alstria office REIT Annual Report 2009

Plain-text annual report

9 0 0 2 t r o p e R l a u n n A G A - T I E R e c ﬁ f o a i r t s l a REAL ESTATE ... ANNUAL REPORT 2009 KEY FIGURES EUR k Revenues and earnings Revenues Net rental income Consolidated loss / proﬁ t for the period FFO Loss per share (EUR) Balance sheet Investment property Total assets Equity Equity ratio Liabilities NAV/share (EUR) NNNAV/share (EUR) REIT key ﬁ gures REIT ratio Revenues plus other income from investment properties Stock ﬁ gures Number of shares (excluding own shares) Number of treasury shares Total CONTENTS Letter from the Board of Management Through Our Eyes alstria Stock Group Management Report (separate content) Economics and strategy Financial analysis Report on risks and opportunities Sustainability report Mandatory disclosure Additional Group disclosures Subsequent events and outlook 2 6 16 19 20 25 29 33 33 35 36 2009 2008 Change (%) 102,510 91,964 – 79,651 32,690 – 1.44 1,425,440 1,766,134 634,185 35.9% 102,055 93,222 – 56,000 39,415 – 1.02 1,805,265 1,873,493 729,667 38.9% 1,131,949 1,143,826 11.32 11.32 40.3% 100% 13.03 13.03 40.3% 100% 55,997,626 54,624,245 2,374 1,375,755 56,000,000 56,000,000 Management Compliance Statement Auditors’ Report Corporate Governance Report of the supervisory board Corporate governance statement Remuneration report REIT Disclosures and Portfolio REIT declaration REIT memorandum Valuation report List of all properties Other Information Glossary 0.4 – 1.4 – 42.2 – 17.1 – 41.2 – 21.0 – 5.7 – 13.1 – 3.0 pp – 1.0 – 13.1 – 13.1 0.0 pp 0.0 pp 2.5 – 99.8 0 81 82 83 83 86 90 92 92 93 94 102 108 108 Consolidated Financial Statements (separate content) 37 Financial calendar/Contact/Imprint Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of ﬁ nancial position Consolidated statement of changes in equity Consolidated statement of cash ﬂ ow Notes to the consolidated ﬁ nancial statements 38 39 40 42 43 44 alstria ofﬁ ce REIT-AG Bäckerbreitergang 75 20355 Hamburg Germany Phone: +49 (0) 40 226341-300 +49 (0) 40 226341-310 Fax: www.alstria.com 9 0 0 2 t r o p e R l a u n n A G A - T I E R e c fi f o a i r t s l a ... 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AnnuAl RepoRt 2009 KEY FigurEs EUR k Revenues and earnings Revenues Net rental income Consolidated loss / profit for the period FFO Loss per share (EUR) Balance sheet Investment property Total assets Equity Equity ratio Liabilities NAV/share (EUR) NNNAV/share (EUR) REIT key figures REIT ratio Revenues plus other income from investment properties Stock figures Number of shares (excluding own shares) Number of treasury shares Total CONTENTs Letter from the Board of Management Through Our Eyes alstria Stock Group Management Report (separate content) Economics and strategy Financial analysis Report on risks and opportunities Sustainability report Mandatory disclosure Additional Group disclosures Subsequent events and outlook 2 6 16 19 20 25 29 33 33 35 36 2009 2008 Change (%) 102,510 91,964 – 79,651 32,690 – 1.44 1,425,440 1,766,134 634,185 35.9% 102,055 93,222 – 56,000 39,415 – 1.02 1,805,265 1,873,493 729,667 38.9% 1,131,949 1,143,826 11.32 11.32 40.3% 100% 13.03 13.03 40.3% 100% 55,997,626 54,624,245 2,374 1,375,755 56,000,000 56,000,000 Management Compliance Statement Auditors’ Report Corporate Governance Report of the supervisory board Corporate governance statement Remuneration report REIT Disclosures and Portfolio REIT declaration REIT memorandum Valuation report List of all properties Other Information Glossary 0.4 – 1.4 – 42.2 – 17.1 – 41.2 – 21.0 – 5.7 – 13.1 – 3.0 pp – 1.0 – 13.1 – 13.1 0.0 pp 0.0 pp 2.5 – 99.8 0 81 82 83 83 86 90 92 92 93 94 102 108 108 Consolidated Financial Statements (separate content) 37 Financial calendar/Contact/Imprint Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flow Notes to the consolidated financial statements 38 39 40 42 43 44 alstria office REIT-AG Bäckerbreitergang 75 20355 Hamburg Germany Phone: +49 (0) 40 226341-300 +49 (0) 40 226341-310 Fax: www.alstria.com ... THROUGH OUR EYES ! ‘ As we see it, the German property market looks very stable at the moment.’ ‘ Just recently, we concluded an investment in Frankfurt that we think is most interesting.’ ‘ Ofﬁ ces are relatively easy to manage.’ Germany Real Estate Yearbook 2010, Leading Investors’ Market Commentary, October 2009 Well, we respect anyone’s point of view. But that does not mean we share it. Take a different view to German real estate. OPEN MARKET VALUE OF INVESTMENT PROPERTIES KEY FACTS 2009 FINANCIAL CALENDAR PROFILE alstria ofﬁ ce REIT-AG is an internally managed Real Estate Investment Trust (REIT) solely focused on acquiring, owning and managing ofﬁ ce real estate in Germany. alstria was founded in January 2006 and was converted into the ﬁ rst German REIT in October 2007. Its headquarters are based in Hamburg. alstria ofﬁ ce REIT-AG owns a diversiﬁ ed portfolio of properties across attractive German ofﬁ ce real estate markets. Its current portfolio comprises 77 properties with an aggregate lettable space of approx. 867,000 sqm and is valued at approx. EUR 1.6 bn. alstria intends to expand its portfolio in the upcoming years as part of a sustainable growth strategy. This strategy is based on selective investments and active asset and portfolio management, as well as on establishing and maintaining good relationships with its key customers and decision-makers. AS THE FIRST GERMAN REIT, WE HAVE > a unique business model: we buy and manage ofﬁ ce real estate > a clear focus on one country: Germany > a long-term orientation toward our tenant relationships > an entrepreneurial view of market opportunities > Revenues increased to EUR 102,510 k > Funds from operations at EUR 32,690 k Hamburg > Vacancy rate brought down from 5.9% to 5.7% Hanover Potsdam Berlin Detmold Magdeburg Dusseldorf Neuss Essen Dortmund Wuppertal Cologne Bonn Halle Leipzig Dresden Erfurt Jena Zwickau > Outstanding exposure of its main syndicated loan facility reduced by around EUR 241 m > Binding and notarised sales agreements for 14 properties concluded of around EUR 226 m Wiesbaden Darmstadt Frankfurt Wurzburg Mannheim Nuremberg Stuttgart Augsburg Munich More than EUR 100 m Between EUR 50 m and EUR 100 m Between EUR 25 m and EUR 50 m Between EUR 10 m and EUR 25 m Between EUR 5 m and EUR 10 m Between EUR 1 and EUR 5 m TOTAL PORTFOLIO BY UTILISATION ALSTRIA’S CORE TENANTS 2009 THE KEY METRICS FOR THE PORTFOLIO % % Ofﬁ ce Retail Residential Others 93 2 1 4 City of Hamburg Daimler AG Bilﬁ nger Berger AG Siemens AG Barmer EK Deutsche Renten- versicherung Bund Rheinmetall HUK-COBURG City of Hanover Others 40 15 6 5 4 4 4 2 1 19 as of Dec. 31 Number of properties Number of joint ventures Market value (EUR bn) Contractual rent (EUR m/annum) Valuation yield (contractual rent/OMV) Lettable area (k sqm) Vacancy (% of lettable area) WAULT (years) Average rent/sqm (EUR/month) 2009 77 1 1.6 97.5 6.2% 867 5.7% 9.6 9.93 2008 89 – 1.8 106.5 5.9% 944 5.9% 10 9.41 Date Feb. 25, 2010 Mar. 16–19, 2010 Mar. 24–25, 2010 Mar. 31, 2010 Mar. 31, 2010 Apr. 20–21, 2010 May 11, 2010 May 26–27, 2010 Jun. 9, 2010 Jun. 16, 2010 Aug. 11, 2010 Oct. 4–6, 2010 Nov. 10, 2010 Event Analysts’ Conference 5th HSBC S&M Real Estate and Infrastructure Conference (Frankfurt) Trade fair mipim (Cannes) Analysts’ Conference 10th Annual Pan European Small and Mid Cap Conference (Deutsche Bank) (London) Publication of Annual Report Publication of the full year 2009 ﬁ nancial results (Frankfurt) Annual Press Conference Annual Press Conference (Frankfurt) Analysts’ Conference Global Real Estate Conference (Credit Suisse) (London) Publication of Q1 Report Interim Report (Hamburg) Roadshow European Property Seminar (Kempen) (Amsterdam) Analysts’ Conference Pan European Real Estate Conference (Credit Suisse) (London) Annual General Meeting Shareholders’ Meeting (Hamburg) Publication of Q2 Report Half-Year Interim Report (Hamburg) Trade fair EXPO REAL (Munich) Publication of Q3 Report Interim Report (Hamburg) CONTACT alstria ofﬁ ce REIT-AG Bäckerbreitergang 75 20355 Hamburg, Germany Phone: +49 (0) 40 226341-300 Fax: +49 (0) 40 226341-310 www.alstria.com Investor Relations Phone: +49 (0) 40 226341-329 Fax: +49 (0) 40 226341-310 E-mail: ir@alstria.de http://investor-relations.alstria.com IMPRINT Concept, design and realisation Kirchhoff Consult AG, Hamburg, Germany Photography Denz, Hamburg, Germany alstria ofﬁ ce REIT-AG is a member of DIRK (Deutscher Investor Relations Verband, the German Investor Relations Association). Other reports issued by alstria ofﬁ ce REIT-AG are posted on the Company’s homepage. Forward-looking statements This Annual Report contains forward-looking statements. These statements represent assessments which we have made on the basis of the information available to us at the time. Should the assumptions on which the statements are based not occur, or if risks should arise – as mentioned in the risk report – the actual results could differ materially from the results currently expected. Note This report is published in German (original version) and English (non-binding translation). OPEN MARKET VALUE OF INVESTMENT PROPERTIES KEY FACTS 2009 FINANCIAL CALENDAR PROFILE alstria ofﬁ ce REIT-AG is an internally managed Real Estate Investment Trust (REIT) solely focused on acquiring, owning and managing ofﬁ ce real estate in Germany. alstria was founded in January 2006 and was converted into the ﬁ rst German REIT in October 2007. Its headquarters are based in Hamburg. alstria ofﬁ ce REIT-AG owns a diversiﬁ ed portfolio of properties across attractive German ofﬁ ce real estate markets. Its current portfolio comprises 77 properties with an aggregate lettable space of approx. 867,000 sqm and is valued at approx. EUR 1.6 bn. alstria intends to expand its portfolio in the upcoming years as part of a sustainable growth strategy. This strategy is based on selective investments and active asset and portfolio management, as well as on establishing and maintaining good relationships with its key customers and decision-makers. AS THE FIRST GERMAN REIT, WE HAVE > a unique business model: we buy and manage ofﬁ ce real estate > a clear focus on one country: Germany > a long-term orientation toward our tenant relationships > an entrepreneurial view of market opportunities > Revenues increased to EUR 102,510 k > Funds from operations at EUR 32,690 k Hamburg > Vacancy rate brought down from 5.9% to 5.7% Hanover Potsdam Berlin Detmold Magdeburg Dusseldorf Neuss Essen Dortmund Wuppertal Cologne Bonn Halle Leipzig Dresden Erfurt Jena Zwickau > Outstanding exposure of its main syndicated loan facility reduced by around EUR 241 m > Binding and notarised sales agreements for 14 properties concluded of around EUR 226 m Wiesbaden Darmstadt Frankfurt Wurzburg Mannheim Nuremberg Stuttgart Augsburg Munich More than EUR 100 m Between EUR 50 m and EUR 100 m Between EUR 25 m and EUR 50 m Between EUR 10 m and EUR 25 m Between EUR 5 m and EUR 10 m Between EUR 1 and EUR 5 m TOTAL PORTFOLIO BY UTILISATION ALSTRIA’S CORE TENANTS 2009 THE KEY METRICS FOR THE PORTFOLIO % % Ofﬁ ce Retail Residential Others 93 2 1 4 City of Hamburg Daimler AG Bilﬁ nger Berger AG Siemens AG Barmer EK Deutsche Renten- versicherung Bund Rheinmetall HUK-COBURG City of Hanover Others 40 15 6 5 4 4 4 2 1 19 as of Dec. 31 Number of properties Number of joint ventures Market value (EUR bn) Contractual rent (EUR m/annum) Valuation yield (contractual rent/OMV) Lettable area (k sqm) Vacancy (% of lettable area) WAULT (years) Average rent/sqm (EUR/month) 2009 77 1 1.6 97.5 6.2% 867 5.7% 9.6 9.93 2008 89 – 1.8 106.5 5.9% 944 5.9% 10 9.41 Date Feb. 25, 2010 Mar. 16–19, 2010 Mar. 24–25, 2010 Mar. 31, 2010 Mar. 31, 2010 Apr. 20–21, 2010 May 11, 2010 May 26–27, 2010 Jun. 9, 2010 Jun. 16, 2010 Aug. 11, 2010 Oct. 4–6, 2010 Nov. 10, 2010 Event Analysts’ Conference 5th HSBC S&M Real Estate and Infrastructure Conference (Frankfurt) Trade fair mipim (Cannes) Analysts’ Conference 10th Annual Pan European Small and Mid Cap Conference (Deutsche Bank) (London) Publication of Annual Report Publication of the full year 2009 ﬁ nancial results (Frankfurt) Annual Press Conference Annual Press Conference (Frankfurt) Analysts’ Conference Global Real Estate Conference (Credit Suisse) (London) Publication of Q1 Report Interim Report (Hamburg) Roadshow European Property Seminar (Kempen) (Amsterdam) Analysts’ Conference Pan European Real Estate Conference (Credit Suisse) (London) Annual General Meeting Shareholders’ Meeting (Hamburg) Publication of Q2 Report Half-Year Interim Report (Hamburg) Trade fair EXPO REAL (Munich) Publication of Q3 Report Interim Report (Hamburg) CONTACT alstria ofﬁ ce REIT-AG Bäckerbreitergang 75 20355 Hamburg, Germany Phone: +49 (0) 40 226341-300 Fax: +49 (0) 40 226341-310 www.alstria.com Investor Relations Phone: +49 (0) 40 226341-329 Fax: +49 (0) 40 226341-310 E-mail: ir@alstria.de http://investor-relations.alstria.com IMPRINT Concept, design and realisation Kirchhoff Consult AG, Hamburg, Germany Photography Denz, Hamburg, Germany alstria ofﬁ ce REIT-AG is a member of DIRK (Deutscher Investor Relations Verband, the German Investor Relations Association). Other reports issued by alstria ofﬁ ce REIT-AG are posted on the Company’s homepage. Forward-looking statements This Annual Report contains forward-looking statements. These statements represent assessments which we have made on the basis of the information available to us at the time. Should the assumptions on which the statements are based not occur, or if risks should arise – as mentioned in the risk report – the actual results could differ materially from the results currently expected. Note This report is published in German (original version) and English (non-binding translation). 2 Letter from the Board of Management alstria Annual Report 2009 Sustainability has been one of the major topics in real estate in 2009. While a lot of companies are linking the sustain ability concept to green building, we went back to the roots. The United Nations deﬁ nition of sustain- able development is ‘a development that meets the needs of the present without compromising the ability of future generations to meet their own needs’. We felt that it was important for real estate companies to look at the future from a sustainable perspective. From our point of view, it was most important to consider the poten- tial implications of our actions on existing shareholders, as well as to position alstria for the future. (Re)Acting under pressure barely leads to sustainable development. Anticipating sometimes does. We have addressed current issues while trying to build the ground for the future development of the Company. We have refused radical and value-destructive measures, and adopted a structured step-by-step approach to reinforce our balance sheet, while keeping the focus on strong asset management. Since mid-2008, we have been preparing alstria for a continuing downturn in the real estate industry. Our analysis at the time, which still holds true today, is that unless the banking system is able to recapitalise, and we see the return of Corporate Mortgage Back Securities (CMBS) to the market, the real estate investment market is heading towards volatile waters. Our expectations for the investment market development may have looked pessimistic in January 2009, but proved to be realistic in December. Back in July 2008, we decided to focus on three targets in order to sail safely towards the next growth opportunity: (i) maintain the Loan To Value (‘LTV’) on our main syndicated facility close to but below 60%, (ii) reduce the EUR 1.1 bn balloon payment on this facility (which is due at the end of 2011), and (iii) ﬁ nally, to stay focused on the assets. We have been able to achieve the ﬁ rst target as we reduced the balloon payment from EUR 1.1 bn in mid-2008 down to EUR 660 m at the end of Q1 2010. This was done through a selective number of reﬁ nancing transac- tions that extended the overall maturity of alstria’s debt while keeping its ﬁ nancing cost under control, as well as through selective mature asset disposals. In total, in what is said to be one of the worst years for real estate investment, alstria has been able to reﬁ nance a total of EUR 241 m and achieved sales of EUR 226 m. More importantly, alstria was able to value its real estate in each of these transactions at or above its latest balance sheet valuation, thereby demonstrating the strength and reliability of its valuation process. As a result of these transactions, the G-REIT equity ratio has substantially improved from 39% to around 43% as of March 31, 2010, but still slightly below the 45% hurdle rate that will be required by year-end 2010. Market transactions on more than 34% of the portfolio in terms of both asset numbers and values have veriﬁ ed our property valuations. Nevertheless, the year-end valuation process ended up showing a non-cash valuation loss of EUR 86 m, which, in turn, led to a non-cash net loss of the same magnitude. While the long-term leased assets and most of the Hamburg portfolio proved resilient in terms of value, short-term leased assets suffered from further yield expansion in the market. Although a number of market commentators speak about the stabil- ity of the German real estate market, we felt that the lack of transactions and the limited bankability of this asset class should, one way or another, be reﬂ ected in the valuation process. This is in line with little inclination in the German commercial property market for any kind of risk taking. The anticipation of these market develop- ments has allowed alstria to keep its main LTV close to but below 60%, as we have used part of the proceeds of the assets sales to pay down the syndicated loan. Through Our Eyes 4 Letter from the Board of Management alstria Annual Report 2009 More importantly, we have continued our focus on operations and asset management, and delivered on the guidance to the market. With revenues at EUR 102.5 m, and funds from operations (FFO) at EUR 32.7 m, alstria has once again demonstrated the strength of its underlying business. The Company has scored a number of operating successes, which include the grant of a building permit for its landmark Alte Post development in Hamburg, the lease-up of the full 3,500 sqm of ofﬁ ce space of this development project, as well as the execu- tion of the largest ofﬁ ce portfolio disposal in Germany. The asset management efforts have led the Company to record a 1.4% increase on the like-for-like rental income of its investment portfolio. Again, we would like to defend our view here that a high value creation in the German real estate scene can only come from hard work on the real estate assets, and their tight management. That is by far the most important thing for a real estate company, and we are determined to keep our eyes on the ball. ‘ A high value creation in the German real estate scene can only come from hard work on the real estate assets, and their tight management.’ There is no fundamental reason to expect a material change in the real estate investment market in 2010. Although the overall sentiment is improving among market participants, from our standpoint, the fundamental reasons for the lack of transactions are still around. Signiﬁ cant need for de-leveraging and debt overhang are still there, and looking at the global industry, little progress was made at both ends during the last 24 months. The sale of mature assets allows alstria to start the year with enough ﬁ repower to look for opportunities in the investment market, and take advantage of attractive acquisitions that may be spotted. alstria can also rely on its strong underlying cash ﬂ ow, with revenues expected to be around EUR 89 m and FFO around EUR 27 m for the year 2010. We have always looked at alstria as one of the pioneer in the real estate ofﬁ ce scene and are preparing the Company to position itself as such – and that in a sustainable manner. Restarting the growth of the Company is one of our key focuses for the future, and we are committed to achieving that goal. This requires that we see enough opportunities in the market that are correctly priced from a risk-return perspective. At the time we are writing this letter, this is clearly not the case. Markets, however, have proven in the past that they can change rapidly, and we should be ready for the change. Sustainability is also about environment and community engagement – not only about sustainable growth. As the management of alstria, we are deeply committed to these concepts. We are looking forward to leading the German market again, and to being among the ﬁ rst German real estate companies to publish a sustainability report in the near future. Yours sincerely, Olivier Elamine Alexander Dexne Chief Executive Ofﬁ cer (CEO) Chief Financial Ofﬁ cer (CFO) Olivier Elamine Chief Executive Ofﬁ cer (CEO) since November 2006 Alexander Dexne Chief Financial Ofﬁ cer (CFO) since June 2007 QUALITY PORTFOLIO alstria owns a diversiﬁ ed portfolio of properties across the most attractive German ofﬁ ce real estate markets. It mainly consists of mid-sized prime and long-lease assets, fea- turing an average unexpired lease term of 9.4 years and an operational vacancy rate of 6.0%. With more than 80% of rental income generated from local authorities and blue chip corporations, our tenant structure is exceptionally good. ACTIVE MANAGEMENT With our buy-and-manage strategy, we established a new approach of real estate management. Our asset manage- ment is not a static exercise, but a dynamic process. We not only leverage the value creation potential within our customer base – with our eyes and ears always open to the market, we also identify and react to risks and oppor- tunities early on. TENANT RELATIONSHIPS alstria’s aim is to establish and maintain close, long-term relationships with its tenants. We have proved more than once that there is no contradiction in reducing overall real estate costs for our tenants through optimised space util- isation, and simultaneously increasing alstria’s returns. In short: We create win-win scenarios. Based on this concept, we signed two major 15-year lease contracts with one of our major tenants in 2009. PASSION AND EXPERTISE For us, real estate management is not only a question of know how, it is also a question of passion. Although still a young company, we combine in-depth knowledge in the ﬁ elds of high-proﬁ le redevelopments and space optimisation with the willingness to go the extra mile. Furthermore, alstria is driven by a vivid culture of corporate responsibility – we strongly believe in the idea of dialogue and partnership as the foundation of long-term success. STEP BY STEP alstria does not strive for big-bang solutions. We are con- vinced that sustainable success can be the sum of many well-reﬂ ected decisions – even more in a difﬁ cult market environment. In 2009, one of the worst years for real estate ﬁ nancing, we started by renegotiating our debt covenant and gradually reduced our syndicated loan from EUR 1.1 bn to EUR 0.66 bn, executing EUR 226 m of sales of real estate assets and small portfolios at or above book value and enter- ing into six new selected reﬁ nancing agreements. 16 alstria Stock alstria Annual Report 2009 ALSTRIA STOCK STOCK MARKETS IN GENERAL strong recovery began, which resulted in the year’s peak in Octo- ber 2009. The EPRA indices for Germany and Europe in 2009 gained In the course of ﬁ rst half of the year 2009 stock markets were charac- 13% and 30%, respectively, and stock prices of individual companies terised by high volatility on low share price levels. In the third quarter followed that trend. of 2009, a rebound began that proved to be stable until the end of the year. Starting from the 2008 year-end level at 4,800 points, the DAX decreased to around 3,700 points in March 2009. After a DEVELOPMENT OF ALSTRIA’S SHARE PRICE recovery period, a second low point of 4,600 points occured in July 2009. From then on the DAX increased gradually to around 6,000 alstria’s share started with a price of EUR 5.01 in 2009. Following a points at the year-end of 2009. low point level of EUR 3.00 at the beginning of March 2009, over the following months alstria’s share price recovered to above EUR 8 from The decrease in the ﬁ rst half of the year can be attributed to the September 2009 onwards. The year-end closing price of alstria’s share ﬁ nancial crisis that emerged in the previous year. The subsequent was EUR 7.50. For the whole year this is an increase of 50%, outper- upswing reﬂ ects the markets’ conviction that the crisis on the ﬁ nancial forming its key comparables by far. markets will not affect the business situation of many companies in such a negative way as was previously estimated. In a year-on-year The Company’s annual general meeting, held on June 10, 2009, comparison the DAX improved by 24% in 2009. The MDAX and the resolved to grant a dividend entitlement of EUR 0.52 per share out- SDAX exceeded this positive development. The MDAX closed 34% standing for the 2008 ﬁ nancial year. This represents a total dividend and the SDAX 27% higher as compared to the beginning of the year. of EUR 28,423 k, fully covered by the Company’s recurring cash ﬂ ow. REAL ESTATE STOCKS alstria was the ﬁ rst German company to give its shareholders the opportunity to swap their dividend rights for shares. For the purpose of this dividend exchange offer, the Company provided up to 1,340,134 The development of real estate stocks was not detached from the of its treasury shares. The stock dividend offer was oversubscribed by development of the stock markets in general. Real estate stock indices more than 100%, thus representing broad acceptance by the share- had been under pressure due to the sub-prime crisis throughout the holders and making it a favourable success for the Company. year 2008. The year 2009 started with a downswing. Afterwards, a SHARE PRICE DEVELOPMENT December 30, 2008 – EUR 4.95 – indexed to 100 180 160 140 120 100 80 60 Dec. 08 Feb. 09 Apr. 09 Jun. 09 Aug. 09 Oct. 09 Dec. 09 alstria EPRA Europe EPRA Germany SDAX DAX alstria Annual Report 2009 alstria Stock 17 SHARE DATA Stock ID code AOX Securities identiﬁ cation number A0LD2U ISIN – International Securities Identiﬁ cation Number DE000A0LD2U1 Common code Reuters symbol Bloomberg symbol Market segment Indices Trading ﬂ oors 028600810 AOXG.DE AOX GY Prime Standard SDAX, EPRA, German REIT Index XETRA, Frankfurt (Prime Standard); Open Market in Berlin, Hamburg, Munich, Stuttgart Designated Sponsors Deutsche Bank AG; J.P. Morgan Total number of shares out - standing as at Dec. 31, 2009 55,997,626 (56,000,000 less 2,374 own shares) INTENSE INVESTOR RELATIONS ACTIVITIES In 2009, alstria’s investor relations activities focussed on informing investors, ﬁ nancial analysts and the business press about alstria’s development speciﬁ cally, 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: INVESTOR RELATIONS Feb. 5, 2009 Feb.10, 2009 Mar. 4, 2009 Roadshow DZ Bank (Zurich) Roadshow DZ Bank (Wien) Analyst Conference 4th HSBC S&M Real Estate Conference (Frankfurt) Mar. 5–6,2009 Roadshow European Property Seminar, Kempen (New York) COVERAGE BY ANALYSTS Mar. 10–13, 2009 Trade fair mipim (Cannes) Being the ﬁ rst German REIT-AG, alstria is actively accompanied by a Mar. 31, 2009 number of ﬁ nancial journalists and ﬁ nancial analysts from renowned investments banks. In a number of reports, alstria’s strategy and real estate portfolio were analysed. The following investment banks reported on alstria: INVESTMENT BANKS AND ANALYSTS Bankhaus Lampe Frank Neumann Bank Sal Oppenheim Jr & Cie Sven Janssen Berenberg Bank Kai Klose Commerzbank Corporates & Markets Burkhard Sawazki Credit Suisse Deutsche Bank DZ Bank Robert Stassen Alexander Hendricks Hasim Sengül HSBC Trinkaus & Burckardt AG Thomas Martin HSH Nordbank J.P. Morgan Kempen & Co Steffen Wollnik Osmann Malik Thomas van der Meij M.M. Warburg & Co Ralf Dibbern Rabo Securities Société Générale UniCredit VISCARDI AG Ruud Van Maanen Marc Mozzi André Remke Peter-Thilo Hasler Publication of Annual Report Publication of the full year 2008 ﬁ nancial results (Frankfurt) Mar. 31, 2009 Annual Press Conference Annual Press Conference (Frankfurt) Apr. 4, 2009 Apr. 7, 2009 Roadshow REITDay 2009 (Frankfurt) Roadshow Société Générale (Paris) Apr. 15–16, 2009 Roadshow Rabobank (London) May 15, 2009 May 20, 2009 May 27–28, 2009 Publication of Q1 report Interim Report (Hamburg) Roadshow Kempen (London) Analyst Conference 7th Kempen Europena Property Seminar (Amsterdam) Jun. 3, 2009 Roadshow UniCredit (Frankfurt) Jun. 3–4, 2009 Roadshow J.P. Morgan (New York + Boston) Jun. 10, 2009 Jun. 24, 2009 Jul. 2, 2009 Jul. 6–8, 2009 Annual General Meeting Shareholders’ Meeting (Hamburg) Analyst Conference German + Austrian Corporate Conference (Frankfurt) Analyst Conference Facets of Real Estate (Frankfurt) Roadshow J.P. Morgan (Australia) 18 alstria Stock alstria Annual Report 2009 INVESTOR RELATIONS SHAREHOLDER STRUCTURE Aug. 14, 2009 Publication of Q2 report Half-year interim Report (Hamburg) Aug. 17 –18, 2009 Aug. 20, 2009 Sept. 8 –10, 2009 Sept. 15, 2009 Sept. 17, 2009 Sept. 22, 2009 Oct. 1, 2009 Oct. 5, 2009 Oct. 12 –13, 2009 Oct. 29, 2009 Nov. 4 – 5, 2009 Nov. 13, 2009 Nov. 16 –17, 2009 Nov. 18, 2009 Dec. 1, 2009 Roadshow J.P. Morgan (London) Roadshow Commerzbank (Zurich) Roadshow J.P. Morgan (USA) Roadshow J.P. Morgan (Paris) Analyst Conference Société Générale (New York) Analyst Conference UniCredit (Munich) Analyst Conference Société Générale (London) Trade fair EXPO REAL (Munich) Roadshow J.P. Morgan (Benelux) Roadshow J.P. Morgan (Switzerland) Analyst Conference Berenberg Bank (London) Publication of Q3 report Interim Report (Hamburg) Roadshow Kempen (London) Roadshow Kempen (Paris) Analyst Conference Commerzbank (Frankfurt) As of December 31, 2009, Captiva 2 Alstria Holding S.à r.l. held a 61% stake in alstria ofﬁ ce REIT-AG. The remainder of the shares are deﬁ ned as free ﬂ oat, out of which Morgan Stanley and Cohen & Steers held more than 2.5% each. At the balance sheet date, alstria held no material own shares any more as a result of the stock divi- dend payment. SHAREHOLDER STRUCTURE BY INVESTOR % Captiva 2 Alstria Holding S.à r.l. 61.0 Free Float 39.0 KEY FIGURES PER SHARE EUR High Low Opening price Year end/closing price Weighted average number of shares outstanding Average trading volume in shares (XETRA) Market capitalisation as at Dec. 31 (EUR m) 2009 8.50 3.00 5.01 7.50 2008 13.69 2.50 10.40 4.95 55,306,000 54,697,000 81,665 85,906 420.00 277.20 Total number of shares as at Dec. 31 56,000,000 56,000,000 Total number of shares outstanding as at Dec. 31 (excluding own shares) Dividend per share1 FFO per share NAV per share 1 For 2009: proposal. 55,997,626 54,624,245 0.50 0.58 11.32 0.52 0.70 13.03 DETAIL INDEX GROUP MANAGEMENT REPORT Economics and strategy Economic conditions Strategy and structure Portfolio overview Financial analysis Earnings position Financial and asset position Report on risks and opportunities Risk report Opportunities of the Group Sustainability report Mandatory disclosure Disclosure requirements in accordance with Section 315 (4) of the German Commercial Code (HGB) for the ﬁ nancial year 2009 and explanatory report of the management board Additional Group disclosures Employees Remuneration report Group and dependent-company report Subsequent events and outlook Subsequent events Outlook 20 20 21 22 25 25 27 29 29 32 33 33 33 35 35 35 35 36 36 36 20 Group Management Report alstria Annual Report 2009 GROUP MANAGEMENT REPORT ECONOMICS AND STRATEGY (BUSINESS OVERVIEW) Economic conditions Although the equity capital markets have seen some of the largest Take up in major German cities The vacancy rate of ofﬁ ce proper- ties in German cities increased from 8.9 % in 2008 to 9.9 % in 2009, which represents total vacancies of 7.89 m sqm. Comparing the six biggest German cities, the highest vacancy rate was noted in Frank- furt (13.6 %), followed by Dusseldorf (12.3 %), Munich (9.6 %), gains on record in 2009, the year was, as expected, challenging from Berlin (9.4 %), Hamburg (8.3 %) and Stuttgart (6.7 %). The highest a macro economic perspective. increase of vacant areas in ofﬁ ce properties from 2008 to 2009 was registered in Dusseldorf (+20.4 %). Germany’s GDP was down 5.0 %in 2009.* The unemployment rate for the full year was 8.2 %,** which reﬂ ects an increase of 0.4 per- New lease-up New lease contracts for over 2.1 m sqm ofﬁ ce space centage points over 2008. The ﬁ rst signs of an economic rebound have been signed in the six major German cities. This reﬂ ects a at the end of the year were mainly driven by economic stimulus downturn of 0.8 m sqm or 28 % compared to the previous year. In programmes established by the German government. Berlin and Stuttgart the downturn ranged between 12 % and 13 %, in Frankfurt and Munich between 29 % and 32 %, whereas the highest The government stimulus packages have imposed signiﬁ cant con- decline in total new lease-up was registered in Dusseldorf (– 40 %). In straints on the national budget, with public deﬁ cits standing at record Hamburg, new lease-up totalled 391,800 sqm, representing a decline levels in 2010 and, therefore, setting limits to the government’s of 28 % in comparison with 2008. ﬁ nancial ﬂ exibility if there should be a double-dip recession. As expected, the real estate market was extremely challenging in nearing completion, the square meter area of new buildings completed 2009, both for investment and on the leasing front. Tenant demand in 2009 is higher than in 2008. With approximately 1,100,000 sqm, was down year on year in all major German cities, and investment the delivery of new ofﬁ ce and commercial space increased by 23 % volumes were amongst the lowest since 1990. in comparison with the previous year. For 2010, it is envisaged that newly completed ofﬁ ce space will remain at approximately the same New ofﬁ ce supply As developments launched in 2006 and 2007 are More importantly, it is uncertain whether all banks have been able level as in 2009. to strengthen their balance sheets in a meaningful manner. Granting of loans remained relatively limited in 2009, and although there was Investment markets As expected, the total registered investment improved liquidity in the mortgage credit market towards the end volume for German commercial real estate in 2009 has been signiﬁ - of the year, the volumes on offer appear far lower than are required cantly lower than in the previous year. Total year-on-year investment to sustain global recovery in the market. It is also evident that the volume was down by approximately 49 % (around EUR 10.55 bn for Commercial Mortgage Backed Securities (CMBS) market will remain commercial assets). In the six most important German locations for inactive for the foreseeable future. ofﬁ ce space, investment markets dropped by 37 % from EUR 9.2 bn to EUR 5.8 bn. Overview of the German ofﬁ ce property market*** Development of ofﬁ ce rents The overall development of rents in the The nature of the transactions that have been completed has also German ofﬁ ce property market mirrored the growth of the German undergone a fundamental change compared with 2007 and 2008. The economy. Rents started to decline at the end of 2008 and continued ﬁ nancial year 2009 was characterised by a number of smaller transac- to fall throughout 2009. Prime rents fell in almost all large cities in Ger- tions (less than EUR 50 m), limited to single assets. There were a small many. Whilst they decreased by around 2 % in Hamburg (EUR 23.00 number of completed portfolio transactions, which represents less than per sqm), Munich prime rents (EUR 28.50 per sqm) were 7 % lower, 20 % of the total investment market. Real estate investors have also Frankfurt (EUR 34.00 per sqm) prime rents were 8 % lower and Berlin focused mainly on long-term leased assets, representing the major (EUR 20.00 per sqm) prime rents were 9 % lower than in 2008. share of the commercial real estate transactions. Short-dated assets or large properties remained under pressure with limited or no demand. * Statistisches Bundesamt (German Federal Statistics Ofﬁ ce). ** Bundesagentur für Arbeit (German Federal Labour Agency). *** All numbers referred to in this section are sourced from Jones Lang Lasalle and BNP Paribas. alstria Annual Report 2009 Group Management Report 21 Economics and strategy Outlook 2010 Economic conditions facing the German real estate of the loan to value (LTV) covenant, and a reduction of the bal- industry are expected to remain challenging in 2010. The Company loon payment that will become due in 2011. alstria believes that a still expects pressure on prime rents, as new stock will be delivered de-leveraging process in the current market environment could only to the market, while second-tier rents are expected to remain at the be achieved by a step-by-step approach. This strategy includes the same level as in 2009. renegotiation of the LTV covenants that took place in the ﬁ rst quarter 2009, selected assets sales and selected non-recourse ﬁ nancing of As mentioned previously, the investment market is highly depend- assets. ent on the availability of ﬁ nancing, and the willingness of banks to provide funding. As long as the banks show limited willingness to By proactive management of its balance sheet, alstria was able to ﬁ nance real estate, it is likely that market conditions will remain chal- meet its short-term LTV target on the main syndicated loan, being lenging. alstria expects that properties with short-term leases will be close, but below 60 % despite the strong decline in the value of the more affected than properties with long-term leases, as banks barely portfolio. At the same time, this structured step-by-step approach provide funding for properties with short-term leases. allowed alstria to reduce the overall balloon payment to EUR 843 m at the end of the year down from EUR 995 m at the beginning of Strategy and structure Against this background of the changing economic environment, the year. alstria focused on regular reviews of its business situation, assets and Despite being faced by the most challenging environment on record liabilities, and on its short- and long-term perspectives. Considering for the investment and credit market, the high quality of the portfolio the conservative nature of alstria’s set-up, analysis of these param- allowed alstria to reﬁ nance around EUR 126 m at an average spread eters leads to the conclusion that the Company is well prepared to of 147 bps, and to dispose selected assets amounting to EUR 141 m. navigate through the difﬁ cult times ahead. These transactions valued the real estate involved in line with IFRS valuations as of December 31, 2008. In addition, alstria agreed terms > alstria has a long-term lease portfolio (around 9.6 years weighted and conditions for further reﬁ nancing of around EUR 115 m and average lease lengths). 80 % of rental income derives from a small for a further asset sale of around EUR 84 m. These transactions are number of high-quality tenants. More than 50 % of rental income expected to be completed in the ﬁ rst quarter of 2010. Further steps is generated from public or public related entities, which are less of this strategy will be executed in the course of 2010. See recent affected by the economical downturn. development and outlook for further details. > alstria pursues a non-trading strategy, and focuses on long-term value creation through asset management. Therefore the slowdown The decline in property valuations had an adverse effect on the in the investment market does not affect the Company’s individual G-REIT equity ratio, which is below the required 45 % for the second business plan, nor does it threaten the Company’s cash projection. year in a row. This should not affect alstria’s tax position in 2010, as > The operating strategy involves helping alstria’s tenants to optimise the G-REIT laws provide for a three-year period of grace to correct their real estate operating costs. There is no contradiction in reduc- the G-REIT equity ratio. ing the overall real estate costs of alstria’s tenants and increasing the returns of alstria. In fact, the current environment could create In 2009, revenues were stable with around EUR 103 m and funds opportunities for alstria at a time when most German corporations from operations (FFO)* were down 17 %, from EUR 39,415 k in 2008 are looking to reduce costs. to EUR 32,690 k. These results are in line with the ﬁ nancial guidance of EUR 102 m in revenues and EUR 32 m of funds from operations. alstria will stay focused on its buy-and-manage strategy. In light of The planned year-on-year decrease in the FFO is mainly driven by the overall economic development, and the liquidity squeeze that was the publicised asset sales, increasing asset management activities and anticipated in the lending market, alstria has proactively focused its the restructuring of the main syndicated loan facility, which increased attention on the management of the maturity proﬁ le of its main syndi- overall ﬁ nancing costs. cated loan facility, and in the management of its debt covenants. As a result, alstria started as early as mid-2008 the proactive management * For further details, please refer to page 25. 22 Group Management Report alstria Annual Report 2009 Portfolio overview On December 31, 2009, alstria’s portfolio consisted of 77 ofﬁ ce Investment decisions at alstria are based on analysis of the local mar- kets and on adequacy of a building within its local environment in buildings with approximately 867,400 sqm of lettable area and a terms of location, size and quality. alstria’s strategy is to enter new contractual vacancy rate of 5.7 %. The portfolio is valued at a yield of markets and build critical mass through long-term secured assets, 6.2 % and the remaining weighted average unexpired lease term at which are mainly acquired through sale-and-leaseback transactions. Once critical mass is achieved, alstria is able to pursue other real estate opportunities, including repositioning and development of assets and additional lease-up risks. Transactions Throughout 2009, alstria continued to pursue its strategy to dispose of selected mature properties at favourable terms. Binding and notarised sales agreements for fourteen properties were concluded in 2009. Ownership of twelve of these fourteen properties has been legally transferred during the ﬁ nancial year. The transfer of beneﬁ ts and burdens for the two remaining properties is expected to take place in the ﬁ rst quarter of 2010. approximately 9.6 years. THE KEY METRICS FOR THE PORTFOLIO1 AS OF DECEMBER 31, 2009 Metric Number of properties Number of joint ventures Market value (EUR bn) Contractual rent (EUR m/annum) Valuation yield (contractual rent/OMV) Lettable area (k sqm) Vacancy ( % of lettable area) WAULT (years) Average rent/sqm (EUR/month) Value 77 1 1.6 97.5 6.2 % 867 5.7 % 9.6 9.93 1 Includes assets held for sale and assets classiﬁ ed under property, plant and equipment. DISPOSALS IN 2009 SUPPORT ALSTRIA’S VALUATIONS Asset Gorch-Fock-Wall 11 Marburger Strasse 10 Eppendorfer Landstrasse 591 Ottenser Marktplatz 10/12 Poststrasse 51 City Hamburg Berlin Hamburg Hamburg Hamburg Portfolio transaction Pan-Germany Sub-total (considering all closed transactions) Portfolio transaction Hamburg Total (considering all signed transactions) 1 In this transaction 94.9 % of the KG-shares were sold. Number of assets Last valuation (EUR k) Avg. lease length Sales price (EUR k) Surplus (EUR k) Surplus ( %) 1 1 1 1 1 7 12 2 14 19,315 12,850 6,440 2,330 5,845 93,800 140,580 75,830 216,410 16.9 6.5 9.4 6.7 3.0 8.1 19,600 12,950 6,622 2,375 6,500 285 100 182 45 655 93,425 – 375 141,472 16.0 84,200 892 8,370 225,672 9,262 1.5 0.8 2.8 1.9 11.2 – 0.4 0.6 11.0 4.3 alstria Annual Report 2009 Group Management Report 23 Economics and strategy In order to meet the requirements of its asset management activi- In 2009 alstria invested around EUR 14 m in ongoing refurbishment ties, in the second quarter 2009 alstria concluded the acquisition of projects. The main part of the 2009 capex investment was linked a vacant property in Hamburg for total consideration (all-in-cost) of to the refurbishment of the Hamburg building Steinstrasse 5 – 7. In around EUR 3.5 m (EUR 1,650 per sqm). The refurbishment process is the next two years, the Company plans to invest between EUR 30 now completed and a lease agreement with a lease length of 15 years and 40 m in the portfolio. These investments depend on ongoing for the entire building was signed in October 2009. lease discussions with existing and potential tenants. Apart from Already in 2008, alstria agreed the terms of a joint venture regard- property Ernst-Merck-Strasse 9 , ‘Bieberhaus’, in Hamburg, which ing the refurbishment of Alte Post (Poststrasse 11) in Hamburg. The comprises the construction of the new Ohnsorg Theatre (EUR 12 m), building permit for the refurbishment of this property was granted and the property Hamburger Strasse 1 – 15 (EUR 14 m) in Hamburg. in the third quarter of 2009. The publicised joint venture became This capex plan is part of alstria’s ongoing asset value enhancement effective in October 2009. alstria’s share in this joint venture is 49 %. programme. the joint venture project Alte Post, major projects are related to the Please refer to the notes for a detailed description of the above transactions. Refurbishment projects Considerable progress was also made with alstria’s refurbishment projects. Lease-ups Leasing activity in 2009 was satisfactory and the vacancy rate was stable. The sale of fully let properties and the commencement of refurbishment of selected assets countervail the deconsolidation of the vacant ‘Alte Post’ property. In 2009, alstria signed new leases* totalling approximately 4,800 sqm. These lease-ups result in a slight decrease of the vacancy rate by 20 bps to 5.7 % or 49,700 sqm. Of > Poststrasse 11, ‘Alte Post’, Hamburg these 49,700 sqm, 15,800 sqm represents strategic vacancy (intended The building permit for the refurbishment of Alte Post, Hamburg, vacancy implemented by alstria as part of its repositioning process for was granted in the third quarter of 2009. The Alte Post building is certain assets), while the remainder is operational vacancy. one of the best-known buildings in the Hanseatic City of Hamburg. It is located at the corner of Poststrasse and Grosse Bleichen, and Based on the strong tenant relationship with its tenants and the strong was built between 1845 and 1847 on the basis of plans by the competence of identifying the tenants' needs, alstria was able to artist and architect Alexis de Chateauneuf. It was last refurbished sign a lease agreement with an existing tenant for a vacant property in the 1970s. This ﬁ rst joint venture is part of alstria’s plans to fund acquired in the second quarter of 2009. This underlines the strong organic growth of the Company. Whilst alstria’s main contribution competence of alstria’s asset management. The lease agreement for to the joint venture will be the building, its two partners will mainly the entire building with a lease length of 15 years was signed in Octo- contribute equity funding. The refurbishment is scheduled to be ber 2009 and commenced in February 2010. alstria fully refurbished the property in the intermediate period. completed by the end of 2011. > Steinstrasse 5 – 7, Hamburg The building, 13,000 sqm pre-let on a 20-year basis to Hamburger Hochbahn AG, is currently undergoing extensive refurbishment. The refurbishment is expected to be completed by April 2010. > Bäckerbreitergang 75, Hamburg The property at Bäckerbreitergang 75 is currently being refurbished and will be completed by mid April 2010. * New leases correspond to lease of vacant space. It does not account for any lease renewal, prolongation or tenant exercise of renewal option. 24 Group Management Report alstria Annual Report 2009 Portfolio valuation alstria’s portfolio is valued in accordance with the RICS Red Book guidance by Colliers CRE, at December 31, 2009. Following the deterioration of the investment market, alstria’s portfolio was not immune to the overall fall in property prices. However, whilst last year’s devaluation was characterised by yield expansion across the board, in 2009 the devaluation has mainly affected speciﬁ c assets for which the market price discovery process is ongoing. The total valuation loss on investment properties is around EUR 86 m for the full year. This valuation adjustment takes the overall value of all alstria properties to EUR 1,601 m. For further information about the valuation of alstria’s portfolio please refer to the valuation certiﬁ - TOTAL PORTFOLIO BY UTILISATION % Ofﬁ ce Retail Residential Others cate of Colliers CRE. ALSTRIA’S CORE TENANTS 2009 Tenants Our key focus on a set number of major tenants is still one of the main characteristics of the alstria portfolio. More than 80 % of total revenues are generated by alstria’s top nine tenants. The 2009 port- folio also reﬂ ects the clear focus on the ofﬁ ce asset class. Of total lettable area, 93 % is dedicated to ofﬁ ces. % City of Hamburg Daimler AG Bilﬁ nger Berger AG Siemens AG Barmer EK Deutsche Rentenversicherung Bund Rheinmetall HUK-COBURG City of Hanover Others 93 2 1 4 40 15 6 5 4 4 4 2 1 19 LEASE EXPIRY PROFILE % of annual rent 2012 2011 2010 7.0 7.4 5.9 3.9 4.7 5.2 as per Dec. 31, 2009 as per Dec. 31, 2008 alstria Annual Report 2009 Group Management Report 25 Economics and strategy Financial analysis FINANCIAL ANALYSIS Earnings position Despite asset disposals, earnings remained stable for the ﬁ nan- cial year 2009. Total revenues in this reporting period amount to alstria closed the ﬁ nancial year 2009 with a net operating result before ﬁ nance costs and taxes of EUR – 3,867 k, which was signiﬁ cantly inﬂ uenced by the valuation result. This compares to EUR – 2,738 k for the previous year. EUR 102,510 k (2008: EUR 102,055 k). The reason for this stable FUNDS FROM OPERATIONS AT EUR 0.58 PER SHARE result is based on the fact that the legal transfer of the publicised transactions became mainly effective in Q4 2009 or later. Real estate EUR k 2009 2008 operating expenses represented 9.9 % of revenues or EUR 10,189 k. Net rental income for 2009 was EUR 91,964 k (2008: EUR 93,222 k). The following table shows the key operating ﬁ gures of the audited income statements for the ﬁ nancial years 2009 and 2008: EUR k Gross rental income Net rental income Operational expenses Net other income Net operating income Net result from fair value adjustments on investment properties Net result on disposals of investment properties Net operating result before ﬁ nance costs 2009 102,510 91,964 – 11,177 1,258 82,045 2008 102,055 93,222 – 11,553 2,259 83,928 – 85,887 – 88,116 Pre-tax income (EBT) – 79,541 – 55,925 +/– Net loss from fair value adjust- ments on investment property +/– Net loss from fair value adjust- ments on ﬁ nancial derivatives +/– Proﬁ t/loss on disposal of investment property +/– Non-cash expenses Funds from operations (FFO)2 85,887 88,116 23,294 7,403¹ 25 3,025 32,690 – 1,450 1,271 39,415 1 Fair value loss disregarding realised fair value gains of EUR 2,328 k. 2 FFO 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-ﬂ ow measures as determined in accordance with IFRS. Furthermore, no standard deﬁ nition exists for FFO. Thus, the FFO or measures with similar names as presented by other companies may not necessarily be comparable – 25 1,450 to alstria’s FFO. – 3,867 – 2,738 Funds from operations amount to EUR 32,690 k in 2009 as against EUR 39,415 k in 2008. As a result, FFO per share was EUR 0.58 in the ﬁ nancial year 2009 (2008: EUR 0.70). Favourable effects on recurring expenses due to efﬁ ciency improvement of administrative processes alstria started to improve the efﬁ ciency of administrative processes in The reduction in comparison with 2008 resulted mainly from the increase in ﬁ nancing costs (EUR 4,005 k) and the rise in operating 2008 and continued this project throughout 2009. This allowed alstria expenses, which reﬂ ect increasing asset management activities. Non- to further reduce overhead expenses for external service providers. cash expenses mainly comprise expenses for stock options and proﬁ t participation rights. Operational expenses (including administrative and personnel expenses) were EUR 11,177 k for the year, compared to EUR 11,553 k in 2008. Accordingly, total operating expenses represent 10.9 % of Hedging instruments The devaluation of the ﬁ nancial derivatives was driven by the devel- total revenues (compared to 11.3 % for 2008). This improvement opment of the yield curve in the year 2009. alstria applies hedge shows that implementation of speciﬁ c measures made it possible to accounting on all qualifying hedges in order to limit the impact on enhance efﬁ ciency of overheads. proﬁ t and loss of the volatility of the interest rate markets. This allows the losses or gains on the qualifying part of the derivatives to be Net other income mainly comprises income from deconsolidation recognised under the equity cash ﬂ ow hedge reserve with no effect (EUR 1,290 k), the reversal of accruals (EUR 323 k), income from on income. project expenses (EUR 327 k) and other income (EUR 1,184 k). On the other hand, it comprises expenses of EUR 1,866 k, which rep- resent a provision for a potential liability arising from the real estate assets sold in 2009 (EUR 1,550 k) and other expenses (EUR 315 k). 26 Group Management Report alstria Annual Report 2009 The implementation of the Group-wide reﬁ nancing strategy resulted alstria complied with all ﬁ nancial covenants as at December 31, 2009. in the termination of existing derivatives and the acquisition of new derivatives. Hedged forecast transactions are no longer expected to Total net ﬁ nancing costs increased by EUR 4,005 k to EUR 52,117 k occur due to pre-drawing in the loan repayment schedule as a result in comparison with 2008. EUR 963 k of this increase is based on a of the reﬁ nancing strategy. The cumulative loss that was reported higher average loan level compared to the previous reporting period, in the equity’s hedging reserve in these cases was transferred to the and higher interest spreads due to the reﬁ nancing and renegotiation income statement within ‘Net loss from fair value adjustments on of covenants. EUR 1,136 k relates to additional capitalised transaction ﬁ nancial derivatives’. As a result, EUR 16,331 k has been transferred costs for the renegotiation of the terms for the syndicated loan to be from equity to these income statement as expenses. The contra allocated under the effective interest method. Another EUR 524 k booking entry of this expenses is the equity, which increased by the is derived from the release of transaction costs originally accrued in same amount. Therefore, this expense entry has no effect on the relation to the syndicated loan. EUR 1,382 k of the increase in net Group’s net asset value. ﬁ nancial costs results from a reduction in ﬁ nancial income. An overview of the composition and changes is described in detail in Note 10.8. Consolidated net result driven by non-cash fair value adjustments The resulting loss before tax is EUR 79,541 k for the ﬁ nancial year In the ﬁ nancial year 2009, the effective change in the value of 2009 (2008 loss before tax: EUR 55,925 k). The consolidated net loss the swaps, which is recorded in equity as ‘hedging reserve’, was amounts to EUR 79,651 k (2008 net loss: EUR 56,000 k). The reason EUR – 9,952 k. The fair value changes of derivatives not categorised for the decrease in the consolidated net result is a signiﬁ cant increase as cash ﬂ ow hedges is recognised in the income statement under of the net loss on ﬁ nancial derivatives (EUR 23,294 k in 2009, against ‘Net result from fair value adjustments on ﬁ nancial derivatives’. The EUR 5,075 k in 2008). The Company has taken again a high net loss interest expenses on swaps and caps are stated in the ﬁ nancial result. from fair value adjustments in investment property of EUR 85,887 k (2008: EUR 88,116 k). These valuation effects amount together to The fact that alstria’s debt exposure is fully hedged by ﬁ nancial EUR – 109,181 k and have, like in 2008, a signiﬁ cant inﬂ uence on the de rivatives ﬁ xes the current overall cost of debt for the existing port- consolidated net result. Loss per share is EUR 1.44 for 2009 (2008 loss per share: EUR 1.02). folio at 4.4 %. Financial result The following table shows the ﬁ nancial result for the period January 1 to December 31, 2009: EUR k 2009 2008 Syndicated loan – interest and similar costs Interest loan reﬁ nanced Interest result derivatives Others Financial expenses Financial income Other ﬁ nancial expenses – 25,638 – 3,918 – 22,433 – 1 – 58,992 – 1,192 10,681 – 1 – 51,990 – 49,503 593 – 720 1,975 – 584 Net ﬁ nancing costs – 52,117 – 48,112 alstria Annual Report 2009 Group Management Report 27 Financial analysis Financial and asset position Financial management Financial management of alstria is performed centrally, with individual As an integral part of the reﬁ nancing strategy, alstria entered into ﬁ ve new non-recourse loans totalling EUR 126 m in 2009. All of the proceeds have been used to repay the main facility. Within this reﬁ - loans being taken out at property and portfolio level. The main goal nancing, alstria agreed a total amount of EUR 8.2 m of capex lines, of alstria’s ﬁ nancial policy is the establishment of secured, long-term which will be used for special refurbishment projects. The average structures to support the development of its business and to provide margin of the new reﬁ nancing is 147 bps. The average costs of debt the required degree of ﬂ exibility. The central management of ﬁ nanc- of the Group remain stable at around 4.4 %. ing forms the basis for harmonised capital procurement, optimised management of interest and liquidity risks and efﬁ ciency improve- Since October 2008, reﬁ nancing, asset disposals and voluntary pre- ments for the whole Group. payments by alstria have reduced the outstanding exposure of its main syndicated loan facility by around EUR 260 m to EUR 843 m. alstria started to restructure its balance sheet in mid 2008 and con- alstria was able to extend the average debt maturity to 2.5 years, as tinued this strategy in 2009. The Company’s key focus was to manage most of the reﬁ nancing has a maturity of around ﬁ ve years or more. the overall balloon payment of its main syndicated loan facility which As 73 % of the ﬁ nancial debt will mature in 2011, alstria will remain will become due at the end of 2011. alstria believes that a de-leverag- focused on downsizing the overall balloon payment of its main syn- ing process in the current market environment can only be achieved dicated loan facility. EUR 89 m are ﬁ nancial liabilities, which will be by a step-by-step approach. Part of this strategy was the disposal of repaid in 2010 with regard to the publicised transactions. Around selective assets and selected non-recourse reﬁ nancing of assets. At 9 %, or EUR 96 m, of the outstanding loans will be due in 2014, and the same time, alstria was able to conclude a renegotiation of its main an additional EUR 95 m or 9 % is due in 2015. syndicated loan facility in the ﬁ rst quarter of 2009. This amendment adjusted the loan to value (LTV) covenant from 60 % to 65 %, and FINANCIAL DEBT BY MATURITIES the interest cover ratio (ICR) covenant was reduced from 160 to 130. EUR k The applicable margin of 65 bps increased by 20 bps in April 2009. The contract parties also agreed to a step-up of the margin if the LTV 2015 95,000 is above 60 %. Provided the Company manages to stay at its targeted capital structure with an LTV below 60 %, this amendment will lead to an annualised increase in interest expenses of around EUR 2 m. NEW MARGIN GRID FOR THE MAIN SYNDICATED LOAN FACILITY LTV ≤ 60 % > 60 % ≤ 62.5 % > 62.5 ≤ 65 % Margin p.a. 85 bps 135 bps 210 bps 2014 95,519 2013 2,079 2012 2,027 2011 2010 88,573 as per Dec. 31, 2009 758,189 28 Group Management Report alstria Annual Report 2009 EXISTING LOAN AGREEMENTS AS PER DECEMBER 31, 2009 Loan Syndicated loan non-recourse loan #1 non-recourse loan #2 non-recourse loan #3 non-recourse loan #4 Total as at Dec. 31, 2009 Maturity Principal amount outstanding (EUR k) LTV covenant ( %) Nov. 29, 2011 Oct. 19, 2015 Dec. 31, 2014 Jun. 30, 2014 Oct. 20, 2014 842,837 95,000 37,283 32,479 33,788 1,041,386 65.0 80.0 80.0 65.0 61.0 Cash position is EUR 146,818 k Cash ﬂ ow from operating activities amounted to EUR 33,171 k. The reduction since 2008 (EUR 40,946 k) has several causes: it is based on an increase in working capital, higher payments for real estate operating expenses and higher interest expenses. The cash ﬂ ow from investing activities mainly comprises cash inﬂ ow EUR k Investment properties at Dec. 31, 2008 Additions Disposals Reclassiﬁ cation Revaluations resulting from the sale of properties (EUR 132,565 k) and the sale of Investment properties at Dec. 31, 2009 a KfW (German Development Bank) bond (EUR 25,156 k). A cash Fair value of development properties outﬂ ow of EUR 21,295 k refers to the acquisition of one property (EUR 3,480 k) and payments for refurbishment measures, tenant incentives and subsequent acquisition costs. Fair value of properties held for sale Interests in real estate partnerships Fair value of immovable assets Next test date Jun. 30, 2010 Sept. 30, 2010 Dec. 31, 2010 Dec. 31, 2010 Dec. 31, 2010 1,805,265 17,467 – 175,580 – 135,825 – 85,887 1,425,440 5,000 135,825 9,046 1,575,311 The cash ﬂ ow from ﬁ nancing activities reﬂ ects loan repayments of EUR 153,058 k, payment of dividends (EUR 22,858 k), add- Reclassiﬁ cations comprise three buildings that have been classiﬁ ed itional transaction costs for the restructuring of the loan facility as investments held for sale following the conclusion of binding sale (EUR 4,357 k) and EUR 6,218 k in payments for the termination and agreements by alstria at the end of 2009. The fair value of immovable acquisition of ﬁ nancial derivatives. Cash inﬂ ow of EUR 128,821 k had assets will be used for the G-REIT equity ratio calculation. been received from reﬁ nancing. As a result, alstria ended the ﬁ nancial year 2009 with a cash position Equity ratio of 35.9 % – G-REIT equity ratio at 40.3 % The balance sheet reﬂ ects a total equity position of EUR 634,185 k of EUR 146,818 k (2008: EUR 31,426 k). The substantial increase of with an equity ratio of 35.9 % (December 31, 2008: EUR 729,667 k EUR 115,392 k is mainly related to the received disposal price from or 38.9 %). The G-REIT equity ratio, which is deﬁ ned as total equity the Pan-German transaction. Investment properties down by 21.0 % Total investment property value amounts to EUR 1,425,440 k in divided by immovable assets, is 40.3 % (December 31, 2008: 40.3 %). According to the G-REIT Act (REITG), the minimum requirement for compliance is a G-REIT equity ratio of 45 % calculated at year-end. The tax position of alstria is unaffected as long as the G-REIT equity comparison with EUR 1,805,265 k at the beginning of the year. The ratio at the end of the business year has not been lower than 45 % for decline in investment properties reﬂ ects the asset sales realised by three consecutive business years. alstria during the year (EUR 176 m), the reclassiﬁ cation of assets held for sale (EUR 136 m) and the revaluation of the remainder of the portfolio (EUR 86 m). alstria Annual Report 2009 Group Management Report 29 Financial analysis Report on risks and opportunities NNNAV at EUR 11.32 per share NNNAV (Triple Net Asset Value according to EPRA*) dropped Organisationally, risk management is assigned to the controlling group. A risk report is prepared by the risk manager on a quarterly from EUR 13.03 per share to EUR 11.32 per share. Dividend pay- basis and provided to the management board. The risk report presents ments (EUR – 22,858 k) and the consolidated loss for the period the organisational measures and regulations that are to be observed (EUR – 79,651 k) were primarily responsible for the reduction in alstria’s with regard to risk identiﬁ cation, assessment, response, reporting and equity. In total, this leads to a reduction in equity from EUR 729,667 k monitoring. At the same time, the comprehensive documentation of to EUR 634,185 k.** this report ensures an orderly assessment, which is conducted by the responsible departments and by the supervisory board. Restructuring measures decrease ﬁ nancial debt In 2009, long-term loans were reduced by 12.8 % to EUR 947,257 k. Risks are assessed according to their likelihood of occurrence and This is mainly related to active management under the restructur- their magnitude of impact. Overall risk is calculated and updated over ing process, including measures such as selective disposals and a speciﬁ c period of time by linking various parameters. By monitoring reﬁ nancing. the risk management system, alstria is able to continually advance Increase in current liabilities Current liabilities amounted to EUR 133,939 k, of which EUR 91,941 k Within the context of its business activities, the alstria Group faces is categorised as short-term loans, representing ﬁ nancial liabilities that various risks, which are explained in greater detail below. will be repaid in the ﬁ rst quarter. Other current liabilities amounting to EUR 9,899 k mainly comprised accruals for outstanding invoices alstria’s risks are divided into four categories: and adapt its structures and processes. (EUR 4,128 k), deferred income (EUR 2,410 k) and other accruals (EUR 2,696 k). REPORT ON RISKS AND OPPORTUNITIES > strategic risks; > operational risks; > compliance risks; > ﬁ nancial risks. Risk report Risk management alstria has implemented structured risk management and an early All material risks to the future development of the Company’s pos- ition and performance are described in this chapter in accordance with alstria’s risk management system. The individual risks described warning system in accordance with Section 91 (2) of the German relate to the planning horizon of 2010 to 2012. Stock Corporation Act (AktG). All risks are recorded, evaluated and monitored on at least a quarterly basis. The goal of alstria Group’s risk management strategy is to minimise or, where possible, com- Strategic risks Strategic risk management consists mainly of the implementation pletely avoid the risks associated with entrepreneurial activity in order of guidelines contained in the investment policy, asset management to safeguard the Group against potential losses and against risks to policy and management rules governing the relationship with the the Company as a going concern. The system of the early detection Group’s core tenants. of risks is in active use. The Company’s risk identiﬁ cation process allows the early identiﬁ cation of sources of any potential new risks Furthermore, risks resulting from the effect of key market dynamics on an ongoing basis. Risk mitigation measures are deﬁ ned in order to on alstria’s business are categorised as strategic risks. In view of the undertake any necessary steps to circumvent the identiﬁ ed risks, i.e. ongoing constrictions in the ﬁ nancial markets, general strategic risks to insure, diversify, manage or avoid risks. For alstria, risk manage- could arise, in particular, if the situation deteriorates once again and ment means the targeted securing of existing and future potential the future macroeconomic environment deteriorates correspondingly. for success, and improving the quality of the Company’s planning As long as there is no dramatic change in the wider economic picture, processes. which seems most likely from today’s point of view, alstria’s strategic risk situation will remain stable. * EPRA: European Public Real Estate Association, Best Practises Committee, Schiphol Airport, Netherlands. ** See also the statement of shareholders’ equity in the consolidated ﬁ nancial statements section, page 42. 30 Group Management Report alstria Annual Report 2009 Operational risks alstria’s operational risk management refers to property-speciﬁ c risks REIT corporations are fully exempted from German corporate income tax (KSt) and German trade tax (GewSt). Subject to certain condi- and general business risks. This includes, among others, vacancy risk, tions, sellers who offered real estate to alstria could beneﬁ t from exit the creditworthiness of tenants and the risk of falling market rents. tax, which gives 50 % relief on German income tax (ESt), German Personnel-related risks such as loss of know-how and competences corporate income tax (KSt) and the German trade tax (GewSt) pay- are also monitored in this risk area. The Company uses various early able on capital gains. warning indicators to monitor these risks. Rent projections, vacancy analyses, the control of the lease terms and termination clauses, and Capital management Capital management activities are designed to ongoing insurance checks are designed to help identify potential maintain the Company’s G-REIT status in order to support its business dangers and risks. Operational risks that could arise as a result of the activities and maximise shareholder value. ﬁ nancial crisis are viewed mainly in terms of a potential shortfall of payment by a major tenant. Due to the fact that all of alstria’s main The Company manages its capital structure and makes adjustments tenants are public institutions or still highly rated, the risk of shortfall in response to changes in economic conditions. In order to maintain in payments is currently limited. or adjust the capital structure, the Group can make a capital repay- ment to its shareholders or issue new shares. No changes were made In the second quarter 2009, alstria started their refurbishment to the aims, guidelines and processes as at December 31, 2009 and projects. All risks related to these projects have increased, e.g. risk of December 31, 2008. not-in-time completion, risk of budget exceedance, as well as the risk of deﬁ ciencies in the construction. The Company installed a project The capital structure is monitored by the Company using Key Per- controlling and a budget process to counteract the risks. formance Indicators (KPIs) relevant for classiﬁ cation as a G-REIT. The Compliance risks G-REIT legislation alstria is registered in the commercial register as a German REIT-AG (G-REIT). The German REIT segment allows alstria G-REIT equity ratio, (the ratio of equity to investment property) is the most important KPI. Under the Group’s strategy, the G-REIT equity ratio must be between 45 % and 55 %. to offer a high proﬁ le to investors and distinguish itself as a REIT on The G-REIT equity ratio at balance sheet date is 40.3 %. According to the capital market. The REIT shares are traded at the Frankfurt Stock the G-REIT Act (REITG), the minimum compliance requirement is a Exchange. The G-REIT status does not have any inﬂ uence on the G-REIT equity ratio calculated at year-end of 45 %. admission on the Regulated Market (Prime Standard). Certain requirements have to be met by the Company in order to 2010 and faces the prospect of losing its status as G-REIT and its tax alstria may fail to meet the minimum equity ratio in the ﬁ scal year qualify for and retain its designation as a G-REIT. The most relevant exemption. of these requirements are as follows: The G-REIT must be a stock corporation listed on an organised market and its registered seat and In particular, the exemption from corporate income tax (KSt) and management must be in Germany. The registered share capital must trade tax (GewSt) would cease at the end of the third ﬁ nancial year if amount to at least EUR 15 m, and all shares must be voting shares of the minimum equity ratio (alstria’s equity must not fall short of 45 % the same class. The free ﬂ oat must be at least 15 % and no investor of its immovable assets, based on alstria’s consolidated ﬁ nancial state- may directly hold 10 % or more of the shares, or shares that repre- ments) has not been satisﬁ ed for three consecutive ﬁ nancial years. sent 10 % or more of the voting rights. Furthermore, at least 75 % of assets must consist of real estate and at least 75 % of gross income If alstria fails to meet the equity ratio requirement also as at Decem- must be generated from real estate. At least 90 % of annual proﬁ ts ber 31, 2010, the Company would lose its tax exemption under the under German GAAP must be distributed to shareholders and the G-REIT Act. G-REIT’s equity may not fall below 45 % of the fair value of its real estate assets as recorded under IFRS rules. In order to meet the minimum equity ratio target, alstria would have to increase its equity and/or reduce its real estate portfolio. alstria Annual Report 2009 Group Management Report 31 Report on risks and opportunities The loss of the tax exemption might trigger various material adverse Interest rate risk Interest rate risk results from ﬂ uctuations in market tax consequences for the Company, in particular the following: interest rates. These affect the amount of interest expenses in the ﬁ nancial year and the market value of derivative ﬁ nancial instruments > alstria would become subject to corporate income tax (KSt) and, used by the Company. possibly, trade tax (GewSt) on its taxable proﬁ ts in Germany; > alstria could only regain tax-exempt status four years after the loss alstria’s hedging policy uses a combination of plain vanilla swaps and of the tax exemption; caps in order to limit the exposure of the Company to interest rate > alstria’s proﬁ ts generated but not distributed during the tax-exempt ﬂ uctuations, but still provides enough ﬂ exibility to allow the disposal period would be subject to taxation at alstria’s tax rate for the ﬁ rst of real estate assets, avoiding any cost linked to an over-hedged situ- year for which the tax exemption had been lost. ation. The interest base for the ﬁ nancial liability (loan) is the 3-month alstria might also face legal action from real estate vendors who had ferent derivative ﬁ nancial instruments were acquired to manage the sold real estate on condition that they will be able to obtain the bene- interest expense. The maturity of the derivative ﬁ nancial instruments ﬁ cial tax treatment (exit tax) for vendors who sell their real estate to is based on the term of the borrowings. The derivative ﬁ nancial EURIBOR, which is adjusted every three months. A number of dif- G-REITs. instruments relate to interest swaps in which the Company agrees to exchange with contracting partners, at speciﬁ ed intervals, the differ- Therefore, if alstria fails to meet the minimum equity ratio for the ence between ﬁ xed and variable interest rate amounts calculated by third year in a row, alstria could face the potential loss of its tax- reference to an agreed notional principal amount. The swaps alstria exempt status and its status as a G-REIT, which could have a material uses to hedge its interest rate payments qualify as cash ﬂ ow hedges. adverse effect on alstria’s assets and liabilities, ﬁ nancial condition and Interest caps were also acquired, where the interest is capped at a set results of operations. maximum. If the maximum interest rate is exceeded, the difference between the actual interest rate and the cap rate will be paid out. Legal risks The Company is not subject to major legal proceedings arising from any individual or other kind of legal dispute outside of its Liquidity risk One of alstria’s core processes is cash management. day-to-day business. The Company manages its future cash position and monitors progress on a daily basis. A cash-forecasting tool is used to prevent liquidity Financial risks Assessment of the ﬁ nancial risk situation is challenging due to the risk. This liquidity-planning tool uses the expected cash ﬂ ows from business activities and the maturity of the ﬁ nancial investments as a ﬁ nancial crisis. basis for analysis. The Group normally uses ﬁ nancial instruments such as bank loans The main liquidity risk arises from the balloon payment of the main and derivative ﬁ nancial instruments. The main purpose of the bank syndicated facility which will be due by the end of November 2011. loans is to ﬁ nance alstria’s business activities. Derivative ﬁ nancial Although this risk is being addressed proactively by the Company, instruments include interest swaps and caps. The purpose of these a further deterioration in ﬁ nancial markets, or further restriction in derivative ﬁ nancial instruments is to hedge against interest risks arising lending by banks, could result in liquidity constraints. from the Company’s business activities and its sources of ﬁ nance. The main risks arising from the Group’s ﬁ nancial instruments are cash ﬂ ow Valuation risks The fair value of the real estate properties owned by interest rate risks and liquidity risks. alstria’s current debt-to-equity the Group reﬂ ects the market value as determined by an independent ratio is approximately 64 %. This is a reasonable rate compared to appraiser, and can be subject to change. Generally, the market value the average leveraging rate of German real estate companies. alstria’s of real estate properties depends on a variety of factors, some of syndicated loan facility agreement allows for a loan-to-value ratio which are exogenous and may not be under alstria's control, such (LTV) of 65 %. After loan restructuring, alstria managed to keep the as declining rent levels, decreasing demand or increasing vacancy LTV at 59.8 % at the relevant test date. With the additional measures rates. Many qualitative factors are also decisive in the valuation of a implemented at the beginning of 2009, the risk of covenant breach property, including a property’s expected rental stream, its condition was resolved proactively. and its location. Finally, the particular assessment of the mandated appraiser is, to a certain extent, discretionary and may differ from The Group is not otherwise exposed to any signiﬁ cant credit risks. the opinion of another appraiser. Should the factors considered or 32 Group Management Report alstria Annual Report 2009 assumptions made in valuing a property change, in order to reﬂ ect The accounting-related risk management system forms part of the new developments or for other reasons, subsequent valuations Group’s risk management system. Risks that are relevant for the of the respective property may result in a decrease in the market accuracy of accounting-related data are monitored by the risk owner value ascribed to such property. If such valuations reveal signiﬁ cant who is responsible for the risk area of ﬁ nance. Risks are identiﬁ ed decreases in market value compared to prior valuations, the Com- quarterly, and assessed and documented by the risk management pany would incur signiﬁ cant revaluation losses with respect to such committee. Appropriate action is taken in order to monitor and opti- properties. mise accounting-related risks throughout the alstria Group. By factors such as economic changes, interest rate ﬂ uctuations and inﬂ ation, the value of the properties may be adversely affected. To Overall assessment Compared to the previous year, the risk situation of alstria ofﬁ ce minimise the risk of regional diversiﬁ cation of investment portfolios, REIT-AG remains unchanged. No risk speciﬁ c to the Company that a consistent focus on the individual needs of tenants and a detailed would threaten its continued existence, can be identiﬁ ed from past or market research and analysis (broker reports) is used. In addition, the future events. Any possible negative impact on alstria’s risk situation market value of all alstria assets will be determined annually at year- arising from adverse developments in the ﬁ nancial markets has been end by independent, internationally recognised experts. subject to thorough analysis. Although alstria has clearly not escaped Counterparty risk alstria hedges a portion of its risk by using third- necessary to minimise the adverse implications that the crisis has had party instruments (interest rate derivatives, property insurances and on alstria’s business situation. Sufﬁ cient precautions have been taken the effects of the ﬁ nancial crisis, the Group has taken all measures others). alstria’s counterparties in these contracts are internationally against identiﬁ able risks. recognised institutions, which are rated by the leading rating agen- cies. alstria reviews the rating of its counterparties on a regular basis in order to mitigate any risk of default. The ﬁ nancial crisis has raised Opportunities of the Group The reﬁ nancing activities undertaken by alstria have safeguarded doubts as to the reliability of rating agencies’ assessments. As a reac- the Company’s medium-term ﬁ nancial position at favourable inter- tion to this objection, alstria started to perform a review of the main est rates. On the revenue side, alstria beneﬁ ts from long-term rent counterparties in order to reinforce the rating agencies’ assessments. agreements of approximately 9.6 years’ average lease length and potential rent increases due to consumer price indexation. The alstria Key characteristics of the accounting-related internal control and risk portfolio is well balanced and contains many ﬁ rst-class anchor build- management system alstria has an accounting-related internal ings with high-quality tenants. control and risk management system in place. The accounting-related monitoring is executed by the controlling department of the Company. Therefore, alstria is well positioned to cope with the future competitive All items and main accounts of the income statement and the balance market environment and for the next growth cycle of the markets. sheet are reviewed regularly for accuracy and plausibility. This refers both to the consolidated ﬁ nancial statements and to the individual alstria’s core competence is asset management. The asset reposition- ﬁ nancial statements of the Group’s companies. Accounting-related ing and refurbishment alstria is planning to undertake, both as part data is monitored monthly or on a quarterly basis, depending on the of joint ventures and on its own, will strengthen the basis for value frequency of preparation. increase across the portfolio. alstria Annual Report 2009 Group Management Report 33 Report on risks and opportunities Sustainability report Mandatory disclosure SUSTAINABILITY REPORT 3. Improvement of market transparency: In 2009, alstria and its partner IPD (Investment Property Datenbank) launched the sec- alstria manages a portfolio with around 867,400 sqm of ofﬁ ce space ond German Reversion Index. Its aim is to measure the reversion located all over Germany. Day by day, alstria’s properties host thou- potential in the various German markets. One of the Company’s sands of civil servants and corporate employees. Day by day, these goals in setting up this index was to increase market understanding tenants and alstria use electricity and water, and produce waste and CO2 emissions. of one of the most sensitive items when it comes to understanding German real estate. As alstria’s assets form an integral part of the local socio-economic 4. Sponsoring: alstria has sponsored several modern art exhibitions network in which they are embedded, alstria’s actions and decisions in Hamburg, making vacant retail space within its portfolio freely as a landlord have an effect on the daily life of hundreds of sharehold- available to organisers. ers, workers, fellow citizens and neighbours. As a real estate owner, alstria has a corporate responsibility towards development can be attained by implementing a strong corporate those citizens and the cities in which they live, as real estate is a responsibility culture to be implemented by the Company’s employ- fundamental part of urban living space. As a long-term real estate ees, tenants and contractors on a daily basis, rather than just within owner, alstria has a direct interest in the sustainable development of one-off public projects. The management of alstria remains convinced that sustainable these cities. alstria believes that sustainability is a combination of economic, envir- Initiative (GRI) Construction and Real Estate (CRE) working Group, onmental and social parameters. Therefore, promoting sustainability which is working on deﬁ nition of a sustainable reporting framework affects every part of the Company’s business and its relationships. for real estate companies (www.globalreporting.org). alstria’s man- alstria has joined, and is actively participating in, the Global Reporting agement has made a medium-term commitment to publish a GRI- Creating sustainable relationships between landlord and tenants is compliant sustainability report. one of the key elements of alstria’s business model, which is based on the principle that there is no contradiction between improving tenant beneﬁ t and simultaneously improving long-term returns for MANDATORY DISCLOSURE the Company. alstria ofﬁ ce REIT-AG draws attention to some of the following actions implemented or supported by the Company where decision- making was partly driven by sustainability considerations: 1. Energy efﬁ ciency and security improvement: As part of its regular Disclosure requirements in accordance with Section 315 (4) of the German Commercial Code (HGB) for the ﬁ nancial year 2009 and explanatory report of the management board Composition of subscribed capital, voting rights and special rights At the balance sheet date December 31, 2009, the share capital of maintenance programme, alstria has prioritised work that improves alstria ofﬁ ce REIT-AG is EUR 56,000 k, divided into 56,000,000 no par the energy efﬁ ciency of its buildings, and/or the overall secur- value bearer shares. All shares have equal rights and obligations. Each ity of the properties. alstria also prepared Energy Performance share gives one vote at the shareholders’ annual general meeting. Certiﬁ cates for more than half of its portfolio in order to monitor the energy consumption of the assets. The result was that for all inspected properties the measured energy efﬁ ciency ranges fell Restrictions on disposal of shares or voting rights There are no restrictions as to the disposal of shares or exercise of within the green band that represents the most energy-efﬁ cient voting rights or, as far as they arise from agreements between share- buildings on the scale. Work carried out for energy efﬁ ciency and holders, are not known to the management board. The exercise of security improvement purposes amounted to around EUR 3,600 k voting rights and the transfer of shares is based on general statutory in 2009. requirements and alstria’s articles of association, which do not restrict either of these activities. 2. Research and development: In partnership with the Hamburg Institute of International Economics, alstria commissioned an economic study on the impact of rising energy and transportation costs for the future development of urban landscapes. 34 Group Management Report alstria Annual Report 2009 Shareholders with a shareholding of more than 10 % As per the balance sheet date December 31, 2009, alstria was not aware of any shareholders whose direct shareholding exceeded 10 % Authority of management board regarding issuance and buyback of shares 1. Authorised Capital of the share capital. Captiva 2 Alstria Holding S.à r.l. holds an indirect The articles of association authorise the management board, participation of more than 50 % in alstria through wholly owned sub- with the approval of the supervisory board, to increase the share sidiaries. None of these companies has a direct shareholding of more capital until March 14, 2012 by issuing new bearer shares against than 10 % of alstria’s share capital. contribution in cash and/or kind once or repeatedly up to a total Holders of shares with special rights alstria has not issued any shares with special rights that grant control 2. Conditional Capital amount of EUR 27,500 k. rights. Nature of voting rights control if employees have a share in capital and do not directly exercise their right of control This arrangement does not exist at alstria. Appointment and dismissal of management board and supervisory board members and amendments to the articles of association alstria’s management board consists of one or more members who The Company disposes of certain conditional capital (pursuant to sections 192 et seq. AktG), which are regulated in Sections 5 (5) to (8) of the Company’s articles of association. a) Conditional Capital 2009/A The share capital is conditionally increased by up to EUR 12,750 k by issuance of up to 12,750,000 new no par value bearer shares with entitlement to share in proﬁ ts from the beginning of the ﬁ nancial year in which they come into existence. The conditional capital increase shall be carried out only to the extent that the hold- may be appointed or dismissed by the supervisory board in accord- ers of partial debentures with conversion rights or obligations, or ance with Sections 84 and 85 of the German Stock Corporation Act option rights, proﬁ t participation rights or participating bonds, or (AktG). The articles of association do not contain any special provi- a combination of these instruments issued in accordance with the sions in this respect. Pursuant to Section 84 AktG, members of the resolution of the general meeting of June 10, 2009, exercise their management board are appointed for a maximum term of ﬁ ve years. conversion or option rights or fulﬁ l their conversion obligations and Reappointment or extension of the term of ofﬁ ce is permitted, in that no treasury shares are being used to satisfy such claims. each case for a maximum of ﬁ ve years. b) Conditional Capital 2009/B Amendments to the articles of association may be made pursuant to The share capital is conditionally increased by up to EUR 12,750 k Sections 179 and 133 AktG. The supervisory board is also authorised, by issuing up to 12,750,000 new no par value bearer shares with without a resolution by the general meeting, to make changes in entitlement to share in proﬁ ts from the beginning of the ﬁ nancial and amendments to the articles of association that merely affect the year in which they come into existence. The conditional capital wording. In accordance with Section 15 (5) of the articles of associa- increase shall be carried out only to the extent that holders of partial tion, in conjunction with Sections 179 (2) and 133 AktG, sharehold- debentures with conversion rights or obligations, or option rights, ers may make resolutions regarding such amendments at a general proﬁ t participation rights or participating bonds, or a combination meeting with a simple majority of the votes cast and a simple major- of these instruments issued in accordance with the resolution of ity of the share capital represented. Where the law requires a larger the general meeting of June 10, 2009, exercise their conversion majority for amendments to the articles of associ ation, that majority or option rights or fulﬁ l their conversion obligations and that no shall be decisive. The articles of association were last amended by the treasury shares are being used to satisfy such claims. shareholders in the annual general meeting held on June 10, 2009: the provisions regarding the convocation to and participation in the c) Conditional Capital II annual general meeting were amended with regard to the law gov- The share capital is conditionally increased in an amount of up to erning implementation of the shareholders’ rights directive (ARUG). EUR 2,000 k by the issuance of up to 2,000,000 no par value bearer The provision regarding conditional capital I was also replaced by pro- shares. The purpose of the conditional capital increase is to grant visions regarding new conditional capital (conditional capital 2009/A shares to the holders of subscription rights (stock options) which and conditional capital 2009/B). are issued by alstria in accordance with the authorisation of the annual general meeting held on March 15, 2007. The conditional capital increase is only carried out insofar as the holders exercise their stock options and no treasury shares are used to fulﬁ l the stock options. The new shares shall participate in the Company's proﬁ ts from the beginning of the ﬁ nancial year in which they come into existence to satisfy the exercise of the stock options. alstria Annual Report 2009 Group Management Report 35 Mandatory disclosure Additional Group disclosures d) Conditional Capital III ADDITIONAL GROUP DISCLOSURES The share capital is conditionally increased in an amount of up to EUR 500 k by the issuance of up to 500,000 no par value bearer shares. The conditional capital increase shall be used only to grant Employees As of December 31, 2009, alstria had 32 employees (December 31, shares to the holders of convertible participation certiﬁ cates which 2008: 29). The annual average number of employees was 31 (previ- are issued by the Company in accordance with the authorisation ous year: 28). These ﬁ gures exclude management board members. of the general meeting held on March 15, 2007. The conditional capital increase shall only be carried out insofar as issued con- vertible participation certiﬁ cates are converted into shares of the Remuneration report Management board members’ compensation comprises a ﬁ xed and a Company and no treasury shares are used to satisfy the certiﬁ - variable component linked to the Company’s operating performance. cates. The new shares shall participate in the Company's proﬁ ts In addition to the bonus, members of the management board received from the beginning of the ﬁ nancial year in which they come into share options as a long-term incentive component of remuneration. existence as a result of the conversion of certiﬁ cates. 3. Purchase of treasury shares Members of the supervisory board receive ﬁ xed remuneration. The general meeting on June 10, 2009 authorised the man- The remuneration report (pages 90 to 91), containing details of the agement board to acquire shares up to a total of 10 % of the principles for the deﬁ nition of the management board and super- Company’s share capital until December 9, 2010. The acquired visory board remuneration, forms an integral part of the audited shares and other treasury shares that are in the possession of, or Group management report. to be attributed to, alstria pursuant to Sections 71a et seq. AktG may at no point in time amount to more than 10 % of the share capital. Shares may be purchased through a stock exchange, by Group and dependent-company report Captiva Capital II S.à r.l., Luxembourg, holds a majority interest in means of a public offer to all shareholders or by using derivatives alstria. In accordance with Section 290 of the German Commercial (put or call options or a combination of both). Code (HGB), alstria is required to prepare consolidated statements and Change of control clauses in key agreements entered into by the Company A signiﬁ cant syndicated loan agreement of alstria contains an entitle- ment of the lender to require repayment of the loan if there is a a Group management report with respect to the Group com panies controlled by the Group. Apart from this, alstria ofﬁ ce REIT-AG and all associated companies as stated in the notes are consolidated in the alstria Group. change of control. In this agreement, a change of control is deﬁ ned as Due to the majority interest in alstria held by Captiva Capital II S.à r.l, the takeover of more than 50 % of the voting rights in alstria. Luxembourg, we issued a separate dependent-company report with Compensation agreements with management board members and employees in case of a takeover bid There are no compensation agreements with management board afﬁ liated companies, in accordance with Section 312 of the German Stock Corporation Act (AktG). This report includes the following statement: members or employees in case of a takeover bid. ‘Our Company received appropriate remuneration for all legal trans- These provisions comply with statutory requirements or are reason- related parties. This appraisal is based on the circumstances which able and common practice by comparable publicly listed companies. were known to us at the time when the events which are subject to They are not intended to hinder potential takeover bids. reporting occurred.’ actions and all the transactions stated in the report on relations with 36 Group Management Report alstria Annual Report 2009 SUBSEQUENT EVENTS AND OUTLOOK Subsequent events In January 2010, alstria agreed the terms of a joint venture with the Hamburg-based developer and fund manager Quantum Immobil- In January 2010, alstria made a voluntary down payment on its main credit facility of EUR 20 m in order to decrease the LTV ratio to below 60 % on the relevant test date. This down payment secures the mar- gin of 85 bps for the next two interest periods. ien AG regarding the reinstatement of the Kaisergalerie at Grosse Taking into consideration the closing of all announced transactions Bleichen 23– 27 in Hamburg. It is the second joint venture between in the ﬁ rst quarter of 2010, the G-REIT equity ratio will increase to Quantum and alstria as part of the overall strategy to fund organic 43.6 % in comparison with 40.3 % at year-end. growth opportunities. This joint venture, which values the building in line with its latest valuation (fair value of EUR 60 m, passing rent EUR 2.8 m), allows alstria to free up around EUR 14.3 m of liquidity. Outlook Based on the latest transactions and the contracted rent for 2010, alstria expects revenues of EUR 89 m and funds from operations THE KEY METRICS OF THE PORTFOLIO POST TRANSACTIONS of EUR 27 m. This projection could be impacted by further reﬁ - Metric Number of properties Number of joint ventures Market value (EUR bn) Contractual rent (EUR m/annum) Valuation yield (contractual rent/OMV) Lettable area (k sqm) Vacancy ( % of lettable area) WAULT (years) Average rent/sqm (EUR/month) nancing, disposals or acquisitions in 2010. alstria expect its 2011 revenues and results to be inﬂ uenced positively or negatively by the reﬁ nancing of its main syndicated loan facility that matures in November 2011, as well by the development of the underlying real estate markets. The management report contains statements relating to antici- pated future developments. These statements are based on current assessments and are, by their very nature, exposed to risks and uncertainty. Actual developments may differ from those predicted in these statements. Value 74 2 1.4 90.8 6.4 % 821 6.0 % 9.4 9.81 In January 2010, alstria entered into a new credit facility on a non- Hamburg, February 12, 2010 recourse basis as an additional step towards decreasing the bal- loon payment of the syndicated loan facility. The credit facility is a EUR 76 m, seven-year non-recourse loan to reﬁ nance four properties in Hamburg, Essen and Leipzig with an average lease term of seven years. The interest rate on this loan is ﬁ xed until maturity at 4.62 %. After this reﬁ nancing, the remaining main syndicated loan facility exposure is EUR 660 m, which is in line with alstria’s target. EXISTING LOAN AGREEMENTS AS PER JANUARY 20, 2010 Loan Syndicated loan Non-recourse loan #1 Non-recourse loan #2 Non-recourse loan #3 Non-recourse loan #4 Non-recourse loan #5 Total as of Jan. 20, 2010 1 LTV as per covenant test date. Maturity Nov. 29, 2011 Oct. 19, 2015 Dec. 31, 2014 Jun. 30, 2014 Oct. 20, 2014 Jan. 31, 2017 Principal amount outstanding (EUR k) LTV covenant ( %) 660,410 95,000 37,283 32,479 33,534 75,794 934,500 65.0 80.0 80.0 65.0 61.0 75.0 LTV ( %) 59.81 76.1 64.3 62.9 60.8 62.1 Next test date Jun. 30, 2010 Sept. 30, 2010 Dec. 31, 2010 Dec. 31, 2010 Dec. 31, 2010 Dec. 31, 2010 DETAIL INDEX CONSOLIDATED FINANCIAL STATEMENTS Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of ﬁ nancial position Consolidated statement of changes in equity Consolidated statement of cash ﬂ ow Notes to the consolidated ﬁ nancial statements 1 Corporate information 2 Basis of preparation 38 39 40 42 43 44 44 44 11 Notes to the consolidated balance sheet – equity and liabilities 11.1 Equity 11.2 Financial liabilities 11.3 Other provisions 11.4 Trade payables and other liabilities 11.5 Trust assets and liabilities 11.6 Deferred taxes 11.7 Liabilities of current tax 3 Changes in accounting policy and disclosures 44 12 Other notes 4 Basis of consolidation 5 6 7 Key judgments and estimates Seasonal or economic effects on business Summary of signiﬁ cant accounting policies 8 Segment reporting 9 Notes to the consolidated income statement 9.1 Revenues 9.2 Income and expenses from passed on Operating expenses 9.3 Real estate operating expenses 9.4 Administrative expenses 9.5 Personnel expenses 9.6 Other operating income 9.7 Other operating expenses 9.8 Financial and valuation result 9.9 Disposal proceeds 9.10 Income taxes 10 Notes to the consolidated balance sheet – assets 10.1 Investment property 10.2 Equity accounted investment 10.3 Property, plant and equipment 10.4 Intangible assets 10.5 Financial assets 10.6 Assets held for sale 10.7 Receivables and other assets 10.8 Derivative ﬁ nancial instruments 10.9 Cash and cash equivalents 47 48 49 49 55 56 56 56 56 56 56 57 57 57 58 58 58 58 59 59 60 60 60 60 61 63 12.1 Compensation of management board And supervisory board 12.2 Commitments and contingencies 12.3 Consolidated cash ﬂ ow statement 13 Related party relationships 13.1 Preliminary remarks 13.2 Remuneration of key management personnel 13.3 Related party transactions 14 Earnings per share 15 Dividends paid 16 Employees 17 Stock option programme 18 Convertible proﬁ t participation rights programme 19 Financial risk management 20 Signiﬁ cant events after the end of the Reporting period 21 Utilisation of exempting provisions 22 Disclosures pursuant to Wertpapier handels - gesetz [German Securities Trading Act] 23 Declaration of compliance pursuant to Section 161 AktG [‘Aktiengesetz’: German Stock Corporation Act] 24 Auditor’s fees 25 Management board 26 Supervisory board 63 63 64 65 65 65 66 66 66 66 66 66 67 67 67 67 67 68 68 68 69 69 75 75 75 79 79 79 79 38 Consolidated Financial Statements alstria Annual Report 2009 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT for the year ended December 31, 2009 EUR k Revenues Income less expenses from passed-on operating expenses Real estate operating costs Net rental income Administrative expenses Personnel expenses Other operating income Other operating expenses Net loss from fair value adjustments on investment property Loss /gain on disposal of investment property Net operating result Net ﬁ nancial result1 Share of the result of joint venture Net loss from fair value adjustments on ﬁ nancial derivatives Pre-tax result (EBT) Income tax expense Consolidated loss for the year Attributable to: Shareholder Earnings per share in EUR Basic earnings per share Diluted earnings per share Notes 9.1 9.2 9.3 9.4 9.5 9.6 9.7 10.1 9.9 9.8 4 9.8 9.10 2009 102,510 – 358 – 10,189 91,964 – 6,187 – 4,990 3,124 – 1,866 – 85,887 – 25 – 3,867 – 52,117 – 264 – 23,294 – 79,541 – 110 – 79,651 2008 102,055 0 – 8,833 93,222 – 6,878 – 4,675 2,774 – 516 – 88,116 1,450 – 2,738 – 48,112 0 – 5,075 – 55,925 – 75 – 56,000 – 79,651 – 56,000 14 14 – 1.44 – 1.44 – 1.02 – 1.02 1 The gross presentation of the net ﬁ nancial result was given in the 2008 income statement. For reason of clarity and comparability, this presentation was changed to a net presentation in the income statement. For further details, please see Note 9.8. alstria Annual Report 2009 Consolidated Financial Statements 39 Consolidated income statement Consolidated statement of comprehensive income CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the period from January 1 to December 31, 2009 EUR k Consolidated loss for the period Fair value gain / loss on available-for-sale ﬁ nancial assets, net of tax Cash ﬂ ow hedges, net of tax Other comprehensive result for the period Total comprehensive loss for the period Total comprehensive loss attributable to: Owners of the Company Notes 10.8 2009 – 79,651 123 6,379 6,502 2008 – 56,000 – 123 – 49,579 – 49,702 – 73,149 – 105,702 – 73,149 – 105,702 40 Consolidated Financial Statements alstria Annual Report 2009 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at December 31, 2009 ASSETS EUR k Non-current assets Investment property Equity-accounted investments Property, plant and equipment Intangible assets Financial assets Total non-current assets Current assets Assets held for sale thereof investment property held for sale thereof other assets held for sale Trade receivables Accounts receivable from joint ventures Derivatives Tax receivables Other receivables Cash and cash equivalents thereof restricted Total current assets Notes 2009 2008 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.7 10.8 10.7 10.7 10.9 1,425,440 1,805,265 9,046 5,897 311 351 0 3,923 336 0 1,441,045 1,809,524 136,621 135,825 796 5,694 1,855 615 3 33,483 146,818 61,848 325,089 0 0 0 4,099 0 176 1 28,266 31,426 0 63,969 Total assets 1,766,134 1,873,493 alstria Annual Report 2009 Consolidated Financial Statements 41 Consolidated statement of ﬁ nancial position EQUITY AND LIABILITIES EUR k Equity Share capital Capital surplus Hedging reserve Treasury shares Retained earnings Total equity Non-current liabilities Long-term loans, net of current portion Derivatives Other provisions Other liabilities Total non-current liabilities Current liabilities Liabilities associated with the sale of non-current assets held for sale Short-term loans Trade payables Proﬁ t participation rights Liabilities of current tax Other current liabilities Total current liabilities Total liabilities Total equity and liabilities Notes 11.1 2009 2008 56,000 685,897 – 43,200 – 26 – 64,486 634,185 947,257 48,859 1,550 344 56,000 726,885 – 49,579 – 14,983 11,344 729,667 1,086,801 28,626 0 70 998,010 1,115,497 28,176 91,941 3,692 231 0 9,899 133,939 0 12,609 4,561 53 21 11,085 28,329 1,131,949 1,143,826 1,766,134 1,873,493 11.2 10.8 11.3 11.4 10.6 11.2 11.4 11.7 11.4 42 Consolidated Financial Statements alstria Annual Report 2009 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended December 31, 2009 EUR k As of Jan. 1, 2009 Notes Share capital Capital surplus Hedging reserve Treasury shares Retained earnings Total equity 56,000 726,885 – 49,579 – 14,983 11,344 729,667 Changes in ﬁ nancial year 2009 Total comprehensive income Payments of dividends Reclassiﬁ cation of retained earnings Result of disposal of treasury shares Intrinsic value of exchange option for treasury shares Exchange of cash dividend claims for shares in the Company Disposal of treasury shares Share-based payments As of Dec. 31, 2009 for the year ended December 31, 2008 15 11.1 15 0 0 0 0 0 0 0 0 123 0 – 28,423 – 13,076 1,744 0 – 14,820 388 6,379 0 0 0 0 0 0 0 11.1 56,000 685,897 – 43,200 0 0 0 14,957 0 0 14,957 0 – 26 – 79,651 – 73,149 – 28,423 – 28,423 28,423 3,821 0 5,702 – 1,744 0 5,565 5,565 0 0 137 388 – 64,486 634,185 EUR k As of Jan. 1, 2008 Notes Share capital Capital surplus Hedging reserve Treasury shares Retained earnings Total equity 56,000 754,647 0 – 7,115 67,344 870,876 Changes in ﬁ nancial year 2008 Total comprehensive income Payment of dividends 15 Reclassiﬁ cation of retained earnings Share-based payments Acquisition of treasury shares Other contributions to capital surplus 0 0 0 0 0 0 – 123 – 49,579 0 – 28,400 768 0 – 7 0 0 0 0 0 0 0 0 0 – 7,868 0 – 56,000 – 105,702 – 28,400 – 28,400 28,400 0 0 0 0 768 – 7,868 – 7 As of Dec. 31, 2008 11.1 56,000 726,885 – 49,579 – 14,983 11,344 729,667 alstria Annual Report 2009 Consolidated Financial Statements 43 Consolidated statement of changes in equity Consolidated statement of cash ﬂ ow CONSOLIDATED STATEMENT OF CASH FLOW for the period from January 1 to December 31, 2009 EUR k 1. Operating activities Consolidated loss for the year Unrealised valuation movements Interest income Interest expense Result from income taxes Other non-cash income ( – )/expenses (+) Loss (+)/gain ( – ) on disposal of investment properties Depreciation and impairment of ﬁ xed assets Increase ( – )/decrease (+) in trade receivables and other assets that are not attributed to investing or ﬁ nancing activities Increase (+)/decrease ( – ) in trade payables and other liabilities that are not attributed to investing or ﬁ nancing activities Interest received Interest paid Income tax paid Cash ﬂ ows from operating activities 2. Investing activities Acquisition of investment properties Proceeds from sale of investment properties Acquisition of other property, plant and equipment Proceeds from sale of ﬁ nancial assets Acquisition of ﬁ nancial assets Proceeds from the disposal of Group companies Cash ﬂ ows used in investing activities 3. Financing activities Repurchase of own shares Proceeds from the disposal of own shares Proceeds from the issue of bonds and borrowings Payments of dividends Payments for the acquisition and termination of ﬁ nancial derivatives Payment of the redemption of bonds and borrowings Payments of transaction costs Cash ﬂ ows used in ﬁ nancing activities 4. 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 Cash and cash equivalents at the end of the period thereof restricted: EUR 61,848 k; previous year: EUR 0 k thereof cash in disposal group Notes 2009 2008 9.8, 10.1 9.8 9.8 9.10 9.9 10.3, 10.4 – 79,651 109,180 – 593 52,710 110 545 25 473 – 56,000 93,191 – 12,656 60,184 75 1,271 – 1,450 507 – 4,356 3,912 4,202 82,645 593 – 49,957 – 110 33,171 – 21,295 132,565 – 2,421 25,156 0 6,622 – 1,467 87,567 11,556 – 53,112 – 5,065 40,946 – 228,036 17,950 – 160 0 – 25,000 0 12.3 140,627 – 235,246 15 12.3 0 137 128,821 – 22,858 – 6,218 – 153,058 – 4,357 – 57,533 116,264 – 538 31,426 147,152 334 146,818 – 7,972 104 266,453 – 28,400 0 – 107,495 0 122,690 – 71,610 0 103,036 31,426 0 31,426 Cash and cash equivalents reported on the balance sheet 10.9 44 Notes to the Consolidated Financial Statements alstria Annual Report 2009 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signiﬁ cant to the consolidated ﬁ nancial statements, are disclosed 1 Corporate information The consolidated ﬁ nancial statements of alstria ofﬁ ce REIT-AG (here- in Note 5. inafter also referred to as the ‘Company’ or ‘alstria ofﬁ ce REIT-AG’) as The consolidated ﬁ nancial statements are presented in euros. All at December 31, 2009 were authorised for issue by resolution of the values are rounded to the nearest thousand (EUR k) except when management board on February 12, 2010. otherwise indicated. alstria ofﬁ ce REIT-AG was transformed into a German Real Estate These consolidated ﬁ nancial statements are ﬁ nancial statements for Investment Trust (G-REIT) in ﬁ nancial year 2007. The Company was the period from January 1 to December 31, 2009. registered as a REIT corporation (hereinafter also referred to as a ‘REIT-AG’) in the commercial register on October 11, 2007. For the sake of clarity, items are summarised in the consolidated balance sheet and income statement and commented on in the notes REIT-AGs are fully exempt from German corporate income tax and to the ﬁ nancial statements. trade tax. Hence, alstria ofﬁ ce REIT-AG has been exempt from tax with retrospective effect since January 1, 2007. Assets and liabilities are classiﬁ ed as non-current – for items due in 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 3 Changes in accounting policy and disclosures New and amended IFRS adopted by the Group The Group has adopted the following new and amended IFRS as of more than one year – or current. participations in enterprises, which acquire, manage, operate and sell January 1, 2009: owned property. All the aforementioned objectives are subject to the conditions of the G-REIT Act legislation. > Amendments to IAS 1: ‘Presentation of Financial Statements’ > Amendments to IAS 23: ‘Borrowing Costs’ concerning elimination The Company is a stock corporation which was founded in Germany of the option to capitalise borrowing costs and has its registered ofﬁ ce in Hamburg. The Company is registered > Amendments to IAS 32: ‘Financial Instruments: Presentation’ and in the commercial register at the local court of Hamburg under follow-up amendment to IAS 1: ‘Presentation of Financial HRB No. 99204. The Company’s address is Bäckerbreitergang 75, Statements’ concerning puttable ﬁ nancial instruments and 20355 Hamburg, Germany. obligations arising on liquidation > Amendments to IAS 39 and IFRS 7: ‘Reclassiﬁ cation of ﬁ nancial The ﬁ nancial year ends on December 31 of each calendar year. instruments: Effective date and transitional provisions’ > Annual Improvements Project ‘Improvements to IFRS’ 2 Basis of preparation The consolidated ﬁ nancial statements of alstria ofﬁ ce REIT-AG and its > Amendments to IFRS 1: ‘First-Time Adoption of IFRS’ and IAS 27: ‘Consolidated and Separate Financial Statements’ concerning subsidiaries (together ‘the Group’) have been prepared in accordance determination of the acquisition costs of an investment, a joint with the International Financial Reporting Standards (IFRS) of the venture or an associated company International Accounting Standards Board (IASB), including the inter- > Amendments to IFRS 2: ‘Share-Based Payment’ concerning vesting pretations of the standards (IFRIC). All IFRS and IFRIC were observed conditions and cancellations as adopted and prescribed by the EU. > Amendments to IFRS 7: ‘Improving Disclosures about Financial The consolidated ﬁ nancial statements have been prepared under the > IFRS 8: ‘Operating Segments’ historical cost convention method except for investment property > Amendments to IFRIC 9 and IAS 39: ‘Embedded Derivatives’ (land and buildings) and ﬁ nancial instruments that have been meas- > IFRIC 11 – IFRS 2: ‘Group and Treasury Share Transactions’ ured at fair value through proﬁ t or loss. > IFRIC 13: ‘Customer Loyalty Programmes’ > IFRIC 14: ‘IAS 19 – The Limit on a Deﬁ ned Beneﬁ t Asset, The preparation of financial statements in conformity with IFRS Minimum Funding Requirements and their Interaction’ Instruments’ requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the alstria Annual Report 2009 Notes to the Consolidated Financial Statements 45 1 Corporate information 2 Basis of preparation 3 Changes in accounting policy and disclosures In the course of the annual improvements project ‘improvement to According to IAS 1 (revised) ‘presentation of ﬁ nancial statements’, IFRS’ the IASB approved revisions to IFRS in May 2008 that are listed alstria ofﬁ ce REIT-AG presented the summary of comprehensive income for the ﬁ rst time in an annual report and implemented the adjustments to presentation that resulted from the revised standard. The initial application of the remaining adopted IFRS had no material effect on the presentation of the consolidated ﬁ nancial statements. New and amended IFRS to existing standards which are not yet effective and have not been early adopted by the Group In its 2009 consolidated ﬁ nancial statements, alstria ofﬁ ce REIT-AG did not apply the following accounting standards or interpretations which have already been adopted by the IASB but were not required to be applied for ﬁ nancial year 2009. in the following table. Amendments to IFRS 7 Presentation of ﬁ nance costs Amendments to IAS 1 Current/non-current classiﬁ cation of derivatives Amendments to IAS 8 Status of implementation guidance Amendments to IAS 10 Amendments to IAS 16 and IAS 7 Dividends declared after the balance sheet date Sale of assets held for rental Amendments to IAS 16 Recoverable amount Amendments to IAS 18 Costs of originating a loan Amendments to IAS 19 Miscellaneous amendments Amendments to IAS 20 Government loans with a below-market rate of interest Amendments to IAS 23 Components of borrowing costs Amendments to IAS 27 Measurement of a subsidiary held for sale in separate ﬁ nancial statements Amendments to IAS 28 Impairment of investment in an associate Amendments to IAS 28 Required disclosures when interest in jointly controlled entities are accounted for at fair value through proﬁ t or loss Amendments to IAS 29 Description of measurement basis in ﬁ nancial statements Amendments to IAS 34 Earnings per share disclosures in interim ﬁ nancial reports Amendments to IAS 36 Disclosure of estimates used to determine recoverable amount Amendments to IAS 38 Advertising and promotional activities and units to production method of amortisation Amendments to IAS 39 Miscellaneous amendments Amendments to IAS 40 Property under construction or development for future use as investment property Amendments to IAS 41 Additional biological transformation as well as discount rate for fair value calculations 46 Notes to the Consolidated Financial Statements alstria Annual Report 2009 Standard/Interpretation Issued by the IASB Effective date Adopted by the EU Expected effects IFRS 1 (amendment) First time adoption of IFRS Nov. 27, 2009 Jan. 1, 2009 Yes IFRS 1 (amendment) Additional exemptions for ﬁ rst time adopters Jul. 23, 2009 Jan. 1, 2010 No IFRS 2 (amendment) Group cash-settled and share-based payment transactions Jun. 18, 2009 Jan. 1, 2010 No IFRS 2 (amendment)1 Scope of IFRS 2 and IFRS 3 (revised) Apr. 16, 2009 Jul. 1, 2009 No IFRS 3 (revised) Business combinations IFRS 5 (amendment)1 Disclosure of non-current assets (or disposal groups) classiﬁ ed as held for sale or discontinued operations Jan. 10, 2008 Jul. 1, 2009 Yes Apr. 16, 2009 Jan. 1, 2009 No None None None None None No material effects IFRS 8 (amendment)1 Disclosure of information about segment assets Apr. 16, 2009 Jan. 1, 2010 No None IFRS 9 (new standard) IAS 1 (amendment)1 Financial Instruments – Classiﬁ cation and Measurement Nov. 12, 2009 Jan. 1, 2013 No Current/non-current classiﬁ cation of convertible instruments Apr. 16, 2009 Jan. 1, 2010 No No material effects No material effects IAS 7 (amendment)1 Classiﬁ cation of expenditures on unrecognised assets Apr. 16, 2009 Jan. 1, 2010 No IAS 17 (amendment)1 Classiﬁ cation of leases of land and buildings Apr. 16, 2009 Jan. 1, 2010 No IAS 181 IAS 24 (revised) Determining whether an entity is acting as a principal or as an agent (guidance to appendix) Related Party Disclosures – Revised deﬁ nition of related parties Apr. 16, 2009 N/A (appendix) No Nov. 4, 2009 Jan. 1, 2011 No IAS 27 (revised) Consolidated and separate ﬁ nancial statements Jan. 10, 2008 Jul. 1, 2009 Yes IAS 32 (amendment) Classiﬁ cation of rights issues Oct. 8, 2009 Feb. 1, 2010 Yes IAS 36 (amendment)1 Unit of accounting for goodwill impairment test Apr. 16, 2009 Jan. 1, 2010 No IAS 38 (amendment)1 Measuring the fair value of an intangible asset acquired in a business combination Apr. 16, 2009 Jul. 1, 2009 No IAS 38 (amendment)1 Additional consequential amendments arising from IFRS 3 Apr. 16, 2009 Jul. 1, 2009 No IAS 39 (amendment)1 Treating loan pre-payment penalties as closely related derivatives Apr. 16, 2009 Jan. 1, 2010 No IAS 39 (amendment)1 Cash ﬂ ow hedge accounting Apr. 16, 2009 Jan. 1, 2010 No IAS 39 (amendment)1 Scope exemption for business combination contracts Apr. 16, 2009 Jan. 1, 2010 No IAS 39 (amendment) Eligible hedged items Jul. 31, 2008 Jul. 1, 2009 Yes IFRIC 9 (amendment)1 Scope of IFRIC 9 and revised IFRS 3 Mar. 12, 2009 Jul. 1, 2009 No IFRIC 12 Service Concession Arrangements Nov. 30, 2006 Apr. 1, 2009 Yes IFRIC 14 (amendment) IAS 19 – The limit on a Deﬁ ned Beneﬁ t Asset, Minimum Funding Requirements and their interaction Nov. 26, 2009 Jan. 1, 2011 No IFRIC 15 IFRIC 16 Agreements for the construction if real estate Jul. 3, 2008 Jan. 1, 2010 Yes Hedges of a Net Investment in a Foreign Operation Jul. 3, 2008 Jul. 1, 2009 Yes IFRIC 16 (amendment)1 Amendment to the restriction on the entity that holds hedging instruments Apr. 16, 2009 Jul. 1, 2009 No IFRIC 17 IFRIC 18 IFRIC 19 Distribution of non-cash assets to owners Nov. 27, 2008 Nov 1, 2009. No Transfers of assets from customers Jan. 29, 2009 Nov. 1, 2009 No Extinguishing Financial Liabilities with Equity Instruments Nov. 26, 2009 Jul. 1, 2009 No 1 Amendment is part of the annual improvements project published in April 2009. None None None None None None None None None None None None None None None None None None None None None None alstria Annual Report 2009 Notes to the Consolidated Financial Statements 47 3 Changes in accounting policy and disclosures 4 Basis of consolidation 4 Basis of consolidation The consolidated ﬁ nancial statements comprise the ﬁ nancial state- The Group of consolidated companies includes 21 companies as well as one joint venture company accounted for using the equity method. ments of alstria ofﬁ ce REIT-AG and its subsidiaries as at December 31, 2009. The ﬁ nancial statements of the subsidiaries are prepared for the same reporting year as for the parent company, using consistent Fully consolidated subsidiaries The following subsidiaries are included in the consolidated ﬁ nancial accounting policies. statements: Share in capital ( %) Subsidiaries are entities where the Group controls their business pol- Group entity icies. Among other criteria, it is possible to exercise control with more alstria Bamlerstrasse GP GmbH, Hamburg ¹ than 50 % of voting rights. Subsidiaries are fully consolidated from the date of acquisition, i.e. the date on which the Group obtains control. Inclusion in the consoli- dated ﬁ nancial statements ends as soon as the parent ceases to have control. All intra-Group balances, transactions, income and expenses and proﬁ ts and losses resulting from intra-Group transactions that are alstria Gänsemarkt Drehbahn GP GmbH, Hamburg alstria Grundbesitz 2 GP GmbH, Hamburg ¹ alstria Halberstädter Strasse GP GmbH, Hamburg ¹ alstria Hamburger Str. 43 GP GmbH, Hamburg ¹ Alstria IV. Hamburgische Grundbesitz GmbH & Co. KG, Hamburg alstria Ludwig-Erhard-Strasse GP GmbH, Hamburg ¹ alstria Mannheim/Wiesbaden GP GmbH, Hamburg ¹ recognised in the carrying amounts of assets are eliminated in full. alstria ofﬁ ce Bamlerstrasse GmbH & Co. KG, Hamburg ¹ In accordance with IFRS 3, all business combinations are stated using alstria ofﬁ ce Gänsemarkt Drehbahn GmbH & Co. KG, Hamburg the acquisition method. The recognised assets and the acquired liabil- alstria ofﬁ ce Grundbesitz 2 GmbH & Co. KG, Hamburg ¹ ities are measured in full at their fair value regardless of the ownership alstria ofﬁ ce Halberstädter Str. GmbH & Co. KG, Hamburg ¹ interest. The carrying values on the date on which control over the subsidiary was obtained are relevant. Any remaining debit difference is recognised as goodwill. After reassessment, any remaining credit difference is recognised immediately as proﬁ t. In the periods following the business combination, the disclosed hidden reserves and charges are carried forward, amortised or released, depending on the treat- ment of the corresponding assets. alstria ofﬁ ce Hamburger Str. 43 GmbH & Co. KG, Hamburg ¹ alstria ofﬁ ce Ludwig-Erhard-Strasse GmbH & Co. KG, Hamburg ¹ alstria ofﬁ ce Mannheim/Wiesbaden GmbH & Co. KG, Hamburg ¹ alstria ofﬁ ce Steinstrasse 5 GmbH & Co. KG, Hamburg ¹ Alstria Sechste Hamburgische Grundbesitz GmbH & Co. KG, Hamburg The Company generally applies IFRS 3 to account for transactions under common control. However, for transactions under common control, any credit and debit differences resulting from capital con- solidation are recognised as an increase or decrease in capital alstria solutions GmbH, Hamburg ¹ alstria Steinstrasse 5 GP GmbH, Hamburg ¹ Kaisergalerie General Partner GmbH, Hamburg ¹ surplus. Verwaltung Alstria Sechste Hamburgische Grundbesitz GmbH, Hamburg 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 100 100 100 100 Signiﬁ cant companies where alstria ofﬁ ce REIT-AG is able, directly or indirectly, to signiﬁ cantly inﬂ uence ﬁ nancial and operating policy 1 Formation in the reporting period. decisions (associates), or directly or indirectly shares control (joint Four companies were deconsolidated in the reporting period. The ventures), are accounted for using the equity method. effects of the changes to the Group of consolidated companies are shown in the table below. The proﬁ t arising on deconsolidation was EUR 1,290 k. 48 Notes to the Consolidated Financial Statements alstria Annual Report 2009 EFFECTS FROM DISPOSAL OF GROUP COMPANIES Operating lease commitments – Group as lessor The Group has EUR k Total disposal consideration Disposal consideration discharged by means of cash and cash equivalents Amount of cash and cash equivalents in the subsidiary disposed of Assets except cash and cash equivalents in the subsidiaries disposed Liabilities in the subsidiaries disposed 2009 15,932 6,622 100 41,544 26,625 Interests in joint ventures By means of a capital contribution from a joint venture partner into entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the signiﬁ cant risks and rewards of ownership of these properties and so accounts for the contracts as operating leases. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the end of reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁ nancial year are discussed below. Estimates are required in particular in order to: the former subsidiary Alstria VII. Hamburgische Grundbesitz GmbH & > determine the fair value of investment property; Co. KG at the end of the reporting period and the contractual agree- > determine the fair value of ﬁ nancial instruments; ment of a joint control, this company is treated as a joint venture. > determine the fair value of stock options granted to management; alstria ofﬁ ce REIT-AG holds a share of 49 % in the joint venture. The and carrying amount of the joint venture at the end of the reporting period > determine the fair value of convertible proﬁ t participation is EUR 9,046 k. certiﬁ cates. The following carrying amounts are attributable to the Group from its In particular, in determining the fair value of the investment property, proportionate interest in the joint venture. alstria ofﬁ ce REIT-AG must apply and take account of numerous EUR k Non-current assets Current assets Non-current liabilities Current liabilities Result for the period 2009 17,807 4,028 12,065 1,103 – 264 factors. A fair value measurement was performed by an independent third party (Colliers CRE, London; see Note 7). If the future develop- ment of these properties differs from the estimate, large-scale losses resulting from the change in the fair value may be incurred. This can have a negative impact on the future results of operations. The external assessors have carried out sensitivity analyses on their fair value assessments, which show the effect of the changes to capitalisa- tion rates on fair market values. 5 Key judgments and estimates The preparation of the consolidated ﬁ nancial statements in accordance Capitalisation rates with IFRS requires assumptions and estimates to be made for various – 0.25 % items which have an effect on the amount and disclosure of the assets and liabilities, as well as income and expenses. Actual amounts may 0.00 % 0.25 % differ from these estimates. Value of the properties (EUR m) 1,676 1,601 1,533 Judgements In the process of applying the Group’s accounting policies, manage- A fair value measurement of the derivative ﬁ nancial instruments was ment has made the following judgement, apart from those involving performed by an independent third party and the market data com- estimations, which has the most signiﬁ cant effect on the amounts piled thereof were included in the standard measurement models. recognised in the ﬁ nancial statements: Thus, the usual estimation uncertainties exist regarding possible devia- Non income producing assets have been excluded from this analysis. tions from the market data used. We consider the models used to be adequate and believe that they do not engender any uncertainty as to their applicability. alstria Annual Report 2009 Notes to the Consolidated Financial Statements 49 4 Basis of consolidation 5 Key judgments and estimates 6 Seasonal or economic effects on business 7 Summary of signiﬁ cant accounting policies The fair value of stock options granted to the management board has been determined as at the granting date. This valuation requires the 7 Summary of signiﬁ cant accounting policies The following accounting and valuation methods have been used to Company to make estimates about these parameters, and hence they prepare these consolidated financial statements of alstria office are subject to uncertainty. The fair value of the stock options granted REIT-AG. as at April 3, 2007 and September 5, 2007, respectively, is allocated to the vesting period according to the determinations in the underlying stock option programme. The resulting personnel expenses caused an Investment property Investment property comprises all property that is held in order to addition to capital surplus of EUR 91 k (December 31, 2008: generate rental income or long-term value increases in assets and is EUR 654 k) in the consolidated ﬁ nancial statements as at Decem- used neither in production nor for administrative purposes. It is recog- ber 31, 2009. nised at acquisition costs at the time of addition. The costs include the transaction costs which have to be capitalised (particularly real estate The fair value of convertible proﬁ t participation certiﬁ cates granted to transfer tax). In accordance with IAS 40.17, costs incurred subsequently the employees of the Group were estimated at the respective granting for dismantling, replacing in parts or maintenance of property are also dates using a binary barrier option model based on the Black Scholes included; however, no costs of this kind had been incurred as of the model; assumptions since the conversion will be affected automatically end of reporting period. once the barrier has been reached. The model takes into account the terms and conditions upon which the instruments were granted. This Cost of debt which can be directly allocated to the acquisition or valuation requires the Company to make estimates about these production of investment property are capitalised in the year in which parameters, and hence they are subject to uncertainty. they arise. The assets, liabilities and equity instruments stated above, which are For subsequent measurement, the Company uses the fair value model particularly exposed to estimation uncertainty, had the following impact according to IAS 40.33 et seq., which reﬂ ects market conditions at the on the consolidated balance sheet as at the end of reporting period: end of reporting period. EUR k Dec. 31, 2009 Dec. 31, 2008 All market values were determined by Colliers CRE, London, a renowned Investment property 1,425,440 1,805,265 Positive fair values of derivatives 615 176 Negative fair values of derivatives 48,859 28,626 Valuation of stock options and conver- tible proﬁ t participation rights 466 768 appraiser and brokerage ﬁ rm, as at December 31, 2009. The basis for deriving the fair values as deﬁ ned 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 sufﬁ cient number of ofﬁ cial 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. 6 Seasonal or economic effects on business The activities of alstria ofﬁ ce REIT-AG (primarily the generation of The method used is a hard-core and top-slice method, whereby rental revenues from investment properties) are not generally affected by income is horizontally segmented, with the hard-core portion repre- seasonal factors. However, the sale of one or more large properties senting the prevailing contractual rent. The top slice represents the may have a signiﬁ cant impact on revenues and operating expenses. difference between market rent and contractual rent. This method Experience shows that the real estate market tends to ﬂ uctuate as a standards set forth by the Royal Institution of Chartered Surveyors. The result of factors such as the net income of consumers or GDP, changes method used by Colliers CRE is also appropriate and suitable for de- in interest rates, consumer conﬁ dence, and demographic and other termining market values in accordance with the provisions of the factors inherent to the market. The change of the interest rate might International Valuation Standards (IVS, or the White Book). fulﬁ ls the requirements of the Red Book, a set of international valuation lead to a lower valuation of the investment property and derivatives. 50 Notes to the Consolidated Financial Statements alstria Annual Report 2009 In order to derive the fair value, the properties were divided into two groups and valued accordingly. Group 1 contained properties with Leases The lessee is considered to be the beneﬁ cial owner of leased assets anchor lease terms of less than ﬁ ve years and Group 2 held properties when the lessee bears all the risks and rewards incidental to the assets with anchor lease terms of more than ﬁ ve years. (ﬁ nance lease) in accordance with IAS 17. If the lessee is deemed Group 1 for properties with leases set to expire in ﬁ ve years or less: lower present value of the minimum lease payments at the inception Hard-core and top-slice method, taking account of: of the lease. beneﬁ cial owner, the leased asset is recognised at fair value or the > the contractual rent for the remaining term of the lease; > a vacancy period of at least 18 months following expiry of the lease; Operating leases Lease agreements that alstria ofﬁ ce REIT-AG has entered into with commercial tenants are classiﬁ ed as operating leases under IFRS. Ac- > the necessary maintenance costs to re-let the properties at a cordingly, alstria ofﬁ ce REIT-AG is lessor in numerous different types of comparable rent level; > re-lets at market rents; operating lease agreements for investment properties with a carrying amount of EUR 1,561,265 k (December 31, 2008: EUR 1,805,265 k). > the capitalisation rates reﬂ ecting the individual risk of the prop- These leases generate the majority of proceeds and income for alstria erty as well as market activity (comparable transactions); and ofﬁ ce REIT-AG. > non-allocable operating costs in the amount of 5 % of rental income p.a. Impairment of assets Intangible assets with indeﬁ nite useful lives are not amortised; they Group 2 for properties with anchor leases that are leased on a long- are tested for impairment on an annual basis. term basis to tenants with strong credit ratings: Hard-core and top-slice method, taking account of: Assets that are amortised are tested for impairment whenever trigger- ing events or changes in circumstances indicate that the carrying > the contractual rent for the remaining term of the lease; amount may no longer be recoverable. An impairment loss is charged > re-lets at market rents (accounting for the difference between in the amount of the excess of the carrying amount over the recover- market rent and contractual rent); able amount. If the reasons for an impairment loss cease to apply, the > the capitalisation rates reﬂ ecting the individual risk of the impairment loss is reversed as appropriate. property as well as market activity (comparable transactions); > non-allocable operating costs in the amount of 5 % of rental income p.a.; and > the net selling price. Property, plant and equipment Property, 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 Gains or losses arising from changes in the fair values of investment is incurred, if the recognition criteria are met. Likewise, when a major property are disclosed in the item ‘Net gain from fair value adjust- inspection is performed, its cost is recognised in the carrying amount ments on investment property’ in the income statement in the year in of the plant and equipment as a replacement if the recognition criteria which they arise. are satisﬁ ed. All other repair and maintenance costs are recognised in proﬁ t or loss as incurred. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently with- Depreciation of plant and equipment is calculated on a straight-line drawn from use and no future economic beneﬁ t is expected from its basis over the useful life of the asset (3 to 15 years). The useful life of disposal. Any gains or losses on the retirement or disposal of an invest- own occupied property is estimated at 50 years. While the building is ment property are recognised in proﬁ t or loss in the year of retirement depreciated on a scheduled basis, the land is not part of a scheduled or disposal. depreciation. alstria Annual Report 2009 Notes to the Consolidated Financial Statements 51 7 Summary of signiﬁ cant accounting policies An item of property, plant and equipment is derecognised upon Currently, the Company does not have intangible assets with indeﬁ nite disposal or when no future economic beneﬁ ts are expected from its useful lives. use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and Gains or losses arising from derecognition of an intangible asset are the carrying amount of the asset) is included in proﬁ t or loss in the measured as the difference between the net disposal proceeds and the year the asset is derecognised. carrying amount of the asset and are recognised in proﬁ t or loss when The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each ﬁ nancial year end. the asset is derecognised. Taxes Current tax assets and liabilities for the current and prior periods are Cost of debt items which can be directly allocated to the acquisition measured at the amount expected to be recovered from or paid to the or production of property, plant and equipment are capitalised in the taxation authorities. The tax rates and tax laws used to compute the year in which they arise. amount are those that are enacted or substantively enacted by the end of the reporting period. Intangible assets Intangible assets acquired separately are measured on initial recogni- Deferred taxes are not carried forward because according to the REIT tion at cost. The cost of intangible assets acquired in a business status the whole Group is tax transparent to income taxes. combination is the 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. Financial instruments Pursuant to IAS 39, a ﬁ nancial instrument is any contract that gives Internally generated intangible assets, excluding capitalised develop- rise to both a ﬁ nancial asset at one entity and a ﬁ nancial liability or ment costs, are not capitalised and expenditure is reﬂ ected in proﬁ t equity instrument at another entity. Financial assets comprise in par- or loss in the year in which the expenditure is incurred. ticular cash and cash equivalents, trade receivables, as well as other loans and receivables originated by the enterprise, held-to-maturity The useful lives of intangible assets are assessed to be either ﬁ nite or investments and original and derivative ﬁ nancial assets held for trad- indeﬁ nite. ing. Financial liabilities frequently underlie a claim to their return in cash or another ﬁ nancial asset. These include in particular liabilities to Intangible assets with ﬁ nite lives are amortised over the useful economic banks and other creditors, trade payables and derivative ﬁ nancial life and assessed for impairment whenever there is an indication that liabilities. Financial assets and liabilities are generally not offset. the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a ﬁ nite useful life are reviewed at least at each ﬁ nancial year end. Financial assets The recognition and measurement of ﬁ nancial assets is subject to the provisions of IAS 39. Depending on the classiﬁ cation prescribed by Changes in the expected useful life or the expected pattern of IAS 39: consumption of future economic beneﬁ ts embodied in the asset are accounted for by changing the amortisation period or method, as > held-to-maturity; appropriate, and are treated as changes in accounting estimates. The > measured at fair value through proﬁ t or loss; amortisation expense on intangible assets with ﬁ nite lives is recognised > available-for-sale; or in proﬁ t or loss in the expense category consistent with the function > loans and receivables, of the intangible asset. Depreciation of licences is calculated on a straight-line basis over the and recognised as of the end of reporting period. useful life of the asset (3 to 8 years). ﬁ nancial assets are either measured at amortised cost or at fair value 52 Notes to the Consolidated Financial Statements alstria Annual Report 2009 The fair value of quoted investments is based on current bid prices. If subsequently carried at fair value. Changes in the fair value of ﬁ nancial the market for a ﬁ nancial asset is not active (and for unlisted securities), assets classiﬁ ed as available for sale are recognised in equity; when the Group determines fair value by using valuation techniques. These they are sold or impaired their accumulated fair value adjustments are include the use of recent arm’s length transactions, reference to other included in the income statement. instruments that are substantially the same, discounted cash ﬂ ow analyses and option pricing models, making maximum use of market The Group holds no ﬁ nancial assets which are classiﬁ ed as held to inputs and relying as little as possible on entity-speciﬁ c inputs. maturity according to the classiﬁ cation prescribed by IAS 39 classiﬁ ed When ﬁ nancial assets are recognised initially, they are measured at fair as held to maturity. value plus transaction costs for all ﬁ nancial assets not carried out at Financial assets have not been designated as ‘at fair value through fair value through proﬁ t or loss. Management decides on the classiﬁ - proﬁ t or loss’. cation of ﬁ nancial assets on initial recognition and reviews the classi- ﬁ cation at the end of reporting period. A ﬁ nancial asset is derecognised when the entity loses control of the contractual rights that comprise Receivables Receivables are classiﬁ ed as loans and receivables as deﬁ ned by IAS 39 the ﬁ nancial instrument. and measured initially at fair value and subsequently at amortised cost, if necessary after deduction of any impairment. Amortised costs All regular way purchases and sales of ﬁ nancial assets are recognised are computed using the effective interest method less any allowance on the trade date, which is the date that the Group commits to pur- for impairment. The calculation takes into account any premium or chase or sell the asset. A purchase or sale of ﬁ nancial assets is custom- discount on acquisition and includes transaction costs and fees that ary when it requires the delivery of assets within the period generally are an integral part of the effective interest rate. established by regulation or convention in the marketplace. Financial assets at fair value through proﬁ t or loss are ﬁ nancial assets check was performed on the tenants (risk associated with the legal held for trading. A ﬁ nancial asset is classiﬁ ed in this category if it is validity of receivables) and certainty gained that there were no rea- acquired principally for the purpose of selling in the short term. sons for a rent reduction (del credere risk). This is done for each indi- Derivatives are also categorised as held for trading unless they are vidual property and portfolio basis, respectively. Within the scope of the measurement of trade receivables, a solvency designated as hedges. Assets in this category are classiﬁ ed as current assets. Non-interest bearing receivables due in more than one year are Derivative ﬁ nancial instruments which are not part of an effective discounted. hedge pursuant to IAS 39 must be classiﬁ ed as ‘held for trading’ and Gains and losses are recognised in proﬁ t or loss when the receivables recognised in proﬁ t or loss at fair value. If their fair value is negative, are derecognised or impaired as well as through the amortisation the instruments are disclosed under ﬁ nancial liabilities. process. Available-for-sale ﬁ nancial assets are non-derivatives that are either If there is objective evidence that an impairment loss has been in- designated in this category or not classified in any of the other curred, the amount of the loss is measured as the difference between categor ies. They are included in non-current assets unless the invest- the asset’s carrying amount and the present value of estimated future ment matures or management intends to dispose of it within twelve cash ﬂ ows discounted at the ﬁ nancial asset’s original effective interest months of the end of the reporting period, or unless the maturity at rate (i.e. the effective interest rate computed at initial recognition). the end of reporting period is less than twelve months. The available- The carrying amount of the asset is reduced directly. The amount of for-sale financial assets are initially recognised at fair value and the loss is recognised in proﬁ t or loss. alstria Annual Report 2009 Notes to the Consolidated Financial Statements 53 7 Summary of signiﬁ cant accounting policies If, in a subsequent period, the amount of the impairment loss Any gains or losses arising from changes in fair value on derivatives decreases and the decrease can be related objectively to an event during the period that do not qualify for hedge accounting are taken occurring after the impairment was recognised, the previously recog- directly to proﬁ t or loss. nised impairment loss is reversed to the extent that the carrying value of the receivable does not exceed its amortised cost at the reversal For the purpose of hedge accounting, hedges are classiﬁ ed as cash date. Any subsequent reversal of an impairment loss is recognised in ﬂ ow hedges when hedging exposure to variability in cash ﬂ ows is proﬁ t or loss. attributable to a particular risk associated with a recognised liability. Provision for impairment is made when there is objective evidence At the inception of a hedge relationship, the Group formally desig- (such as the probability of insolvency or signiﬁ cant ﬁ nancial difﬁ culties nates and documents the hedge relationship to which the Group of the debtor) that the Group will not be able to collect all of the wishes to apply hedge accounting and the risk management objective amounts due under the original terms of the invoice. The carrying and strategy for undertaking the hedge. The documentation includes amount of the receivable is reduced directly. Impaired assets are identiﬁ cation of the hedging instrument, the hedged item, the nature derecognised when they are assessed as uncollectable. of the risk being hedged and how the entity will assess the hedging Derivative ﬁ nancial instruments and hedge accounting The Group uses derivative ﬁ nancial instruments such as interest rate hedged item’s cash ﬂ ows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in swaps and caps to hedge its risks associated with interest rate ﬂ uctu- fair value or cash ﬂ ows and are assessed on an ongoing basis to de- ations. Such derivative ﬁ nancial instruments are initially recognised at termine that they actually have been highly effective throughout the fair value on the date on which a derivative contract is entered into ﬁ nancial reporting periods for which they were designated. instrument’s effectiveness in offsetting the exposure to changes in the and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair Cash ﬂ ow hedges which meet the strict criteria for hedge accounting value is negative. are accounted for as follows: The instruments were measured as at December 31, 2009 by an inde- The effective portion of the gain or loss on the hedging instrument is pendent third party. The fair value of derivative ﬁ nancial instruments recognised directly in equity, while any ineffective portion is recog- is determined by discounting the expected future cash ﬂ ows over the nised immediately in proﬁ t or loss. remaining life of the agreement based on current market rates or term structures of interest rates. Amounts taken to equity are transferred to proﬁ t or loss when the hedged transaction affects proﬁ t or loss, such as when the hedged The Group assesses whether embedded derivatives are required to be ﬁ nancial income or ﬁ nancial expense is realised. separated from host contracts when the Group ﬁ rst becomes party to the contract. Reassessment only occurs if there is a change in the terms The Group uses no ﬁ nancial derivatives that qualify for the hedging of the contract that signiﬁ cantly modiﬁ es the cash ﬂ ows that would of the fair value of recognised assets or liabilities or a ﬁ rm commitment otherwise be required. (fair value hedges), nor such ﬁ nancial derivatives that qualify for the hedging of a net investment in a foreign operation (net investment The method used for recording gains and losses depends on whether hedge). the derivative was assigned to an underlying transaction as a hedge. To this end, ﬁ nancial management deﬁ nes 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. 54 Notes to the Consolidated Financial Statements alstria Annual Report 2009 Cash and cash equivalents Cash and short-term deposits in the balance sheet comprise current bank balances. The component of the convertible proﬁ t participation rights (Wandel- genussrechte) which exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of transaction costs. On issuance of the jouissance shares, the fair value of the liability component is For the purposes of the consolidated cash ﬂ ow statement, cash and determined using a market rate for an equivalent non-convertible cash equivalents include the cash and cash equivalents deﬁ ned above, bond, and this amount is classiﬁ ed as a ﬁ nancial liability measured at other short-term highly liquid investments with original maturities of amortised cost until it is extinguished on conversion or redemption. three months or less, and bank overdrafts. A ﬁ nancial liability is derecognised when the obligation under the liabil- Current bank balances are recognised in the nominal amount. ity is discharged or cancelled or expires. When an existing ﬁ nancial Treasury shares Company equity instruments which are reacquired (treasury shares) liability is replaced by another from the same lender under substantially different terms, or the terms of an existing liability are substantially modiﬁ ed, such an exchange or modiﬁ cation is treated as a derecogni- are deducted from equity. No gain or loss is recognised in proﬁ t or loss tion of the original liability and the recognition of a new liability, and on the purchase, sale, issue or cancellation of the Group’s own equity instruments. the difference in the respective carrying amounts is recognised in proﬁ t or loss. Liabilities Financial liabilities, in particular trade payables, are stated at the Provisions Provisions are recognised where a present obligation exists to third amount repayable and are, if non-current and non-interest bearing, parties as a result of a past event, where a future outﬂ ow of resources discounted. is probable and where a reliable estimate of that outﬂ ow can be made. The provisions are measured, taking account of all risks at the best The fair values are determined by discounting the future contractually estimate of future cash outﬂ ows required to meet the obligation, agreed cash ﬂ ows at the interest rates from the term structure of and – if non-current – discounted. They may not be offset against interest rates to the end of reporting period. reimbursements. The recognition and measurement of ﬁ nancial liabilities is subject to the provisions of IAS 39. Depending on the classiﬁ cation prescribed by IAS 39 > at amortised cost 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- > measured at fair value through proﬁ t or loss; settled transactions is measured by reference to the fair value at the date on which they are granted. The fair value is determined using ﬁ nancial liabilities are either measured at amortised cost or at fair value an appropriate pricing model, further details of which are given in and recognised as of the end of reporting period. Notes 17 and 18 and in the remuneration report, respectively. All loans and borrowings are initially recognised at fair value less The cost of equity-settled transactions is recognised, together with a directly attributable transaction costs, and have not been designated corresponding increase in equity, over the period in which the as ‘at fair value through proﬁ t or loss’. After initial recognition, interest- performance and/or service conditions are fulﬁ lled, ending on the bearing loans and borrowings are subsequently measured at amortised date on which the relevant assignee becomes fully entitled to the cost using the effective interest method. Gains and losses are recog- award (‘the vesting date’). The cumulative expense recognised for nised in proﬁ t or loss when the liabilities are derecognised as well as equity-settled transactions at each reporting date until the vesting through the amortisation process. date reﬂ ects the extent to which the vesting period has expired and alstria Annual Report 2009 Notes to the Consolidated Financial Statements 55 7 Summary of signiﬁ cant accounting policies 8 Segment reporting the Group’s best estimate of the number of equity instruments that will ultimately vest. The proﬁ t or loss charge or credit for a period Revenue recognition Revenue is recognised to the extent that it is probable that the eco- represents the movement in cumulative expense recognised as at the nomic beneﬁ ts will ﬂ ow to the Group and the revenue can be reliably beginning and end of that period. measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and other sales taxes or duty. No expense is recognised for awards that do not ultimately vest, The following speciﬁ c recognition criteria must also be met before except for awards where vesting is dependent upon a market condi- revenue is recognised: tion, which are treated as vesting irrespective of whether or not the market condition is satisﬁ ed, provided that all other performance Rental income Rental income arising from operating leases on invest- and/or service conditions are satisﬁ ed. ment properties is accounted for on a straight-line basis over the lease Where the terms of an equity-settled award are modiﬁ ed, the min- terms. imum expense recognised is the expense as if the terms had not been Interest income Revenue is recognised as interest accrues (using the modiﬁ ed. An additional expense is recognised for any modiﬁ cation, effective interest rate that is the rate that exactly discounts estimated which increases the total fair value of the share-based payment ar- rangement, or is otherwise beneﬁ cial to the assignee as measured at future cash receipts through the expected life of the ﬁ nancial instru- ment to the net carrying amount of the ﬁ nancial asset). the date of modiﬁ cation. Where an equity-settled award is cancelled, it is treated as if it had Income taxes REIT-AGs are fully exempt from German corporate income tax and vested on the date of cancellation, and any expense not yet recog- trade tax. Hence, alstria ofﬁ ce REIT-AG has been exempt from tax nised for the award is recognised immediately. However, if a new with retrospective effect since January 1, 2007. 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 modiﬁ cation of the original 8 Segment reporting IFRS 8 replaces IAS 14, ‘Segment reporting’. It requires a ‘manage- award, as described in the previous paragraph. ment approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The dilutive effect of outstanding options is reﬂ ected as additional share dilution in the computation of earnings per share as far as at the As the type of services offered by alstria ofﬁ ce REIT-AG is comprised end of reporting period the related contingencies are achieved (further exclusively of lessor activities for commercial property tenants in details are given in Note 14). Minority interests in partnerships Under IAS 32.16 and IAS 32.19, a ﬁ nancial instrument is an equity Germany, there were no reportable segments within the meaning of IAS 14. According to IFRS 8, one reporting segment can be identiﬁ ed that is comprised of the Groups’ total operations. instrument if, and only if, an entity has no conditional or unconditional This reporting segment is reported in a manner consistent with the obligation to deliver cash or another asset. In addition, IAS 32.18(b) internal reporting provided to the chief operating decision-maker. The states that the right of a partner to return his investment to the partner- chief operating decision-maker has been identiﬁ ed as the manage- ship for compensation at any time must be disclosed as a liability, even ment board. when, in legal terms, the partner is an investor. Speciﬁ cally, equity must be reclassiﬁ ed as liabilities when the shareholders have a right of ter- mination and the exercise of that right justiﬁ es a settlement claim against the company. Therefore minority interests in fully consolidated partnerships are disclosed under liabilities. The minority interests’ share in net proﬁ t or loss is recorded in the income statement as income or an expense (ﬁ nancial result) in accordance with IAS 32.35. 56 Notes to the Consolidated Financial Statements alstria Annual Report 2009 9 Notes to the consolidated income statement 9.1 Revenues 9.4 Administrative expenses EUR k EUR k 2009 2008 Legal and consulting fees Revenues from investment property 102,510 105,055 Communication and marketing Revenues from investment property chieﬂ y include net rents from Audit fee Depreciation investment property. Supervisory board compensation Travel expenses Leasing costs Stock exchange Insurances IT maintenance Recruitment costs Other 9.2 Income and expenses from passed-on operating expenses EUR k 2009 2008 Income from passed-on operating expenses Income from passed-on operating expenses prior year Expenses from passed-on operating expenses Expenses from passed-on operating expenses prior year 17,202 17,057 2,031 19,233 0 17,057 – 17,202 – 17,057 9.5 Personnel expenses – 2,389 0 EUR k – 19,591 – 17,057 Salaries and wages Income less expenses from passed-on operating expenses – 358 0 Social insurance contribution Bonuses Expenses for share-based compensation The expenses from passed-on operating expenses which are directly thereof relating to stock options attributable to investment property include, in particular, operating costs, maintenance and property-based taxes. thereof relating to the convertible proﬁ t participation certiﬁ cates 2009 2,066 2008 3,061 800 427 359 292 264 185 162 122 91 25 1,394 6,187 2009 2,477 312 1,320 466 91 375 131 284 574 538 506 299 237 309 80 81 58 139 996 6,878 2008 2,380 256 895 776 654 122 1 367 9.3 Real estate operating expenses EUR k Maintenance and refurbishment Vacancy Running repairs Property management Non-deductable VAT Depreciation of own occupied property Other 2009 4,778 2,076 1,149 869 408 114 795 10,189 Amounts for retirement provisions and disability management board Other 2008 3,793 1,412 469 956 294 4,990 4,675 Convertible proﬁ t participation rights granted to employees entitle not only a conversion when the conditions apply, but also an annual pay- ment equivalent to the dividend per share. Therefore, expenses for share-based compensation resulting from the convertible profit 0 participation rights are to be recognised also in equity (for the conver- 1,909 8,833 sion right) as well as against liabilities (for the dividend entitlement). Out of the EUR 375 k expense in relation to the proﬁ t participation rights, EUR 297 k was recognised in equity (2008: EUR 114 k) while EUR 78 k were reﬂ ected in the liabilities (2008: EUR 8 k). Within the course of 2009 the Group had 31 employees on average (2008: 28). alstria Annual Report 2009 Notes to the Consolidated Financial Statements 57 9 Notes to the consolidated income statement 9.6 Other operating income EUR k Proﬁ t on deconsolidation Income from development projects From the reversal of liabilities Payments on provisions on doubtful debts Income from the consumption of accrued liabilities From insurance compensation Car use Compensation payment (rent) Other 2009 1,290 327 323 221 170 82 42 0 669 2008 0 0 456 0 710 95 36 1,000 476 3,124 2,774 9.8 Financial and valuation result The ﬁ nancial result breaks down as follows: EUR k Financial income 2009 593 2008 1,975 Syndicated loan – interest – 25,638 – 58,992 Interest non-recourse loans Interest result derivatives Bank overdraft Financial expenses Commitment fees Bank charges Guarantee fees Transaction costs Other Other ﬁ nancial expenses – 3,918 – 22,433 – 1 – 1,192 10,681 – 1 – 51,990 – 49,503 – 75 – 80 0 – 524 – 40 – 720 – 238 – 82 – 2 0 – 262 – 584 Other operating income includes the proﬁ t that arose on the decon- Net ﬁ nancing result – 52,117 – 48,112 solidation of two former Group companies. Income from the consump- tion of accrued liabilities resulted from lower than expected payments on the prior year-end’s accruals. 9.7 Other operating expenses EUR k Rental guarantees Impairment on trade receivables Off period expenses Other Total interest income and expenses for ﬁ nancial assets and liabilities which are not recognised at fair value through proﬁ t or loss were EUR 593 k (interest income; 2008: EUR 1,975 k) and EUR 29,557 k (interest expenses; 2008: EUR 60,184 k). Total interest income and expense calculated using the effective inter- est method for ﬁ nancial assets and liabilities that are not recognised at fair value through proﬁ t or loss was EUR 2,362 k (interest expenses; 2008: EUR 1,145 k). No net gains/losses arose from ﬁ nancial assets and liabilities available for sale. 2009 1,550 311 0 5 1,866 2008 0 255 251 11 516 The rental guarantees relate to the sale of properties. The buyer was Change in presentation In the split-up of the consolidated ﬁ nancial granted a rental guarantee; the rental guarantee is limited in time and statements 2008, the interest result out of derivatives (EUR 10,681 k) can only be drawn if existing tenants make use of a break option. was included in ﬁ nancial income and was not offset from the ﬁ nancial expenses as presented above. Therefore ﬁ nancial income in the 2008 annual report was stated with EUR 12,656 k and ﬁ nancial expenses with EUR – 60,184 k. This change in presentation does not affect the net ﬁ nancial result. The reason for the change in presentation is that the interest result out of derivatives is used to hedge the variable inter- est loans. It belongs to the ﬁ nancing side and, in order to improve the comparability, should be recognised under ﬁ nancial expenses as it is now presented. 58 Notes to the Consolidated Financial Statements alstria Annual Report 2009 The net loss from the fair value loss from the fair value adjustments Deferred income tax Due to the REIT tax exemption, there were no on ﬁ nancial derivatives is shown below: impacts on the ﬁ nancial statements, equity or proﬁ t and loss in 2008 EUR k 2009 2008 and 2009. – 16,331 0 10 Notes to the consolidated balance sheet – assets 10.1 Investment property This item, which comprises all investment properties held by the – 6,002 – 5,544 Company, breaks down as follows: Transfer of cumulated loss from cash ﬂ ow hedge reserve to income statement Ineffective change of the fair value of cash ﬂ ow hedges Change in fair value of ﬁ nancial deriva- tives not qualifying to a cash ﬂ ow hedge Net loss from fair value adjustments on ﬁ nancial derivatives – 961 469 – 23,294 – 5,075 EUR k Fair values As of Jan. 1 Changes in the consolidated group In 2009, EUR 16,331 k relates to cumulative loss in the fair value of cash ﬂ ow hedge derivatives which were reported in equity and for Property acquisition Capital expenditure which a forecast transaction is no longer expected to occur. Disposals Further details and explanation on derivatives are shown under Note 10.8. 9.9 Disposal proceeds Transfers to held for sale – 135,825 – 2,754 Net result from the adjustment of the fair value of investment property As of Dec. 31 – 85,887 – 88,116 1,425,440 1,805,265 EUR k 2009 2008 alstria ofﬁ ce REIT-AG uses the fair value model pursuant to IAS 40.33 Investment property disposal proceeds 134,115 17,950 et seq. for subsequent measurement. External appraisals were ob- tained for measurement. For a detailed description of the valuation of Carrying value of investment property disposals – 134,140 – 16,500 assets, please see Note 7. – 25 1,450 The loss from objects and portfolios sold below their carrying value amounts to EUR 375 k. alstria ofﬁ ce REIT-AG in 2009 concluded the acquisition of one invest- ment property located in Hamburg. This property has been transferred to alstria ofﬁ ce REIT-AG in the third quarter of 2009. 9.10 Income taxes Because of obtaining the G-REIT status, alstria ofﬁ ce REIT-AG was sion, beneﬁ ts and burden of thirteen properties took place in 2009. Two of them have been transferred in the course of deconsolidation subject to ﬁ nal taxation on the effective date of the transfer into a of former Group companies (see Note 4). In the course of the property disposal process, the transfer of posses- G-REIT in 2007. For a detailed description of the transformation into a G-REIT, please see Note 1 of the 2007 consolidated ﬁ nancial state- Due to probable sale transactions, three properties in a total amount ments. alstria ofﬁ ce REIT-AG is tax-exempt effective as of January 1, of EUR 135,825 k were categorised as ‘held for sale’ in the consoli- 2007. Deferred tax liabilities and assets had to be released to income dated ﬁ nancial statements as at December 31, 2009. in 2007. A total of EUR 110 k in tax expenses in 2009 refer to trade taxes levied retrospectively for the 2007 ﬁ nancial year on a subsidiary Capital expenditure (EUR 13,987 k) is made up of subsequent acquisi- of alstria ofﬁ ce REIT-AG. The EUR 75 k of tax expenses in 2008 refer tion and production costs in relation to property acquisitions and to corporate tax levied retrospectively for the ﬁ nancial year 2006. refurbishment projects. 2009 2008 1,805,265 1,693,718 – 41,440 3,480 13,987 0 218,917 0 – 134,140 – 16,500 alstria Annual Report 2009 Notes to the Consolidated Financial Statements 59 9 Notes to the consolidated income statement 10 Notes to the consolidated balance sheet – assets Expenses/income disclosed in the income statement pursuant to Investment properties have been used as security for bank loans in the IAS 40.75 (f): amount of EUR 1,561,265 k (2008: EUR 1,805,265 k). > EUR 102,510 k (2008: EUR 102,055 k) rental income from invest- ment property; 10.2 Equity accounted investment By means of a capital contribution from a joint venture partner, into > EUR 8,166 k (2008: EUR 7,487 k) operating expenses (including the former subsidiary Alstria VII. Hamburgische Grundbesitz GmbH repairs and maintenance) directly allocable to investment property & Co. KG at the end of the reporting period, this company is treated from which rental income was generated during the period under as a joint venture and it is stated as an equity-accounted investment. review; and alstria ofﬁ ce REIT-AG holds a share of 49 % in the joint venture. The > EUR 2,023 k (2008: EUR 1,346 k) operating expenses (including carrying amount of the joint venture at the end of the reporting repairs and maintenance) arising from investment property which did period is EUR 9,046 k. not generate rental income during the period under review. 10.3 Property, plant and equipment EUR k Acquisition and production cost As at Jan. 1, 2009 Additions Transfer from investment property Reclassiﬁ cations As at Dec. 31, 2009 Accumulated amortisation, depreciation and write-downs As at Jan. 1, 2009 Additions As at Dec. 31, 2009 Net book values as at Dec. 31, 2009 EUR k Acquisition and production cost As at Jan. 1, 2008 Additions Transfer from investment property Reclassiﬁ cations As at Dec. 31, 2008 Accumulated amortisation, depreciation and write-downs As at Jan. 1, 2008 Additions As at Dec. 31, 2008 Net book values as at Dec. 31, 2008 Furniture and ﬁ xtures Own occupied property Plant 1,100 0 0 0 159 43 0 0 3,381 2,274 0 0 Total 2009 4,640 2,317 0 0 1,100 202 5,655 6,957 659 187 846 254 58 43 101 101 0 114 114 5,541 Furniture and ﬁ xtures Own occupied property Plant 1,727 0 0 – 627 1,100 285 374 659 441 75 84 0 0 159 23 35 58 101 0 0 3,381 0 3,381 0 0 0 717 343 1,060 5,897 Total 2008 1,802 84 3,381 – 627 4,640 308 409 717 3,381 3,923 60 Notes to the Consolidated Financial Statements alstria Annual Report 2009 The useful life of the assets is estimated at 3 to 15 years for plant, furniture and ﬁ xtures and 50 years for the own occupied property by 10.5 Financial assets A minority interest in a former Group company is stated in this line the Group. item. The plants consist of miscellaneous items such as ﬁ re extinguishers or a control panel for a closed-circuit television system. 10.6 Assets held for sale Assets held for sale as shown refer exclusively to investment properties alstria ofﬁ ce REIT-AG intends to occupy one of its ofﬁ ce buildings in Hamburg for its own use. For this purpose, the property will be refur- The asset held for sale in the disposal group include one property bished. Therefore the property is categorised as owner-occupied (carrying amount EUR 60.000 k) which is to be transferred to a joint which are to be sold in the reporting year 2010. property according to IAS 16. In order to secure Group liabilities, the venture in 2010. property is pledged with a land charge as security. The main assets and liabilities of the disposal group are as follows: 10.4 Intangible assets EUR k Acquisition and production cost As of Jan. 1, 2009 Additions As of Dec. 31, 2009 Accumulated amortisation, depreciation and write-downs As of Jan. 1, 2009 Additions As of Dec. 31, 2009 Net book values EUR k Acquisition and production cost As of Jan. 1, 2008 Additions As of Dec. 31, 2008 Accumulated amortisation, depreciation and write-downs As of Jan. 1, 2008 Additions As of Dec. 31, 2008 Net book values Licences Dec. 31, 2009 EUR k Assets Investment property Receivables and other assets Cash and cash equivalents Total assets Liabilities Short-term loans Other liabilities Total liabilities 475 105 580 139 130 269 311 Dec. 31, 2009 135,825 462 334 136,621 27,500 676 28,176 Licences Dec. 31, 2008 10.7 Receivables and other assets Due to the speciﬁ c nature of the business, the Group considers re- ceivables due up to one year to be current. The following table presents an overview on the receivables of the Group: 399 76 475 40 99 139 336 EUR k Trade receivables Rent receivables Accounts receivable from afﬁ liates Tax receivables Other receivables Receivables from disposal group Prepayments Deposit account Held-for-sale asset (bond) Other assets Other receivables Dec. 31, 2009 Dec. 31, 2008 5,694 1,855 3 27,500 2,361 1,550 0 2,072 33,483 4,099 0 1 0 303 0 24,878 3,085 28,266 The useful life of the intangible assets is estimated at 3 to 8 years. The intangible assets mainly consist of software licences, which amount to EUR 290 k (2008: EUR 324 k). alstria Annual Report 2009 Notes to the Consolidated Financial Statements 61 10 Notes to the consolidated balance sheet – assets All receivables are due within one year from the end of the reporting To secure the loans of the Group, all receivables from rental and prop- period. The fair value of all receivables equals to their carrying amount erty purchase agreements as well as insurance receivables and derivative in the balance sheet. ﬁ nancial instruments were assigned to the lenders (Note 11.2). Trade receivables were written down by EUR 311 k (December 31, Receivables from the disposal group are related to ‘liabilities associ- 2008: EUR 255 k) due to rent payments in arrears. Other assets than ated with the sale of non-current assets held for sale’. It is the part trade receivables were not impaired. of the syndicated loan of alstria ofﬁ ce REIT-AG which is designated to the disposal group. The corresponding liability is shown within the As of December 31, 2009, trade receivables of EUR 724 k (Decem- ‘liabilities associated with the sale of non-current assets held for sale’ ber 31, 2008: EUR 830 k) were past due but not impaired. These relate on the liabilities side of the Group’s balance sheet. to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as A total of EUR 1.831 k of the other assets are made up of accruals follows: EUR k Trade receivables Up to 3 months 3 to 6 months Over 6 months Total Dec. 31, 2009 Dec. 31, 2008 76 648 0 383 447 0 724 830 resulting from the recognition of total rental revenues on a straight- line basis over the term of the lease agreements (rent smoothing). Prepayments relate to annual insurance premiums that are payable in advance. The decline of ﬁ nancial instruments held for sale is the result of the disposal of a bond. 10.8 Derivative ﬁ nancial instruments The following derivative ﬁ nancial instruments existed as at the end of reporting period: Product Cap Swap Interest rate derivatives – held for trading Cap Cap Swap Swap Swap Swap Swap Dec. 31, 2009 Dec. 31,2008 Strike p.a. ( %) Maturity date Notional (EUR k) Fair value (EUR k) 4.9000 Dec. 20, 2012 75,000 4.1160 Jul. 10, 2013 100,000 3.3000 Oct. 20, 2014 25,139 3.3000 Oct. 20, 2014 8,649 3.1925 Nov. 29, 2011 21,880 4.6000 Oct. 20, 2015 95,000 4.9000 Dec. 20, 2012 34,100 3.9087 Jan. 20, 2012 148,785 100 – 7,331 – 7,231 383 132 – 781 – 1,854 – 3,170 – 7,828 Notional (EUR k) 75,000 100,000 0 0 80,880 95,000 75,000 148,785 Fair value (EUR k) 176 – 4,517 – 4,341 0 0 – 557 – 1,447 – 5,497 – 4,282 3.6165 Nov. 29, 2011 625,000 – 27,895 625,000 – 12,326 Interest rate derivatives – cash ﬂ ow hedges Total – 41,013 – 48,244 – 24,109 – 28,450 62 Notes to the Consolidated Financial Statements alstria Annual Report 2009 The changes of the derivatives result from various effects. The follow- ing table shows the changes of alstria ofﬁ ce REIT-AG’s ﬁ nancial instru- ments since December 31, 2008 by category: CHANGES IN FINANCIAL DERIVATIVES EUR k Hedging instruments as at Dec. 31, 2008 Effective change in fair values cash ﬂ ow hedges Ineffective change in fair values cash ﬂ ow hedges Net loss from fair value changes in ﬁ nancial derivatives not qualifying for cash ﬂ ow hedging Reclassiﬁ cation of cumulated loss from equity to income statement Changes in accrued interests concerning ﬁ nancial derivatives Acquisitions Disposals Hedging instruments as at Dec. 31, 2009 Cash ﬂ ow hedge reserve – 49,579 – 9,952 0 0 16,331 0 0 0 – 43,200 Financial derivatives Financial assets Financial liabilities Total 176 22 – 235 – 47 0 – 29 728 0 615 – 28,626 – 28,450 – 9,974 – 5,767 – 914 0 – 9,952 – 6,002 – 961 0 – 9,068 – 9,097 0 5,490 728 5,490 – 48,859 – 48,244 The notional amount of the ﬁ nancial derivatives effective at the end Together, this results in a loss of EUR 23,294 k (2008: EUR 5,075 k) of the reporting period is EUR 1,039,553 k (December 31, 2008: shown under net loss from fair value adjustments on ﬁ nancial deriva- EUR 1,104,665 k). One swap with a notional of EUR 95,000 k will not tives. For the EUR 16,331 k expense relating to the transfer out of become effective before July 10, 2013. Derivatives with a notional of equity, the corresponding booking entry is an equity account, which EUR 175,000 k are not designated as a cash ﬂ ow hedge. increased by the same amount. Therefore this expense entry in the amount of EUR 16,331 k has no effect on the Group’s net asset value. In total EUR – 9,952 k changes in fair values of effective derivatives have been recognised in the hedging reserve. On October 13, 2009, alstria ofﬁ ce REIT-AG entered into two interest The ineffective portion recognised in the proﬁ t or loss that arises 3.3000 %, expiring on October 20, 2014. This transaction became from cash ﬂ ow hedges amounts to a loss of EUR 6,002 k (2008: effective as per October 20, 2009. The fair value of the caps at the EUR 5,544 k). inception of the hedging relationship was EUR 728 k. caps with a notional amount of EUR 33,788 k and a cap strike of Losses totalling EUR 961 k (2008: proﬁ t of EUR 469 k) due to the The aforementioned caps partly replaced the EUR 59,000 k notional market valuation of derivatives not included in hedge accounting were amount of an existing interest rate swap terminated with the effective recorded in the income statement in the period of the ﬁ nancial state- date of July 20, 2009. This resulted in the fair value reduction of ments to December 31, 2009. ﬁ nancial liabilities out of this swap by EUR 2,000 k. A loss of EUR 16,331 k relates to the cumulative losses that were Further interest rate swaps with a notional amount of EUR 40,900 k reported in equity and for which the forecast transaction is no longer have been terminated with the effective date of October 20, 2009. expected to occur. It was immediately transferred to the income state- The value reduction out of this termination amounted to EUR 3,490 k. ment within net loss of fair value adjustments on ﬁ nancial derivatives (see Note 9.8). alstria Annual Report 2009 Notes to the Consolidated Financial Statements 63 10 Notes to the consolidated balance sheet – assets 11 Notes to the consolidated balance sheet – equity and liabilities 10.9 Cash and cash equivalents Capital surplus The capital surplus changed as follows during the EUR k Bank balances Dec. 31, 2009 Dec. 31, 2008 146,818 31,426 EUR k ﬁ nancial year: Bank balances earn interest at ﬂ oating rates based on daily bank de- posit rates. As at the end of the reporting period, EUR 61,848 k of the cash and cash equivalents is restraint on disposal; EUR 59,132 k thereof is dedicated to the repayment on a loan in relation to the disposal of properties. Another EUR 2,716 k is dedicated to the pay- ment of interest. The amount corresponds to the accrued interest on the syndicated loan. 11 Notes to the consolidated balance sheet – equity and liabilities 11.1 Equity For detailed information on equity we refer to the consolidated state- As of Jan. 1 Share-based payments Contributions to capital surplus Valuation of available-for-sale ﬁ nancial assets Transaction costs of issue of shares Other contributions to capital surplus Reclassiﬁ cation of retained earnings (see also Note 15) Result of the disposal of treasury shares Intrinsic value of exchange option for treasury shares Disposal of treasury shares ment of changes in consolidated equity. As of Dec. 31 Dec. 31, 2009 Dec. 31, 2008 726,885 754,647 388 0 123 0 0 – 28,423 – 13,076 1,744 – 14,820 685,897 768 0 – 123 0 – 7 – 28,400 0 0 0 726,885 Share capital thousand Dec. 31, 2009 Dec. 31, 2008 board of the Company, and accordingly, stock options with a fair value A stock option programme was resolved in 2007 by the supervisory Ordinary share of EUR 1 each 56,000 56,000 of EUR 1,997 k were issued to members of the management board of the Company. As of December 31, 2009, this resulted in a further increase of the capital surplus of EUR 91 k (2008: EUR 654 k) from In the balance sheet of the consolidated ﬁ nancial statements as at the allocation of the fair values of the granted stock options over the December 31, 2009, the share capital of alstria ofﬁ ce REIT-AG was respective vesting period. A further increase of EUR 297 k (2008: unchanged, amounting to EUR 56,000 k. Captiva 2 Alstria Holding EUR 114 k) resulted from the vesting of the convertible proﬁ t partici- S.à r.l., Luxembourg, directly and indirectly held a majority of the shares in the Company, the remaining shares are free ﬂ oat. pation certiﬁ cates granted to employees of the Group. Together, this amounts to EUR 388 k shown under share-based payments. Treasury stock Dec. 31, 2009 Dec. 31, 2008 dend payments for 2007 and 2008. The Company aligns the disclosure Reclassiﬁ cations from retained earnings (EUR – 56,823 k) for the years 2008 (EUR – 28,400 k) and 2009 (EUR – 28,423 k) relate to the divi- Non-par value bearer shares (quantity) 2,374 1,375,755 Non-par value bearer shares (amount in EUR k) 26 14,983 carried forward. to the German GAAP presentation that requires a reposting out of the capital reserve corresponding its decrease in the German GAAP proﬁ t alstria ofﬁ ce REIT-AG offered its shareholders to pay out treasury shareholders to swap their dividend claims for treasury shares. Due to shares instead of a cash dividend. As a result, 1,337,760 treasury a granted discount, the intrinsic value of the exchange option for shares were issued to the shareholders. The distribution date was on treasury shares amounted to EUR 1,744 k. In the course of dividend payments, in 2009 the Company offered its July 7, 2009. By resolution of the general meeting on June 10, 2009, the authori- Hedging reserve sation of the Company to acquire treasury shares has been renewed. EUR k Dec. 31, 2009 Dec. 31, 2008 According to the resolution, alstria ofﬁ ce REIT-AG is authorised to ac- quire up to 10 % of the capital stock until December 9, 2010. For the time being, it is not intended to make any use of this authorisation. Hedging reserve – 43,200 – 49,579 64 Notes to the Consolidated Financial Statements alstria Annual Report 2009 11.2 Financial liabilities EUR k Loans Syndicated loan Non-recourse loans Total EUR k Loans Syndicated loan Non-recourse loans Total Non-current 751,387 195,870 947,257 Non-current 992,033 94,768 1,086,801 Current Accrued interest Total current Dec. 31, 2009 2,716 663 3,379 89,348 2,593 840,735 198,463 91,941 1,039,198 Current Accrued interest Total current Dec. 31, 2008 11,423 1,186 12,609 11,423 1,003,456 1,186 95,954 12,609 1,099,410 Loan 86,632 1,930 88,562 Loan 0 0 0 The table shows the long-term loans, net of the current portion as The current amount is made up of amortisation, scheduled loan repay- stated under non-current liabilities and the current amount that is due ment and accrued interest to be paid on the loans. within one year, and shown as short-term loans under current liabilities. The variable interest of the loans is payable on a quarterly basis, with the standard margin and borrowing costs for the market added to the The syndicated loan was arranged with J.P. Morgan Plc., Natixis respective Euribor rate. Banques Populaires, German Branch, and HSH Nordbank AG for a nominal amount of EUR 1,139,800 k. Out of this nominal amount, Due to the variable interest rate, there are no signiﬁ cant differences EUR 842,837 k (December 31, 2008: EUR 995,374 k) had been drawn as of the end of the reporting period. The carrying amount due to deducted transaction costs to be allocated under the effective interest between the carrying amounts and fair value with the exception of transaction costs. method upon raising the liabilities is EUR 838,019 k (December 31, A total of EUR 32,540 k in ﬁ nancial liabilities from non-recourse loans 2008: EUR 992,033 k). To secure these liabilities, receivables from relate to a ﬁ xed interest rate loan. As at the end of the reporting period, rental and property purchase agreements as well as insurance receiv- this loan has a fair value of EUR 32,872. ables and derivative ﬁ nancial instruments were assigned to the lend- ers, liens were granted on bank accounts and the registration of land As at December 30, 2009, alstria agreed on a further non-recourse charges was agreed (Notes 10.3 and 10.7). loan amount of EUR 33,000 k and an additional CAPEX line of EUR 6,200 k. This loan has been closed in the course of a joint venture Furthermore, due to reﬁ nancing activities, non-recourse loans with a which became effective with the drawdown as at January 20, 2010. nominal amount of EUR 198,550 k (December 31, 2008: EUR 95,000 k) existed as at the end of the reporting period. The lower As at December 31, 2009, loans were reduced by transaction costs of carrying amount of EUR 197,800 k (December 31, 2008: EUR 94,768 k) EUR 5,568 k (December 31, 2008: EUR 3,574 k). takes into account interest liabilities and transaction costs to be allocated under the effective interest method upon raising the The carrying amounts of the loans are all denominated in euros; the liabilities. fair value of all ﬁ nancial liabilities, with the exception of the transac- tion cost and the ﬁ xed interest rate loan, approximates their nominal value at the end of the reporting period. alstria Annual Report 2009 Notes to the Consolidated Financial Statements 65 11 Notes to the consolidated balance sheet – equity and liabilities The liabilities exposed to an interest rate risk are due as follows: Due Dec. 31, 2009 Dec. 31, 2008 EUR k up to 1 year in more than 1 year Total Dec. 31, 2008 EUR k Up to 1 year More than 1 year Total 88,562 0 Trade payables 914,717 1,086,801 Other trade payables 1,003,279 1,086,801 The following loans are secured by land charges: EUR k Dec. 31, 2009 Dec. 31, 2008 Financial liabilities secured by land charges 1,035,819 1,086,801 thereof on investment property 1,030,278 1,086,801 Other current liabilities VAT liabilities Liability for real estate transfer tax Miscellaneous other liabilities 4,561 4,561 790 2,147 8,148 11,085 0 0 0 0 70 701 4,561 4,561 790 2,147 8,218 11,155 ¹ This position is shown under non-current liabilities in the consolidated balance sheet. 11.3 Other provisions In respect of the sale of properties, the Group has accepted the com- mitment to compensate the buyer for possible rent income shortfalls The disclosed carrying amounts approximate the fair values. in case of non-extension of rental agreements existing with certain Other trade payables relate to operating costs not yet invoiced of tenants at the disposal date. The provision amount of EUR 1,550 k was EUR 2,981 k (December 31, 2008: EUR 3,435 k) and liabilities from calculated as net present value of possible cash outﬂ ow due to this third-party real estate management services and rental activities of rental guarantee for which a realisation is expected more likely than EUR 711 k (December 31, 2008: EUR 1,126 k). not. The commitment relate to a 6 years rental period starting in 2014. The same circumstances led to contingent liabilities (see Note 12.2). The liabilities for real estate transfer tax result from the acquisition of 11.4 Trade payables and other liabilities properties in 2008. Due Miscellaneous other liabilities include outstanding invoices with an amount of EUR 4,128 k and deferred income of EUR 2,410 k (2008: EUR k up to 1 year in more than 1 year Total Dec. 31, 2009 EUR 2,451 k). Accrued bonuses amount to EUR 1,320 k (2008: EUR 843 k). It also includes received deposits of EUR 434 k (2008: Trade payables Other trade payables Other current liabilities VAT liabilities Liability for real estate transfer tax Miscellaneous other liabilities 3,692 3,692 110 220 9,569 9,899 0 0 0 0 344 344 3,692 3,692 110 220 9,913 10,243 EUR 451 k). Minority interests in partnerships (EUR 10 k) are also disclosed under miscellaneous other liabilities. 11.5 Trust assets and liabilities As at the end of the reporting period, alstria ofﬁ ce REIT-AG has trust assets with an amount of EUR 1,550 k and liabilities of EUR 434 k (December 31, 2008: EUR 451 k), in particular from rent deposits. 66 Notes to the Consolidated Financial Statements alstria Annual Report 2009 11.6 Deferred taxes According to its REIT status, alstria ofﬁ ce REIT-AG has been fully tax transparent for income taxes starting from January 1, 2007. Therefore, As at December 31, 2009, there was no rental agreement for the administrative premises with a minimum lease length. at the end of reporting period as well as at the end of the prior-years’ Operating lease commitments – Group as lessor The Group has en- reporting period deferred, taxes do not exist. tered into commercial property leases on its investment property 11.7 Liabilities of current tax As at reporting date no liabilities of current tax existed (December 31, 2008: EUR 21 k). 12 Other notes 12.1 Compensation of management board and supervisory board Management board In 2009, the overall compensation of the mem- bers of the executive board totalled EUR 1,529 k (2008: EUR 1,314 k). As at the reporting date, liabilities for the compensation of the mem- bers of the executive board amount to EUR 550 k. Under the stock option programme of alstria ofﬁ ce REIT-AG, members of the executive board held non-transferable stock options for 375,000 shares of alstria ofﬁ ce REIT-AG as at December 31, 2009 and 2008, respectively. portfolio, consisting of the Group’s surplus ofﬁ ce and manufacturing buildings. These non-cancellable leases have remaining terms of be- tween 1 and 26 years. All leases include an indexation clause, i.e. the rental charges may be raised annually according to prevailing market conditions. Future minimum rental charges receivable under non-cancellable operating leases are as follows: EUR k Within 1 year After 1 year but not longer than 5 years More than 5 years Dec. 31, 2009 Dec. 31, 20081 91,707 101,905 309,248 519,158 352,550 602,754 920,113 1,057,209 Details of the stock option programme are also included in these notes 1 Corrected previous year values. (see Note 17). Supervisory board Pursuant to the Articles of Association, supervisory board members’ ﬁ xed annual payment amounted to EUR 299 k (2008: 12.3 Consolidated cash ﬂ ow statement The cash ﬂ ow statement shows how the cash and cash equivalents of EUR 292 k). the Group changed in the course of the ﬁ nancial year as a result of cash received and paid. In accordance with IAS 7, a distinction is made Further information on disclosures according to Section 314 para- between cash ﬂ ows from operating activities and cash ﬂ ows from graph 1 no. 6a HGB (German Commercial Code) and IAS 24.16 is investing and ﬁ nancing activities. provided in the remuneration report (pages 90 to 91) that is presented in the corporate governance chapter and is also part of these notes. The cash and cash equivalents in the cash ﬂ ow statement relate to all cash disclosed in the balance sheet, i.e. cash on hand and bank 12.2 Commitments and contingencies alstria ofﬁ ce REIT-AG entered into a general building agreement. balances. Future commitments out of this contract amounted to EUR 4,122 k The cash ﬂ ows from investing and ﬁ nancing activities are calculated as at the end of the reporting period. Other ﬁ nancial obligations from on the basis of payments, whereas the cash ﬂ ows from operating refurbishment projects and ongoing maintenance amount to activities are derived indirectly based on the consolidated proﬁ t for the EUR 3,862 k (2008: EUR 6,105 k). year. Under the indirect method, changes to the balance sheet items recognised in connection with operating activities are adjusted for In respect of the sale of properties, at the disposal date the Group effects arising from changes to the consolidated Group. accepted the commitment to compensate the buyer for possible rent income shortfalls in case rental agreements existing with certain ten- Thus changes to the relevant balance sheet items cannot always be ants are not extended. Contingencies out of this commitment amount reconciled to the corresponding amounts from the published consoli- to EUR 4,768 k. The commitment relates to a 6-year rental period dated balance sheet. starting 2014. According to the details of the rental guarantees and the lettability of the objects, the Company does not expect a claim to The payments for investing activities with an amount of EUR 140,627 k come out of the rental guarantees. The same circumstances led to (2008: EUR – 235,246 k) were funded by additional borrowings and provisions (see Note 11.3). by operating cash. The repayments of borrowings (EUR 153,058 k; 2008: EUR 107,495 k) were ﬁ nanced by additional borrowings, by operating cash and by using the cash and cash equivalents. alstria Annual Report 2009 Notes to the Consolidated Financial Statements 67 11 Notes to the consolidated balance sheet – equity and liabilities 12 Other notes 13 Related party relationships 14 Earnings per share 13 Related party relationships 13.1 Preliminary remarks Related parties are members of the management of alstria ofﬁ ce 14 Earnings per share Basic earnings per share are calculated as the quotient of the proﬁ t attributable to the shareholders and the weighted average number of REIT-AG (management board and supervisory board) and close family shares outstanding during the ﬁ nancial year – except for the average members of these persons. Related parties also include entities with number of treasury shares held by the Company itself. controlling inﬂ uence over the Group and entities with joint control over, or signiﬁ cant inﬂ uence on, alstria ofﬁ ce REIT-AG. Diluted earnings per share amounts are calculated by dividing the Captiva 2 Alstria Holding S.à r.l. (the parent company), Captiva Capital weighted average number of ordinary shares outstanding during the Partners II SCA and Captiva Capital II S.à r.l. (ultimate parent com- year – except for the treasury shares held by the Company itself – pany) are considered to have a controlling inﬂ uence over alstria ofﬁ ce plus the weighted average number of ordinary shares that would be REIT-AG. There was no group of entities with joint control or signiﬁ - issued on the conversion of all the dilutive potential ordinary shares cant inﬂ uence, with which business was conducted in the ﬁ nancial into ordinary shares. proﬁ t attributable to ordinary owners of the parent company by the year. The following reﬂ ects the income and share data used in the earnings As a joint venture in which alstria ofﬁ ce REIT-AG is a joint venturer, per share computations: Alstria VII. Hamburgische Grundbesitz GmbH & Co. KG is a related party. Two members of the supervisory board of alstria ofﬁ ce REIT-AG are also executive managers of Natixis Capital Partners Limited and Proﬁ t attributable to the shareholders (EUR k) Average number of shares outstanding (thousands) Natixis Capital Partners GmbH. Therefore, related parties during the ﬁ nancial year also included Natixis Capital Partners Limited and Basic earnings per share (EUR per share) Natixis Capital Partners GmbH. 2009 2008 – 79,651 – 56,000 55,306 54,697 – 1.44 – 1.02 In the view of alstria ofﬁ ce REIT-AG’s management, all transactions There were no dilution effects resulting from the granted stock options with related parties have been entered into on arm’s length terms or or the convertible proﬁ t participation rights during the period under under conditions in alstria ofﬁ ce REIT-AG’s favour. review, as the related vesting conditions were not satisﬁ ed as at the 13.2 Remuneration of key management personnel For a detailed description of the remuneration of key management For further information concerning granted stock option and convert- personnel, please see Note 12.1 and the remuneration report (pages ible proﬁ t participation rights, please see Notes 17 and 18. end of the reporting period. 90 to 91) in the corporate governance chapter. 13.3 Related party transactions Transactions with related parties only apply to laid-out expenses in relation to accounting services for Captiva Capital Partners II SCA in There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these ﬁ nancial statements. an amount of EUR 24 k (2008: EUR 28 k). alstria ofﬁ ce REIT-AG is authorised to issue up to EUR 28,000 k shares as conditional capital. These contingently issuable shares could poten- At the end of the reporting period, the Group has receivables of tially dilute basic earnings per share in the future, but were not included EUR 1,855 k against the joint venture. Furthermore, alstria ofﬁ ce in the calculation of diluted earnings per share because they are non- REIT-AG received EUR 327 k from the joint venture as compensation dilutive for the period presented. for services connected to real estate. 68 Notes to the Consolidated Financial Statements alstria Annual Report 2009 15 Dividends paid The annual general meeting of alstria ofﬁ ce REIT-AG on June 10, 2009 At the beginning of the reporting period, 515,625 stock options out- standing existed. Therefore, the amount of stock options outstanding resolved to pay out dividends totalling of EUR 28,423 k (EUR 0.52 as at the end of reporting period remained unchanged. None of these per share outstanding). The dividends paid out in 2008 totalled stock options are exercisable. The personnel expenses resulting from EUR 28,400 k (EUR 0.52 per share outstanding). the allocation of the fair values of the stock options at the granting date over the vesting period amounted to EUR 91 k in 2009 (Note 9.5). Shareholders had been entitled to exchange their cash dividend en- titlement for a share dividend. The shares have been exchanged into The fair values of the options outstanding were estimated at the cash dividend entitlements 2008 for a share price of EUR 4.16. At a respective granting dates using a Black Scholes model and partial-time cash dividend entitlement of EUR 0.52, eight dividend entitlements barrier options, taking into account the terms and conditions upon equal one share. EUR 15,794 k of the dividend was paid out on June which the instruments were granted. The following table lists the 29, 2009 as a cash dividend to those shareholders who did not apply inputs to the model used for the determination of the fair value of the for the share dividend. A total of EUR 5,565 k in share dividends, stock options granted: together with EUR 7,064 k in cash dividends due to the oversubscrip- tion of the offer, was paid out on July 6, 2009. The EUR 5,565 k, which reﬂ ects the exchange of cash dividend claims for shares in the Company, are shown under retained earnings. Dividend yield ( %) Risk-free interest rate ( %) Expected volatility ( %) 16 Employees During the period from January 1, 2009 to December 31, 2009, the Expected life of option (years) Exercise share price (EUR) Company had an average of 31 employees (January 1, 2008 to De- Labour turnover rate ( %) cember 31, 2008: on average 28 employees). The average was calcu- Stock price as of valuation date (EUR) 3.60 4.21 30.00 4.50 16.00 0.00 16.00 3.60 4.29 30.00 4.50 16.00 0.00 13.93 Fair value of stock options granted on Mar. 27, 2007 Sept. 5, 2007 lated by the fourth part of the total of employed people at the end of each quarter. On December 31, 2009, 32 people (December 31, 2008: 29 people) were employed at alstria ofﬁ ce REIT-AG, excluding the management board. 17 Stock option programme On March 27, 2007, the supervisory board of the Company resolved to establish a stock option programme for the members of the man- Estimated fair value of one stock option at the granting date (EUR) 3.17 2.28 Expected volatility is based on the historical volatility of comparative listed companies and was calculated as an average of these compar- ables. The term of each stock option is 7 years beginning with the respective agement board. The supervisory board ﬁ xed the details of the stock issue date. The stock options may only be exercised if the current stock option programme in accordance with the authorisation granted by exchange price of the Company’s shares exceeds the stock exchange the general meeting of shareholders of March 15, 2007 and granted price of the Company’s shares on the issue date by 20 % or more for a ﬁ rst tranche of stock options to the management board. at least seven non-subsequent trading days of the Frankfurt Stock Exchange prior to the commencement of the respective exercise The main terms of the stock option programme resolved by the super- period. The stock options may only be exercised after the expiration visory board can be summarised as follows: of a vesting period of 2 years and then during the four exercise periods each year. Each exercise period lasts 30 days, commencing with the Under the stock option programme, up to 2,000,000 options entitling day of announcement of the results for the ﬁ rst, second and third to the subscription of a maximum of 2,000,000 shares of the Company quarter, and the day of the Company’s annual general meeting. There with a total nominal value of EUR 2,000 k may be granted to members are no cash settlement alternatives. of the management board. The stock options will be granted in annual tranches. The ﬁ rst tranche was granted by the supervisory board in 2007, subject to the conditions below. The exercise price for the stock options granted in 2007 is EUR 16. Due to the development of the Company’s share price, the supervisory board did not grant any stock options in 2008 and 2009. alstria Annual Report 2009 Notes to the Consolidated Financial Statements 69 15 Dividends paid 16 Employees 17 Stock option programme 18 Convertible proﬁ t participation rights programme 19 Financial risk management 18 Convertible proﬁ t participation rights programme On September 5, 2007, the supervisory board of the Company The fair values of the inherent options for conversion were estimated at the respective granting dates using a binary barrier option model resolved the issuance of convertible proﬁ t participation certiﬁ cates based on the Black Scholes model since the conversion will be affected (‘certiﬁ cates’) to employees of the Company and to employees of automatically once the barrier has been reached. The model takes into companies in which alstria ofﬁ ce REIT-AG, directly or indirectly, holds account the terms and conditions upon which the instruments were a majority interest. Members of alstria ofﬁ ce REIT-AG’s management granted. board are not considered employees of the Company in terms of this convertible proﬁ t participation rights programme. With its resolution, The following table lists the inputs to the model used for the deter- the supervisory board ﬁ xed the details of the convertible proﬁ t partici- mination of the fair value of the options for conversion: pation rights programme in accordance with an authorisation granted by the general meeting of shareholders of March 15, 2007. Granting date of tranche Sept. 6, 2007 Jun. 6, 2008 Jun. 11, 2009 The main terms of the programme resolved by the supervisory board can be summarised as follows: The nominal amount of each certiﬁ cate is EUR 1.00 and is payable upon issuance. Under the programme, a maximum of 500,000 certiﬁ - cates in an aggregate nominal amount of up to EUR 500 k may be issued; 3,600 certiﬁ cates were issued on September 6, 2007, 42,000 certiﬁ cates on June 6, 2008 and a further 114,000 certiﬁ cates on June 11, 2009. Total expenses relating to convertible proﬁ t participation rights were EUR 375 k in 2009 (Note 9.5). In 2008 1,100 participation rights have been terminated. None of the convertible proﬁ t participation rights expired during the Dividend yield ( %) 3.70 4.70 8.68 Risk-free interest rate ( %) 4.20 4.65 1.71 Expected volatility ( %) 30.00 35.00 73.00 Expected life of option (years) 2.00 2.00 2.00 Exercise share price (EUR) 2.00 2.00 2.00 Labour turnover rate ( %) 10.00 10.00 10.00 Stock price as of valuation date (EUR) Estimated fair value of one option for conversion at the granting date 13.18 11.03 5.99 10.77 8.76 4.01 reporting period. At the end of the reporting period, 158,500 convert- Expected volatility is based on the historical volatility of comparative ible proﬁ t participation rights were outstanding. listed companies and was calculated as an average of these The certiﬁ cates are issued as non-transferable rights. The certiﬁ cates are neither sellable nor pledgeable or otherwise chargeable. comparables. 19 Financial risk management The ﬁ nancial instruments chieﬂ y used by the Group are bank loans The maximum term of each certiﬁ cate is ﬁ ve years. and derivative ﬁ nancial instruments. The main purpose of the bank loans is to ﬁ nance the business activities of alstria ofﬁ ce REIT-AG. The During its term, each certiﬁ cate entitles to a preferred disbursement Company also has various ﬁ nancial assets, such as cash and short-term from the Company’s annual net proﬁ t. The proﬁ t share corresponds deposits, which arise directly from business activities. to the dividend per share of the Company for a full business year of the Company. For certiﬁ cates held by a beneﬁ ciary for less than a full Derivative ﬁ nancial instruments include interest swaps and caps. The business year of the Company, the proﬁ t share is reduced pro rata purpose of these derivative ﬁ nancial instruments is to hedge against temporis. interest risks arising from the Company’s business activities and its Each certiﬁ cate shall be converted into one non-par-value bearer share sources of ﬁ nancing. of the Company on the second, third, fourth or ﬁ fth anniversary date The main risks arising from the Group’s ﬁ nancial instruments are cash of the issue date if the then current stock exchange price of the Com- ﬂ ow interest rate risks and liquidity risks. The Group is not exposed to pany’s shares has exceeded the stock exchange price of the Company’s any signiﬁ cant credit risks. The amount that best presents the max- shares on the issue date by 5 % or more on at least seven non-subse- imum credit risk is the carrying amount of ﬁ nancial assets. The man- quent trading days (market condition). For the 114,000 certiﬁ cates is- agement board decides on strategies and processes for managing sued on June 11, 2009 this market condition was fulﬁ lled in 2009. speciﬁ c risk types. These are presented below. Upon conversion of a certiﬁ cate, the beneﬁ ciary shall pay an additional conversion price to the Company for each certiﬁ cate to be converted. The conversion price shall be the aggregate proportionate amount in the Company’s share capital of the shares each certiﬁ cate entitles to subscribe for and shall be payable in addition to the offer price. 70 Notes to the Consolidated Financial Statements alstria Annual Report 2009 Risks that could arise as a result of the ﬁ nancial crisis are seen mainly Apart from this, the Group is not exposed to any commodity or in a potential default of payment by a major tenant. Due to the fact currency risks. that all of the Company’s main tenants are public institutions or still highly rated, the risk of default of payments is currently limited. Interest rate risk The following table sets out the carrying amount, by maturity, of the Group’s ﬁ nancial instruments which are exposed alstria ofﬁ ce REIT-AG’s syndicated loan facility agreement allows for a to interest rate risk: loan to value (LTV) ratio of 65 %. After the loan restructuring, the Company managed to keep the LTV ratio on the relevant test date at 59.8 %. With the measures implemented since the beginning of 2009, the risk of a breach of covenant was effectively countered. EUR k < 1 year 1 – 2 years 2 – 3 years 3 – 4 years > 4 years Total Financial year as at Dec. 31, 2009 Variable interest Loan facility Non-recourse loans Total Financial year as at Dec. 31, 2008 Variable interest Loan facility Non-recourse loans Total 86,632 751,387 927 971 87,559 752,358 0 1,013 1,013 0 1,065 1,065 0 161,517 838,019 165,493 161,517 1,003,512 0 0 0 0 0 0 992,033 0 992,033 0 0 0 0 992,033 94,768 94,768 94,768 1,086,801 Due to the extensive portfolio of non-current ﬁ nancial liabilities with a difference between ﬁ xed and variable interest rate amounts calculated variable interest risk, alstria ofﬁ ce REIT-AG is exposed to risks from by reference to an agreed-upon notional principal amount. In addition, ﬂ uctuations in market interest rates. The interest base for the ﬁ nancial interest caps were acquired; that is, the interest is capped at a prede- liability (loan) is the 3-month EURIBOR, which is adjusted every three months. A number of different derivative ﬁ nancial instruments were acquired to manage the interest expense. The derivative ﬁ nancial termined maximum. If the maximum interest rate is exceeded, the difference between the actual interest rate and the cap rate is paid out. instruments relate to interest swaps in which the Company agrees to The derivative ﬁ nancial instruments of alstria ofﬁ ce REIT-AG are pre- exchange with contracting partners, at specified intervals, the sented below: Product Cap Cap Cap Swap Swap Swap Swap Swap Swap Total Strike p.a. ( %) Notional (EUR k) Maturity date 3.3000 3.3000 4.9000 3.1925 4.6000 4.9000 4.1160 3.9090 3.6165 25,139 Oct. 20, 2014 8,649 Oct. 20, 2014 75,000 Dec. 20, 2012 21,880 Nov. 29, 2011 95,000 Oct. 20, 2015 34,100 Dec. 20, 2012 100,000 Jul. 10, 2013 148,785 Jan. 20, 2012 Carrying amount/fair value (EUR k) 2009 383 132 100 – 781 – 1,854 – 3,170 – 7,331 – 7,828 2008 0 0 176 – 557 – 1,447 – 5,497 – 4,517 – 4,282 625,000 Nov. 29, 2011 – 27,895 – 12,326 – 48,244 – 28,450 alstria Annual Report 2009 Notes to the Consolidated Financial Statements 71 19 Financial risk management These interest swaps and interest caps are used to hedge the obliga- b) Impact on income statement tion underlying the loans. The following table shows the sensitivity of the Company’s loans on FINANCIAL DERIVATIVES NOT QUALIFYING TO CASH FLOW HEDGE ACCOUNTING consolidated proﬁ t or loss and equity accordingly to a reasonably EUR k possible change in the interest rates (due to the effect on the ﬂ oating +80 basis points interest loans). All variables remain constant; the effects from the – 100 basis points derivative financial instruments were not factored into this 2009 5,797 – 7,555 2008 338 – 128 calculation. INTEREST EXPENSES P. A. EUR k +80 basis points – 100 basis points 2009 6,674 2008 7,050 – 12,764 – 8,812 Liquidity Risk The Company continually monitors the risk of potential liquidity bottlenecks using a liquidity planning tool, which uses the expected cash ﬂ ows from business activities and the maturity of the ﬁ nancial liabilities as a basis for analysis. The long-term reﬁ nancing strategy of the Group ensures the medium and long-term liquidity requirements. The fair market value of derivative ﬁ nancial instruments is also subject As at the end of the reporting period, the nominal ﬁ nancial liabilities to interest rate risks. A change in the interest rate would give rise to had the following maturities in line with their contractual maturity (the the following changes of the respective fair market values: basis is the 3-month EURIBOR as at December 31, 2009 plus the weighted average margin of 94 basis points for the Group’s loans). a) Impact on equity FINANCIAL DERIVATIVES QUALIFYING TO CASH FLOW HEDGE ACCOUNTING EUR k +80 basis points – 100 basis points 2009 11,670 2008 25,308 – 14,794 – 32,963 EUR k < 1 year 1 – 2 years 2 – 3 years 3 – 4 years 4 – 5 years > 5 years Total Financial year as at Dec. 31, 2009 Interests Loans 20,057 23,471 6,447 6,681 6,269 3,042 65,967 88,573 758,189 2,027 2,079 95,519 95,000 1,041,387 Financial derivatives 25,386 18,923 3,274 2,070 1,917 0 51,570 Trade payables 3,692 0 0 0 0 0 3,692 Other current liabilities 6,599 0 0 0 0 0 6,599 144,307 800,584 11,747 10,831 103,705 98,042 1,169,215 Financial year as at Dec. 31, 2008 Interests Loans 52,202 39,591 36,461 3,904 3,893 7,018 143,069 1,341 0 994,033 0 0 95,000 1,090,374 Financial derivatives 9,139 9,139 8,715 2,860 1,421 2,966 34,240 Trade payables 4,561 0 0 0 0 0 4,561 Other current liabilities 7,793 0 0 0 0 0 7,793 75,036 48,730 1,039,209 6,764 5,315 104,984 1,280,037 72 Notes to the Consolidated Financial Statements alstria Annual Report 2009 The most signiﬁ cant liability is a syndicated loan from J.P. Morgan Plc., The capital structure is monitored by the Company using the key Natixis and HSH Nordbank AG for a nominal EUR 1,139,800 k; performance indicators (KPIs) relevant for classiﬁ cation as a REIT. The EUR 842,837 k of this nominal amount had been utilised as at the end REIT equity ratio, being the ratio of equity to immovable assets, is the of reporting period (December 31, 2008: EUR 995,374 k). The second most important KPI. According to the Group’s strategy, the REIT equity major part of liabilities is made up of loans entered into with several ratio shall be between 45 % and 55 % within the relevant term banks as result of the Group’s reﬁ nancing strategy, with a nominal provided by the REIT law. The G-REIT status is unaffected as long as amount of EUR 198,550 k (December 31, 2008: EUR 95,000 k). The the G-REIT ratio at the end of the business year is not below 45 % for entire amount of the loans has been utilised as at the end of reporting three consecutive business years. period. To secure these liabilities, receivables from rental and property purchase agreements as well as insurance receivables and derivative The following KPIs are also used to manage capital: ﬁ nancial instruments were assigned to the lenders; liens were granted on bank accounts and charges on the land registered. The obligations KPIS ACCORDING TO G-REIT LAW arising from the ﬂ oating interest bank loans were fully secured. Land charges for real estate property with a carrying amount of % EUR 1,566,806 k were furnished as security. Equity ratio according to G-REIT law Capital management Capital management activities are aimed at Immovable assets maintaining the Company’s classiﬁ cation as a REIT in order to support its business activities and maximise shareholder value. 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, 2009 and Decem- ber 31, 2008. Revenues gained from immovable assets Income gained from disposal of immovable assets 2009 2008 G-REIT Covenant 40.26 89.20 40.34 96.36 100.00 100.00 > 45 > 75 > 75 9.93 1.24 < 501 1 Within ﬁ ve years based on the average property value during this period. alstria Annual Report 2009 Notes to the Consolidated Financial Statements 73 19 Financial risk management Fair value The following table shows the carrying amount and fair value of all ﬁ nancial instruments disclosed in the consolidated ﬁ nancial statements. Carrying amount Non- ﬁ nancial instruments Financial instruments Assets as per balance sheet (EUR k) as of Dec. 31, 2009 Equity-accounted investments Financial assets Trade receivables Accounts receivable from joint ventures Derivatives Tax receivables 9,046 351 5,694 1,855 615 3 Loans and receivables 0 0 5,694 1,855 0 3 0 0 0 0 0 0 Receivables and other assets 33,483 4,152 29,331 Cash and cash equivalents Total 146,818 197,866 0 146,818 Assets at fair value through profit and loss 9,046 0 0 0 Derivatives hedge accounting 0 0 0 0 100 515 0 0 0 0 0 0 Available for sale 0 351 0 0 0 0 0 0 Total Fair value 9,046 351 5,694 1,855 615 3 9,046 351 5,694 1,855 615 3 29,331 29,331 146,818 146,818 4,152 183,701 9,146 515 351 193,713 193,713 Liabilities as per balance sheet (EUR k) as of Dec. 31, 2009 Long-term loans Derivatives Short-term loans Trade payables Other liabilities Total Carrying amount Non-ﬁ nancial instruments Financial instruments Liabilities at fair value through profit and loss Other liabilities Derivatives hedge accounting Total Fair value 947,257 48,859 91,941 3,692 10,243 1,101,992 0 0 0 0 9,465 9,465 0 952,825 0 952,825 952,825 18,328 0 30,531 0 0 0 91,941 3,692 778 0 0 0 48,859 91,941 3,692 778 48,859 91,941 3,692 778 18,328 1,049,236 30,531 1,098,095 1,098,095 74 Notes to the Consolidated Financial Statements alstria Annual Report 2009 Carrying amount Non-ﬁ nancial instruments Financial instruments Assets as per balance sheet (EUR k) as of Dec. 31, 2008 Trade receivables Derivatives Tax receivables Receivables and other assets Cash and cash equivalents Total 4,099 176 1 28,266 31,426 63,968 Loans and receivables 4,099 0 1 2,291 31,426 37,817 0 0 0 1,097 0 1,097 Assets at fair value through profit and loss 0 176 0 0 0 Available for sale 0 0 0 24,878 0 176 24,878 Total 4,099 176 1 27,169 31,426 62,871 Fair value 4,099 176 1 27,169 31,426 62,871 Carrying amount Non-ﬁ nancial instruments Financial instruments Liabilities as per balance sheet (EUR k) as of Dec. 31, 2008 Long-term loans 1,086,801 Derivatives (designated for hedge accounting) Short-term loans Trade payables Other liabilities Total 28,626 12,609 4,561 11,156 1,143,753 Liabilities at fair value through profit and loss Other liabilities Derivatives hedge accounting Total Fair value 0 0 0 0 3,293 3,293 0 0 0 0 0 0 1,090,374 0 1,090,374 1,090,374 0 28,626 12,609 4,561 7,863 0 0 0 28,626 12,609 4,561 7,863 28,626 12,609 4,561 7,863 1,115,407 28,626 1,144,033 1,144,033 The fair value of the derivative ﬁ nancial instruments and the loans was determined by an independent expert by discounting the expected Fair value estimation Effective as of January 1, 2009, the Group adopted the amendment to IFRS 7 for ﬁ nancial instruments which are future cash ﬂ ows at prevailing market interest rates. measured in the balance sheet at fair value. This requires the disclo- sure of fair value measurements by level of the following fair value Net gains and losses from ﬁ nancial instruments are as follows: measurement hierarchy: EUR k Financial instruments at fair value through profit or loss Loans and receivables Total 2009 2008 > Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). – 23,294 – 5,075 > Inputs other than quoted prices included within level 1 which are – 311 – 254 – 23,605 – 5,329 observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (level 2). > Inputs for the asset or liability which are not based on observable market data (that is, unobservable inputs) (level 3). Net losses during the reporting period resulted from valuation losses and, in the case of loans and receivables, from the write-down on trade receivables. alstria Annual Report 2009 Notes to the Consolidated Financial Statements 75 19 Financial risk management 20 Signiﬁ cant events after the end of the reporting period 21 Utilisation of exempting provisions 22 Disclosures pursuant to Wertpapierhandelsgesetz [German Securities Trading Act] All of the Group’s ﬁ nancial instruments which are measured in the In January 2010, three swaps with a notional amount of EUR 203.9 m balance sheet at fair value are valued using the level 2 valuation were terminated and a new one with a notional amount of EUR 33.0 m measurement approach. This only applies to the Group’s ﬁ nancial (cash ﬂ ow hedge) was closed. derivatives, as there are no other ﬁ nancial instruments that are meas- ured in the balance sheet at fair value. 21 Utilisation of exempting provisions The following German subsidiaries included in the consolidated ﬁ nan- The fair value of ﬁ nancial instruments that are not traded in an active cial statements of alstria ofﬁ ce REIT-AG have made use of the exemp- market (for example, over-the-counter derivatives) is determined by tion granted in Section 264b HGB: using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as > Alstria IV. Hamburgische Grundbesitz GmbH & Co. KG, Hamburg possible on entity-speciﬁ c estimates. If all signiﬁ cant inputs required > alstria ofﬁ ce Bamlerstrasse GmbH & Co. KG, Hamburg to ascertain the fair value of an instrument are observable, the instru- > alstria ofﬁ ce Gänsemarkt Drehbahn GmbH & Co. KG, Hamburg ment is included in level 2. > alstria ofﬁ ce Grundbesitz 2 GmbH & Co. KG, Hamburg > alstria ofﬁ ce Halberstädter Str. GmbH & Co. KG, Hamburg 20 Signiﬁ cant events after the end of the reporting period alstria ofﬁ ce REIT-AG agreed the terms of a joint venture regarding the > alstria ofﬁ ce Hamburger Str. 43 GmbH & Co. KG, Hamburg > alstria ofﬁ ce Ludwig-Erhard-Strasse GmbH & Co. KG, Hamburg rebuilding of the Kaisergalerie at Grosse Bleichen 23 – 27 in Hamburg. > alstria ofﬁ ce Mannheim/Wiesbaden GmbH & Co. KG, Hamburg While the Company will mainly contribute the building to the joint > alstria ofﬁ ce Steinstrasse 5 GmbH & Co. KG, Hamburg venture, the partner will basically contribute equity funding. The envis- > Alstria Sechste Hamburgische Grundbesitz GmbH & Co. KG, aged time line for the project is around twelve months, starting in the Hamburg middle of 2011. 22 Disclosures pursuant to Wertpapierhandelsgesetz In January, alstria ofﬁ ce REIT-AG entered into a new credit facility on a [German Securities Trading Act] non-recourse basis as an additional step towards decreasing the balloon 1 Ad-hoc announcement payment of the syndicated loan facility. The credit facility is a EUR 76 m, 7-year non-recourse loan with a ﬁ xed rate over the maturity at 4.62 %. Date Topic In January 2010, the Company made a voluntary down payment on its main credit facility of EUR 20 m to decrease the LTV ratio below 60 %, Feb. 11, 2009 alstria ofﬁ ce REIT-AG: Debt covenants successfully renegotiated and LTV at year-end below 60 % Language German/ English and to secure the margin of 85 bp for the next two interest periods. Oct. 29, 2009 alstria ofﬁ ce REIT-AG: alstria agrees to sell a EUR 93.4 m ofﬁ ce portfolio German/ English 2 Directors’ dealings The following transactions were executed in 2009 and reported to alstria ofﬁ ce REIT-AG: Name of person subject to the disclo- sure requirement Olivier Elamine Alexander Dexne Function Member of the manage- ment board Member of the manage- ment board Classiﬁ cation of the share ISIN Transaction Place Transaction date Price per share (EUR) Number of Shares Deal volume (EUR) Share Share DE000A0L- D2U1 Buy DE000A0L- D2U1 Buy Over the counter Over the counter Mar. 26, 2009 Mar. 26, 2009 3.86 22,668 87,498.48 3.86 12,953 49,998.58 76 Notes to the Consolidated Financial Statements alstria Annual Report 2009 3 Voting rights notiﬁ cations No. Date Shareholders Jan. 5, 2009 CCT Corporate Nom- inees Limited Mourant Limited Voting rights (new) ( %) 0.00 52.04 Mourant & Co. Limited 52.04 Mourant Ireland Limited 52.04 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Jan. 5, 2009 Jan. 5, 2009 Jan. 5, 2009 Jan. 7, 2009 Jan. 7, 2009 Jan. 7, 2009 Morgan Stanley Investment Management Limited Morgan Stanley Morgan Stanley International Holdings Inc. Jan. 7, 2009 Morgan Stanley International Limited Jan. 7, 2009 Morgan Stanley Group (Europe) Feb. 2, 2009 Feb. 2, 2009 Feb. 2, 2009 Morgan Stanley Investment Management Limited Morgan Stanley Morgan Stanley International Holdings Inc. Feb. 2, 2009 Morgan Stanley International Limited Feb. 2, 2009 Morgan Stanley Group (Europe) Feb. 2, 2009 Feb. 2, 2009 Feb. 2, 2009 Morgan Stanley Investment Management Limited Morgan Stanley Morgan Stanley International Holdings Inc. Feb. 2, 2009 Morgan Stanley International Limited Feb. 2, 2009 Morgan Stanley Group (Europe) Feb. 2, 2009 Feb. 2, 2009 Feb. 2, 2009 Morgan Stanley Investment Management Limited Morgan Stanley Morgan Stanley International Holdings Inc. Strike threshold ( %) 50, 30, 25, 20, 15, 10, 5 , 3 50, 30, 25, 20, 15, 10, 5 , 3 50, 30, 25, 20, 15, 10, 5 , 3 50, 30, 25, 20, 15, 10, 5 , 3 5 5 5 5 5 3 3 3 3 3 5 5 5 5 5 5 5 5 Date of change Attributed shares Disclosure according to Dec. 22, 2008 Dec. 22, 2008 Dec. 22, 2008 Dec. 22, 2008 Dec. 19, 2008 Dec. 19, 2008 Dec. 19, 2008 Dec. 19, 2008 Dec. 19, 2008 Apr. 12, 2007 Apr. 12, 2007 Apr. 12, 2007 Apr. 12, 2007 Apr. 12, 2007 Nov. 20, 2007 Nov. 20, 2007 Nov. 20, 2007 Nov. 20, 2007 Nov. 20, 2007 no yes yes no yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes Jan. 14, 2008 yes Jan. 14, 2008 Jan. 14, 2008 yes yes § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG Language German/ English German/ English German/ English German/ English English English English English English English English English English English English English English English English English English English 4.95 4.96 4.95 4.95 4.95 3.35 3.35 3.35 3.35 3.35 5.03 5.03 5.03 5.03 5.03 4.84 4.84 4.84 alstria Annual Report 2009 Notes to the Consolidated Financial Statements 77 22 Disclosures pursuant to Wertpapierhandelsgesetz [German Securities Trading Act] No. 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Voting rights (new) ( %) Strike threshold ( %) Date of change Attributed shares Disclosure according to Date Shareholders Feb. 2, 2009 Morgan Stanley International Limited Feb. 2, 2009 Morgan Stanley Group (Europe) Feb. 2, 2009 Feb. 2, 2009 Feb. 2, 2009 Morgan Stanley Investment Management Limited Morgan Stanley Morgan Stanley International Holdings Inc. Feb. 2, 2009 Morgan Stanley International Limited Feb. 2, 2009 Morgan Stanley Group (Europe) Cohen & Steers Inc. Cohen & Steers Inc. 4.84 4.84 5.33 5.33 5.33 5.33 5.33 3.10 2.50 5 5 5 5 5 5 5 3 3 Maitre Patrick Foetisch 48.90 30, 25, 20, 15, 10, 5, 3 Maitre Patrick Foetisch 50.20 50 Maitre Patrick Foetisch 0.00 50, 30, 25, 20, 15, 10, 5, 3 SFCT Investments Ltd 48.90 30, 25, 20, 15, 10, 5, 3 SFCT Investments Ltd 50.20 50 SFCT Investments Ltd 0.00 50, 30, 25, 20, 15, 10, 5, 3 Citco III Limited 48.90 30, 25, 20, 15, 10, 5, 3 Citco III Limited Citco III Limited 50.20 0.00 50 50, 30, 25, 20, 15, 10, 5, 3 Citco Group Limited 48.90 30, 25, 20, 15, 10, 5, 3 Citco Group Limited Citco Group Limited 50.20 0.00 50 50, 30, 25, 20, 15, 10, 5, 3 CBC Holdings NV 48.90 30, 25, 20, 15, 10, 5, 3 CBC Holdings NV CBC Holdings NV Jun. 29, 2009 Citco Banking Corporation NV 50.20 0.00 50 50, 30, 25, 20, 15, 10, 5, 3 48.90 30, 25, 20, 15, 10, 5, 3 Feb. 2, 2009 Mar. 17, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Jan. 14, 2008 Jan. 14, 2008 Feb. 28, 2008 Feb. 28, 2008 Feb. 28, 2008 Feb. 28, 2008 Feb. 28, 2008 Jan. 28, 2009 Mar. 10, 2009 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 yes yes yes yes yes yes yes yes yes yes yes no yes yes no yes yes no yes yes no yes yes no yes § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG Language English English English English English English English German/ English German/ English English English English English English English English English English English English English English English English English 78 Notes to the Consolidated Financial Statements alstria Annual Report 2009 No. 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 Date Shareholders Jun. 29, 2009 Citco Banking Corporation NV Jun. 29, 2009 Citco Banking Corporation NV Jun. 29, 2009 Citco C&T Holdings Limited Jun. 29, 2009 Citco C&T Holdings Limited Jun. 29, 2009 Citco C&T Holdings Limited Voting rights (new) ( %) 50.20 0.00 Strike threshold ( %) 50 50, 30, 25, 20, 15, 10, 5, 3 48.90 30, 25, 20, 15, 10, 5, 3 50.20 0.00 50 50, 30, 25, 20, 15, 10, 5, 3 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 CC&T Holdings Limited 48.90 30, 25, 20, 15, 10, 5, 3 CC&T Holdings Limited 50.20 50 CC&T Holdings Limited 0.00 50, 30, 25, 20, 15, 10, 5, 3 Jun. 29, 2009 Citco Holdings Denmark ApS Jun. 29, 2009 Citco Holdings Denmark ApS Jun. 29, 2009 Citco Holdings Denmark ApS Jun. 29, 2009 Citco C&T Holdings (Luxembourg S.A.R.L.) Jun. 29, 2009 Citco C&T Holdings (Luxembourg S.A.R.L.) Jun. 29, 2009 Citco C&T Holdings (Luxembourg S.A.R.L.) 48.90 30, 25, 20, 15, 10, 5, 3 50.20 0.00 50 50, 30, 25, 20, 15, 10, 5, 3 48.90 30, 25, 20, 15, 10, 5, 3 50.20 0.00 50 50, 30, 25, 20, 15, 10, 5, 3 Jun. 29, 2009 Jun. 29, 2009 Jun. 29, 2009 Citco Nederland B.V. 48.90 30, 25, 20, 15, 10, 5, 3 Citco Nederland B.V. 50.20 50 Citco Nederland B.V. 0.00 50, 30, 25, 20, 15, 10, 5, 3 Jun. 29, 2009 Citco Corporate Services (Ireland) Ltd Jun. 29, 2009 Citco Corporate Services (Ireland) Ltd Jun. 29, 2009 Citco Corporate Services (Ireland) Ltd Jul. 28, 2009 Jul. 28, 2009 Jul. 28, 2009 Morgan Stanley Investment Management Limited Morgan Stanley Morgan Stanley International Holdings Inc. Jul. 28, 2009 Morgan Stanley International Limited Jul. 28, 2009 Morgan Stanley Group (Europe) 48.90 30, 25, 20, 15, 10, 5, 3 50.20 50 0.00 2.46 2.52 2.46 2.46 2.46 50, 30, 25, 20, 15, 10, 5, 3 3 3 3 3 3 Date of change Attributed shares Disclosure according to Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Sept. 14, 2007 Aug. 21, 2008 Dec. 22, 2008 Jul. 20, 2009 Jul. 20, 2009 Jul. 20, 2009 Jul. 20, 2009 Jul. 20, 2009 yes no yes yes no yes yes no yes yes no yes yes no yes yes no yes yes no yes yes yes yes yes § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG § 26 (1) WpHG Language English English English English English English English English English English English English English English English English English English English English English English English English English alstria Annual Report 2009 Notes to the Consolidated Financial Statements 79 22 Disclosures pursuant to Wertpapierhandelsgesetz [German Securities Trading Act] 23 Declaration of compliance pursuant to Section 161 AktG [‘Aktiengesetz’: German Stock Corporation Act] 24 auditor’s fees 25 Management board 26 Supervisory board 23 Declaration of compliance pursuant to Section 161 AktG [‘Aktiengesetz’: German Stock Corporation Act] 26 Supervisory board Pursuant to the Company’s Articles of Association (Section 9), the The declaration of compliance required by Section 161 AktG regarding supervisory board consists of six members, which are elected by the the recommendations of the German Corporate Governance Code general meeting of shareholders. The expiration of the term of ofﬁ ce developed by the government commission has been submitted by the is identical for all members, i.e. the close of the annual general meet- management board and the supervisory board and is made perma- ing of shareholders in the year 2011. nently available to the shareholders on alstria ofﬁ ce REIT-AG’s website (www.alstria.com). It is included in the declaration of corporate During the ﬁ nancial year 2009 the members of the supervisory board management according to Section 289a HGB. were: 24 Auditor’s fees At June 10, 2009, the general meeting elected Pricewaterhouse- Alexander Stuhlmann (chairman), Hamburg, Germany Management Consultant; Coopers AG Wirtschaftsprüfungsgesellschaft, Lise-Meitner-Strasse 1, Manager of Alexander Stuhlmann GmbH Berlin, to audit the separate and consolidated ﬁ nancial statements for > BVV Versicherungsverein des Bankgewerbes a.G., the ﬁ nancial year 2009. The fee expenses in 2009 are comprised as follows: EUR k Audit services Other audit-related services Other Services 2009 366 61 0 2008 356 82 100 member of the supervisory board > BVV Versorgungskasse des Bankgewerbes e.V, member of the supervisory soard > BVV Pensionsfonds des Bankgewerbes AG, member of the supervisory board > Capital Stage AG, vice-chairman of the supervisory board > Frank Beteiligungsgesellschaft mbH, chairman of the advisory board > Hamburger Feuerkasse Versicherung AG, vice-chairman of the supervisory board 25 Management board During the ﬁ nancial year the Company’s general managers were: > HASPA Finanzholding, member of the board of trustees > HCI Capital AG, member of the supervisory board Mr Olivier Elamine, Chief Executive Ofﬁ cer (CEO) > LBS Bausparkasse Schleswig-Holstein-Hamburg AG, > Jahr Holding GmbH & Co. KG, chairman of the advisory board Mr Alexander Dexne, Chief Financial Ofﬁ cer (CFO) member of the supervisory boards > Ludwig Görtz GmbH, Member of the administrative board > Otto Dörner GmbH & Co. KG, chairman of the advisory board The attached remuneration report (pages 90 to 91) contains details of > Siedlungsbaugesellschaft Hermann und Paul Frank mbH & Co. KG, the principles for the deﬁ nition of the management board’s and chairman of the advisory board supervisory board’s remuneration. > Studio Hamburg Berlin Brandenburg GmbH, member of the advisory board 80 Notes to the Consolidated Financial Statements alstria Annual Report 2009 John van Oost (vice-chairman), London, United Kingdom Richard Mully, Dublin, Ireland Managing Partner at Natixis Capital Partners Investment Manager at Grove International Partners (UK) Ltd. > Natixis Capital Partners Ltd., managing partner > Grove International Partners LLP, managing partner > Axiom Asset 1 GmbH & Co. KG, director > Axiom Asset 2 GmbH & Co. KG, director > Axiom Immo Management GmbH, director > Axiom Immo GP GmbH > Apellas Holdings B.V., director > Douglasshire International Holdings B.V., director > Event Hospitality Group B.V., director > Hansteen Holdings PLC, director (formerly Captiva Industrial GP GmbH), director > Hellenic Land Holdings B.V., director > Axiom Immo Holding GmbH > Hypo Real Estate Holdings AG, member of the supervisory board, (formerly Captiva Industrial Holding GmbH), director until March 27, 2009 > Captiva Capital Management SaRL, board member > Karta Realty Limited, director > Express Holding Srl, board member > Nowe Ogrody 2 Sp. z o.o., director > Green Cove Capital Management SaRL, board member > Nowe Ogrody 3 Sp. z o.o., director > La Jolla Capital Management SaRL, board member > Nowe Ogrody 4 Sp. z o.o., director > Natixis Capital Partners GmbH, board member > Natixis Capital Partners Srl, board member > Nowe Ogrody Sp. z o.o., director > Polish Investment Real Estate Holding B.V, director > Ocala Capital Management LLC, board member > Polish Investments Real Estate Holding II B.V., director Dr. Johannes Conradi, Hamburg, Germany > Spazio Investments NV, director, until December 3, 2009 > SI Real Estate Holding B.V., director Lawyer and Partner at Freshﬁ elds Bruckhaus Deringer LLP > Global head of Real Estate Sector Group > Managing partner of the Hamburg Ofﬁ ce > Member of the German Management Group Roger Lee, London, United Kingdom > Spazio Industriale II B.V., director > SREI DI Properties, Inc., director Daniel Quai, Crans, Switzerland Banker at NATIXIS Capital Partners > Natixis Capital Partners Ltd., director Real Estate Investment Manager at Natixis Capital Partners > Arman SW03, director > CDS Costruzioni S.p. A., director > CDS Holding S.p. A., director > CDS Project Development BV, director > Excelsia Otto Srl, director > Express Holdings Srl, director > Natixis Capital Partners GmbH, managing director > Newreal SpA, director alstria Annual Report 2009 Management Compliance Statement 81 MANAGEMENT COMPLIANCE STATEMENT ‘We conﬁ rm that, to the best of our knowledge, the consolidated ﬁ nancial statements give a true and fair view of the net assets, ﬁ nan- cial position and results of operations of the Group, and the Group management report gives a true and fair view of business perfor- mance including the results of operations and the situation of the Group, and describes the main opportunities and risks and anticipated development of the Group in accordance with the applicable ﬁ nancial reporting framework.’ Hamburg, February 12, 2010 The management board Olivier Elamine CEO Alexander Dexne CFO 82 Auditors’ Report alstria Annual Report 2009 AUDITORS’ REPORT ‘We have audited the annual ﬁ nancial statements, comprising the and signiﬁ cant estimates made by the Company’s Board of Managing balance sheet, the income statement and the notes to the ﬁ nancial Directors, as well as evaluating the overall presen tation of the annual statements, together with the bookkeeping system, and the man- ﬁ nancial statements and management report. We believe that our agement report of alstria ofﬁ ce REIT-AG, Hamburg, for the business audit provides a reasonable basis for our opinion. year from January 1 to December 31, 2009. The maintenance of the books and records and the preparation of the annual ﬁ nancial state- Our audit has not led to any reservations. ments and management report in accordance with German commer- cial law are the responsibility of the Company’s Board of Managing In our opinion, based on the ﬁ ndings of our audit, the annual ﬁ nancial Directors. Our responsibility is to express an opinion on the annual statements comply with the legal requirements and give a true and ﬁ nancial statements, together with the bookkeeping system, and the fair view of the net assets, ﬁ nancial position and results of operations management report based on our audit. of the Company in accordance with [German] principles of proper accounting. The management report is consistent with the annual We conducted our audit of the annual ﬁ nancial statements in ﬁ nancial statements and as a whole provides a suitable view of the accor dance with Section 317 HGB [Handelsgesetzbuch – German Company's position and suitably presents the opportunities and risks Commercial Code] and German generally accepted standards for of future development.’ the audit of ﬁ nancial 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, Berlin, February 22, 2010 ﬁ nancial position and results of operations in the annual ﬁ nancial state- ments in accordance with [German] principles of proper accounting and in the management report are detected with reasonable assur- PricewaterhouseCoopers ance. Knowledge of the business activities and the economic and Aktiengesellschaft legal environment of the Company and expectations as to possible Wirtschaftsprüfungsgesellschaft misstatements are taken into account in the determination of audit procedures. The effect iveness of the accounting-related internal con- trol system and the evidence supporting the disclosures in the books sgd. Gregory Hartman sgd. ppa. Markus Salzer and records, the annual ﬁ nancial statements and the management Wirtschaftsprüfer Wirtschaftsprüfer report are examined primarily on a test basis within the framework of (German Public Auditor) (German Public Auditor) the audit. The audit includes assessing the accounting principles used alstria Annual Report 2009 Corporate Governance 83 Report of the supervisory board CORPORATE GOVERNANCE REPORT OF THE SUPERVISORY BOARD dividend. The management board and supervisory board discussed the possibility of offering Company shares to shareholders in lieu of Supervision of the Company’s management During the reporting year, the supervisory board advised and super- their cash dividend as a way of offering an attractive option for the shareholders and saving additional liquidity. The supervisory board vised the management board of the Company in accordance with resolved on a corresponding proposal to the annual general meeting. statutory provisions and the Company’s articles of association. The Furthermore, during its meeting the supervisory board drew up supervisory board was also involved in matters of material import- resolutions on its report to the annual general meeting and on the ance to the Company. declaration of compliance with the recommendations of the German Corporate Governance Code. Moreover, it consulted and resolved on During the meetings of the supervisory board and its committees, the incentive payments to the members of the management board the management board regularly reported on the current situation for ﬁ nancial year 2008. and development of the Company and on important business events, current risks, risk management and on Company compliance. The During the supervisory board meeting following the annual general management and supervisory board cooperated to set the strategic meeting on June 10, 2009, ﬁ nancing strategies and management direction of the Company. Between meetings, the management board remuneration in the light of the planned German Act on Appro- board further informed the supervisory board orally and in writing priateness of the Management Board Compensation ( VorstAG) were of important events; the chair of the supervisory board regularly met the principle topics of discussion. As part of the ﬁ nancing strategy, the with the management board to exchange information and advice. supervisory board approved of two reﬁ nancing projects. It also dis- The management board consulted the supervisory board intensively have the compensation system for the management board reviewed cussed the short-term variable compensation element and resolved to on all transactions requiring its approval. After careful examination by an independent external expert. and consultation, the supervisory board took decisions on all matters brought to its attention as the law, the articles of association, or the During its meeting on September 14, 2009, the supervisory board rules of procedure of either the management board or the super- discussed in-depth the German Accounting Law Modernisation Act visory board dictated. This included the Company’s budget planning. (BilMoG), the VorstAG which came into force in the meantime and the amendments to the German Corporate Governance Code and In ﬁ nancial year 2009 the supervisory board met four times in plenum, their impact on alstria, resolved to amend the rules of procedure for once each quarter. All members of the supervisory board were present the audit committee and the supervisory board in plenum, and drew for each meeting or participated by teleconference. Moreover, ﬁ ve up the ﬁ rst rules of procedure for the nomination and remuneration written resolutions were taken after circulation of detailed documents committee and the investment committee. Furthermore, the super- to the members. Two additional plenary meetings of the supervisory visory board discussed the results of the review of management board board have taken place in 2010 before the ﬁ nalisation of this report. remuneration with the external compensation expert in regard to the new legal conditions. The review determined that the compensation The ﬁ nancial results of the Company (quarterly and half-year ﬁ nan- amount is strongly in line with the market and appropriate, and that cial reports, consolidated ﬁ nancial statements and the ﬁ nancial state- the system should be adapted to the new legal requirements. More- ments of alstria ofﬁ ce REIT-AG), the market, the situation and devel- over, the supervisory board agreed to another reﬁ nancing project as opment of the Company, the development of risks, and the business part of the ﬁ nancing strategy. performance were discussed with the management board during the meetings of the supervisory board. Focal points of discussion During the supervisory board meeting on March 3, 2009, members During its meeting on November 26, 2009, the supervisory board approved various measures such as another reﬁ nancing project, the sale of real estate property, the signing of a cooperation agreement to develop an asset and a lease project. The supervisory board discussed discussed the consolidated ﬁ nancial statements and the ﬁ nancial the very positive results of an examination of the efﬁ ciency of its statements for 2008, the dependency report and the resolution work and dealt with and resolved after intensive discussion on the proposals for the general meeting. After careful examination, the Company and budget planning for ﬁ nancial year 2010. supervisory board agreed with the proposal of the management board regarding the proﬁ t appropriation, because the payment of a The decisions by way of written circular resolution in ﬁ nancial year dividend was in the best interest of the Company considering the 2009 dealt with the prolongation of the terms of ofﬁ ce and service Company’s dividend policy and the signal this would send to the contracts for members of the management board, with an amend- capital market. The independent auditors conﬁ rmed that the liquidity ment to the Company’s syndicated loan, which has raised the situation of the Company would allow the payment of the proposed allowed loan-to-value ratio from 60 % to 65 %, with changes to the 84 Corporate Governance alstria Annual Report 2009 management board’s recommendation for the proﬁ t appropriation, which became necessary because of the change in the number of Committees of the supervisory board To increase the efﬁ ciency of its work the six-person supervisory board treasury shares, with the appointment of the management board formed three committees, each composed of three members. To the members to managing directors of subsidiaries, and with updating extent permitted by law, the committees have been given decision- the declaration of compliance with the recommendations of the Ger- making powers in some cases, and in some cases they prepare the man Corporate Governance Code. resolutions of the supervisory board by making proposals. During the supervisory board plenary meetings, the committee chairs reported At the start of 2010, the supervisory board discussed the Company’s on the results of their committee’s work. long-term strategic direction with the management board. In March 2010, the supervisory board dealt with the consolidated ﬁ nancial In ﬁ nancial year 2009, the audit committee met four times to review statements and the ﬁ nancial statements for the year ending Decem- the consolidated ﬁ nancial statements and the ﬁ nancial statements, ber 31, 2009 and, in accordance with the suggestions of the exter- the management report and the dependency report, discussed these nal remuneration expert, revised the compensation system and the with the independent auditors, and conducted a preliminary exam- service contracts for members of the management board to meet the ination of these documents and the management board’s proposed new legal requirements of the VorstAG. appropriation of the annual net proﬁ t. Additional topics included the supervisory board’s proposed resolution to the annual general The compensation for each management board member will in future meeting regarding the choice of independent auditor, examining the also be comprised of a ﬁ xed base compensation and a short-term independence of the external auditor and the additional services per- and a long-term variable component. The majority of the compensa- formed by the auditor, granting the audit contract to PwC, setting the tion will be variable, based primarily or completely on a multi-year key audit areas, discussing the effectiveness of the internal controlling assessment. Possibilities of capping were introduced for extraordinary system and the risk management system, the included main risks and developments. the necessity of an internal audit as well as the compliance system. Finally, the audit committee examined the efﬁ ciency of its own work. The short-term variable compensation for this ﬁ nancial year will be The results were very good. benchmarked against a performance target set by the supervisory board, the funds from operations (FFO). Only 75 % of the incentive During the reporting period, the investment committee decided by payment will be paid in cash to the management board members. circular written resolution to sell one real estate portfolio. The remaining 25 % will be converted into virtual shares subject to a minimum holding period of two years. The nomination and remuneration committee, which also carries out the tasks of a nomination committee, met three times during the As the long-term variable component, the management board’s reporting period and took one decision by circular written resolution. former stock option programme is replaced by a new performance Two issues taken under consideration were the adjustment of man- share plan. Each year the members of the management board are agement board compensation to meet the new legal requirements granted virtual shares with a four-year maturity. The performance of the VorstAG and the German Corporate Governance Code and targets set by the supervisory board are comprised in equal measure the preparation of corresponding advisement and resolutions for the of the absolute total shareholder return, derived from the weighted supervisory board. Additional topics included the recommendation to average cost of capital (WACC), and the relative total shareholder the annual general meeting to elect Mr Roger Lee as a new member return as measured against the benchmarked index, the EPRA REIT of the supervisory board and approval of the consulting services of Continental Europe. Freshﬁ elds Bruckhaus Deringer LLP. The total variable compensation is completed by a discretionary factor considering the individual performance of the management board members and additionally ensuring that the amount of compensation remains appropriate and in line with the market in future as well. alstria Annual Report 2009 Corporate Governance 85 Report of the supervisory board Financial statements and audits PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungs- Corporate governance During the reporting period, the supervisory board also dealt with the gesell schaft, Berlin, audited the ﬁ nancial statements and manage- issue of alstria ofﬁ ce REIT-AG fulﬁ lling the recommendations of the ment report of alstria ofﬁ ce REIT-AG, as well as the consolidated German Corporate Governance Code. The management board and ﬁ nancial statements, including the management report of the Group the supervisory board last issued the annual declaration of compli- for the ﬁ nancial year running from January 1 until December 31, ance with the German Corporate Governance Code in March 2010 2009, all prepared by the management board, and issued its unquali- in accordance with Section 161 of the German Stock Corporation ﬁ ed opinion on these documents. Act; it was subsequently made permanently available to shareholders on the Company website. In this declaration, the management board The ﬁ nancial statements and management report of alstria ofﬁ ce and supervisory board explained that most of the recommendations REIT-AG, the consolidated ﬁ nancial statements including the man- of the German Corporate Governance Code have been or will be agement report of the Group, as well as the management board’s implemented, as well as which recommendations were or will not be recommendation for the appropriation of the net proﬁ t were immedi- followed, and the reasons why not. Each member of the supervisory ately presented to the members of the supervisory board after being board informs the plenum of potential conﬂ icts of interest and prepared, as was the auditors’ report. The supervisory board exam- abstains from voting on the related resolutions – such as the deci- ined the documents provided by the management board in detail sions of the supervisory board on contracts with supervisory board both in its audit committee and at a plenary meeting. The au ditors members pursuant to Section 114 of the German Stock Corporation were present for the meeting of the audit committee, reported on the Act. The members of the supervisory board examined the efﬁ ciency material ﬁ ndings of their audit and answered questions. The audit of their work using a survey ﬁ lled out by all members. The results committee prepared the examination of the supervisory board and, were that efﬁ ciency is very good. in the presence of the auditors of the ﬁ nancial statements of alstria ofﬁ ce REIT-AG and consolidated ﬁ nancial statements, reported to the plenary session. The plenary meeting examined and discussed both Changes in the supervisory board By resolution of the District Court of Hamburg, effective as of Feb- the documents prepared by the management board and the ﬁ ndings ruary 24, 2009, Roger Lee was appointed member of the supervi- of the auditors. Finding no objections, it concurred with the results sory board of alstria ofﬁ ce REIT-AG until the end of the next general of the audit and approved the ﬁ nancial statements of alstria ofﬁ ce meeting. The general meeting conﬁ rmed this on June 10, 2009 and REIT-AG and consolidated ﬁ nancial statements. The ﬁ nancial state- elected Roger Lee to the supervisory board. Roger Lee succeeded ments are thus conﬁ rmed. The supervisory board also concurred with John van Oost as member of the audit committee, effective as of the recommendation for the appropriation of the net proﬁ t. October 1, 2009. Furthermore, the management board also presented the supervisory The supervisory board would like to thank the management board board with a dependency report pursuant to Section 312 of the German and all employees for their dedication and hard work in ﬁ nancial year Stock Corporation Act, in which the management board reports 2009. on the relationships to afﬁ liated companies. Likewise, Pricewater- houseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesell schaft, Berlin, presented the supervisory board with its audit report on the dependency report. The auditors’ opinion is as follows: Hamburg, March 2010 ‘On the basis of our dutiful audit and judgement, we conﬁ rm that 1. the factual statements of the report are correct, Chairman of the supervisory board Alexander Stuhlmann 2. the consideration of the Company for the legal transactions stated in the report was not in-adequately high.’ The supervisory board concurred with the management board’s dependency report and the related auditors’ report. After conduct- ing its own examination, the supervisory board concurred with the report notes of the management board pursuant to Section 312 para- graph 3 of the German Stock Corporation Act. The supervisory board found no objections. 86 Corporate Governance alstria Annual Report 2009 CORPORATE GOVERNANCE STATEMENT Nevertheless, within the legal transition period, the Company will revise the D&O insurance policies for the members of the management The management board and supervisory board of alstria ofﬁ ce REIT-AG board to conform to the new legal requirements regarding a deductible are responsible for the corporate governance of the Company, which is for D&O insurance for members of the management board. undertaken with due regard to the Company’s shareholders, employ- ees and tenants. The conﬁ dence of alstria’s shareholders, employees and tenants is supported by transparent corporate governance. In this statement, the management board and supervisory board report on Possibility of limitation (cap) on stock options, Section 4.2.3 (version dated June 6, 2008) When setting up the stock option programme for the management alstria ofﬁ ce REIT-AG’s corporate governance according to no. 3.10 board, the supervisory board did not stipulate any upper limit (cap) in of the German Corporate Governance Code and Section 289a of the the event of extraordinary, unforeseen developments. The value of real German Commercial Code (HGB). German Corporate Governance Code and declaration of compliance Many of the principles of the most recent version of the German Corporate Governance Code (dated June 18, 2009) have already become part of our value-oriented corporate management, which are therefore stricter than the legal requirements. The principles and recommendations of the Government Commission appointed by the estate companies was considered relatively stable; no extraordinary or unforeseen share price increases were anticipated. In March 2010, the supervisory board introduced a new, variable compensation system for the members of the management board with the possibility of a cap for extraordinary developments. Performance-related compensation for supervisory board members, Section 5.4.6 (version dated June 18, 2009) The members of the supervisory board do not receive any perform- German Federal Ministry of Justice contain internationally and nation- ance-related remuneration in addition to their ﬁ xed compensation. ally recognised standards for effective and responsible corporate This is due to the relatively small size of the Company. management. The Company’s declaration of compliance with the recommendations of the German Corporate Governance Code is published on alstria’s website (www.alstria.com). After careful consideration, alstria chose not to follow the recommendations of the Code in regard to a few Discussion of the half-year and quarterly ﬁ nancial reports between the supervisory board or its audit committee and the management board prior to publication, Section 7.1.2 (version dated June 18, 2009) Prior to their publication, the half-year and quarterly ﬁ nancial reports points. These points and the reasons for nonconformity are detailed will be made available to the supervisory board. Furthermore, the in the declaration of compliance issued by the management board ﬁ nancial reports will be discussed with the supervisory board in detail and the supervisory board on March 2, 2010. and soon after their publication. In the event that there are consider- Declaration of compliance dated March 2, 2010 ‘The recommendations of the ‘Government Commission of the supervisory board, the supervisory board will have the opportunity to discuss the ﬁ gures with the management board before they are German Corporate Governance Code’ as amended on June 18, 2009 published. The management board and supervisory board consider and previously in the version dated June 6, 2008, were complied with this approach appropriate and adequate.’ able differences to the budget or business plan authorised by the since the prior declaration of compliance, dated May 29, 2009 with the following exceptions. The Company intends to continue to com- All other recommendations of the German Corporate Governance ply with the recommendations of the Code as amended on June 18, Code dated June 18, 2009 and formerly in the version dated June 6, 2009 to the same extent: Deductible for D&O insurance for the supervisory board, Section 3.8 (version dated June 18, 2009) The D&O insurance for the supervisory board of alstria ofﬁ ce REIT-AG 2008 have been or will be fully implemented. alstria has appointed a corporate compliance ofﬁ cer in the Company, who will report any changes in the implementation of the Code to the management board and the supervisory board at least once per year. In this way, alstria ensures consistent compliance with these principles. Analysis, does not include a deductible. The management board and supervisory supervision and transparency are the tools with which alstria lays the board believe that the members of the supervisory board carry out foundation for fair and efﬁ cient corporate management. They will their duties responsibly without any such deductible. also remain the key criteria in future. Deductible for D&O insurance for the management board, Section 3.8 (version dated June 6, 2008) The D&O insurance for the management board of alstria ofﬁ ce REIT-AG Working methods of the management board and the supervisory board The management board and the supervisory board cooperate closely does not presently include a deductible. The management board and and with conﬁ dence in the interest of the Company. The chair of the supervisory board believe that the members of the management supervisory board has regular contact with the management board. board carry out their duties responsibly without any such deductible. alstria Annual Report 2009 Corporate Governance 87 Corporate governance statement The management board has two members: Olivier Elamine as the In addition to matters of diversity, nominees to the supervisory board Chief Executive Ofﬁ cer and Alexander Dexne as the Chief Financial are considered for how well they have the necessary knowledge, Ofﬁ cer. The management board is responsible for running alstria in competence and professional experience to properly discharge their the interests of the Company with the aim of sustainably increasing responsibilities. No former members of the management board sit on the Company’s value. It sets the business targets and – in conjunction the supervisory board. with the supervisory board – the strategic direction of the Company. The work of the management board and the allocation of responsibil- ities between the individual members of the management board are Supervisory board committees The supervisory board has formed three committees. Each committee stipulated in the rules of procedure and the role sort for the manage- has its own rules of procedure to specify the concerns and tasks of ment board. The members of the management board are obligated to the committee. immediately disclose any conﬂ icts of interest to the supervisory board. The members of the management board may only conduct secondary The audit committee monitors the Company’s ﬁ nancial reporting pro- activities, particularly membership in the supervisory boards of com- cess, engages the independent auditors to prepare audit reports, deter- panies not afﬁ liated with the Group, with the approval of the super- mines the key audit areas and the independent auditors’ compensation, visory board. The members of alstria’s management board had no and is responsible for issues surrounding risk management, internal conﬂ icts of interest in the reporting year. Major business transactions control and compliance. The audit committee consists of Dr Johannes between the Company and members of the management board, or Conradi, as chairman, as well as Roger Lee and Daniel Quai. with any persons or companies in close association with them, require the approval of the supervisory board. All such business transactions The investment committee decides whether the supervisory board must be concluded under standard commercial conditions. There will approve the acquisition or disposal of real estate property or were no such contracts during the reporting period. other assets worth between EUR 30 m and EUR 100 m. The entire The supervisory board appoints the members of the management is greater than this amount. The investment committee consists of board and monitors and advises the management board on manage- John van Oost, as chair, as well as Richard Mully and Alexander supervisory board is needed to approve such transactions if the value ment issues. The management board involves the supervisory board Stuhlmann. in any decisions of fundamental importance for the Company. The rules of procedure for the supervisory board stipulate that certain, The tasks of the nomination and remuneration committee, which also signiﬁ cant business transactions by the Company are subject to the carries out the function of a nomination committee, include prepar- approval of the supervisory board, for example acquiring or disposing ations for the appointment and dismissal of members of the manage- of real estate property for a consideration of more than EUR 30 m, ment board, for the management board’s compensation system and entering ﬁ nancing agreements with a volume of more than EUR for the total remuneration of individual members of the membership 30 m, entering or prematurely terminating leasing contracts with an board, the resolution of or amendments to the rules of procedure of annual consideration of more than EUR 2 m, or investing in Company the management board, as well as the approval of certain other activ- assets (modernisation measures) with an annual total sum of more ities and primary contracts of members of the management board. It than EUR 2 m when such investments were not already included is also responsible for entering into, amending, extending and ter- in the budget approved by the supervisory board. The supervisory minating contracts with management board members, as well as for board reports on its activity in ﬁ nancial year 2009 in its report to the decisions regarding compensation beyond the terms of the contracts. annual general meeting on pages 83 to 85 of the annual report. The executive committee consists of Alexander Stuhlmann, as chair, Composition of the supervisory board In accordance with the articles of association, the supervisory board For information on the activities of the committees of the supervisory comprises six members. The following are members of the super visory board during ﬁ nancial year 2009, see its report to the general meeting board at present: Alexander Stuhlmann as chair of the supervisory on pages 83 to 85 of the annual report. as well as Richard Mully and John van Oost. board, John van Oost as vice-chair, as well as Dr Johannes Conradi, Roger Lee, Richard Mully and Daniel Quai. The appointments of all members of the supervisory board are over at the end of the general meeting which resolves to discharge them in respect to their activities for ﬁ nancial year 2010. Remuneration of the management board and the supervisory board The compensation system for the management report and the super- visory report is laid out in the remuneration report for ﬁ nancial year 2009. The remuneration of each member of the management board and the supervisory board is also broken down there for ﬁ nancial years 2009 and 2008. 88 Corporate Governance alstria Annual Report 2009 Stock option programme and similar securities-oriented incentive systems Stock option programme The stock option programme stipulates the granting of option rights to members of the management board and is shown on page 91 of the Remuneration Report. This refers to the transfer of Company shares as performance incen- tives for ﬁ nancial year 2008. The Company paid 25 % of performance incentives with its own shares. Share ownership by members of management board and supervisory board Section 6.6 of the German Corporate Governance Code recommends Employee proﬁ t participation plan The employee proﬁ t participation plan regulates the granting of indicating the ownership of Company shares or related ﬁ nancing instruments by members of the management board and supervisory convertible proﬁ t participation rights to employees of alstria and board if such ownership directly or indirectly exceeds 1 % of the shares companies directly or indirectly controlled by alstria. Members of the issued by the Company. If the total shares owned by all members of management board are not considered employees for the purposes the management board and supervisory board together exceed 1 % of this plan. of the total shares issued by the Company, the total share ownership is to be broken down by management board and supervisory board. The nominal amount of each certiﬁ cate is EUR 1. The plan stipulates that a maximum of 500,000 convertible proﬁ t participation certiﬁ - No member of the management board or supervisory board of alstria cates can be issued for a total nominal value of EUR 500,000. To ofﬁ ce REIT-AG directly or indirectly owns more than 1 % of the date, 158,600 certiﬁ cates have been issued. subscribed capital of the Company. The total share ownership of all members of the management board and the supervisory board does Each convertible proﬁ t participation certiﬁ cate can be converted into not exceed 1 % of the total shares issued by the Company. an alstria bearer share once the share price exceeds the price on the day the certiﬁ cate was issued by 5 % or more on at least seven non- consecutive trading days. Conversion is only carried out on prede- Relationship to the shareholders of the Company alstria ofﬁ ce REIT-AG respects the rights of its shareholders and sup- ﬁ ned dates and only when the subscriber pays the conversion price ports them as much as is possible and legal in the exercise of those and is still employed at alstria or one of its subsidiaries on the date of rights. In particular, these include the right to freely purchase and conversion. The maximum term for a convertible proﬁ t participation sell shares, appropriate access to information, an adequate number certiﬁ cate is ﬁ ve years. Directors’ dealings The management board and supervisory board of alstria ofﬁ ce of voting rights per share (one share – one vote) and participation in our annual general meeting. Shareholders have the possibility to exercise their voting rights personally or by authorised representative at the general meeting, or send voting instructions to their proxies. REIT-AG, as well as related parties (family members) are required pur- The invitation to the general meeting includes voting instructions. suant to Section 15a of the German Securities Trading Act to notify After the agreement of the 2008 general meeting to this effect, it is the Company of their own transactions involving Company shares. now possible for shareholders to receive this information electroni- Every buy or sale transaction related to alstria shares (e.g. the purchase cally. The agenda and all documents relating to our upcoming general or sale of options on alstria shares) has to be reported. The Company meetings, including the ﬁ nancial statements, are available for viewing shall be informed of such transactions within ﬁ ve working days and on the Company website and at the Company premises. publish them immediately. This only applies when the total of the transactions is EUR 5,000 or more within one calendar year. The following transactions were reported to alstria in 2009: Name of person subject to the disclo- sure requirement Olivier Elamine Alexander Dexne Function Member of the manage- ment board Member of the manage- ment board Classiﬁ cation of the share ISIN Transaction Place Transaction date Price per share (EUR) Number of Shares Deal volume (EUR) Share Share DE000A0L- D2U1 Buy DE000A0L- D2U1 Buy Over the counter Over the counter Mar. 26, 2009 Mar. 26, 2009 3.86 22,668 87,498.48 3.86 12,953 49,998.58 alstria Annual Report 2009 Corporate Governance 89 Corporate governance statement Publications and reports In sharing information with the public, the management board follows Compliance In accordance with Section 4.1.3 of the German Corporate Governance the principles of transparency, promptness, openness, clarity and equal Code, the supervisory board is responsible for ensuring compliance treatment of shareholders. In particular, alstria informs its shareholders with the legal provisions and Company guidelines throughout all of and the interested public about the situation of the Company and the consolidated companies. The good reputation of alstria and the signiﬁ cant business events through ﬁ nancial reports, analyst and trust of its shareholders, tenants and employees depends entirely on press conferences, press and ad-hoc announcements and the general the behaviour of each individual employee. meeting. The website of alstria includes information on the Company and its shares, especially the ﬁ nancial reports, share price tracking For this reason, alstria drew up a code of conduct, listing guidelines and announcements about the acquisition or disposal of Company for behaviour, orientation for resolving conﬂ icts (e.g. conﬂ icts of shares or related ﬁ nancing instruments pursuant to Section 15a of the interest) and thereby serving as a model of correct behaviour for all German Securities Trading Act. Moreover, alstria’s ﬁ nancial reports employees of the Group. The guidelines are published on our website and website include a ﬁ nancial calendar which indicates all dates of (www.alstria.com). importance to shareholders. All announcements and information is additionally published in English. The Annual Document (pursuant alstria set up a compliance organisation to communicate the values to Section 10 of the German Securities Prospectus Act) includes a inherent in the code of conduct and Company guidelines, and to moni- detailed list of all capital market-related announcements issued in tor compliance with these values. The compliance ofﬁ cer is respon- 2009; it can be found on the alstria website. sible for communicating these values by answering questions on Financial reporting and auditing During the ﬁ nancial year, alstria regularly informs shareholders and the implementation of the code and through in-house training for all employees. Compliance is monitored through colleagues, super- visors and the compliance ofﬁ cer, as well as via regular investigation third parties by publishing its consolidated, half-year and quarterly by auditors. alstria has also set up a hotline through which employees ﬁ nancial statements. The consolidated ﬁ nancial statements are pre- can anonymously report any violations of the code of conduct or the pared in accordance with the International Financial Reporting Stand- Company-internal guidelines. Furthermore, the management board ards (IFRS). For legal reasons (calculating dividends, creditor protec- regularly discusses Company compliance with the supervisory board’s tion), ﬁ nancial statements for alstria ofﬁ ce REIT-AG are also prepared audit committee. in accordance with the German Commercial Code (HGB). The consolidated ﬁ nancial statements and the ﬁ nancial statements fully investigated and the violators punished. This can be anything of alstria ofﬁ ce REIT-AG are audited by both the independent audi- from disciplinary measures to dismissal, a claim for damages or even tor selected by the general meeting, and by the supervisory board. prosecution. Violations of the code of conduct will not be tolerated; they will be The audit committee of the supervisory board appoints an external auditing ﬁ rm, after examining its independence, to audit the ﬁ nan- cial statements and negotiates the auditing fees. Pricewaterhouse- Coopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin, was appointed to audit the annual and half-year ﬁ nancial statements of alstria ofﬁ ce REIT-AG and of the Group for ﬁ nancial year 2009. The auditors participated in the meetings of the audit committee and the supervisory board in plenum to advise on the consolidated ﬁ nancial statements and the ﬁ nancial statements of alstria ofﬁ ce REIT-AG and to present the key ﬁ ndings of the audit. 90 Corporate Governance alstria Annual Report 2009 REMUNERATION REPORT* determines an incentive payment to be paid to individual members of the management board with respect to the past ﬁ nancial year, Management board remuneration The remuneration system for the members of the management which is paid out partly in Company shares; and, secondly, after the annual general meeting the supervisory board may issue stock board is determined by the supervisory board and is reviewed options with long-term incentives to members of the management regularly. The supervisory board currently reviews the remuneration board. alstria further pays for each member of the management system for the members of the management board and discusses board premiums for a disability insurance, a risk life insurance and a amendments with regard to regulations of the German Manage- Company pension scheme. ment Board Remuneration Appropriateness Act (VorstAG) which came into force in summer 2009. The following describes the Total remuneration for all active members of the management remuneration system effective at the date of the preparation of this board in the last ﬁ nancial year amounted to EUR 1,516 k. Members report and before any of these amendments were resolved upon or of the management board did not receive any advance salary pay- came into force. ments, loans or pension beneﬁ ts. 25 % of the incentive payment were paid out as shares in the Company. In ﬁ nancial year 2009 no The structure and amount of management board remuneration is stock options were issued. based on customary market terms and conditions. It comprises a ﬁ xed basic salary and two variable components. These variable com- Former members of the management board received payments in ponents (short- and long-term) are performance and result-based: the ﬁ nancial year 2009 totalling EUR 13 k. No provisions needed to ﬁ rstly, in the ﬁ rst quarter of a ﬁ nancial year the supervisory board be set aside for former members of the management board. INDIVIDUAL MANAGEMENT BOARD REMUNERATION 2009 EUR k Management board member Fixed amount Short-term variable remuneration 1 Long-term variable remuneration Other remuneration 2 Total remuneration Olivier Elamine, Chief Executive Ofﬁ cer Alexander Dexne, Chief Financial Ofﬁ cer Former members of the management board Total 1 For performance in 2008. 2 Includes beneﬁ ts for Company cars, insurance and pensions. Cash component Share component 262.5 150 0 412.5 87.5 50 0 137.5 438 360 0 798 0 0 0 0 94 74 13 181 882 634 13 1,529 INDIVIDUAL MANAGEMENT BOARD REMUNERATION 2008 EUR k Management board member Fixed amount Short-term variable remuneration 1 Long-term variable remuneration Other remuneration 2 Total remuneration Cash component Share component 267.3 3 82.7 78 0 22 0 345.3 104.7 265 300 250 4 815 0 0 0 0 17 19 13 49 632 419 263 1,314 Olivier Elamine, Chief Executive Ofﬁ cer Alexander Dexne, Chief Financial Ofﬁ cer, Since Jun. 1, 2007 Former members of the management board Total 1 For performance in 2007. 2 Includes beneﬁ ts for Company cars. 3 Partly includes promised incentive payments. 4 Lump sum payment. * This remuneration report forms an integral part of the audited Group management report and notes to the annual ﬁ nancial statements and also forms part of the corporate governance statement. alstria Annual Report 2009 Corporate Governance 91 Remuneration report If membership of the management board is terminated, members of the share price. The stock options granted in the ﬁ nancial year 2007 have agreed to a post-contractual non-compete agreement of up to resulted in an expense in the ﬁ nancial year 2009 of EUR 55.8 k for twelve months, which may be waived by alstria with a six months Olivier Elamine and EUR 35.6 k for Alexander Dexne. notice period. As long as alstria exercises this post-contractual non- compete obligation, the members of the management board shall The term of the stock options is seven years from the time they are receive a compensation payment for this period equivalent to their last granted. The options may only be exercised if the current share price ﬁ xed basic salary. Beneﬁ ts to be paid by the company if the appoint- of the company exceeds the exercise price by 20 % or more on at least ment is terminated by the death of the board member amount to the seven non-consecutive trading days of the Frankfurt Stock Exchange ﬁ xed basic salary for the month in which the member died and for the before the start of the respective exercise period. The performance following three months. The incentive payment for this period shall target for the 2007 stock options amounts to EUR 19.20. The stock be paid pro rata up to and including the month of death. options may only be exercised after expiry of a vesting period of two Stock option scheme On March 27, 2007, the supervisory board established a stock option exercise period amounts to 30 days beginning on the date of publica- tion of the Company’s results for the ﬁ rst, second and third quarters, programme for members of the management board. The details of and the date of the Company’s annual general meeting. There are no this stock option programme were based on the authorisation by the cash settlement alternatives. years and during one of the four exercise periods of each year. The annual general meeting of March 15, 2007, and the ﬁ rst tranche of stock options was issued to members of the management board. Remuneration of the supervisory board Total remuneration for the supervisory board in 2009 amounted to The details of the stock option programme set up by the supervisory EUR 299.1 k. Members of the supervisory board each receive an board are as follows: annual ﬁ xed remuneration amount of EUR 40 k. The chairman of the supervisory board also receives an additional annual amount of Members of the management board may be granted up to 2,000,000 EUR 20 k, the deputy chairman receives an additional EUR 10 k. options, giving entitlement of up to a maximum 2,000,000 shares Members who only sit on the supervisory board for part of a year of the company with a total nominal value of up to EUR 2,000 k. receive pro rate remuneration. Membership of the audit committee The stock options shall be issued in annual tranches. The supervisory entails separate remuneration of EUR 10 k and the chair of the audit board granted the ﬁ rst tranche in 2007. The exercise price for the committee receives EUR 15 k. Membership of other committees does stock options granted in 2007 is EUR 16. The exercise price for future not give entitlement to any additional remuneration. No advance options amounts to 100 % of the arithmetic mean of the closing auc- remuneration payments were made to members of the supervisory tion in Xetra trading of alstria shares on the Frankfurt Stock Exchange board, nor were any loans made. No remuneration was paid out for on the last ten trading days before the options are issued (‘issue date’). individual services. No stock options were issued in 2008 and 2009 due to development INDIVIDUAL SUPERVISORY BOARD MEMBER REMUNERATION EUR k Supervisory board member Supervisory board membership Audit committee membership Alexander Stuhlmann Chairman n.a. John van Oost Deputy Chairman Dr Johannes Conradi Member Roger Lee Richard Mully Daniel Quai Dr Christian Olearius Total Member since Feb. 24, 2009 Member Member Member until Aug. 31, 2008 Member until Sept. 30, 2009 Chairman Member since Oct. 1, 2009 n.a. Member Member until Aug. 31, 2008 Remuneration for 2009 Remuneration for 2008 60.0 57.5 55.0 36.6 40.0 50.0 – 299.1 60.0 53.3 55.0 – 40.0 50.0 33.3 291.6 92 REIT Disclosures and Portfolio alstria Annual Report 2009 REIT DISCLOSURES AND PORTFOLIO REIT DECLARATION Statement of the management board Regarding the compliance with the requirements of Section 11 to 5. In 2009 a dividend payment of EUR 28.4 m for the prior ﬁ nancial year was distributed to the shareholders. The ﬁ nancial year 2008 did not result in a net income according to commercial law pursu- ant to Section 275 of the German Commercial Code. 15 REIT Act (Real Estate Investment Trust Law) as per December 31, 6. alstria ofﬁ ce REIT-AG’s dividend does not derive from already 2009, we declare the following in relation with our ﬁ nancial state- taxed parts of the proﬁ t. ment according to Section 264 HGB (German Commercial Code) and 7. Since 2007 the Groups has realised 10 % of the average portfolio our consolidated ﬁ nancial statement according to Section 315a HGB of its immovable assets and therefore did not trade with real estate as per balance sheet date: according to Section 14 REIT Act. 1. As per balance sheet date, 38.94 % of alstria’s shares were free dated statements according to Section 12 paragraph 1 REIT Act was ﬂ oat according to Section 11 paragraph 1 REIT Act. This was stated EUR 634 m. This equals to 40.3 % of the value of the immovable to the German Federal Financial Supervisory Authority (BaFin). assets which are shown in the consolidated statements in conform- 2. In accordance with Section 11 paragraph 4 REIT Act, as per bal- ance with Section 12 paragraph 1 REIT Act. For the second time, the ance sheet date, no shareholder owned directly 10 % or more of equity ratio fell below the threshold pursuant to Section 15 REIT act. 8. On balance sheet date the Group’s equity as shown in the consoli- our shares or shares of such an amount, that he holds 10 % or more of the voting rights. 3. In relation to the sum of the assets pursuant to the consolidated statements less the distribution obligation and the reserves pursu- Hamburg, February 12, 2010 ant to Section 12 paragraph 2 REIT Act a) as per the balance sheet date the immovable assets amounted to EUR 1,575,662 k which equals to 89 % of the assets, there- fore at least 75 % of the assets belong to the immovable assets; b) the assets belonging to the property of REIT service companies which were included in the consolidated statements amount to Olivier Elamine Alexander Dexne a maximum of 20 %, namely EUR 25 k and therefore 0 %. CEO CFO 4. For the ﬁ nancial year 2009, the entire sales revenues of the Group alstria ofﬁ ce REIT-AG alstria ofﬁ ce REIT-AG plus other earnings from immovable assets in the meaning of Section 12 paragraphs 3 and 4 REIT Act amounted to EUR 103 m. This equals 100 % of total revenues. alstria Annual Report 2009 REIT Disclosures and Portfolio 93 REIT declaration REIT memorandum REIT MEMORANDUM Auditors´ Memorandum in Accordance with Section 1 (4) German REIT Act (REITG) To alstria ofﬁ ce REIT-AG, Hamburg ownership per shareholder according to Section 11 (1) and (4), REIT Act to the announcements made according to Section 11 (5) REIT Act as of 31 December 2009. Furthermore, we compared the disclosures according to Section 12 and 15 REIT Act with respective information contained in the ﬁ nancial statement and the consolidated ﬁ nancial statements of the company. We believe that our audit provides a reason able basis for our opinion. As auditor of the ﬁ nancial statement and the consolidated ﬁ nancial statement of alstria ofﬁ ce REIT-AG, Hamburg, for the business year In our opinion based on the ﬁ ndings of our audit, the information from January 1, to December 31, 2009, we have audited the infor- given in the REIT declaration concerning the free ﬂ oat ratio and the mation given in the attached declaration of the management board maximum stock ownership per shareholder due to Section 11 (1) members for the compliance with the requirements of Section 11 to and (4) REIT Act agrees with the announcements made according to 15 of the REIT Act and the composition of the proceeds concerning Section 11 (5) REIT Act as of December 31, 2009 and the information qualifying or disqualiﬁ ed proceeds according to Section 19a REIT Act provided concerning the compliance with Section 12 to 15 REIT Act as of December 31, 2009 (hereinafter referred to as ‘REIT declara- and the composition of the proceeds concerning qualifying or dis- tion’). The information given in the REIT declaration is in the account- qualiﬁ ed proceeds according to Section 19a REIT Act are appropriate. ability of the management board of the company. Our responsibility is to express an opinion on the information given, based on our audit. This Report is solely provided for the submission to the tax authorities of the city of Hamburg with the tax declaration according to Section We conducted our audit considering the audit guidance promulgated 21 (2) REIT Act. by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW): Particularities concerning the audit of a REIT stock corporation according to Section 1 (4) REIT Act, a pre-REIT stock corporation according to Section 2 Clause 3 REIT Act and Berlin, February 22, 2010 the audit according to Section 21 (3) Clause 3 REIT Act (IDW PH 9.950.2). Therefore we have planned and performed our audit to conclude with reasonable assurance if the free ﬂ oat ratio and the PricewaterhouseCoopers maximum stock ownership per shareholder according to Section 11 Aktiengesellschaft (1) and (4) REIT Act agrees with the announcements according to Wirtschaftsprüfungsgesellschaft Section 11 (5) REIT Act as of December 31, 2009 and if the provided information concerning the requirements of Section 12 to 15 REIT Act and the compos ition of the proceeds concerning qualifying or sgd. Gregory Hartman sgd. ppa. Markus Salzer disqualiﬁ ed proceeds according to Section 19a REIT Act is appropri- Wirtschaftsprüfer Wirtschaftsprüfer ate. Within our audit, we have compared the disclosures in the REIT (German Public Auditor) (German Public Auditor) declaration concerning the free ﬂ oat ratio and the maximum stock 94 REIT Disclosures and Portfolio alstria Annual Report 2009 VALUATION REPORT The Directors alstria ofﬁ ce REIT-AG Bäckerbreitergang 75 20355 Hamburg Germany Dear Sirs Colliers CRE 9 Marylebone Lane London W1U 1HL Tel Fax 020 7935 4499 020 7344 6539 Direct Line 020 7344 6609 Direct Fax 020 7344 6539 Mobile 07768 500 202 chris.fowler-tutt@collierscre.co.uk The alstria ofﬁ ce REIT-AG portfolio (the company) valuation as at 31 December 2009 In accordance with the instruction letter dated 30 June 2009, we Compliance with Rics Valuation Standards We conﬁ rm that the valuations have been made in accordance with the appropriate sections of the Practice Statements (‘PS’) and United have considered the properties owned by the Company referred to Kingdom Practice Statements (‘UKPS’) contained within the ‘Red in Appendix II to this report, in order to provide you with our opinion Book’ prepared by the ‘RICS’. of the Market Value of the above portfolio, as at 31 December 2009. The revaluation is required for balance sheet purposes, debt covenant This is an internationally accepted basis of assessing the value of calculation and inclusion within your ﬁ nancial year end accounts. real estate. We have pleasure in presenting our report. Our General Assumptions and Deﬁ nitions form Appendix I to this report. Inspections and qualiﬁ cations the properties have been inspected, as detailed below, and valued The subject portfolio has been inspected at various stages in its com- by suitably qualiﬁ ed surveyors who fall within the requirements as to pilation between June 2006 and December 2009 by either Christo- competence as set out in PS 1.4 and 1.5 of the Valuation Standards pher J Fowler-Tutt, BSc MRICS, Adrian Camp BSc (Hons) MRICS, 6th Edition (the ’Red Book’) issued by the Royal Institution of Robert Mayhew BSc (Hons) MRICS, Nick Harris BSc (Hons) MRICS, Chartered Surveyors (the ‘RICS’). Charlie Henry BSc (Hons) MRICS, Tom Hughes MRICS, Kristian Eng- ley MRICS, Robert Pritchard BA (Hons) MSc MRICS or Giles Bendell We conﬁ rm that Colliers CRE complies with the requirements of inde- BSc MRICS. pendence and objectivity under PS 1.6 and that we have no conﬂ ict of interest in acting on your behalf in this matter. alstria Annual Report 2009 REIT Disclosures and Portfolio 95 Valuation report In October 2009 the following sample of the portfolio, comprising 33 The extent of our investigations and the sources of information on properties, was re-inspected: Asset No Asset Bertha-von-Suttner-Platz 17 Zellescher Weg 21 – 25a Johannesstr. 164 – 165/ J.-Gagarin-Ring 133 – 135 Ludwig-Erhard-Straße 49 Halberstädter Straße 17 Arnulfstraße 150 Am Gräslein 12 Helene-Lange-Straße 6/7 City Bonn Dresden Erfurt Leipzig Magdeburg München Nürnberg Potsdam Gathe 78/Karlstraße 13/Friedrichstraße 39 Wuppertal Lothar-Streit-Straße 10b Alter Steinweg 4/Wexstraße 7 Steinstraße 10 Garstedter Weg 13 Hammer Steindamm 129 Herthastr. 20 Johanniswall 4 Kaiser-Wilhelm-Straße 79 – 87 Kattunbleiche 19 Kümmellstraße 5 – 7 Lenhartzstraße 28 Ludwig-Rosenberg-Ring 41 Max-Brauer-Allee 89 – 91 Öjendorfer Weg 9 – 11 Rahlstedter Straße 151 – 157 Schloßstraße 60 Steckelhörn 12 Friedrichstraße 19 Harburger Ring 17 Wandsbeker Chaussee 220 Arndtstraße 1 Schweinfurter Straße 4 Grosse Bleichen Zwickau Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Hamburg Düsseldorf Hamburg Hamburg Hannover Würzburg Hamburg 2002 2004 2006 2009 2010 2012 2013 2015 2017 2019 2020 2023 2033 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2050 2051 2052 2054 2055 2056 2057 2059 2062 which we have relied upon are as described in Section 4 – Valuation Procedures and Assumptions contained within the Red Book. We conﬁ rm that our valuation complies with the requirements of IAS 40 – Investment Property. Where an entity opts to account for investment property using the fair value model, IVSC considers that the requirements of this model are met by the valuer adopting Mar- ket Value. Our General Assumptions and Deﬁ nitions form Appendix I to this report. The portfolio and its location The portfolio comprises 78 ofﬁ ce investment properties located throughout Germany. The regional location proﬁ le of the portfolio in terms of Market Value across Germany’s states is illustrated below, where it can be seen that the largest concentration of investment property is held in the City of Hamburg. The portfolio also comprises properties in the cities of Berlin, Bonn, Detmold, Dortmund, Dres- den, Düsseldorf, Erfurt, Essen, Frankfurt, Halle, Hannover, Jena, Köln, Leipzig, Magdeburg, Mannheim, Munich, Neuss, Nurnberg, Pots- dam, Stuttgart, Wiesbaden, Wuppertal, Wurzburg and Zwickau. ALSTRIA OFFICE REIT-AG Baden Wuerttemberg 281,540,000 Berlin Hessen Hamburg Brandenburg 52,650,000 43,850,000 866,315,000 5,525,000 Nth Rhine Westphalia 175,440,000 Lower Saxony Bavaria Saxony Saxony Anhalt Thuringia 35,975,000 79,850,000 40,125,000 9,100,000 10,895,000 96 REIT Disclosures and Portfolio alstria Annual Report 2009 Lease expiry analysis An analysis of the lease expiry terms demonstrates that the majority Title Due Diligence Report of the income is secured for a period of between 10 and 20 years. Draft Due Diligence Report Portfolio Lease Expiry Proﬁ le Gross Rent (€) Percentage Expiry less than 1 Yr and open ended leases Expiry between 1 Yr and 3 Yrs Expiry between 3 Yrs & 5 Yrs Expiry between 5 Yrs & 10 Yrs Expiry between 10 Yrs & 20 Yrs Expiry 20 Yrs or more Total 3,620,520 15,667,740 10,343,136 32,124,276 26,167,524 9,377,736 97,300,932 3.72 % 16.10 % 10.63 % 33.02 % 26.89 % 9.64 % 1.00 % ALSTRIA OFFICE REIT-AG € Expiry less than 1 Yr 3,620,520 Expiry between 1 Yr & 3 Yrs 15,667,740 Expiry between 3 Yrs & 5 Yrs 10,343,136 Expiry between 5 Yrs & 10 Yrs 32,124,276 Expiry between 10 Yrs & 20 Yrs 26,167,524 Expiry 20 Yrs or more 9,377,736 Date 12 December 2005 26 September 2006 27 September 2005 26 September 2006 Summary of Major Findings Legal Due Diligence Report Preliminary Legal and tax Due Diligence Report 28 September 2006 Legal Due Diligence Report Legal Due Diligence Report Legal Due Diligence Report Draft Preliminary Key Issues Report for Legal Due Diligence 24 October 2006 16 July 2007 31 October 2007 14 November 2007 Red Flag List of Legal Due Diligence 14 December 2007 Preliminary Legal Due Diligence Report 1 April 2008 All of the above reports were prepared by your lawyers Messrs Alpers & Stenger, Freshﬁ elds Bruckhaus Deringer and Lovells. Our valu ations 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. Lettings We have relied upon the letting details contained within the following reports prepared by your lawyers Messrs Alpers & Stenger, Freshﬁ elds Bruckhaus Deringer and Lovells. Floor areas In accordance with the instruction letter we have not measured the properties and have relied upon the ﬂ oor areas and car parking stated in the most recent tenancy schedule provided by the Company. Nev- Title Due Diligence Report Draft Due Diligence Report Summary of Major Findings Legal Due Diligence Report ertheless, during the course of our inspections we did seek to ensure, Legal Due Diligence Report where possible, that the areas provided were consistent with the Legal Due Diligence Report accommodation inspected. We are not aware of any major inconsist- Legal Due Diligence Report encies in this regard but would emphasise that we cannot provide any warranty as to the accuracy of the ﬂ oor areas provided. Draft Preliminary Key Issues Report for Legal Due Diligence Date 12 December 2005 26 September 2006 27 September 2005 26 September 2006 24 October 2006 16 July 2007 31 October 2007 14 November 2007 Tenure We have been provided with the following reports, which we have had regard to in arriving at our opinions of value. In circumstances where there have been tenant changes we have Red Flag List of Legal Due Diligence 14 December 2007 relied solely upon the summary letting details provided by the Com- pany. We have assumed all information provided to be accurate, up- to-date and complete. alstria Annual Report 2009 REIT Disclosures and Portfolio 97 Valuation report Rent roll We have been provided with a ﬁ nalised tenancy schedule dated Title Technical Due Diligence Report 10 November 2009 by the Company to which we have had regard in arriving at our opinions of value. We have compared the new rent Technical and Environmental Due Diligence Assessment Date 19 December 2005 25 August 2006 roll with the one provided to us on the 2 December 2008 and have Intermediate Environmental Bullet Point Report 9 October 2006 enquired about any changes. We have assumed all information pro- Technical Due Diligence Report vided to be accurate, up-to-date and complete. 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 signiﬁ cant 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 Technical and Environmental Due Diligence Assessment Revised Final Report Technical and Environmental Due Diligence Assessment Technical and Environmental Due Diligence Assessment Reports Technical and Environmental Due Diligence Assessments 29 December 2006 7 November 2007 13 November 2007 21 December 2007 22 December 2007 behalf by URS Deutschland GmbH (URS): Additionally, we have been provided with the following report pre- pared on your behalf Messrs ARGOS Projektmanagement GmbH. Title Date Technical Due Diligence Report 19 December 2005 Title Technical and Environmental Due Diligence Assessment 25 August 2006 Technical Due Diligence Assessment Date 1 April 2008 Intermediate Environmental Bullet Point Report 9 October 2006 Structural Property Survey Technical Due Diligence Report Technical and Environmental Due Diligence Assessment Revised Final Report 19 October 2006 29 December 2006 7 November 2007 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: Technical and Environmental Due Diligence Assessment 13 November 2007 Title Technical and Environmental Due Diligence Assessment Reports Technical and Environmental Due Diligence Assessments 21 December 2007 Due Diligence Report Draft Due Diligence Report 22 December 2007 Summary of Major Findings Legal Due Diligence Report Legal Due Diligence Report Additionally, we have been provided with the following report, pre- Legal Due Diligence Report pared on behalf of the Company, by Messrs ARGOS Projektmanage- Legal Due Diligence Report Date 12 December 2005 26 September 2006 27 September 2005 26 September 2006 28 September 2006 16 July 2007 31 October 2007 14 November 2007 ment GmbH. Title Draft Preliminary Key Issues Report for Legal Due Diligence Date Red Flag List of Legal Due Diligence 14 December 2007 Technical Due Diligence Assessment 1 April 2008 Preliminary Legal Due Diligence Report 1 April 2008 Environmental matters We have been provided with the following reports, prepared on your All of the above were prepared by your lawyers Messrs Alpers & Stenger, Freshﬁ elds Bruckhaus Deringer and Lovells for formal search behalf by URS Deutschland GmbH (URS), which we have relied upon information, town planning and permit issues and we have had in arriving at our opinions of value. regard to this information in arriving at our opinions of value. 98 REIT Disclosures and Portfolio alstria Annual Report 2009 Market approach In preparing our valuations we have taken into account market trends Market value We are of the opinion that the aggregate Market Value, as at 31 in the locality and except where you have advised us to the contrary, December 2009, of these 78 freehold and long leasehold proper- or our other enquiries have alerted us to this, we have assumed that ties is €1,601,265,000 (one billion six hundred and one million, two there have been no material changes to any of the properties or their hundred and sixty ﬁ ve thousand euros). surroundings that might have a material effect on value, since the time of our inspection. This value reﬂ ects the following aggregate net yields. In arriving at our opinions of value we have had regard to compar- able investment transactions in determining the net initial yield and equivalent yield which we have adopted in capitalising the current income stream. Where properties have less than 5 years of term cer- tain left we have adopted income void periods which range from 18 to 24 months depending upon the type of property prior to re-letting. Yield Initial Equivalent Reversion (July 2020) % 5.50 5.77 6.21 For properties with a large car parking provision we have adopted a We conﬁ rm that all of the foregoing opinions of value, with the structural void ranging from 5 to 20 %, depending on the vacancy exception of Daimler Chrysler HQ property and the three Berlin rate at the date of valuation. In the case of properties with small car City properties, are net of the requisite purchaser’s costs of 5.0 %. In parking provisions we have adopted a void period of 3 months. In respect of the Daimler Chrysler HQ investment property in Stuttgart addition, where appropriate, we have allowed for capital expenditure purchaser’s costs of 4.25 % were adopted reﬂ ecting the high value either to undertake works necessary to re-let properties at the end of this single asset and the relatively low costs associated with its of the lease or deal with extraordinary items of disrepair that are the management. For the three Berlin City properties, we have adopted responsibility of the lessor. the requisite purchaser’s costs of 6.0 % to reﬂ ect the higher rate of We are of the opinion that this portfolio as a whole or each of its land transfer tax. individual assets would appeal to a wide range of purchasers includ- The market value of the portfolio is the sum of the individual market ing funds, property companies and institutions. It would also be of values of each of its assets. This aggregate ﬁ gure makes no allowance interest to overseas investors attracted by the high quality income for any effect that placing the whole portfolio on the market may stream secured over long unexpired lease terms. We consider that have on the overall realisation. The market value of the portfolio demand for the portfolio would be strong. sold as in a single transaction would not necessarily be the same as Non-recoverable expenses In arriving at our opinion of the value we have made a total deduc- tion of 5 % from the income receivable to allow for non-recoverable Disclosures In accordance with UK Practice Statement 5.4 we conﬁ rm the the aggregate ﬁ gure reported. costs. Such costs relate to items which cannot be recovered from following: the tenant and generally includes the expense of maintaining and repairing all structural components of the property and associated i. Colliers CRE have valued this portfolio since 2006. access roads, as well as being ﬁ nancially responsible for maintenance ii. The total fees earned in the latest ﬁ nancial year from the Com- and repair items and management expenses etc. However, it does pany amounted to substantially less than 5 % of our Company not include tenant improvement measures that have been taken into turnover. consideration. Moreover, when the technical due diligence reports iii. We do not undertake any non-valuation fee earning work for showed that additional Capital Expenditure was required, we have the Company. deducted all, or part of those additional costs from our valuation on the basis of a day 1 deduction. 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. Any differ- ence between the Market Rent and the passing rent has been taken into consideration in our valuation. alstria Annual Report 2009 REIT Disclosures and Portfolio 99 Valuation report Liability and publication This report is private and conﬁ dential and for the sole use of alstria ofﬁ ce 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 ofﬁ ce REIT-AG as bor- rower (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 Agree- ment. 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 without our prior written consent to the form and context in which it may appear. In breach of this condition, no responsibility can be accepted to third parties for the comments or advice contained in this report. Yours faithfully Christopher J Fowler-Tutt Adrian Camp BSc MRICS Director BSc (Hons) MRICS Director For and behalf of Colliers CRE For and behalf of Colliers CRE 100 REIT Disclosures and Portfolio alstria Annual Report 2009 Appendix I General Assumptions and Deﬁ nitions The valuations have been prepared by a suitably qualiﬁ ed valuer, 4 . Purchase and Sale Costs In arriving at our opinion of value we have allowed for purchaser’s costs of 5 %, or 6 % for Berlin assets. This reﬂ ects 3.5 % (4.5 % for Berlin) for land tax with the remainder being apportioned between as deﬁ ned by PS1.1 of the Appraisal and Valuation Standards, on agents and legal fees. Because of the high value of the portfolio we the basis set out below unless any variations have been speciﬁ cally consider it appropriate to adopt slightly lower professional fees than referred to under the heading “Special Remarks”: usual. In respect of the Daimler Chrysler HQ investment property 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 Valuation Standards issued by The Royal Institution of Chartered Surveyors, which is deﬁ ned 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 in Stuttgart purchaser’s costs of 4.25 % were adopted reﬂ ecting the high value of this single asset and the relatively low costs associated in managing it. 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. arm’s-length transaction after proper marketing wherein the parties We have been provided with a Technical Due Diligence Report pre- had each acted knowledgeably, prudently and without compulsion.” pared by on behalf of the alstria ofﬁ ce REIT-AG as listed in our certiﬁ - The interpretative commentary on Market Value, as published in cate which we have had regard to in arriving at our opinion. 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 deﬁ nition as settled by the International Valuation Standards Committee which is as follows: Where we have noticed items of disrepair during the course of our inspections, they have been reﬂ ected in our valuation which we com- ment upon in the individual reports attached hereto. 6. Environmental Matters We have relied upon the environmental investigation undertaken ‘The estimated amount for which a property, or space within a prop- in respect of the property as listed in our certiﬁ cate. We have been erty, should lease (let) on the date of valuation between a willing provided with a report highlighting the potential risks at the subject lessor and a willing lessee on appropriate lease terms in an arm’s- property and have had regard to this report in arriving at our opinion length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion.’ of value. We comment upon the environmental issue in the report attached hereto. MR will vary signiﬁ cantly according to the terms of the assumed lease contract. The appropriate lease terms will normally reﬂ ect current 7. Fixtures and Fittings In arriving at our opinions of value we have disregarded the value of practice in the market in which the property is situated, although for all process related plant, machinery, ﬁ xtures and ﬁ ttings and those certain purposes unusual terms may need to be stipulated. Matters items which are in the nature of tenants’ trade ﬁ ttings and equip- such as the duration of the lease, the frequency of rent reviews, ment. We have had regard to landlords’ ﬁ xtures such as lifts, escala- and the responsibilities of the parties for maintenance and outgoings, tors, central heating and air conditioning forming an integral part of will all impact on MR. In certain States, statutory factors may either the buildings. restrict the terms that may be agreed, or inﬂ uence the impact of terms in the contract. These need to be taken into account where Where the properties are valued as an operational entity and includes appropriate. The principal lease terms that are assumed when provid- the ﬁ xtures and ﬁ ttings, it is assumed that these are not subject to ing MR will be clearly stated in the report. any hire purchase or lease agreements or any other claim on title. Rental values are provided for the purpose described in this report and Electrical Equipment Regulations and Gas Safety Regulations and we are not to be relied upon by any third party for any other purpose. assume that where appropriate all such equipment meets the neces- No equipment or ﬁ xtures and ﬁ ttings have been tested in respect of 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. sary legislation. Unless otherwise speciﬁ cally mentioned the valuation excludes any value attributable to plant and machinery. alstria Annual Report 2009 REIT Disclosures and Portfolio 101 Valuation report 8. Tenure, Lettings and Reports on Title and/or Tenancies We have not inspected the title deeds, lease and related legal docu- 14. Insurance In arriving at our valuation we have assumed that the buildings are ments and have instead relied upon the Legal Due Diligence as listed capable of being insured by reputable insurers at reasonable market in our certiﬁ cate. We conﬁ rm we have relied upon the information rates. If, for any reason, insurance would be difﬁ cult to obtain or contained therein in arriving at our opinions of value. would be subject to an abnormally high premium, it may have an 9. Taxation Whilst we have had regard to the general effects of taxation on mar- ket value, we have not taken into account any liability for tax which 15. Liability Cap We conﬁ rm that the extent of our liability in respect of this valuation may arise on a disposal, whether actual or notional, and neither have and report is limited to a maximum sum of £50 million. effect on value. 16. Standard Terms of Business We conﬁ rm that this valuation report has been provided in accord- ance with our Standard Terms of Business. 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, debentures or other charges to which the properties may be subject. 11. Operational Entities Where the properties are valued as an operational entity and refer- ence 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 unre- liable, the valuations reported could be adversely affected. Our valuations do not make any allowance for goodwill. 12. Local authorities, Statutory Undertakers and Legal Searches We have relied upon the Legal Due Diligence Report as listed in our certiﬁ cate with respect of formal 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 Report in respect of all consents, licences and permissions including, inter alia, ﬁ re cer- tiﬁ cates, 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 required by lessors or statutory, local or other competent authorities. 13. Arrears We have assumed that all rents and other payments payable by vir- tue of the leases have been paid to date. If there are rents or other arrears, we recommend that we should be informed in order that we may consider whether our valuation should be revised. 102 REIT Disclosures and Portfolio alstria Annual Report 2009 LIST OF ALL PROPERTIES Investment portfolio Asset name Berlin Darwinstrasse 14 – 18/Quedlinburgerstrasse 2 Holzhauser Strasse 175 – 177 Hamburg Alte Königstrasse 29 Alter Steinweg 4 Amsinckstrasse 28 Amsinckstrasse 34 Basselweg 73 Besenbinderhof 41 Buxtehuder Strasse 9 – 11a Drehbahn 36 Ernst-Merck-Strasse 9 (Bieberhaus) Gänsemarkt 36 2 Garstedter Weg 13 Gorch-Fock-Wall 15, 17 2 Grindelberg 62 – 66 Grosse Bleichen 23 – 27 1, 2 Hamburger Strasse 43 – 49 Hammer Steindamm 129 Harburger Ring 17 Herthastrasse 20 Johanniswall 4 Kanalstrasse 44 Kattunbleiche 19 Kümmellstrasse 5 – 7 Lenhartzstrasse 28 Ludwig-Rosenberg-Ring 41 Max-Brauer-Allee 41 – 43 Max-Brauer-Allee 89 – 91 Nagelsweg 41 – 45 Öjendorfer Weg 9 – 11 Rahlstedter Strasse 151 – 157 Schlossstrasse 60 Schopenstehl 24 Steckelhörn 12 Steinstrasse 10 Steinstrasse 5 – 7 Wandsbeker Chaussee 220 City Berlin Berlin 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 Hamburg 1 Joint venture assets. 2 Assets held for sale. 3 Classiﬁ ed as property, plant and equipment. 4 Year of erection of the building or part thereof. Do not reﬂ ect latest renovation. 5 According to the year-end valuation from Colliers CRE. Year of construction4 Total lettable area (sqm) Ofﬁ ce area (sqm) 1992/1993 1997 1992 1962/1970 1991 1993 1912/1986 1927 1868/1940 1915/1982 1909 1926 1964/1970 1910 1953 1909 1969 1929 1976 1960/1997 1943 1982 1997 1952/1983 1960 1986 1900 1874/1878 1987 1950/2004 1983 1923/1955 1908 1930 1939 1926 1986 22,200 7,200 29,400 4,300 32,000 8,100 6,200 2,700 5,000 7,700 25,700 17,500 20,900 3,600 7,700 18,400 18,000 21,900 7,200 3,100 3,300 14,000 8,100 12,400 15,700 1,100 5,000 3,200 9,800 6,200 6,100 2,900 11,900 2,100 14,700 26,800 22,400 3,200 378,900 20,800 7,000 27,800 3,600 28,000 7,800 5,900 1,900 3,500 5,100 20,200 12,500 18,100 2,700 5,800 17,400 13,500 20,600 6,300 1,500 2,700 10,500 7,800 9,800 13,300 900 3,600 2,700 7,000 5,900 5,900 2,900 9,500 2,100 12,600 22,200 18,400 2,500 314,700 alstria Annual Report 2009 REIT Disclosures and Portfolio 103 List of all properties Vacany (sqm) Contractual rent (EUR) ERV5 (EUR) OMV5 (EUR) Δ like-for-like contractual rent (2008 vs. 2009) ( %) Δ OMV 2008 vs. OMV 2009 ( %) – 1,800 1,800 – – – – – – – – 2,400 150 – – – 200 – – 500 – – – – – – – – – – – – – – – – – – 3,420,000 510,000 3,930,000 560,000 3,950,000 950,000 720,000 260,000 480,000 560,000 3,240,000 2,070,000 3,050,000 340,000 810,000 2,070,000 2,800,000 2,360,000 540,000 275,000 290,000 1,690,000 910,000 1,510,000 1,370,000 100,000 460,000 275,000 900,000 880,000 560,000 290,000 960,000 240,000 1,870,000 3,240,000 3,370,000 385,000 3,040,000 44,500,000 720,000 3,760,000 8,150,000 52,650,000 550,000 4,320,000 990,000 770,000 290,000 480,000 530,000 3,500,000 2,380,000 3,200,000 360,000 800,000 2,140,000 4,470,000 2,900,000 560,000 340,000 320,000 1,790,000 940,000 1,430,000 1,780,000 150,000 530,000 370,000 960,000 960,000 680,000 320,000 1,040,000 370,000 1,980,000 3,680,000 2,930,000 370,000 8,250,000 74,000,000 12,150,000 8,950,000 4,700,000 6,000,000 9,000,000 64,185,000 33,470,000 60,625,000 5,570,000 15,200,000 37,145,000 60,000,000 36,750,000 9,280,000 3,250,000 4,780,000 32,785,000 12,570,000 28,500,000 24,100,000 1,600,000 7,400,000 5,350,000 16,540,000 14,265,000 8,850,000 4,650,000 17,200,000 4,450,000 35,000,000 61,400,000 58,000,000 5,200,000 3,250 44,335,000 49,180,000 791,165,000 0.0 6.3 0.8 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 40.7 0.0 0.0 – 11.3 0.0 0.6 0.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 – 2.6 1.3 2.8 – 7.3 – 5.8 – 7.1 – 6.3 – 1.2 – 8.3 – 6.0 – 1.1 – 9.4 – 6.7 – 0.9 – 7.0 – 0.9 – 1.0 – 1.0 – 0.9 0.0 – 0.9 – 5.8 – 14.5 – 0.9 – 1.0 – 4.6 – 3.1 – 3.6 – 3.0 – 0.7 – 2.7 – 1.0 – 0.9 – 0.6 – 1.1 14.7 2.2 – 1.4 – 1.0 3.6 – 5.5 – 1.3 104 REIT Disclosures and Portfolio alstria Annual Report 2009 City Year of construction4 Total lettable area (sqm) Ofﬁ ce area (sqm) Asset name Hanover Arndtstrasse 1 Werner-von-Siemens-Platz 1 Munich Arnulfstrasse 150 Hofmannstrasse 51 Landshuter Allee 174 Hanover Hanover Munich Munich Munich Rhineland Benrather Schlossallee 29 – 33/Ludolfstrasse 3 Dusseldorf Bertha-von-Suttner-Platz 17 Friedrichstrasse 19 Gereonsdriesch 13 Horbeller Strasse 11 Jagenbergstrasse 1 Ruhr Bamler Strasse 1 – 5 Gathe 78 Max-Eyth-Strasse 2 Saxony Lothar-Streit-Strasse 10b Ludwig-Erhard-Strasse 49 Washingtonstrasse 16 – 16a Zellescher Weg 21 – 25a Zwinglistrasse 11 – 13 Stuttgart Epplestrasse 225 Ernsthaldenstrasse 17 Siemensstrasse 33 Bonn Dusseldorf Cologne Cologne Neuss Essen Wuppertal Dortmund Zwickau Leipzig Dresden Dresden Dresden Stuttgart Stuttgart Ditzingen 1 Joint venture assets. 2 Assets held for sale. 3 Classiﬁ ed as property, plant and equipment. 4 Year of erection of the building or part thereof. Do not reﬂ ect latest renovation. 5 According to the year-end valuation from Colliers CRE. 1972 1913/14, 1987 2002 1990 1990 2002 1958 1998 1954/1980 1991 1993 1988 1990/2000/2002 1986 1995 2003 1996 1994 1911/1993 1987 – 1989 1967 1989 10,200 21,700 31,900 5,900 22,100 6,900 34,900 5,000 1,400 2,100 2,400 6,700 24,700 42,300 36,400 8,600 7,000 52,000 1,000 6,300 21,600 6,500 3,000 38,400 107,500 2,500 22,000 132,000 8,400 21,300 29,700 5,600 20,400 6,500 32,500 4,300 1,100 1,200 2,100 6,100 23,900 38,700 29,000 8,500 6,600 44,100 1,000 6,000 18,400 5,400 2,800 33,600 78,000 2,200 7,800 88,000 alstria Annual Report 2009 REIT Disclosures and Portfolio 105 List of all properties Vacany (sqm) Contractual rent (EUR) OMV5 (EUR) Δ like-for-like contractual rent (2008 vs. 2009) ( %) Δ OMV 2008 vs. OMV 2009 ( %) ERV5 (EUR) 940,000 1,990,000 2,930,000 1,100,000 2,710,000 1,100,000 4,910,000 530,000 200,000 420,000 350,000 680,000 2,860,000 5,040,000 4,040,000 1,010,000 710,000 5,760,000 100,000 630,000 1,760,000 780,000 220,000 3,490,000 10,975,000 25,000,000 35,975,000 14,250,000 41,600,000 14,200,000 70,050,000 7,150,000 2,300,000 4,950,000 5,240,000 6,500,000 47,750,000 73,890,000 60,700,000 12,200,000 4,000,000 76,900,000 1,050,000 9,925,000 16,000,000 10,950,000 2,200,000 40,125,000 1,030,000 1,860,000 2,890,000 980,000 2,430,000 900,000 4,310,000 535,000 200,000 340,000 350,000 480,000 3,410,000 5,315,000 4,030,000 960,000 185,000 5,175,000 140,000 750,000 1,200,000 830,000 195,000 3,115,000 14,660,000 14,730,000 239,530,000 260,000 1,460,000 16,380,000 240,000 2,110,000 17,080,000 2,860,000 18,000,000 260,390,000 – – – – – – – – – 300 – 1,700 – 2,000 3,200 600 5,000 8,800 – – 6,000 100 100 6,200 – – 5,400 5,400 1.0 0.0 0.3 0.0 0.0 0.0 0.0 2.9 0.0 – 15.0 0.0 0.0 0.0 – 0.8 6.3 4.3 2.8 5.8 0.0 0.0 – 2.4 9.2 95.0 4.5 0.0 0.0 – 19.8 – 2.2 – 15.4 – 14.2 – 14.5 – 12.3 – 3.3 – 5.3 – 5.7 – 1.4 0.0 – 13.2 0.0 – 3.7 – 10.3 – 8.2 0.3 0.0 0.0 0.3 – 25.0 0.0 – 3.1 0.0 – 1.6 – 2.2 – 7.7 – 4.7 – 23.9 – 9.0 106 REIT Disclosures and Portfolio alstria Annual Report 2009 Asset name Others Am Gräslein 12 Am Roten Berg 5 Carl-Reiß-Platz 1 – 5 Doktorweg 2 – 4/Bismarckstrasse 3 Emil-von-Behring-Strasse 2 Goldsteinstrasse 114 Gustav-Nachtigal-Strasse 3 Gustav-Nachtigal-Strasse 4 Halberstädter Strasse 17 Helene-Lange-Strasse 6 – 7 Johannesstrasse 164 – 165 Joliot-Curie-Platz 29 – 30 Schweinfurter Strasse 4 Spitzweidenweg 107 Total Development asset Asset name Bäckerbreitergang 73 – 75 3 Hamburger Strasse 1 – 15 Kaiser-Wilhelm-Strasse 79 – 87 Poststrasse 11 (Alte Post) 1 Disposals Asset name Bonner Strasse 351 2 Eppendorfer Landstrasse 59 Eserwallstrasse 1 – 3 2 Gorch-Fock-Wall 11 Marburger Strasse 10 Mecumstrasse 10 2 Ottenser Marktplatz 10/12 Poststrasse 51 Regensburger Strasse 223 – 231 2 Rheinstrasse 23 2 Steubenstrasse 72 – 74 2 Vahrenwalder Strasse 133 2 City Year of construction4 Total lettable area (sqm) Ofﬁ ce area (sqm) Nuremberg Erfurt Mannheim Detmold Frankfurt am Main Frankfurt am Main Wiesbaden Wiesbaden Magdeburg Potsdam Erfurt Halle Wurzburg Jena City Hamburg Hamburg Hamburg Hamburg City Cologne Hamburg Augsburg Hamburg Berlin Dusseldorf Hamburg Hamburg Nuremberg Darmstadt Mannheim Hanover 1972 1994 1959 – 1979 1959/1960 1988 1996 2000 1981 1996/2002 1995 1998 1998 1996 1992 Year of construction4 1885 1973 1901 1850/1971 Year of construction4 2000 1978 2000 1893/1985 1967 2001 1956/2000 1913 1999 1958 1998 1999 2,700 5,300 17,500 9,800 9,300 8,400 18,500 700 7,600 3,300 5,800 1,100 5,100 2,900 2,500 4,100 14,800 8,600 8,400 7,900 16,500 700 6,900 2,600 4,200 500 4,100 2,500 98,000 84,300 837,800 693,400 Total lettable area (sqm) 2,400 21,700 5,500 6,600 36,200 Total lettable area (sqm) 10,900 3,300 5,600 8,700 6,200 8,600 1,000 1,700 8,900 2,700 4,100 7,100 Ofﬁ ce area (sqm) 2,100 9,100 4,200 4,600 20,000 Ofﬁ ce area (sqm) 9,500 2,600 5,100 7,200 5,700 8,500 1,000 1,200 7,300 2,300 4,100 6,700 68,800 61,200 1 Joint venture assets. 2 Assets held for sale. 3 Classiﬁ ed as property, plant and equipment. 4 Year of erection of the building or part thereof. Do not reﬂ ect latest renovation. 5 According to the year-end valuation from Colliers CRE. alstria Annual Report 2009 REIT Disclosures and Portfolio 107 List of all properties Vacany (sqm) Contractual rent (EUR) OMV5 (EUR) Δ like-for-like contractual rent (2008 vs. 2009) ( %) Δ OMV 2008 vs. OMV 2009 ( %) ERV5 (EUR) 290,000 300,000 1,710,000 830,000 1,080,000 1,000,000 2,400,000 140,000 660,000 410,000 560,000 120,000 450,000 240,000 3,600,000 2,600,000 21,150,000 11,000,000 12,000,000 13,650,000 30,500,000 1,350,000 7,950,000 5,525,000 6,875,000 1,150,000 6,200,000 1,420,000 800 2,300 1,200 – – – – – 600 – 100 200 – 1,300 6,500 225,000 145,000 1,590,000 800,000 1,500,000 1,090,000 2,400,000 110,000 640,000 385,000 530,000 90,000 490,000 140,000 10,135,000 10,190,000 124,970,000 33,950 95,585,000 102,340,000 1,526,115,000 – 10.0 3.6 0.0 0.0 0.0 0.0 0.0 0.0 4.9 1.3 1.9 12.5 0.0 – 12.5 0.1 1.4 – 10.0 0.0 – 1.3 0.0 – 16.2 – 3.4 – 7.6 – 0.4 0.0 0.0 – 5.2 – 4.2 – 3.1 – 23.2 – 5.3 – 4.1 Vacany (sqm) 2,400 10,950 2,400 6,600 22,350 Contractual rent (EUR) – 1,700,000 215,000 – 1,915,000 ERV5 (EUR) 480,000 3,650,000 990,000 3,700,000 8,820,000 OMV5 (EUR) 5,000,000 27,000,000 8,150,000 35,000,000 75,150,000 Δ like-for-like contractual rent (2008 vs. 2009) ( %) Δ OMV 2008 vs. OMV 2009 ( %) n.a. – 15.0 – 20.4 – 100.0 – 38.6 0.0 – 14.3 – 16.2 0.0 – 7.5 Vacany (sqm) Contractual rent (EUR) ERV5 (EUR) Disposal price (EUR) Δ like-for-like contractual rent (2008 vs. 2009) ( %) Δ OMV 12/2008 vs. disposal price 2009 ( %) – – – – 150 – – – 1,480,000 1,500,000 23,000,000 410,000 710,000 1,030,000 900,000 1,230,000 155,000 380,000 560,000 730,000 980,000 910,000 1,300,000 150,000 450,000 6,622,000 9,925,000 19,600,000 12,950,000 18,400,000 2,375,000 6,500,000 440 1,010,000 1,100,000 15,000,000 – – – 590 350,000 530,000 1,100,000 9,285,000 330,000 500,000 1,020,000 9,530,000 4,500,000 7,700,000 14,900,000 141,472,000 0.0 7.9 2.9 1.0 0.0 0.0 3.3 0.0 0.0 9.4 0.0 11.1 2.3 – 0.4 1.9 0.8 0.5 0.8 – 0.5 1.1 10.2 – 0.7 – 2.2 – 0.6 0.0 0.4 108 Other Information alstria Annual Report 2009 GLOSSARY Asset management Value-orientated running and/or optimisation of properties through letting management, refurbishment, repositioning and tenant man age ment. CMBS (Commercial mortgage backed securities) Securities or loans that are backed by commercial real estate mortgages. Contractual rent At a given date, the contractual rent reﬂ ects the total annualised rent, taking into consideration all signed rental contracts. Derivative ﬁ nancial instruments Derivative ﬁ nancial instruments or derivatives are contracts to hedge and compensate ﬁ nancial risk positions. The pricing is based on a market-linked underlying value (e.g. interest rate, shares or indices). EPRA index The EPRA index is the well-known international index which tracks the performance of the largest European and North American listed property com- panies. The European Public Real Estate Association (EPRA) is an organisation that represents the interests of the major European property management companies and supports the development and market presence of European public property companies. Its members include companies such as alstria ofﬁ ce REIT-AG, ﬁ nancial analysts, investors, advisors and auditors. Fair value (or open market value (OMV)) 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 trans- action after proper marketing, wherein the parties had each acted knowledge- ably, prudently and without compulsion. The Fair Value for alstria’s investment properties is reviewed regularly by external appraisers. Investment property Property, land and buildings, which are held as ﬁ nancial investments to earn rents or for growth and not used for the Company’s own purpose. The value of the investment property is determined according to IAS 40. Joint venture Legally independent entity formed between two or more parties to undertake economic activity together. It is jointly controlled by the parties under a contractual arrangement whereby decisions on ﬁ nancial and operating policies essential to the operation, performance and ﬁ nancial position of the venture require each party’s consent. LTV (Loan to value) Means the ratio of loan amount to the fair value of the real estate. NAV (Net asset value) Reﬂ ects the economic equity of the Company. It is calculated from the value of assets less debt. NNNAV (Triple net asset value) NAV adjusted for hidden reserves and hidden losses in immovable assets and ﬁ nancial liabilities. Prime Standard Market segment of the Frankfurt Stock Exchange with the greatest relevance and degree of regulation. Being quoted on the Prime Standard is a prerequisite for admission to DAX, MDAX, SDAX and TecDAX. REIT (G-REIT) Real Estate Investment Trusts are public listed companies, fully tax transpar- ent, which solely invest in properties. FFO (funds from operations) Operating result from real estate management. alstria’s FFO represents the operating result, excluding valuation effects and other non-cash items. Sale-and-leaseback transaction Form of arrangement in which one party sells an asset to another party in exchange for cash and contracts to lease the asset for a speciﬁ ed term. ICR (Interest coverage ratio) The Interest Coverage Ratio is a key ratio which belongs in a loan agree- ment to the debtor’s contractual assurances (covenants) for the duration of the loan. It indicates to which proportion the interest payments have to be covered by the earnings of the Company, respectively, by the earnings of the investment property. IFRS (International Financial Reporting Standards) IFRS are adopted by the International Accounting Standards Board (IASB). The objective is to achieve uniformity and transparency in the accounting principles that are used by companies and other organisations worldwide for the ﬁ nancial reporting. IFRSs have applied to listed companies since January 1, 2005. Valuation yield Key performance indicator, which is determined at a given date by the contractual rent in relation to the fair value of the property. WAULT (Weighted average unexpired lease term) The weighted average unexpired lease term shows the average remaining lease length of a portfolio and is deﬁ ned as the total contractual rent to be collected in relation to the contractual rent of the date of the report. OPEN MARKET VALUE OF INVESTMENT PROPERTIES KEY FACTS 2009 FINANCIAL CALENDAR PROFILE alstria ofﬁ ce REIT-AG is an internally managed Real Estate Investment Trust (REIT) solely focused on acquiring, owning and managing ofﬁ ce real estate in Germany. alstria was founded in January 2006 and was converted into the ﬁ rst German REIT in October 2007. Its headquarters are based in Hamburg. alstria ofﬁ ce REIT-AG owns a diversiﬁ ed portfolio of properties across attractive German ofﬁ ce real estate markets. Its current portfolio comprises 77 properties with an aggregate lettable space of approx. 867,000 sqm and is valued at approx. EUR 1.6 bn. alstria intends to expand its portfolio in the upcoming years as part of a sustainable growth strategy. This strategy is based on selective investments and active asset and portfolio management, as well as on establishing and maintaining good relationships with its key customers and decision-makers. AS THE FIRST GERMAN REIT, WE HAVE > a unique business model: we buy and manage ofﬁ ce real estate > a clear focus on one country: Germany > a long-term orientation toward our tenant relationships > an entrepreneurial view of market opportunities > Revenues increased to EUR 102,510 k > Funds from operations at EUR 32,690 k Hamburg > Vacancy rate brought down from 5.9% to 5.7% Hanover Potsdam Berlin Detmold Magdeburg Dusseldorf Neuss Essen Dortmund Wuppertal Cologne Bonn Halle Leipzig Dresden Erfurt Jena Zwickau > Outstanding exposure of its main syndicated loan facility reduced by around EUR 241 m > Binding and notarised sales agreements for 14 properties concluded of around EUR 226 m Wiesbaden Darmstadt Frankfurt Wurzburg Mannheim Nuremberg Stuttgart Augsburg Munich More than EUR 100 m Between EUR 50 m and EUR 100 m Between EUR 25 m and EUR 50 m Between EUR 10 m and EUR 25 m Between EUR 5 m and EUR 10 m Between EUR 1 and EUR 5 m TOTAL PORTFOLIO BY UTILISATION ALSTRIA’S CORE TENANTS 2009 THE KEY METRICS FOR THE PORTFOLIO % % Ofﬁ ce Retail Residential Others 93 2 1 4 City of Hamburg Daimler AG Bilﬁ nger Berger AG Siemens AG Barmer EK Deutsche Renten- versicherung Bund Rheinmetall HUK-COBURG City of Hanover Others 40 15 6 5 4 4 4 2 1 19 as of Dec. 31 Number of properties Number of joint ventures Market value (EUR bn) Contractual rent (EUR m/annum) Valuation yield (contractual rent/OMV) Lettable area (k sqm) Vacancy (% of lettable area) WAULT (years) Average rent/sqm (EUR/month) 2009 77 1 1.6 97.5 6.2% 867 5.7% 9.6 9.93 2008 89 – 1.8 106.5 5.9% 944 5.9% 10 9.41 Date Feb. 25, 2010 Mar. 16–19, 2010 Mar. 24–25, 2010 Mar. 31, 2010 Mar. 31, 2010 Apr. 20–21, 2010 May 11, 2010 May 26–27, 2010 Jun. 9, 2010 Jun. 16, 2010 Aug. 11, 2010 Oct. 4–6, 2010 Nov. 10, 2010 Event Analysts’ Conference 5th HSBC S&M Real Estate and Infrastructure Conference (Frankfurt) Trade fair mipim (Cannes) Analysts’ Conference 10th Annual Pan European Small and Mid Cap Conference (Deutsche Bank) (London) Publication of Annual Report Publication of the full year 2009 ﬁ nancial results (Frankfurt) Annual Press Conference Annual Press Conference (Frankfurt) Analysts’ Conference Global Real Estate Conference (Credit Suisse) (London) Publication of Q1 Report Interim Report (Hamburg) Roadshow European Property Seminar (Kempen) (Amsterdam) Analysts’ Conference Pan European Real Estate Conference (Credit Suisse) (London) Annual General Meeting Shareholders’ Meeting (Hamburg) Publication of Q2 Report Half-Year Interim Report (Hamburg) Trade fair EXPO REAL (Munich) Publication of Q3 Report Interim Report (Hamburg) CONTACT alstria ofﬁ ce REIT-AG Bäckerbreitergang 75 20355 Hamburg, Germany Phone: +49 (0) 40 226341-300 Fax: +49 (0) 40 226341-310 www.alstria.com Investor Relations Phone: +49 (0) 40 226341-329 Fax: +49 (0) 40 226341-310 E-mail: ir@alstria.de http://investor-relations.alstria.com IMPRINT Concept, design and realisation Kirchhoff Consult AG, Hamburg, Germany Photography Denz, Hamburg, Germany alstria ofﬁ ce REIT-AG is a member of DIRK (Deutscher Investor Relations Verband, the German Investor Relations Association). Other reports issued by alstria ofﬁ ce REIT-AG are posted on the Company’s homepage. Forward-looking statements This Annual Report contains forward-looking statements. These statements represent assessments which we have made on the basis of the information available to us at the time. Should the assumptions on which the statements are based not occur, or if risks should arise – as mentioned in the risk report – the actual results could differ materially from the results currently expected. Note This report is published in German (original version) and English (non-binding translation). 9 0 0 2 t r o p e R l a u n n A G A - T I E R e c ﬁ f o a i r t s l a REAL ESTATE ... ANNUAL REPORT 2009 KEY FIGURES EUR k Revenues and earnings Revenues Net rental income Consolidated loss / proﬁ t for the period FFO Loss per share (EUR) Balance sheet Investment property Total assets Equity Equity ratio Liabilities NAV/share (EUR) NNNAV/share (EUR) REIT key ﬁ gures REIT ratio Revenues plus other income from investment properties Stock ﬁ gures Number of shares (excluding own shares) Number of treasury shares Total CONTENTS Letter from the Board of Management Through Our Eyes alstria Stock Group Management Report (separate content) Economics and strategy Financial analysis Report on risks and opportunities Sustainability report Mandatory disclosure Additional Group disclosures Subsequent events and outlook 2 6 16 19 20 25 29 33 33 35 36 2009 2008 Change (%) 102,510 91,964 – 79,651 32,690 – 1.44 1,425,440 1,766,134 634,185 35.9% 102,055 93,222 – 56,000 39,415 – 1.02 1,805,265 1,873,493 729,667 38.9% 1,131,949 1,143,826 11.32 11.32 40.3% 100% 13.03 13.03 40.3% 100% 55,997,626 54,624,245 2,374 1,375,755 56,000,000 56,000,000 Management Compliance Statement Auditors’ Report Corporate Governance Report of the supervisory board Corporate governance statement Remuneration report REIT Disclosures and Portfolio REIT declaration REIT memorandum Valuation report List of all properties Other Information Glossary 0.4 – 1.4 – 42.2 – 17.1 – 41.2 – 21.0 – 5.7 – 13.1 – 3.0 pp – 1.0 – 13.1 – 13.1 0.0 pp 0.0 pp 2.5 – 99.8 0 81 82 83 83 86 90 92 92 93 94 102 108 108 Consolidated Financial Statements (separate content) 37 Financial calendar/Contact/Imprint Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of ﬁ nancial position Consolidated statement of changes in equity Consolidated statement of cash ﬂ ow Notes to the consolidated ﬁ nancial statements 38 39 40 42 43 44 alstria ofﬁ ce REIT-AG Bäckerbreitergang 75 20355 Hamburg Germany Phone: +49 (0) 40 226341-300 +49 (0) 40 226341-310 Fax: www.alstria.com

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