersatzkasse) Portfolio. With the pay off
of the minority shareholders alstria office REIT-AG then,
directly and indirectly, owned 100 % of JUNA Property
GmbH & Co. KG. Both companies merged with alstria
office REIT-AG with effect from October 1, 2007.

Regardless of

their

legal

structure,

the transactions

are disclosed in accordance with their economic
substance in the consolidated financial statements as of
December 31, 2007.

The acquisition of a 94 % interest in Verwaltung Alstria IV.
and VII. Hamburgische Grundbesitz GmbH & Co. KG
(formerly Verwaltung Alstria Vierte and Siebte Hamburgische
Grundbesitz GmbH) as of March 31, 2007 as well as the
acquisition of 6 % of the shares in Alstria IV. Hamburgische
Grundbesitz GmbH & Co. KG and Alstria VII. Hamburgische
Grundbesitz GmbH & Co. KG as of June 30, 2007 were
stated as a business combination as well as the acquisition
of minority shares involving entities under common control
since the seller of the shares, Alstria Hanseatische Grund-
besitz Holding S.à.r.l., was also a subsidiary of Captiva
Capital Partners II SCA, Luxembourg.

Also, the acquisition of a 51 % interest in Alstria Sechste
Hamburgische Grundbesitz GmbH & Co. KG was stated as
a transaction under common control as of April 1, 2007
since the seller of the shares, Verwaltung Alstria Sechste
Hamburgische Grundbesitz GmbH, was a subsidiary of
Captiva Capital Partners II SCA, Luxembourg, as well.

The same type of business combination applies for the
acquisition of a 100 % interest
in JUNA Beteiligungs
GmbH. The seller of the shares, Captiva 2 JUNA Holding
S.à.r.l., Luxembourg, was also a subsidiary of the Captiva
Capital Partners II SCA, Luxembourg, and the transaction
is therefore stated as a business combination involving
entities under common control as of July 30, 2007. In the
course of this business combination a minority interest in
Juna Property GmbH & Co. KG was acquired.

IFRS 3 does not apply to business combinations under
joint control. As a consequence of the gap in legislation
after the introduction of IFRS 3, the transactions were
stated using the purchase method (in line with IFRS 3).
The difference amount resulting from the acquisition costs
of the minority interest and the minority interest stated in

the consolidated balance sheet was recorded in the
capital surplus.

Altogether, fair values of the following assets and liabilities
accrued to the Group in the course of
first-time
consolidation of the Company:

(in EUR k)

Assets
Investment property
Receivables
Other assets
Cash and cash equivalents
Prepaid expenses
Deferred tax assets

Total assets

Equity and Liabillties
Equity and reserves
Deferred tax liabilities
Other provisions
Current liabilities

50,000
679
650
597
18
732

52,676

3,148
263
149
49,116

Total equity and liabilities

52,676

No adjustments had to be made to account
for
differences between the carrying amounts determined by
the Company in its separate financial statements in
accordance with IFRS and the fair values of the acquired
assets and liabilities.

A contribution or withdrawal in kind in the amount of the
differences between the purchase prices of the interests
and the pro-rated fair values of the net assets acquired as
of March 31, 2007, April 1, 2007, June 30, 2007 and July
30, 2007, respectively, are assumed. Accordingly, the
respective remaining debit or credit difference from
capital consolidation resulted in a decrease or increase in
the captal surplus of the consolidated financial statements
of alstria office REIT-AG without effect on income.

The main business objective of Alstria IV. Hamburgische
Grundbesitz GmbH & Co. KG (formerly Verwaltung Alstria
Vierte Hamburgische Grundbesitz GmbH) is the leasing of
office property throughout Germany.

The key figures of the acquisition of 94 % of the shares as
of March 31, 2007 are as follows:

(in EUR k)

Cost of the investment
Carrying amount of the
acquired assets (excluding
cash and cash equivalents)
Purchased cash and cash
equivalents
Liabilities acquired
Carrying amount of the
acquired net assets
Thereof 94%

Remaining credit
difference

52,079

597
-49,528

3,148
-2,959

2,095

-2,959

-864

The remaining credit difference has been contributed in
full to the capital surplus of alstria office REIT-AG.

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The cost of the investment in terms of actual acquisition
costs and incidental acquisition costs break down as
follows:

(in EUR k)

Acquisition costs pursuant
to the purchase agreement
dated March 15, 2007
Legal advice
Non-deductible input
VAT on legal advice

Additional incidental costs concerning legal advice which
amount to EUR 25k arose in the 4th quarter and were
capitalized.

The additional consolidated net profit for a theoretical
acquisition as of January 1, 2007 was calculated as
follows (pro forma figures only):

(in EUR k)

Revenues
Other operating income
Cost of materials
Other operating expenses
Deferred income tax
Other interest and similar income
Interest and similar expenses
Extraordinary expenses
Other taxes

520
5
-70
-43
554
1
-685
-3,613
-21

Additional consolidated loss for
the period for a theoretical
acquisition as of January 1, 2007

-3,352

2,006
76

2,095

(in EUR k)

Acquisition costs pursuant
to the purchase agreement
dated June 29, 2007
Legal advice

are amounting to EUR 154k. In consideration of 6 % of the
equity taken over amounting to EUR 189k a remaining
credit difference of EUR 35k results, which has been
surplus of alstria
to the capital
contributed in full
office REIT-AG.

The cost of the investment in terms of actual acquisition
costs and incidental acquisition costs break down as follows:

The main business objective of Alstria VII. Hamburgische
Grundbesitz GmbH & Co. KG (formerly Verwaltung Alstria
Siebte Hamburgische Grundbesitz GmbH) is the leasing
of office property throughout Germany.

The key figures of the acquisition of 94 % of the shares as
of March 31, 2007 are as follows:

(in EUR k)

45,491

575
-33,728

12,338
-11,598

128
26

154

12,942

-11,598

1,344

The acquisition costs of the remaining minority interest of 6 %
of Alstria IV. Hamburgische Grundbesitz GmbH & Co. KG

Remaining debit
difference

The remaining debit difference has been attributed in full
to the capital surplus of alstria office REIT-AG.

The cost of the investment in terms of actual acquisition costs
and incidental acquisition costs break down as follows:

Altogether, fair values of the following assets and liabilities
accrued to the Group in the course of
first-time
consolidation of the Company:

(in EUR k)

Assets
Investment property
Receivables
Other assets
Cash and cash equivalents
Prepaid expenses
Deferred tax assets

Total assets

Equity and Liabillties
Equity and reserves
Other provisions
Current liabilities
Deferred tax liabilities

45,000
32
422
575
11
26

46,066

12,338
104
30,496
3,128

Total equity and liabilities

46,066

(in EUR k)

Acquisition costs pursuant
to the purchase agreement
dated March 15, 2007
Legal advice
Non-deductible input VAT
on legal advice

12,853
76

12,942

Additional incidental costs concerning legal advice which
amount to EUR 25k arose in the 4th quarter and were
capitalized.

The additional consolidated net profit for a theoretical
acquisition as of January 1, 2007 was calculated as
follows (pro forma figures only):

(in EUR k)

Revenues
Other operating income
Cost of materials
Other operating expenses
Deferred income tax
Other interest and similar income
Interest and similar expenses
Extraordinary Income
Extraordinary expenses
Other taxes

Additional consolidated profit
for the period for a theoretical
acquisition as of January 1, 2007

313
9
-3
-97
-3,219
1
-436
10,750
-10
-13

7,295

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The acquisition costs of the remaining minority interest of
6 % of Alstria VII. Hamburgische Grundbesitz GmbH & Co.
KG are amounting to EUR 860k. In consideration of 6 % of
the equity taken over amounting to EUR 740k a remaining
debit difference of EUR 120k as of June 30, 2007 results,
which has been attributed in full to the capital surplus of
alstria office REIT-AG.

The cost of the investment in terms of actual acquisition costs
and incidental acquisition costs break down as follows:

(in EUR k)

Acquisition costs pursuant
to the purchase agreement
dated June 29, 2007
Legal advice

835
25

860

The business objective of Alstria Sechste Hamburgische
Grundbesitz GmbH & Co. KG is the leasing of mainly
office property throughout Germany.

Regarding the transfer of the interest no purchase price
was concluded and no incidental acquisition costs had to
be considered. As the Company did not have material
equity, no difference from capital consolidation had to be
recognized in the capital surplus of alstria office REIT-AG.

The consolidated financial statements include the expenses
and income of Alstria Sechste Hamburgische Grundbesitz
GmbH & Co. KG for the period since the acquisition as of
April 1, 2007. Minority interests represent the portion of
profit or loss and net assets in Alstria Sechste Hamburgische
Grundbesitz GmbH & Co. KG not held by the Group. In

accordance with IAS 32, minority interests in partnerships
are disclosed under liabilities.
The additional consolidated net loss for the period for
a theoretical acquisition as of January 1, 2007 was
amounting to EUR 312.

The main business objective of JUNA Beteiligungs GmbH
is the holding of 5,1% interests in JUNA Property GmbH &
Co. KG.

The key figures of the acquisition of the interests are as
follows:

(in EUR k)

Cost of the investment
Omission of the liability
against the minority
shareholder
Carrying amount of the
acquired assets (excluding
cash and cash equivalents)
Purchased cash and
cash equivalents
Liabilities acquired
Carrying amount of the
acquired net assets
thereof 100%

Remaining debit
difference

1,791

254
-249

1,797
-1,797

6,764

-1,797

4,967

The remaining debit difference has been attributed in full
to the capital surplus of alstria office REIT-AG.

Altogether, the following assets and liabilities accrued to
the Group in the course of first-time consolidation of the
Company:

(in EUR k)

Assets
Cash and cash equivalents
Prepaid expenses

Total assets

Equity and Liabillties
Equity and reserves
Tax accruals
Other provisions
Current liabilities

Total equity and liabilities

254
1

255

6
223
12
14

255

the sole interest of

JUNA
The acquisition costs of
Beteiligungs GmbH are amounting to EUR 6,764k. Apart
from the purchase price of 1,848k this amount contains
real estate transfer tax of EUR 4,910k that resulted from
the aggregation of 100 % of the shares in JUNA Property
GmbH & Co. KG in the hand of alstria office REIT-AG.
Furthermore, additional costs for legal advice amount
investment in terms of actual
to EUR 6k. The cost of
acquisition costs and incidental acquisition costs breaks
down as follows:

(in EUR k)

Acquisition costs pursuant
to the purchase agreement
dated July 30, 2007
Property Transfer Tax
Legal advice
Non-deductible input VAT
on legal advice

1,848
4,910
6

6,764

6. Key Judgments and Estimates
The preparation of the consolidated financial statements in
accordance with IFRSs requires assumptions and estimates
to be made for various items which have an effect on the
amount and disclosure of the assets and liabilities as well
as income and expenses. Actual amounts may differ from
these estimates.

Judgements
In the process of applying the Group's accounting
policies, management has made the following judgement,
apart from those involving estimations, which has the
most significant effect on the amounts recognised in the
financial statements:

Operating Lease Commitments – Group as Lessor

The Group has entered into commercial property leases
on its investment property portfolio. The Group has
determined, based on an evaluation of the terms and
retains all
conditions of
the arrangements,
the significant
risks and rewards of ownership of
these properties and so accounts for the contracts as
operating leases.

that

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Estimates and assumptions
The key assumptions concerning the future and other key
sources of estimation uncertainty at the balance sheet
date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next
financial year are discussed below.
Estimates are required in particular in order to:

• determine the fair values of investment property;
• determine the fair values of financial instruments; and
• determine the fair value of stock options granted to

management; and

• determine the amount of tax liabilities concerning the

G-REIT conversion tax.

in determining the fair values of

In particular,
the
investment property, alstria office REIT-AG must apply and
take account of numerous factors. If the future development
of these properties differs from the estimate, large-scale
impairment losses may incur. This can have a negative
impact on future results of operations.

the derivative financial
A fair value measurement of
instruments was performed by an independent third party
and the market data compiled thereof were included in
the standard measurement models. Thus,
the usual
estimation uncertainties exist regarding possible deviations
from the market data used. Depending on the paramete-
rization of
the
these deviations at between
maximum range for
EUR -10,000 and EUR 10,000. We consider the models
used to be adequate and believe that
they do not
engender any uncertainty as to their applicability.

the models, alstria office REIT-AG put

The fair value of stock options granted to the management
board has been determined as of the granting date and
has been valued based on the expected volatility, life of
option and labor turn rate using current discount rates
applicable for items with similar terms and risk characteristics.
This valuation requires the Company to make estimates

about these parameters, and hence they are subject to
uncertainty. The fair value of the stock options granted as
of April 3, 2007 and September 5, 2007, respectively,
is allocated to the vesting period according to the
determinations in the underlying stock option program.
The resulting personnel expenses caused an addition
to capital surplus of EUR 806k (December 31, 2006:
EUR 0) in the consolidated financial statements as of
December 31, 2007.

The assets, liabilities and equity instruments stated above,
which are particularly exposed to estimation uncertainty,
had the following impact on the consolidated balance
sheet as of the balance sheet date:

(in EUR k)

Dec. 31,
2007

Dec. 31,
2006

Investment property
Positive fair values of
derivatives
Tax accruals
(G-REIT conversion tax)
Valuation of stock options
Deferred tax assets
thereof loss carryforwards

1,693,718

1,289,536

27,202

14,563

5,100
806
0
0

0
0
12,513
7,605

7. Seasonal or Economic Effects on Business
The activities of alstria office REIT-AG (primarily the
generation of revenues from investment properties) are
not generally affected by seasonal factors. However, the
sale of one or more large properties may have a significant
impact on revenues and operating expenses.

From experience, the real estate market tends to fluctuate
as a result of factors such as the net income of consumers
or GDP, changes in interest rates, consumer confidence,
and demographic and other factors inherent to the market.
The change of the interest rate might lead to a lower

valuation of the investment property and derivatives.

8. Summary of Significant Accounting Policies
The following accounting and valuation methods have
been used to prepare these consolidated financial
statements of alstria office REIT-AG.

Investment Property
Investment property comprises all property that is held in
order to generate rental
income or long-term value
increases in assets and is used neither in production nor
for administrative purposes. It is recognized at acquisition
costs at
the time of addition. The costs include the
transaction costs which have to be capitalized (particularly
real estate transfer tax). In accordance with IAS 40.17,
costs incurred subsequently for dismantling, replacing in
parts or maintenance of property are also included; no
costs of this kind, however, had been incurred as of the
balance sheet date.

For subsequent measurement the Company uses the fair
value model according to IAS 40.33 et seq. which reflects
market conditions at the balance sheet date.

All market values were determined by Colliers CRE,
London, a renowned appraiser and brokerage firm, as of
December 31, 2007.

The basis for deriving the fair values as defined by IAS
40.33 should be, where possible, prices in an active market
for similar property (IAS 40.45). An analysis showed that
there was not a sufficient number of official comparable
transactions to derive any market values. In accordance
with IAS 40.46, therefore, the fair value was determined
on the basis of an income approach.

The method used is a hardcore and top slice method,
income is horizontally segmented, with
whereby rental
the hardcore portion representing the prevailing contractual
rent. The top slice represents the difference between

market rent and contractual rent. This method fulfills the
international
requirements of
the Red Book, a set of
valuation standards set forth by the Royal
Institution of
Chartered Surveyors. The method used by Colliers is also
appropriate and suitable for determining market values in
accordance with the provisions of
the International
Valuation Standards (IVS, or the White Book).

In order to derive the fair value, the properties were
divided into two groups and valued accordingly. Group 1
contained properties with anchor lease terms of less than
five years and Group 2 properties with anchor lease terms
of more than five years.

Group 1 for properties with leases set to expire in five
years or less:

Hardcore and top slice method, taking account of

• contractual rent for the remaining term of the lease;
• a vacancy period of at least 18 months following

expiry of the lease;

• necessary maintenance costs to re-let the properties

at a comparable rent level;

• re-lets at market rents;
• capitalization rates reflecting the individual risk of the
property as well as market activity (comparable
transactions); and

• non-allocable operating costs in the amount of 5 % of

rental income p.a.

Group 2 for properties with anchor leases that are leased
on a long-term basis to tenants with high credit ratings:

Hardcore and top slice method, taking account of

• contractual rent for the remaining term of the lease;
• re-lets at market rents (accounting for the difference

between market rent and contractual rent);

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• capitalization rates reflecting the individual risk of
the property as well as market activity (comparable
transactions);

• non-allocable operating costs in the amount of 5 % of

rental income p.a.; and

• net selling price.

Gains or losses arising from changes in the fair values of
investment property are disclosed in the item “Net gain
from fair value adjustments on investment property” in the
income statement in the year in which they arise.

Investment properties are derecognised when either they
have been disposed of or when the investment property is
permanently withdrawn from use and no future economic
benefit is expected from its disposal. Any gains or losses on
the retirement or disposal of an investment property are
recognised in proﬁt or loss in the year of retirement or disposal.

incidental

Leases
The lessee is considered to be the beneficial owner of
leased assets when the lessee bears all
the risks and
in
to the assets
rewards
accordance with IAS 17. If the lessee is deemed beneficial
owner, the leased asset is recognized at fair value or the
lower present value of the minimum lease payments at
the inception of the lease.

(finance lease)

Operating Leases
Lease agreements that alstria office REIT-AG has entered
into with commercial tenants are classified as operating
leases under IFRS. Accordingly, alstria office REIT-AG is
lessor in numerous different
types of operating lease
agreements for investment properties with a carrying
amount of EUR 1,693,718k (December 31, 2006:
EUR 1,289,536k). These leases generate the majority of
proceeds and income for alstria office REIT-AG.

amortized; they are tested for impairment on an annual
basis.

that are amortized are tested for

impairment
Assets
whenever triggering events or changes in circumstances
indicate that
the carrying amount may no longer be
recoverable. An impairment loss is charged in the amount of
the excess of the carrying amount over recoverable amount.
If the reasons for an impairment loss cease to apply, the
impairment loss is reversed as appropriate.

Property, Plant and Equipment
Plant and equipment is stated at cost less accumulated
depreciation and accumulated impairment losses. Such
cost includes the cost of replacing part of the plant and
equipment when that cost is incurred, if the recognition
criteria are met. Likewise, when a major inspection is
performed, its cost is recognised in the carrying amount of
the plant and equipment as a replacement if the recognition
criteria are satisfied. All other repair and maintenance costs
are recognised in profit or loss as incurred.

Depreciation of plant and equipment is calculated on
a straight line basis over the useful
life of the asset (5 to
15 years).

An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying
amount of the asset) is included in profit or loss in the year
the asset is derecognised.

The asset’s residual values, useful
lives and methods of
depreciation are reviewed, and adjusted if appropriate,
at each financial year end.

Impairment of Assets
Intangible assets with indefinite useful

lives are not

Borrowing costs are recognised as an expense when in-
curred.

Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired
in a business combination is fair value as at the date of
acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and
any accumulated impairment losses. Internally generated
intangible assets, excluding capitalized development costs,
are not capitalised and expenditure is reflected in profit or
loss in the year in which the expenditure is incurred.

The useful
either finite or indefinite.

lives of intangible assets are assessed to be

Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever
there is an indication that the intangible asset may be
impaired. The amortisation period and the amortisation
life is
method for an intangible asset with a finite useful
reviewed at least at each financial year end. Changes in
the expected useful
the expected pattern of
consumption of future economic benefits embodied in the
is accounted for by changing the amortisation
asset
period or method, as appropriate, and are treated as
changes
in accounting estimates. The amortisation
expense on intangible assets with finite lives is recognised
in profit or loss in the expense category consistent with
the function of the intangible asset.

life or

Taxes
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance
sheet date.

Deferred taxes are carried forward using the liability
method. Deferred tax assets are the amounts of income
tax that are recoverable in future fiscal years and result
from deductible temporary differences and from unused
tax loss carryforwards. Deferred tax liabilities are the
amounts of income tax payable on taxable temporary
differences in future fiscal years.

A deferred tax liability was recognized for all
temporary differences.

taxable

Deferred tax assets were recognized for all deductible
temporary differences to the extent that it is probable that
taxable profit will be available against which the deductible
temporary difference can be utilized.

A deferred tax asset was recognized for the carryforward
of unused tax losses to the extent that it is probable that
future taxable profit will be available against which the
unused tax losses can be utilized.

Depreciation of licence is calculated on a straight line basis
over the useful life of the asset (3 to 8 years).

Currently, the Company does not have intangible assets
with indefinite useful lives.

Deferred tax assets and deferred tax liabilities were
measured at the tax rates that are expected to apply for
the period when the asset is realized or the liability is
settled using tax rates and tax laws that have been enacted
or substantively enacted as of the balance sheet date.

Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset
and are recognised in profit or loss when the asset is
derecognised.

Temporary differences are differences between the carrying
amount of an asset or liability in the balance sheet and its
tax base.

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Financial Instruments
Pursuant to IAS 39, a financial instrument is any contract
that gives rise to both a financial asset at one entity and a
liability or equity instrument at another entity.
financial
Financial assets comprise in particular cash and cash
equivalents, trade receivables, as well as other loans and
receivables originated by the enterprise, held-to-maturity
investments and original and derivative financial assets
held for trading. Financial liabilities frequently underlie a
claim to their return in cash or another financial asset.
These include in particular liabilities to banks and other
creditors, trade payables and derivative financial liabilities.
Financial assets and liabilities are generally not offset.

financial assets is
Recognition and measurement of
subject to the provisions of IAS 39. Depending on the
classification prescribed by IAS 39

• held-to-maturity;
• measured at fair value through profit or loss;
• available-for-sale; or
• loans and receivables,

financial assets are either measured at amortized cost
or the lower net realizable value or at fair value and
recognized as of the balance sheet date.

When financial assets are recognized initially, they are
measured at fair value. A financial asset is derecognized
when the entity loses control of the contractual rights that
instrument. Management decides
comprise the financial
financial assets on first-time
on the classification of
recognition and reviews
the classification on every
balance sheet date.

All regular way purchases and sales of financial assets are
recognized on the trade date, which is the date that the
Group commits to purchase the asset. Regular way
purchases or sales are purchases or sales of
financial
assets that require delivery of assets within the period

generally established by regulation or convention in the
marketplace.

instruments that are not part of an
Derivative financial
effective hedge pursuant to IAS 39 must be classified as
“held for trading” and recognized in profit or loss at fair
value. If their fair value is negative, the instruments are
disclosed under financial liabilities.

The Group assesses whether embedded derivatives are
required to be separated from host contracts when the
Group first becomes party to the contract. Reassessment
only occurs if
the
contract that significantly modifies the cash flows that
would otherwise be required.

there is a change in the terms of

Receivables
Receivables are classified as loans and receivables as
defined by IAS 39 and measured initially at fair value and
subsequently at amortized cost, if necessary after deduction
of any valuation adjustments. Amortized costs are computed
using the effective interest method less any allowance for
impairment. The calculation takes into account any
premium or discount on acquisition and includes
transaction costs and fees that are an integral part of the
effective interest rate.

Within the scope of the measurement of trade receivables,
a solvency check was performed on the tenants (risk
associated with the legal validity of receivables) and
certainty gained that there were no reasons for a rent
reduction (delcredere risk). This
takes place on an
individual property and portfolio basis respectively.

Non-interest bearing receivables due in more than one
year are discounted.

Gains and losses are recognized in profit or loss when the
receivables are derecognized or impaired as well as
through the amortization process.

If there is objective evidence that an impairment loss has
been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the
present value of estimated future cash flows discounted
at the financial asset’s original effective interest rate (ie the
effective interest rate computed at initial recognition).
The carrying amount of the asset is reduced directly. The
amount of the loss shall be recognised in profit or loss.

If, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed, to the
extent that the carrying value of the receivable does not
the reversal date. Any
exceed its amortised cost at
subsequent reversal of an impairment loss is recognised
in profit or loss.

Provision for impairment is made when there is objective
evidence (such as the probability of insolvency or significant
financial difficulties of the debtor) that the Group will not
be able to collect all of
the amounts due under the
original terms of the invoice. The carrying amount of the
receivable is
Impaired debts are
derecognized when they are assessed as uncollectible.

reduced directly.

agreement based on current market
structures of interest rates.

rates or

term

The method used for recording gains and losses depends
on whether the derivative was assigned to an underlying
transaction as a hedge. To this end, financial management
defines the hedge relationship between the hedging
instrument and the hedged item and the aim of the risk
management measure and underlying strategy when
concluding the hedge transaction.

As of December 31, 2007 and during the period under
review, the derivative financial instruments concluded by
alstria office REIT-AG do not qualify for hedge accounting.
The changes in the fair value of these derivatives are
recognized directly in profit or loss.

A financial asset (or, where applicable a part of a financial
asset or part of a group of similar financial assets) is
derecognized when the rights to receive cash flows from
the asset have expired.

Cash and Cash Equivalents
Cash and short-term deposits in the balance sheet
comprise current bank balances.

Assets, Derivative Financial Assets and Hedging
Instruments Measured at Fair Value through
Profit or Loss
alstria office REIT-AG makes targeted use of derivative
financial instruments as part of its financial management
to minimize risks and optimize interest charges.

For the purposes of the consolidated cash flow statement,
cash and cash equivalents include the cash and cash
equivalents defined above and short-term deposits.

Current bank balances are recognized in the nominal
amount.

Derivative financial
value upon initial and subsequent recognition.

instruments were measured at fair

The instruments were measured as of December 31, 2007
by an independent third party. The fair value of derivative
financial
instruments is determined by discounting the
expected future cash flows over the remaining life of the

Treasury shares
Own equity instruments which are reacquired (treasury
shares) are deducted from equity. No gain or loss is
recognized in profit or loss on the purchase, sale, issue or
cancellation of the Group’s own equity instruments.

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Liabilities
Financial liabilities, in particular trade payables, are stated
at the amount repayable and are, if non-current and
non-interest bearing, discounted.

The fair values are determined by discounting the future
contractually agreed cash flows at the interest rates from the
term structure of interest rates to the balance sheet date.

All
loans and borrowings are initially recognized at fair
value less directly attributable transaction costs, and have
not been designated as ‘at fair value through profit or
loss’. After initial recognition, interest bearing loans and
borrowings are subsequently measured at amortized cost
using the effective interest method. Gains and losses are
recognized in profit or
loss when the liabilities are
derecognized as well as through the amortization process
.
The component of the convertible profit participation
rights (Wandelgenussrechte) that exhibits characteristics
of a liability is recognized as a liability in the balance sheet,
net of transaction costs. On issuance of the jouissance
is
shares,
determined using a market rate for an equivalent non
is classified as a
convertible bond; and this amount
financial
it is
extinguished on conversion or redemption.

liability measured at amortized cost until

the liability component

the fair value of

A financial
liability is derecognized when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms,
or
the terms of an existing liability are substantially
modified, such an exchange or modification is treated as
a derecognition of the original liability and the recognition
of a new liability, and the difference in the respective
carrying amounts is recognized in profit or loss.

Provisions
Provisions are set up if the entity currently has a legal or
constructive external obligation and it is probable that

meeting this obligation will result in an outflow of economic
benefits that can be reliably estimated. The provisions are
measured, taking account of all risks at the best estimate
of future cash outflows required to meet the obligation,
and - if non-current - discounted. They may not be offset
against reimbursements.

Share-based payment transactions
The members of
the management board as well as
employees of the Group receive remuneration in the form
of share-based payment transactions, whereby employees
render services as consideration for equity instruments
(‘equity-settled transactions’). The cost of equity-settled
transactions is measured by reference to the fair value at
the date on which they are granted. The fair value is
determined using an appropriate pricing model, further
details of which are given in Note 18 and in the
compensation report, respectively.

The cost of equity-settled transactions is recognized,
together with a corresponding increase in equity,
over
the period in which the performance and/or
service conditions are fulfilled, ending on the date
on which the relevant assignee become fully entitled
to the award (‘the vesting date’). The cumulative
expense recognized for equity-settled transactions at
each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the
Group’s best estimate of
the number of equity
instruments that will ultimately vest. The profit or loss
charge or credit for a period represents the movement in
cumulative expense recognized as at the beginning and
end of that period.

No expense is recognized for awards that do not ultimately
vest, except for awards where vesting is conditional upon
a market condition, which are treated as vesting irrespective
the market condition is satisfied,
of whether or not
provided that all other performance and/or service
conditions are satisfied.

Where the terms of an equity-settled award are modified,
the minimum expense recognized is the expense as if the
terms had not been modified. An additional expense is
recognized for any modification, which increases the total
fair value of the share-based payment arrangement, or is
otherwise beneficial to the assignee as measured at the
date of modification.

Where an equity-settled award is cancelled, it is treated as
if
it had vested on the date of cancellation, and any
expense not yet recognized for the award is recognized
immediately. However, if a new award is substituted for
the cancelled award, and designated as a replacement
award on the date that it is granted, the cancelled and
new awards are treated as if they were a modification
of
the original award, as described in the previous
paragraph.

The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings
per share as far as at the balance sheet date the related
contingencies are achieved (further details are given in
Note 15).

Minority Interests in Partnerships
Under IAS 32.16 and IAS 32.19, a financial instrument is
an equity instrument if, and only if, an entity has no
conditional or unconditional obligation to deliver cash or
another asset. In addition, IAS 32.18(b) states that the
right of a partner to return his investment to the partner-
ship for compensation at any time must be disclosed as
a liability, even when, in legal terms, the partner is an
investor. Specifically, equity must be reclassified as
liabilities when the shareholders have a right of termination
and the exercise of that right justifies a settlement claim
against the company. Therefore minority interests in fully
consolidated partnerships are disclosed under liabilities.
The minority interests’ share in net profit or loss is recorded
in the income statement as income or an expense (financial
result) in accordance with IAS 32.35.

Revenue Recognition
Revenue is recognised to the extent that it is probable that
the economic benefits will flow to the Group and the
revenue can be reliably measured. Revenue is measured
at the fair value of the consideration received, excluding
discounts, rebates, and other sales taxes or duty. The
following specific recognition criteria must also be met
before revenue is recognised:

RENTAL INCOME
Rental income arising from operating leases on investment
properties is accounted for on a straight line basis over
the lease terms.

INTEREST INCOME
Revenue is recognised as interest accrues (using the
effective interest rate, that is the rate that exactly discounts
estimated future cash receipts through the expected life
of the financial instrument to the net carrying amount of
the financial asset).

Income Taxes
from
The following effects on profit and loss result
the transformation of the Company into a G-REIT. For
a detailed description of
the transformation, please
see note 1.

The tax assets and liabilities reported as of December 31,
2006 for prior periods which amount to EUR 12,513k and
EUR 19,869k, respectively, were recognized in profit and
loss in 2007.

9. Segment Reporting
IAS 14 requires segment reporting for business segments
and geographical segments with distinguishable and
significant risks and returns.

The type of services offered by alstria office REIT-AG
exclusively comprises lessor activities. There is also no
differentiation by tenant group since alstria office REIT-AG’s

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portfolio consists almost entirely of commercial properties,
with only a very few exceptions. When selecting tenants,
alstria office REIT-AG places high demands on tenants’
credit ratings, such that no different risks and returns
pursuant to IAS 14.9 can be derived from this criterion.
For the valuation of the properties, a differentiation is
made between properties with anchor lease terms of less
than five years and more than five years; however, this
allocation is made on a rolling basis and therefore
depends on the date. Furthermore, this differentiation
does not result in any structurally different cash flows for
the fiscal year. Different risks are only snapshots and
change immediately when new anchor
leases are
concluded. However,
is not possible to identify a
segment from these criteria.

From a geographical perspective, alstria office REIT-AG
operates exclusively in the German market and is present
all over Germany. As there are therefore no reportable
segments within the meaning of IAS 14.9, the criteria for
segment reporting pursuant to IAS 14 are not met.

10. Notes to the Consolidated
Balance Sheet – Assets

As of December 31, 2007, prepayments are broken down
as follows:

10.1 Investment Property
This item, which comprises all properties held by the
Company, breaks down as follows:

(in EUR k)

2007

2006

Fair values
As of January 1
Changes in the
consolidated group
Additions
Disposals
Net result from the
adjustment of the fair
value of investment
property
Subtotal
Prepayments

1,289,536

95,000
293,448
-3,525

191,125
1,032,009
0

11,170
1,685,629
8,089

22,871
1,246,005
43,531

As of Dec. 31.

1,693,718 1,289,536

(in EUR k)

Dec. 31, 2007

Dec. 31, 2006

Alstria Zwölfte Hamburgische Grundbesitz GmbH & Co. KG
Alstria Vierzehnte Hamburgische Grundbesitz GmbH & Co. KG
Alstria Fünfzehnte Hamburgische Grundbesitz GmbH & Co. KG
Alstria Sechzehnte Hamburgische Grundbesitz GmbH & Co. KG
Alstria Siebzehnte Hamburgische Grundbesitz GmbH & Co. KG
Alstria Achtzehnte Hamburgische Grundbesitz GmbH & Co. KG
Alstria Neunzehnte Hamburgische Grundbesitz GmbH & Co. KG
Alstria Zwanzigste Hamburgische Grundbesitz GmbH & Co. KG
Alstria Einundzwanzigste Hamburgische Grundbesitz GmbH & Co. KG
alstria office REIT-AG

0
0
0
0
0
0
0
0
0
8,089

35,346
1,019
281
593
1,022
1,070
982
1,455
1,763
0

Total prepayments

8,089

43,531

alstria office REIT-AG uses the fair value model pursuant to
IAS 40.33 et seq. for subsequent measurement. External
appraisals were obtained for measurement in 2007. For a
detailed description of the valuation of assets, please see
Note 8.

Under the purchase agreement effective on December
18, 2006, Alstria Vierzehnte to Einundzwanzigste
Hamburgische Grundbesitz GmbH & Co. KGs, Hamburg,
– subsidiaries of alstria office REIT-AG then and represented
by their general partner, Verwaltung Alstria Dreizehnte
Hamburgische Grundbesitz GmbH, Hamburg, – concluded
a purchase agreement on the acquisition of
further
property with a purchase price value of EUR 217,950k,
with the properties being transferred to the buyers with
the effect of April 1, 2007 (AURORA portfolio). Additional
acquisition costs arose in the amount of EUR 170k.

price of EUR 10,700k, with the property being transferred
to the buyer with the effect of June 6, 2007 (SIGMA
portfolio). Additional acquisition costs arose in the amount
of EUR 606k.

Under the purchase agreement effective on September 9,
2007, alstria office REIT-AG, Hamburg, concluded a
purchase agreement on the acquisition of another
property with a purchase price of EUR 2,851k. The
property has been transferred to the buyer effective from
October 1, 2007 (Bäckerbreitergang 73). Additional
acquisition costs arose in the amount of EUR 253k.

Two residential assets held for sale were economically
transferred at the beginning of July. In March 2007 alstria
office REIT-AG had agreed to dispose these two residential
assets for total net proceeds of EUR 3,700k versus an IFRS
fair value of EUR 3,525k as of December 31, 2006.

Under the purchase agreement effective on May 10, 2007,
alstria office REIT-AG concluded a purchase agreement on
the acquisition of one further property with a purchase

Under the purchase agreement effective on November 19,
2007, alstria office REIT-AG concluded a purchase

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agreement on the acquisition of further properties with a
total value of EUR 58,587k. alstria office REIT-AG paid the
full purchase price for the transaction in December 2007
and the transfer of possession, benefits and burdens took
place in December 2007. Additional acquisition costs
arose in the amount of EUR 2,175k.

Under the purchase agreement dated December 17, 2007,
alstria office REIT-AG concluded a purchase agreement on
the acquisition of further properties with a total value
of EUR 50,262k. The transfer of possession, benefits
and burdens is expected to take place in the first months
of 2008.

Furthermore, additional acquisition costs arose for the
existing portfolios in the amount of EUR 156k.

The prepayments include incidental acquisition costs for
the above mentioned purchases.

Under the purchase agreement effective on December 11,
2007, alstria office REIT-AG concluded a purchase
agreement on the acquisition of further properties with a
total value of EUR 52,350k. The transfer of possession,
benefits and burdens is expected to take place in the first
months of 2008.

Under the purchase agreement dated December 12, 2007,
alstria office REIT-AG concluded a purchase agreement on
the acquisition of further properties with a total value
of EUR 105,770k. The transfer of possession, benefits
and burdens is expected to take place in the first months
of 2008.

Expenses/income disclosed in the income statement
pursuant to IAS 40.75(f):

• EUR 82,552k (2006: EUR 30,063k) rental income from

investment property;

• EUR 4,277k (2006: EUR 466k) operating expenses
(including repairs and maintenance) directly allocable
to investment property from which rental income was
generated during the period under review; and
• EUR 688k (2006: EUR 147k) operating expenses
(including repairs and maintenance) arising from to
investment property that did not generate rental
income during the period under review.

lives of

10.2 Property, plant and equipment
The useful
is estimated with 3
the assets
to 15 years. Within the merger, for further information we
the plants were transferred from
refer
Verwaltung Alstria Dreizehnte Hamburgische Grundbesitz

to Sec. 1,

GmbH, Hamburg, to alstria office REIT-AG. The plants
constist of miscellaneous items like fire extinguishers or a
control panel for a closed-circuit television system.

(in EUR k)

Acquisition and production cost
As of January 1
Additions
Disposals
Reclassifications
Prepayments

As of December 31

Accumulated amortization, depreciation and write-downs
As of January 1
Additions
Disposals

As of December 31

Net book values

Fixed assets

plant

furniture and
fixtures

0
1,727
0
0
0

1,727

0
285
0

285

1,442

0
75
0
0
0

0
23
0

Total
2007

0
1,802
0
0
0

1,802

0
308
0

308

1,494

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(in EUR k)

Acquisition and production cost
As of January 1
Additions
Additions due to Sec. 738 BGB (Anwachsung)
Disposals
Reclassifications
Prepayments

As of December 31

Accumulated amortization, depreciation and write-downs
As of January 1
Additions
Disposals

As of December 31

Net book values

Fixed assets

plant

furniture and
fixtures

Total
2006

0
0
0
0
0
0

0
0
0

0
0
0
0
0
0

0
0
0

0
0
0
0
0
0

0
0
0

10.3 Intangible assets
The useful lives of the intangible assets is estimated with 3
to 8 years.

The intangible assets mainly consist of software licenses
which amount to EUR 350k (2006: EUR 0).

Intangible assets

Development
costs

Licences Goodwill

Total
2007

(in EUR k)

Acquisition and production cost
As of January 1
Additions
Additions due to Sec. 738 BGB (Anwachsung)
Disposals
Reclassifications
Prepayments

As of December 31

0
0
0
0
0
0

Accumulated amortization, depreciation and write-downs
As of January 1
Additions
Disposals

0
0
0

As of December 31

Net book values

0
392
7
0
0
0

399

0
40
0

359

0
0
0
0
0
0

0
0
0

0
392
7
0
0
0

399

0
40
0

359

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Intangible assets

Development
costs

Licences Goodwill

Total
2006

(in EUR k)

Acquisition and production cost
As of January 1
Additions
Additions due to Sec. 738 BGB (Anwachsung)
Disposals
Reclassifications
Prepayments

As of December 31

0
0
0
0
0
0

Accumulated amortization, depreciation and write-downs
As of January 1
Additions
Disposals

0
0
0

As of December 31

Net book values

0
0
0
0
0
0

0
0
0

0
0
0
0
0
0

0
0
0

0
0
0
0
0
0

0
0
0

10.4 Receivables
Due to the specific nature of the business, the Group
considers receivables due up to one year to be current.
The following overview breaks down receivables into
those due within the next twelve months and those due
in more than one year.

Due

(in EUR k)

Trade receivables
Rent receivables

Due

in more

up to
one
year one year

total
than Dec. 31,
2006

(in EUR k)

in more

up to
one
year one year

total
than Dec. 31,
2007

Trade receivables
Rent receivables

2,646

Positive fair value
derivatives

27,202

0 27,202

Tax receivables

1,949

Other receivables
Other assets
Prepayments

4,728
311

5,039

0
0

4,728
311

5,039

Positive fair value
derivatives

14,563

2,646

Tax receivables

Other receivables
Other assets
Prepayments

3,564
97

3,661

0 14,563

0
0

3,564
97

3,661

Trade receivables were written down by EUR 0k
(December 31, 2006: EUR 6k) due to rent payments
in arrears.

Other assets mainly relate to capitalized transaction costs,
which have not yet been allocated to a liability
(EUR 1,071k)
(December 31, 2006: EUR 2,491k).
Furthermore, costs of EUR 3,500k (December 31, 2006:
EUR 0) relating security payments for the Bamler portfolio
are included.

Prepayments relate to annual insurance premiums that are
payable in advance.

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The following derivative financial instruments classified as
“held for trading” existed as of the balance sheet date:

Euribor) for fixed interest rates (3.617 % p.a.) with a
quarterly payment term. The fair value of the swap was

Profit of EUR 635k (December 31, 2006: EUR 541k) was
recognized in the 2007 income statement.

Product

Notional
EUR k

Strike p.a.

Maturity
Date

Fair Value
Dec. 31, 07
EUR k

Fair Value
Dec. 31, 06
EUR k

Profit/
Loss 07
EUR k

Profit/
Loss 06
EUR k

Cap
Cap
Swap
Swap
Cap
Cap

41.721
26.184
625,000
80,880
80,880
150,000

3,800
3,800
3,617
3,193
4,000
4,900

31.03.2011
31.03.2011
29.11.2011
29.11.2011
29.11.2011
20.12.2012

961
604
18,939
3,761
1,811
1,126

0 1
0 2
10,430
2,986
1,147
0

264
166
7,139
635
560
-678

0
0
-1,201
541
-70
0

Total

1,004,665

27,202

14,563

8,086

-730

Profit totaling to EUR 8,086k (December 31, 2006: losses
of EUR 730k) due to market valuations for hedge transactions
not included in hedge accounting were recorded in the
income statement in the period of the financial statements
to December 31, 2007.

Alstria Erste Hamburgische Grundbesitz GmbH & Co. KG,
Hamburg, and JP Morgan Chase Bank entered into a
swap agreement effective May 31, 2006.

Alstria Erste Hamburgische Grundbesitz GmbH & Co. KG,
Hamburg, and JP Morgan Chase Bank entered into a
further swap agreement effective July 6, 2006.

The two abovementioned swap transactions were
transferred from Alstria Erste Hamburgische Grundbesitz
to alstria office REIT-AG
GmbH & Co. KG, Hamburg,
effective October 20, 2006. Hence, since this date, a
swap agreement in the amount of EUR 625,000k has
been in place between alstria office REIT-AG, Hamburg,
and JP Morgan Chase Bank. This agreement provides for
a payer interest rate swap under which the Company
(3-month-
exchanges

variable-interest

liabilities

its

EUR 18,939k (December 31, 2006: EUR 10,430k) as
of the balance sheet date. The agreement expires on
November 29, 2011.

Profit of EUR 7,139k (December 31, 2006: Losses of
EUR 1,201k) were recognized in the 2007 income
statement.

JUNA Property GmbH & Co. KG and NATIXIS Corporate
& Investment Bank entered into a swap agreement with
a nominal value of EUR 80,880k as of December 31,
2007 (January 2, 2006: EUR 81,000k). This agreement
provides for an interest rate swap under which the
Company exchanges its variable-interest liabilities for
fixed interest rates. The fair value of the swap was EUR
3,761k (December 31, 2006: EUR 2,986k) as of the
balance sheet date. For consolidation purposes, the cost
incurred (and the fair value) on the date of first-time
consolidation of JUNA Property GmbH & Co. KG as of
May 31, 2006 amounted to EUR 2,444k. The fair value
initial measurement as of January 2, 2006 was
at
EUR 0k. The swap expires on November 29, 2011.

Also effective January 2, 2006, JUNA Property GmbH
& Co. KG and NATIXIS Corporate & Investment Bank
entered into a cap agreement with a nominal value of
EUR 80,880k, which serves to hedge interest rate risks.
For consolidation purposes, the cost incurred (and the fair
value) on the date of
first-time consolidation of JUNA
Property GmbH & Co. KG as of May 31, 2006 amounted
to EUR 1,296k. The fair value at initial measurement as
of January 2, 2006 was EUR 940k. The fair value of the
cap was EUR 1,811k (December 31, 2006: EUR 1,147k)
as of
the balance sheet date. The cap expires on
November 29, 2011.

A profit of EUR 560k (December 31, 2006: Losses of
EUR 70k) was recognized in the 2007 income statement.

The two abovementioned swap and cap transactions were
transferred from Juna Property GmbH & Co. KG, Hamburg,
to alstria office REIT-AG effective January 24, 2007.

Alstria IV. Hamburgische Grundbesitz GmbH & Co. KG,
Hamburg, and JP Morgan Chase Bank entered into a cap
agreement with a nominal value of EUR 41,721k effective
July 20, 2006, which serves to hedge interest rate risks.
For consolidation purposes, the cost incurred (and the fair
value) on the date of first-time consolidation of Alstria IV.
Hamburgische Grundbesitz GmbH & Co. KG as of March
31, 2007 amounted to EUR 627k. The fair value at initial
measurement as of July 20, 2006 was EUR 475k. The fair
value of the cap was EUR 961k as of the balance sheet
date. The cap expires on March 31, 2011.

agreement with a nominal value of EUR 26,184k effective
July 20, 2006, which serves to hedge interest rate risks.
For consolidation purposes, the cost incurred (and the fair
value) on the date of first-time consolidation of Alstria VII.
Hamburgische Grundbesitz GmbH & Co. KG as of March
31, 2007 amounted to EUR 393k. The fair value at initial
measurement as of July 20, 2006 was EUR 298k. The fair
value of the cap was EUR 604k as of the balance sheet
date. The cap expires on March 31, 2011.

A profit of EUR 166k was recognized in the 2007 income
statement.

The
two abovementioned cap agreements were
transferred from Alstria IV. Hamburgische Grundbesitz
GmbH & Co. KG, Hamburg,
respectively Alstria VII.
Hamburgische Grundbesitz GmbH & Co. KG, Hamburg,
to alstria office REIT-AG effective October 1, 2007.

alstria office REIT-AG and JP Morgan Chase Bank
entered into a cap agreement with a nominal value of
EUR 150,000k effective December 20, 2007, which
serves to hedge interest rate risks. The fair value at initial
measurement was EUR 1,804k.The fair value of the cap
was EUR 1,126k as of the balance sheet date. The cap
expires on December 20, 2012.

A loss of EUR 678k was recognized in the 2007 income
statement.

10.5 Cash and Cash Equivalents

(in EUR k)

Dec. 31,
2007

Dec. 31,
2006

A profit of EUR 264k was recognized in the 2007 income
statement.

Bank balances

103,036

24,304

Alstria VII. Hamburgische Grundbesitz GmbH & Co. KG,
Hamburg, and JP Morgan Chase Bank entered into a cap

Bank balances earn interest at floating rates based on daily
bank deposit rates.

1 As of December 31, 2006 Alstria IV. Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg, did not belong to the Group of alstria office REIT-AG.
Therefore the fair value of the cap as of December 31, 2006 amounting to
EUR 643k can not be shown in the consolidated financial statements.

2 As of December 31, 2007 Alstria VII. Hamburgische Grundbesitz GmbH &
Co. KG, Hamburg, did not belong to the Group of alstria office REIT-AG.
Therefore the fair value of the cap as of December 31, 2006 amounting to
EUR 404k can not be shown in the consolidated financial statements.

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11. Notes to the Consolidated Balance Sheet –
Equity and Liabilities

Treasury Stock

11.1 Equity
For detailed information on equity we refer
to the
consolidated statement of changes in consolidated equity.

Share Capital
Authorised

(in EUR k)

Ordinary share of
EUR 1 each

Dec. 31,
2007

Dec. 31,
2006

56,000

8,000

By resolution of the extraordinary general meeting of
shareholders held on December 21, 2006 the nominal
share capital was increased against contribution in kind
by EUR 32,000k from EUR 8,000k to EUR 40,000k. The
capital
increase has been registered in the commercial
register on March 9, 2007.

By resolution of the annual general meeting of shareholders
held on March 15, 2007, the Company was authorized
to further increase the nominal share capital by up to
EUR 20,000k from EUR 40,000k up to EUR 60,000k.
On the basis of this resolution, the share capital was
increased against contribution in cash in the amount of
EUR 16,000k. This capital increase has been registered in
the commercial register on March 30, 2007. The nominal
amount was paid in on March 30, 2007.

In the balance sheet of the consolidated financial statements
as of December 31, 2007, the share capital of alstria office
REIT-AG amounted to EUR 56,000k. Captiva 2 Alstria
Holding S.à.r.l., Luxembourg, held, directly and indirectly,
the remaining
54.0 % of
44.8 % of the shares are free float and the remaining 1.2 %
are treasury shares.

the shares in the Company,

(in EUR k)

Dec. 31,
2007

Dec. 31,
2006

Non-par value bearer
shares of EUR 1 each

-7,115

By resolution of the shareholder meeting on March 15,
2007, the Company was authorized to acquire treasury
shares up to 10 % of the capital stock during the period
from November 7, 2007 to September 14, 2008. On
November 6, 2007, the Company’s management board
resolved to acquire up to 2.5 % of the shares outstanding
in connection with the above authorization. The shares
the stock exchange by a credit
were acquired over
institution. The credit
institution decides on when to
acquire treasury shares independently and without the
involvement of the Company.

Capital Surplus
The capital surplus changed as follows during the fiscal year:

(in EUR k)

2007

2006

As of January 1
Changes in the
consolidated group
Valuation shareholder
loan/other IFRS adjustments
Share-based payments
Contributions to
capital surplus
Transaction costs of
issue of shares
Other contributions to
capital surplus

-5,531

8,763

647
813

1,576
0

240,000

-11,038

154,690

364,727

As of Dec. 31

754,647

375,066

shareholder

resolution of

By
January 22, 2007,
EUR 49,008k was paid in the capital surplus. By way of a
loan agreement dated November 23, 2006, Captiva 2
Alstria Holding S.à.r.l. granted to alstria office REIT-AG a
shareholder loan. On March 15, 2007 said shareholder
loan amounting to EUR 104,500k plus accrued interests of
EUR 1,182k was contributed to capital surplus as agreed
on March 15, 2007. The valuation of this shareholder loan
resulted in a further increase of the capital surplus of EUR
447k. The capital surplus was additionally increased by
EUR 200k due to the relating deferred taxes.

Furthermore, the first consolidation of Alstria IV. and VII.
Hamburgische Grundbesitz GmbH & Co. KG resulted in
a decrease of EUR 429k and the first consolidation of
the remaining minority interest of 6 % of Alstria IV. and
VII. Hamburgische Grundbesitz GmbH & Co. KG resulted
in a decrease of EUR 50k of the capital surplus. Additional
for
acquisition costs
these acquisitions (EUR 50k in total). The additional
acquisition costs decreased the capital surplus. Further
additional acquisition costs for these acquisitions arose in
the fourth quarter (EUR 35k in total). The additional
acquisition costs decreased the capital surplus.

third quarter

in the

arose

In the initial public offering of

Since April 3, 2007, the shares of alstria office REIT-AG
have been listed on the Regulated Market of the Frankfurt
Stock Exchange.
the
Company’s shares, a total of 25,778k shares were placed
at a price of EUR 16 per share, of which 16 million shares
increase, 9,778,324 shares were
resulted from a capital
sold by the selling shareholder (including 378,324 shares
from the exercise of the Greenshoe option). The initial
public offering of the Company’s shares resulted in an
increase of the capital surplus of EUR 228,962k, thereof
contributions amounting to EUR 240,000k and expenses
of EUR 11,038k.

Additionally, a stock option program was resolved on
March 27, 2007 by the supervisory board of the Company
and accordingly stock options with a fair value of
EUR 1,997k were issued to members of the management
board of the Company on April 3, 2007 and September 5,
2007, respectively. Thereof stock options with a fair value
of EUR 446k were forfeited as of December 31, 2007 in
relation with the retirement of Dr. Michael Börner-
Kleindienst. As of December 31, 2007, this resulted in a
further increase of the capital surplus of EUR 806k from
the granted stock
the fair values of
the allocation of
options over the respective vesting period.

In connection with, and for purposes of, the initial public
offering (IPO) of the Company on April 3, 2007, the
Company increased its subscribed capital, based on the
resolution of the annual general shareholders meeting of
March 15, 2007, from EUR 40 mio by EUR 16 mio to
EUR 56 mio by issuing 16 mio no-par value bearer shares.
The issued shares were subscribed at an issue price of
EUR 1,00 per share on March 30, 2007 by the bank J.P.
Morgan Securities Limited in its own name and for
the syndicate of banks, which were
the account of
accompanying the IPO, with the obligation to offer them
to investors at an offer price still to be determined and to
pay the proceeds of the offering – after deduction of an
appropriate commission and of the expenses – to the
Company. The capital
increase became effective upon
registration in the commercial register of the Company on
March 30, 2007. The shares were offered and sold in the
IPO at an offer price of EUR 16,00 per share; the proceeds
by which the issue price was exceeded amounted
to EUR 240 mio and were booked into the capital reserve
the German
pursuant
Commercial Code (HGB).

to sec. 272 para. 2 no. 1 of

375,066

Additionally, the first consolidation of JUNA Beteiligungs
GmbH resulted in a decrease of EUR 4,967k.

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investment

In accordance with these regulations,
the Company
disclosed reclassified equity in its balance sheet in the item
“other liabilities” as minority interests in partnerships under
other current liabilities. The share of income attributable to
minority shareholders of EUR 0k (December 31, 2006:
EUR 309k) was disclosed as part of the financial result in
the income statement.

Minority interests break down as follows:

11.2 Financial Liabilities

(in EUR k)

Minority interests
in equity
As of January 1, 2007
or June 30, 2006
Less withdrawal
As of December 31

Minority interests in
net profit or loss

Dec. 31,
2007

Dec. 31,
2006

0
0
0

0
0

1,550
-102
1,448

309
1,757

(in EUR k)

Loans

Payables to affiliates
Shareholder loans
Other

Total

(in EUR k)

Loans

Payables to affiliates
Shareholder loans
Other

Non-current

Current

Dec. 31, 2007

927,400

8,936

936,336

0
0

927,400

8,936

936,336

Non-current

Current

Dec. 31, 2006

813,466

0
0

1,712

82,447
24

815,178

82,447
24

Total

813,466

84,183

897,649

31,

EUR

940,352k

(December

Nominal
2006:
EUR 819,275k) of the loans are repayable. The carrying
amount takes into account interest liabilities and transaction
costs to be allocated under the effective interest method
upon raising the liabilities. These liabilities relate to a loan
arranged with J.P. Morgan Plc., Natixis Banques Populaires,
German Branch, and HSH Nordbank AG for a nominal
amount of EUR 1,139,800k. EUR 931,416k (December 31,
2006: EUR 655,743k) of this nominal amount had been
drawn as of the balance sheet date. To secure these
liabilities, receivables from rental and property purchase
agreements as well as
insurance receivables and
derivative financial
instruments were assigned to the
lenders, liens were granted on bank accounts and the
registration of land charges was agreed.

Furthermore, a loan totaling EUR 79,492k existed
between Alstria IV. and VII. Hamburgische Grundbesitz

GmbH & Co. KG, respectively, and HSH Nordbank AG,
Hamburg, until
September 28, 2007. Within the
refinancing of Alstria IV. and VII. Hamburgische Grundbesitz
GmbH & Co. KG this
loan has been repaid. The
repayment was funded by additional borrowings from
the syndicated loan amounting to EUR 52,250k and
by operating cash.

The variable interest is payable on a quarterly basis, with
the standard margin and borrowing costs for the market
added to the respective Euribor rate.

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Due to the variable interest rate, there are no significant
differences between the carrying amounts and fair value.
As of December 31, 2007,
loans were reduced by
transaction costs of EUR 4,017k (December 31, 2006:
EUR 4,097k).

The decrease in shareholder loans can be largely attributed
to the refinancing of alstria office REIT-AG, which involved
the reclassification of shareholder loans from Captiva 2
Alstria Holding S.à.r.l. to the capital reserves. Please see
Note 11.1. for further information.

The shareholder loan of EUR 161,820k from NATIXIS
Corporate & Investment Bank was repaid on January 22,
2007.

The carrying amounts of the loans are all denominated
in euros;
liabilities with
the transaction cost approximates their
exception of
nominal value on the balance sheet date.

the fair value of all

financial

The liabilities exposed to an interest rate risk are due
as follows:

11.3 Trade Payables and Other Liabilities

Due

(in EUR k)

Dec. 31,
2007

Dec. 31,
2006

Up to one year
More than one year

0
927,400

0
813,466

Total

927,400

813,466

The following loans are secured by land charges:

(in EUR k)

Dec. 31,
2007

Dec. 31,
2006

Financial liabilities
secured by land charges
thereof on
investment property

927,400

813,466

927,400

813,466

in more

up to
one
year one year

total
than Dec. 31,
2007

(in EUR k)

in more

up to
one
year one year

total
than Dec. 31,
2006

(in EUR k)

Trade payables
Liabilities from the
utilization of services
Other trade
payables

3,068

Other current liabilities
Liabilities to minority
interests
VAT liabilities
Liability for real estate
transfer tax
Miscellaneous
other liabilities

0
194

9,897

9,741

0
0

3,068

0
194

9,897

561

9,797

Trade payables
Liabilities from the
utilization of services 1,979
Other trade
payables

3,384

5,363

Other current liabilities
Liabilities to minority
interests
VAT liabilities
Liability for real estate
transfer tax
Miscellaneous
other liabilities

1,757
155

18,079

4,149

0
0

1,979

3,384

5,363

1,757
155

18,079

56 1

4,205

19,832

56 19,888

24,140

24,196

the interest

Miscellaneous other liabilities include substantially a refund
of running costs 2006 of EUR 1,063k (2006: EUR 0).
item comprises outstanding costs
Furthermore this
in JUNA
resulting from the acquisition of
Property GmbH & Co. KG amounting to EUR 4,895k
(2006: EUR 0). Additionally, management bonuses
amounting to EUR 400k (2006: EUR 20k) and liabilities
resulting from the acquisition of treasury shares amounting
to EUR 409k (2006: EUR 0) are included. Miscellaneous
other liabilities also include costs of the registration of
ownerships in the amount of EUR 686k (2006: EUR 0).

The disclosed carrying amounts approximate the fair values.

Liabilities from the utilization of services did not occur in
2007 ( 2006: EUR 1,979k).

Other trade payables relate to operating costs not yet
invoiced of EUR 2,376k (December 31, 2006: EUR 3,347k)
and liabilities from third-party real estate management
services and rental activities of EUR 692k (December 31,
2006: EUR 37k).

The liabilities for real estate transfer tax result from the
acquisition of Bamler Servicepark and the projects Blue,
HUK and Darwinstraße.

1 This position is shown under Non-Current Liabillities in the

Consolidated Balance Sheet

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11.4 Trust Assets and Liabilities
alstria office REIT-AG has trust assets in the amount of
EUR 3,500k resulting from the provision of securities
relating to the acquisition of Bamler Service Park. Additionally
alstria office REIT-AG has trust
liabilities of EUR 285k
(December 31, 2006: EUR 161k), in particular from rent
deposits.

11.5 Deferred Taxes
Deferred tax assets and liabilities break down as follows:

CONSOLIDATED BALANCE SHEET

(in EUR k)

Dec. 31,
2007

Dec. 31,
2006

11.6 Liabilities of Current Tax
Liabilities of current tax break down as follows:

CONSOLIDATED BALANCE SHEET

(in EUR k)

Liabilities resulting from
final taxation
Liabilities resulting from
taxation of operating
income 2006

Dec. 31,
2007

Dec. 31,
2006

5,072

260

5,332

Deferred income
tax liabilities
Revaluation of investment
property to fair value
Revaluation of a cap to
fair value
Revaluation of interest rate
swaps to fair value
Financial liabilities
(transaction costs)

Deferred income tax assets
Revaluation of investment
property to fair value
Prepaid expenses
(transaction costs)
Shareholder Loan
Tax loss carryforwards

0
0
0

16,044

2,091

1,638

19,869

4,760

30
118
7,605

12,513

For a detailed description of the significant accounting
policies with respect to the taxes please see Note 8. For a
description of the influences on the consolidated income
statement we refer to Note 12.9.

12. Notes to the Consolidated Income Statement
12.1 Revenues
Revenues from investment property chiefly include net
rents from investment property.

(in EUR k)

Revenues from
investment property

Jan. 20 -
2007 Dec. 31, 06

82,552

30,063

12.2 Income From Passed on Operating
Expenses

(in EUR k)

Income from passed
on operating expenses
Income from passed
on operating expenses
prior year

Jan. 20 -
2007 Dec. 31, 06

11,007

5,870

-2,559

8,448

5,870

12.3 Expenses From Passed on Operating
Expenses

12.5 Personnel Expenses

(in EUR k)

Jan. 20 -
2007 Dec. 31, 06

(in EUR k)

Jan. 20 -
2007 Dec. 31, 06

Expenses from passed
on operating expenses
Expenses from passed on
operating expenses prior year 2,873

-11,007

-5,887

-8,134

-5,887

The expenses
from passed on operating expenses
that are directly attributable to investment property
include in particular operating costs, maintenance and
property-based taxes.

Salaries and wages3
Social insurance contribution
Bonuses
Expenses for share-based
compensation (including
7k expenses for share-based
compensation transactions
with compensation by the
use of equity instruments)

1,814
143
762

813

3,532

0 1
0 1
0

12.4 Administrative Expenses

Within the course of 2007 the Company has employed
15 employees on the average (2006: 4).

(in EUR k)

Jan. 20 -
2007 Dec. 31, 06

12.6 Other Operating Income

(in EUR k)

Jan. 20 -
2007 Dec. 31, 06

Compensation
payment (rent)
From the reversal of liabilities
From insurance compensation
Car use
From the exercise of a swaption
Other

227
121
50
25
0
165

0
63
0
0
5,991
63

588

6,117

Income from exercise of a swaption relates to the cash
settlement of an option to conclude a swap.

Legal and consulting fees
IPO expenses
Registration fees
Audit fee
Depreciation
Supervisory Board
Compensation
Communication
Recruitment costs
Travel expenses
Allocation
Other personnel expenses1
Salaries2
Other

4,118
1,402
470
428
348

301
264
208
201
174
0
0
1,337

3,527
0
0
0
0

0
0
397
0
483
22
249
845

9,251

5,523

1 In 2007 shown as personnel expenses.
2 In 2007 shown as personnel expenses.
3 In 2006 the positions are shown as administrative expenses.

We refer to 12.4.

| 86 | alstria Annual Report 2007

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12.7 Other Operating Expenses

(in EUR k)

Jan. 20 -
2007 Dec. 31, 06

Loan charges
Bad debts, bad debt allowance
Other

0
0
5

91
49
27

167

(in EUR k)

Net gain from the fair
value adjustments on
investment property

11,170

22,871

The net gain (2006: loss) from the fair value adjustments
on financial derivatives relates exclusively to derivatives
that do not qualify for hedge accounting. It breaks down
as follows:

12.8 Financial and Valuation Result
The financial result breaks down as follows:

(in EUR k)

Jan. 20 -
2007 Dec. 31, 06

(in EUR k)

Jan. 20 -
Dec. 31, 06

2007

Financial Income

6,184

128

Financial Expenses

-38,683

-23,006

Transaction costs
Commitment fees
Guarantee Fees
Minority interest
Other financial expenses

-876
-796
-504
0
-440

-9,116
0
0
-309
0

-2,616

-9,425

The effect on profit or loss of the fair value measurement of
financial instruments and investment property is as follows:

(in EUR k)

Net gain from the fair
value adjustments on
financial derivatives

Jan. 20 -
2007 Dec. 31, 06

8,086

-730

1 Formerly Alstria Erste Hamburgische Grundbesitz GmbH & Co. KG, Hamburg
2 Formerly JUNA Property GmbH & Co. KG, Hamburg
3 Formerly Alstria IV. Hamburgische Grundbesitz GmbH & Co. KG, Hamburg
4 Formerly Alstria VII. Hamburgische Grundbesitz GmbH & Co. KG, Hamburg

Payer interest rate swap
alstria office REIT-AG 1
EUR 625,000k dated
December 11, 2006
Interest rate swap
alstria office REIT-AG 2
EUR 80,880k dated
January 2, 2006
Cap alstria office REIT-AG 2
EUR 80,880k dated
January 2, 2006
Cap alstria office REIT-AG 3
EUR 41,721k dated
July 20, 2006
Cap alstria office REIT-AG 4
EUR 26,184k dated
July 20, 2006
Cap alstria office REIT-AG
EUR 150,000k dated
December 20, 2007

7,139

-1,201

635

541

560

264

166

-678

-70

Net profit/loss from fair
value adjustments on
financial derivatives

8,086

-730

Jan. 20 -
2007 Dec. 31, 06

Further details on derivatives are shown under Note 10.4
following the order of the table.

12.9 Income Taxes
The tax income/expense breaks down as follows:

(in EUR k)

Jan. 20 -
2007 Dec. 31, 06

Consolidated
income statement
Current income
tax expenses
-5,110
Deferred income tax income 9,788

-3
-4,087

4,678

-4,090

Because of obtaining the G-REIT status alstria office
REIT-AG is subject to final taxation on the effective date of
the transfer into a G-REIT. For a detailed description of the
transformation into a G-REIT, please see note 1. Tax
expenses of EUR 5,110k result from the final taxation and
from the taxation of operating income as by December
31, 2006. alstria office REIT-AG is tax exempted as by
January 1, 2007. Deferred tax liabilities and assets have
tax income of
to be released to income. As a result
EUR 9,788k (2006: loss EUR 4,087) arises. The overall tax
profit of alstria office REIT-AG amounts to EUR 4,678k
in EUR 2007.

This amount considers the release of deferred tax liabilities
and assets as by December 31, 2006 (EUR 7,356k), the
release of deferred tax liabilities and assets that were
booked against
the
shareholder loan (EUR 62k), the acquisition of Alstria Vierte
Hamburgische Grundbesitz GmbH, Hamburg (EUR 438k)
and the acquistition of Alstria Siebte Hamburgische Grund-
besitz GmbH (EUR 2,932k).

surplus because of

the capital

The Group’s tax expense differs from the theoretical
amount calculated by multiplying the Group tax rate of
0 % (2006: 26.375 %) by profit before taxes, as follows:

(in EUR k)

Jan.20 -
2007 Dec. 31, 06

IFRS proﬁt before taxes 48,133

18,623

Tax expense at a tax rate
of 0% (2006: 26.375 %)
Income not subject to tax
(constructive contribution)
Expense not subject to tax
(constructive dividend)
Expense not subject to
tax (interest paid for
shareholder loan)
Loss of the general partners
subject to corporate income
tax for which no deferred
tax assets have been
recognized
Expense not subject to tax
(capital consolidation)
Loss generated by JUNA
Property GmbH & Co. KG
which was not recognized
for tax purposes (deferral)
Release of deferred tax
liabilities and assets
(conversion into G-REIT)
Current taxes result
from final taxation and from
taxation of operating income
as by December 31, 2006

-9,788

5,110

4,912

-1,580

188

370

Income tax expenses

-4,678

4,090

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Deferred Income Tax
For a detailed description of the effect on the consolidated
balance sheet, please see Note 11.5

CONSOLIDATED INCOME STATEMENT

(in EUR k)

2007

Jan. 20-
Dec. 31, 06

13. Other Notes
13.1 Compensation of Management Board and
Supervisory Board
With respect to disclosures according to Sec. 314 par.1
no. 6 HGB (“Handelsgesetzbuch”) and IAS 24.16 we refer
to the Compensation Report attached, which is part of the
Notes to the consolidated financial statements.

18,826

2,152

1,961

-11,465

-1,436

-1,638

23,035

-14,521

Deferred income tax assets
Revaluation of investment
property to fair value
Prepaid expenses
(transaction costs)
Shareholder Loan
Tax loss carryforwards

-30
-180
-7,605

-5,432

2,652

-3
180
7,605

-13,247

10,434

Deferred income tax /
income expense

9,788

-4,087

13.2 Commitments and contingencies
There were no contingent liabilities as of the balance sheet
date. Other financial obligations from ongoing maintenance
amount to EUR 2,000k (2006: EUR 51k as of December 31,
2006,
the
there was
administrative premises).

still no rental agreement

for

Under the purchase agreement dated December 12,
2007, alstria office REIT-AG concluded a purchase
agreement on the acquisition of further properties with a
total value of EUR 105,770k. The transfer of possession,
benefits and burdens is expected to take place in the first
months of 2008.

Under the purchase agreement dated December 17,
2007, alstria office REIT-AG concluded a purchase
agreement on the acquisition of further properties with a
total value of EUR 50,262k. The transfer of possession,
benefits and burdens is expected to take place in the
first months of 2008.

Operating lease commitments - Group as lessor
The Group has entered into commercial property leases
on its investment property portfolio, consisting of the
Group’s surplus office and manufacturing buildings. These

non-cancellable leases have remaining terms of between
5 and 20 years. All
leases include a clause to enable
upward revision of the rental charge on an annual basis
according to prevailing market conditions.

(2006: EUR 1,071,637k) were funded by additional
borrowings and by operating cash. The residual amount
was financed by using the cash and cash equivalents
especially received from the IPO.

Future minimum rentals receivable under non-cancellable
operating leases are as follows:

(in EUR k)

Dec. 31,
2007

Dec. 31,
2006

Within one year
After one year but not
longer than five years
More than five years

89,201

61,895

324,411
952,629

237,354
629,766

1,366,241

929,015

13.3 Consolidated Cash Flow Statement
The cash flow statement shows how the cash and cash
equivalents of the Group changed in the course of the
In
fiscal year as a result of cash received and paid.
accordance with IAS 7, a distinction is made between cash
flows from operating activities and cash flows from
investing and financing activities.

The cash and cash equivalents in the cash flow statement
relate to all cash disclosed in the balance sheet, i.e. cash
on hand and bank balances.

The cash flows from investing and financing activities are
calculated on the basis of payments. Whereas, the cash
flows from operating activities are derived indirectly based
on the consolidated profit for the year. Under the indirect
method, changes to the balance sheet items recognized
in connection with operating activities are adjusted for
effects arising from changes to the consolidated group.

The payments for investing activities (EUR 306,498k)

The repayments of borrowings (EUR 243,262k) (2006:
EUR 625,180k) were financed by additional borrowings,
by operating cash and by using the cash and cash
equivalents especially received from the IPO.

Thus changes to the relevant balance sheet items cannot
always be reconciled to the corresponding amounts from
the published consolidated balance sheet.

14. Related Party Relationships
14.1 Preliminary Remarks
Related parties are members of management of alstria
office REIT-AG (Management Board and Supervisory
these persons.
Board) and close family members of
Related parties also include entities with controlling
influence over the Group and entities with joint control
over or significant influence on alstria office REIT-AG.

Captiva 2 Alstria Holding S.à.r.l.
(parent company),
Captiva Capital Partners II SCA and Captiva Capital II S.à.r.l.
(ultimate parent company) are considered to have a
controlling influence over alstria office REIT-AG. There
was no group of entities with joint control or significant
influence, with which business was conducted in the
fiscal year.

Related parties during the fiscal year also included NATIXIS
Capital Partners Limited and NATIXIS Capital Partners
GmbH.

In the view of alstria office REIT-AG’s management, all
transactions with related parties have been entered into
on arm's length terms or under conditions to alstria office
REIT-AG’s favor.

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14.2 Remuneration of Key Management Personnel
For a detailed description of the remuneration of key
management personnel, please see the compensation
report.

14.3 Related Party Transactions
The following table provides the total amount of transactions
which have been entered into with related parties in 2007:

(in EUR k)

2007

2006

Acquisition of shares in Alstria IV. and VII.
Hamburgische Grundbesitz GmbH & Co. KG (former Verwaltung
Alstria Vierte and Siebte Hamburgische Grundbesitz GmbH)
Total Acquisition of shares in Juna Beteiligungs-GmbH, Frankfurt a.M.
Interest expense shareholder loan alstria office REIT-AG
(including interest expenses former JUNA Beteiligungs GmbH)
Performance guarantees
Service Agreement with Natixis Capital Partners GmbH
Use of office space
Interest expense shareholder loan Alstria IV. Hamburgische
Grundbesitz S.à.r.l. & Co. KG (former Verwaltung Alstria Vierte
Hamburgische Grundbesitz GmbH)
Interest expense shareholder loan Alstria VII. Hamburgische
Grundbesitz S.à.r.l. & Co. KG (former Verwaltung Alstria Siebte
Hamburgische Grundbesitz GmbH)
Laid out expenses EY for Captiva Capital Partners II SCA
Asset Management fees expensed for Alstria IV. and VII. Hamburgische
Grundbesitz GmbH & Co. KG (former Verwaltung Alstria Vierte and
Siebte Hamburgische Grundbesitz GmbH)
Management fees in line with the asset management agreement
of June 1, 2006 (Natixis Capital Partner GmbH). The agreement was
terminated with effect from March 1, 2007
Acquisition of shares in Verwaltung Alstria Sechste GmbH, Hamburg
Interest income for permission loan to Alstria Fünfte Hamburgische
Grundbesitz GmbH & Co. KG
Compensation for liability coverage of Juna Property GmbH & Co. KG liability
Compensation for liability coverage of Alstria Vierte and Siebte
Hamburgische Grundbesitz S.à.r.l. & Co. KG
Shareholder loan (including valuation)
Service Agreement with Natixis Capital Partner Ltd.
Advisory Agreement with Captiva 2 Alstria Holding S.à.r.l.

15,821
1,848

1,206
418
210
71

45
40

27
15

9
2

1
0
0
0

0
0

244
32
0
0

0
0

182
0

0
2

0
82,447
1,332
700

Acquisition of shares in Alstria IV. and VII.
Hamburgische Grundbesitz GmbH & Co. KG
(former Alstria Vierte and Siebte Hamburgische
Grundbesitz GmbH)
alstria acquired from Alstria Hanseatische Grundbesitz
Holding S.à.r.l.
in total 100 % of Alstria IV. and VII.
Hamburgische Grundbesitz GmbH & Co. KG (former
Verwaltung Alstria Vierte and Siebte Hamburgische
Grundbesitz GmbH), for an amount of EUR 15.821k. The
acquisition process was made up as follows:

• During the reporting period, alstria office REIT-AG
acquired a 94% interest in Verwaltung Alstria Vierte
Hamburgische Grundbesitz GmbH, Hamburg, and
Verwaltung Alstria Siebte Hamburgische Grundbesitz
GmbH, Hamburg.

• In addition, Verwaltung Alstria Vierte Hamburgische
Grundbesitz GmbH and Verwaltung Alstria Siebte
Hamburgische Grundbesitz GmbH respectively,
acquired an interest of 1% in Alstria Vierte Hamburgische
Grundbesitz S.à.r.l. & Co. KG, Hamburg, and Alstria
Siebte Hamburgische Grundbesitz S.à.r.l. & Co. KG,
Hamburg, respectively, from its general partner, and
therefore expanded their interests in these companies
to 100%. Thereafter, the general partner withdrew
from the partnerships, and, as a consequence, the
partnerships ceased to exist and the assets and
liabilities were automatically transferred to Verwaltung
Alstria Vierte Hamburgische Grundbesitz GmbH and
Verwaltung Alstria Siebte Hamburgische Grundbesitz
GmbH respectively, in accordance with Sec. 738 BGB
(Anwachsung) with effect as of March 31, 2007.

effective. Thereafter, alstria office REIT-AG acquired the
remaining interest of 6 % in Alstria IV. Hamburgische
Grundbesitz GmbH & Co. KG and Alstria VII.
Hamburgische Grundbesitz GmbH & Co. KG with
effect from June 30, 2007.

Acquisition of shares in Verwaltung Alstria
Sechste GmbH, Hamburg
alstria office REIT-AG acquired a 100 % interest in Verwal-
tung Alstria Sechste Hamburgische Grundbesitz GmbH
from Alstria Hanseatische Grundbesitz Holding S.à.r.l.
effective from April 1, 2007 at a price of EUR 15k.

limited partner’s

interest of Alstria

Acquisition of shares in Alstria Sechste
Hamburgische Grundbesitz GmbH & Co. KG
• With effect as of April 1, 2007 Verwaltung Alstria
Sechste Hamburgische Grundbesitz GmbH transferred
a
Sechste
Hamburgische Grundbesitz S.à.r.l. & Co. KG amounting
to EUR 9,600 to Alstria Hanseatische Grundbesitz
Holding S.à.r.l. and of EUR 10,200 to alstria office
REIT-AG (equals 51 %). Furthermore,
the general
S.à.r.l.
partner Alstria Hanseatische Grundbesitz
transferred its capital contribution of EUR 200 to Alstria
Hanseatische Grundbesitz Holding S.à.r.l. Regarding
the transfers of these interests no purchase prices were
paid since the capital contribution is still outstanding
and the net asset value of the KG amounts to EUR 0.

• By shareholder’s resolution of Alstria Sechste Hambur-
gische Grundbesitz S.à.r.l. & Co. KG dated April 1,
2007, Verwaltung Alstria Sechste Hamburgische
Grundbesitz GmbH joined Alstria Sechste Hamburgi-
sche Grundbesitz S.à.r.l. & Co. KG as general partner
without capital contribution and without participation
in losses and profits of the KG. At the same time Alstria
Sechste Hamburgische Grundbesitz S.à.r.l. & Co. KG
was renamed to Alstria Sechste Hamburgische Grund-
besitz GmbH & Co. KG.

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Acquisition of Shares in JUNA Property
GmbH & Co. KG
alstria office REIT-AG acquired 100 % of JUNA Beteiligungs
GmbH, Frankfurt am Main, from Captiva 2 JUNA Holding
S.à.r.l. The transaction was notarized on July 30, 2007.
JUNA Beteiligungs GmbH holds a 5.1 % share in JUNA
the
Property GmbH & Co. KG, Frankfurt am Main,
company holding the Barmer Portfolio. The purchase
price was EUR 1,848k. With the pay off of the minority
shareholders alstria office REIT-AG now, directly and
indirectly, owns 100 % of JUNA Property GmbH & Co. KG.

Shareholder Loan
On November 23, 2006, Alstria Office AG entered into a
loan agreement with Captiva 2 Alstria Holding S.à.r.l.
pursuant
to which Captiva 2 Alstria Holding S.à.r.l.
granted a loan in the amount of EUR 155.000k to Alstria
Office AG. The loan is unsecured and bears from January 1,
2007 an interest rate of 5.4125 % p.a. According to the
conditions of the agreement the loan was to be repaid on
the date of the initial public offering for shares in alstria
office REIT-AG.

By shareholder resolution of Captiva 2 Alstria Holding
S.à.r.l. dated December 14, 2006, EUR 73,000k of the
repayable amount was booked in the capital surplus of
the Company. In the course of a capital increase effective
March 9, 2007 further EUR 32,000k of the loan have been
allocated to the Company’s equity. By shareholder resolution
dated March 15, 2007 Captiva 2 Alstria Holding S.à.r.l.
increased the shareholder loan by EUR 54,500k. Together
with the EUR 50,000k still outstanding the shareholder
loan amounted to EUR 104,500k plus accrued interests.
With shareholder resolution of the same day the total loan
amount has been allocated to the capital surplus at the
first trading day of alstria’s stock (April 3, 2007). Thus at
April 3, 2007 no obligations out of the loan existed against
Captiva 2 Alstria Holding S.à.r.l. any more.

Transactions with Parties Related to Members of
the supervisory board

Advisory Agreement with NATIXIS Capital
Partners Limited terminated on June 30, 2007
John van Oost, the chairman of the Supervisory Board, is
a managing partner of NATIXIS Capital Partners Limited
and Daniel Quai, a member of the Supervisory Board, is
employed at NATIXIS Capital Partners Ltd. and is a
managing director of NATIXIS Capital Partners GmbH.
alstria office REIT-AG concluded an advisory agreement
with NATIXIS Capital Partners Limited. Pursuant to this
agreement, NATIXIS Capital Partners Limited assisted the
Company in identifying potential acquisition opportunities
relating to real estate assets in Germany, drafting proposals
to and approaching potential sellers, coordination of due
diligence processes, coordination with the Company's
other advisors in defining the appropriate consideration,
structure and other financial terms for acquisitions of real
estate, negotiations with sellers and development of
related strategies and completion of acquisitions.

The services could be performed by NATIXIS Capital
Partners Limited itself or by other entities affiliated to it.
The term of the agreement is from February 1, 2006 until
June 30, 2007. NATIXIS Capital Partners Limited received
a success fee based on the transaction volume of real
estate acquisitions completed by alstria office REIT-AG. The
Company also agreed to indemnify and hold harmless
Limited and any person
NATIXIS Capital Partners
performing the services from and against any and all
actions, proceedings, claims, demands, losses, liabilities,
damages, costs, charges and expenses in relation with the
services performed and not arising primarily from such
person's gross negligence or willful misconduct.

Service Agreement with Natixis Capital
Partners GmbH (expired on June 30, 2007)
On March 16, 2007 Natixis Capital Partners GmbH and
the Company entered into a service agreement under
which Natixis Capital Partners GmbH shall assist
the
Company in accounting, finance and working capital
the Company’s
matters and shall make available, at
request, two duly qualified and competent professionals
who shall assist the Company within the scope of the
engagement at the premises of the Company. The services
can also be rendered by an affiliate of Natixis Capital
Partners GmbH at its discretion, provided that any entity or
person rendering services agree to confidentiality of the
matters of the Company. The agreement has a term of
three months, commencing March 15, 2007 and the
Company has a recurring option to request an extension
of such term provided that the maximum term of the
agreement must not exceed six months. The Company
has the right to terminate the agreement at any time upon
15 days prior written notice to the other party, while
Natixis Capital Partners GmbH is only entitled to terminate
the agreement for good cause. The agreement provides
for a monthly fee of EUR 60k flat (plus any VAT) provided
that if the agreement terminates during a month such fee
shall only be payable pro rata temporis. In addition, the
Company must reimburse Natixis Capital Partners GmbH
for all reasonable costs and expenses incurred, including
travel expenses and expenses,
in connection with
the agreement.

Asset Management Agreement with
NATIXIS Capital Partners GmbH
(terminated on March 1, 2007)
JUNA Property GmbH & Co. entered into an asset
management agreement with NATIXIS Capital Partners
GmbH, a subsidiary of NATIXIS Capital Partners Limited as
of June 1, 2006, regarding asset management services for
the real estate properties comprised by the Barmer
Portfolio.

Payment to NATIXIS Capital Partners GmbH for the services
provided to JUNA Property GmbH & Co. KG was EUR 27k
in 2007.

Use of Office Space
For its head office in Hamburg, alstria office REIT-AG uses
office space that is let by NATIXIS Capital Partners GmbH
under a lease agreement with HIH. NATIXIS Capital
Partners GmbH has indicated that it might assign the lease
agreement to alstria office REIT-AG subject to the consent
of the lessor. So far, alstria office REIT-AG has reimbursed
NATIXIS Capital Partners GmbH on an at-cost basis for the
use of office space. Expenses amounted to EUR 60k for
2007 and EUR 11k for 2006.

Advisory Agreement with Captiva 2 Alstria
Holding S.à.r.l. (terminated on March 5, 2007)
The Company and the Captiva 2 Alstria Holding S.à.r.l.
entered into an advisory agreement relating to financial
and strategic advice. According to the terms of
this
agreement, the Captiva 2 Alstria Holding S.à.r.l. assisted
the Company in the areas of capital structure, arranging
and assisting with the closing and funding process. In
addition, the Captiva 2 Alstria Holding S.à.r.l. advised on
strategy and related matters and assisted in other areas
upon the Company's request. The original term of the
agreement was from June 30, 2006 until June 30, 2007.
As consideration, the Captiva 2 Alstria Holding S.à.r.l.
received a lump sum payment of EUR 700k and had to
be reimbursed for all reasonable costs and expenses. The
Company also agreed to indemnify and hold harmless
the Captiva 2 Alstria Holding S.à.r.l. and any person
performing the services from and against any and all
actions, proceedings, claims, demands, losses, liabilities,
damages, costs, charges and expenses in relation with the
services performed and not arising primarily from such
person's gross negligence or willful misconduct. With
contract dated February 16, 2007 this agreement was
terminated effective March 5, 2007.

| 94 | alstria Annual Report 2007

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Performance Guarantees
Captiva Capital Partners II SCA has granted a number of
payment guarantees for the benefit of NATIXIS Corporate
& Investment Bank, S.A. in relation to the Company’s
obligation arising from transaction with respect to the
acquisition of real estate properties. Generally, the seller
real estate property demands a performance
of
guarantee from a bank for the period from signing of the
sale-and-purchase agreement until payment of
the
purchase price. NATIXIS Corporate & Investment Bank, S.A.
has issued such performance guarantees for the benefit
of
the respective sellers regarding sale-and-purchase
agreements concluded by alstria office REIT-AG. Captiva
Capital Partners II SCA has arranged the issuance of such
performance guarantees and may be liable for any
amounts paid by NATIXIS Corporate & Investment Bank,
S.A. to the respective purchaser under such performance
guarantees. Captiva Capital Partners II SCA is entitled to
receive a guarantee fee from alstria office REIT-AG. In 2007
alstria office REIT-AG paid to Captiva Capital Partners II SCA
guarantee fees amounting to EUR 418k.

Loan Agreement with Alstria Fünfte
Hamburgische Grundbesitz GmbH & Co. KG
Dated September 21, 2007 alstria
and
(lender)
Alstria Fünfte Hamburgische Grundbesitz GmbH & Co. KG,
term loan
Hamburg (Borrower), entered into a short
agreement. The credit facility was EUR 1,250k, with an
interest rate of 5.8%. The loan was drawn to EUR 1,200k
and repaid on November 7, 2007. For the interest period
Alstria Fünfte Hamburgische Grundbesitz GmbH & Co. KG
received interest payments of EUR 9k .

15. Earnings per Share
Basic earnings per share are calculated as the quotient of
the profit attributable to the shareholders and the
weighted average number of shares outstanding during
the fiscal year - except for the average number of treasury
shares held by the Company itself.

Diluted earnings per share amounts are calculated by
dividing the profit attributable to ordinary equity holders
of
the parent by the weighted average number of
ordinary shares outstanding during the year - except for
the treasury shares held by the Company itself - plus the
weighted average number of ordinary shares that would
be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.

The following reflects the income and share data used in
the earnings per share computations:

Profit attributable to
the shareholders
(in EUR k)
Average number of
shares outstanding
(in thousands)

2007

2006

52,811

14,533

46,082

1,042

Basic earnings per share
(in EUR per share)

1.15

13.95

There were no dilution effects resulting from the granted
stock options or the convertible profit participation rights
during the period under review as the related contingencies
were not achieved as of the balance sheet date.

For further information concerning granted stock option
and convertible profit participation rights we refer to the
compensation report respectively section 18.

There have been no other transactions involving ordinary
shares or potential ordinary shares between the reporting
date and the date of completion of
these financial
statements.

alstria is authorised to issue up to EUR 20,000 k shares as
conditional capital. These contingently issuable shares
could potentially dilute basic earnings per share in the
included in the calculation of
future, but were not
diluted earnings per share because they are antidilutive
for the period presented.

the details of the convertible profit participation rights
program in accordance with an authorization granted by
the general meeting of shareholders of March 15, 2007.

The main terms of the program resolved by the supervisory
board can be summarized as follows:

16. Dividends Proposed
Proposed for approval at annual general meeting
(not recognized as a liability as of December 31):

(in EUR k)

2007

2006

Equity dividends on
ordinary shares
Dividend per share
(without treasury shares)

28,400

0.5133

17. Employees
During the period from January 1, 2007 to December 31,
2007, on an average 15 employees (January 20, 2006 to
December 31, 2006: on an average 4 employees) were
employed at the Company. The average was calculated
by the fourth part of the total of employed people at the
end of each quarter. On December 31, 2007, 20 people
(December 31, 2006: 4 people) were employed at alstria
office REIT-AG, excluding the management board.

18. Convertible Profit Participation
Rights Program
On September 5, 2007 the supervisory board of
the
Company resolved the issuance of Convertible Profit
Participation Certificates (“certificates”) to employees of the
Company and to employees of companies in which alstria
office REIT-AG, directly or indirectly, holds a majority
interest. Members of alstria office REIT-AG’s management
board are not considered employees of the Company in
terms of
this convertible profit participation rights
program. With its resolution, the supervisory board fixed

The nominal amount of each certificate is EUR 1.00 and is
payable upon issuance. Under the program, a maximum
of 500,000.00 certificates in an aggregate nominal
amount of up to EUR 500,000.00 may be issued. 3,600
certificates were issued on September 6, 2007.

The certificates are issued as non transferable rights. The
sellable nor pledgeable or
certificates are neither
otherwise chargeable.

The maximum term of each certificate is five years.

During its term, each certificate entitles to a preferred
disbursement from the Company’s annual net profit. The
profit share corresponds to the dividend per share of the
Company for a full business year of the Company. For
certificates held by a beneficiary for less than a full
business year of the Company, the profit share is reduced
pro rata temporis.

Each certificate shall be converted into one non-par value
bearer share of the Company on the second, third, fourth
or fifth anniversary date of the issue date if the then
current stock exchange price of the Company’s shares has
exceeded the stock exchange price of the Company’s
shares on the issue date by 5 % or more on at least seven
non subsequent trading days.

Upon conversion of a certificate, the beneficiary shall pay
an additional conversion price to the Company for each
certificate to be converted. The conversion price shall be
the aggregate proportionate amount in the Company’s
the shares each certificate entitles to
share capital of

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19. Financial Risk Management
The financial
instruments chiefly used by the Group are
bank loans and derivative financial instruments. The main
purpose of the bank loans is to finance the business
activities of alstria office REIT-AG. The Company also has
various financial assets, such as cash and short-term
deposits, which arise directly from business activities
.
Derivative financial instruments include interest swaps and
caps. The purpose of these derivative financial instruments
is to hedge against interest risks arising from the Company’s
business activities and its sources of financing.

The main risks arising from the Group’s
financial
instruments are cash flow interest rate risks and liquidity
risks. The Group is not exposed to any significant credit
risks. The management board decides on strategies and
processes for managing specific risk types. These are
presented below.

Interest Rate Risk
The following table sets out the carrying amount, by
maturity, of the Group’s financial
instruments that are
exposed to interest rate risk:

FISCAL YEAR AS AT DECEMBER 31ST, 2007

< 1 year
EUR k

1- 2 years
EUR k

2-3 years
EUR k

3-4 years
EUR k

>4 years
EUR k

Total
EUR k

Variable interest
Loan facility of EUR 1,139,800k

927,400

FISCAL YEAR AS AT DECEMBER 31ST, 2006

< 1 year
EUR k

1- 2 years
EUR k

2-3 years
EUR k

3-4 years
EUR k

>4 years
EUR k

Total
EUR k

Variable interest
Loan facility of EUR 1,139,800k

813,466

subscribe for and shall be payable in addition to the
offer price.

The management board, subject to the approval of the
supervisory board, shall be entitled to amend the program
at any time. This also applies to the administration of
certificates which have already been issued provided that
such amendment does not affect the commercial value of
the certificates and/or a respective compensation is paid.

The fair values of the inherent options for conversion were
estimated at the respective granting dates using a binary
barrier option model based on the black-scholes-
assumptions
since the conversion will be affected
automatically once the barrier has been reached. The
model takes into account the terms and conditions upon
which the instruments were granted.

The following table lists the inputs to the model used for
the determination of the fair value of the options for
conversion granted on September 6, 2007:

The estimated fair value of one option for conversion at
the granteing date was EUR 10.77.

Dividend yield (%)
Risk-free interest rate (%)
Expected volatility (%)
Expected life of option (years)
Exercise share price (EUR)
Labor turnover rate (%)
Stock price as of valuation date (EUR)

3.70
4.20
30.00
2.00
1.00
10
13.18

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Due to the extensive portfolio of non-current financial lia-
bilities with a variable interest risk, alstria office REIT-AG is
exposed to risks from fluctuations in market interest rates.
liability (loan) is the
The interest base for the financial
3-month EURIBOR, which is adjusted every three months.
A number of different derivative financial instruments were
acquired to manage the interest expense. The derivative
financial instruments relate to interest swaps in which the
Company agrees to exchange with contracting partners,
at specified intervals, the difference between fixed and
variable interest rate amounts calculated by reference to
an agreed-upon notional principal amount. In addition,
interest caps were acquired; here the interest is capped at
a set maximum. If the maximum interest rate is exceeded,
interest rate and the
the difference between the actual
cap rate is paid out. The derivative financial instruments of
alstria office REIT-AG are presented below:

These interest swaps and interest caps are used to hedge
the obligation underlying the loans.

The following table shows the sensitivity of consolidated
profit or loss to a reasonably possible change in the
interest rates (due to the effect on the floating interest
loans). All variables remain constant, the effects from the
derivative financial instruments were not factored into the
calculation. Consolidated equity is not affected.

(in EUR k)

2007

2006

+80 basis points
-100 basis points

5,714
- 7,143

423
- 528

Product Strike p.a.

Notional

Maturity
Date

Carrying Amount
2006
2007

Fair Value

2007

2006

Cap
Cap
Swap
Swap
Cap
Cap

Total

3.8000%
3.8000%
3.6165%
3.1925%
4.0000%
4.9000%

41,720,700
26,184,540
625,000,000
80,880,000
80,880,000
150,000,000

31.03.2011
31.03.2011
29.11.2011
29.11.2011
29.11.2011
20.12.2012

961,194
603,260
18,939,326
3,760,776
1,811,391
1,125,871

na
na
10,429,881
2,985,671
1,147,246
na

961,194
603,260
18,939,326
3,760,776
1,811,391
1,125,871

na
na
10,429,881
2,985,671
1,147,246
na

27,201,818 14,562,798 27,201,818 14,562,798

Liquidity Risk
The Company continually monitors the risk of potential
liquidity bottlenecks using a liquidity planning tool,
which uses the expected cash flows from business
activities and the maturity of the financial
investments
as a basis for analysis.

FISCAL YEAR AS AT DECEMBER 31, 2007

the balance sheet date,

As of
financial
liabilities had the following maturities in line with their
contractual maturity (basis is the 3-month EURIBOR as of
December 31, 2007 plus 60 basispoints).

the nominal

< 1 year
EUR k

1- 2 years
EUR k

2-3 years
EUR k

3-4 years
EUR k

>4 years
EUR k

Total
EUR k

Interests
Loans
Financial Derivatives
Trade payables
Other Liabilites

57,940

48,868

-
3,068
25,164

-
-
-

44,648
927,400
-
-
-

86,172

48,868

972,048

-
-
-

200,324
927,400
-
3,068
25,164

1,155,956

FISCAL YEAR AS AT DECEMBER 31, 2006

< 1 year
EUR k

1- 2 years
EUR k

2-3 years
EUR k

3-4 years
EUR k

>4 years
EUR k

Total
EUR k

Interests
Loans
Financial Derivatives
Trade payables
Other Liabilites

48,922
82,471
134
5,363
24,140

42,984

42,864

-
-
-

39,163
813,466
-
-
-

216,797
895,937
134
5,363
24,140

161,030

42,984

42,864

852,629

1,142,371

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As of December 31, 2007, EUR 936,336k was
outstanding on the financial
liabilities (December 31,
2006: EUR 897,649k). The carrying amount takes into
liabilities and transaction costs to be
account
allocated under the effective interest method upon raising
the liabilities.

interest

The most significant liability is a syndicated loan from J.P.
Morgan Plc., Natixis and HSH Nordbank AG for a nominal
EUR 1,139,800k. EUR 931,416k of this nominal amount
the balance sheet date
had been utilized as of
(December 31, 2006: EUR 655,743k). To secure these
liabilities, receivables from rental and property purchase
agreements as well as
insurance receivables and
instruments were assigned to the
derivative financial
lenders, liens were granted on bank accounts and the
registration of land charges was agreed. The obligations
arising from the floating interest bank loans were fully
secured. Land charges with a carrying amount of
EUR 1,235,565k were furnished as security.

Capital Management
Capital management activities are aimed at maintaining
the Company’s classification as a REIT in order to support
its business activities and maximize shareholder value.

The capital structure is monitored by the Company using
the KPIs relevant for classification as a REIT. The REIT equity
ratio, being the ratio of equity to investment property, is
the most
important Key Performance Indicators (KPI).
According to the Group’s strategy, the REIT equity ratio
must be between 45 % and 55 %. The following KPIs are
also used to manage capital:

KPIS ACCORDING TO G-REIT LAW

(in %)

Equity Ratio acc. G-REIT law
Investment properties
Revenues from investment properties
Income from disposal of investment properties

2007

51.4 %
92.3 %
100 %
0.25 %

2006

Guideline

30.8 %
95,9 %
100 %
-

> 45 %
> 75 %
> 75 %
< 50 % 1

1 Within five years based on the average property value during this periode

20. Financial Instruments
Fair Value
The following table shows the carrying amount and
instruments disclosed in the
fair value of all
consolidated financial statements.

financial

DECEMBER 31, 2007

Assets as
per balance
sheet in EUR k

Loans and
receivables

Assets at fair
value through the
profit and loss

Derrivates
used for
hedging

Available
for sale

Total

Available-for-sale
financial assets
Derivative financial
instruments
Trade and other
receivables
Cash and cash
equivalents

7,685

103,036

Total

110,721

DECEMBER 31, 2007

27,202

7,685

103,036

137,923

Liabillities as
per balance
sheet in EUR k

Liabillities at fair
value through
the profit and loss

Derrivates
used for
hedging

Other
financial
liabillities

Total

Borrowings
Derivative financial instruments

Total

-
-

936,336
-

936,336

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DECEMBER 31, 2006

Assets as
per balance
sheet in EUR k

Loans and
receivables

Assets at fair
value through the
profit and loss

Derrivates
used for
hedging

Available
for sale

Total

Available-for-sale
financial assets
Derivative financial
instruments
Trade and other
receivables
Cash and cash
equivalents

Total

3,760

24,304

28.064

DECEMBER 31, 2006

14,563

3,760

24,304

42,627

Liabillities as
per balance
sheet in EUR k

Liabillities at fair
value through
the profit and loss

Derrivates
used for
hedging

Other
financial
liabillities

Total

Borrowings
Derivative financial instruments

Total

-
-

897,649
-

897,649

instruments and
The fair value of the derivative financial
the loans was determined by an independent expert by

discounting the expected future cash flows at prevailing
market interest rates.

Interest Rate Risk
The fair market value of derivative financial instruments is
also subject to interest rate risks. A change in the interest
rate would give rise to the following changes of the
respective fair market values:

22. Utilization of Exempting Provisions
The following German subsidiaries
included in the
consolidated financial statements of alstria office REIT-AG
the exemption granted in Sec.
have made use of
264b HGB:

(in EUR k)

2007

2006

• Alstria Sechste Hamburgische Grundbesitz GmbH

& Co. KG, Hamburg

• Alstria IV. Hamburgische Grundbesitz GmbH & Co.

KG, Hamburg

• Alstria VII. Hamburgische Grundbesitz GmbH & Co.

KG, Hamburg

+80 basis points
-100 basis points

6,568
- 7,456

555
- 695

21. Significant Events after the End of the
Reporting Period
alstria office REIT-AG and HSH Nordbank AG entered into
a swap agreement with a nominal value of EUR 100,000k
effective July 10, 2008, which serves to hedge interest
rate risks. The swap expires on July 10, 2013.

As to the acquisition of investment property expected in
the first month of 2008 we refer to Note 10.1.

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23. Disclosures Pursuant to Wertpapierhandels-
gesetz [German Securities Trading Act]

1. AD-HOC ANNOUNCEMENTS

Date

27.03.2007
28.03.2007

03.04.2007
11.10.2007
06.11.2007
12.12.2007

Topic

Language

alstria announces offer price range
Extraordinary general meeting of shareholders
established framework for conversion into G-REIT
alstria sets offer price and placement size
Registration as REIT-stock corporation
Buy back of own shares
alstria office REIT-AG: agrees on the acquisition of a
German office real estate portfolio

English / German

English / German
English / German
English / German
English / German

English / German

The following transactions were executed in 2007 and
reported to alstria:

DIRECTORS’ DEALINGS IN 2007

Name of the Board Member
Function
Classification of the share

Olivier Elamine
Member of the Management Board
Share

ISIN

Place

Transaction

Transaction
Date

Price Per
share in EUR

Number
of Shares

Deal
Volume

DE000A0LD2U1
DE000A0LD2U1
DE000A0LD2U1
DE000A0LD2U1
DE000A0LD2U1

Xetra
Xetra
Xetra
Xetra
Xetra

Purchase
Purchase
Purchase
Purchase
Purchase

25.07.2007
10.08.2007
14.08.2007
19.10.2007
21.11.2007

13.89
13.20
12.22
12.75
10.48

2,650
1,200
1,200
2,000
1,000

36,808.5
15,840
14,664
25,500
10,480

VOTING RIGHTS NOTIFICATIONS

No.

Date

Shareholders Voting
rights
(new)

Strike
threshold

Date of Additional Disclosure Language
Change

13.04.07

Cohen & Steers
Capital
Management
Inc.
Cohen & Steers
Inc.
Captiva Capital
Partners
II SCA
Captiva 2 Alstria
Holding S.à.r.l.
13.04.07 Captiva Capital II
S.à.r.l.
Deutsche
Bank AG

13.04.07

3a 13.04.07

3b 13.04.07

13.04.07

Union
Investment
Privatfonds
GmbH
JPMorgan
Chase & Co.

13.04.07

JPMorgan
Chase Bank

13.04.07

JPMorgan
International
Inc.

3,67 %

3 %

03.04.07

§ 26 (1)
WpHG

German

4,73 %

3 %

03.04.07

71,43 %

n/a

02.04.07

71,43 %

n/a

02.04.07

71,43 %

n/a

02.04.07

10,00 %

n/a

02.04.07

0,00 %

4,29 %

10%, 5 %,
3 %
3 %

05.04.07

17,14 %

n/a

02.04.07

24,10 %
0,33 %

17,14 %

20 %
20%, 15 %,
10 %, 5 %, 3 %
n/a

23,82 %
0,05 %

17,14 %

23,82 %
0,05 %

20 %
20%, 15 %,
10 %, 5 %, 3 %
n/a

20 %
20%, 15 %,
10 %, 5 %, 3 %

03.04.07
05.04.07

02.04.07

03.04.07
05.04.07

02.04.07

03.04.07
05.04.07

§ 26 (1)
WpHG
§ 26 (1)
WpHG

§ 26 (1)
WpHG
§ 26 (1)
WpHG
§ 26 (1)
WpHG
§ 26 (1)
WpHG
§ 26 (1)
WpHG

German

§ 26 (1)
WpHG

Engl

§ 26 (1)
WpHG

Engl

§ 26 (1)
WpHG

Engl

yes

yes
yes

yes

yes
yes

yes

yes
yes

| 106 | alstria Annual Report 2007

alstria Annual Report 2007 | 107 |

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> Valuation Report

> List of all Properties

No.

Date

Shareholders Voting
rights
(new)

Strike
threshold

Date of Additional Disclosure Language
Change

No.

Date

Shareholders Voting
rights
(new)

Strike
threshold

Date of Additional Disclosure Language
Change

17,14 %

n/a

02.04.07

10 13.04.07

11 13.04.07

Bank One
International
Holdings
Corporation

J.P. Morgan
International
Finance Limited

12 13.04.07

13 13.04.07

J.P. Morgan
Capital
Holdings
Limited

J.P. Morgan
Chase (UK)
Holdings
Limited

14 13.04.07

J.P. Morgan
Chase International
Holdings

15 13.04.07

J.P. Morgan
Securities Ltd.

16 16.04.07

17 16.04.07

Bank One
International
Holdings
Corporation
J.P. Morgan
International
Finance Limited

23,82 %
0,05 %

17,14 %

20 %
20%, 15 %,
10 %, 5 %, 3 %
n/a

23,82 %
0,05 %

17,14 %

23,82 %
0,00 %

17,14 %

23,82 %
0,00 %

17,14 %

23,82 %
0,00 %

17,14 %

23,82 %
0,00 %

n/a

20 %
20%, 15 %,
10 %, 5 %, 3 %
n/a

20 %
20%, 15 %,
10 %,5 %, 3 %
n/a

20 %
20%, 15 %,
10 %, 5 %, 3 %
n/a

20 %
20%, 15 %,
10 %, 5 %, 3 %
25 %
exceeded
and fell below

n/a

25 %
exceeded
and fell below

03.04.07
05.04.07

02.04.07

03.04.07
05.04.07

02.04.07

03.04.07
05.04.07

02.04.07

03.04.07
05.04.07

02.04.07

03.04.07
05.04.07

02.04.07

03.04.07
05.04.07

30.03.07

yes

yes
yes

yes

yes
yes

yes

yes
yes

yes

yes
yes

yes

yes
yes

no
no

yes

§ 26 (1)
WpHG

Engl

§ 26 (1)
WpHG

Eng

§ 26 (1)
WpHG

Engl

§ 26 (1)
WpHG

Engl

§ 26 (1)
WpHG

Engl.

§ 26 (1)
WpHG

Engl.

§ 20 (6)
AktG

German

30.03.07

yes

§ 20 (6)
AktG

German

18 16.04.07

JPMorgan
Chase & Co

19 16.04.07

20 16.04.07

21 16.04.07

J.P. Morgan
Chase
International
Holdings
J.P. Morgan
Capital Holdings
Limited
JPMorgan
Chase Bank

22 16.04.07

J.P. Morgan
Securities Ltd.

23 16.04.07

24 16.04.07

25 30.05.07

26 24.07.07

27 18.09.07

28 18.09.07

29 18.09.07

J.P. Morgan
Chase (UK)
Holdings Limited
JPMorgan
International
Inc.
Cohen & Steers
Inc.
Union
Investment
Privatfonds
GmbH
CCT Corporate
Nominees
Limited
Captiva
Alstria
S.à.r.l.
Captiva
Alstria 1
S.à.rl.

n/a

25 %
exceeded
and fell below
25 %
exceeded
and fell below

30.03.07

yes

30.03.07

yes

30.03.07

yes

30.03.07

yes

30.03.07

yes

30.03.07

yes

n/a

5,174 %

25 %
exceeded
and fell below
25 %
exceeded
and fell below
25 %
exceeded
and fell below
25 %
exceeded
and fell below
25 %
exceeded
and fell below
5 %

1,83 %

3 %

20.07.07

23.05.07

yes

§ 20 (6)
AktG

§ 26 (1)
WpHG
§ 26 (1)
WpHG

German

48,9 %

9,78 %

3%, 5 %,
10 %, 15 %,
20 %, 30 %
3%, 5 %

14.09.07

yes

9,78 %

3%, 5 %

14.09.07

yes

§ 26 (1)
WpHG

Engl.

§ 26 (1)
WpHG

German
(Engl.)

§ 26 (1)
WpHG

German
(Engl.)

| 108 | alstria Annual Report 2007

alstria Annual Report 2007 | 109 |

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No.

Date

Shareholders Voting
rights
(new)

Strike
threshold

Date of Additional Disclosure Language
Change

30 18.09.07

31 18.09.07

32 18.09.07

Captiva
Alstria 2
S.à.rl.
Captiva
Alstria 3
S.à.rl.
Captiva
Alstria 4
S.à.rl.

9,78 %

3%, 5 %

14.09.07

yes

9,78 %

3%, 5 %

14.09.07

yes

9,78 %

3%, 5 %

14.09.07

yes

33 10.10.07

Cohen & 4,813 %

5 %

02.10.07

yes

34 21.11.07

35a 29.11.07

35b 05.12.07

Steers Inc.
Stanley
Morgan
Investment
Management
Limited
Stichting
Pensioenenfonds
ABP
Stichting
Pensioenenfonds
ABP

36 17.01.08 Morgan Stanley
Investment
Management
Limited

5,03 %

5 %

20.11.07

3,02 %

3 %

21.11.07

3,02 %

3 %

21.09.07

4,83 %

5 %

14.01.08

§ 26 (1)
WpHG

German
(Engl.)

§ 26 (1)
WpHG

German
(Engl.)

§ 26 (1)
WpHG

German
(Engl.)

§ 26 (1)
WpHG

German
(Engl.)

§ 26 (1)
WpHG

German
(Engl.)

§ 26 (1)
WpHG

German
(Engl.)

Correction
of the
notification
of 29.11.07
§ 26 (1)
WpHG
§ 26 (1)
WpHG

German
(Engl.)

Dr. Michael Börner-Kleindienst
Chief Operating Officer (COO)
from March 1, 2007
until October 31, 2007

Dr. Robert Hannemann
Chief Financial Officier (CFO)
until February 1, 2007

The attached compensation report contains details of the
principles for the definition of the Management Board and
Supervisory Board remuneration.

27. Supervisory Board
Pursuant to the Company’s articles of association (section
9), the supervisory board consists of six members, which
are elected by the general meeting of shareholders. With
the extraordinary general meeting of
resolution of
January 16, 2007, having become
shareholders of
effective on February 15, 2007, the number of members
of the supervisory board was increased from three to six.
The expiration of the term of office is identical
for all
members, i.e., the close of the annual general meeting of
shareholders in the year 2011.

24. Declaration of Compliance Pursuant to
Sec. 161 AktG [“Aktiengesetz”: German
Stock Corporation Act]
The declaration of compliance required by Sec. 161 AktG
regarding the recommendations of the German Corporate
Governance Code developed by
the government
commission has been submitted by the management
board and the supervisory board and has been made
permanently available to the shareholders on alstria office
REIT-AG’s website (www.alstria.de).

25. Auditor’s Fees
On March 15, 2007, the shareholder meeting elected
PricewaterhouseCoopers AG Wirtschaftsprüfungsgesell-
schaft, Lise-Meitner-Straße 1, Berlin, to audit the separate
and consolidated financial statements for
fiscal year
2007.The fee expenses in 2007 comprise as follows:

(in EUR k)

Audit services
Other audit-related services
Tax advisory services
Other services

2007

419
0
30
504

26. Management Board
During the fiscal year the Company’s general managers
were:

Mr. Olivier Elamine
Chief Executive Officer (CEO)

Mr. Alexander Dexne
Chief Financial Officier (CFO)
since June 1, 2007

| 110 | alstria Annual Report 2007

alstria Annual Report 2007 | 111 |

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During the fiscal year 2007 the members of
supervisory board were:

the

Mr. Alexander Stuhlmann (Chairman)

Hamburg
West LB AG
Berlin-Brandenburg Media GmbH
BVV Pensionsfonds des Bankgewerbes AG
BVV Versicherungsverein des Bankgewerbes a.G.
BVV Versorgungskasse des Bankgewerbes e.V.

DekaBank Deutsche Girozentrale
Deutsche Hypothekenbank AG
Frank Beteiligungsgesellschaft mbH

CEO
Member of the Advisory Board
Member of the Supervisory Boards
Member of the Supervisory Boards
Member of the Supervisory Boards
Capital Stage AG Vice-Chairman of the Supervisory Board
Member of the Administrative Board
Chairman of the Supervisory Board
Member of the Advisory Board
Hamburger Feuerkasse AG Vice-Chairman of the Supervisory Board
HCI Capital AG Vice-Chairman of the Supervisory Board
Member of the trustees board
Member of the Supervisory Board
Member of the Supervisory Board
Member of the Supervisory Board
Vice-Chairman of the Advisory Board
Member of the Supervisory Board

Mr. John van Oost (Vice-Chairman)

HSBA Hamburg School of Business Administration GmbH
HSH Real Estate AG
LBS Bausparkasse Hamburg AG
LBS Bausparkasse Schleswig-Holstein-Hamburg AG
Siedlungsgesellschaft Hermann + Paul Frank mbH & Co. KG
Stiftung Schloss Neuhardenburg GmbH
Hamburg
NATIXIS Capital Partners Ltd.
Arman Amberley SaRL
Arman Mentelle SaRL
Arman Plantagenet BV
Arman Voyager SPRL
Axiom Asset 1 GmbH & Co. KG
Axiom Asset 2 GmbH & Co. KG
Axiom Immo Management GmbH
Captiva Capital Management SaRL
Captiva Healthcare Holding GmbH
Captiva Industrial GP GmbH
Captiva Industrial Holding GmbH
Express Holding Srl
Green Cove Capital Management SaRL
La Jolla Capital Management SaRL
Natixis Capital Partners GmbH
NATIXIS Capital Partners Srl
Ocala Capital Management LLC
Ocala Capital Management S.a.r.l.

Managing Partner
Board Member
Board Member
Board Member
Board Member
Director
Director
Director
Board Member
Director
Director
Director
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member

Dr. Johannes Conradi

Richard Mully

Dr. Christian Olearius

Hamburg
Freshfields Bruckhaus Deringer
Dublin
Grove International Partners LLP
Apellas Holdings B.V.
Dolce International Limited
Douglasshire International Holdings B.V.
Hansteen Holdings PLC
Hellenic Land Holdings B.V.
Karta Realty Limited
MED Group Leisure Investments B.V.
Natixis Capital Partners Limited
Nowe Ogrody 2 Sp. z o.o.
Nowe Ogrody 3 Sp. z o.o.
Nowe Ogrody 4 Sp. z o.o.
Nowe Ogrody Sp. z o.o.
Oliver's Wharf (Management) Limited
Polish Investment Real Estate Holding II B.V
Polish Investments Real Estate Holding B.V.
SB Capital Europe B.V.
Spazio Industriale B.V.
Spazio Industriale II B.V.
Stichting Administratiekontoor
Douglasshire International Holding
Hamburg
M.M. Warburg & CO KGaA

Bankhaus Carl F. Plump & Co., Bremen
Bankhaus Hallbaum AG & Co. KG, Hannover
Bankhaus Löbbecke AG, Berlin
Degussa Bank GmbH, Frankfurt
GEDO Grundstücksentwicklungs- und
Verwaltungsgesellschaft mbH & Co KG, Grünwald
Hannover Finanz GmbH, Hannover
KanAM Grund Kapitalanlagegesellschaft mbH,
Frankfurt am Main
Liquiditäts-Konsortialbank GmbH, Frankfurt am Main

Partner

Managing Partner
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director

Director

Spokesman of the Partners
and General Partner
Chairman of the Partners' Committee
Chairman of the Supervisory Board
Chairman of the Supervisory Board
Chairman of the Supervisory Board

Member of the Supervisory Board
Vice-Chairman of the Advisory Board

Member of the Supervisory Board
Deputy Member
of the Administrative Board

| 112 | alstria Annual Report 2007

alstria Annual Report 2007 | 113 |

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M.M. Warburg & Co. Geschäftsführungs-AG, Hamburg
M.M. Warburg & Co. Hypothekenbank AG, Hamburg
M.M. Warburg Bank (Schweiz) AG, Zürich
M.M. Warburg-Hansa Ltd., Tortola/British Virgin Islands
Marcard, Stein & Co., Hamburg
VTG Aktiengesellschaft, Hamburg
Warburg Invest Kapitalanlagegesellschaft mbH,
Frankfurt am Main
London
NATIXIS Capital Partners Ltd.
Express Holdings Srl
Natixis Capital Partners GmbH
Hamburg
Natixis Capital Partners GmbH

Chairman of the Supervisory Board
Chairman of the Supervisory Board
President of the Administrative Board
Director
Chairman of the Administrative Board
Member of the Supervisory Board

Member of the Supervisory Board

Partner
Board Member
Managing Director

Director

Daniel Quai

Stephan Fritsch
Until January 16, 2007

With effect as of April 1, 2007, the supervisory board
elected Alexander Stuhlmann as Chairman and John van
Oost as Vice-Chairman.

and anticipated development of the Group in accordance
with the applicable financial reporting framework.”

the net assets,

28. Management Compliance Statement
“We confirm that, to the best of our knowledge, the
consolidated financial statements give a true and fair view
of
financial position and results of
operations of the Group and the group management
report gives a true and fair view of business performance
including the results of operations and the situation of the
Group, and describes the main opportunities and risks

Hamburg, March 18, 2008

The Management Board

Olivier Elamine
Chief Executive Officer

Alexander Dexne
Chief Financial Officer

COMPENSATION REPORT

Management board compensation
The total compensation paid to the members of the
management board in the financial year 2007 was
1,397k. Management board compensation
EUR
comprises fixed and variable components, as well as
performance incentives to increase the Company’s value
in the long run. Long-term compensation components
consist of stock options. The intention of this is to create
performance incentives aimed at sustained corporate
success. Success benchmarks may not be changed

subsequently. There were no advance payments to
board members and no granting of pension benefits.

Following his departure, Dr. Michael Börner-Kleindienst
received an immediate one time payment of EUR 250k.
Furthermore he is entitled to a second payment of
EUR 250k in 2008 subject to certain conditions being met.
His stock options have been reduced from 281,250
to 140,625.

DETAILED OVERVIEW OF INDIVIDUAL MANAGEMENT BOARD MEMBER COMPENSATION:
In EUR k

Management
board member

Fixed
compensation

Performance

Other
based payments 2

Long-term
incentives 4

Total
renumeration

compensation 1

Olivier Elamine
Chief Executive Officer
Alexander Dexne
since June 1, 2007
Chief Financial Officer
Dr. Michael Börner-Kleindienst
from March 1 to October 31, 2007
former Chief Operating Officer
Dr. Robert Hannemann
until February 1, 2007
former Chief Financial Officer

Total

265

175

427 3

917

350

n/a

400

502

1,160

251

n/a

806

253

685

105

2,203

1 Related to 2006 performance
2 Comprise benefits like company cars or relocation allowances
3 Includes severance payment of EUR 250k
4 Total non-cash expenses recognised for 2007

| 114 | alstria Annual Report 2007

alstria Annual Report 2007 | 115 |

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The Company has agreed to assume the premiums of
a combined disability and risk life insurance policy for
both members of the management board, providing each
for an insurance sum of EUR 5k per month (until reaching
the age of 65) in case of invalidity as well as EUR 2,500k
as lump sum coverage in case of death. If Mr. Elamine or
Mr. Dexne should die during the term of their service
contract, the fixed remuneration shall be paid for the
month of death and the following three months. The
bonus shall be paid on a pro rata temporis basis until the
end of the month of death. Mr. Elamine and Mr. Dexne
are subject to a post-contractual non-compete obligation
for up to 12 months after termination of their respective
service contracts and are entitled to a compensation
amounting to their last fixed salary for the duration of such
post-contractual non-compete obligation.

the supervisory board of

Stock Option Program
the
On March 27, 2007,
Company resolved on the establishment of a stock option
program for the members of the management board. The
supervisory board fixed the details of the stock option
program in accordance with an authorization granted by
the general meeting of shareholders of March 15, 2007
and granted a first
tranche of stock options to the
management board.

The main terms of the stock option program resolved by
the supervisory board can be summarized as follows:

Under
the stock option program, up to 2,000,000
options entitling to the subscription of a maximum of
2,000,000 shares of the Company with a total notional
value of EUR 2,000,000 may be granted to members of
the management board. The stock options will be granted
in annual tranches. The first tranche was granted by the
supervisory board, subject to the above said conditions,
with granting date April 3. Under this tranche 281,250
stock options (fair value at granting date: EUR 892k; i.e.
EUR 3.17 per option) were granted to each of Olivier

Elamine and Dr. Michael Börner-Kleindienst. The stock
options granted to Dr. Michael Börner-Kleindienst were
reduced from 281,250 to 140,625 (remaining fair value at
granting date: EUR 446k; i.e. EUR 3.17 per option). With
resolution from September 5, 2007, the supervisory board
granted 93,750 stock options to Alexander Dexne (fair
value at granting date: EUR 213k; i.e. EUR 2.28 per
option). The exercise price for the stock options granted in
2007 is EUR 16.The total fair value at granting date of all
stock options granted in 2007 is EUR 1,551k.

The term of each stock option is seven years beginning
with the respective issue date. The stock options may only
be exercised if the current stock exchange price of the
Company’s shares exceeds the stock exchange price of the
Company’s shares on the issue date by 20 % or more for at
least seven non subsequent trading days of the Frankfurt
Stock Exchange prior
the
respective exercise period.

to the commencement of

The stock options may only be exercised after
the
expiration of a vesting period of two years and then during
the four exercise periods each year. Each exercise period
lasts 30 days, commencing with the day of announcement
of the results for the first, second and third quarter, and
the day of
the Company’s annual general meeting,
respectively. There are no cash settlement alternatives. The
options may not be exercised before April 3, 2009 (Mr.
Olivier Elamine and Dr. Michael Börner-Kleindienst) and
September 7, 2009 (Mr. Alexander Dexne).

the options were estimated at

The fair values of
the
respective granting dates using a black-scholes-model and
partial-time barrier options, taking into account the terms
and conditions upon which the instruments were
granted. The following table lists the inputs to the model
used for the determination of the fair value of the stock
options granted:

Fair value of stock options granted on

March 27, 2007

September 5, 2007

Dividend yield (%)
Risk-free interest rate (%)
Expected volatility (%)
Expected life of option (years)
Exercise share price (EUR)
Labour turnover rate (%)
Stock price as of valuation date (EUR)
Estimated fair value of one stock option at granting date (EUR)

3.60
4.21
30.00
4.50
16.00
0.00
16.00
3.17

3.60
4.29
30.00
4.50
16.00
0.00
13.93
2.28

Supervisory board compensation
Supervisory board compensation totalled EUR 283k
in 2007 and EUR 18k in 2006. The supervisory board
members receive a fixed compensation amount. As of
fiscal year 2007, members of
the supervisory board
receive a fixed annual remuneration of EUR 40k each. The
chairman of the supervisory board receives additional
remuneration of EUR 20k p.a., his deputy receives an
additional EUR 10k p.a.. Members who only sit on the
board for part of the year receive pro rata remuneration
for that part of the year. Furthermore, membership in the
audit committee and chairmanship of the audit committee
are taken into account in the evaluation of the supervisory
board members’ compensation amount. Membership in
other committees is not taken into account. No advance
payments were made to the supervisory board. No
compensation was paid for individually performed services.

Member

Compensation
(in EUR k)

Alexander Stuhlmann -
chairman
John van Oost -
vice chairman
Dr. Johannes Conradi -
member
Richard Mully -
member
Dr. Christian Olearius -
member
Daniel Quai -
member
Stephan Fritsch -
former member

50.0

52.5

48.1

38.3

43.8

48.8

1.7

Total

283.2

| 116 | alstria Annual Report 2007

alstria Annual Report 2007 | 117 |

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VALUATION REPORT 1

Our Ref: international/ CFT/Alstria Office REIT AG/Alstria AG Year End Accounts/Alstria AG portfolio certificate December 31, 2007

Date December 31, 2007

9 Marylebone Lane
London
W1U 1HL
Tel: 020 7935 4499
Fax: 020 7344 6539

Direct Line 020 7344 6609
Direct Fax 020 7344 6539
Mobile
07768 500 202
chris.fowler-tutt@collierscre.co.uk

The Directors
alstria office REIT-AG
Fuhlentwiete 12
20355 Hamburg
Germany

The Directors
HSH Nordbank AG
Gerhart-Hauptmann-Platz 50
20095 Hamburg
Germany

FAO: Alexander Dexne

FAO: Oliver Waldeck

THE ALSTRIA OFFICE REIT-AG PORTFOLIO
VALUATION AS AT 31 DECEMBER 2007
We refer to your instructions to provide you with our
opinion of the Market Value of the above portfolio, as at
December 31, 2007, for balance sheet purposes, debt
covenant calculation and inclusion within your annual
accounts.

We have pleasure in presenting our report.

INSPECTIONS AND QUALIFICATIONS
The properties have been inspected and valued by suitably
qualified surveyors who fall within the requirements as to
competence set out in PS 1.1 and 1.2 of the Appraisal and
Valuation Standards issued by the Royal
Institution of
Chartered Surveyors (the “Red Book”).

We confirm that Colliers CRE falls within the definition of
Independent Valuers and that we have no conflict of
interest in acting on your behalf in this matter.

The properties were all
inspected between June and
October 2006 by either Christopher J Fowler-Tutt, BSc
MRICS, Robert Mayhew BSc (Hons) MRICS, Nick Harris BSc
(Hons) MRICS, Charlie Henry BSc (Hons) MRICS and Adrian
Camp BSc (Hons) MRICS. A further sample of 5 properties
were re-inspected in December 2007, namely

• Hamburg, Steinstr. 7 (Bartholomay-Haus)
• Hamburg, Drehbahn 36

• Hamburg, Gänsemarkt 36
• Düsseldorf, Mecumstr 10
• Köln, Bonner Str 351

The extent of our
investigations and the sources of
information on which we have relied upon are as
described in Section 4 – Valuation Procedures and
Assumptions contained within the Red Book.

We confirm that our valuation complies with the
requirements of IAS 40 – Investment Property.

Where an entity opts to account for investment property
the
using the fair value model,
requirements of
this model are met by the valuer
adopting Market Value

IVSC considers that

Our General Assumptions and Definitions form Appendix
I to this report.

THE PORTFOLIO AND ITS LOCATION
The portfolio comprises 70 office investment properties
located throughout Germany. The largest concentration
of investment property is held in the city of Hamburg,
The second
the portfolio is situated.
where 53 % of
largest concentration of properties is in Baden Wuerttem-
berg which accounts for 19 % of
The
portfolio also comprises properties
in the cities of
Augsburg, Bonn, Darmstadt, Dresden, Erfurt, Koln,
Magdeburg, Mannheim, Munchen, Potsdam, Stuttgart,
Wurzburg and Zwickau.

the portfolio.

1 Exerp from the valuation report prepared by Colliers CRE on December 31, 2007

FLOOR AREAS
In accordance with your
instructions we have not
measured the subject premises and have relied upon the
the time the properties were
floor areas adopted at
purchased.

TENURE
We have been provided with the following reports, which
we have had regard to in arriving at our opinions of value.
All of the above reports were prepared by your lawyers
Messrs. Alpers & Stenger Freshfields and Lovells. Our
valuations assume that, with the exception of the matters
disclosed within the aforementioned reports, there are no
unusual, onerous or restrictive covenants in the titles
which are likely to affect the value.

Dated September 26,2006

Due Diligence Report Dated December 12, 2005
Draft Due
Diligence Report
Summary of
Major Findings
Legal Due
Diligence Report
Legal Due
Diligence Report

Dated September 26, 2006

Dated September 27, 2005

Dated October 24, 2006

LETTINGS
We have relied upon the letting details contained within
the following reports prepared by your lawyers Messrs.
Alpers & Stenger and Freshfields:

RENT ROLL
We have been provided with a tenancy schedule dated
31 December 2007 by alstria office REIT-AG to which we
have had regard in arriving at our opinions of value. We
have compared the new rent roll with the one provided
to us on the 31 December 2006 and have enquired about
any changes.

We have assumed all
accurate, up-to-date and complete.

information provided to be

CONDITION
We have not carried out building surveys of the properties
and neither have we tested the drainage or service
installations in the buildings as this was outside the scope
of our instructions. If there is significant capital expenditure
required on a property this sum will have been deducted
from the value reported.

We have been provided with the following reports prepared
on your behalf by URS Deutschland GmbH (URS):

Dated December 19, 2005

Technical Due
Diligence Report
Technical and Environmental
Due Diligence Assessment Dated August 25, 2006
Intermediate Environmental
Bullet Point Report
Technical Due
Diligence Report

Dated December 29, 2006

Dated October 9, 2006

Dated September 26,2006

Due Diligence Report Dated December 12, 2005
Draft Due
Diligence Report
Summary of
Major Findings
Legal Due
Diligence Report
Legal Due
Diligence Report

Dated September 26, 2006

Dated September 27, 2005

Dated October 24, 2006

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ENVIRONMENTAL MATTERS
We have been provided with the following reports,
prepared on your behalf by URS Deutschland GmbH
(URS), which we have relied upon in arriving at our
opinions of value.

Dated December 19, 2005

Technical Due
Diligence Report
Technical and Environmental
Due Diligence Assessment Dated August 25, 2006
Intermediate Environmental
Bullet Point Report
Technical Due
Diligence Report

Dated December 29, 2006

Dated October 9, 2006

TOWN PLANNING
We have not made any formal searches or enquiries in
respect of the properties and are, therefore, unable to
accept any responsibility in this connection. We have,
however, relied upon the following reports:

Due Diligence Report Dated December 12, 2005
Draft Due
Diligence Report,
Summary of
Major Findings,
Legal Due
Diligence Report,

Dated September 26, 2006

Dated September 27, 2005

All of the above were prepared by your lawyers Messrs.
Alpers & Stenger and Freshfields
search
information, town planning and permit issues and we
have had regard to this information in arriving at our
opinions of value.

formal

for

MARKET APPROACH
In preparing our valuations we have taken into account
market trends in the locality and except where you have
advised us to the contrary, or our other enquiries have

alerted us to this, we have assumed that there have been
no material changes to any of the properties or their
surroundings that might have a material effect on value,
since the time of our inspection.

In arriving at our opinions of value we have had regard to
comparable investment transactions in determining the
net initial yield which we have adopted in capitalising the
current income stream. Where properties have less than
5 years of term certain left we have adopted income void
periods which range from 18 to 24 months depending
upon the type of property prior to reletting. In addition,
where appropriate, we have allowed for capital expenditure
either to undertake works necessary to relet properties at
the end of the lease or deal with extra ordinary items of
disrepair that are the responsibility of the lessor.

We are of the opinion that this portfolio as a whole or
each of its individual assets would appeal to a wide range
of purchasers including funds, property companies and
institutions.
to overseas
investors attracted by the high quality income stream
secured over long unexpired lease terms. We consider
that demand for the portfolio would be strong.

It would also be of

interest

NON-RECOVERABLE EXPENSES
In arriving at our opinion of the value we have made a
total deduction of 5 % from the income receivables to
allow for non-recoverable costs. Such costs relate to items
which cannot be recovered from the tenant and generally
includes the expense of maintaining and repairing all
structural components of the property and associated
access roads, as well as being financially responsible for
maintenance and repair items and management expenses
etc. However, it does not include tenant improvement
measures
that have been taken into consideration.
Moreover, when the technical due diligence reports
showed that additional Capital Expenditure was required,
we have deducted all, or parts of those additional costs
from our valuation.

MARKET RENT
In preparing our valuation we have made an analysis of
the Market Rent of the portfolio and compared it to the
passing rent (as shown in Appendix III). Any difference
between the Market Rent and the passing rent has been
taken into consideration in our valuation.

We estimate that the portfolio is approximately 10.86 %
reversionary.

MARKET VALUE
We are of the opinion that the aggregate Market Value, as
at 31 December 2007, of these 70 freehold properties is
EUR 1,621,250,000 (One billion six hundred and twenty
one million two hundred and fifty thousand euros).

We confirm that all of the foregoing opinions of value,
the requisite
with the exception of one, are net of
the Daimler
In respect of
purchaser’s costs of 5 %.
Chrysler HQ investment property in Stuttgart purchaser’s
costs of 4.25 % were adopted reflecting the high value of
this single asset and the relatively low costs associated in
managing it. The valuations of the individual properties
are set out in the attached schedule forming Appendix II
to this report.

the portfolio is the sum of

the
The market value of
individual market values of each of
its assets. This
aggregate figure makes no allowance for any effect
that placing the whole portfolio on the market may have
on the overall realisation.
the
portfolio sold as in a single transaction would not
necessarily be the same as the aggregate figure reported.

The market value of

DISCLOSURES
In accordance with UK Practice Statement 5.4 we confirm
the following:
i. Colliers CRE have valued this portfolio since 2006.
ii. The total fees earned in the latest financial year from
alstria office REIT-AG amounted to substantially less

than 5 % of our Company turnover.

iii. We do not undertake any non-valuation fee earning

work for alstria office REIT-AG.

LIABILITY AND PUBLICATION
This report is private and confidential and for the sole use
of alstria office REIT-AG for publication in its reports and
accounts and HSH Nordbank AG for calculation of debt
covenant.

HSH Nordbank AG is an agent and security agent under
the facility agreement to be entered into with Alstria Office
AG as borrower (the “Facility Agreement”) for and on
behalf of itself and each of HSH Nordbank AG, Natexis
Banques Populaires and J. P. Morgan Plc as mandated lead
arrangers under the Facility Agreement. HSH Nordbank
AG, Natexis Banques Populaires and J. P. Morgan Chase
Bank N.A. as original lenders under the Facility Agreement
and each of their respective assignees or transferees (the
“Finance Parties”) and to each such Finance Party.

We do not accept any responsibility to any third party for
the whole or any part of its contents.

Neither the whole nor any part of this valuation or any
reference thereto may be included within any published
document, circular or statement or disclosed in anyway
to the form and
without our prior written consent
context
this
In breach of
in which it may appear.
condition, no responsibility can be accepted to third parties
for the comments or advice contained in this report.

Yours faithfully

Christopher J Fowler-Tutt BSc MRICS
Director
For and behalf of Colliers CRE

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APPENDIX I
GENERAL ASSUMPTIONS AND DEFINITIONS

GENERAL ASSUMPTIONS AND DEFINITIONS
The valuations have been prepared by a suitably qualified
valuer, as defined by PS1.1 of the Appraisal and Valuation
Standards, on the basis set out below unless any variations
have been specifically referred to under the heading
“Special Remarks”:

1 Market Value (MV)

Where we have been instructed to value the
properties on the basis of Market Value, we have done
so in accordance with PS 3.2 of the Appraisal and
Institution
Valuation Standards issued by The Royal
of Chartered Surveyors, which is defined as follows:

“The estimated amount for which a property should
exchange on the date of valuation between a willing
buyer and a willing seller
in an arm’s-length
transaction after proper marketing wherein the parties
had each acted knowledgeably, prudently and
without compulsion.”

The interpretative commentary on Market Value, as
published in International Valuation Standards 1, has
been applied.

2 Market Rent (MR)

Valuations based on Market Rent (MR), as set out in PS
3.4 of the Appraisal and Valuation Standards, adopt
the definition as settled by the International Valuation
Standards Committee which is as follows:

‘The estimated amount for which a property, or space
within a property, should lease (let) on the date of

valuation between a willing lessor and a willing
lessee on appropriate lease terms in an arm’s-length
transaction after proper marketing wherein the parties
had acted knowledgeably, prudently and without
compulsion.’

slightly lower professional fees than usual. In respect of
the Daimler Chrysler HQ investment property in
Stuttgart purchaser’s costs of 4.25 % were adopted
reflecting the high value of this single asset and the
relatively low costs associated in managing it

which are in the nature of tenants’ trade fittings and
equipment. We have had regard to landlords’
fixtures such as lifts, escalators, central heating and
the
air conditioning forming an integral part of
buildings.

such as

MR will vary significantly according to the terms of the
assumed lease contract. The appropriate lease terms
will normally reflect current practice in the market in
which the property is situated, although for certain
purposes unusual terms may need to be stipulated.
Matters
the
the duration of
frequency of rent reviews, and the responsibilities of
the parties for maintenance and outgoings, will all
impact on MR. In certain States, statutory factors may
either
the terms that may be agreed, or
influence the impact of terms in the contract. These
need to be taken into account where appropriate. The
principal lease terms that are assumed when providing
MR will be clearly stated in the report.

the lease,

restrict

Rental values are provided for the purpose described
in this report and are not to be relied upon by any
third party for any other purpose.

3 Rental Assessment

We have been provided with an updated tenancy
schedule and rent roll to which we have had regard in
arriving at our opinions of value.

4 Purchase and Sale Costs

In arriving at our opinion of value we have allowed
for purchaser’s costs of 5 %. This reflects 3.5 % for land
tax with the remainder being apportioned between
agents and legal fees. Because of the high value of
the portfolio we consider it appropriate to adopt

5 Condition

As this was outside the scope of our instruction, we
have not carried out a building survey, nor have
we inspected the woodwork or other parts of
the structure which are covered, unexposed or
inaccessible.

We have been provided with a Technical Due
Diligence Report prepared by on behalf of the alstria
office REIT-AG as listed in our certificate which we
have had regard to in arriving at our opinion.

Where we have noticed items of disrepair during the
course of our inspections, they have been reflected
in our valuation which we comment upon in the
individual reports attached hereto.

6 Environmental Matters

We have relied upon the environmental investigation
undertaken in respect of the property as listed in our
certificate. We have been provided with a report
highlighting the potential risks at the subject property
and have had regard to this report
in arriving at
our opinion of value. We comment upon the
environmental issue in the report attached hereto.

7 Fixtures and Fittings

In arriving at our opinions of value we have
disregarded the value of all process related plant,
fixtures and fittings and those items
machinery,

Where the properties are valued as an operational
entity and includes the fixtures and fittings,
is
assumed that
to any hire
these are not subject
purchase or lease agreements or any other claim on
title. No equipment or fixtures and fittings have been
tested in respect of Electrical Equipment Regulations
and Gas Safety Regulations and we assume that
where appropriate all such equipment meets the
necessary legislation. Unless otherwise specifically
mentioned the
value
attributable to plant and machinery.

valuation excludes

any

8 Tenure, Lettings and Reports on Title and/or

Tenancies
We have not inspected the title deeds, lease and
related legal documents and have instead relied upon
the Legal Due Diligence as listed in our certificate. We
confirm we have relied upon the information
contained therein in arriving at our opinions of value.

9 Taxation

Whilst we have had regard to the general effects of
taxation on market value, we have not taken into
account any liability for tax which may arise on a
disposal, whether actual or notional, and neither have
we made any deduction for Capital Gains Tax, Valued
Added Tax or any other tax.

10 Mortgages

We have disregarded the existence of any mortgages,

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debentures or other charges to which the properties
may be subject.

11 Operational Entities

Where the properties are valued as an operational
entity and reference has been made to the trading
history or trading potential of the property, reliance
has been placed on information supplied to us.
Should this information subsequently prove to be
inaccurate or unreliable, the valuations reported could
be adversely affected.

enabling the property to be put to the uses ascertained
at
the date of our inspection have been obtained
and that there are no outstanding works or conditions
local or other
required by lessors or
competent authorities.

statutory,

13 Arrears

We have assumed that all rents and other payments
payable by virtue of the leases have been paid to date.
If there are rents or other arrears, we recommend that
that we may
we should be informed in order
consider whether our valuation should be revised.

Our valuations do not make any allowance for
goodwill

14 Insurance

12 Local authorities, Statutory Undertakers and

Legal Searches
We have relied upon the Legal Due Diligence Report
formal
as listed in our certificate with respect of
searches and enquiries for
the property and are
therefore unable to accept any responsibility in the
connection. We have, however, made informal
enquiries of the local planning authority in whose
areas the properties are situated as to whether or not
they are affected by planning proposals. We have not
received a written reply and, accordingly, have had to
rely upon information obtained verbally.

We have also relied upon the Legal Due Diligence
licences and
Report
fire certificates,
permissions

in respect of all consents,

inter alia,

including,

In arriving at our valuation we have assumed that the
buildings are capable of being insured by reputable
insurers at reasonable market rates. If, for any reason,
insurance would be difficult to obtain or would be
subject to an abnormally high premium, it may have
an effect on value.

15 Liability Cap

We confirm that the extent of our liability in respect of
this valuation and report is limited to a maximum sum
of £50 million.

16 Standard Terms of Business

We confirm that
this valuation report has been
provided in accordance with our Standard Terms of
Business.

Cologne

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LIST OF ALL PROPERTIES

Address

HAMBURG
Alte Königsstrasse 29
Alter Steinweg 4
Amsinckstr. 28
Amsinckstr. 34
Bäckerbreitergang 73 2
Basselweg 73
Besenbinderhof 41
Buxtehuder Strasse 9-11a
Drehbahn 36
Düsternstrasse 10
Eppendorfer Landstr. 59
Ernst-Merck-Str. 9 (Bieberhaus)
Gänsemarkt 36
Garstedter Weg 13
Gorch-Fock-Wall 11
Gorch-Fock-Wall 15 / 17
Grindelberg 62-66
Grosse Bleichen 23 / 27
Hamburger Strasse 1-15
Hamburger Strasse 43-49
Hammer Steindamm 129
Harburger Ring 17
Herthastrasse 20
Johanniswall 4
Kaiser-Wilhelm-Strasse 79-87
Kattunbleiche 19
Kümmelstrasse 5-7
Lenhartzstrasse 28
Ludwig-Rosenberg-Ring 41
Max-Brauer-Allee 89-91
Öjendorfer Weg 9-11
Osterbekstr. 96
Ottenser Marktplatz 10 / 12
Poststr. 11 (Alte Post)

1 Based on the valuation of Colliers CRE as of December 31, 2007
2 Based on company information

City

Total Lettable Area

Office Area
(SQM)

Vancancy
(SQM)

Passing Rent (EUR)
(SQM)

ERV 1 (EUR)

OMV 1 (EUR)

Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg

4,300
32,000
8,100
6,200
2,400
2,700
5,000
7,700
26,200
2,200
3,300
17,500
20,900
3,600
8,700
7,700
18,400
17,700
19,600
20,500
7,200
3,100
3,300
14,100
5,500
12,400
15,700
1,100
5,000
9,800
6,100
7,400
900
6,600

4,300
32,000
8,100
6,200
2,400
2,300
5,000
6,300
26,200
2,200
2,900
15,600
20,600
3,600
8,700
7,700
18,400
15,800
8,500
20,500
7,200
1,600
3,300
12,500
5,100
12,400
15,700
1,100
4,800
9,800
6,100
7,400
900
4,900

-
-
-
-
2,400
313
-
-
-
-
-
1,309
59
-
-
-
-
4,826
2,352
-
-
36
-
383
-
-
-
-
-
-
-
-
-
111

534,600
3,772,600
904,900
690,900
-
248,400
476,000
536,500
3,094,200
263,800
389,900
2,128,800
2,986,800
327,400
977,300
769,700
1,983,100
1,827,600
2,078,200
2,356,400
520,200
328,300
281,500
1,589,400
577,600
1,441,100
1,305,900
96,000
440,000
858,000
534,300
526,500
147,900
1,202,500

547,800
4,310,300
990,000
690,000
407,800
290,400
474,600
531,600
3,096,000
264,000
387,300
2,274,100
3,034,900
358,800
981,000
768,000
2,022,000
3,627,400
2,714,700
2,865,900
522,000
336,000
318,000
1,790,300
604,000
1,434,000
1,350,000
110,400
499,200
882,000
684,000
645,000
153,600
2,160,000

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Address

City

Total Lettable Area

Office Area
(SQM)

Vancancy
(SQM)

Passing Rent (EUR)
(SQM)

ERV 1 (EUR)

OMV 1 (EUR)

Poststrasse 51
Rahlstedter Strasse 151-157
Schlossstrasse 60
Steckelhörn 12
Steinstrasse 10
Steinstrasse 7, Bartholomay-Haus
Wandsbeker Chaussee 220

STUTTGART
Epplestrasse 225
Siemensstrasse 33

DUSSELDORF AREA
Bamler Str. 1-5
Friedrichstrasse 19
Gathe 78
Jagenbergstrasse 1
Max-Eyth-Strasse 2
Mecumstrasse 10

MUNICH
Arnulfstrasse 150
Hofmannstrasse 51
Landshuter Allee 174

HANOVER
Arndtstrasse 1

1 Based on the valuation of Colliers CRE as of December 31, 2007

Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg

Stuttgart
Ditzingen

Essen
Dusseldorf
Wuppertal
Neuss
Dortmund
Dusseldorf

Munich
Munich
Munich

1,600
2,900
11,900
14,700
26,800
21,900
3,200

415,900

107,300
29,100

136.400

36,400
2,100
8,500
24,700
6,300
8,600

86,600

5,900
22,100
7,000

35,000

1,400
2,900
11,900
14,300
26,800
19,900
2,500

96
-
-
-
-
2,772
-

353,400
276,600
919,600
1,786,500
3,095,000
3,070,400
366,000

348,600
324,000
1,041,000
1,974,300
2,928,000
3,392,600
359,600

389,800

14,657

46,063,800

52,493,200

908,931,111

107,300
12,300

-
3,307

14,513,300
1,789,400

14,914,200
1,848,500

119,600

3,307

16,302,700

16,762,700

317,000,000

36,400
1,300
4,500
24,700
6,300
8,600

3,971
137
140
-
5,179
-

3,762,200
421,500
1,014,500
3,133,000
92,200
1,228,100

4,222,700
358,700
1,313,100
2,958,000
908,400
1,253,900

81,800

9,427

9,651,500

11,014,800

160,150,000

5,900
22,100
7,000

-
-
5,600

974,500
2,227,500
900,000

1,098,600
2,778,000
1,113,000

35,000

5,600

4,102,000

4,989,600

77,150,000

Hanover

10,200

9,300

342

1,005,200

1,118,400

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Address

City

Total Lettable Area

Vahrenwalder Strasse 133
Werner-von-Siemens-Platz 1

SAXONY
Lothar-Streit-Strasse 10b
Ludwig-Erhard-Strasse 49
Nikolaistrasse 16
Washingtonstrasse 16-16a
Zellescher Weg 21-25a

COLOGNE / BONN
Bertha-von-Suttner-Platz 17
Bonner Strasse 351

OTHERS
Im Gräslein 12
Emil-von-Behring-Strasse 2
Eserwallstrasse 1-3
Halberstädter Strasse 17
Helene-Lange-Strasse 6-7
Johannesstrasse 164-165
Regensburger Strasse 223-231
Rheinstrasse 23
Schweinfurter Strasse 4
Steubenstrasse 72-74

TOTAL PORTFOLIO as of Dec. 31, 2007

1 Based on the valuation of Colliers CRE as of December 31, 2007
2 Disregarding prepayments and acquisition related sundry expenses

Hanover
Hanover

Zwickau
Leipzig
Leipzig
Dresden
Dresden

Bonn
Cologne

Nuremberg
Frankfurt
Augsburg
Magdeburg
Potsdam
Erfurt
Nuremberg
Darmstadt
Wurzburg
Mannheim

7,100
21,700

39,000

1,000
6,300
1,000
20,700
6,500

35,500

1,400
10,900

12,300

2,700
9,300
5,600
7,600
3,400
5,800
8,900
2,700
5,100
4.100

55,200

815,000

Office Area
(SQM)

Vancancy
(SQM)

Passing Rent (EUR)
(SQM)

ERV 1 (EUR)

OMV 1 (EUR)

7,000
21,700

-
-

991,400
1,862,700

997,100
1,986,000

38,000

342

3,859,300

4,101,500

63,525,000

1,000
6,300
800
20,700
5,600

-
-
325
5,362
402

140,100
751,700
153,300
1,182,800
743,300

140,400
686,900
169,000
1,701,500
649,200

34,400

6,089

2,971,200

3,347,000

41,880,000

1,000
10,500

11,500

2,400
9,300
5,500
7,600
3,100
4,400
7,900
2,600
4,700
4,100

-
-

521
-
-
592
55
308
386
-
1,084
-

178,800
1,475,100

200,400
1,482,800

1,653,900

1,683,200

28,150,000

261,800
1,495,200
710,000
607,800
384,100
518,700
1,004.100
317.200
415,200
532,700

341,600
1,524,000
728,900
658,200
402,800
520,800
1,085,400
334,100
523,600
547,500

51,600

2,946

6,246,800

6,666,900

89,315,000

761,700

47,943

90,851,200

101,058,900

1,686,101,111 2

| 130 | alstria Annual Report 2007

alstria Annual Report 2007 | 131 |

> Compensation Report

> Valuation Report

> List of all Properties

Address

City

Total Lettable Area

Office Area
(SQM)

Vancancy
(SQM)

Passing Rent (EUR)
(SQM)

ERV 1 (EUR)

OMV 1 (EUR)

NEW ACQUISITIONS SUBJECT TO CLOSING
Am Roten Berg 5
Benrather Schlossallee 29-33
Carl-Reiss-Platz 1,3,5
Darwinstr. 14-16 / Quedlinburger Str. 1-3
Doktorweg 2-4 / Bismarkstr. 3
Ernsthaldenstr. 17
Gereonsdriesch 13
Goldsteinstr. 114
Gustav-Nachtigal-Str. 3
Gustav-Nachtigal-Str. 4
Holzhauser Str. 175-177
Horbeller Str. 11
Joliot-Curie-Platz 29-30
Kanalstr. 44
Marburger Str. 10
Nagelsweg 41-45
Spitzweidenweg 107
Zwinglistr. 11-13

TOTAL ALSTRIA PORTFOLIO

Erfurt
Dusseldorf
Mannheim
Berlin
Detmold
Stuttgart
Cologne
Frankfurt
Wiesbaden
Wiesbaden
Berlin
Cologne
Halle
Hamburg
Berlin
Hamburg
Jena
Dresden

4,200
5,000
18,600
22,200
9,800
2,600
2,400
8,500
18,400
700
7,400
6,700
1,100
8,300
6,200
6,200
2,900
3,200

134,400

949,400

4,200
5,000
18,400
22,200
9,800
2,500
2,200
8,500
18,200
700
7,400
6,700
1,100
8,300
6,100
6,100
2,900
3,200

1,813
-
2,119
-
-
194
-
195
-
-
3,069
2,028
-
244
717
-
571
1,842

172,600
522,200
1,561,800
3,245,500
803,600
239,900
345,600
1,079,600
2,411,400
108,900
421,400
465,200
112,200
912,700
800,400
880,100
148,300
86,500

288,900
530,400
1,732,400
3,245,500
755,900
261,600
344,100
1,354,800
2,412,000
119,000
709,400
680,400
110,400
957,400
908,400
957,000
204,600
230,400

133,500

12,792

14,317,900

15,802,600

215,970,000

895,200

60,734

105,169,100

116,861,500

1,902,071,111

1 Based on the valuation of Colliers CRE as of December 31, 2007

| 132 | alstria Annual Report 2007

alstria Annual Report 2007 | 133 |

AUDITORS' REPORT

"We have audited the consolidated financial statements
prepared by the alstria office REIT-AG, Hamburg, comprising
the balance sheet, the income statement, statement of
changes in equity, cash flow statement and the notes to the
consolidated financial statements, together with the group
management report for the business year from January 1 to
December 31, 2007. The preparation of the consolidated
financial statements and the group management report in
accordance with the IFRSs, as adopted by the EU, and the
additional
law
(paragraph) 1 HGB
pursuant
(“Handelsgesetzbuch”: German Commercial Code) are the
responsibility of the parent Company's Board of Managing
Directors. Our responsibility is to express an opinion on
the consolidated financial statements and on the group
management report based on our audit.

requirements of German commercial

to § (Article) 315a Abs.

We conducted our audit of
the consolidated financial
statements in accordance with § 317 HGB and German
generally accepted standards for the audit of
financial
statements promulgated by the Institut der Wirtschaftsprüfer
(Institute of Public Auditors in Germany) (IDW). Those
standards require that we plan and perform the audit such
that misstatements materially affecting the presentation of
the net assets, financial position and results of operations in
the consolidated financial statements in accordance with the
applicable financial reporting framework and in the group
report are detected with reasonable
management
assurance. Knowledge of
the business activities and
the economic and legal environment of the Group and
expectations as to possible misstatements are taken into
account in the determination of audit procedures. The
effectiveness of
the accounting-related internal control
system and the evidence supporting the disclosures in
the consolidated financial statements and the group

the audit. The audit

management report are examined primarily on a test basis
within the framework of
includes
assessing the annual financial statements of those entities
included in consolidation, the determination of the entities
to be included in consolidation,
the accounting and
consolidation principles used and significant estimates made
by the Company's Board of Managing Directors, as well as
evaluating the overall presentation of the consolidated
financial statements and the group management report.
We believe that our audit provides a reasonable basis for
our opinion.

Our audit has not led to any reservations.

In our opinion based on the findings of our audit the
consolidated financial statements comply with the IFRSs
as adopted by the EU and the additional requirements of
German commercial law pursuant to § 315a Abs. 1 HGB
and give a true and fair view of the net assets, financial
the Group in
position and results of operations of
accordance with these
The group
management report is consistent with the consolidated
financial statements and and as a whole provides a
suitable view of the Group's position and suitably presents
the opportunities and risks of future development."

requirements.

Berlin, March 19, 2008

PricewaterhouseCoopers
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

Gregory Hartmann
Wirtschaftsprüfer
(German Public Auditor)

ppa. Markus Salzer
Wirtschaftsprüfer
(German Public Auditor)

REIT DECLARATION

Statement of the Management Board
Regarding the compliance with the requirements of
Section 11 to 15 REIT Act (Real Estate Investment Trust
Law) as per December 31, 2007, we declare the following
in relation with our financial statements according to
Section 264 HGB (German Commercial Code) and our
consolidated financial statements according to Section
315a HGB as per balance sheet date:

1. As per balance sheet date, 33,14 percent of alstria’s
shares were free floating shares according to Section 11
paragraph 1 REIT Act. This was disclosed to the German
Federal Financial Supervisory Authority (BaFin).

In accordance with Section 11 paragraph 4 REIT Act,
as per balance sheet date, no shareholder owned
directly 10 percent ore more of our shares or shares
of such an amount, that he holds 10 percent or more
of the voting rights.

In accordance with Section 12 paragraph 2 the Group
held immovable assets in an amount of EUR 1,694m as
per balance sheet date, which equals 92 percent of
assets. No REIT service companies were included into
the consolidated financial statement.

4. As to the balance sheet date the entire sales revenues of
the Group plus other earnings from immovable assets in
compliance with Section 12 paragraphs 3 and 4 REIT
Act amounted to EUR 83m. This equals 100 percent of
total revenues.

5. A dividend payment

to the shareholders in 2007
according to Section 13 REIT Act was not required, since
the REIT status was not obtained before 2007.

In the financial year 2007 the Group sold 0.2 percent of
its immovable assets and therefore did not trade with
real estate according to Section 14 REIT Act.

7. The Group’s equity as per balance sheet date accounted
for in the consolidated financial statements pursuant to
Section 12 paragraph 1 REIT Act amounted to 871m.
This equals in conformance with Section 15 REIT Act 51
percent of the amount with which the immovable assets
are determined in the consolidated accounts pursuant to
Section 12 paragraph 1 REIT Act.

Hamburg, March 18, 2008

Olivier Elamine
Chief Executive Officer
alstria office REIT-AG

Alexander Dexne
Chief Financial Officer
alstria office REIT-AG

The Auditor of the ﬁnancial statements and the consolidated
financial statements for the financial year from January 1
to December 31, 2007 has summarized the results of his
audit according to Sec. 1 para. 4 REITG concerning the
REIT statement of the management board in an unqualified
audit opinion.

| 134 | alstria Annual Report 2007

alstria Annual Report 2007 | 135 |

FINANCIAL CALENDAR

FINANCIAL CALENDER

January 10, 2008
January 15, 2008
January 21-22, 2008
January 22, 2008
February 4, 2008
February 5, 2008
February 11-12, 2008
February 22, 2008
February 27, 2008
March 6-7, 2008
March 10-14, 2008
April 2, 2008
April 4, 2008
April 9, 2008
April 10, 2008
April 14-15, 2008
April 29, 2008
May 6, 2008
May 20, 2008
May 28-29, 2008
June 5, 2008
June 20, 2008
August 19, 2008
October 6, 2008
November 19, 2008

Morgan Stanley's 3rd German Property Day

Deutsche Bank 2008 Real Estate Outlook Conference New York
London at the Renaissance Chancery Court
Roadshow Munich/Frankfurt
Roadshow JPMorgan Frankfurt
Roadshow M.M. Warburg Kopenhagen
Roadshow M.M. Warburg Edinburgh
3. DVFA-Immobilien-Konferenz Frankfurt
Roadshow JPMorgan Brussels
3. HSBC Trinkaus Real Estate Conference Frankfurt
Kempen & Co. European Property Seminar New York
mipim Cannes
Publication of the annual financial results for 2007
Sal. Oppenheim Roadshow Paris
Real Estate Investors Conference Dresdner Kleinworth London
US REIT Day Frankfurt
Roadshow JPMorgan Japan
Sal. Oppenheim Roadshow Zurich
Sal. Oppenheim Roadshow Vienna/Munich
Publication of financial results of Q1 2008 Hamburg
Kempen & Co 6th European Property Seminar Amsterdam
General Meeting Hamburg
Sal. Oppenheim Real Estate Conference Vienna
Publication of financial results of Q2 2008 Hamburg
EXPO REAL Munich
Publication of financial results of Q3 2008 Hamburg

IMPRINT

Contact
alstria office REIT-AG
Fuhlentwiete 12
20355 Hamburg
Phone: +49 (0) 40 22 63 41 -300
e-mail: info@alstria.de

Photos
Michael Zahlten
Hamburg
Design
PrasserSander Markengestaltung
Hamburg

| 136 | alstria Annual Report 2007

alstria Annual Report 2007 | 137 |

alstria office REIT-AG
Fuhlentwiete 12
20355 Hamburg
Phone: +49 (0) 40 22 63 41 -300
e-mail: info@alstria.de