ANNUAL REPORT 2014
Key figures
KEY FIGURES
Five-year overview according to IFRS
EUR k
2014
2013
2012
2011
2010
Revenues and Earnings
Revenues
Net rental income
Consolidated profit for the period
FFO
Earnings per share (EUR)
FFO per share (EUR)
EUR k
Balance sheet
101,782
104,224
101,286
88,960
36,953
47,626
0.47
0.60
93,249
38,945
45,328
0.49
0.57
90,110
39,911
43,571
0.51
0.55
90,798
80,868
27,448
34,685
0.40
0.48
89,094
81,759
206
27,541
0.00
0.45
Dec. 31,
2014
Dec. 31,
2013
Dec. 31,
2012
Dec. 31,
2011
Dec. 31,
2010
Investment property
1,645,840
1,632,362
1,622,988
1,528,589
1,348,400
Total assets
Equity
Liabilities
1,769,304
1,785,679
1,786,893
1,686,637
1,542,336
846,593
844,114
829,287
768,195
692,408
922,711
941,565
957,606
918,442
849,928
NAV per share (EUR)
Diluted NAV per share (EUR) 1)
Net LTV (%)
10.71
10.67
50.4
10.69
10.60
50.7
10.51
10.71
11.24
47.8
50.1
49.8
1) Dilution based on potential conversion of convertible bond.
G-REIT figures
Dec. 31,
2014
Dec. 31,
2013
Dec. 31,
2012
Dec. 31,
2011
Dec. 31,
2010
G-REIT equity ratio (%)
50.2
50.9
50.0
48.7
49.8
Revenues incl. other income from
investment properties (%)
100
100
100
100
100
EPRA1) key figures
2014
2013
2012
EPRA earnings per share (EUR)
EPRA cost ratio A (%)2)
EPRA cost ratio B (%)3)
0.59
23.3
20.1
0.57
21.7
18.6
0.55
21.6
18.5
2011
0.50
n/a
n/a
2010
0.44
n/a
n/a
EPRA NAV per share (EUR)4)
EPRA NNNAV per share (EUR)
EPRA net initial yield (%)
EPRA ‘topped-up` net initial yield
(%)
EPRA vacancy rate (%)
Dec. 31,
2014
Dec. 31,
2013
Dec. 31,
2012
Dec. 31,
2011
Dec. 31,
2010
11.22
10.58
4.8
5.0
11.0
10.97
10.55
5.6
5.8
6.8
10.98
10.50
5.7
5.7
8.0
11.32
10.71
5.8
5.8
6.5
11.68
11.24
5.5
5.7
5.1
1) For further information, please refer to EPRA Best Practices Recommendations, www.epra.com.
2) Including vacancy costs.
3) Excluding vacancy costs.
4) Based on cumulated fair value adjustments on financial derivatives as at December 31, 2014 and December 31, 2013; based
on fair values of financial derivatives as at December 31, 2012 and before.
alstria Annual Report 2014
CONTENT
DETAIL INDEX GROUP MANAGEMENT REPORT ........................................ 2
GROUP MANAGEMENT REPORT ................................................................ 3
ECONOMICS AND STRATEGY ............................................................................... 3
FINANCIAL ANALYSIS ........................................................................................12
RISK AND OPPORTUNITY REPORT .......................................................................20
SUSTAINABILITY REPORT ...................................................................................36
DISCLOSURES REQUIRED BY TAKEOVER LAW ......................................................36
ADDITIONAL GROUP DISCLOSURE ......................................................................40
REPORTS ON POST-BALANCE SHEET DATE EVENTS AND EXPECTED DEVELOPMENTS 40
DETAIL INDEX CONSOLIDATED FINANCIAL STATEMENTS ..................... 43
CONSOLIDATED FINANCIAL STATEMENTS ............................................. 44
CONSOLIDATED INCOME STATEMENT ..................................................................44
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ...................................45
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ..........................................46
CONSOLIDATED STATEMENT OF CASH FLOWS......................................................48
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...........................................50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................51
RESPONSIBILITY STATEMENT ........................................................................... 123
INDEPENDENT AUDITORS' REPORT ................................................................... 124
CORPORATE GOVERNANCE .................................................................. 126
REPORT OF THE SUPERVISORY BOARD .............................................................. 126
CORPORATE GOVERNANCE STATEMENT ............................................................. 133
REMUNERATION REPORT ................................................................................. 144
REIT DISCLOSURES ............................................................................. 152
REIT DECLARATION ......................................................................................... 152
REIT MEMORANDUM ........................................................................................ 154
OTHER INFORMATION ......................................................................... 156
GLOSSARY ..................................................................................................... 156
FINANCIAL CALENDAR ..................................................................................... 161
CONTACT/IMPRINT .......................................................................................... 161
alstria Annual Report 2014
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Group management report
DETAIL INDEX GROUP MANAGEMENT REPORT
ECONOMICS AND STRATEGY.................................................................... 3
ECONOMIC CONDITIONS .................................................................................. 3
STRATEGY AND STRUCTURE ............................................................................. 5
PORTFOLIO OVERVIEW ..................................................................................... 6
FINANCIAL ANALYSIS ........................................................................... 12
EARNINGS POSITION ...................................................................................... 12
FINANCIAL AND ASSET POSITION ..................................................................... 16
CORPORATE MANAGEMENT .............................................................................. 20
RISK AND OPPORTUNITY REPORT ......................................................... 20
RISK REPORT ................................................................................................. 20
REPORT ON OPPORTUNITIES ............................................................................ 34
SUSTAINABILITY REPORT ..................................................................... 36
DISCLOSURES REQUIRED BY TAKEOVER LAW ....................................... 36
ADDITIONAL GROUP DISCLOSURE ........................................................ 40
EMPLOYEES .................................................................................................... 40
REMUNERATION REPORT ................................................................................. 40
REPORTS ON POST-BALANCE SHEET DATE EVENTS AND EXPECTED
DEVELOPMENTS .................................................................................... 40
REPORT ON POST-BALANCE SHEET DATE EVENTS .............................................. 40
REPORT ON EXPECTED DEVELOPMENTS............................................................. 41
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GROUP MANAGEMENT REPORT
ECONOMICS AND STRATEGY
ECONOMIC CONDITIONS
The German economy again proved to be solid in 2014. Germany’s GDP increased by
1.5%, which is 0.8 percentage points more than its growth in 2013 (0.7%) and above
the average growth of the last 10 years (+1.2%).* This development was also reflected
in the German labour market, resulting the unemployment rate decreasing by 0.5
percentage points to 6.4% in comparison to 2013. The employment level reached a peak
of 42.7 million or 0.9% more than last year.**
The German real estate market developed in a positive manner in 2014. The total
investment volume on the commercial real estate market rose to approx. EUR 39.8 bn
and was therefore 30% higher than in the previous year and the highest since 2007.
Domestic and international investors prefered the stable German real estate market to
others, which appears to be very attractive with regard to its risk/return profile.***
Overview of the German office property market
Development of office rents
In 2014, prime rents for office space developed positively at the most important
commercial real estate sites, namely Berlin, Düsseldorf, Frankfurt/Main, Hamburg,
Cologne, Munich und Stuttgart – the so called ‘Big-7’. On average, prime rents increased
by around 0.6%. An increase was achieved in Munich at 4.8% (EUR 33.00 per sqm) and
Stuttgart at 2.7% (EUR 19.00 per sqm). In Hamburg the prime office rents increased by
2.1% (EUR 24.50 per sqm). In Berlin (EUR 22.00 per sqm), Frankfurt (EUR 35.00 per
sqm) and Cologne (EUR 22.00 per sqm) prime rents remained at previous year level.
Rents only decreased in Düsseldorf, respectively by -5.5% (EUR 26.00 per sqm).
Take-up in major German cities
The vacancy rate of office properties in German cities decreased from 8.3% in 2013 to
7.6% in 2014, which represents a total vacancy of 6.81 million sqm (decrease by
0.51 million sqm). Comparing the Big-7, the highest vacancy rate was noted in
Düsseldorf (10.9%), followed by Frankfurt (10.4%), Berlin (7.7%), Hamburg (6.8%),
Munich (6.6%), Cologne (6.5%) and Stuttgart (5.2%).
* Federal Statistics Office (Statistisches Bundesamt).
** Federal Employment Agency (Bundesagentur für Arbeit).
*** All numbers referred to in this section are sourced from Jones Lang Lasalle´s Market Report.
alstria Annual Report 2014
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New lease-up
In 2014, new lease contracts were signed in the seven major German cities for more
than 3.02 million sqm of office space. This reflects a slight increase by 0.09 million sqm
or 3.0% as compared to the previous year. The highest increases were registered in
Berlin (35.6%), Hamburg (19.3%), Stuttgart (8.1%) and Munich (2.6%). Some
decreases were noted in Düsseldorf (-22.1%), Frankfurt (-14.2%) and Cologne
(-13.2%).
New office supply
In 2014, the delivery of new office and commercial spaces increased by approx.
988,000 sqm. Compared to last year this is an increase of 11.0%, which is mainly due to
the completions of developments in Düsseldorf (56.0%), Frankfurt (31.2%) and Berlin
(16.3%). For 2015, a slight increase of the completion volume (approx. 1,000,000 sqm)
is forecasted.
Investment markets
The positive trend on the investment markets continued in the fiscal year 2014. Total
investment volume approx. amounted to 30% (EUR 39.8 bn for commercial assets)
higher than previous year results. The transaction volume in 2014 thus represents the
highest volume since 2007. The Big-7 cities recorded a transaction volume of around
EUR 23.0 bn. The highest transaction volumes were recorded in Frankfurt (EUR 5.5 bn),
Munich (EUR 5.0 bn) and Berlin (EUR 4.4 bn).
The investment market has continued to focus on core assets, which are characterized by
their good condition, good location and a long-term, attractive letting status. The
average prime yield for commercial office real estate was 4.45%. With regard to the deal
structure, approx. 70% of the commercial investment turnover in fiscal year 2014 related
to single deals, whereas the share of portfolio transactions amounted to 30%.
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alstria Annual Report 2014
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STRATEGY AND STRUCTURE
alstria office REIT-AG (hereafter referred to as ‘company’) is a real estate company listed
on the Frankfurter stock exchange. The alstria group consists of the parent company
alstria office REIT-AG and 19 subsidiaries (nine general partners, nine limited
partnerships holding assets and one REIT service company) hereafter referred to as
‘alstria’ or ‘group’). Operational decisions are made at parent company level. Although
the major part of the assets is allocated to the alstria office REIT-AG, 15 properties were
respectively held by eight subsidiaries as at December 31, 2014.
alstria follows a long term investment strategy for its portfolio. alstria’s strategy is
essentially based on the following assumptions:
The German real estate market will offer limited growth in terms of rents and
capital value in the future.
Overall, the currently existing office space is sufficient to host the entire demand
for office space.
The markets’ vacancy rates will remain relatively stable in average.
alstria faces these challenges with a long-term strategy, characterized by a high price-
discipline in terms of its acquisitions as well as an active Asset- and Property-
Management. Key aspects of this management-approach are:
The focus is on the tenant. Only those who know the needs of their tenants, will
be successful with their letting activities in the long-run.
Continous investments secure the quality of the assets. Increase in value can only
be realised by a constant level of modernisation measures and the reduction of
vacancy.
Realizing
the potential of value enhancements
through comprehensive
repositioning and development of assets.
The best value for money secures the lettability of the assets. Many tenants are
price-sensitive and only the lessor, who offers better conditions than the
competition is successful.
The aim of this strategy is the steady development of revenues and operating profit
(FFO).
alstria Annual Report 2014
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Due to its active Asset-Management-approach and its high discipline regarding prices,
alstria had the ability to achieve above-average returns throughout the past years. The
pre-conditions that this will be also true for the future are supported by the following
facts:
alstria has a long-term leased-portfolio (around 6.8 years weighted average
unexpired lease term (WAULT)). 66% of the rental income derives from a small
number of high-quality tenants. Around 40% of rental income is generated from
public authorities or institutionals, which are not immediately affected by
economic developments.
alstria pursues a non-trading strategy and focuses on long-term value creation
through conducting work on and with the building, i.e. classic Asset- and
Property-Management. At alstria these activities are handled internally, which
positively differentiates the company from its competitors.
A key element of alstria’s strategy is supporting tenants in optimising their real
estate operating costs. From the tenants’ point of view low real estate operating
expenses are crucial in the decision process for or against a rental agreement.
alstria believes that an active Asset and Property Management in terms of
optimising costs offers new potential for future successful letting activities.
PORTFOLIO OVERVIEW
Key metrics of the portfolio
Key metrics1)
Number of properties
Number of joint venture properties
Market value (EUR bn)1)
Annual contractual rent (EUR m)
Valuation yield (contractual rent/market value)
Lettable area (sqm)
Vacancy (% of lettable area)2)
WAULT (years)
Average rent/sqm (EUR/month)
Dec. 31, 2014
Dec. 31, 2013
74
1
1.7
99.7
6.0
875,100
12.6
6.8
10.9
76
1
1.6
106.7
6.5
894,400
9.1
6.8
10.9
1) Incl. fair value of owner-occupied properties.
2) Contractual vacancy rate includes vacancies in assets of the Company’s development pipeline.
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Real Estate Operations
Letting metrics
New leases (in sqm)1)
Renewals of leases (in sqm)
2014
55,300
32,600
2013
Change
35,600
49,000
19,700
-16,400
1) New leases refer to letting vacant space. It does not account for any lease renewals, prolongations or a tenant’s exercise of
its renewal option.
Vacancy metrics
Vacancy rate (%)
EPRA vacancy rate (%)
Vacancy (sqm)
thereof vacancy in development projects (sqm)
Dec. 31, 2014
Dec. 31, 2013
Change
12.6
11.0
110,400
19,600
9.1
6.8
81,300
24,100
3.5 pp
4.2 pp
29,100
-4,500
In fiscal year 2014 letting activities (as measured by new leases and lease extensions)
remained at a high level.
A substantial letting success was the initial lease with a new tenant in Essen,
Bamlerstrasse. The tenant signed a 7-year-lease for around 9,700 sqm of office and
ancillary space. The new lease will start in the third quarter of 2015 and will replace an
expiring contract.
Another letting success was the signing of a new lease for an asset in Jagenbergstrasse,
Neuss. The new tenant, a subsidiary of a leading automotive company, signed a 10-year-
lease for 7,300 sqm of office and ancillary space. The lease started in January 2015 and
replaced the rental agreement with the previous tenant Rheinmetall.
In addition alstria continued its leasing activities in the development segment. alstria and
Hagebau have agreed on the construction and long-term lease of a 10,000 sqm Do-It-
Yourself store, making use of to date unused land in Siemensstrasse, Ditzingen. The
lease contract will have a maturity of 20 years and is planned to start in early 2016.
Nonetheless, the negative development of the vacancy rate mainly results from the lease
expiry of the Deutsche Rentenversicherung Bund (approx. 21,000 sqm) in the property in
Darwinstrasse, Berlin as well as the expiry of Siemens AG’s (approx. 22,000 sqm) lease
in the property in Hofmannstrasse, Munich. The reduction of vacancy is in the operational
focus. Consequently alstria already succeeded in singing an initial contract for approx.
3,500 sqm for the property Hofmannstrasse in Munich in December 2014.
alstria Annual Report 2014
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Portfolio Valuation and Regions
As at December 31, 2014 alstria’s portfolio was valued by Colliers International pursuant
to IFRS 13 and in accordance with the RICS* Red Book guidance. The valuation resulted
in a total market value of investment properties of EUR 1,652 m. Of this total market
value approx. EUR 690 m is located in Hamburg. Herewith the investment focus on
selected locations becomes obvious:
Total portfolio by regions
% of market value
Dec. 31, 2014
Dec. 31, 2013
Change (pp)
Hamburg
Rhine-Ruhr
Stuttgart
Rhine-Main
Munich
Hanover
Berlin
Saxony
Others
42
18
17
7
4
3
2
2
5
43
16
18
7
4
2
3
2
5
-1
2
-1
0
0
1
-1
0
0
For further information on the valuation of alstria’s portfolio please refer to the valuation
certificate of Colliers International, which is published on pages 70 to 85 in the Company
Report 2014. The Company Report
is published on
the alstria website
www.alstria.com/en/investors/.
* Royal Institution of Chartered Surveyors.
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Tenants
Another main characteristic of alstria’s portfolio is the focus on a small number of major
tenants.
alstria’s main tenants
% of annual rent
City of Hamburg
Daimler AG
Bilfinger SE
Barmer GEK
Württembergische Lebensversicherungs AG
State of Baden-Württemberg
L'Oreal Deutschland GmbH
Rheinmetall
Siemens AG
HUK Coburg
Deutsche Rentenversicherung Bund
Dec. 31, 2014
Dec. 31, 2013
Change (pp)
29
16
6
3
3
2
2
2
2
1
-
30
15
5
3
3
2
2
2
4
1
3
-1
1
1
0
0
0
0
0
-2
0
-3
4
Others
34
30
Furthermore the focus is cleary on one asset class: Of the total lettable area approx.
95% accounts to office space.*
Lease expiry profile
% of annual rent
2015
2016
2017
Transactions
Dec. 31, 2014
Dec. 31, 2013
Change (pp)
4.4
17.3
6.1
3.5
16.9
5.0
0.9
0.4
1.1
Investment decisions at alstria are based on the analysis of the local markets and on the
adequacy of a building within its submarket in terms of location, size and quality as well
as its potential for value enhancement. alstria's strategy is to build a critical mass
through long-term secured assets in the respective locations. In the light of this
approach, alstria added two properties and approx. 17,100 sqm of lettable space to its
portfolio in 2014, helping to reinforce its position in the core market Düsseldorf, where
alstria established an office in 2012. To realise value enhancements and/or exits of B-
markets, five assets were sold in 2014.
* Office and storage.
alstria Annual Report 2014
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In 2014 alstria was involved in the following transactions:
City
Sales
price
(EUR k)1)
Annual
rent
(EUR k)
Avg. Lease
length
(years)2)
Transfer of
benefits
and
burdens
Signing
SPA
Asset
Disposals
Max-Brauer-Allee 41-43 Hamburg
Ernsthaldenstr. 16
Stuttgart
Spitzweidenweg 107
Jena
6,150
3,300
1,415
366
261
155
10.0
02/25/2014
03/31/2014
4.6
03/07/2014
05/31/2014
1.6
09/02/2014
10/31/2014
Hamburger Str. 43-49
Hamburg
41,662
2,553
9.1
10/02/2014
11/30/2014
Englische Planke 2
Hamburg
15,530
839
1.4
10/10/2014
12/31/2014
Total
Acquisitions
68,057
4,174
Elisabethstr. 5-11
Düsseldorf
30,475
1,577
8.2
09/26/2014
11/01/2014
Hansaallee 247
Düsseldorf
9,700
491
5.9
09/26/2014
11/01/2014
Total
40,175
2,068
1) Excluding transaction costs.
2) At the time of transfer of benefits and burdens.
Refurbishment projects
alstria has achieved significant progress with respect to its development projects, which
could in part be completed:
Kaiser-Wilhelm-Strasse 79-87, Hamburg (Holstenhof)
The historic Kontorhaus Holstenhof in Hamburg, Kaiser-Wilhelm-Strasse was acquired by
alstria in 2006. At the time of the acquisition, the listed Art Nouveau building, built in
1900/01, was in need of renovation. alstria decided to completely revitalize the building.
Redevelopment measures started at the end of 2012. The modernisation includes, among
others, the rebuilding of the entire roof construction and the ceiling above the 4th floor.
The building offers efficient office space with high-quality equipment and modern retail
space on the ground floor. Furthermore, the building has been certified as a ’major
refurbishment`- building by the BREEAM International Green Building Standard. The
poject was completed in 2014. More than 75% of the building was let as at December 31,
2014.
Schaartor 1, Hamburg
The building at Schaartor was acquired by alstria in 2011. The property is directly located
between the city centre and the HafenCity, which is one of Hamburg’s most important
urban axis. The revitalisation of the asset took place in 2013 and 2014. It included the
complete reinstallation of the building’s technical facilities, a new construction of the 6th
floor and further tenant-specific developments. The revitalisation was completed in the
summer of 2014. On the reporting date alstria had already signed lease agreements for
approx. 90% of the lettable area.
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Arndtstrasse 1, Hanover
The office building, which holds retail space on the ground floor, was erected in 1970.
The technical installations date back to 1970 and did hence not fulfil today’s technical
requirements. The revitalization adapts the building to today's state of the art technology
and any tenant’s expectations. Besides the modernisation of the façade, the
refurbishment measures
include the complete refurbishment of all
floors, the
replacement of technical installations and an improvement of the flexibility of the floor
plan. The main refurbishment measures were completed at the end of 2014.
Nonetheless, at the end of 2013, alstria already succeeded in pre-letting a substantial
part of the building to the City of Hanover on a long-term basis. In total, approx. 95% of
the asset was let as at December 31, 2014.
Grosse Bleichen 23-27, Hamburg (Kaisergalerie)
In January 2010, alstria agreed to terms of a second joint venture with the Hamburg-
based Quantum Immobilien AG to refurbish the Kaisergalerie in Hamburg.
The Kaisergalerie was erected from 1907-1909 and is listed in the ‘List of recognized
monuments’ (Liste erkannter Denkmäler) in Hamburg. The property is located at Grosse
Bleichen 23-27 directly in the city centre of Hamburg. The refurbishment of this asset
started after the previous tenant ‘Ohnsorg-Theatre’ moved to its new location at
Bieberhaus in 2011, which was also renovated by alstria. After completion of the
modernisation, the building will offer attractive retail and office space. Parts of this
redevelopment project include the addition of a new pedestrian bridge at the waterside of
the Kaisergalerie and a passage through the building to connect the streets Grosse
Bleichen and Bleichenfleet. The opening took place in summer of 2014 and more than
92% was let as at December 31, 2014.
Mundsburg Center, Hamburg
The Mundsburg Center in Hamburg was built in 1969. The property is located directly
adjacent to the mall ”hamburger mile” in the Barmbek/Uhlenhorst district. The Center,
comprising 28 rental units, was fundamentally restructured by alstria. The measures tak-
en have increased the attractiveness of the retail space significantly by means of rede-
signing the public mall. As part of the modernisation the central building equipment and
safety devices have also been extensively renovated and brought up to reflect the mod-
ern state of the art. During the project, several units, as well as the restaurant areas
were already let. The occupancy rate amounts to approx. 86%. The completion for the
refurbishment is expected in 2015.
alstria Annual Report 2014
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In 2014, alstria invested around EUR 33.2 m in ongoing refurbishment projects.* Around
EUR 23.8 m referred to development projects, while the remainder was invested in value
increasing tenant improvement measures. The main part of the capex investment in
2014 was linked to the refurbishment of the Hamburg building Holstenhof (Kaiser-
Wilhelm-Strasse 79-87), the property at Arndtstrasse 1 in Hanover as well as the
Hamburg sited properties Schaartor (Schaartor 1) and Mundsburg Center (Hamburger
Strasse 1–15). Within the next two years, alstria is planning to invest around EUR 45 m
in its portfolio. Major projects are related to the properties in Siemensstrasse in
Ditzingen, the Wehrhahn-Center in Dusseldorf, the Mundsburg Center and Harburger
Ring in Hamburg. This investment plan is part of alstria’s ongoing asset value
enhancement program. The volume of these investments, however, also depend on
ongoing lease negotiations with existing and potential tenants.
FINANCIAL ANALYSIS
alstria developed according to plan in the reporting period. Revenues (approx.
EUR 102 m) matched the
forecast and
funds
from operations (FFO) (approx.
EUR 47.6 m) were slightly higher than forecast for financial year 2014 (EUR 47.0 m).
EARNINGS POSITION
Revenues
As expected, revenues decreased by 2.3% compared to the revenues in the last year due
to disposals in 2013 and expired leases. Revenues totalled EUR 101,782 k (2013:
EUR 104,224 k). Net rental income amounted to EUR 88,960 k (2013: EUR 93,249 k).
Real estate operating expenses
Real estate operating expenses amounted to EUR 12,190 k or 12.0% of total revenues
for the reporting period (2013: EUR 10,462 k or 10.0% of revenues). The increase
mainly results from scheduled fire protection measures.
Administrative and personnel expenses
Administrative expenses decreased by EUR 570 k to EUR 4,755 k, which is basically due
to lower legal- and other administrative expenses (2013: EUR 5,325 k). Personnel ex-
penses remained stable at EUR 7,807 k (2013: EUR 7,790 k). The sum of the administra-
tive and personnel expenditures correspond roughly to 12.3% of total revenues. Com-
pared to 2013, the rate decreased slightly by 0.3 percentage points.
* Without Joint Venture Kaisergalerie.
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Other operating result
alstria’s other operating result amounted to EUR 5,176 k during the reporting period
(2013: EUR 3,821 k). Operating income was mainly driven by one-time compensation
payments in conjunction with lease expiries.
Net result on disposals of investment property
alstria was able to achieve a positive result of EUR 4,566 k from the disposals of proper-
ties in 2014. The realized disposal gains mainly result from the sale of the asset
Englische Planke in Hamburg.
Net operating result
alstria closed its financial year 2014 with a net operating result before financing costs
and taxes of EUR 86,964 k, which compares to EUR 85,380 k for the previous year.
Lower net rental income could be compensated by gains achieved from disposals.
The following table shows the main figures of the income statements for financial years
2014 and 2013:
EUR k
Revenues
Net rental income
Administrative and personnel expenses
Other operating result
Operating income
Net result from fair value adjustments on investment property
Net result on disposals of investment property
Net operating result
2014
2013
101,782
104,224
88,960
93,249
-12,562
-13,115
5,176
3,821
81,574
83,955
824
4,566
27
1,398
86,964
85,380
Net financial result
EUR k
Interest expense syndicated loan
Interest expense other loans
Interest result derivatives
Interest expenses convertible bond
Other interest expenses
Financial expenses
Financial income
Other financial expenses
Net financial result
2014
-9,950
-9,172
-10,838
-4,871
0
2013
-13,471
-9,036
-13,406
-2,697
-119
-34,831
-38,729
113
-611
317
-704
-35,329
-39,116
Change
(%)
-26.1
1.5
-19.2
80.6
-100.0
-10.1
-64.4
-13.2
-9.7
Net financing costs decreased by EUR 3,787 k to EUR 35,329 k in comparison to the
financial year 2013. This development is mainly due to a lower year on year average loan
alstria Annual Report 2014
13
Group management report
interest rate. Additionally the average amount of the outstanding loans was lower in
2014 as compared to 2013.
For details on the new loans, we refer to the section ‘financial and asset position’ on
page 16.
Share of the result of joint venture companies
The increase of the share of earnings from joint venture companies from EUR 273 k in
2013 to EUR 12,798 k in 2014 is mainly attributable to the upvaluation of the asset Kai-
sergalerie, Hamburg. By the completion of extensive renovation measures and the mov-
ing in of the first tenants a corresponding increase in value could be realized.
Valuation result of financial derivatives
The change in value of the financial derivatives was driven by the development of the
yield curve in 2014. alstria applies hedge accounting to all qualifying hedges in order to
limit the impact of the volatility of the interest rate markets on profit and loss. This
allows alstria to recognise the losses or gains on the qualifying part of the derivatives as
an equity cash flow hedge reserve, having no effect on income.
In line with the group-wide financing strategy for floating interest hedging the Company
entered into new derivative financial instruments in 2014.
At the end of the reporting period alstria’s entire floating interest rate debt exposure was
hedged by financial derivatives. The current overall cost of debt due to these hedging
activities amounted to around 3.4% for the existing portfolio on the reporting date.
The valuation result concerning financial derivatives amounted to EUR –27,461 k in the
period from January 1 to December 31, 2014 (please refer to section 10.7 of the notes
for further details).
Consolidated net result
The consolidated net result amounted to EUR 36,953 k (2013: EUR 38,945 k) in the
reporting period, hence decreasing by EUR 1,992 k.
Overall, lower net rental income could be overcompensated by an improved level of other
income as well as lower financing costs. The valuation loss in financial derivatives could
not completely be compensated by gains on the disposal of investment property and
increased earnings from joint venture companies. Undiluted earnings per share
amounted to EUR 0.47 for the reporting period (2013: EUR 0.49).
REIT-AGs are fully exempt from German corporate income tax and trade tax. Hence,
alstria office REIT-AG has been exempt from income and trade tax with retrospective
effect since January 1, 2007. Tax payment obligations of EUR 19 k arose on group level
in 2014 (2013: EUR 38 k) due to a subsidiary that serves as a REIT Service Company.
14
alstria Annual Report 2014
Group management report
Funds from operations (FFO)
Funds from operations amounted to EUR 47,626 k in 2014 as compared to EUR 45,328 k
in 2013. The FFO ratio could be increased to 46.8%, i. e. by 3.3 percentage points. As a
result, FFO per share* was EUR 0.60 in financial year 2014 (2013: EUR 0.57).
The increase as compared to the prior year amounted to EUR 3,787 k and mainly
resulted from an improved financial result as well as net other income. Administrative
and personnel expenses decreased by EUR 553 k. Net rental income decreased by
EUR 4,289 k, having an adverse effect.
EUR k
Pre-tax income (EBT)
Net profit/loss from fair value adjustments on
investment property
Net profit/loss from fair value adjustments on
financial derivatives
Profit/loss from the disposal of investment property
Other adjustments1)
Fair value and other adjustments in joint venture
Funds from operations (FFO)2)
Maintenance and re-letting
Adjusted funds from operations (AFFO)3)
Number of shares (k)
FFO per share (EUR k)
2014
36,972
-824
27,461
-4,566
762
-12,179
47,626
-9,452
38,174
79,018
0.60
2013
38,983
-27
7,554
-1,398
545
-329
45,328
-7,963
37,365
78,933
0.57
1) Non-cash income or expenses and non-recurring effects.
2) (A)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 flow measures as determined in accord-
ance with IFRS. Furthermore, there is no standard definition for (A)FFO. Thus, the (A)FFO or measures with similar names as
presented by other companies may not necessarily be comparable to alstria’s (A)FFO.
3) The AFFO is equal to the FFO with adjustments made for capital expenditures used to maintain the quality of the underlying
investment portfolio and expenses for lease-ups.
* Divided by the number of shares at the end of the reporting period (December 31, 2014 79,018,487; December 31, 2013:
78,933,487).
alstria Annual Report 2014
15
Group management report
FINANCIAL AND ASSET POSITION
Investment properties
The total value of investment property amounted to EUR 1,645,840 k at year-end, in
comparison to EUR 1,632,362 k at the beginning of the year. The slight increase results
from the acquisition of two properties as well as the capitalisation of modernisation
measures on the one hand and the disposal of five assets on the other hand. The valua-
tion result amounted to EUR 824 k as compared to EUR 27 k in 2013.
EUR k
Investment properties as at Dec. 31, 2013
Investments
Acquisitions
Disposals
Reclassifications
Net loss/gain from fair value adjustments on
investment property
Investment properties as at Dec. 31, 2014
Carrying amount of owner occupied properties
Fair value of properties held for sale
Interests in joint ventures
Carrying amount of immovable assets
Adjustments to fair value of owner occupied properties
Fair value of immovable assets
1,632,362
33,234
42,390
-62,970
-
824
1,645,840
4,536
-
34,534
1,684,910
1,199
1,686,109
For a detailed description of the investment properties, please refer to pages 26 to 33 of
the Company Report 2014.
Financial management
alstria’s financial management is carried out at corporate level. Individual loans and
corporate bonds are taken out at both property level and portfolio level. alstria’s main
financial goal is to establish a sustainable long-term finance structure. An integral part of
this structure is for example the coverage of long-term floating loans by corresponding
hedging instruments, more precisely swaps and caps. Depending on the individual
situation, fixed interest rate loans are used. The aim of this strategy is to largely
eliminate short-term interest rate volatility from the profit and loss account while
providing the group with operational flexibility.
In February 2014, alstria signed a credit agreement amounting to EUR 61 m. The loan
was taken out to replace an existing loan facility, which was due to mature on December
31, 2014 as well as to finance a further property in Hamburg. The new loan facility was
drawn on March 19, 2014, amortising the existing loan by an amount of EUR 43 m at the
same time. The new loan has a maturity of seven years.
16
alstria Annual Report 2014
Group management report
Furthermore, alstria signed a credit agreement amounting to EUR 60 m in order to
replace an existing loan facility, which was due to mature on October 19, 2015 as well to
finance two properties in Stuttgart and Düsseldorf, which were acquired in 2013. The
new loan was drawn on March 31, 2014, amortising the old loan facility by an amount of
EUR 48 m at the same time. The new loan has a maturity of ten years.
On June 30, 2014, a fixed-interest loan of EUR 28.2 m was repaid according to the terms
of the loan contract. The refinancing of EUR 27.5 m was made at the same day by in-
creasing the nonotional of an existing loan facility.
Further, the syndicated loan was amortized by EUR 37.9 m, thereof EUR 2.9 m resulting
from the sale of assets. Triggered by a property disposal, alstria fully amortized another
loan amounting to roughly EUR 13 m as per December 31, 2014. The loan was initially
due to mature at the end of December 2015.
The loan facilities in place as at December 31, 2014 are as follows:
Liabilities
Maturity
Principal
amount
drawn as at
Dec. 31, 2014
EUR k
LTV as at
Dec. 31,
2014
%
LTV
covenant
%
Principal
amount
drawn as at
Dec. 31, 2013
EUR k
Syndicated loan
Sept. 30, 2020
501,070
Non-recourse loan #1
Jan. 31, 2017
Loan #21)
Loan #3
Loan #4
Loan #5
Loan #6
Non-recourse loan #7
Non-recourse loan #8
Non-recourse loan #9
Total loans
Dec. 31, 2014
Dec. 17, 2018
Sept. 30, 2019
Apr. 30, 2021
Mar. 28, 2024
Dec. 31, 20142)
June 30, 20143)
Oct. 20, 20152)
Convertible bond
June 14, 2018
Total
68,260
2,617
56,000
67,000
60,739
60,000
–
–
–
815,686
79,400
895,086
49.1
59.0
17.0
45.6
43.8
55.0
52.4
–
–
–
49.3
–
54.2
70.0
75.0
75.0
60.0
65.0
67.0
75.0
–
–
–
–
–
–
1) Loan agreement terminated taking effect on December 31, 2014, withdrawal occurred on January 02, 2015.
2) Refinanced in Q1 2014.
3) Refinanced in Q2 2014.
538,963
69,626
11,328
56,000
39,500
–
–
42,670
28,503
47,902
834,492
79,400
913,892
Average term to maturity of loans/convertible bond (years)
5.3
5.3
Dec. 31, 2014
Dec. 31, 2013
alstria Annual Report 2014
17
Group management report
Maturity profile of financial debt as at December 31, 20141) in EUR m
501
135
121
68
67
32)
2015
0
2016
2017
2018
2019
2020
from 2021
1) Excluding regular amortisation.
2) Loan agreement terminated taking effect on December 31, 2014, withdrawal occurred on January 02, 2015.
Average cost of debt (% p.a.)
2014
3.4
2013
3.6
As of December 31, 2014 no covenants have been breached.
Cash position
Cash and cash equivalents declined from EUR 82,782 k to EUR 63,145 k in the reporting
period. This was mainly a result of cash used to pay the dividends of an amount of
EUR 39,467 k, other net repayments of loans, in addition to capital expenditure
investments in the property portfolio. The former was partly compensated by the positive
cash flow resulting from current operating activities of an amount of EUR 52,889 k.
18
alstria Annual Report 2014
Group management report
Equity Metrics
Equity metrics
Equity (EUR k)
NAV per share (EUR)
Equity ratio (%)
G-REIT equity ratio (%)1)
Dec. 31, 2014
Dec. 31, 2013
Change
846,593
844,114
10.71
47.8
50.2
10.69
47.3
50.9
0.3%
0.2%
0.5 pp
-0.7 pp
1) Is defined as total equity divided by carrying amount of immovable assets. Minimum requirement according to G-REIT regula-
tions: 45%.
Compared to fiscal year 2013, total equity increased by EUR 2,479 k as at December 31,
2014. The consolidated net profit for the period of EUR 36,953 k contributed to an
increase in equity. Due to reclassification amounts regarding financial derivatives, the
provision for cash flow hedging increased by EUR 4,234 k. This was contrasted by the
dividend payment of EUR 39,467 k. Overall, the developments led to an increase in
equity from EUR 844,114 k to EUR 846,593 k.*
Increase in long-term loans
Long-term loans increased by 6.3% from EUR 822,486 k as at December 31, 2013 to a
total of EUR 874,025 k as at December 31, 2014. The increase resulted from new loans
amounting to EUR 173,823 k. This was contrasted by repayments of EUR 84,975 k as well
as reclassifications of loans from long-term to short-term debt (EUR 40,399 k).
Furthermore the new loans led to a positive change of ancillary loan-related expenses
(effective interests) in the amount of EUR 3,090 k.
Decrease in short-term loans
The short-term loan obligations amounted to EUR 7,702 k on the reporting date (previous
year: EUR 73,886 k). Beside amounts for scheduled repayments in 2015, the position also
includes an early repayment resulting from the sale of the property Englische Planke. The
increase compared to the previous year results from the reclassification of long-term loans
as described above. Again this is contrasted by repayments of EUR 107,653 k. The chang-
es of the effective interest resulted in a decrease in short-term loans by EUR 1,071 k.
Decrease in current liabilities
The current liabilities amounted to EUR 29,534 k and mainly consist of the above
mentioned short-term loan obligations of EUR 7,702 k, a EUR 6,198 k liability with regards
to a SWAP maturing July 2015, trade payables (EUR 4,389 k) and other current liabilities
(EUR 10,360 k). Other current liabilities mainly consist of provisions for outstanding
invoices (EUR 4,798 k), liabilities from other accruals and deferrals (EUR 2,013 k),
prepayment of rents (EUR 1,468 k) as well as received deposits (EUR 1,064 k).
* See also the consolidated statement of changes in equity
alstria Annual Report 2014
19
Group management report
CORPORATE MANAGEMENT
alstria proactively focuses on the following key financial performance indicators:
revenues and funds from operations (FFO). Revenues are mainly comprised of rental
income, which derives from the leasing activities of the Company. FFO is the operating
result deriving from real estate management, excluding valuation effects and other
adjustments such as non-cash expenses/income and non-recurring effects.*
For financial year 2014 the Company forecasted revenues of around EUR 102 m, which
have been achieved as planned. In 2014 FFO totalled EUR 47.6 m. Hence the forecast
has been exceeded by EUR 0.6 m. Higher property operating expenses were slightly
overcompensated by higher other operating income.
The company also monitores the progress of its LTV, the G-REIT equity ratio and its
liquidity. alstrias’s LTV of the loan financing improved from 50.9% as at December 31,
2013 to 49.3% as at the end of financial year 2014. The G-REIT equity ratio accounted
for 50.2% as compared to 50.9% in the previous year and the statutory rate of 45%.
RISK AND OPPORTUNITY REPORT
RISK REPORT
Risk Management
alstria has implemented a Group-wide structured risk management and an early warning
system in accordance with Section 91 (2) of the German Stock Corporation Act (AktG).
All risks are recorded, evaluated and monitored on an at least quarterly basis. The aim of
alstria risk management strategy is to minimise or, where possible, completely avoid the
risks associated with entrepreneurial activity in order to safeguard the company against
potential losses, and against risks to the company going concern. The system of the early
detection of risks is in active use. The company’s risk identification process allows the
early identification of sources of any potential new risks on an ongoing basis. Risk
mitigation measures are defined in order to undertake any necessary steps to circumvent
the identified risks, i.e., to insure, diversify, manage or avoid risks.
For alstria, risk management is the targeted securing of existing and future potential for
success, along with improving the quality of the Company’s planning processes.
The risk management system of alstria office REIT-AG is an integral part of the
management and control system of the alstria. The risk management system is
integrated into the regular reporting to the Management Board and Supervisory Board in
order to ensure that risks are dealt with proactively and efficiently. The risk management
* For further details, please refer to page 15
20
alstria Annual Report 2014
Group management report
system thereby focuses on a full coverage of the risks. The identification and assessment
of opportunities is not part of the risk management system of alstria office REIT-AG.
Structure of risk management system
Risk management is organised as a central unit independent of the individual business
divisions. The risk manager prepares a risk report on a quarterly basis and provides it to
the Management Board. The bases for the preparation of the risk report are the reports
from the risk owner, who is responsible for a particular area of risk.
alstria faces various areas of risk within the context of its business activities, which are
divided into the following four categories:
> strategic risks
> operational risks
> compliance risks
> financial risks
Each risk category is assigned to a so-called risk owner. Inherent to his position in the
Company the risk owner represents the area in which the identified risks could possibly
materialise and is at the same time responsible for the assigned risk category:
alstria‘s areas of risk and risk categories
Risk categorie
Strategic risks
Operational risks
Compliance risks
Financial risks
Risk owner
Finance & Controlling
Real Estate Operations
Legal
Finance & Controlling
The risk report presents the findings that are observed during risk identification,
assessment, evaluation and monitoring. At the same time, the comprehensive
documentation of this report ensures an orderly assessment, which is conducted by the
responsible departments and by the Supervisory Board.
In addition, the divisions report their respective risks and opportunities to the
Management Board in weekly meetings. The Management Board must be notified of any
risks immediately via ad-hoc announcements, which represent a potential economic loss
of more than EUR 1.0 m.
By monitoring the risk management system, alstria is able to continually improve and
adapt its structures and processes.
alstria Annual Report 2014
21
Group management report
Risk valuation
Risks are assessed according to their likelihood of occurrence and their magnitude of im-
pact. Accordingly, they are categorised as ‘high’, ‘medium’ or ‘low’. The potential damage
is any potential negative deviation from the forecasts and objectives of the alstria.
Classification according to likelihood
Probability/likelihood of occurrence
1 to 15%
16 to 35%
36 to 55%
56 to 75%
76 to 99%
Description
very unlikely
unlikely
possible
likely
highly likely
According to this framework, a very unlikely risk is defined as one that will occur only in
exceptional circumstances and a highly likely risk as one that can be expected to occur
within a specified period of time.
Classification according to degree of impact
Expected impact in EUR m
Degree of impact
Greater than 0.0 to 0.3
Greater than 0.3 to 0.75
Greater than 0.75 to 3.0
Greater than 3.0 to 7.5
Greater than 7.5
minor
low
moderate
high
critical
Based on the likelihood that a risk will occur and the impact it would have on alstria’s
business, financial position, profit, and cash flow, risks are classified as ‘high’, ‘medium’
or ‘low’ according to the following matrix.
Risk classification
Probability
highly likely
likely
possible
unlikely
very unlikely
l
L
L
L
L
L
M
M
L
L
L
H
M
M
L
L
H
H
M
M
L
H
H
H
M
M
Degree of impact
minor
low
moderate
high
critical
L = low risk
M = medium risk
H = high risk
alstria office REIT-AG’s risk management system was not exposed to any significant
changes as compared to the previous year.
22
alstria Annual Report 2014
Group management report
Key characteristics of the accounting-related internal control and risk manage-
ment system
The objective of the control and risk management system regarding the reporting pro-
cess is to make sure that the reporting is consistent and in line with legal requirements,
the generally accepted accounting principles and the International Financial Reporting
Standards (IFRS), and internal guidelines. Only then can it provide true and reliable
information to the recipients of the annual financial statements. To this end alstria has
implemented an internal control and risk management system that combines all relevant
principles, processes and measures.
The internal control system consists of two areas: control and monitoring. In
organisational terms, the divisions’ treasury, controlling and accounting divisions are
responsible for control.
The monitoring measures consist of elements incorporated in the process as well as
external, independent elements. Among others, the integrated measures include process
related system based technical controls such as the ‘dual control principle’, which is
applied universally, and software-based checking mechanisms. In addition, qualified
employees, who have the appropriate expertise, and specialised departments such as
controlling, legal and treasury perform monitoring and control functions as part of the
various processes.
The Management Board and the Supervisory Board (in particular the Audit Committee) as
well as a firm of auditors are involved in the monitoring system. They perform various
checks that are independent of the Company’s processes.
The accounting acts as the central interlocutor for special technical questions and
complex reporting issues. If required, external experts (auditors, qualified accounting
specialists, etc.) are consulted.
In addition, monitoring related to accounting is executed by the controlling department of
the Company. All items and main accounts of the income statements and the balance
sheets of the consolidated companies as well as the consolidated income statements and
the consolidated statement of financial position are reviewed regularly for accuracy and
plausibility. This is conducted both for the consolidated financial statements and for the
individual financial statement of alstria. Accounting-related data is monitored monthly or
on a quarterly basis, depending on the frequency of its preparation.
The accounting-related risk management system forms part of the alstria Group’s risk
management system. The risk owner responsible for the area of risk ‘finance’ monitors
risks that are relevant for the accuracy of accounting-related data. Risks are identified on
a quarterly basis and are assessed and documented by the risk management committee.
alstria Annual Report 2014
23
Group management report
Appropriate action is taken to monitor and optimise accounting-related risks throughout
the alstria-Group.
Description and assessment of risks
In accordance with alstria’s risk management system, all material risks inherent to the
future development of alstria Group’s position and performance are described in this
chapter. The individual risks described relate to the planning period from 2015 to 2017.
Corporate risks
Strategic risks
Likelihood
Risk
impact
Risk level
Change since
prior year
Market environment
unlikely
moderate
Risks in relation to changes
of the legal environment
Risk due to inefficient
organisational structures
Operational risks
Maintenance risks
Refurbishment projects
Vacancy risk
unlikely
moderate
unlikely
moderate
possible
possible
unlikely
high
high
high
Risks relating to property transactions
unlikely
moderate
HR-related risks
IT risks
possible
possible
low
low
Shortfall of rental payments
very unlikely
high
Environmental risks
unlikely
low
Compliance risks
Risks resulting from not complying
with G-REIT legislations
Risks arising from fraud/
non-compliance
Litigation risks
Financial risks
Valuation risks
Breach of covenants
Tax risks
Liquidity risk
unlikely
moderate
unlikely
unlikely
moderate
moderate
possible
unlikely
unlikely
unlikely
high
high
high
moderate
Refinancing on unfavourable terms
very unlikely
high
Interest rate risk
Counterparty risk
very unlikely
high
very unlikely
high
L
L
L
M
M
M
L
L
L
L
L
L
L
L
M
M
M
L
L
L
L
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
lower
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
lower
unchanged
24
alstria Annual Report 2014
Group management report
Strategic risks
Strategic risk management addresses with factors influencing the Company’s market en-
vironment, its regulatory environment and its strategic corporate organisation.
Market environment risks
For alstria Group, market environment risks are derived from macro-economic
developments and their impact on respective real estate markets. An economic downturn
in the German market could result in a decreasing number of employees and in turn be
reflected in lower demand for office properties. For alstria this would lead to a higher risk
of vacant space or lower rental income. The demand for goods and services may also be
affected by what happens next in the financial markets and the sovereign debt in
individual countries. The development of the euro and sovereign debt crisis in these
countries, rising unemployment and the resulting uncertainty amongst customers might
also affect the German markets by a decrease in demand for goods and services from
these markets. To date, however, the German market has proven to be unimpressed and
stable in spite of such circumstances.
As opposed to last year, no direct impact on the overall strategic risk situation that can
be linked to the macroeconomic environment can currently be identified.
As long as there is no substantial change in the economic environment, the market
environment risk level will remain at a stable low (L).
Risks in relation to changes of the legal environment
Risks related to the Company’s legal environment result from changes to regulations and
laws. These may, in turn, have an impact on the key regulatory requirements as well as
the corporate constitution of the alstria companies. These are e.g. alstria office REIT-AG’s
classification as a REIT and other regulations concerning publicly listed companies. New
laws and regulations may result in new regulatory requirements, resulting in higher
expenses.
Overall, risks regarding the legal environment are, like in the previous year, classified as
low (L).
Risk of inefficient organisational structures
Further risks exist as part of the strategic direction of the business organization, due to
inefficient organisational structures and the Company’s dependence on IT systems and -
structures. Both the organisational structure and the IT infrastructure support strategic
and operational objectives. The risk of strategic corporate organization therefore remains
classified as low (L).
alstria Annual Report 2014
25
Group management report
Operational risks
alstria’s operational risk management deals with property-specific risks and general
business risks. This includes, among others, vacancy risk, the creditworthiness of tenants
and the risk of falling market rents. Personnel-related risks such as loss of know-how and
competences due to fluctuation of staff are also monitored in this risk area. alstria applies
various early warning indicators to monitor these risks. Ongoing insurance checks such
as rent projections, vacancy analyses, the control of the lease terms and termination
clauses are designed to help identify potential dangers and risks.
Vacancy risk
In the case of lease terminations, non-extended leases or existing vacancy there is a risk
that the rental area cannot be re-let as planned. Consequentially this results lower than
anticipated revenues.
alstria’s budgeting is based on the assumption that rental areas can be re-let within a
defined period following the end of a lease. During the reporting period leases for some
larger rental areas expired. At the same time the re-letting activities for these areas
achieved a high positive response. As in the previous year, the vacancy risk is overall
assessed as medium (M).
Shortfall of rental payments
An operational risk, which could still materialise as a result of the sovereign debt crisis,
is, as before, mainly due to a potential shortfall of rental payments from one or more
major tenants. Due to the fact that all of alstria’s main tenants are public institutions or
highly rated, the risk of shortfall in payments is currently, and as in the previous year,
limited (L).
Maintenance risk
In order to plan for the requirements for maintenance measures, the Company makes
assumptions about the condition and the intended standard of the property. Undetected
defects, repair requirements resulting from external damage, new legal requirements as
to the condition of the building or an incorrect assessment of the maintenance
requirement, could result in higher than planned maintenance costs. Due to alstria’s high
maintenance budgets the maintenance risk is categorized as medium (M) as in the
previous year.
Refurbishment projects
alstria realises a significant number of refurbishment projects. All risks related to these
projects are managed by extensive project controlling and a related budget management
process. Potential risks are e.g. the risk of not-in-time completion, risk of budget
overrun, as well as the risk of deficiencies in the construction. Unchanged to the end of
26
alstria Annual Report 2014
Group management report
the previous reporting period the risk resulting from refurbishment projects is
categorised at a moderate level (M).
Employees
The skills and motivation of alstria’s employees are decisive factors in the company’s
success. A risk of losing knowledge results from the fluctuation of staff as well as from
not recruiting sufficiently qualified experts to fill vacancies in the company in good time.
Both cases could result in a shortfall of suitable experts and key personnel, which could
endanger alstria’s competitive advantages in its markets as well as its further growth
opportunities. alstria mitigates these risks through the following measures: selective,
needs-oriented skills-development of the existing staff, strengthening its image as an
attractive employer, university marketing, promoting employee motivation through
strong leadership and corporate culture and profit-oriented variable remuneration
schemes. Overall, alstria estimates the described risks to be at a low level (L), which
corresponds to the situation at the end of the previous year.
IT security
The majority of our business processes are supported by efficient IT systems. Any fault
affecting the reliability or security of the IT system could lead to delays or interruptions
of operating activities. alstria protects itself against IT risks by constant examination and
enhancement of the information technology deployed. In addition, modern hardware and
software solutions and safeguards against attacks are installed. Structural security
measures are in place to protect the computer centre. All data is backed up daily in an
internal data depository, and in an external data depository once a week. Workstations
have access restrictions so that employees are only able to access the systems they need
for their work. Overall, therefore IT risks are assessed to be unlikely to materialise and
as in the prior year, their possible consequences are considered to be low (L). Last year,
they were still classified as medium risk (M), as some significant adjustments on the IT
systems were still being implemented by an external IT service.
Property transactions
alstria is exposed to risks related to the acquisition and disposal of real estate properties.
Related risks are not revealing all or the full extent of the risks and liabilities associated
with properties in the due diligence examination carried out or the risks associated with
or inherent to the valuation method used to value the property. In case of the disposal of
real estate assets alstria usually gives certain warranties to the potential purchaser
regarding factual and legal matters of the property in question. It cannot be fully ruled
out that alstria’s management is not aware of a risk covered by certain elements and
warranties given in the sales agreement. As a result, there is generally a risk that alstria
(as the seller) may be charged for breach of warranty by a prospective purchaser. From
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a purchasing perspective, alstria is exposed to the risks that hidden deficiencies on land
and/or property are not observed or unfavourable contractual agreements are
transferred to the Company, resulting in additional future costs.
Both in acquisition and selling proceedings alstria responds to these risks by thorough
technical, legal and tax analysis with respect to all relevant property and contractual
issues. It does so by employing internal and external lawyers, tax advisors, architects,
construction engineers and other required experts. As before, risks relating to
transactions of properties are assessed to be of a low (L) to moderate (M) level.
Environmental risks
alstria is exposed to risks arising from environmental liabilities or possible damages
resulting from natural events like fire or flooding. alstria’s buildings may contain
undetected hazardous materials (such as asbestos) to an unanticipated extent. It might
further be contaminated or otherwise affected by environmental risks or liabilities, such
as pre-existing pollution and soil contamination. Risk mitigation is implemented by a due-
diligence examination that alstria customarily undertakes when acquiring new properties
in addition to a warranty issued by the seller.
Furthermore insurances covering the impacts of natural catastrophes are in place. The
environmental risks described are considered to be at a low (L) level, same as in the
previous year.
Compliance risks
G-REIT legislation
alstria is registered as a German REIT-AG (G-REIT) in the commercial register. The
German REIT segment allows alstria to offer a high profile to investors and distinguish
itself on the capital market as a REIT. The REIT shares are traded at the Frankfurt Stock
Exchange. The G-REIT status does not have any influence on the admission to the
Regulated Market (Prime Standard).
Certain requirements have to be met by the Company in order to qualify for and retain
its designation as a G-REIT. The most significant requirements are as follows: The G-
REIT must be a stock corporation listed on an organised market and its registered office
and management must be in Germany. Its registered share capital must amount to at
least EUR 15 m. All shares must be voting shares of the same class. Free float must be at
least 15% and no investor may directly hold 10% or more of the shares, or shares that
represent 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 must be generated from real
estate. At least 90% of annual profits as resulting under German GAAP-accounting must
be distributed to shareholders and the G-REIT’s equity may not fall below 45% of the fair
value of its real estate assets as recorded under IFRS.
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Due to the consistent monitoring of the compliance with all described REIT criteria, the
risk of non-compliance is considered to be low (L), as in the previous year
REIT corporations are fully exempt from German corporate income tax (KSt) and German
trade tax (GewSt). This tax exemption has been applied with retrospective effect starting
on January 1, 2007.
Capital and investment management activities maintain the Company’s G-REIT status in
order to support its business activities and maximise shareholder value.
alstria manages its capital structure and makes adjustments in response to changes in
economic conditions. In order to maintain or adjust the capital structure, the company
can issue new shares or make a capital repayment to its shareholders.
According to Section15 of the REIT Act, altria’s equity (as reported in its consolidated
financial statements) must not fall short of 45% of its immovable assets. If the minimum
equity ratio is, however, not satisfied for three consecutive financial years, the exemption
from corporate income tax (KSt) and trade tax (GewSt) ceases at the end of the third
financial year
The G-REIT equity ratio is 50.2% on the balance sheet date. Accordingly, alstria complies
with the minimum G-REIT equity ratio requirement according to section 15 G-REIT-Act
(REITG). Nonetheless, the risk that alstria may fail to meet the minimum G-REIT equity
ratio of 45% in the following three consecutive years remains. As stated above it would
then face the prospect of losing its status as G-REIT and its tax exemption. The three-
year forecast until December 31, 2017, excludes the possibility that alstria will lose its G-
REIT status by falling shortfall of the 45% barrier.
Compliance risks
alstria is dependent on all employees and management respecting the compliance
standards in place. alstria's business depends on employees and the members of the
management complying with laws, policies and procedures as prescribed by documented
policies, procedures and laws. If alstria's senior management fails to document and
reinforce the Company's policies and procedures or employees commit criminal, unlawful
or unethical acts (including corruption), this could have a material adverse effect on
alstria's business, financial condition and results of operations. It would also harm
alstria's reputation in the real estate market and thereby negatively affect future
business opportunities. alstria has implemented a compliance organisation, which deals
with adequate and documented compliance rules and regulations and provides training to
all employees concerning compliance-related topics. The materialization of compliance
risks is assessed to be unlikely (L) unchanged to the previous year.
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Litigation
alstria office REIT-AG or any of its subsidiaries could be involved in pending or
foreseeable court or arbitration proceedings which might have a significant impact on the
Group’s business position at any time. Other risks might arise from legal actions taken
addressing, warranty claims, repayment claims or any other claims brought forward in
connection with divested properties or implemented development projects over the last
few years. Neither alstria office REIT-AG nor any of its subsidiaries are involved in
pending or foreseeable court or arbitration proceedings which might have a significant
impact on the Group’s business position. This also applies to legal actions addressing
warranty claims, repayment claims or any other remuneration brought forward in
connection with divested properties or implemented development projects over the last
few years. The respective Group companies have accounted for appropriate provisions to
cover any potential financial charges from court or arbitration proceedings. Since none of
the Group’s companies are currently exposed to any civil rights proceedings or any other
kind of legal dispute, nor is this expected to occur, the risk of legal disputes is classified
as low (L), as in the previous year.
Financial risks
Due to alstria’s refinancing strategy, its financial risk situation remained stable in
comparison to the previous year’s reporting period.
Refinancing risks
The Group’s main financial instruments such are bank loans and derivative financial
instruments. The main purpose of the bank loans is to finance alstria’s business
activities. Derivative financial instruments include interest swaps and caps. The purpose
of these derivative financial instruments is to hedge against interest risks arising from
the Company’s business activities and its sources of finance. The main risks arising from
the Group’s financial instruments are cash flow risks, interest rate risks and liquidity
risks. The alstria Group’s current debt ratio is approx. 52.2%. This is a reasonable rate
compared to the average leverage of German real estate companies. alstria’s syndicated
loan facility agreement allows for a loan-to-value ratio (LTV) of up to 70%. After
refinancing the main loan in financial year 2013, alstria managed to fix the loan LTV at
49.3% on the relevant test date. The risk of a covenant breach was encountered
effectively.
According to plan the next refinancing of the main part of alstria’s loans will be necessary
in 2020. Thus, the risk of refinancing on unfavourable terms is limited for the time being
(L).
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Breach of Covenants
In the process of taking out loans alstria agrees to comply with certain covenants, such
as not to exceed a certain level of debt (loan to value) or to achieve a minimum income
(debt service coverage ratios) from mortgaged properties. In the event of a breach of
these covenants consequences, such as increased credit margins or in the worst case an
extraordinary termination of a loan by the lender, would arise. The Company’s current
LTV ratio as described above, gives significant leeway to the permitted leverage ratio.
Hence, the risk of a breach of covenants is at present classified as medium (M) as it was
in the previous year.
Interest rate risk
Interest rate risks result from fluctuations in market interest rates. These affect the
amount of interest expenses in the financial year and the market value of derivative
financial instruments used by the Company.
alstria’s hedging policy allows the use of a combination of plain vanilla swaps and caps in
order to limit the Company’s exposure to interest rate fluctuations. It still provides
enough flexibility to allow for the disposal of real estate assets, avoiding any cost linked
to an over-hedged situation. The interest base for the financial liability (loan) is the
three-month EURIBOR, which is adjusted every three months. The maturity of the
derivative financial instruments is linked to the term of maturity of the loans. Derivative
financial instruments mainly relate to interest swaps, in which the Company agrees to
exchange the difference between fixed and variable interest rate amounts with its
contract partners at specified intervals, as calculated by reference to an agreed notional
principal amount. Interest caps were further acquired in order to cap the interest at a set
maximum. If the maximum interest rate is exceeded, the difference between the actual
interest rate and the cap rate is paid out. In this way all existing floating rate loans were
secured over a period of at least three years as at balance sheet date. Interest rate risk
is currently considered to be low (L). A year earlier because part of the loan was not
secured by interest rate derivative financial instruments, last years’ risk classification was
classified at a medium (M) level.
Liquidity risk
One of alstria’s core processes is cash management. The Company manages its future
cash position and monitors its progress on a daily basis. A cash-forecasting tool is used
to prevent liquidity risks. As a basis for analysis this liquidity-planning tool makes use of
the expected cash flows from business activities and the maturity of the financial
investments.
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Having implemented refinancing in 2013, the major liquidity risk resulting from the
balloon repayment on the main syndicated loan facility was successfully averted. Since
the new syndicated loan facility will not be due until mid-2020, the liquidity risk resulting
from repayment obligations is currently, as in the previous year, mitigated (L).
Valuation risks
The fair value of the real estate properties owned by the company reflects the market
value as determined by an independent appraiser. It can be subject to change in the
future. Generally, the market value of real estate properties depends on a variety of
factors, some of which are exogenous and may not be under alstria’s control. These are
declining rent levels, a decreasing demand or increasing vacancy rates. Many qualitative
factors are also decisive in the valuation of a property, including a property’s expected
market rents, its condition and its location. The final assessment of the mandated
appraiser is, to a certain extent, discretionary and may differ from the opinion of another
appraiser. Should the factors considered or assumptions made in valuing a property
change in order to reflect new developments or for other reasons, subsequent valuations
of the respective property may result in a decrease in the market value ascribed to such
a property. If such valuations reveal significant decreases in market value compared to
prior valuations, the Company can incur significant revaluation losses with respect to
such properties.
Factors such as economic changes, interest rate fluctuations and inflation may adversely
affect the value of the properties. To minimise these risks, a regional diversification of
investment portfolios, a consistent focus on the individual needs of tenants and a detailed
market research and analysis (broker reports) is applied. In addition, the market value of
all of alstria’s assets is determined annually at year-end by independent, internationally
recognised experts. In summary, the risk of unexpected devaluations is, as in the
previous year, classified as moderate (M).
Counterparty risk
alstria hedges a portion of its risk by applying third party instruments (interest rate
derivatives, property insurances and others). alstria’s counterparties in these contracts
are internationally recognised institutions, which are rated by the leading rating agencies.
alstria reviews the ratings of its counterparties on a regular basis in order to mitigate any
risk of default. The financial crisis has raised doubts as to the reliability of rating
agencies’ assessments. As a reaction to this objection, alstria makes use of other sources
of information to challenge the rating agencies’ assessments.
alstria is otherwise not exposed to any significant credit risks. Hence same as last year,
they can be classified, as low (L).
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Tax risks
REITs are completely exempt from corporate income tax and trade tax. As a result tax
risks can only arise in the case of loss of the REIT status or at subsidiary-level.
Additionally the Group as a whole faces risks from value added tax, real estate transfer
tax and property tax. Furthermore, it is possible that changes in tax laws or their
interpretations can result in a higher tax liability also for prior tax periods that have not
yet been finally approved. Due to the income tax exemption as a REIT and a consistent
monitoring of tax relevant issues by internal and external tax experts, the probability of a
tax loss is considered to be limited. Since certain tax-related issues, such as real estate
transactions or valuations of assets and liabilities as well as a re-entry into the tax
liability could result in high tax obligations over the three-year risk period, the risk
impact is considered to be significant. This fact results in an overall tax risk level, which
is unchanged from the previous year’s average (M) control risk.
Overall risk assessment by the Management Board
alstria office REIT-AG consolidates and aggregates all risks reported by the different
business units and functions adhering to its risk management policy. Compared to the
previous year, the overall risk situation of alstria remained stable. In financial year 2014
only minor or immaterial changes were noted in alstria’s risk level matrix for risks
categorised as high (H) or medium (M). At the end of the year, risks categorised as ‘high’
accounted for 0.0% (2013: 1.1%) of all identified risks while risks categorised as
‘medium’ accounted for 44.4% (2013: 46.3%) of all identified risks.
On the one hand this is due to the economic environment in Germany, which so far has
proven to be relatively stable despite the sovereign debt crisis in some European
countries and the uncertainties concerning the Euro currency. On the other hand, the
company’s stable funding position, conservative level of debt and its solid-REIT equity
ratio support this assessment.
Sufficient precautionary measures have been undertaken to counteract identifiable risks.
In addition to assessing the potential impact of the realization of risks on the value of the
Group’s net assets the potential liquidity requirements for selected key risks are
identified to cover a period of three years. The assessed amount of liquidity amounted to
EUR 12.7 m as at the balance sheet date.
In our view, the risks described in our aggregated risk report neither threaten our ability
to continue as a going concern individually nor cumulatively in terms of their likelihood of
occurrence and level of impact. This applies both to the single Group companies and the
Group.
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REPORT ON OPPORTUNITIES
Management of opportunities
alstria’s opportunities management aims to identify and assess opportunities as early as
possible and to initiate appropriate measures in order to take advantage of opportunities
and transform them into business success.
Growth and earnings opportunities of alstria result both from the existing real estate
portfolio and the acquisition of properties, which have a certain earnings potential.
Depending on the level of a property’s life cycle, opportunities may be found in the
repositioning and development, the strengthening of tenant relationships or in selling the
property.
The funding that is necessary for the implementation of these activities is safeguarded by
the financing activities of the company. Here, opportunities lie in ensuring sustainable
financing on favourable terms.
The evaluation of opportunities is partially carried out in the context of the annual budget
planning or on an ongoing or occasional basis during the year. The process starts with
the careful analysis of the market environment and the market opportunities of the
properties held in the portfolio. These include the assessment of different criteria like
tenant needs, the category of properties, as well as the regulatory changes. Regular
reporting supports the monitoring of growth initiatives within the respective budget and
planning approval processes.
The Management Board of alstria office REIT-AG is regularly (usually at least via a
monthly report) updated on the status and progress of the initiatives being implemented.
In addition, the real estate operations department receives monthly reports in which the
planned costs and revenues are compared to the actual budget consumption and actual
revenues. Coordinated by the central controlling department the Management Board is
provided with an indicator-based report, in which the planned performance indicators are
compared to the actual figures. In addition, the financial and liquidity planning as well as
forecasts are updated and changes to the project scope are made transparent.
Opportunities relating to real estate acquisitions
The location of a property is essential for its attractiveness. Opportunities arise when the
regional market is characterised by favourable demographics and positive real estate
dynamics. Together with an optimal property management this results in opportunities
for long-term capital appreciation. alstria’s acquisition strategy aims to identify properties
with the described opportunity structure. The acquisition will therefore only be performed
if the investment volume offers prospects of achieving a sustainable increase in value.
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Opportunities relating to tenant relationships
A structured and active property and asset management ensures the quality of our
leasing service and is the basis for a sustainable tenant relationship. Opportunities arise
through a flexible response to the needs and requirements of existing or potential
tenants. The Company has the knowledge and resources to provide solutions and to
implement the requirements for the tenants of the rental property. This gives rise to
opportunities for the generation of sustainable and long-term leases.
Opportunities arising from real estate development
As a long-term oriented owner of real estate alstria’s property portfolio also entails aging
buildings, which require refurbishment or repositioning. The modernisation of a property
opens up the opportunity for value creation by reshaping the asset for the next 20 to 30
years and strengthens its future attractiveness in the market and for tenants.
Opportunities from financing
The alstria's financing strategy is focused on optimal provision of funds to invest in new
properties and development projects. Opportunities arise from optimisation of the
financing terms. This requires the implementation of long-term and flexible funding at
favourable conditions as well as the safeguarding of the financial covenants at all times.
A significant opportunity from financing also arises out of the low debt ratio (LTV), which
is currently at 49.3%, representing a comfortable base for future funding and growth.
Overall Summary of the Opportunities Report
The current refinancing position of the alstria safeguards a stable financial position at
favourable interest rates until mid-2020. Concerning revenues, alstria benefits from long-
term rental agreements of an average lease length of approx. 6.8 years and potential
increases in rents due to decreases in vacancy rates and adjustments to the consumer
price index. In addition, the company possesses a range of properties available for
attractive and value adding refurbishment opportunities. alstria’s portfolio is well
balanced and contains many first-class anchor buildings with high-quality tenants.
Therefore, alstria is well positioned to continue its buy-and-manage strategy and to
identify and implement relevant future market opportunities.
alstria’s core competence is the management of assets. The asset repositioning and the
refurbishment alstria are continuously undertaking, both as a part of joint ventures and
on its own, will strengthen the basis for an increase in organic value across the portfolio.
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SUSTAINABILITY REPORT
In 2014, alstria published its fifth sustainability report. This report shows a continuous
improvement of alstria’s reporting framework and its scope of coverage since the first
publication of a sustainability report. It provides information about alstria’s key
achievements within its sustainability framework and gives the reader a deeper insight
into the respective operational impacts. The key values within the framework, which are
expressed for each and every stakeholder group, are alstria’s main drivers when
considering a sustainable approach for every decision made at every level of the
organisation.
For further information on our sustainability engagement and targets, please refer to al-
stria´s annual sustainability report 2014
http://www.alstria.com/sustainability/sustainability-reports/date/2014/
or to the Company Report.
DISCLOSURES REQUIRED BY TAKEOVER LAW
Disclosures and the explanatory report pursuant to Section 315 para. 4 of the
German Commercial Code (Handelsgesetzbuch, HGB).
COMPOSITION OF SUBSCRIBED CAPITAL
On the balance sheet date of December 31, 2014, the share capital of alstria amounted
to EUR 79,018,487.00, divided into 79,018,487 no par value bearer shares. All shares
have equal rights and obligations. Each share entitles the bearer to one vote at general
shareholders’ meetings and is decisive for the shareholder’s share in the profit of the
Company. The individual rights and duties of the shareholders result from the provisions
of the German Stock Corporation Act (Aktiengesetz, AktG), in particular Sections 12, 53a
et seq., 118 et seq. and 186.
RESTRICTIONS ON VOTING RIGHTS OR THE TRANSFER OF SHARES
The exercise of voting rights and the transfer of shares are based on the general
statutory requirements and alstria’s articles of association, which do not restrict either of
these activities. According to Section 136 AktG the voting rights of the affected shares
are excluded by law. Other restrictions as to voting rights or the transfer of shares do not
exist, or, as far as they arise from agreements between shareholders, are not known to
the Management Board.
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SHAREHOLDINGS EXCEEDING 10% OF THE VOTING RIGHTS
As per the balance sheet date of December 31, 2014, alstria was not aware of any
shareholders directly or indirectly holding more than 10% of the voting rights.
SHARES WITH SPECIAL RIGHTS
alstria has not issued any shares with special rights of control.
SYSTEM OF CONTROL OF ANY EMPLOYEE SHARE SCHEME WHERE THE CONTROL
RIGHTS ARE NOT EXERCISED DIRECTLY BY THE EMPLOYEES
The employees, who hold alstria shares, exercise their rights of control as any other
shareholders in accordance with the applicable law and the articles of association.
APPOINTMENT AND DISMISSAL OF MANAGEMENT BOARD AND AMENDMENTS
TO THE ARTICLES OF ASSOCIATION
alstria’s Management Board consists of one or more members who may be appointed or
dismissed by the Supervisory Board in accordance with Sections 84 and 85 AktG. The
articles of association do not contain any special provisions in this respect. Pursuant to
Section 84 AktG, members of the Management Board are appointed for a maximum term
of five years. Reappointment or extension of the term of office is permitted, for a
maximum of five years in each case.
Amendments to the articles of association may be made pursuant to Sections 179 and
133 AktG. Pursuant to Section 12 para. 2 of the articles of association the Supervisory
Board is furthermore authorised to make changes in, and amendments to, the articles of
association that merely affect the wording without passing a resolution of the
shareholders in the general meeting. The Supervisory Board has, in addition, been
authorized to adapt the wording of the articles of association to the utilization of the
Conditional Capital 2013 and the Authorized Capital 2014 and after expiration of the
applicable authorization periods by resolution of the Annual General Meetings on May 29,
2013 and May 14, 2014.
Pursuant to Section 15 para. 5 of the articles of association in conjunction with
Sections 179 para. 2 and 133 AktG, shareholders may make resolutions regarding such
amendments at a general meeting with a simple majority of the votes cast and a simple
majority of the share capital represented. Insofar as a larger majority is prescribed by
law, such majority shall be decisive.
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The articles of association were last amended by resolutions passed by the Supervisory
Board on September 2 and December 1, 2014: Section 5 para. 1, 2 and 8 of the articles
of association were formally adapted to a capital increase executed under the Company’s
employee participation programme and the provisions regarding Conditional Capital II in
Section 5 para. 6 of the articles of association were deleted without substitution, as the
Conditional Capital II became irrelevant due to the expiry of the stock option programme
for the management board.
AUTHORITY OF MANAGEMENT BOARD REGARDING THE ISSUE AND BUYBACK OF
SHARES
1. Authorised Capital
The articles of association authorise the Management Board, with the approval of the
Supervisory Board, to increase the share capital until May 13, 2016 by issuing new
bearer shares against contribution in cash and/or kind once or repeatedly up to a
total amount of EUR 39,466,743.00. Further details are governed by Section 5 para.
3, 4 and 4a of the articles of association.
2. Conditional Capital
alstria holds three conditional capitals (pursuant to Sections 192 et seq. AktG), which
are regulated in Sections 5 para. 5, 7 and 8 of the Company’s articles of association.
a) Conditional Capital 2013
The share capital
is conditionally
increased by an amount of up
to
EUR 38,000,000.00 by issuing of up to 38,000,000 no par value bearer shares.
The Management Board is authorised to stipulate the profit entitlement for the
new shares issued on the basis of the exercise of options or conversion rights or
the fulfilment of a conversion obligation at variance from Section 60 para. 2 AktG.
The conditional capital increase is only carried out insofar as the holders of option
rights or conversion rights or those holders with conversion obligations from
bonds with warrants or convertible bonds, profit participation rights or
participating bonds which were issued based on the authorisation resolved by the
shareholders in the general meeting on May 29, 2013, utilise their option rights or
conversion rights or, insofar as such holders have conversion obligations, such
holders fulfil their conversion obligations, unless a cash settlement is granted or
treasury shares are used to fulfil the option rights or conversion rights.
b) Conditional Capital III
The share capital is conditionally increased by an amount of up to EUR 336,874.00
by the issueing up to 336,874 no par value bearer shares. The conditional capital
increase shall be used solely to grant shares to the holders of convertible profit
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participation certificates, which were issued by the Company up until March 14,
2012 in accordance with the authorisation of the general meeting held on March
15, 2007. The conditional capital increase is only carried out insofar as issued
convertible profit participation certificates are converted into shares of the
Company and no treasury shares are used to satisfy the certificates. The new
shares shall participate in the Company’s profits from the beginning of the
financial year in which they come into existence as a result of the conversion of
certificates.
c) Conditional Capital III 2012
Furthermore, the share capital is conditionally increased by an amount of up to
EUR 415,000.00 by issueing up to 415,000 no par value bearer shares. The
conditional capital increase shall be used solely to grant shares to the holders of
convertible profit participation certificates, which were issued by the Company up
until April 23, 2017 in accordance with the authorisation of the general meeting
held on April 24, 2012. The conditional capital increase is only carried out insofar
as issued convertible profit participation certificates are converted into shares of
the Company and no treasury shares are used to satisfy the certificates. The new
shares shall participate in the Company’s profits from the beginning of the
financial year in which they come into existence as a result of the conversion of
certificates.
3. Purchase of treasury shares
In the general meeting held on June 8, 2011 the shareholders authorised the
Management Board to acquire shares of up to a total of 10% of the Company’s share
capital in place at the time of the issuance of the authorisation until June 7, 2016.
The acquired shares and other treasury shares that are in the possession of, or 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 means of a public offer to all shareholders or by making use of
financial derivatives (put or call options or a combination of both).
SIGNIFICANT AGREEMENTS WHICH TAKE EFFECT UPON A CHANGE OF CONTROL
OF THE COMPANY FOLLOWING A TAKEOVER BID
Significant financing agreements of alstria contain the usual clauses common to such
contracts regarding a change of control. In particular, the agreements entitle the lenders
to require repayment of the loans or an obligation of alstria to repay the loans in the case
any person, company or a group of persons should acquire - directly or indirectly – 50%
of the voting rights or a controlling influence in alstria.
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The terms and conditions of the convertible bond issued by the Company also provide for
termination rights or an adaption of the conversion price in the case of a change of con-
trol. Such change of control occurs, in particular, if a person or persons acting in concert
acquire - directly or indirectly – more than 50% of the voting rights in the Company.
The total volume of obligations under financing instruments with corresponding change of
control clauses amounted to approx. EUR 701.2 m at the balance sheet date.
COMPENSATION AGREEMENTS WITH MANAGEMENT BOARD MEMBERS AND
EMPLOYEES IN CASE OF A TAKEOVER BID
No compensation agreements with Management Board members or employees are in
place that take effect in case of a takeover bid.
These provisions comply with statutory requirements or are reasonable and common
practice at comparable, publicly listed companies. They are not intended to hinder
potential takeover bids.
ADDITIONAL GROUP DISCLOSURE
EMPLOYEES
As at December 31, 2014, alstria had 63 employees (December 31, 2013: 63). The
annual average number of employees was 62 (previous year: 61). These figures exclude
Management Board members.
REMUNERATION REPORT
Management Board members’ compensation comprises a fixed and a variable component
linked to the Company’s operating performance. In addition to the bonus, members of
the Management Board receive share-based remuneration as a long-term incentive
component of remuneration.
Members of the Supervisory Board receive a fixed remuneration.
The remuneration report (see pages 144 to 151), which contains details of the principles
for the definition of the Management Board and Supervisory Board remuneration, forms
an integral part of the audited Group management report.
REPORTS ON POST-BALANCE SHEET DATE EVENTS AND EXPECTED DEVELOP-
MENTS
REPORT ON POST-BALANCE SHEET DATE EVENTS
No events occurred after the balance sheet date, which had a significant impact on the
earnings, financial and asset position of alstria-Group.
40
alstria Annual Report 2014
Group management report
REPORT ON EXPECTED DEVELOPMENTS
The report on expected developments contains statements relating to anticipated future
developments. The development of the Company depends on various factors. Some of
these
factors are beyond the Company’s control. Statements about expected
developments are based on current assessments and are hence, by their very nature,
exposed to risks and uncertainty. The actual development of the alstria Group may differ
positively or negatively from the predicted development presented in the statements of
this report.
Expected economic development
The German economy is still in good condition. This is reflected by the employment rate,
which remains at record level in 2014. Despite the temporarily cool down of the economic
growth in the middle of 2014, the German government expect, driven by strong
consumption of private households and the positive development on the german labor
market, a recovery of the macroeconomic situation. This development loomed already at
the end of 2014. Following that, the German government forecasts a growth rate of the
German economy of 1.5% for 2015.* This development is expected to positively impact
the labour market, especially the number of employees in the service sector.
Development of the real estate market: Outlook for 2015
The relevance of real estate as an investment will persist at a high level in 2015, due to
the continuing very low interest rates. On the investment market, the demand for core
assets is expected to remain high and will highly exceed the supply. Therefore, investor
demand for value-adding properties could accelerate, although the biggest transactions
should still take place in the core markets. Considering the continuing request for first-
class office space in central locations, top rents are likely to rise slightly in 2015.
Outlook for the alstria-Group
Based on the expected stability of the German economy and the real estate market, the
Company does not expect significant changes in alstria’s direct environment. However,
changes other than the expected in terms of interest rates, further property acquisitions
or property disposals or other changes in the assumptions for the financial year 2015
could have an impact on the projections.
Based on the transactions undertaken in financial year 2014 and in light of the already
contracted rents for 2015, alstria is expecting revenues to decrease by approx. EUR 4 m
to EUR 98 m as compared to revenues in 2014.
* Please refer to annual economic report 2015 (Bundesministerium für Wirtschaft und Energie)
alstria Annual Report 2014
41
Group management report
For fiscal year 2015, the Company is expecting an FFO of around EUR 49 m. The increase
in FFO as compared to the FFO of EUR 47.6 m as achieved in 2014 is mainly due to the
Company’s finance/hedging structure, which results in lower financing costs.
Since the Company pays out a significant part of its funds from operations as dividends,
future external growth largely depends on the Company’s ability to raise additional
equity. Consequently, further portfolio growth is highly dependent on the development of
the global equity markets and is therefore difficult to predict for a longer period of time.
Hamburg, February 13, 2015
42
alstria Annual Report 2014
Consolidated financial statements
DETAIL INDEX CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS ............................................. 44
CONSOLIDATED INCOME STATEMENT ................................................... 44
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................. 45
CONSOLIDATED STATEMENT OF FINANCIAL POSITION......................... 46
CONSOLIDATED STATEMENT OF CASH FLOWS ....................................... 48
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .......................... 50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ..................... 51
1 CORPORATE INFORMATION ........................................................................... 51
2 BASIS OF PREPARATION ............................................................................... 51
3 CHANGES IN ACCOUNTING POLICIES AND MANDATORY DISCLOSURES .............. 52
4 BASIS OF CONSOLIDATION ........................................................................... 60
5 KEY JUDGMENTS AND ESTIMATES .................................................................. 64
6 SEASONAL OR ECONOMIC EFFECTS ON BUSINESS ........................................... 66
7 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ........................................ 67
8 SEGMENT REPORTING .................................................................................. 79
9 NOTES TO THE CONSOLIDATED INCOME STATEMENT ....................................... 79
10 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION –
ASSETS ......................................................................................................... 85
11 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION –
EQUITY AND LIABILITIES ................................................................................. 94
12 OTHER NOTES ......................................................................................... 100
13 RELATED PARTY RELATIONSHIPS ............................................................... 102
14 EARNINGS PER SHARE .............................................................................. 103
15 DIVIDENDS PAID...................................................................................... 104
16 EMPLOYEES ............................................................................................. 104
17 STOCK OPTION PROGRAMME ..................................................................... 104
18 SHARE-BASED REMUNERATION.................................................................. 105
19 CONVERTIBLE PROFIT PARTICIPATION RIGHTS PROGRAMME ........................ 107
20 FINANCIAL RISK MANAGEMENT.................................................................. 109
21 SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD ............... 117
22 UTILISATION OF EXEMPTING PROVISIONS .................................................. 117
23 DISCLOSURES PURSUANT TO THE WERTPAPIERHANDELSGESETZ .................. 118
24 DECLARATION OF COMPLIANCE PURSUANT TO SECTION 161 AKTG ............... 120
25 AUDITOR’S FEES ...................................................................................... 120
26 MANAGEMENT BOARD ............................................................................... 120
27 SUPERVISORY BOARD ............................................................................... 121
alstria Annual Report 2014
43
Consolidated financial statements
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
for the period from January 1 to December 31, 2014
EUR k
Revenues
Income less expenses from passed on
operating expenses
Real estate operating expenses
Net rental income
Administrative expenses
Personnel expenses
Other operating income
Other operating expenses
Net result from fair value adjustments on
investment property
Gain on disposal of investment property
Notes
2014
2013
9.1
9.2
9.3
9.4
9.5
9.6
9.7
10.1
9.9
101,782
104,224
-632
-513
-12,190
-10,462
88,960
93,249
-4,755
-7,807
6,141
-965
824
4,566
-5,325
-7,790
3,932
-111
27
1,398
Net operating result
86,964
85,380
Net financial result
9.8
-35,329
-39,116
Share of the result of joint venture
companies accounted for at equity
Net loss from fair value adjustments on
financial derivatives
Pre-tax income
4
9.8
12,798
273
-27,461
36,972
-7,554
38,983
Income tax expenses
Consolidated profit
9.10
-19
-38
36,953
38,945
Attributable to:
Shareholders
Earnings per share in EUR
Basic earnings per share
Diluted earnings per share
36,953
38,945
14
14
0.47
0.45
0.49
0.46
44
alstria Annual Report 2014
Consolidated financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period from January 1 to December 31, 2014
EUR k
Notes
2014
2013
Consolidated profit for the period
36,953
38,945
Items which might be classified to the income
statement in a future period:
Valuation cash flow hedges
Reclassification from cash flow
hedging reserve
10.7
10.7
Other comprehensive income for the period:
Total comprehensive income for the period:
99
11,820
4,135
4,234
41,187
2,988
14,808
53,753
Total comprehensive income attributable to:
Shareholders
41,187
53,753
alstria Annual Report 2014
45
Consolidated financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at December 31, 2014
ASSETS
EUR k
Non-current assets
Investment property
Equity-accounted investments
Property, plant and equipment
Intangible assets
Derivatives
Total non-current assets
Current assets
Trade receivables
Accounts receivable from joint ventures
Derivatives
Other receivables
Cash and cash equivalents
thereof restricted
Total current assets
Notes
2014
2013
10.1
10.2
10.3
10.4
10.7
10.6
10.6
10.7
10.6
10.8
1,645,840
1,632,362
34,534
21,001
5,085
344
6,643
5,156
472
32,474
1,692,446
1,691,465
3,498
3,708
88
0
10,127
63,145
0
89
644
6,991
82,782
252
76,858
94,214
Total assets
1,769,304
1,785,679
46
alstria Annual Report 2014
Consolidated financial statements
EUR k
Equity
Share capital
Capital surplus
Hedging reserve
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
Short-term loans
Trade payables
Profit participation rights
Derivatives
Other Provisions
Other current liabilities
Total current liabilities
Total liabilities
Notes
11.1
11.2
10.7
11.3
11.4
11.2
11.4
19
10.7
11.3
11.4
EQUITY AND LIABILITIES
2014
2013
79,018
78,933
691,693
730,486
-3,095
78,977
-7,329
42,024
846,593
844,114
874,025
822,486
13,488
25,963
3,628
2,036
3,244
1,052
893,177
852,745
7,702
4,389
424
6,198
461
10,360
73,886
3,474
468
0
2,015
8,977
29,534
88,820
922,711
941,565
Total equity and liabilities
1,769,304
1,785,679
alstria Annual Report 2014
47
Consolidated financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ending December 31, 2014
EUR k
Notes
2014
2013
1. Cash flows from operating activities
Consolidated profit or loss for the period
Unrealised valuation movements
Interest income
Interest expense
Result from income taxes
Other non-cash income (–)/expenses (+)
Gain (–)/loss (+) on disposal of investment
properties
36,953
13,937
-113
35,442
19
-731
9.8
9.8
9.10
9.9
-4,566
Depreciation and impairment of fixed assets (+)
10.3; 10.4
179
38,945
7,254
-317
39,432
38
708
-1,398
549
Increase (–)/Decrease (+) in trade receivables
and other assets that are not attributed to investing
or financing activities
Increase (+)/Decrease (–) in trade payables and
other liabilities that are not attributed to investing
or financing activities
Cash generated from operations
Interest received
Interest paid
Income taxes paid
844
-270
1,435
83,399
113
-1,652
83,289
317
-30,604
-33,454
-19
-38
Net cash generated from operating activities
52,889
50,114
2. Cash flows from investing activities
Acquisition of investment properties
Proceeds from the sale of financial assets
Payment of transaction cost in relation to the sale
of investment properties
Acquisition of other property, plant and equipment
Proceeds from the equity release of interests
in joint ventures
Payments for capital contribution in joint ventures
-75,264
65,467
-291
22
1,470
-2,205
-58,506
51,040
-272
-376
826
-3,370
Net cash used in investing activities
12.3
-10,801
-10,658
48
alstria Annual Report 2014
Consolidated financial statements
EUR k
Notes
2014
2013
3. Cash flows from financing activities
Cash received from equity contributions
170
0
Proceeds from issuing of bonds and taking on loans
173,823
544,100
Proceeds from the issue of a convertible bond
Payments of dividends
Payments for the acquisition and termination
of financial derivatives
Payments due to the redemption
of bonds and borrowings
Payments of transaction costs
11.2
15
0
-39,467
79,400
-39,467
-2,882
-46,512
-192,629
-606,592
-740
-6,151
Net cash used in financing activities
-61,725
-75,222
4. Cash and cash equivalents
at the end of the period
Change in cash and cash equivalents
(subtotal of 1 to 3)
Cash and cash equivalents
at the beginning of the period
Cash and cash equivalents
at the end of the period
thereof restricted: EUR 0 k;
previous year: EUR 252 k
-19,637
-35,766
82,782
118,548
63,145
82,782
alstria Annual Report 2014
49
Consolidated financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period from January 1 to December 31, 2014
EUR k
Notes
Share
capital
Capital
surplus
Hedging
reserve
Retained
earnings
Total
equity
As at Jan. 1, 2014
78,933
730,486
-7,329
42,024
844,114
Changes in the
financial year 2014
Consolidated profit
Other comprehensive
income
Total comprehensive
income
Payments of dividends
Share-based
remuneration
Conversion of convertible
participation rights
15
19
0
0
0
0
0
85
0
0
0
-39,467
589
85
0
36,953
36,953
4,234
0
4,234
4,234
36,953
41,187
0
0
0
0
-39,467
0
0
589
170
As at Dec. 31, 2014
11.1 79,018
691,693
-3,095
78,977
846,593
for the period from January 1 to December 31, 2013
EUR k
Notes
Share
capital
Capital
surplus
Hedging
reserve
Retained
earnings
Total
equity
As at Jan. 1, 2013
78,933
769,412
-22,137
3,079
829,287
Changes in the
financial year 2013
Consolidated profit
Other comprehensive
income
Total comprehensive
income
Payments of dividends
Share-based remunera-
tion
0
0
0
0
0
0
0
0
38,945
38,945
14,808
0
14,808
0
14,808
38,945
53,753
-39,467
541
0
0
0
-39,467
0
541
15
19
As at Dec. 31, 2013
11.1 78,933
730,486
-7,329
42,024
844,114
50
alstria Annual Report 2014
Consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 CORPORATE INFORMATION
alstria office REIT-AG is a listed real estate property corporation within the meaning of the
G-REIT Act. Pursuant to Section 2 of its Articles of Association, the Company’s objective is
the acquisition, management, operation and sale of owned real estate property, as well as
the holding of participations in enterprises, which acquire, manage, operate and sell
owned property. All of the aforementioned objectives are subject to the conditions and
rules of the G-REIT Act legislation.
alstria office REIT-AG was transformed into a German Real Estate Investment Trust
(G-REIT) in the financial year 2007 and was registered as a REIT corporation (hereinafter
also referred to as a ‘REIT-AG’) in the commercial register on October 11, 2007.
REIT-AGs are fully exempt from German corporate income tax and trade tax. Hence,
alstria office REIT-AG has been exempt from tax with retrospective effect since
January 1, 2007.
The Company’s registered office and address is Bäckerbreitergang 75, 20355 Hamburg,
Germany. Registration was made in the commercial register at the local court of
Hamburg under HRB No. 99204.
The Company’s Management Board prepared the consolidated financial statements of
alstria office REIT-AG (hereinafter also referred to as the ‘Company’ or ‘alstria office REIT-
AG’) as at December 31, 2014. It passed resolution on their publication and submission to
the Supervisory Board on February 13, 2015.
The financial year ends on December 31 of each calendar year.
2 BASIS OF PREPARATION
The consolidated financial statements of alstria office REIT-AG and its subsidiaries (to-
gether ‘the Group’) have been prepared in accordance with the International Financial
Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), in-
cluding the interpretations of the standards (IFRIC). All IFRS and IFRIC were observed as
adopted and prescribed by the EU as of the reporting date.
Apart from investment property (land and buildings) and certain financial instruments
that are measured at fair values at the end of each reporting period and as explained in
the accounting policies below, the consolidated financial statements have been prepared
based on historical cost.
The preparation of financial statements in conformity with IFRS requires the use of cer-
tain critical accounting estimates. It also requires management to exercise its judgement
alstria Annual Report 2014
51
Consolidated financial statements
in the process of applying the Group’s accounting policies. Areas involving a higher de-
gree of judgement or complexity, or items where assumptions and estimates have a sig-
nificant impact on the consolidated financial statements, are disclosed in Note 5.
The consolidated financial statements are presented in euros. All values are rounded to
the nearest thousand (EUR k) except when otherwise indicated.
The consolidated financial statements presented in this report were prepared for the
period from January 1 to December 31, 2014.
Single items are summarised in the consolidated statement of financial position and the
income statement. They are commented on in the notes to the financial statements.
Assets and liabilities are classified as non-current and current, respectively. Current
items are defined as items that are due in less than one year and vice versa.
3 CHANGES IN ACCOUNTING POLICIES AND MANDATORY DISCLOSURES
Effects resulting from new and amended IFRS
alstria office REIT-AG prepares its consolidated financial statements in accordance with
IFRS as endorsed for use in the European Union (EU) and the additional requirements of
Section 315a para. 1 of the German Commercial Code (HGB). The following paragraphs
describe the IFRS published by the IASB and endorsed for application in the EU that were
applied for the first time during the reporting period. Thereafter, new Standards and
Interpretations that have been issued by the IASB at the reporting date are described
which have not been applied early, as their application is either not mandatory or
endorsement by the European Commission is still pending.
The following new standards and amendments to standards are mandatory for the first
time for the financial year beginning on January 1, 2014:
EU-Endorsement
until
Dec. 31, 2014
Standard/
interpretation
Content
Applicable for
f/y beginning
on/after
Dec. 11, 2012
Dec. 11, 2012
IFRS 10
IFRS 11
Dec. 11, 2012
IFRS 12
Consolidated financial statements
Jan. 1, 2014
Joint arrangements
Disclosure of interests in other
entities
Jan. 1, 2014
Jan. 1, 2014
Effects
None
None
Notes
disclosure
Dec. 11, 2012
IAS 27
Separate financial statements
Jan. 1, 2014
None
Dec. 11, 2012
IAS 28
Dec. 13, 2012
Dec. 19, 2013
Dec. 19, 2013
Apr. 4, 2013
Nov. 20, 2013
Amendments
to IAS 32
Amendment
to IAS 36
Amendment
to IAS 39
Transition
Guidance
Investment
Entities
Investments in associates and
joint ventures
Offsetting financial assets and
financial liabilities
Impairment of assets – clarification
of disclosures required
Novation of derivatives and
continuation of hedge accounting
Amendments to IFRS 10,
IFRS 11 and IFRS 12
Amendments to IFRS 10,
IFRS 12 and IAS 27
Jan. 1, 2014
None
Jan. 1, 2014
None
Jan. 1, 2014
None
Jan. 1, 2014
None
Jan. 1, 2014
No material
effects
Jan. 1, 2014
None
52
alstria Annual Report 2014
Consolidated financial statements
Effects resulting from new and amended IFRS and interpretations to be applied
the first time in the reporting period
In May 2011, the IASB issued a set of five standards relating to group accounting, which
are described below.
IFRS 10 ‘Consolidated financial statements’
New standard issued on May 12, 2011. IFRS 10 replaces the part of IAS 27
‘Consolidated and Separate Financial Statements’ that deals with consolidated
financial statements and SIC-12 ‘Consolidation – Special Purpose Entities’.
Under IFRS 10, there is only one basis for consolidation for all entities, and
that basis is control. The definition of control under IFRS 10 includes the
following three elements:
Power over an investee.
Exposure, or rights, to variable returns from its involvement with the
investee.
Ability to use its power over the investee to affect the amount of the
investor’s returns.
For an investor to have control over an investee all three elements must be
met.
The first time application of the new standard did not result in a change in the
companies included in the consolidated Group.
IFRS 11 ‘Joint arrangements’
New standard issued on May 12, 2011. IFRS 11 replaces IAS 31 ‘Interests in
Joint Ventures’ and SIC-13 ‘Jointly Controlled Entities – Non-Monetary
Contributions by Venturers’. The standard deals with how a joint arrangement
should be classified where two or more parties have joint control. There are
two types of joint arrangements under IFRS 11: joint operations and joint
ventures. These two types of joint arrangements are distinguished by parties’
rights and obligations under the arrangements. The application of the new
standard did not result in changes in accounting for joint ventures of the
Group. The Group holds interests in two joint ventures, which are still to be
recognized as such and are accounted for using the equity method.
IFRS 12 ‘Disclosures on interests in other entities’
New standard issued on May 12, 2011. IFRS 12 sets out what entities need to
disclose in their annual financial statements when they have interests in
subsidiaries, joint arrangements, associates or unconsolidated structured
alstria Annual Report 2014
53
Consolidated financial statements
entities. Basically, the standard generally led to more extensive disclosures in
the consolidated financial statements.
IAS 27 ‘Separate financial statements’
New revised standard issued on May 12, 2011. IAS 27 (revised 2011) has the
objective of setting standards to be applied when accounting for investments
in subsidiaries, joint ventures, and associates, if an entity chooses to or is by
local regulations required to present separate (non-consolidated) financial
statements. Together with IFRS 10 ‘Consolidated Financial Statements’,
IAS 27 (2011) supersedes the previous version of IAS 27 (2008) ‘Consolidated
and Separate Financial Statements’, including the related interpretation
SIC-12 ‘Consolidation – Special Purpose Entities’. Since none of alstria’s Group
companies prepare single entity financial statements in accordance with IFRS,
no impact on accounting procedures resulted from the revised standard.
IAS 28 ‘Investments in associates and joint ventures’
New standard issued on May 12, 2011. The objective of IAS 28 (revised 2011)
is to set the accounting for investments in associates and to set the
requirements for the application of the equity method when accounting for
investments in associates and joint ventures. IAS 28 (2011), together with
IFRS 12 ‘Disclosures of interests in other entities’, supersedes the previous
version of IAS 28 (2008) ‘Investments in Associates’. The application of the
new standard did not lead to a change in accounting for joint ventures.
Transition guidance
Amendments to IFRS 10 ‘Consolidated financial statements’, IFRS 11 ‘Joint
arrangements’, and IFRS 12 ‘Disclosures of interests in other entities’ –
Transition Guidance. The amendments clarify the transition guidance in IFRS
10, which also grant additional relief to the application of all three standards.
Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment entities
The amendments to IFRS 10 define an investment entity. They moreover
prohibit a reporting entity that meets the definition of an investment entity
from consolidating its subsidiaries. Instead it requires it to measure its
subsidiaries at fair value through profit or loss in its consolidated and separate
financial statements.
To qualify as an investment entity, a reporting entity is required to:
obtain funds from one or more investors for the purpose of providing
them with investment management services;
54
alstria Annual Report 2014
Consolidated financial statements
commit to its investor(s) that its business purpose is to invest funds
solely for returns from capital appreciation, investment income, or
both; and
measure and evaluate performance of substantially all of
its
investments on a fair value basis.
Consequential amendments have been made to IFRS 12 and IAS 27 to
introduce new disclosure requirements for investment entities. As the
Company is not an investment entity in the sense of IFRS 10 the application of
the amendments has no impact on the disclosures or the amounts recognised
in the Group’s consolidated financial statements.
Amendments to IAS 32 ‘Financial instruments: presentation: offsetting
financial assets and financial liabilities’
The IASB has revised the requirements for offsetting financial assets and
financial liabilities and as a result published amendments to IAS 32 ‘Financial
instruments: presentation’ and IFRS 7 ‘financial instruments: disclosure’. The
current offsetting model in IAS 32 has basically been maintained and has
solely been substantiated by additional application guidance, which applies to
annual periods beginning on or after January 1, 2014 with retrospective
application required. The Group has assessed whether any of its financial
assets and financial liabilities qualify to be offset based on the criteria set out
in the amendments and has concluded that the application of the amendments
has no impact on the amounts recognised in the Group’s consolidated financial
statements.
Amendment to IAS 36 ‘Impairment of assets’
IAS 36 was amended by recoverable amount disclosures for non-financial
assets. The amendments represent a correction of disclosure requirements
that have been modified in the context of IFRS 13 more comprehensively than
intended. This involves impaired assets for which the recoverable amount is
defined as fair value less costs to sell. Currently, the recoverable amount is
disclosed irrespective of whether there is impairment or not. The correction
now limits the disclosure requirements to cases where actual impairments are
present. However the required disclosure in these cases was extended. The
application of these amendments has had no impact on the disclosures in the
Group’s consolidated financial statements.
alstria Annual Report 2014
55
Consolidated financial statements
Amendment to IAS 39 ‘Financial instruments: recognition and meas-
urement’
The amendment relates to the novation of derivatives and the continuation of
hedge accounting. According to the amendment there is no need to
discontinue hedge accounting if a hedging derivative is novated, provided
certain criteria are met. The changes had no impact on the consolidated
financial statements as existing derivatives of the Group are not subject to
statutory or regulatory requirements for the installation of a central
counterparty.
New and amended IFRS and interpretations to existing standards which are not
yet effective and have not been adopted early by the Group
In its 2014 consolidated financial statements, alstria office 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 the financial year 2014.
Standard/
interpretation
Content
EU-
Endorse-
ment
not yet
endorsed
not yet
endorsed
not yet
endorsed
not yet
endorsed
not yet
endorsed
not yet
endorsed
not yet
endorsed
not yet
endorsed
not yet
endorsed
not yet
endorsed
Dec. 17, 2014
not yet
endorsed
IFRS 9
IFRS 14
IFRS 15
Amendments to
IFRS 11
Amendments to
IFRS 7 and IFRS 9
Amendments to
IFRS 10 and IAS 28
Amendments to
IFRS 10, IFRS 12
and IAS 28
Amendments to
IAS 1
Amendments to
IAS 16 and IAS 38
Amendments to
IAS 16 and IAS 41
Amendments to
IAS 19
Amendments to
IAS 27
New Standard ‘Financial instruments:
classification and measurement’
New Standard ‘Regulatory
deferral accounts’
New Standard ‘Revenue from
contracts with customers’
Accounting for Acquisitions of
Interests in Joint Operations
Mandatory effective date and
transition disclosure
Sale or contribution of assets
between an investor and its
associate or joint venture
Investment entities: applying the
consolidation exception
Applicable for
f/y beginning
on/after
Jan. 1, 2018
Effects
No material
effects
Jan. 1, 2016
None
Jan. 1, 2017
Notes
disclosure
Jan. 1, 2016
None
Jan. 1, 2018
None
Jan. 1, 2016
Under
review
Jan. 1, 2016
None
Disclosure initiative
Jan. 1, 2016
Notes dis-
closure
Clarification of acceptable methods
of depreciation
Jan. 1, 2016
None
Agriculture: bearer plants
Jan. 1, 2016
None
Defined benefit plans: employee
contributions (Amendments to
IAS 19 'Employee Benefits')
Equity method in separate
financial statements
Feb. 1, 2015
None
Jan. 1, 2016
None
June 13, 2014
IFRIC 21
New interpretation ‘taxes
June 17, 2014
None
Dec. 17, 2014
Dec. 18, 2014
not yet
endorsed
Annual Improve-
ments to IFRSs
Annual Improve-
ments to IFRSs
Annual Improve-
ments to IFRSs
Improvements to IFRSs 2010-2012
Feb. 1, 2015
None
Improvements to IFRSs 2011-2013
Jan. 1, 2015
None
Improvements to IFRSs 2012-2014
Jan. 1, 2016
Under
review
56
alstria Annual Report 2014
Consolidated financial statements
IFRS 9 ‘Financial instruments’
New standard issued November 12, 2009. The standard addresses the
classification and measurement of financial assets and is likely to affect the
Group’s accounting of financial assets. Application of the standard is
mandatory from January 1, 2018 onwards. However, the standard is available
for early adoption subject to EU endorsement. The Group has not yet assessed
the full impact of IFRS 9 on its reported figures.
IFRS 14 ‘Regulatory deferral accounts’
New standard issued on January 30, 2014. The standard permits an entity,
which is a first-time adopter of International Financial Reporting Standards to
continue to account, with some limited changes, for 'regulatory deferral
account balances' in accordance with its previous GAAP, both on initial
adoption of IFRS and in subsequent financial statements. Regulatory deferral
account balances, and movements in them, are presented separately in the
statement of financial position and statement of profit or loss and other
comprehensive income, and specific disclosures are required. IFRS 14 applies
to an entity's first annual IFRS financial statements for a period beginning on
or after January 1, 2016. Since alstria is not a first-time adopter of IFRS the
standard has no impact on the financial reporting of the Group.
IFRS 15 ‘Revenues from contracts with customers’
IFRS 15 is a new standard and was issued on May 28, 2014. It applies to an
annual reporting period beginning on or after January 1, 2017. IFRS 15
specifies how and when an entity reporting in accordance with IFRS shall
recognise revenue as well as requiring such entities to provide users of
financial statements with more informative, relevant disclosures. The standard
provides a single, principles based five-step model to be applied to all
contracts with customers. Apart from the additional disclosures, no impact on
the net assets, financial and earnings position of the Group is expected.
Amendments to IFRS 11 ‘Joint Arrangements’
The amendments to IFRS 11 relate to the accounting for acquisitions of
interests in joint operations. It clarifies the accounting treatment in the event
that these shares constitute a business. The amendments were published on
May 6, 2014. They are effective for annual periods beginning on or after
January 1, 2016. The Group does not expect an impact on its reporting
resulting from the amendments.
alstria Annual Report 2014
57
Consolidated financial statements
Effective date of IFRS 7 amendments on application of IFRS 9
On 16 December 2011, the IASB issued Mandatory Effective Date and
Transition Disclosures (Amendments to IFRS 9 and IFRS 7), which: amends
the effective date of IFRS 9 Financial Instruments to annual periods beginning
on or after January 1, 2018 modifies the relief from restating comparative
periods and the associated disclosures in IFRS 7 Financial Instruments:
Disclosures. The amendments to IFRS 7 apply when an entity first applies the
requirements of IFRS 9 and so apply to annual periods beginning on or after
January 1, 2018 (or such other date as when an entity applies IFRS 9).
Amendments to IAS 28 and IAS 10 ‘Sale or Contribution of Assets be-
tween an Investor and its Associate or Joint Venture’
The amendments were proposed due to the conflict between the requirements
of IAS 28 ‘Investments in Associates and Joint Ventures’ and IFRS 10
‘Consolidated Financial Statements’. The main consequence of
the
amendments is that a full gain or loss is recognised when a transaction
involves a business, whether it is housed in a subsidiary or not. A partial gain
or loss is recognised when a transaction involves assets that do not constitute
a business, even if these assets are housed in a subsidiary. The amendments
are effective for annual periods beginning on or after January 1, 2016, with
earlier application being permitted.
Amendments to IFRS 10, IFRS 12 and IAS 28 ‘Investment entities: ap-
plying the consolidation exception’
The amendments address issues that have arisen in the context of applying
the consolidation exception for investment entities. They are effective for
annual periods beginning on or after January 1, 2016. Since alstria office
REIT-AG does not constitute as investment entity and the group does not
include investment entities, the amendments will not have an effect on the
Group’s financial statements.
Amendments to IAS 1 ‘Disclosure initiative’
The amendments aim at clarifying IAS 1 to address perceived impediments to
preparers exercising their judgement in presenting their financial reports. They
are effective for annual periods beginning on or after January 1, 2016, with
earlier application being permitted. Minor changes in the presentation of
financial statements are expected.
58
alstria Annual Report 2014
Consolidated financial statements
Amendments to IAS 16 and IAS 38 ‘Clarification of acceptable meth-
ods of depreciation and amortisation’
The amendments were issued on May 12, 2014 and relate to the clarification
of acceptable methods of depreciation and amortisation. The revenue based
depreciation method is not an acceptable depreciation method under IAS 16.
Impacts on the Group's financial position and results of operations are not
expected.
Amendments to IAS 16 and IAS 41 ‘Agriculture: bearer plants’
The amendments were issued on June 30, 2014 and add bearer plants, which
are used solely to grow produce, to the scope of IAS 16. There will be no
impact on the Group’s financial accounting.
Amendments to IAS 19 ‘Employee benefits’
On November 21, 2013, the IASB published further amendments to IAS 19.
The amendments clarify the requirements that relate to how contributions
from employees or third parties that are linked to service should be attributed
to periods of service. In addition, it permits a practical expedient if the amount
of the contributions is independent of the number of years of service. The
amendments are effective for annual periods beginning on or after February 1,
2015, with earlier application being permitted. The amendments are not
affecting the presentation of the Group’s financial reporting.
Amendments to IAS 27 ‘Equity method in separate financial state-
ments’
The amendments reinstate the equity method as an accounting option for
investments in subsidiaries, joint ventures and associates in an entity's
separate financial statements. The amendments are effective for annual
periods beginning on or after January 1, 2016, with earlier application being
permitted.
IFRIC 21 ‘Levies’
The interpretation provides guidance on when to recognise a liability for a levy
imposed by a government. Guidance is given for levies that are accounted for
in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent
Assets and those for which where the timing and amount of the levy is known
and certain. The interpretation is applicable to reporting periods beginning on
or after June 17, 2014 and is not assumed to have consequences for the
Group’s financial reporting.
alstria Annual Report 2014
59
Consolidated financial statements
Annual improvement process IFRS 2010-2012
The International Accounting Standards Board (IASB)
issued
‘Annual
Improvements 2010–2012’, a collection of amendments to IFRSs, in response
to issues addressed during the 2010–2012 cycle. Eight standards (IFRS 2,
IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) are affected by the
amendments. The improvements apply to annual periods beginning on or after
February 1, 2015 and will be of only minor, if any, relevance for the Group.
Annual improvement process IFRS 2011-2013
The International Accounting Standards Board (IASB)
issued
‘Annual
Improvements 2011–2013’, a collection of amendments to IFRSs, in response
to issues addressed during the 2011–2013 cycle. Four standards (IFRS 1, IFRS
3, IFRS 13 and IAS 40) are affected by the amendments. The improvements
apply to annual periods beginning on or after January 1, 2015 and will be of
only minor, if any, relevance for the Group.
Annual improvement process IFRS 2012-2014
The International Accounting Standards Board (IASB)
issued
‘Annual
Improvements 2012–2014’, a collection of amendments to IFRSs, in response
to issues addressed during the 2012–2014 cycle. Four standards (IFRS 5, IFRS
7, IAS 19 and IAS 34) are affected by the amendments. The improvements
apply to annual periods beginning on or after July 1, 2016 and will be of only
minor, if any, relevance for the Group.
The Group did not adopt any new or amended standard or interpretation early in 2014.
4 BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of alstria office
REIT-AG and its subsidiaries as at December 31, 2014. The subsidiaries’ financial
statements are prepared for the same reporting year as the parent Company. Consistent
accounting policies are applied.
Subsidiaries are entities whose financial and operating policies are controlled by the
Group. Generally, the Group holds more than half of the voting rights of these
companies.
Subsidiaries are fully consolidated from the date onwards, on which the Group obtains
control, which is generally the date of acquisition. They are excluded from the
consolidated financial statements on the date on which the Group ceases to have control
over them.
60
alstria Annual Report 2014
Consolidated financial statements
All intra-Group receivables, liabilities, gains and losses, income and expenses are
eliminated upon consolidation.
In accordance with IFRS 3, all business combinations are accounted for by means of the
acquisition method. The acquired assets and liabilities are fully recognised at their fair
value irrespective of the ownership interest. These are reflected in their carrying
amounts on the date on which control over the subsidiary is obtained. A debit difference
is recognised as goodwill. Any credit difference remaining after reassessment is
recognised immediately in profit and loss. The disclosed hidden reserves and charges
are carried forward, amortised or released, depending on the treatment of the
corresponding assets in the periods following the business combination.
The Company generally applies IFRS 3 to account for transactions under common
control. Any credit and debit differences resulting from respective capital consolidations
are recognised as an increase or decrease in the Group’s capital surplus.
Significant companies where alstria office REIT-AG is directly or indirectly able to
significantly influence financial and operating decisions (associates), or directly or
indirectly shares control (joint ventures), are accounted for using the equity method.
4.1 Fully consolidated subsidiaries
The Group of consolidated companies includes 20 companies as well as two joint venture
companies accounted for applying the equity method. No business combinations took
place in either financial year 2013 or 2014.
alstria Annual Report 2014
61
Consolidated financial statements
The following subsidiaries are included in the consolidated financial statements:
Group entity (subsidiaries of alstria office REIT-AG)
alstria Bamlerstrasse GP GmbH, Hamburg
alstria Portfolio 1 GP GmbH, Hamburg
alstria Gänsemarkt Drehbahn GP GmbH, Hamburg
alstria Halberstädter Strasse GP GmbH, Hamburg
alstria Hamburger Strasse 43 GP GmbH, Hamburg
alstria Englische Planke GP GmbH, Hamburg
alstria Ludwig-Erhard-Strasse GP GmbH, Hamburg
alstria Mannheim/Wiesbaden GP GmbH, Hamburg
alstria office Bamlerstrasse GmbH & Co. KG, Hamburg
alstria office Englische Planke GmbH & Co. KG, Hamburg
alstria office Gänsemarkt Drehbahn GmbH & Co. KG, Hamburg
alstria office Halberstädter Strasse GmbH & Co. KG, Hamburg
alstria office Hamburger Strasse 43 GmbH & Co. KG, Hamburg
alstria office Insterburger Strasse GmbH & Co. KG , Hamburg
alstria office Ludwig-Erhard-Strasse GmbH & Co. KG, Hamburg
alstria office Mannheim/Wiesbaden GmbH & Co. KG, Hamburg
alstria office Steinstrasse 5 GmbH & Co. KG, Hamburg
alstria solutions GmbH, Hamburg
alstria Steinstrasse 5 GP GmbH, Hamburg
Share in capital
( %)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
In comparison to the consolidated financial statements as at December 31, 2013 there
have been no changes to the consolidated Group in financial year 2014. All Group
companies are property management companies or their general partners.
4.2 Interests in joint ventures
The Group holds interests in two joint ventures that had a carrying amount of
EUR 34,534 k at the end of the reporting period.
Details of the Group’s joint ventures at the end of the reporting period are as follows:
Name of joint venture
Alstria IV. Hamburgische
Grundbesitz GmbH & Co. KG
Alstria VII. Hamburgische
Grundbesitz GmbH & Co. KG
Principal
activity
Hold and manage
of real property
Hold and manage
of real property
Place of incorpora-
tion and business
Dec. 31, 2014
(%)
Dec. 31, 2013
(%)
Hamburg, Germany
Oststeinbek, Germany
49.0
49.0
49.0
49.0
Proportion of ownership,
interest and voting rights
held by the Group
The above-mentioned joint ventures are accounted for applying the equity method in
these consolidated financial statements.
Alstria IV. Hamburgische Grundbesitz GmbH & Co. KG is classified as a material joint
venture.
62
alstria Annual Report 2014
Consolidated financial statements
Summarized financial information with respect to the Group’s material joint venture is set
out below. The summarized information below represents amounts shown in the joint
venture’s financial statements as prepared in accordance with IFRS.
Joint venture Alstria IV. Hamburgische Grundbesitz GmbH & Co. KG
EUR k
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Dec. 31, 2014
Dec. 31, 2013
4,847
105,025
2,542
40,500
2,168
74,525
3,708
37,238
The amounts of assets and liabilities stated above include the following:
EUR k
Dec. 31, 2014
Dec. 31, 2013
Cash and cash equivalents
Current financial liabilities
(excluding trade and other payables and provisions)
Non-Current financial liabilities
(excluding trade and other payables and provisions)
EUR k
Revenue
Profit or loss from continuing operations
Post-tax profit (loss) for the year
Other comprehensive income for the year
Total comprehensive income for the year
Dividends received from the joint venture during the year
The above profit (loss) for the year includes the following:
EUR k
Depreciation and amortisation
Interest income
Interest expense
Income tax expenses (income)
3,721
151
1,074
147
39,421
35,046
2014
3,210
25,480
25,480
1,111
26,591
-
2013
2,152
-108
-108
732
623
-
2014
2013
0
1
-1,552
0
-1
3
-1,606
-952
The profit on continuing operations in 2014 relates to an increase in fair value of an
investment property as a result of refurbishment measures.
alstria Annual Report 2014
63
Consolidated financial statements
The reconciliation of the above-summarised financial information to the carrying amount
of the interests in the joint venture as recognised in the consolidated financial statements
is as follows:
EUR k
Dec. 31, 2014 Dec. 31, 2013
Net assets of the joint venture
Proportion of the Group's ownership interest in the joint venture
Cumulativ disproportionate profit allocation
Carrying amount of the Group's interest in the joint venture
66,830
49.0%
804
33,551
Aggregate information of joint ventures that are not individually material:
EUR k
The Group's share of profit (loss) from continuing operations
The Group's share of other comprehensive income
The Group's share of total comprehensive income
2014
-156
0
-156
35,747
49.0%
1,337
18,853
2013
-145
0
-145
EUR k
Dec. 31, 2014 Dec. 31, 2013
Aggregate carrying amount of the Group's interests in these
joint ventures
983
2,148
There were neither unrecognised shares of losses of a joint venture nor any significant
restrictions as to the ability of joint ventures to transfer cash funds to the Group.
5 KEY JUDGMENTS AND ESTIMATES
To a certain degree, estimates, assessments and assumptions have to be made in the
course of preparing the Group’s consolidated financial statements. These can affect the
reported amounts and recognition of assets and liabilities, contingent assets and
liabilities on the balance sheet date and the amounts of income and expenses reported
for the period overall. The major items affected by such estimates, assessments and
assumptions are described hereinafter. Actual amounts may differ from the estimates.
Changes in the estimates, assessments and assumptions can have a material impact on
the consolidated financial statements.
5.1 Judgements
Management has made the following discretionary decision in line with the Group’s
accounting policies. Apart from decisions involving estimations, it has the most significant
effect on the amounts recognised in the financial statements:
Operating lease commitments – Group as lessor The Group has entered into com-
mercial property leases on its investment property portfolio. Based on an evaluation of
the terms and conditions of the arrangements the Group has determined, that all the
significant risks and rewards of ownership of these properties remain with the Group.
As a result the contracts are treated and accounted for as operating leases.
64
alstria Annual Report 2014
Consolidated financial statements
5.2 Estimates and assumptions
Together with other key sources of estimation uncertainty the key assumptions
concerning the future, which were valid on the reporting date, are discussed below. They
present a significant risk, possibly resulting in necessary, material adjustments to the
carrying amounts of assets and liabilities within the next financial year. Applying
estimates is in particular necessary to:
determine the fair value of investment property;
determine the fair value of derivative financial instruments;
determine the fair value of virtual shares granted to management;
determine the fair value of other provisions and
determine the fair value of convertible profit participation certificates.
Fair value of investment property
Especially when determining the fair value of the investment property, alstria office REIT-
AG must apply and take into account numerous estimated factors. The fair value
measurement was performed by an independent third party (Colliers International UK
plc., London; see Note 7). If the future development 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 future earnings. The effects of the most significant
input parameters on the valuation of the Group’s investment properties are shown in
Note 10.1.
Fair value of derivative financial instruments
An independent third party performed a fair value measurement of the derivative
financial instruments. The market data compiled thereof was included in the standard
valuation models. Thus, a normal level of estimation uncertainty exists with respect to
possible deviations from the market data applied. We consider the models used to be
adequate and believe there is no reason to question their applicability.
Fair value of virtual shares
Until settlement the fair value of share based virtual shares granted to the Management
Board is measured at each balance sheet date. They are accounted for as provisions. The
proportional expense incurred in the period comprises the addition to, and the reversal
of, the provision between two reporting dates and the dividend paid during the respective
period. This valuation requires the Company to make estimates about certain
parameters, and hence they are subject to uncertainty. The fair value of the virtual
shares granted, is allocated to the vesting period subject to the terms of the underlying
alstria Annual Report 2014
65
Consolidated financial statements
share based incentive plan. The resulting personnel expenses incurred an addition to
provisions of EUR 749 k (December 31, 2013: EUR 1,046 k) and a provision of an
amount of EUR 1,490 k as reported in the consolidated financial statements as at
December 31, 2014.
Other provisions
Furthermore provisions include provisions for rental guarantees of an amount of
EUR 2,325 k. The amount of the provision for rental guarantees is based on the
assessment of the probability of their use. This, in turn, refers to information about the
situation of the respective tenants and the likelihood of them exercising the break option.
Fair value of convertible profit participation certificates
The Group’s employees were granted convertible profit participation certificates. The fair
value of which was estimated at the respective granting dates applying of a binary
barrier option model based on the Black-Scholes model; assumptions include an
automatic conversion once the barrier is reached. The model takes the terms and
conditions upon which the instruments were granted into account. This valuation requires
the Company to make estimates concerning these parameters, which are hence subject
to uncertainty.
At the end of reporting period the above stated assets, liabilities and equity instruments,
which are particularly exposed to estimation uncertainties, had the following impact on
the consolidated statement of financial position:
EUR k
Investment property
Positive fair values of derivatives
Negative fair values of derivatives
Other provisions
Valuation of convertible profit
participation rights and virtual shares
Dec. 31, 2014
Dec. 31, 2013
1,645,840
1,632,362
6,643
19,686
4,089
-1,410
33,118
25,963
5,259
-1,711
6 SEASONAL OR ECONOMIC EFFECTS ON BUSINESS
The business activities of alstria office REIT-AG (primarily the generation of revenues
from investment properties) are not generally affected by seasonality. However, the sale
of one or more large properties can have a significant impact on revenues and operating
expenses.
Experience shows that the real estate market tends to fluctuate as a result of factors
such as changes in consumers’ net income, GDP, interest rates, consumer confidence,
demographic factors and other factors inherent to the market. Changes in the interest
rate might lead to a modified valuation of the investment property and derivatives.
66
alstria Annual Report 2014
Consolidated financial statements
7 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting and valuation methods have been used to prepare the
consolidated financial statements of alstria office REIT-AG.
Fair value measurement
The Group measures financial instruments, such as derivatives, and non-financial assets,
such as investment property, at their fair value at each reporting date.
Fair value is defined as the price that would be received upon selling or paid upon
purchasing an asset in an orderly transaction at arms’ length between willing market
participants on the measurement date in question; regardless of whether that price is
directly observable or estimated applying another valuation technique. In estimating the
fair value of an asset or a liability, the Group takes the characteristics of the asset or
liability into account, if market participants were also to take them into account when
pricing the asset or liability on the measurement date. Fair value for measurement
and/or disclosure purposes in these consolidated financial statements is determined on
such basis. Hereby excluded are the following:
share-based payment transactions tha are within the scope of IFRS 2 ‘Share-
based payments’,
leasing transactions that are within the scope of IAS 17 ‘Leases’ and
measurements that have some similarities to fair value but are not fair value,
such as net realisable value in IAS 2 ‘Inventories’ or value in IAS 36 ‘Impairment
of assets’.
The valuation technique used is appropriate in the circumstances and sufficient data is
available to measure fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs. To increase consistency and comparability in
fair value measurements and related disclosures, the IFRSs established a fair value
hierarchy that categorises the inputs used to measure fair value into three levels. The fair
value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets
for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable
inputs (Level 3 inputs).
Level 1 inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability.
The level of disclosure is more extensive for Level 3 inputs.
alstria Annual Report 2014
67
Consolidated financial statements
Investment property
Investment property comprises all property that is held in order to generate rental
income or long-term value increases in assets. It is neither used in production nor for
administrative purposes. It is recognised at acquisition cost at the time of purchase.
Costs include transaction costs, which have to be capitalised (particularly real estate
transfer tax). In accordance with IAS 40.17, costs incurred subsequently for dismantling,
replacement of parts or maintenance of property are also included.
Costs of debt, which can be directly allocated to the acquisition, or production of
investment property are capitalised in the year in which they arise.
For subsequent measurement, the Company uses the fair value model according to
IFRS 13.61 et seq., which reflects an income capitalization approach combined with
market conditions at the end of the reporting period.
In the context of the fair value hierarchy as described above, only inputs of level 2 and 3
are applicable for property. The majority is categorised as Level 3.
In addition, if inputs are categorized in different levels of the fair value hierarchy, the
entire fair value measurement is categorized at the same level of the fair value hierarchy
as the lowest level input significant to the measurement in question.
The property valuation process is normally carried out by qualified external valuers using,
when available, relevant market information generated from transactions of comparable
properties. Such information can be regarded as an observable input.
A high degree of judgment may be required from valuers when observable information is
not available or when significant adjustments are made to the observable market
information. If the adjustments made are significant to the entire measurement then the
fair value is to be categorized within Level 3.
Categorization in level 2 is possible to the extent that sufficient data is available and does
not require significant adjustments. This will occur in the more transparent markets
where there is likely to be a significant number of comparable transactions.
Disclosure categorization will be determined by such factors as the nature, characteristics
and risks of the asset and on the level of fair value hierarchy.
The level of disaggregation of the following quantitative disclosures is largely based on
asset type and geographical location (city/country). The intention is to provide sufficient
detail to reflect the different characteristics of assets and to provide enough information
for users to assess whether the entity’s views about individual inputs differs from their
own.
Inputs used in the valuation approach adopted by the Group for all its properties include
68
alstria Annual Report 2014
Consolidated financial statements
rental revenues, adjusted yield figures (e.g. property based capitalization rates) and
vacancy periods. These inputs can hardly be observed at markets and they are
considered to be significant inputs. Therefore the fair value measurement used by the
Group for valuation of all investment properties is entirely categorized as level 3.
Information about the significant unobservable inputs used and their sensitivities on the
fair values of the Group’s investment property is presented in Note 10.1.
Valuation process for investment properties
The fair value hierarchy does not make any statements concerning the applied valuation
techniques.
All market values were determined by Colliers International UK plc, London, a renowned
appraiser and brokerage firm, as at December 31, 2014.
The basis for deriving the fair values as defined by IFRS 13.61 should, if possible, be
based on valuation techniques that are appropriate in the circumstances and for which
sufficient data is available to measure fair value, thereby maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs. The analysis above
showed that there was not a sufficient number of official comparable transactions to
derive any market values. Therefore, the fair values were determined based on an
income approach in accordance with IFRS 13.61.
In estimating the fair value of the properties, the highest and best use of the properties
is their current use. There has been no change to the valuation method during the year.
The method used is a hard-core and top-slice method, whereby rental income is
horizontally segmented. The hard-core portion represents the prevailing contractual rent.
The top slice represents the difference between market rent and contractual rent. This
method fulfils the requirements of the Red Book, a set of international valuation
standards set forth by the Royal Institution of Chartered Surveyors. In addition, the
method used by Colliers International UK plc. is also appropriate and suitable for
determining market values in accordance with the provisions of the International
Valuation Standards (IVS, or the White Book).
In order to derive the fair value the properties were divided into two groups and valued
accordingly. Group 1 contained properties with anchor lease terms of five years or less
and Group 2 held properties with anchor lease terms of more than five years.
Group 1 is for properties with leases set to expire in five years or less: Hard-core and
top-slice method, taking into account
the contractual rent for the remaining term of the lease;
a vacancy period of between 6 and 18 months following the expiry of the lease;
alstria Annual Report 2014
69
Consolidated financial statements
the necessary maintenance costs to re-let the properties at a comparable rent
level;
re-lets at market rents;
capitalisation rates reflecting the individual risk of the property as well as the
market activity (comparable transactions);
non-allocable operating costs of an amount of 5% of market rents p.a.
the net selling price.
Group 2 is for properties with anchor leases that are let to tenants with strong credit
ratings on a long-term basis: Hard-core and top-slice method, taking into account
the contractual rent for the remaining term of the lease;
re-lets at market rents (accounting for the difference between market rent and
contractual rent);
capitalisation rates reflecting the individual risk of the property as well as the
market activity (comparable transactions);
non-allocable operating costs in the amount of 5% of market rents p.a.
the net selling price.
Gains or losses arising from changes in the fair values of investment property are dis-
closed in the income statement in the item ‘Net gain/loss from fair value adjustments on
investment property’ in the year in which they arise.
Investment properties are derecognised when they have either been disposed of or when
the investment property is permanently withdrawn from use and no future economic
benefit is to be expected from its disposal. Any gains or losses on the retirement or
disposal of an investment property are recognised in the income statement in the year of
retirement or disposal.
Leases
In accordance with IAS 17 the lessee is considered to be the beneficial owner of leased
assets when the lessee bears all the risks and rewards incidental to the assets (finance
lease). If the lessee is deemed to be the beneficial owner, the leased asset is recognised
at fair value or at the lower present value of the minimum lease payments at the
inception date of the lease. The corresponding leasing liability is recorded as a lease
commitment under other non-current liabilities. The resulting lease payments are
separated into an interest portion and an amortizing portion, respectively.
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alstria Annual Report 2014
Consolidated financial statements
Operating leases
Lease agreements that alstria office REIT-AG has entered into with commercial tenants
are classified as operating leases under IFRS. Accordingly, alstria office REIT-AG acts as
a lessor in numerous different types of operating lease agreements for investment
properties. These leases generate the majority of proceeds and income for alstria office
REIT-AG. Furthermore, alstria office REIT-AG is, to a limited extent, lessee within the
scope of operating lease agreements.
Impairments of assets
Intangible assets with an indefinite useful live are not amortised; they are tested for
impairment on an annual basis.
Assets that are amortised, however, are tested for impairment whenever triggering
events or changes in circumstances indicate that the carrying amount may no longer be
recoverable.
An impairment loss is recorded at an amount equivalent to the excess of the carrying
amount over the recoverable amount. If the reasons for an impairment loss cease to
apply, the impairment loss is reversed as appropriate, which is the maximum value that
would have resulted, if normal amortisation had been charged.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and
accumulated impairment losses. Such costs include replacement costs part of the plant
and equipment when that cost is incurred, if the recognition criteria are met. All other
repair and maintenance costs are recognised in profit or loss as incurred.
Depreciation of plant and equipment is calculated on a straight-line basis over the useful
life of the asset (three to 15 years). The useful life of owner-occupied property is
estimated at 50 years. While the building is depreciated on a scheduled basis, the land is
not subject to depreciation.
An item of property, plant and equipment is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net proceeds of
disposal and the carrying amount of the asset) is recorded in profit or loss in the year the
asset is derecognised.
The assets’ residual values, useful lives and methods of depreciation are reviewed, and
adjusted if required, at the end of each financial year.
Borrowing costs, which can be directly allocated to the acquisition or production of
property, plant and equipment are capitalised in the year in which they arise.
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71
Consolidated financial statements
Intangible assets
Separately acquired intangible assets are measured at cost upon initial recognition. The
cost of intangible assets acquired in a business combination is its fair value on the date of
acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment losses. Internally generated
intangible assets are not capitalised and expenditure is reflected in profit or loss in the
year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or infinite.
Intangible assets with finite lives are amortised over their useful economic life and
assessed for impairment whenever there is an indication that the intangible asset may be
impaired. The amortisation period and amortisation method for an intangible asset with a
finite useful life is reviewed at least at the end of each financial year.
Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted for by changing the amortisation
period or method, as appropriate, and are treated as changes in accounting estimates.
The amortisation expense on intangible assets with finite lives is recognised in profit or
loss in the category of expenses consistent with the function of the intangible asset.
Amortisation of licences is calculated on a straight-line basis over the useful life of the
asset (three to eight years).
Currently, the Company does not have intangible assets with indefinite useful lives.
Gains or losses arising from derecognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the asset and
are recognised in profit or loss when the asset is derecognised.
Taxes
Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those that are enacted or substantively
enacted by the end of the reporting period.
The financial statements do not show any deferred taxes as alstria office REIT-AG, is
exempt from income taxation due to its REIT status.
Financial instruments
Pursuant to IAS 39, a financial instrument is any contract that gives rise to both a finan-
cial asset in one entity and a financial liability or equity instrument in another entity. Fi-
nancial assets in particular comprise cash and cash equivalents, trade receivables, as well
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alstria Annual Report 2014
Consolidated financial statements
as other loans and receivables issued by the enterprise, held-to-maturity investments
and original and derivative financial assets held for trading. Financial liabilities frequently
feature a claim to their return in cash or by means of other financial assets. In particular
these include liabilities to banks and other creditors, trade payables and derivative finan-
cial liabilities. Financial assets and liabilities are generally set off against each other.
Financial assets
The recognition and measurement of financial assets is subject to the provisions of IAS
39. Depending on the following classification as prescribed by IAS 39:
> held-to-maturity;
> measured at fair value through profit or loss;
> available-for-sale; or
> loans and receivables
Financial assets are either measured at amortised cost or at fair value and recognised as
at the end of the reporting period.
The fair value of quoted investments is based on current market prices. If the market for
a financial asset is not active (and for unlisted securities), the Group determines its fair
value by using valuation techniques. These include the use of recent arm’s length
transactions, reference to other instruments that are substantially the same, discounted
cash flow analyses and option pricing models, making maximum use of market inputs
and relying as little as possible on entity-specific inputs.
When financial assets are initially recognised, they are measured at fair value plus
transaction costs. The former is applicable for all financial assets whose fair value is not
adjusted for through profit or loss. Management decides on the classification of financial
assets upon initial recognition and reviews the classification at the end of each reporting
period. A financial asset is derecognised when the entity loses control of the contractual
rights that comprise the financial instrument.
All customary purchases and sales of financial assets are recognised on the trade date,
which is the date on which the Group commits to purchase or sell the asset in question. A
purchase or sale of financial assets is customary when it requires the delivery of assets
within the period generally established by regulations or conventions in the marketplace.
Financial assets held for trading are financial assets measured at fair value through profit
or loss. A financial asset is classified in this category if it is acquired principally for the
purpose of selling it in the short term. Unless derivatives are designated as hedges they
are also categorised as held for trading.
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Consolidated financial statements
Derivative financial instruments, which are not part of an effective hedge pursuant to
IAS 39, must be classified as held for trading and recognised in profit or loss at fair val-
ue. If their fair value is negative, they are disclosed under financial liabilities.
Financial assets available-for-sale are non-derivatives that are either designated in this
category or not classified in any of the other categories. They are included in non-current
assets unless the investments mature within twelve months of the end of the reporting
period or management intends to dispose of them in this period or the maturity at the
end of reporting period is less than twelve months. Available-for-sale financial assets are
initially recognised at fair value and subsequently carried forward at fair value. Changes
in the fair value of financial assets classified as available for sale are recognised in
equity; in the case they are sold or impaired their accumulated fair value adjustments
are recognised in the income statement.
The Group holds no financial assets, which are classified as held to maturity according to
the classification as prescribed by IAS 39.
No items of financial assets have been categorised as ‘at fair value through profit or loss’.
Receivables
Receivables are classified as loans and receivables as defined by IAS 39 and initially
measured at fair value and subsequently at amortised cost, after deduction of any
necessary impairment. Amortised costs are computed using the effective interest method
less any allowance for impairment. The calculation takes into account any premium or
discount on acquisition and includes transaction costs and fees that are an integral part of
the effective interest rate.
Within the scope of the measurement of trade receivables, a solvency check was
performed on the tenants (risk associated with the legal validity of receivables). The
result of which was that there were no reasons for a rent reduction (delcredere risk). This
examination is done for each individual property and portfolio basis, respectively.
Non-interest bearing receivables due in more than one year are discounted.
Gains and losses resulting from receivables being derecognised or impaired or due to
amortisation are recognised in profit or loss.
If there is objective evidence that an impairment loss has been incurred, the amount of
the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows discounted at the financial asset’s original
effective interest rate (i.e. the effective interest rate computed at initial recognition). The
carrying amount of the asset is reduced directly. The amount of the loss is recognised in
profit or loss.
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If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be objectively related to an event occurring after the impairment was
recognised, the previously recognised impairment loss may be reversed to the extent
that the carrying value of the receivable does not exceed its amortised cost at the
reversal date. Any subsequent reversal of an impairment loss is recognised in profit or
loss.
Provisions for impairments are made when there is objective evidence (such as the
probability of insolvency or significant financial difficulties of the debtor) that the Group
will not be able to collect all of the amounts due under the original terms of the invoice.
The carrying amount of the respective receivable is reduced directly. Impaired assets are
derecognised when they are assessed as uncollectable.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments such as interest rate swaps and caps to
hedge its risks associated with interest rate fluctuations. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative
contract is entered into and are subsequently remeasured at fair value. Derivatives are
carried as assets when their fair value is positive and as liabilities when their fair value is
negative.
The instruments reported as at December 31, 2014 were valued by an independent third
party. The fair value of derivative financial instruments is determined by discounting the
expected future cash flows over the remaining life of the agreement based on current
market rates or term structures of interest rates. Further details on the valuation of
derivative financial instruments under the fair value hierarchy can be found in Note 20.3.
When the Group first becomes party to the contract it assesses whether embedded
derivatives are required to be separated from host contracts. A reassessment can only
occur if there is a change in the terms of the contract that significantly modifies the cash
flows that would otherwise be required.
The method used for recording gains and losses depends upon whether the derivative
was assigned to an underlying transaction as a hedge. To this end, financial management
defines the hedge relationship between the hedging instrument and the hedged item.
Furthermore, the aim of the risk management measure and underlying strategy when
concluding the hedge transaction are described.
Any gains or losses arising from changes in fair value on derivatives during the period
that do not qualify for hedge accounting are recognised immediately in profit or loss.
For the purpose of hedge accounting, hedges are classified as cash flow hedges when
hedging exposure to variability in cash flows is attributable to a particular risk associated
alstria Annual Report 2014
75
Consolidated financial statements
with a recognised liability.
At the inception of a hedge relationship the Group formally designates and documents
the hedge relationship to which the Group wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The documentation
includes the identification of the hedging instrument, the hedged item, the nature of the
risk that is being hedged and how the entity will assess the hedging instrument’s
effectiveness in offsetting the exposure to changes in the hedged item’s cash flows that
are attributable to the hedged risk. The applied hedges are deemed to be highly effective
in achieving offsetting changes in fair value or cash flows. They are assessed on an on-
going basis to determine their effectiveness throughout the financial reporting periods for
which they were designated.
Cash flow hedges, which meet the strict criteria for hedge accounting, are accounted for
as follows:
> The effective portion of the gain or loss on the hedging instrument is recognised
directly in equity, while any ineffective portion is recognised immediately in profit or loss.
> Amounts taken to equity are transferred to profit or loss when the hedged transaction
affects profit or loss, such as when the hedged financial income or financial expense is
realised.
The Group neither uses any financial derivatives that qualify for the hedging of the fair
value of recognised assets or liabilities or a firm commitment (fair value hedges), nor
such financial derivatives that qualify for the hedging of a net investment in a foreign
operation (net investment hedge).
Cash and cash equivalents
Cash and short-term deposits in the consolidated statement of financial position are
comprised of current bank balances.
For the purposes of the consolidated cash flow statement, cash and cash equivalents
include the cash and cash equivalents defined above, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts.
Current bank balances are recognised at their nominal amount.
Treasury shares
Company equity instruments which are reacquired (treasury shares) are deducted from
equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or
cancellation of the Group’s own equity instruments.
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Liabilities
Financial liabilities, in particular trade payables, are stated at the amount repayable and
are discounted if classified as non-current and non-interest bearing.
Fair values are determined by discounting the future contractually agreed cash flows by
an appropriate interest rate from the yield curve at the end of the reporting period.
The recognition and measurement of financial liabilities is subject to the provisions of IAS
39. Depending on the classification as prescribed by IAS 39, which is:
at amortised cost or
measured at fair value through profit or loss
financial liabilities are either measured at amortised cost or at fair value and recognised
accordingly at the end of reporting period.
All loans and borrowings are initially recognised at fair value less directly attributable
transaction costs. They have not been designated as ‘at fair value through profit or loss’.
After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest method. Gains and losses
resulting from derecognition of amortisation are recognised in profit or loss.
The component of the convertible profit participation rights (Wandelgenussrechte), which
exhibits characteristics of a liability, is recognised as a liability in the balance sheet, net
of transaction costs. Upon issuing the jouissance shares, the fair value of the liability
component is determined using a market rate for an equivalent non-convertible bond.
This amount is then classified as a financial liability and measured at amortised cost until
it is extinguished on conversion or redemption.
A financial liability is derecognised when the obligation from the liability is discharged or
cancelled or expires. If an existing financial liability is replaced with a liability from the
same lender under substantially different terms, or the terms of an existing liability are
substantially modified, the exchange or modification is treated as a derecognition of the
original liability. The new liability is recorded and the difference in the respective carrying
amounts is recognised in profit or loss.
Provisions
Provisions are recognised where a present obligation to third parties exists as a result of
a past event, where a future outflow of resources is probable and where a reliable
estimate of that outflow can be made. Provisions are measured, taking all risks into
account at the best estimate of future cash outflows required to meet the obligation. If
they are non-current they are discounted. Provisions are not offset with reimbursements.
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77
Consolidated financial statements
Share-based payments
Share-based payments comprise cash-settled liability awards and equity-settled equity
awards.
The fair value of equity awards is generally determined by using a modified Black-Scholes
option-pricing model at the grant date. It measures the total personnel expense which is
to be recognised in profit and loss for the service period and which in turn increases
equity (paid-in capital) by the same amount.
Until settlement liability awards are measured at fair value at each balance sheet date,
they are classified as provisions. The expense of the period comprises the addition to,
and the reversal of, the provision between two reporting dates and the dividend
equivalent paid during the period.
Further details on the share-based payment schemes are given in Notes 17, 18 and 19
and in the remuneration report, respectively.
Revenue and expense recognition
Revenues and other operating expenses are basically recognised when it is probable that
the economic benefits will flow to the Group and only when the amount becomes reliably
measureable.
This is usually the case when services are rendered or goods or products have been
delivered and the risk has thus been transferred.
Revenue is measured at the fair value of the consideration received, excluding discounts,
rebates and other sales taxes or duties. Revenues are recorded excluding VAT. In
addition, the following specific recognition criteria must be met before revenues are
recognised:
Rental income from operating leases on investment properties is recognized on a
straight-line basis over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the
leased asset.
Operating expenses Operating expenses are recognized at the time of the service, or
when they are incurred.
Interest expenses and interest income are recognised when it is probable that the
economic benefits will flow out from the Group or to the Group and the amount of
expenses or income can be measured reliably. Interest expenses and income are
allocated to the period to which they apply, taking the principal amount outstanding into
account and measured at the applicable effective interest rate. The latter is defined as
the rate that is - on initial recognition - used to discount all estimated future cash
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alstria Annual Report 2014
Consolidated financial statements
outflows or receipts from the financial liability or asset over its expected term. .
Income taxes
REIT-AGs are fully exempt from German corporate income tax and trade tax. Hence,
alstria office REIT-AG has been exempt from tax with retrospective effect since
January 1, 2007.
Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to the
shareholders of the parent company by the weighted-average number of shares
outstanding during the business year. Diluted earnings per share are calculated based on
the assumption that all potentially dilutive securities and share-based payments are
converted or exercised.
8 SEGMENT REPORTING
IFRS 8 requires a ‘management approach’, under which information on segments is
presented on the same basis used for internal reporting purposes.
The services offered by alstria office REIT-AG exclusively focus on letting activities to
commercial property tenants in Germany. In accordance with IFRS 8, a single reporting
segment is identified which comprises all of the Groups’ operations.
The manner of reporting for this segment is consistent with the internal reporting
provided to the chief operating decision-maker. The chief operating decision-maker is
responsible for allocating resources to the operating segments of an entity and assesses
their performance. The Group’s chief operating decision-maker is the Management Board.
Revenues are generated by a larger number of tenants. Total revenues amount to
EUR 101,782 k (2013: EUR 104,224 k), of which EUR 30,986 k and EUR 15,656 k relate
to leases to the two largest customers of the Group. No other single customer has
neither in the financial year 2014 nor in the financial year 2013 contributed with 10% or
more to the consolidated revenues
9 NOTES TO THE CONSOLIDATED INCOME STATEMENT
9.1 Revenues
EUR k
Revenues from investment property
2014
101,782
2013
104,224
Revenues from investment property are mainly comprised of rental income from
investment property. The rental income includes effects totalling EUR 1,770 k (2013:
EUR 1,770 k) that are attributable to rent-free periods.
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79
Consolidated financial statements
9.2 Income less expenses from passed on operating expenses
EUR k
Income from passed on operating expenses
Income from passed on operating expenses
related to the prior years
Expenses from passed on operating expenses
Expenses from passed on operating expenses
related to the prior years
Income less expenses from passed on operating expenses
2014
15,586
836
16,422
-15,695
-1,359
-17,054
-632
2013
16,361
193
16,554
-16,361
-706
-17,067
-513
The expenses from passed on operating expenses which are directly attributable to
investment property include, in particular, operating costs, maintenance expenses and
property-based taxes.
9.3 Real estate operating expenses
EUR k
Maintenance and refurbishment
Vacancy costs
On-going repairs
Legal and advisory fees
Taxes on land and building
Property management
Other Expenses
2014
5,156
3,210
1,656
524
101
57
1,486
12,190
2013
5,218
3,190
1,253
204
170
26
401
10,462
Other expenses include operating costs, which could not be passed on to the tenants.
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Consolidated financial statements
9.4 Administrative expenses
EUR k
Legal and consulting fees
Communication and marketing
Depreciation
IT maintenance
Audit fee (audit and audit related services)
Travel expenses
Supervisory Board compensation
Leasing costs
Office area costs
Insurances
Training & workshops
Recruitment
Other
9.5 Personnel expenses
EUR k
Salaries and wages
Social insurance contribution
Bonuses
Expenses for share-based compensation
thereof relating virtual shares
thereof relating to the convertible profit
participation certificates
Amounts for retirement provisions and disability
Management Board
Other
2014
1,383
550
420
433
335
319
305
181
144
100
85
60
440
2013
1,320
532
549
420
335
397
305
190
143
41
136
62
895
4,755
5,325
2014
4,150
623
1,260
1,410
749
661
209
155
2013
3,919
580
1,256
1,711
1,046
665
202
122
7,807
7,790
Convertible profit participation rights granted to employees do not only grant the right to
a conversion when the conditions apply, but also to an annual payment equivalent to the
dividend amount paid out per share. Therefore, expenses for share-based compensation
resulting from the convertible profit participation rights must be accounted for in equity
(for the conversion right) as well as in liabilities (for the dividend entitlement). Of the total
expense related to the profit participation rights, which amounted to EUR 661 k,
EUR 589 k were recognised in equity (2013: EUR 541 k), while EUR 72 k were recorded as
an item in liabilities (2013: EUR 124 k).
On average the Group employed 62 employees in 2014 (2013: 61).
alstria Annual Report 2014
81
Consolidated financial statements
9.6 Other operating income
EUR k
Compensation payments and other recharges
Income from the reversal of provisions
in relation to rental guarantees
Capital funding fee
Income from the reversal of accrued liabilities
Property management services
Car use
Reimbursement of property taxes
Other
2014
3,622
570
491
459
179
95
0
725
2013
1,926
946
0
88
186
64
429
293
6,141
3,932
Compensation payments and other reallocations result from the early termination of
leases and refurbishment activities conducted by alstria. The
latter refers to
refurbishments to which the tenants had originally committed themselves upon entering
into the leasing contracts.
The prior years’ compensation payments also include charges passed on to a former
majority shareholder of an amount of EUR 571 k. The compensation has been incurred in
connection with the placement of alstria-shares of that shareholder in the capital
markets.
The capital funding fee resulted from the funding of additional equity intended for a joint
venture company.
An explanation for the reversal of provisions for rental guarantees can be found in
Notes 11.3.
9.7 Other operating expenses
EUR k
Legal and advisory fees
Impairment on trade receivables
Donations
Other
2014
577
114
12
263
965
2013
0
40
68
3
111
Legal and consulting fees of an amount of EUR 303 k were incurred as a result of a non-
recurring strategic projects related to the further development of the Group. A further
EUR 274 k have been added to litigation provisions.
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Consolidated financial statements
9.8 Financial and valuation result
The financial result breaks down as follows:
EUR k
Income from financial instruments
Interest expenses syndicated loan
Interest expenses other loans
Interest result derivatives
Interest expenses convertible bond
Other interest expenses
Financial expenses
Agency fees
Commitment fees
Net present value adjustments due to
the discount of leasing liabilities
Other
Other financial expenses
Net financial result
2014
113
-9,950
-9,172
-10,838
-4,871
0
-34,831
-300
-22
0
-289
-611
2013
317
-13,471
-9,036
-13,406
-2,697
-119
-38,729
0
-20
-413
-271
-704
-35,329
-39,116
Total interest income and expenses for financial assets and liabilities other than financial
derivatives amounted to an interest income of EUR 113 k (2013: EUR 317 k) and
EUR 21,654 k of interest expenses; (2013: EUR 24,011 k), respectively.
Total interest expenses calculated applying the effective interest method for financial
liabilities, i. e. not recognised at fair value through profit or loss, amounted to
EUR 1,548 k (interest expenses; 2013: EUR 4,280 k).
In neither of the two former financial years did the Group hold any financial assets
available for sale. Therefore, the net result from the disposal of financial assets available
for sale amounted, like in the previous year, to EUR 0.
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83
Consolidated financial statements
Fair value adjustments on financial derivatives resulted in a net loss, which is broken
down as follows:
EUR k
Transfer of cumulated loss from cash flow
hedge reserve to income statement
Ineffective change of the fair value of cash flow hedges
Change in fair value of financial
derivatives not qualifying as a cash flow hedge
Net loss from fair value
adjustments on financial derivatives
2014
-4,135
-18,146
-5,180
-27,461
2013
-2,988
-7,798
3,232
-7,554
In 2014, a loss amounting to EUR 4,135 k related to cumulative losses from fair value
adjustments of cash flow hedge derivatives, which were recorded in equity. The adjust-
ments resulted from the fact that the originally hedged transactions are no longer ex-
pected to occur.
Further details and explanations on derivatives are presented in Note 10.7.
9.9 Net result on the disposal of investment property
EUR k
Proceeds from the disposal of investment property
Carrying amount of investment property disposed of
2014
71,650
-67,084
4,566
2013
54,418
-53,020
1,398
The total loss from the disposal of objects and portfolios sold below their carrying value
amounted to EUR 4 k in 2014 and EUR 523 k in 2013.
9.10 Income tax expenses
alstria office REIT-AG obtained the G-REIT status on January 1, 2007. At this time it was
subject to final taxation and has been tax-exempt with regard to corporate tax and trade
tax effectively since then.
Minor tax payment obligations may arise at Group level for affiliates serving as a general
partner of a partnership or for REIT Service Companies.
Deferred income tax Due to its REIT-status and resulting tax exemption, there were
no impacts on the Company’s financial statements, its equity or profit and loss in 2013
and 2014, which resulted from deferred income taxes.
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Consolidated financial statements
10 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION –
ASSETS
10.1 Investment property
This item, which is comprised of all investment properties held by the Company, breaks
down as follows:
Fair Values in EUR k
As of Jan. 1
Property acquisition
Capital expenditure
Disposals
Net result from the adjustment of the fair value
of investment property
As of December 31
2014
2013
1,632,362
1,622,988
42,390
33,234
-62,970
36,865
14,483
-42,000
824
27
1,645,840
1,632,362
alstria office REIT-AG applies the fair value model pursuant to IAS 40.33 et seq. for
subsequent measurement of investment property. External appraisals were obtained for
measurement. For a detailed description of the valuation of assets, please see Note 7.
The item on the income statement ‘net result from fair value adjustments on investment
property’ of an amount of EUR 42,077 k is attributable to a change in unrealized losses.
The following table provides details of the Group’s investment properties and information
about the fair value hierarchy as at December 31, 2014:
Investment property
Level 1
EUR k
-
Level 2
EUR k
Level 3
EUR k
Fair value at
Dec. 31, 2014
EUR k
-
1,645,840
1,645,840
There were no transfers between Levels 1 and 2 during the year.
The Group has considered the nature, characteristics and risks of its properties as well as
the level of the fair value hierarchy within which the fair value measurements are
categorised in determining the appropriate classes of investment property. The following
factors have been applied to determine the appropriate classes.
a) The real estate segment: Within all investment portfolios the majority of the lettable
area is dedicated to offices. Therefore all investment properties belong to one asset
class: offices.
b) The geographical location of all properties is Germany.
c) The level of fair value hierarchy for all investment properties is level 3.
alstria Annual Report 2014
85
Consolidated financial statements
d) There are larger differences between the contractual lease terms. This also affects the
weighted average unexpired lease term (WAULT) for each investment property. A dis-
tinction is made between objects with a short, medium and long WAULT.
As a result three appropriate classes of investment properties have been identified:
Germany – Office – Level 3 – short WAULT (0 to 5 years),
Germany – Office – Level 3 – medium WAULT (> 5 to 10 years),
Germany – Office – Level 3 – long WAULT (> 10 years).
Quantitative information about fair value measurements using unobservable
inputs (level 3)
EUR k, unless stated otherwise
Fair Value at
Dec. 31, 2014
1,645,840
Valuation
technique
hard-core
and top slice
Portfolio
Offices Germany
Number of buildings:
74
Unobservable
inputs
Range
Min. Max.
Weighted
average
Estimated rental value
(EUR/sqm/month)
Adjusted yield
Void period of office
leases expiring within
next 5 years [months]
5.7
19.2
4.16% 9.57%
10.8
5.92%
6
18
12
0 ≤ WAULT ≤ 5 Years
Offices Germany
Number of buildings:
49
5 < WAULT ≤ 10 Years
Offices Germany
Number of buildings:
10
WAULT > 10 Years
Offices Germany
Number of buildings:
15
930,155
hard-core and
top slice
Estimated rental value
(EUR/sqm/month)
Adjusted yield
Void period of office
leases expiring within
next 5 years [months]
6.2
19.2
4.78% 9.57%
10.7
6.30%
6
18
16
190,570
hard-core and
top slice
Estimated rental value
(EUR/sqm/month)
Adjusted yield
Void period of office
leases expiring within
next 5 years [months]
8.4
17.0
4.84% 7.99%
12.3
6.33%
12
18
15
525,115
hard-core
and top slice
Estimated rental value
(EUR/sqm/month)
Adjusted yield
Void period of office
leases expiring within
next 5 years [months]
5.7
17.0
4.16% 6.98%
10.2
4.84%
12
12
12
Sensitivity of measurement to variance of significant unobservable input
A decrease in the estimated rental income decreases the fair value.
An increase in the vacancy periods decreases the fair value.
An increase in the adjusted yield decreases the fair value.
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alstria Annual Report 2014
Consolidated financial statements
A decrease in the estimated rental income leads to an increase in the adjusted yield; an
increase in the estimated rental income leads to a decrease in the adjusted yield.
A decrease in the vacancy period leads to an increase in the adjusted yield; an increase
in the vacancy period leads to a decrease in the adjusted yield.
The external assessor has carried out sensitivity analyses on his fair value assessments,
which show the effect of changes in capitalisation rates (adjusted yield) on fair market
values.
Fair Value of investment properties (EUR m)
Capitalisation rates
Dec. 31, 2014
Dec. 31, 2013
–0.25 %
0.00 %
0.25 %
1,723
1,646
1,577
1,713
1,632
1,560
In financial year 2014 benefits and obligations were transferred for five properties to the
buyers, none of which classified as ‘assets held for sale’ as at December 31, 2013. The
transaction volume amounted to EUR 67,057 k.
Capital expenditure (EUR 33,234 k) is comprised of subsequent acquisition and
production costs relating to property acquisitions and refurbishment projects.
Furthermore, the Group acquired two investment properties for which the transfer of
benefits and obligations was completed in the reporting period. The transaction volume
for the properties amounted to EUR 42,390 k including incidental acquisition costs.
For more information on changes to the immovable property, please refer to the
‘Transactions’ section in the Group management report for the business year 2014 (see
page 10).
Borrowing costs that would have had to be capitalised as construction costs were not
incurred during the reporting period (2013: EUR 0 k).
Disclosures concerning expenses/income as recorded in the income statement pursuant
to IAS 40.75 (f) include:
> EUR 101,782 k (2013: EUR 104,224 k) rental income from investment property;
> EUR 8,980 k (2013: EUR 7,272 k) operating expenses (including repairs and
maintenance) directly allocable to investment property from which rental income was
generated during the period under review; and
> EUR 3,210 k (2013: EUR 3,190 k) operating expenses (including repairs and
maintenance) arising from investment property which did not generate rental income
alstria Annual Report 2014
87
Consolidated financial statements
during the period under review.
Investment properties (including held-for-sale investment properties) of an amount of
EUR 1,645,840 k (2013: EUR 1,632,362 k) served as collaterals for bank loans.
10.2 Equity-accounted investment
At the end of the reporting period, two companies in which alstria office REIT-AG holds a
share of 49.0% were treated as joint ventures and accounted for using the equity
method. The carrying amount of the joint ventures at the end of the reporting period was
EUR 34,534 k (December 31, 2013: EUR 21,001 k). For further information please refer
to Note 4.
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alstria Annual Report 2014
Consolidated financial statements
10.3 Property, plant and equipment
EUR k
Acquisition and production cost
As at January 1, 2014
Additions
Disposals
As at December 31, 2014
Accumulated amortization,
depreciation and write-downs
As at January 1, 2014
Additions
Disposals
As at December 31, 2014
Net book values as at
December 31, 2014
EUR k
Acquisition and production cost
As at January 1, 2013
Additions
As at December 31, 2013
Accumulated amortization,
depreciation and write-downs
As at January 1, 2013
Additions
As at December 31, 2013
Net book values as at
December 31, 2013
Plant
Furniture and
fixtures
Owner occupied
property
Total 2014
1,169
121
-242
1,048
1,153
22
-242
933
115
930
45
0
975
431
109
0
540
435
5,019
7,118
16
-33
182
-275
5,002
7,025
378
89
0
467
1,962
220
-242
1,940
4,535
5,085
Plant
Furniture and
fixtures
Owner occupied
property
Total 2013
1,169
0
1,169
1,134
19
1,153
16
883
47
930
318
113
431
499
5,019
7,071
0
47
5,019
7,118
285
93
378
1,737
225
1,962
4,641
5,156
The useful life of the assets is estimated to be between three to 15 years for plant,
furniture and fixtures and 33.33 to 50 years for the own-occupied properties.
Plant is comprised of miscellaneous items such as fire extinguishers or a control panel for
a closed-circuit television system.
alstria office REIT-AG occupies areas for its own use in two of its office buildings in
Hamburg and Düsseldorf. Therefore, the owner-occupied areas of the properties are
categorised as ‘property, plant and equipment’ according to IAS 16.
In order to secure Group liabilities, both properties are pledged via land charges.
alstria Annual Report 2014
89
Consolidated financial statements
10.4 Intangible assets
EUR k
Acquisition and production cost
As of Jan. 1
Additions
As of Dec. 31
Accumulated amortisation, depreciation and
write-downs
As of Jan. 1
Additions
As of Dec. 31
Net book values as at Dec. 31
Licences
2014
2013
1,812
71
1,883
1,340
199
1,539
344
1,480
332
1,812
1,013
327
1,340
472
The useful life of the intangible assets is estimated to be between three to eight years.
The intangible assets consist of software licences and licences to other rights of an
amount of EUR 262 k and EUR 82 k, respectively.
10.5 Assets held for sale
The Group neither disclosed any assets held for sale at this year’s balance sheet date nor
at the previous year’s balance sheet date. The level of fair value hierarchy within which
the fair value measurements are in principle categorised is level 3. The valuation of the
properties held for sale is regularly based on two unobservable input parameters: (i) the
contractual disposal price for the asset and (ii) the expected disposal costs to be borne
by the Group. Since the expected disposal expenses are of minor influence to the
valuation the contractual disposal price corresponds to the carrying amount of the assets
held for sale.
In estimating the fair value of the properties, the highest and best use of the properties
is their current use. There has been no change to the valuation method during the year.
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alstria Annual Report 2014
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10.6 Receivables and other assets
Due to the specific nature of the business, the Group considers receivables due in up to
one year to be current. The following table presents an overview on the receivables of
the Group:
EUR k
Trade receivables
Rent receivables
Accounts receivable from joint ventures
Other receivables
Accrued receivables for ‘Rent free periods’
Deposit account
Purchase price retention
Prepayments
Receivables and other assets
Other receivables
Dec. 31, 2014
Dec. 31, 2013
3,498
88
6,538
1,653
1,000
99
837
10,127
3,708
89
4,768
1,639
0
130
454
6,991
Except for EUR 1,653 k of receivables (December 31, 2013: EUR 1,639 k) due from an
escrow holder all receivables are due within one year from the end of the reporting
period. The fair value of all receivables is equal to their carrying amount.
Trade receivables were written down by EUR 114 k (December 31, 2013: EUR 40 k) due
to rent payments in arrears. Apart from trade receivables no other receivables, were
impaired.
As at December 31, 2014, trade receivables of an amount of EUR 1,010 k (December 31,
2013: EUR 991 k) were past due but not yet impaired. These relate to a number of
independent tenants for whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
EUR k
Trade receivables
Up to 3 months
3 to 6 months
Over 6 months
Dec. 31, 2014
Dec. 31, 2013
608
95
307
1,010
662
87
242
991
All receivables from rental agreements and property disposals, as well as insurance
receivables and derivative financial instruments, have been assigned to the lenders
(Note 11.2) in order to secure the Group’s loans.
A total of EUR 6,538 k of other receivables is made up of accruals resulting from the
recognition of total rental revenues on a straight-line basis over the entire term of the
alstria Annual Report 2014
91
Consolidated financial statements
lease agreements (rental smoothing).
Purchase price retentions in an amount of EUR 1,000 k relate to the sale of one
investment property
10.7 Derivative financial instruments
The following derivative financial instruments were in place at the end of reporting period:
Dec. 31, 2014
Dec. 31, 2013
Product
Strike p.a. Maturity date
Notional Fair value
Notional Fair value
Cap
Cap
Cap
Swap
(%)
(EUR k)
(EUR k)
(EUR k)
(EUR k)
0.2500
Dec. 31, 2017
340,000
3.0000
Sept. 30, 2019
4.6000
Oct. 20, 2015
50,250
47,902
402
49
0
0
42,500
47,902
0
641
3
2.9900
July 20, 2015
380,870
-6,198
380,870
-15,769
Financial derivatives -
held for trading
Forward-Cap1)
0.0000
Sept. 30, 2020
819,022
380,870
-5,747
5,874
471,272
-15,125
380,870
31,932
Cap
Cap
Cap
Cap
Swap
3.0000
Apr. 30, 2021
3.0000
Mar. 29, 2024
3.0000
Dec. 17, 2018
3.2500
Dec. 31, 2015
2.1940
Dec. 31, 2014
48,591
10,900
56,000
11,155
0
147
140
31
0
0
0
0
56,000
11,327
37,283
0
0
541
2
-858
Financial derivatives -
cash flow hedges
Total interest rate
derivatives
Embedded
derivative
Total
n/a
June 14, 2018
126,6462)
6,192
104,6102)
31,617
945,668
445
575,882
16,492
8,0923)
-13,488
-13,043
7,8843)
-9,336
7,156
1) Not effective prior to July 20, 2015.
2) Notional value excluding an amount of EUR 380,870 k not effective prior to July 20, 2015
3) Underlying number of shares subject to conversion in thousand.
On June 7, 2013, alstria issued a convertible bond for a total amount of EUR 79,400 k.
Due to the terms and conditions of the convertible bond, the conversion right has to be
separately accounted as an embedded derivative.
In line with alstria’s hedging strategy, a new interest rate forward cap agreement with a
notional value of EUR 380,870 k and a cap rate of 0.0000% was entered to hedge the
variable interest payments. The cap will become effective on July 20, 2015 and will
expire on September 30, 2020. This transaction was executed on September 11, 2013.
The new interest rate forward cap agreement will replace the existing interest rate
forward swap with a notional amount of EUR 380,870 k, a swap rate of 2.9900% and a
maturity to July 20, 2015.
To hedge the interest rate risk of variable interest rate loans a cap agreement of a
notional amount of EUR 340,000 k, a cap rate of 0.2500% and a term of the hedging
92
alstria Annual Report 2014
Consolidated financial statements
relationship until December 31, 2017, was signed taking effect on December 31, 2014.
The financial derivative constitutes an economic hedge since the cap agreement does not
meet the conditions for a cash flow hedge.
The value changes of the derivatives are reflected in various items in the balance sheet.
The following table shows the change in financial derivatives since December 31, 2013:
EUR k
Hedging instruments as at
January 1, 2014
Effective change in fair values
cash flow hedges
Ineffective change in fair values
cash flow hedges
Net result from fair value chang-
es in financial derivatives not
qualifying for cash flow hedging
Reclassification of cumulated loss
from equity to income statement
Changes in accrued interests
concerning financial derivatives
Acquisitions
Disposals
Reclassification due to change of
residual term
Hedging instruments as at
December 31, 2014
99
0
0
4,135
0
0
0
0
Cash
flow
hedge
reserve
Financial assets
Financial liabilities
Non-current Current Non-current Current
Total
-7,329
32,474
644
-25,963
0
-27,718
0
0
0
0
7,155
99
99
9,573
0 -18,145
0
0
0
1,436
0
-1,069
-4,112
0
-5,181
0
0
876
0
0
145
0
572
0
0
0
0
0
145
2,312
572
451
-451
6,198
-6,198
0
-3,095
6,643
0
-13,488
-6,198 -13,043
The notional amount of the financial derivatives effective at the end of the reporting
period is EUR 945,668 k (December 31, 2013: EUR 575,882 k). This includes cash flow
hedges and derivatives not qualifying for cash flow hedging.
Derivatives of a notional amount of EUR 819,022 k (December 31, 2013: EUR 471,272 k)
are not designated as a cash flow hedge.
An increase in the fair values of derivatives of an amount of EUR 99 k that are effective
in a cash flow hedge was recognised in the equity in the hedging reserve in 2014 (2013:
increase of EUR 11,820 k).
The ineffective portion that arises from cash flow hedges amounted to a fair value loss
of EUR 18,145 k (2013: loss of EUR 7,798 k) and is recognised in profit or loss.
Further losses totalling EUR 5,181 k (2013: gain of EUR 3,232 k), which were due to the
market value of the derivatives not included in hedge accounting, were recorded in the
income statement 2014.
A loss of EUR 4,135 k (2013: loss of EUR 2,988 k) relates to cumulative losses from cash
flow hedges for which the forecast transaction is no longer expected to occur, as the
respective loans were repaid prematurely.
alstria Annual Report 2014
93
Consolidated financial statements
Overall, this results in a total loss of EUR 27,461 k (2013: loss of EUR 7,554 k), which is
presented as the ‘net loss from fair value adjustments on financial derivatives’.
10.8 Cash and cash equivalents
EUR k
Bank balances
Dec. 31, 2014
63,145
Dec. 31, 2013
82,782
Cash and cash equivalents in an amount of EUR 63,145 k refer to cash at banks. The
cash amount is not subject to any restrictions (December 31, 2013: EUR 252 k).
11 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION –
EQUITY AND LIABILITIES
For detailed information on equity please refer to the consolidated statement of changes
in consolidated equity.
11.1 Equity
Share capital
Thousand
Ordinary shares of EUR 1 each
Dec. 31, 2014
Dec. 31, 2013
79,018
78,933
The conversion of profit participation rights (Note 12) in the second quarter of 2014
resulted in the issue of 85,000 new shares by utilising the conditionally increased capital
provided for such purposes (Conditional Capital III 2012).
On December 31, 2014 alstria office REIT-AG’s share capital amounted
to
EUR 79,018,487, represented by 79,018,487 non-par value bearer shares.
The majority of the shares of the Company’s are in free float.
The following table shows the reconciliation of the number in shares outstanding:
Number of shares
Shares outstanding on Jan. 1
Conversion of convertible participation rights
As of Dec. 31
2014
78,933,487
85,000
79,018,487
2013
78,933,487
0
78,933,487
94
alstria Annual Report 2014
Consolidated financial statements
Capital reserve
The capital reserve changed as follows during the financial year:
EUR k
As at Jan. 1
Payment of dividends
Share-based payments
Conversion of convertible participation rights
2014
730,486
-39,467
589
85
2013
769,412
-39,467
541
0
As at Dec. 31
691,693
730,486
An increase of EUR 589 k (2013: EUR 541 k) resulted from the vesting of the convertible
profit participation certificates as granted to the Group’s employees.
Dividend payments released from capital reserves totalled EUR 39,467 k (EUR 0.50 per
outstanding share) in 2014.
Hedging reserve
EUR k
Hedging reserve
Dec. 31, 2014
Dec. 31, 2013
–3,095
–7,329
For further details on the changes in the hedging reserve please refer to Note 10.7.
Treasury shares
As at December 31, 2014, the Company held no treasury shares.
By resolution of the Annual General Meeting held on June 8, 2011, the Company’s
authorisation to acquire treasury shares was renewed. According to the resolution, alstria
office REIT-AG is authorised to acquire up to 10% of the capital stock until June 8, 2016.
There is no intention to make use of this authorisation at present.
Retained earnings
Retained earnings as at December 31, 2014 totalled an amount of EUR 78,977 k. The
payment of the dividend could not be generated from alstria office REIT-AG’s stand alone
positive retained earnings according to German GAAP [HGB] at the time the dividend had
to be paid. This is why the amount of the dividend payouts was released from the capital
reserve in 2014.
alstria Annual Report 2014
95
Consolidated financial statements
11.2 Financial liabilities
EUR k
Loans
Syndicated loan
Other loans
Convertible bond
Total
EUR k
Loans
Syndicated loan
Other loans
Convertible bond
Total
Non-current
Current
Loan
Accrued
interest
Total
current
Total
Dec. 31,
2014
497,516
307,114
69,395
0
0
0
497,516
5,923
1,779
7,702
314,816
0
0
0
69,395
874,025
5,923
1,779
7,702
881,727
Non-current
Current
Accrued
interest
Total
current
Total
Dec. 31,
2013
Loan
0
73,178
0
534,794
220,984
66,708
822,486
73,178
29
582
97
708
29
534,823
73,760
294,744
97
66,805
73,886
896,372
The table presents the long-term loans, net of the current portion as stated under non-
current liabilities. Furthermore, it shows the current amount due within one year, which
is recorded as an item in short-term loans in current liabilities.
As at December 31, 2014, the total repayable amount of the loans drawn by alstria office
REIT-AG was EUR 895,086 k (December 31, 2013: EUR 913,892 k). The lower carrying
amount of EUR 881,727 k (EUR 847,025 k non-current and EUR 7,702 k current) takes
interest liabilities and transaction costs to be allocated under the effective interest
method upon raising liabilities into account. Financial liabilities with a maturity of up to
one year are recognised as current loans.
alstria refinanced its main credit facility on September 30, 2013. A syndicate consisting
of four banks has provided a credit facility totalling EUR 544,100 k (‘syndicated loan’). Of
this nominal amount, EUR 501,070 k had been drawn as at December 31, 2014
(December 31, 2013: EUR 538,963 k under the former, replaced credit facility
agreement). The carrying amount was EUR 497,516 k as at December 31, 2014
(December 31, 2013: EUR 534,794 k under the former, replaced credit facility
agreement). The difference between the notional amount and the carrying amount is due
the allocated transaction costs accounted for applying the effective interest rate method.
To secure the liabilities of the loans, receivables from rental and property purchase
agreements as well as insurance receivables and derivative financial instruments were
assigned to the lenders. In addition, liens were granted on bank accounts and the
registration of land charges was agreed (Note 10.6).
96
alstria Annual Report 2014
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More information on terms and conditions of the syndicated loan and the other loans can
be found in the table on page 110 in Section 20 of the notes.
In the second quarter of financial year 2013, alstria office REIT-AG issued a convertible
bond generating proceeds of EUR 79,400 k. The convertible bond has a term to maturity
of five years. It will be redeemed at 100% of its principal amount. The bond has a
coupon of 2.75% p.a., payable in quarterly instalments in arrears and an initial
conversion price of EUR 10.0710. In line with the terms and conditions of the convertible
bond the conversion price was adjusted to EUR 9.8123 during financial year 2014.
The issuing volume resulting from the convertible bond loan amounts to EUR 79,400 k
and is included in financial liabilities in full. It is divided into a loan portion and a financial
liability in the form of an embedded derivative. The carrying amount of the convertible
bond liability therefore lies below its nominal amount. The initial recognition of these two
components was at fair value, which corresponds to the emission volume. As a part of
the allocation of the issue proceeds, the fair value of the embedded derivative was
determined and the residual value less transaction costs was assigned to the loan
component. Subsequently, the loan component is valued at amortised cost. The
derivative component is, however, valued at fair value at the end of subsequent
reporting periods. Upon conversion into shares both components, which are discontinued
upon conversion of the bond, are reclassified as equity. alstria office REIT-AG issued this
bond based on the authorisation received from the Annual General Meeting in 2013. The
convertible loan has a carrying amount without accrued interests of EUR 69,395 k and a
fair market value of EUR 87,253 k.
The current portion of the loans refers to scheduled repayments and accrued interest on
the loans.
The variable interest of the loans is payable on a quarterly basis, whereby the standard
margin and borrowing costs for the market are added to the respective EURIBOR rate.
Due to the variable interest rate, there are no significant differences between the
carrying amounts and fair value with the exception of transaction costs.
A total of EUR 105,360 k (December 31, 2013: EUR 98,130 k) in financial liabilities from
non-recourse loans relates to two fixed interest rate loans. At the end of the reporting
period, these loans had a fair value of EUR 114,060 k (December 31, 2013:
EUR 100,574 k). The fair value estimation is based on the discounted cash flows using
quoted prices for loans with equivalent risk and maturity as a discount rate (level 2 in fair
value hierarchy).
As at December 31, 2014, the loans and the convertible bond were reduced by
transaction costs of EUR 6,336 k (December 31, 2013: EUR 7,087 k).
alstria Annual Report 2014
97
Consolidated financial statements
The average debt maturity as at the end of the reporting period remained unchanged
with and was 5.3 years as at December 31, 2014 and at December 31, 2013.
The average interest rate of the Group's loans was 3.4% at the end of the reporting
period.
The carrying amounts of the loans are all reported in euros. With the exception of the
fixed rate loans and the convertible bond described above, the fair values of the Group’s
financial liabilities approximate their carrying values at the end of the reporting period.
This does not apply to their accrued transaction costs.
The liabilities exposed to an interest rate risk are due as follows:
EUR k
Up to 1 year
More than 1 year
Total
Dec. 31, 2014
Dec. 31, 2013
3,539
706,787
710,326
42,843
693,520
736,363
The following loans are secured by land charges:
EUR k
Financial liabilities secured by land charges
thereof on investment property
Dec. 31, 2014
Dec. 31, 2013
812,332
807,796
829,567
824,926
11.3 Other Provisions
EUR k
Provisions
Rental guarantee
Provision virtual
share liabilities
Other
Due
Due
up to
1 year
in more
than1 year
Total
Dec. 31, 2014
up to 1
year
in more
than 1 year
Total
Dec. 31, 2013
48
139
274
461
2,277
1,351
0
2,325
490
2.372
1,490
1.525
274
0
872
0
3,628
4,089
2,015
3,244
2.862
2.397
0
5,259
In connection with property sales, the Group has committed itself to compensate buyers
for possible shortfalls in rental income for rental agreements that are in place with
certain tenants and are not extended at the disposal date. A provision amounting to
EUR 2.325 k was calculated as the net present value of possible cash outflows from this
rental guarantee, for which a realisation is more likely than not. The commitment relates
to a six-year rental period starting in 2014. As at December 31, 2013, the provision for
the rental guarantees amounted to EUR 2,862 k reflecting a decrease of EUR 537 k. The
decrease in this provision by EUR 571 k is based on the modified expectation of the
tenants making use of their possible break option, taking new information on the tenants’
situation into account. A further amount of EUR 48 k of the provision was used. An
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alstria Annual Report 2014
Consolidated financial statements
increase in value by EUR 82 k resulted from the change in the net present value due to
expiries and discount rate changes.
In addition EUR 1,490 k (December 31, 2013: EUR 2,397 k) were recognised as a
provision for awarding the Long and Short Term Incentive Plan (Note 18).
Other provisions were made for potential costs of litigation. At the balance sheet date,
there were no significant legal proceedings in which alstria office REIT-AG or its affiliates
could be subject to be claimed for payments. The main part of the provision was
therefore made for the litigation costs for lawyers and court fees for cases in which alstria
office REIT-AG or its subsidiaries act as plaintiff.
11.4 Trade payables and other liabilities
EUR k
Trade payables
Other trade payables
Other current liabilities
Accruals for outstanding
invoices
Security deposits
Advance rent payments
received
Accrued bonuses
Value added tax liabilities
Customers with credit balances
Supervisory Board
compensation
Auditing costs
Miscellaneous other liabilities
Due
Due
up to
1 year
in more
than 1 year
Total
Dec. 31,
2014
up to
1 year
in more
than 1 year
Total
Dec. 31,
2013
4,389
4,389
4,798
1,064
1,468
1,238
157
415
305
271
644
0
0
4,389 3,474
4,389 3,474
0
4,798 3,435
0
0
0
2,036
3,100
996
1,052
0
0
0
0
0
0
0
1,468 1,544
1,238 1,238
157
415
485
425
305
305
271
644
266
283
0
0
0
0
0
0
0
3,474
3,474
3,435
2,048
1,544
1,238
485
425
305
266
283
10,360
2,036
12,396 8,977
1,052
10,029
The disclosed carrying amounts approximate their fair values.
Trade payables relate to operating costs not yet invoiced of EUR 1,588 k (December 31,
2013: EUR 1,489 k), liabilities from project development, rental activities and third-party
real estate management services of EUR 2,801 k (December 31, 2013: EUR 1,985 k).
11.5 Trust assets and liabilities
At the end of the reporting period, alstria office REIT-AG held trust assets worth
EUR 1,653 k (December 31, 2013: EUR 1,639 k) and liabilities worth EUR 3,100 k
(December 31, 2013: EUR 2,048 k), in particular from rent deposits.
11.6 Deferred taxes
Due to its REIT status, alstria office REIT-AG has been fully tax exempt regarding income
alstria Annual Report 2014
99
Consolidated financial statements
taxes from January 1, 2007 onwards. Therefore, deferred taxes are neither reported at
the end of this year’s reporting period nor at the end of the prior years’ reporting period.
12 OTHER NOTES
12.1 Compensation of the Management Board and Supervisory Board
Management Board The following total remuneration were granted to the members of
the Management Board according to IAS 24.17 and Section 314 para. 1 no. 6 HGB:
EUR k
Short-term benefits
Share based payments
Total
2014
1,275
1,656
2,931
2013
1,343
121
1,464
On the reporting date, liabilities for the compensation of the members of the
Management Board amounted to EUR 378 k (2013: EUR 378 k). As at December 31,
2014 the members of the Management Board no longer held any stock options from the
meanwhile terminated stock option programme initiated in 2007. As at December 31,
2013 non-transferable stock options for 375,000 shares of alstria office REIT-AG were in
place. Since the conversion conditions were not met for the share options during their
term, all 375,000 shares options expired in fiscal year 2014. Details of the stock option
programme are also included in Note 17.
As at December 31, 2014 363,347 virtual shares were granted to the members of the
Management Board, resulting from a subsequent cash-settled share-based incentive plan
implemented in 2010 (see also Note 18).
Supervisory Board Pursuant to the Articles of Association, Supervisory Board
members’ fixed annual payment amounted to EUR 305 k (2013: EUR 305 k).
Further information on disclosures according to Section 314 para. 1 no. 6a HGB (German
Commercial Code) and IAS 24.17 is provided in the remuneration report (see pages 144
to 151) that is an integral part of these Notes and at the same time presented in the cor-
porate governance chapter.
12.2 Other financial commitments and contingencies
Other financial obligations from refurbishment projects and on-going maintenance
amounted to EUR 10,645 k (2013: EUR 16,345 k).
With respect to property sales, the Group has committed itself to compensate buyers for
possible shortfalls in rental income in case rental agreements existing with certain
tenants are not extended at the disposal date. Contingencies resulting from this
commitment amounted to EUR 0 k (December 31, 2013: EUR 456 k). The commitment
related to a six-year rental period that started in 2014. According to the details of the
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alstria Annual Report 2014
Consolidated financial statements
rental guarantees and the lettability of the objects, the Company does not expect any
claims from these rental guarantees. The same circumstances led to provisions for rental
guarantees (see Note 11.3). The decrease in this commitment from EUR 456 k to
EUR 0 k is based on the extension of the lease term for a part of the rental areas in
question, resulting in the termination of the rental guarantee originally granted for these
areas.
As at December 31, 2014, there were no rental agreements for the administrative
premises that were subject to a minimum lease term. An amount of EUR 146 k of future
financial obligations arose from other leasing agreements. EUR 94 k of them have a
residual maturity of up to one year and the remainder, EUR 52 k, has a remaining
maturity of one to five years.
Operating lease commitments – Group as lessor The Group has entered into
commercial property leases on its investment property portfolio, which consists of the
Group’s offices and commercial real estate. These non-cancellable leases have remaining
terms to maturity of between one and 21 years. Most leases include an indexation
clause, i.e. allowing rental charges to be raised annually according to prevailing market
conditions.
Future minimum rental charges receivable as agreed on in 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, 2014
Dec. 31, 2013
95,768
274,190
305,032
674,990
96,965
281,798
323,480
702,243
12.3 Consolidated cash flow statement
The cash flow statement shows how the Group’s cash and cash equivalents have changed
in the course of the financial year as a result of cash received and paid. In accordance
with IAS 7, a distinction is made between cash flows from operating activities and cash
flows from investing and financing activities.
Cash flows from investing and financing activities are calculated based on payments,
whereas cash flows from operating activities are derived indirectly based on the
consolidated profit for the year.
Net Cash generated from operating activities for financial year 2014 amounted to
EUR 52,889 k. The increase as compared to the reporting period 2013 (EUR 50,114 k)
resulted mainly from lower payments for interest expenses and higher cash inflows from
other operating results.
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Consolidated financial statements
Cash flow from investing activities was impacted by the cash outflows due to the
acquisitions of two investment properties and investments in existing properties (cash
outflow EUR 72,264 k). Cash inflows of EUR 65,467 k related to payments received for
the sale of investment properties and of an amount of EUR 1,470 k to equity releases of
interests in joint ventures. Payments for capital contributions in joint ventures generated
cash outflows of an amount of EUR 2,205 k.
Cash flows from financing activities mainly reflect refinancing activities with payments for
the redemption of borrowings of an amount of EUR 192,629 k and cash proceeds from
taking out loans (EUR 173,823 k). Dividend payments resulted in cash outflows of
EUR 39,467 k. Furthermore, cash outflows occurred due to the acquisition and
termination of financial derivatives (EUR 2,882 k).
Cash and cash equivalents reported in the cash flow statement relate to all liquidity items
disclosed in the balance sheet, i.e. cash at hand and bank balances.
13 RELATED PARTY RELATIONSHIPS
13.1 Preliminary remarks
Related parties are members of the management of alstria office REIT-AG (Management
Board and Supervisory Board) and close family members of these persons. Related
parties also include entities with controlling influence over the Group and entities with
joint control over, or significant influence on, alstria office REIT-AG.
The majority of alstria office REIT-AG’s shares are free float shares. No person or entity
has a controlling influence over the Company. alstria office REIT-AG is the ultimate
parent company of the Group.
Joint ventures over which alstria office REIT-AG has joint control are also considered
related parties.
In the view of alstria office REIT-AG’s management, all transactions with related parties
entered into in financial year 2014 have been undertaken at terms of arm’s length
transactions or under conditions in alstria office REIT-AG’s favour.
13.2 Remuneration of key management personnel
For a detailed description of the remuneration of key management personnel, please
refer to Note 12.1 and the remuneration report (see pages 144 to 151 of the Corporate
Governance Section).
13.3 Related party transactions
At the end of the reporting period, the Group recorded receivables of an amount of
EUR 88 k (December 31, 2013: EUR 89 k) from joint ventures. Furthermore, alstria office
REIT-AG received EUR 610 k (2013: EUR 142 k) from the joint venture as a
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alstria Annual Report 2014
Consolidated financial statements
compensation for services connected to real estate.
No further transactions with related parties arose during the reporting period.
14 EARNINGS PER SHARE
Basic earnings per share are calculated as the quotient of the profit attributable to the
shareholders and the weighted average number of shares outstanding during the
financial year – except for the average number of treasury shares held by the Company
itself.
Diluted earnings per share amounts are calculated by dividing the profit attributable to
ordinary owners of the parent company by the weighted average number of ordinary
shares outstanding during the year – except for the treasury shares held by the Company
itself – plus the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the earnings per share
computations:
Earnings per share
Profit attributable to the shareholders (EUR k)
Average number of shares outstanding (thousands)
Basic earnings per share (EUR per share)
2014
36,953
78,980
0.47
2013
38,945
78,933
0.49
The potential conversion of shares in relation to the convertible bond could dilute basic
earnings per share in the future:
Diluted earnings per share
Diluted profit attributable to the shareholders (EUR k)
Average diluted number of shares (thousands)
Diluted earnings per share (EUR)
2014
39,137
87,072
0.45
2013
39,896
86,818
0.46
There were no dilution effects resulting from the granted stock options or the convertible
profit participation rights during the period under review, as the related vesting
conditions were not satisfied as at the end of the reporting period.
For further information concerning granted stock options and convertible profit
participation rights, please see Notes 17 and 19.
There have been no other transactions involving ordinary shares or potential ordinary
shares between the reporting date and the date of completion of these financial
statements.
alstria office REIT-AG is authorised to issue up to EUR 38,751 k shares as conditional
capital. These contingently issuable shares could potentially dilute basic earnings per
alstria Annual Report 2014
103
Consolidated financial statements
share in the future, but were not included in the calculation of diluted earnings per share
because they are non-dilutive for the period presented.
15 DIVIDENDS PAID
EUR k
Dividends on ordinary shares1 not recognised
as a liability as at Dec. 31
Dividend per share
2014
2013
39,467
39,467
0.50
0.50
1 Refers to all shares except treasury shares at the dividend payment date.
The Annual General Meeting of alstria office REIT-AG held on May 14, 2014, resolved to
distribute dividends totalling EUR 39,467 k (EUR 0.50 per outstanding share). The
dividend was distributed on May 15, 2014. The dividends paid out in 2013 totalled
EUR 39,467 k (EUR 0.50 per share outstanding).
16 EMPLOYEES
During the period from January 1 to December 31, 2014, the Company on average
employed 62 employees (January 1 to December 31, 2013: on average 61 employees).
The average was calculated based the total number of employees at the end of each
quarter. On December 31, 2014, 63 people (December 31, 2013: 63 people) were
employed at alstria office REIT-AG, excluding the Management Board members.
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 Management Board. The Supervisory Board
fixed the details of the stock option programme in accordance with the authorisation
granted by the General Meeting of Shareholders of March 15, 2007, and granted a first
tranche of stock options to the Management Board.
The main terms of the stock option programme resolved by the Supervisory Board can be
summarised as follows:
The members of the Management Board could be granted up to 2,000,000 options,
entitling the holder to a subscription of a maximum of 2,000,000 Company shares with a
total nominal value of EUR 2,000 k. The stock options had to be granted in annual
tranches. The first tranche was granted by the Supervisory Board in 2007, subject to the
conditions below. The exercise price for the stock options granted in 2007 was EUR 16.
In 2010 the stock option programme was replaced by a new long-term incentive plan
that is described in detail in Note 18. The stock options granted in 2007 under the
terminated stock option program were unaffected.
At the beginning of the reporting period, 515,625 stock options outstanding were in
place. The number decreased to zero by December 31, 2014, since the term of the stock
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alstria Annual Report 2014
Consolidated financial statements
options ended in the business year 2014. Due to the termination of the stock option plan,
no new stock options were issued. Since the conversion terms for the stock options were
not met within their term, all stock options expired within the business year 2014,
without the options having been exercised. The personnel expenses resulting from the
allocation of the fair values of the stock options on the date of their granting over the
vesting period amounted to EUR 0 k in 2014 and 2013, respectively.
The fair values of the options outstanding were estimated at the respective granting
dates using a Black-Scholes model and partial-time barrier options, taking into account
the terms and conditions upon which the instruments were granted. The following table
lists the inputs to the model used for the determination of the fair value of the stock
options granted:
Fair value of stock options granted on
Mar. 27, 2007
Sept. 5, 2007
Dividend yield (%)
Risk-free interest rate (%)
Expected volatility (%)
Expected life of option (years)
Exercise share price (EUR)
Labour turnover rate (%)
Stock price as of valuation date (EUR)
Estimated fair value of one stock option
at the granting date (EUR)
3.60
4.21
30.00
4.50
16.00
0.00
16.00
3.17
3.60
4.29
30.00
4.50
16.00
0.00
13.93
2.28
The expected volatility was based on the historical volatility of comparative listed compa-
nies and was calculated as their average.
18 SHARE-BASED REMUNERATION
On March 2, 2010, the Company’s supervisory board established a new share-based
remuneration system as part of the success based remuneration for members of the
Management Board. The share-based remuneration is made up of a long-term
component, the Long-Term Incentive Plan (LTIP), and a short-term component, the
Short-Term Incentive Plan (STIP). The remuneration type is a cash-settled and
share-based payment transaction respectively.
Under the LTIP, alstria office REIT-AG grants virtual shares, which give an entitlement to
conversion into cash payments after four years.
The amount of the conversion payment is based on the number of virtual shares,
multiplied by the average stock market price of alstria’s shares on the Frankfurt Stock
Exchange during the last 60 trading days prior to the relevant maturity date, plus an
amount equal to the sum of the dividend per share paid by the Company to its
shareholders between the grant date and the maturity date, but in no event higher than
alstria Annual Report 2014
105
Consolidated financial statements
250% of the average stock market price of alstria’s shares on the Frankfurt Stock
Exchange in the last 60 trading days prior to the relevant grant date, multiplied by a
specified discretionary factor.
The discretionary factor is a multiplier that can vary between 0.8 and 1.2, and is subject
to the individual performance of each participant during the respective holding period.
The assessment of the target achievement depends on the absolute return of the alstria
share price (absolute total shareholder return) and in an equal amount on the relative
performance of alstria's share in relation to the EPRA/NA-REIT Index Europe Ex UK
(relative total shareholder return).
Since payment per vested virtual share depends on the average quoted price of alstria's
shares for 60 trading days, the quoted average prior to the end of the reporting period
essentially represents the fair value of each virtual share.
Virtual shares under the short-term variable remuneration (STIP) were granted for the
first time on March 3, 2011. The virtual shares resulting from the STI remuneration are
subject to a minimum vesting period of two years. Virtual STI shares are converted into a
cash amount after the expiry of the vesting period. This cash amount is calculated based
on the number of virtual shares, multiplied by the share price of one alstria share at that
time, which is in turn calculated based on a reference period.
The table below summarizes the number of virtual shares granted under the existing STI
and LTI program and outstanding as at December 31, 2014.
Start of
deferral
period
Reference
share price
in EUR
End of
Deferral
period
Number of virtual
shares
Number of virtual
shares
Olivier Elamine
Alexander Dexne
STI 2012
STI 2013
LTI 2011
LTI 2012
LTI 2013
LTI 2014
2013
2014
2011
2012
2013
2014
9.45
9.57
10.43
8.70
9.29
9.44
2015
2016
2015
2016
2017
2018
7,193
5,914
42,186
50,575
47,363
46,610
5,885
4,839
34,516
41,379
38,751
38,136
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alstria Annual Report 2014
Consolidated financial statements
The development of the virtual shares until December 31, 2014 is shown in the following
table:
Number of virtual shares
2014
2013
January 1
Granted in the reporting period
Converted into cash in the
reporting period
December 31
LTI
353,779
84,746
-99,009
339,516
STI
25,989
10,753
-12,911
23,831
LTI
267,665
86,114
0
353,779
STI
24,629
13,078
-11,718
25,989
The 12,911 virtual shares converted into cash under the STIP resulted in payments to the
management board in an amount of EUR 136 k within the business year 2014. The con-
version amount is the weighted average price of the first 20 trading days in the calendar
year 2014 plus the dividend paid during the vesting period. It amounted to EUR 10.51, of
which EUR 9.57 relate to the share price and EUR 0.94 to the dividend paid. Under the
LTIP 99,009 virtual shares were converted, resulting in a payout of EUR 1,520 k.
In 2014, the LTI and the STI generated remuneration expenses amounting to EUR 749 k
(2013: remuneration expenses of EUR 1,046 k) and provisions amounting to EUR 1,490 k
(December 31, 2013: EUR 2,397 k). The Group recognises the liabilities arising from the
vested virtual shares under other provisions.
19 CONVERTIBLE PROFIT PARTICIPATION RIGHTS PROGRAMME
On September 5, 2007, the Supervisory Board of the Company resolved the issuance of
convertible profit participation certificates (‘certificates’) to employees of the Company
and to employees of companies in which alstria office REIT-AG, directly or indirectly,
holds a majority interest. Members of alstria office REIT-AG’s Management Board are not
considered employees of the Company in terms of this convertible profit participation
rights programme. With its resolution, the Supervisory Board fixed the details of the
convertible profit participation rights programme in accordance with an authorisation
granted by the general meeting of shareholders of March 15, 2007. The convertible profit
participation rights programme was renewed by the Supervisory Board with minor
modifications in 2012 in accordance with an authorisation granted by the general
meeting of shareholders of April 24, 2012.
The main terms of the programme Board can be summarised as follows:
The nominal amount of each certificate is EUR 1.00 and is payable upon issuance. Under
the current programme, starting in 2012, a maximum of 500,000 certificates in an
aggregate nominal amount of up to EUR 500 k may be issued.
The certificates are issued as non-transferable rights and are neither sellable nor
alstria Annual Report 2014
107
Consolidated financial statements
pledgeable or otherwise chargeable.
The maximum term of each certificate is five years.
During its term, each certificate entitles the holder to a preferred disbursement from the
Company’s annual net profit. The profit share corresponds to the dividend per share of
the Company for a full business year of the Company. For certificates held by a
beneficiary for less than a full business year of the Company, the profit share is reduced
pro rata temporis.
Each certificate shall be converted into one non-par-value bearer share of the Company
on the second, third, fourth or fifth anniversary date of the issue date if the then current
stock exchange price of the Company’s shares has exceeded the stock exchange price of
the Company’s shares on the issue date by 5% or more on at least seven non-
subsequent trading days (market condition). For 96,800 certificates issued on June 7,
2013 and 107,250 certificates issued on May 22, 2014, this market condition was fulfilled
until the end of the financial year 2014.
Upon conversion of a certificate, the beneficiary shall pay an additional conversion price
to the Company for each certificate to be converted. The conversion price shall be the
aggregate proportionate amount in the Company’s share capital of the shares each
certificate entitles the holder to subscribe for and shall be payable in addition to the
offer price.
The fair values of the inherent options for conversion were estimated at the respective
granting dates using a binary barrier option model based on the Black-Scholes model,
since the conversion will be affected automatically once the barrier has been reached.
The model takes into account the terms and conditions upon which the instruments were
granted.
The following share based payment agreements under the employee profit participation
programme were in existence during the year.
Number of Certificates
Granting date of
tranche
January 1, 2014
Expired due to termina-
tion of employment
Converted
Granted
June 9, 2011 June 18, 2012
June 7, 2013 May 22, 2014
72,500
85,500
111,800
-13,000
0
0
-500
-85,000
0
0
-15,000
0
0
0
0
Total
269,800
-28,500
-85,000
107,250
107,250
December 31, 2014
59,500
96,800
107,250
263,550
The relevant amount for the conversion of 85,000 convertible profit participation rights
was the XETRA closing price on the conversion date of EUR 9.65 per share. Total
expenses relating to convertible profit participation rights amounted to EUR 661 k in
108
alstria Annual Report 2014
Consolidated financial statements
2014 (Note 9.5).
The following table lists the inputs to the model used for the determination of the fair
value of the options for conversion:
Granting date of tranche
Dividend yield (%)
Risk-free interest rate (%)
Expected volatility (%)
Expected life of option (years)
Exercise share price (EUR)
Labour turnover rate (%)
Stock price as of valuation date (EUR)
Estimated fair value of one option for conversion
at the granting date
June 9,
2011
June 18,
2012
June 7,
2013
May 22,
2014
4.23
1.67
5.76
0.04
5.68
0.04
5.18
0.06
47.00
38.00
25.00
21.50
2.00
2.00
10.00
10.40
2.00
2.00
10.00
7.64
2.00
2.00
10.00
8.80
2.00
2.00
10.00
9.65
8.25
5.45
6.18
6.77
Expected volatility is based on the historical volatility of alstria and comparative listed
companies and was calculated as an average of these comparable figures.
20 FINANCIAL RISK MANAGEMENT
20.1 Managing financial risk factors
The group’s activities expose it to a variety of financial risks such as: interest rate risks,
credit risks and liquidity risks. The group’s overall risk management programme focuses
on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the group’s financial performance. The group makes use of derivative financial
instruments to hedge certain exposures to risk. Risk management is carried out by a
central treasury function (group treasury) within the finance and controlling department
under policies approved by the Board of Directors. Group treasury identifies, evaluates
and hedges financial risks in close co-operation with the CFO. The Management Board
provides written principles for overall risk management, as well as policies covering
specific areas, such as interest rate risk, credit risk, making use of derivative financial
instruments and non-derivative financial instruments, and the investment of excess
liquidity.
The financial instruments chiefly used by the Group are bank loans and derivative
financial instruments. The main purpose of the bank loans is to finance the business
activities of alstria office REIT-AG. In addition, the Group also owns various financial
assets, such as cash and short-term deposits, which arise directly from business
activities.
Derivative financial instruments comprise interest swaps and caps. The purpose of these
derivative financial instruments is to hedge against interest risks arising from the Group’s
business activities and its funding.
alstria Annual Report 2014
109
Consolidated financial statements
The main risks arising from the Group’s financial instruments are cash flow risks, interest
rate risks and liquidity risks. The Group is exposed to credit risks mainly where derivative
financial instruments are held as assets and via its bank balances. The amount that best
presents the maximum credit risk is the carrying amount of the financial assets. The
Management Board decides on strategies and processes for managing specific risk types.
These are defined in the following paragraphs.
Risks that could arise as a result of the financial crisis are seen mainly in a potential
default of payment by a major tenant. Due to the fact that all of the Company’s main
tenants are public institutions or still highly rated, the risk of default of payments is
currently limited.
alstria office REIT-AG’s syndicated loan facility agreement allows for a loan to value (LTV)
ratio of up to 70%. The Company managed to keep the LTV ratio for the syndicated loan
on the relevant test date at 49.0%. The risk of a breach of covenant is effectively
countered.
The following table presents the single LTV-ratios and covenants for the Group loans as
at the end of the reporting period
Existing loan agreements as per December 31, 2014
Liabilities
Maturity
Principal amount
drawn as at
Dec. 31, 2014
EUR k
LTV as at
Dec. 31,
2014
%
LTV
covenant
%
Principal amount
drawn as at
Dec. 31, 2013
EUR k
Syndicated loan
Sept. 30, 2020
501,070
Non-recourse loan #1
Jan. 31, 2017
Loan #21)
Loan #3
Loan #4
Loan #5
Loan #6
Dec. 31, 2014
Dec. 17, 2018
Sept. 30, 2019
Apr. 30, 2021
Mar. 28, 2024
Non-recourse loan #7
Dec. 31, 20142)
Non-recourse loan #8
June 30, 20143)
Non-recourse loan #9
Oct. 20, 20152)
Total loans
Convertible bond
June 14, 2018
Total
68,260
2,617
56,000
67,000
60,739
60,000
–
–
–
815,686
79,400
895,086
49.1
59.0
17.0
45.6
43.8
55.0
52.4
–
–
–
49.3
–
54.2
70.0
75.0
75.0
60.0
65.0
67.0
75.0
–
–
–
–
–
–
538,963
69,626
11,328
56,000
39,500
–
–
42,670
28,503
47,902
834,492
79,400
913,892
1) Loan agreement terminated taking effect on Dec. 31, 2014, withdrawal occurred on Jan. 02, 2015.
2) Refinanced in Q1 2014.
3) Refinanced in Q2 2014.
Apart from the risks mentioned above, the Group is not exposed to any commodity or
currency risks.
110
alstria Annual Report 2014
Consolidated financial statements
a) Interest rate risk
The following table sets out the carrying amount of the Group’s financial instruments,
which are exposed to interest rate risk by maturity:
EUR k
< 1 year
1–2 years
2–3 years
3–4 years
> 4 years
Total
Financial year as
at Dec. 31, 2014
Variable interest
Syndicated loan
Other loans
Total
0
3,538
3,538
0
921
921
0
921
921
15,000
486,070
501,070
56,921
146,953
209,254
71,921
633,023
710,324
EUR k
< 1 year
1–2 years
2–3 years
3–4 years
> 4 years
Total
Financial year as
at Dec. 31, 2013
Variable interest
Syndicated loan
0
0
24,863
Other loans
42,843
59,057
0
Total
42,843
59,057
24,863
0
0
0
514,100
538,963
123,000
224,900
637,100
763,863
Due to the extensive portfolio of non-current financial liabilities with a variable interest
rate, alstria office REIT-AG is exposed to risks from fluctuations in market interest rates.
The interest base for the financial liability (loan) is the three-month EURIBOR rate, which
is adjusted every three months. A number of different derivative financial instruments
were acquired to secure the interest expense. The terms to maturity of the derivatives
corresponds to the terms to maturity of the loans. The derivative financial instruments
relate to interest swaps for which the Company agrees to exchange the difference
between fixed and variable interest rate amounts with contracting partners at specified
intervals. The amounts are calculated by reference to an agreed-upon notional principal
amount. In addition, interest caps were acquired; that is, the interest is capped at a
predetermined maximum. If the maximum interest rate is exceeded, the difference
between the actual interest rate and the cap rate is paid out.
The derivative financial instruments of alstria office REIT-AG as at December 31, 2014
are presented on page 92.
These interest rate swaps and interest rate caps are used to hedge the obligation
underlying the loans.
The following table shows the sensitivity of the Company’s loans on consolidated profit or
loss and equity due to a reasonably possible change in the interest rates (due to the
effect on the floating interest loans). All variables remain constant; the effects from the
derivative financial instruments were not factored into this calculation.
alstria Annual Report 2014
111
Consolidated financial statements
Interest expenses p.a.
EUR k
+ 100 bps
– 50 bps
2014
7,103
-3,552
2013
8,490
-3,865
The fair market value of derivative financial instruments is also subject to interest rate
risks. A change in the interest rate would give rise to the following changes of the re-
spective fair market values:
aa) Impact on equity
Financial derivatives qualifying for cash flow hedge accounting
EUR k
+ 100 bps
– 50 bps
2014
21,157
-6,473
2013
17,879
-9,556
ab) Impact on the income statement and resulting effects on equity
Financial derivatives not qualifying for cash flow hedge accounting
Impact from interest rate changes of the 3-month-EURIBOR:
EUR k
+ 100 bps
– 50 bps
2014
11,643
-1,309
2013
5,638
-1,840
Impact from changes in alstria office REIT-AG’s share price (only relates to the embedded
derivative):
EUR k
Share price compared to year end
price 2014 (EUR 9.15)
+ 10 per cent
– 10 per cent
2014
2013
-6,774
5,417
-4,262
3,602
112
alstria Annual Report 2014
Consolidated financial statements
b) Credit risk
Except for credit risks relating to accounts receivable balances credit risks are managed at
group level.
The department responsible for the operating business property management manages
and analyses credit risks in relation to each re-letting activity, before standard payment
and lease terms and conditions are offered. Credit risk arises from cash and cash
equivalents, derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers, including outstanding receivables
and other compensatory commitments. Banks and financial institutions only are accepted
as counterparties, and only if they are independently rated parties with a minimum rating
of ‘investment grade’. If tenants are independently rated, these ratings are applied. If
there is no independent rating, the credit quality of the tenant is assessed, taking into
account his financial position, past experience and other factors. Credit limits to tenants
are generally not provided. Lease receivables from tenants are settled in bank transfers
usually due at the beginning of each payment term. Tenants must pay a deposit or provide
other warranties prior to the start of a lease term.
c) Liquidity Risk
The Company continually monitors the Group-wide risk of potential liquidity bottlenecks
using a liquidity-planning tool. The tool uses the expected cash flows from business
activities and the maturity of the financial liabilities as a basis for analysis. The long-term
refinancing strategy of the Group ensures the medium and long-term liquidity
requirements. Such forecasting takes the Group’s debt financing plans, covenant
compliance, compliance with internal balance sheet targets and, if applicable, external
regulatory or legal requirements – for example, G-REIT equity ratio into consideration.
At the end of the reporting period, the nominal financial liabilities had the following
maturities in line with their contractual maturity (based on the three-month EURIBOR) as
at December 31, 2014 plus the weighted average margin of 155 basis points for the
Group’s loans).
alstria Annual Report 2014
113
Consolidated financial statements
The following chart shows the related future undiscounted cash flows of financial liabilities.
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, 2014
Interest
Loans
18,138
18,090
16,064
15,164
13,694
16,141
97,291
5,923
2,930
64,789
71,921
77,921
592,202
815,686
Convertible Bond
Financial derivatives
Trade payables
0
6,106
4,389
Other liabilities
10,360
0
0
79,400
0
0
79,400
-281
-704
-1,268
-1,896
-1,954
3
0
0
0
0
0
0
0
0
0
0
4,389
10,360
44,916
20,739
80,149 165,217
89,719 606,389 1,007,129
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, 2013
Interest
Loans
20,689
20,826
23,286
23,945
25,457
39,298
153,501
73,178
60,975
26,872
63,867
76,000
561,100
861,992
Convertible Bond
0
0
0
0
79,400
0
79,400
Financial derivatives
11,161
4,457
-3,958
-6,316
-8,487
-17,744
-20,887
Trade payables
Other liabilities
3,475
8,977
0
0
0
0
0
0
0
0
0
0
3,475
8,977
117,480
86,258
46,200
81,496 172,370 582,654 1,086,458
The most significant liability is a syndicated loan provided by four banks totalling
EUR 501,070 k (December 31, 2013: EUR 538,963 k). The second major item in
liabilities is comprised of loans entered into as a result of the Group’s refinancing strategy
totalling an amount of EUR 314,616 k (December 31, 2013: EUR 295,529 k). To secure
these liabilities, receivables from rental and property purchase agreements as well as
insurance receivables and derivative financial instruments were assigned to the lenders;
liens were granted on bank accounts and charges registered on the land. Obligations
arising from floating interest bank loans were fully secured. Land charges for real estate
property with a carrying amount of EUR 1,645,840 k were provided as collaterals.
20.2 Capital management
Capital management activities are aimed at maintaining the Company’s classification as a
REIT in order to support its business activities and maximise shareholder value.
The Company actively 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, 2014, and
as at December 31, 2013.
The Company monitors its capital structure by making use of the performance indicators
114
alstria Annual Report 2014
Consolidated financial statements
relevant for a classification as a REIT. The REIT equity ratio, which is the ratio of equity
to immovable assets, is the most important of these indicators. According to the Group’s
strategy, the REIT equity ratio is aimed to be between 45% and 55% within the relevant
term provided by the REIT law. The G-REIT status is unaffected as long as the G-REIT
ratio is not below 45% at the end of the business year for three consecutive business
years.
The following ratios are also used to manage capital:
Ratios according to G-REIT law
%
Equity ratio acc. to G-REIT law
Immovable assets
Revenues gained from immovable
assets
Income gained from disposal of
immovable assets
2014
50.25
95.23
100.00
18.67
2013
G-REIT covenant
50.87
92.93
100.00
23.66
> 45
> 75
> 75
< 501
1) Within five years based on the average property value during this period.
The following table shows the carrying amount and fair value of all financial instruments
disclosed in the consolidated financial statements:
Carrying
amount
Non-
financial
assets
Financial assets
Loans
and
receiv-
ables
3,498
88
0
0
0
0
Assets at
fair value
through
profit
and loss
0
0
Deriva-
tives for
hedging
0
0
Total
Fair
value
3,498
3,498
88
88
451
6,192
6,643
6,643
6,538
3,602
0
63,145
0
0
0
0
3,602
3,602
63,145
63,145
3,498
88
6,643
10,140
63,145
83,514
6,538
70,333
451
6,192 76,976 76,976
Carrying
amount
Non-financial
liabilities
Financial liabilities
874,025
19,686
7,702
4,389
0
0
0
0
12,396
1,305
11,091
Other
liabilities
874,025
Deriva-
tives for
hedging
Total
Fair
value
0
874,025
882,725
0
19,686
19,686
19,686
7,702
4,389
0
0
0
7,702
4,389
7,702
4,389
11,091
11,091
Assets as per
balance sheet
(EUR k) as at
Dec. 31, 2014
Trade receivables
Accounts receivable
from joint ventures
Derivatives
Receivables and
other assets
Cash and cash
equivalents
Total
Liabilities as per
balance sheet
(EUR k) as at
Dec. 31, 2014
Long-term loans
Derivatives
Short-term loans
Trade payables
Other liabilities
Total
918,198
1,305
897,207
19,686 916,893
925,593
alstria Annual Report 2014
115
Consolidated financial statements
Carrying
amount
Non-
financial
assets
Financial assets
Assets as per
balance sheet
(EUR k) as at Dec.
31, 2013
Trade receivables
3,708
89
33,118
Accounts receivable
from joint ventures
Derivatives
Receivables and
other assets
Cash and cash
equivalents
Total
Loans and
receiva-
bles
3,708
89
0
0
0
0
Assets at
fair value
through
profit
and loss
0
0
Deriva-
tives for
hedging
0
0
Total
3,708
Fair
value
3,708
89
89
644
32,474
33,118
33,118
6,991
4,768
2,223
82,782
0
126,688
4,768
82,782
88,802
0
0
0
0
2,223
2,223
82,782
82,782
644
32,474 121,920
121,920
Non-
financial
liabili-
ties
Carrying
amount
Liabilities as per
balance sheet (EUR
k)
as at Dec. 31,
2013
Long-term loans
822,486
Derivatives
Short-term loans
Trade payables
25,963
73,886
3,474
0
0
0
0
Other liabilities
10,030
1,544
Financial liabilities
Other
liabilities
822,486
Deriva-
tives for
hedging
Total
0
822,486
0
25,963
25,963
73,886
3,474
8,486
0
0
0
73,886
3,474
8,486
Fair
value
831,661
25,963
73,886
3,474
8,486
Total
935,839
1,544
908,332
25,963 934,295
943,470
An independent expert determined the fair value of the derivative financial instruments
by discounting the expected future cash flows at prevailing market interest rates.
Net gains and losses from financial instruments are as follows:
EUR k
Financial instruments at fair value
through profit or loss
Loans and receivables
Total
2014
-27,461
-114
-27,575
2013
-7,554
-40
-7,594
Net losses during the reporting period resulted from valuation losses and, in the case of
loans and receivables, from the write-down of trade receivables.
20.3 Determination of fair value
The fair value of financial instruments that are not traded in an active market (for exam-
ple, over-the-counter derivatives) is determined by using valuation techniques. These
valuation techniques maximise the use of observable market data where it is available
116
alstria Annual Report 2014
Consolidated financial statements
and rely on entity-specific estimates as little as possible. If all significant inputs required
to ascertain the fair value of an instrument are observable, the instrument is included in
level 2.
An independent expert determined the fair value of the derivative financial instruments
by discounting the expected future cash flows at prevailing market interest rates. Future
cash flows are estimated at the end of the reporting period based on forward interest
rates from observable yield curves as well as contractually agreed interest rates. These
are discounted at a rate that reflects the credit risk of various counterparties.
All of the Group’s financial instruments, which are measured at fair value in the balance
sheet are valued applying the level 2 valuation measurement approach. This only applies
to the Group’s financial derivatives, as there are no other financial instruments that are
measured in the balance sheet at fair value.
21 SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD
No events that must be reported pursuant to IAS 10 (Events after the end of the
reporting period) occurred after the end of the reporting period December 31, 2014.
22 UTILISATION OF EXEMPTING PROVISIONS
The following German subsidiaries included in the consolidated financial statements of
alstria office REIT-AG have made use of the exemption granted in Section 264b HGB:
> alstria office Bamlerstrasse GmbH & Co. KG, Hamburg
> alstria office Englische Planke GmbH & Co. KG, Hamburg
> alstria office Gänsemarkt Drehbahn GmbH & Co. KG, Hamburg
> alstria office Halberstädter Str. GmbH & Co. KG, Hamburg
> alstria office Hamburger Str. 43 GmbH & Co. KG, Hamburg
> alstria office Insterburger Strasse GmbH & Co. KG, Hamburg
> alstria office Ludwig-Erhard-Strasse GmbH & Co. KG, Hamburg
> alstria office Mannheim/Wiesbaden GmbH & Co. KG, Hamburg
> alstria office Steinstrasse 5 GmbH & Co. KG, Hamburg
alstria Annual Report 2014
117
Consolidated financial statements
23 DISCLOSURES PURSUANT TO THE WERTPAPIERHANDELSGESETZ
[GERMAN SECURITIES TRADING ACT]
23.1 Ad-hoc announcement
During the reporting period there were no facts or events the Company was obliged to
publish pursuant to Section 15 para. 1 German Securities Trading Act (WpHG).
23.2 Directors’ dealings
During the reporting period no transactions were made that should have been reported
to the Company pursuant to Section 15a para. 1 WpHG.
23.3 Voting right notifications
Information according to Section 160 para. 1 No. 8 German Stock Corporation Act
(AktG): The following table shows share holdings in the Company that were in place on
the balance sheet date of 2014, and that were communicated to us pursuant to Section
21 para. 1 WpHG and have been published pursuant to Section 26 para. 1 WpHG. Moreo-
ver, share holdings were considered that were in place until the date of the preparation
of the financial statements, that were communicated to us pursuant to Section 21 para. 1
WpHG and have been published pursuant to Section 26 para. 1 WpHG. The Company did
not receive any notifications pursuant to Section 20 para. 1 and 4 AktG or pursuant to
Section 21 para. 1a WpHG during the reporting period.
118
alstria Annual Report 2014
Consolidated financial statements
Voting
rights
(new)
(in %)
Strike
threshold
(in %)
Date of
change
Dec. 07,
Attribu-
tion of
voting
rights
Contains 3 %
or more of
voting rights
from
-
-
-
BNP Investment
Partners
Belgium S.A.
-
-
-
-
-
-
BNP Paribas In-
vestment Part-
ners Belgium SA.
Norges Bank
-
-
-
-
-
-
-
-
-
No. Shareholders, registered office
1 CNP Assurances, Paris, France
2 APG Algemene Pensioen Groep
N.V., Amsterdam, Netherlands
3 BNP Paribas Investment Partners
Belgium S.A., Brussels, Belgium
4 BNP Paribas Investment Partners
UK Ltd, London,United Kingdom
5 APG Asset Management N.V.,
Amsterdam, Netherlands
6 Stichting Pensioenfonds ABP,
Heerlen, Netherlands
7 APG Groep N.V., Heerlen, Netherlands
8 BlackRock, Inc., New York, NY, USA
9 BlackRock Holdco 2, Inc., Wilmington,
Delaware, USA
10 BlackRock Financial Management,
Inc., New York, USA
11 BNP Paribas Investment
Partners S.A., Paris, France
12 Ministry of Finance of
Norway, Oslo, Norway
13 Norges Bank, Oslo, Norway
14 Cohen & Steers, Inc., New York, USA
15 JPMorgan Asset Management (UK)
Limited, London, United Kingdom
16 JPMOrgan Chase Bank, National
Association, Columbus, USA
17 J.P. Morgan Investment Management
INc., New York, USA
18 BlackRock Advisors Holdings, Inc.,
New York, NY, USA
19 BlackRock International Holdings,
Inc., New York, NY, USA
20 BR Jersey International Holdings L.P.,
St. Helier, Jersey, Channel Islands
21 BlackRock Group Limited, London,
United Kingdom
22 BlackRock Advisors Holdings,
Inc., New York, NY, USA
23 BlackRock International Holdings,
Inc., New York, NY, USA
24 BR Jersey International Holdings L.P.,
St. Helier, Jersey, Channel Islands
25 BlackRock Group Limited, London,
United Kingdom
26 BlackRock Advisors Holdings,
Inc., New York, NY, USA
27 BlackRock International Holdings,
Inc., New York, NY, USA
28 BR Jersey International Holdings L.P.,
St. Helier, Jersey, Channel Islands
29 BlackRock Group Limited, London,
United Kingdom
5.14
0.00
3.001
3.001
2.961
2.961
2.961
4.53
4.26
4.25
5.08
2.97
2.97
2.88
3.19
3.19
3.19
2.81
2.81
2.81
2.72
3.02
3.02
3.02
3.05
2.95
2.95
2.95
2.88
5
3
3
3
3
3
3
3
3
3
5
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
2012 No
Jan. 03,
2014 No
Jan. 03,
2014 No
Jan. 03,
May 08,
2014 Yes1,3
2014 No
May 08,
2014 Yes3
May 08,
2014 Yes3
Sept. 25,
2014 Yes1, 2, 3
Sept. 25,
Sept. 25,
2014 Yes1, 2, 3
2014 Yes1, 2, 3
Oct . 08,
2014 Yes1, 2, 3
Oct. 21,
2014 Yes3
Oct. 21,
2014 No
Nov. 04,
2014 Yes1, 2
2014 Yes1, 4
2014 Yes1, 4
2014 Yes1, 4
Nov. 06,
Nov. 06,
Nov. 06,
Dec. 18,
Dec. 18,
Dec. 18,
Dec. 18,
Feb. 06,
Feb. 06,
Feb. 06,
Feb. 06,
Feb. 10,
Feb. 10,
Feb. 10,
Feb. 10,
2014 Yes1, 2, 3
2014 Yes1, 2, 3
2014 Yes1, 2, 3
2014 Yes1, 2
2015 Yes1, 2, 3
2015 Yes1, 2, 3
2015 Yes1, 2, 3
2015 Yes1, 2
2015 Yes1, 2, 3
2015 Yes1, 2, 3
2015 Yes1, 2, 3
2015 Yes1, 2
1) Attribution pursuant to Section 22 para. 1 Sentence 1 No. 6 WpHG.
2) Attribution pursuant to Section 22 para. 2 WpHG.
3) Attribution in connection with Section 22 para. 1 Sentence 1 No. 1 WpHG.
4) Attribution in connection with Section 22 para. 2 WpHG.
alstria Annual Report 2014
119
Consolidated financial statements
24 DECLARATION OF COMPLIANCE PURSUANT TO SECTION 161 AKTG
[AKTIENGESETZ: GERMAN STOCK CORPORATION ACT]
The Management Board and the Supervisory Board have submitted the declaration of
compliance that is required by Section 161 AktG with respect to the recommendations of
the German Corporate Governance Code as developed by a government commission. It is
permanently available
to
the public on alstria office REIT-AG’s website
(www.alstria.com). It is included in the declaration of corporate management according
to Section 289a HGB.
25 AUDITOR’S FEES
On May 14, 2014,
the general meeting elected Deloitte & Touche GmbH
Wirtschaftsprüfungsgesellschaft, Dammtorstrasse 12, Hamburg, as auditors of the sepa-
rate and consolidated financial statements for financial year 2014. The fees for these au-
diting services amounted to EUR 260 k in 2014. Other consulting services accumulated to
EUR 75 k.
26 MANAGEMENT BOARD
During the financial year, the Company’s members of the Management Board were:
Olivier Elamine, Chief Executive Officer (CEO)
Alexander Dexne, Chief Financial Officer (CFO)
The attached remuneration report contains details of the principles for the definition of
the Management Board and Supervisory Board’s remuneration.
120
alstria Annual Report 2014
Consolidated financial statements
27 SUPERVISORY BOARD
Pursuant to the Company’s Articles of Association (Section 9), the Supervisory Board
consists of six members, which are elected by the general meeting of the shareholders.
The expiration of the term of office is identical for all members, and ends with the closing
of the annual general meeting of the shareholders in the year 2016.
During the financial year 2014, the members of the Supervisory Board were:
Alexander
Stuhlmann
Chairman
Hamburg,
Germany
Managmenet Consultant,
Managing Director,
Alexander Stuhlmann
GmbH
since
January 1, 2015
Capital Stage AG
Euro-Aviation Versicherungs AG
Frank Beteiligungsgesellschaft
mbH
GEV AG
HASPA Finanzholding
HCI Capital AG
until
August 31, 2014
LBS Bausparkasse Schleswig-
Holstein-Hamburg AG
until
June 30, 2014
Ludwig Görtz GmbH
Vice-Chairman of the
Supervisory Board
Chairman of the
Supervisory Board
Chairman of the
Advisory Board
Chairman of the
Supervisory Board
Member of the
Board of Trustees
Chairman of the
Supervisory Board
Member of the
Supervisory Board
Member of the
Administrative Board
Siedlungsbaugesellschaft Hermann
und Paul Frank mbH & Co. KG
Chairman of the
Advisory Board
until
December 31, 2014
Studio Hamburg Berlin Branden-
burg GmbH
Member of the
Advisory Board
Dr. Johannes
Conradi
Vice-Chairman
Hamburg,
Germany
Lawyer and Partner,
Freshfields Bruckhaus
Deringer LLP
Freshfields Bruckhaus Deringer LLP Global Head of Real Estate,
EBS Universität für Wirtschaft und
Recht – Real Estate Management
Institute
Elbphilharmonie Hamburg Bau
GmbH & Co. KG
Member of the German
Management Group
Member of the
Board of Trustees
Member of the
Supervisory Board
alstria Annual Report 2014
121
Consolidated financial statements
Benoît Hérault
Uzès,
France
Managing Director,
Chambres de
l'Artémise S.à r.l
Belvédère SA
Chairman of the Board
since
September 16, 2014
since
July 23, 2014
since
September 1, 2014
SIIC de Paris
Westbrock Partners
Roger Lee
London,
United Kingdom
Chairman of the
audit committee
Board of directors/senior
advisor for France
Real Estate Investment
Manager and Director,
Captiva Capital
Management SAS
Caposition SARL
Captiva Capital Management Ltd
Director
Director
until June 23, 2014
Captiva Capital Management GmbH Director
Captiva International Partners LLP
Partner
Richard Mully
Cobham (Surrey),
United Kingdom
Director,
Starr Street Limited
Aberdeen Asset Management PLC
Hansteen Holdings PLC
ISG plc
St Modwen Properties PLC
Director
Director
Director
Director
Marianne Voigt
Berlin,
Germany
Managing Director,
bettermarks GmbH
Hamburg, February 13, 2015
The Management Board
Olivier Elamine
Alexander Dexne
CEO
CFO
122
alstria Annual Report 2014
Responsibility statement
RESPONSIBILITY STATEMENT
To the best of our knowledge we confirm that, in accordance with the applicable
reporting principles, the consolidated financial statements give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Group, and the Group
management report includes a fair review of the development and performance of the
business and the position of the Group, together with a description of the principal
opportunities and risks associated with the expected development of the Group.
Hamburg, February 13, 2015
alstria office REIT-AG
The Management Board
Olivier Elamine
Alexander Dexne
CEO
CFO
alstria Annual Report 2014
123
Independent auditors‘ report
INDEPENDENT AUDITORS' REPORT
We have audited the consolidated financial statements prepared by alstria office REIT-
AG, Hamburg/Germany, - comprising the income statement and statement of
comprehensive income, consolidated statement of financial position, statement of cash
flows, statement of changes in equity and the notes to the consolidated financial
statements - and the group management report for the business year from January 1
until December 31, 2014. The preparation of the consolidated financial statements and
the group management report in accordance with IFRS, as adopted by the European
Union (EU), and the additional requirements
of German commercial law pursuant to
§ 315a (1) HGB (‘German Commercial Code’) are the responsibility of the Parent
Company's Management Board. Our responsibility is to express an opinion on the
consolidated financial statements and on the group management report based on our
audit.
We conducted our audit of the consolidated financial statements in accordance with § 317
HGB and German generally accepted standards for the audit of financial statements
promulgated by the Institut der Wirtschaftsprüfer. Those standards require that we plan
and perform the audit such that misstatements materially affecting the presentation of
the net assets, financial position and results of operations in the consolidated financial
statements in accordance with the applicable financial reporting framework and in the
group management report are detected with reasonable assurance. Knowledge of the
business activities and the economic and legal environment of the Group and
expectations as to possible misstatements are taken into account in the determination of
audit procedures. The effectiveness of the accounting-related internal control system and
the evidence supporting the disclosures in the consolidated financial statements and the
group management report are examined primarily on a test basis within the framework
of the audit. The audit includes assessing the annual financial statements of those
entities included in consolidation, the determination of entities to be included in
consolidation, the accounting and consolidation principles used and significant estimates
made by the Management Board, as well as evaluating the overall presentation of the
consolidated financial statements and the group management report. We believe that our
audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements
of alstria office REIT-AG, Hamburg/Germany, comply with IFRS, as adopted by the EU,
the additional requirements of German commercial law pursuant to § 315a (1) HGB and
give a true and fair view of the net assets, financial position and results of operations of
the Group in accordance with these requirements. The group management report is
124
alstria Annual Report 2014
Independent auditors‘ report
consistent with the consolidated financial statements and as a whole provides a suitable
view of the Group's position and suitably presents the opportunities and risks of future
development.
Hamburg/Germany, February 13, 2015
Deloitte & Touche GmbH
Wirtschaftsprüfungsgesellschaft
[seal]
Signed: Reiher
Wirtschaftsprüfer
Signed: p.p. Blumhagen
Wirtschaftsprüferin
[German Public Auditor]
[German Public Auditor]
alstria Annual Report 2014
125
Corporate Governance
CORPORATE GOVERNANCE
REPORT OF THE SUPERVISORY BOARD
Dear shareholders,
In this report we present an overview on the supervision and advising activities of the
Supervisory Board in order to monitor the Company’s management. Furthermore, the
main topics discussed by the plenary Supervisory Board and the work of its committees
are presented, in addition to the audit of the annual and consolidated financial
statements and the Company’s corporate governance during the reporting period.
SUPERVISION AND ADVISING OF THE COMPANY’S MANAGEMENT BOARD
During the reporting period 2014, we performed the duties required by the statutory
provisions and the Company's articles of association. We advised and supervised the
Management Board of the Company and their conducting of business and were
intensively involved in matters of material importance to the Company.
During the meetings of the Supervisory Board and its committees the Management Board
provided us with regular, prompt and detailed reports on the development of the
business and financial situation of the Company. Furthermore, we were informed on
issues concerning the Company’s planning, important business events and on current
risks, on risk management and on the Company’s compliance. The Management Board
and Supervisory Board cooperated to set the strategic direction of the Company.
Between meetings, the Management Board further informed the Supervisory Board of
important events orally and in writing. The Chairman of the Supervisory Board regularly
met with the Management Board to exchange information and advice on matters
concerning the Company’s business strategy, its planning, business development, current
risks, risk management and compliance.
We have intensively consulted with the Management Board on all transactions requiring
our approval. After careful examination and consultation, the Supervisory Board voted on
all matters brought to its attention as dictated by law, the articles of association or rules
of procedure of either the Management Board or the Supervisory Board. This also
extended to the Company’s budget planning.
In financial year 2014 the Supervisory Board held four ordinary meetings and two
extraordinary meetings. All members attended a minimum of at least half of the
meetings of the Supervisory Board. The presence of the members in the meetings of the
Supervisory Board was 89% on average. Additionally, we passed written resolutions on
two issues based on detailed documents. In 2015, the Supervisory Board met for one
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additional ordinary and one extraordinary meeting and passed one written resolution
prior to the finalisation of this report.
In all ordinary meetings of the Supervisory Board the Supervisory Board and the
Management Board discussed the situation and development of the Company, its
business performance, its market situation and development of risks as well as its
financial results (quarterly and half-year financial reports, financial statements of alstria
office REIT-AG and its consolidated financial statements).
MAIN POINTS OF DISCUSSION
During its financial meeting in February 2014, the Supervisory Board dealt with the
consolidated financial statements, the financial statements as at December 31, 2013 and
the management reports and discussed them with the auditors. The Supervisory Board
approved the financial statements of alstria office REIT-AG as well as the consolidated
financial statements as at December 31, 2013, and confirmed the Management Board’s
proposal regarding the appropriation of the profit. The Supervisory Board passed
resolution on its report to the annual general meeting for financial year 2013 and on the
corporate governance statement. The latter of which includes the declaration of
compliance with the recommendations of the German Corporate Governance Code. The
Supervisory Board further approved an investment proposition into one of the Company’s
assets for letting purposes as well as the conclusion of a bank loan agreement of an
amount of approx. EUR 121 m. Management Board and Supervisory Board discussed the
agenda for the ordinary Annual General Meeting of the Company, possible real estate
transactions as well as the Company’s general strategic orientation. The Supervisory
Board appointed a special committee, which has not been given any decision-making
power in order to pass resolutions on behalf of the full board. Rather, the committee is
responsible for the prior discussion and preparation of decisions with reference to
acquisition opportunities. Finally, the Supervisory Board discussed and decided on the
amount of the long-term variable remuneration of the members of the Management
Board for financial year 2010 and of the short-term variable remuneration for financial
year 2013 based on the nomination and remuneration committee’s recommendation and
after carrying out a vertical remuneration comparison. It thereby considered the board
members’ individual performance and also discussed the parameters for the variable
remuneration for the members of the Management Board for financial year 2014.
In the ordinary meeting in May 2014, Management Board and Supervisory Board
discussed the Company’s acquisition opportunities and opportunities to dispose of assets
of the Company.
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The items discussed in the two extraordinary meetings of the Supervisory Board in June
2014 were again the acquisition opportunities of the Company as well as the Company’s
strategic development.
In its meeting in September 2014, the Supervisory Board approved the disposal of a
property as well as the acquisition of a real estate portfolio. Management Board and
Supervisory Board discussed the financing of the acquisition as well as the Company’s
further strategic development. Moreover, the Supervisory Board approved the editorial
amendment of the Company’s articles of association with respect to a conditional capital
increase of an amount of EUR 85,000 k, which has been executed within the framework
of the Company’s employees’ participation programme. Finally, employees at first
management level and the departments they manage were introduced to the Supervisory
Board.
After intensive discussion with the Management Board, the Supervisory Board passed
resolution on the business and budget planning for financial year 2015 in its meeting in
December 2014. It also approved the Company’s budget for financial year 2014 which
had been adapted due to the acquisitions and disposals executed during the year 2014.
The Supervisory Board furthermore approved the amendment of a loan agreement of the
Company. The Supervisory Board also decided on an editorial amendment of the articles
of association resulting in the deletion of Conditional Capital II which could no longer be
used due to the expiry of the stock option programme for the supervisory board.
Furthermore, the Supervisory Board dealt with the objectives regarding the composition
of the Supervisory Board as last determined in November 2012 (Diversity Statement)
and discussed the acquisition and development opportunities of the Company with the
Management Board. Finally, the Supervisory Board reviewed the positive result of the
efficiency check of its work, which the Supervisory Board members had performed by
means of a questionnaire prior to the meeting.
The resolutions passed by means of a written circulation procedure in March and April
2014 concerned the Supervisory Board’s proposals of to the shareholders on issues to be
addressed at the ordinary Annual General Meeting for financial year 2013 as well as an
issue of staff matter.
In the extraordinary meeting in January 2015, the Supervisory Board discussed the
Company’s strategic orientation.
In its financials meeting in February 2015, in particular, the Supervisory Board dealt with
the consolidated financial statements and the financial statements for the year ending on
December 31, 2014. It further reviewed the Management Board’s recommendation for
the profit appropriation. The Supervisory Board passed resolution on its report to the
Annual General Meeting for financial year 2014 as well as the Corporate Governance
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Report. The
latter of which
includes the declaration of compliance with the
recommendations of the German Corporate Governance Code. The Supervisory Board
also dealt with the variable remuneration for the members of the Management Board.
COMMITTEES OF THE SUPERVISORY BOARD
The Supervisory Board has six members. It has formed three permanent committees to
support it in its work, each of them composed of three members. The composition of the
committees is described in the Company’s Corporate Governance Statement on pages
133 to 143 of the annual report.
The committees have been given decision-making powers in some cases to the extent
permitted by law. In all other cases they prepare the resolutions the Supervisory Board
will pass by making proposals. During the Supervisory Board’s meetings, the committee’s
chairmen report on their committees’ work. In financial year 2014, the Supervisory
Board’s committees focused on the following topics:
The audit committee held four meetings in financial year 2014. All of them were attended
by the Chief Financial Officer. The company’s current risk position was discussed in all
meetings. In the course of auditing the accounts of the Company, the audit committee
dealt with the consolidated financial statements and the financial statements as at
December 31, 2013 as well as the management reports. It discussed the documents with
the independent auditors and carried out a respective preliminary examination of the
annual and consolidated
financial statements and
the Management Board’s
recommendation for the appropriation of profit. As a result the committee submitted
corresponding proposals for resolution to the Supervisory Board. Further topics were the
recommendation to the Supervisory Board regarding the proposed resolution to the
annual general meeting for the choice of the auditors, the auditor’s independence and
any additional services to be performed by them. Deloitte & Touche GmbH
Wirtschaftsprüfungsgesellschaft, Hamburg branch has been appointed as auditor. The
audit committee decided on the engagement agreement and set the key audit areas. In
addition, the Company’s accounting process, its risk management system and key risks
were discussed. Moreover, the effectiveness of the Company’s internal controlling, audit
system and compliance system were discussed. Finally, the audit committee dealt with
the results of the Company’s internal audit and examined the efficiency of its own work.
The evaluation revealed a consistently high efficiency.
The nomination and remuneration committee, which also carries out the tasks of a
nomination committee, met twice during the financial year 2014. The committee
discussed about the amount of the long-term variable remuneration of the members of
the Management Board for financial year 2010 and the short-term variable remuneration
of the members of the Management Board for financial year 2013. In light of this
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discussion, each Management Board member’s individual performance was discussed.
The committee furthermore discussed the parameters of the variable remuneration of the
Management Board members for financial year 2014 and prepared the vertical
remuneration comparison for the Supervisory Board. It provided the Supervisory Board
with corresponding resolution proposals. Furthermore, the committee examined the
efficiency of its own work.
In financial year 2014, the investment committee deliberated with the Management
Board on an acquisition opportunity in three meetings. It gave its approval for advisory
services from the law firm Freshfields Bruckhaus Deringer LLP, of which the member of
the Supervisory Board, Dr Johannes Conradi, is a partner. In the meetings of the entire
Supervisory Board, the members of the investment committee comprehensively
discussed all real estate transactions executed in financial year 2014 with the other
Supervisory Board members.
With resolution dated February 27, 2014, the Supervisory Board additionally established
in the reporting period a special committee, which was comprised of three-members. It
was responsible for the discussion and preparation of decisions regarding possible
acquisitions. It has not been equipped with any decision-making competencies. It, held
two telephone conferences in May 2014 and discussed acquisition opportunities with the
Management Board. The composition of the special committee is described in the
Company’s Corporate Governance Statement on pages 133 to 143 of the annual report.
No member of the committees participated in less than half of its respective committee’s
meetings.
AUDIT OF THE ANNUAL FINANCIAL STATEMENTS AND CONSOLIDATED
FINANCIAL STATEMENTS
Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Hamburg branch, audited the
financial statements and the management report of alstria office REIT-AG and its
consolidated financial statements, including the management report of the Group for the
financial year from January 1 to December 31, 2014. All reports were prepared by the
Management Board and issued with unqualified audit statements.
Immediately after their preparation, the members of the Supervisory Board were
presented with the financial statements and management report of alstria office REIT-AG.
Likewise, the consolidated financial statements including the management report of the
Group, along with the auditors’ report, as well as with the Management Board’s
recommendation for the appropriation of the annual net profit were presented. The
Supervisory Board examined the documents provided by the Management Board in
detail, in both its audit committee and at a plenary meeting. In the meeting of the audit
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committee, the auditors presented the essential results of their audit (including the audit
of the internal control and risk management system) and were available for answering
questions. The audit committee conducted the Supervisory Board’s audit and reported to
the plenary in the presence of the auditors of the financial statements of alstria office
REIT-AG and its consolidated financial statements. The attendees of the plenary meeting
examined and discussed both the annual financial statements of the Company and the
consolidated financial statements as prepared by the Management Board as well as the
auditors’ results. There were no objections to the results concluding the review as
conducted by the Supervisory Board. The Supervisory Board approved the financial
statements of alstria office REIT-AG and its consolidated financial statements. The annual
financial statements are thus endorsed. The Supervisory Board also shared the
Management Board’s recommendation for the appropriation of the profit.
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CORPORATE GOVERNANCE
In the reporting period the Supervisory Board also dealt with whether alstria office REIT-
AG fulfils the recommendations of the German Corporate Governance Code. The
Management Board and the Supervisory Board last issued the annual declaration of
compliance with the German Corporate Governance Code in February 2015, in
accordance with Section 161 AktG; it was subsequently made permanently available to
shareholders on the Company’s website. In their declaration, the Management Board and
Supervisory Board explained that most of the recommendations of the German Corporate
Governance Code have been, or will be, adopted. Furthermore information on the
recommendations that have not been, or will not be, followed, is presented together with
the reasons for making these decisions.
Concerning its own composition the Supervisory Board decides on specific objectives
(‘Diversity Statement’), which are published in the Company’s Corporate Governance
Report, together with the status of their implementation. Based on a self-assessment of
the members of the Supervisory Board in Winter 2014, we were able to conclude that the
composition of the Supervisory Board met these objectives as at December 31, 2014. No
conflicts of interest arose during the financial year 2014, neither concerning members of
the Supervisory Board nor the Management Board.
The Supervisory Board would like to thank the Management Board and all employees for
their dedication and their successful work in financial year 2014.
Hamburg, February 2015
For the Supervisory Board
Alexander Stuhlmann
Chairman of the Supervisory Board
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CORPORATE GOVERNANCE STATEMENT
Corporate Governance
The Management Board and Supervisory Board of alstria office REIT-AG (‘alstria’) are
aware of their responsibility concerning the corporate governance of the Company. It is
undertaken with due regard to the Company’s shareholders, employees, tenants and
business partners. This sense of responsibility is expressed, amongst others, in a
transparent corporate governance with the aim of promoting the confidence of alstria’s
shareholders’, employees’, tenants’, business partners’ and the public’s trust in the
management and supervision of the Company. In this statement, the Management Board
and Supervisory Board report on alstria’s corporate governance according to Section 3.10
of the German Corporate Governance Code (‘Code’) and Section 289a para. 1 of the
German Commercial Code (HGB). This statement includes the declaration of compliance
according to Section 161 of the German Stock Corporation Act, the relevant information
on corporate governance practices, a description of the Company’s operating principles
and the composition of its Management Board and Supervisory Board as well as its
corporate governance structures.
GERMAN CORPORATE GOVERNANCE CODE AND DECLARATION OF COMPLIANCE
alstria's value-oriented corporate management has already implemented many of the
principles of the most recent version of the German Corporate Governance Code (dated
June 24, 2014) to an extent beyond of what is legally required. The principles and
recommendations of the Government Commission as appointed by the German Federal
Ministry of Justice contain internationally and nationally recognised standards for effective
and responsible corporate management.
The Company’s declaration of compliance with the recommendations of the German
Corporate Governance Code is published on the Company’s website (www.alstria.com).
After careful consideration, alstria has chosen not to comply with some of the
recommendations of the Code. These items and the reasons for the Company’s
nonconformity are set out in the declaration of compliance as issued by the Management
Board and the Supervisory Board on February 24, 2015:
WORDING OF DECLARATION OF COMPLIANCE DATED FEBRUARY 24, 2015
Since the prior declaration of compliance dated February, 27, 2014, the company has –
apart from the exceptions stated below – complied with the recommendations of the
‘Government Commission German Corporate Governance Code’ as amended on May 13,
2013 and as equally set out in the version dated June 24, 2014. The Company intends to
continue to comply with the recommendations of the Code as amended on June 24, 2014
to the same extent:
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Corporate Governance
Deductible for D&O insurance for the Supervisory Board, Section 3.8
The D&O insurance for the Supervisory Board of alstria office REIT-AG does not
comprise a deductible. The Management Board and Supervisory Board believe that the
members of the Supervisory Board will carry out their duties responsibly irrespective of
any such deductible.
Change of performance targets for elements of variable remuneration,
Section 4.2.3
The short-term incentive remuneration element of the Management Board is mainly
based on the achievement of a funds from operations (‘FFO’) target. In the event that
the FFO achieved in a financial year is positively and materially impacted by new
acquisitions, the Supervisory Board adjusts the FFO target accordingly. In doing so, the
Supervisory Board makes sure that the Management Board is not incentivised to enter
into acquisitions by means of achieving personal short-term benefits. The impact of any
acquisition on the management remuneration is solely linked to multi-year remuneration
elements, therefore, aligning the interest of the Management Board with those of the
Company and its shareholders. Vice versa, the Supervisory Board adapts the FFO target
to disposals.
Determination of a level of benefits for the private pension plan, Section 4.2.3
As the Company has opted for a defined contribution model for the private pension plan
of the Management Board members for reasons of transparency and risk management,
the Supervisory Board has not fixed a level of benefits for the private pension plan of the
Management Board members. The Supervisory Board believes that it is in the best
interest of the Company to have a defined contribution model rather than a defined
benefit model, as the defined contribution does not create any unforeseen future liability
for the Company.
Discussion of the half-year and quarterly financial reports by the Supervisory
Board or its audit committee and the Management Board prior to their
publication, Section 7.1.2
Prior to their publication, the half-year and quarterly financial reports are made available
to the Supervisory Board. Furthermore, the financial reports are discussed with the
Supervisory Board in detail soon after their publication. In the event that there are
considerable differences to the budget or business plan as authorised by the Supervisory
Board, the Supervisory Board is given the opportunity to discuss the figures with the
Management Board before they are published. The Management Board and Supervisory
Board consider this approach to be appropriate and adequate.’
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All other recommendations of the German Corporate Governance Code dated June 24,
2014 have been fully implemented. alstria has appointed a corporate governance officer
within the Company, who will report any changes of the Code to the Management Board
and the Supervisory Board at least once per year and whenever necessary. In this way,
alstria ensures consistent compliance with these principles. Analysis, supervision and
transparency are the measures undertaken to lay the foundation for fair and efficient
corporate management. They will remain the key criteria in future.
WORKING METHODS OF THE MANAGEMENT BOARD AND THE SUPERVISORY
BOARD
The Management Board and the Supervisory Board cooperate closely and faithfully in the
interest of the Company. The chairman of the Supervisory Board has regular contact with
the Management Board.
The Management Board has two members: Olivier Elamine as Chief Executive Officer and
Alexander Dexne as Chief Financial Officer. The Management Board is responsible for
running alstria in the interest of the Company with the aim of sustainably increasing the
Company’s value. It sets the business goals and – in conjunction with the Supervisory
Board – the strategic direction of the Company. The tasks of the Management Board and
the allocation of responsibilities between the individual members of the Management
Board are stipulated in the rules of procedure and the role sort for the Management
Board. The members of the Management Board are obligated to immediately disclose any
conflicts of interest to the Supervisory Board. The members of the Management Board
may only conduct secondary activities, particularly memberships in the supervisory
boards of companies not affiliated with the Group, with the approval of the Supervisory
Board. The members of alstria’s Management Board had no conflicts of interest in the
reporting year. The members of the Management Board serve on no supervisory boards
of listed companies outside of the Group or in supervisory boards of companies with
comparable requirements. Major business transactions between the Company and
members of the Management Board, or with any persons or companies in close
association with them, require the approval of the Supervisory Board. All such business
transactions must be concluded at customary commercial conditions. There were no such
contracts during the reporting period. The Management Board pays attention to diversity
in filling its management positions and aims to adequately consider women for these
positions. As at December 31, 2014, 44% of the management positions at alstria were
held by female employees.
The Supervisory Board appoints the members of the Management Board and monitors
and advises the Management Board on management issues. The Management Board
involves the Supervisory Board in all decisions of fundamental importance to the
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Company. The rules of procedure for the Supervisory Board stipulate that certain,
significant business transactions by the Company are subject to the approval of the
Supervisory Board. For example, the acquisition or disposal of real estate property for a
consideration of more than EUR 30 m, entering into financing agreements with a volume
of more than EUR 30 m, entering or prematurely terminating lease contracts with an
annual consideration of more than EUR 2 m, or investing in Company assets
(modernisation measures) with an annual total sum of more than EUR 2 m, if such
investments have not already been included in the budget as approved by the
Supervisory Board. In its report to the Annual General Meeting the Supervisory Board
reports on its activities undertaken in financial year 2014. The report is presented on
pages 126 to 132 of the annual report.
COMPOSITION OF THE SUPERVISORY BOARD
In accordance with the articles of association, the Supervisory Board is composed of six
members. The Supervisory Board currently is comprised of the following members:
Member
Profession
Alexander Stuhlmann
(Chairman)
Dr Johannes Conradi
(Vice-Chairman)
Benoît Hérault
Roger Lee
Richard Mully
Marianne Voigt
Management consultant;
Managing Director, Alexander Stuhlmann GmbH
Lawyer and Partner,
Freshfields Bruckhaus Deringer LLP
Managing Director, Chambres de l‘Artémise S.à r.l
Real Estate Investment Manager and Director, Captiva Capital Management SAS
Director, Starr Street Limited
Managing Director , bettermarks GmbH
The periods of office of all Supervisory Board members expire at the end of the Annual
General Meeting in which the shareholders pass resolution to discharge them with respect
to their activities for financial year 2015. No changes took place in the composition of the
Supervisory Board in 2014.
No former members of the Management Board sit on the Supervisory Board. The
Supervisory Board is composed of members who have the necessary knowledge,
competence and professional experience to properly carry out their duties. The
Supervisory Board of alstria office REIT-AG first specified the goals for its composition in
November 2010. In November 2012, the Supervisory Board reviewed and revised the
goals for its composition, especially with regard to the amendments of the German
Corporate Governance Code as issued in 2012.
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Corporate Governance
With due consideration of the specific situation of alstria, the Supervisory Board specified
the following goals for its composition in November 2012, which are to be considered in its
proposals to the shareholders in the General Meeting regarding new elections to the
Supervisory Board:
1. Diversity
The members of the Supervisory Board shall in its entirety have the knowledge, skills
and expert experience required to successfully complete their tasks, especially within
the capital market and the German real estate market.
2. Women
At least one member of the Supervisory Board shall be female.
3. Experience abroad
At least two members of the Supervisory Board shall have acquired reasonable
international experience.
4. Independence
At least three members of the Supervisory Board shall have no business or personal
relationships with the Company, its executive bodies, a controlling shareholder or an
enterprise associated with the latter, which could cause any substantial and not
temporary conflict of interest.
5. Independent financial expert
At least one independent member of the Supervisory Board shall have expertise in
accounting or the auditing of annual financial statements.
6. Other conflicts of interest
At least three members of the Supervisory Board shall not have any consulting or
representation duties with main tenants, lenders or other business partners of the
Company.
7. Age limit
Members of the Supervisory Board shall generally not be older than 70 years of age.
In autumn 2014 the Supervisory Board repeatedly assessed the implementation of the
targets and came to the conclusion that all of them are currently met.
SUPERVISORY BOARD COMMITTEES
The Supervisory Board has formed three standing committees. Each committee has its
own rules of procedure to specify its concerns and tasks.
The audit committee monitors the Company’s financial reporting process, engages the
independent auditors to prepare audit reports, determines the key audit areas and the
independent auditors’ compensation, and is responsible for issues concerning risk
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management, internal control, internal audit and compliance. In financial year 2014 the
audit committee was comprised of Marianne Voigt, as Chair, and Dr Johannes Conradi
and Roger Lee as members.
The investment committee decides on the approval of the Supervisory Board concerning
the acquisition or disposal of real estate property or other assets worth between
EUR 30 m and EUR 100 m. Transactions of a value greater than this amount are to be
presented to the entire Supervisory Board for approval. The investment committee
furthermore decides on the approval of the Supervisory Board regarding the conclusion,
renewal or early termination of lease agreements with third parties with a total annual
consideration of more than EUR 2 m, as well as regarding contracts with Supervisory
Board members according to Section 114 German Stock Corporation Act (Aktiengesetz,
AktG). In financial year 2014 the investment committee was comprised of Richard Mully,
as Chair, and Benoît Hérault and Alexander Stuhlmann as members.
The nomination and remuneration committee, which also carries out the function of a
nomination committee, prepares resolutions for the entire Supervisory Board for the
appointment and dismissal of members of the Management Board, for the Management
Board’s compensation system and for the total remuneration of individual members of
the Management Board. Furthermore, it deals with the resolution of, or amendments to,
the rules of procedure for the Management Board, as well as the approval of certain
other activities and primary contracts of members of the Management Board. Apart from
the amount of compensation, the nomination and remuneration committee decides on
the conclusion, amendment, extension and termination of contracts with Management
Board members as well as on the content of such contracts. Finally, the committee
prepares the resolutions for the Supervisory Board regarding the proposal of the
appointment of suitable Supervisory Board members at Annual General Meetings. In
financial year 2014 the nomination and remuneration committee was comprised of
Alexander Stuhlmann, as Chair, and Dr Johannes Conradi and Richard Mully as members.
In February 2014, the Supervisory Board additionally formed a special committee, which
has no decision-making competence. Its members were Dr Johannes Conradi, as Chair,
and Benoît Hérault and Richard Mully as members.
The Supervisory Board reports on the activities of the committees of the Supervisory
Board during financial year 2014 in its report to the Annual General Meeting on pages
126 to 132 of the annual report.
REMUNERATION OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD
The compensation system for the Management Board and the Supervisory Board is laid
out in the remuneration report for financial year 2014. The report also entails a
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breakdown of the remuneration of each member of the Management Board and the
Supervisory Board for financial years 2013 and 2014, respectively, applying the model
tables provided by the German Corporate Governance Code. In the Annual General
Meeting on June 16, 2010, the shareholders approved the remuneration system for the
members of the Management Board by a large majority.
STOCK OPTION PROGRAMME AND SIMILAR SECURITIES-ORIENTED INCENTIVE
SYSTEMS
Stock option programme and long term incentive plan
In 2010 a long-term incentive plan for the Management Board was implemented and
thus replaced the stock option programme 2007 for the members of the Management
Board as a new long-term variable remuneration element. The term of the first and only
tranche of stock option rights for the Management Board expired in financial year 2014
so that the stock option programme 2007 is now terminated. From financial year 2010
onwards, the members of the Management Board are each granted virtual shares with a
four-year term within the framework of the long term incentive plan every year. The
stock option programme and long-term incentive plan are described in the remuneration
report on pages 144 to 151 of the annual report.
Employee participation programme
Pursuant to the authorisation as granted by the shareholders in the Annual General
Meeting on March 15, 2007, the Management Board was authorised to issue up to a total
of 500,000 convertible profit participation certificates with a total nominal value of
EUR 500,000 until March 15, 2012. The rights were issuable to alstria’s employees and
employees of companies directly or indirectly controlled by alstria according to the terms
of the employee profit participation programme.
After expiration of the aforementioned authorisation, the Annual General Meeting on
April 24, 2012 further authorised the Management Board to issue up to a total of
500,000 convertible profit participation certificates until April 23, 2017. The certificates
are issuable to alstria’s employees and employees of companies directly or indirectly
controlled by alstria according to the definition of the employee profit participation
programme. Members of the Management Board are not considered employees for the
purposes of this plan.
Each convertible profit participation certificate issued under the employee participation
programmes can be converted into an alstria bearer share once the share price exceeds
the price on the day the certificate was issued by 5% or more on at least seven non-
consecutive trading days. Conversion is only carried out on predefined dates and only
when the subscriber pays the conversion price and is still employed at alstria or one of its
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Corporate Governance
subsidiaries on the date of conversion. The maximum term for a convertible profit
participation certificate is five years.
A total of 300,100 certificates were issued in the course of the now expired employee
profit participation programme 2007. So far, a total of 165,500 convertible profit
participation rights resulting from this programme have been converted into shares of
the Company. Furthermore, up to now, 304,550 profit participation certificates have been
issued in the course of the new employee profit participation programme 2012 and so
far, a total of 85,000 convertible profit participation rights resulting from this
programme, have been converted into shares of the Company.
DIRECTORS' DEALINGS – SECURITIES TRANSACTIONS SUBJECT TO REPORTING
REQUIREMENT
Pursuant to Section 15a of the German Securities Trading Act (Wertpapierhandelsgesetz,
WpHG) the Management Board and Supervisory Board of alstria office REIT-AG, as well
as related parties (family members), are required to notify the Company of their own
transactions involving Company shares. In addition to the acquisition and sale of alstria
shares, every buy or sale transaction related to alstria shares (e.g., the purchase or sale
of options on alstria shares) has to be reported. The Company must be informed of such
transactions within five working days and publish them immediately. However, the
former only applies if the total value of the transactions is EUR 5,000 or more within one
calendar year. In financial year 2014 no such transactions were reported to alstria.
RELATIONSHIP TO THE SHAREHOLDERS OF THE COMPANY
alstria office REIT-AG respects the rights of its shareholders and makes best efforts to
guarantee the exercise of those rights to the extent stipulated by law or its bylaws. In
particular, these include the right to freely purchase and sell shares, to have an
appropriate level of access to information, an adequate number of voting rights per share
(one share – one vote) and the participation in our Annual General Meeting. Shareholders
have the option of exercising their voting rights personally or via an authorised
representative present at the Annual General Meeting or by sending voting instructions to
their proxies. The invitation to the Annual General Meeting includes an explanation of
how voting instructions can be issued. The articles of association do not stipulate an
option to vote by written mail. By means of authorising a proxy, shareholders now
already have the possibility to vote prior to the date of the Annual General Meeting. This
is why an additional option of being able to vote by written mail would not facilitate the
exercise of the shareholders’ rights.
It is possible to send invitations and documents for shareholders’ general meetings to the
shareholders electronically upon request. The invitation and the documents to be made
available for viewing prior to the upcoming Annual General Meetings pursuant to the
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alstria Annual Report 2014
Corporate Governance
legal provisions will be published on the Company’s website together with additional
documents pursuant to Section 124a of the German Stock Corporation Act (Aktiengesetz,
AktG) and the agenda. The results of the votes will likewise be published on the
Company’s website following the Annual General Meeting.
COMMUNICATION WITH THE PUBLIC
In sharing information with people outside of the Company, the Management Board
follows the principles of transparency, promptness, openness, clarity and a policy of equal
treatment of its shareholders. In particular, alstria informs its shareholders and the
interested public about the situation of the Company and significant business events
through
financial
reports, analyst and press conferences, press and ad-hoc
announcements and the Annual General Meeting. alstria’s website includes information on
the Company and its shares, especially its financial reports, share price tracking and
announcements about the acquisition or disposal of Company shares or related financing
instruments pursuant to Section 15a WpHG. Moreover, alstria’s financial reports and
website include a financial calendar which indicates all dates of importance to
shareholders. All announcements and pieces of information are additionally published in
English language.
FINANCIAL REPORTING AND AUDITING
alstria regularly informs shareholders and third parties by publishing its consolidated,
half-year and quarterly financial statements in the course of each financial year. The
consolidated financial statements are prepared in accordance with the International
Financial Reporting Standards (IFRS). For legal reasons (calculating dividends, creditor
protection), financial statements for alstria office REIT-AG are also prepared in
accordance with the German Commercial Code (HGB).
The consolidated financial statements and the financial statements of alstria office REIT-AG
are audited by both the independent auditor as appointed by the shareholders in the
Annual General Meeting and by the Supervisory Board. After having examined its
independence, the audit committee of the Supervisory Board appoints an external auditing
firm, to audit the financial statements and negotiates the respective auditing fees. Deloitte
& Touche GmbH Wirtschaftsprüfungsgesellschaft, Hamburg branch, was appointed to audit
the annual and half-year financial statements of alstria office REIT-AG and of the Group for
financial year 2014. The auditors participate in the plenary sessions of the audit committee
and the Supervisory Board to advise on the consolidated financial statements and the
financial statements of alstria office REIT-AG and to present the key findings of the audit.
alstria Annual Report 2014
141
Corporate Governance
COMPLIANCE
In accordance with Section 4.1.3 of the German Corporate Governance Code, the
Management Board is responsible for ensuring compliance with the legal provisions and
Company guidelines throughout all of the Group’s companies. alstria’s outstanding
reputation and the trust of its shareholders, tenants, employees and business partners
crucially depend on the behaviour of each individual employee.
For this reason, alstria has developed a code of conduct, listing guidelines for behaviour
and providing orientation to resolve conflicts (e.g. conflicts of interest), thereby serving
as a model for correct behaviour for all employees of the Group. The code of conduct is
published on the Company’s website (www.alstria.com).
alstria has set up a compliance organisation to communicate the values laid out in the
code of conduct and Company guidelines and to monitor compliance with these values.
The compliance officer is responsible for communicating these values by answering
questions on the implementation of the code and by offering in-house training for all
employees. Compliance is monitored by colleagues, supervisors and the compliance
officer as well as via regular investigation by auditors. alstria has also set up a hotline
through which employees can anonymously report any violations of the code of conduct
or the Company’s internal guidelines. Furthermore, the Management Board regularly
discusses Company compliance with the Supervisory Board’s audit committee.
Violations of the code of conduct will not be tolerated; they will be fully investigated and its
violators punished. This can be anything from disciplinary measures to dismissal, a claim for
damages or even prosecution.
SUSTAINABILITY
alstria’s sustainability approach is based on a three-pillar model, taking the impact of
business on the following pillars into account: the economy, the environment and social
issues.
As a commercial organization, alstria’s main objective is to optimize its long term
sustainable value. It strives to generate the best yield possible on its equity over time.
alstria’s approach to sustainability does not solely focus on environmental matters, but
considers economic and social impacts of its actions as well. alstria weighs the risk-
benefit-ratio of the three areas before making any decisions and adapts its actions to
what it feels is the most viable course of action in each case, respectively. The result of
this approach is that alstria might not always take the decisions that maximize its short-
term benefit, striving to always take the path that will yield the best long-term prospects
for the Company.
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alstria's sustainability approach, its achievements in its three defined areas of
sustainability, as well as the Company’s related future targets are described in detail in
the Company’s yearly sustainability report. The report is available on the Company’s
website (www.alstria.com).
February 2015
The Management Board
The Supervisory Board
alstria Annual Report 2014
143
REMUNERATION REPORT*
Corporate Governance
REMUNERATION OF THE MANAGEMENT BOARD MEMBERS
The remuneration system for the members of the Management Board is determined by
the Supervisory Board and is reviewed regularly. The Supervisory Board is of the opinion
that an adequate remuneration for the members of the Management Board is provided,
which is based on customary market terms and conditions and, in particular, also takes
the long-term success of the Company into account. The remuneration system for the
members of the Management Board as described below was developed by involving an
external and independent remuneration expert. The shareholders approved it in the
general meeting for financial year 2009; since then it has been applied without changes.
The remuneration structure complies with the German Stock Corporation Act (AktG) and
- except for the deviations declared in the Compliance Statement according to Sec. 161
AktG - with the recommendations of the German Corporate Governance Code.
The criteria for determining the appropriateness of the remuneration of the Management
Board, which are used as part of the remuneration system, are among others:
the duties of each individual Management Board member;
his or her personal performance;
the financial situation of the Company;
the success and future prospects of the Company;
customary practice regarding remuneration relative to its peer companies and
the remuneration structure of the Company, taking into account the level of
compensation of the Management Board in comparison to that of the Company’s
senior management and its staff in general, particularly in terms of its
development over time.
1. Structure of the Management Board remuneration
The Supervisory Board determines target remuneration for each board member. The
target remuneration of each Management Board member is comprised of a fixed basic
salary, a short-term and a long-term variable component and ancillary benefits (benefits
in kind). The majority of the target remuneration is made up of variable components
which are dependent on achieving annual or multi-year targets as described below. The
system also comprises caps for the different variable elements of the remuneration.
* This remuneration report forms an integral part of the audited Group management report and notes to the
annual financial statements.
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Corporate Governance
Fixed remuneration
The fixed element of the remuneration is a basic salary, which is independent of
performance and paid as a salary on a pro-rata basis each month. The fixed element of
the remuneration amounts to approx. 40% of the total target remuneration, excluding
any ancillary benefits for the financial year.
Variable remuneration
The variable element of the remuneration amounts to approximately 60% of the total
target remuneration, and is composed of two parts: a Short Term Incentive and a Long
Term Incentive.
The table below summarizes the main characteristics of each of the two programs:
Short term incentive (STI)
Long term incentive (LTI)
Proportion of total
target remuneration
20%
Targets to asses
performance
Min/Max target
achievement
Discretionary factor
Deferred component
Form of the deferred
component
Deferral period
Reference
share price
Payout cap for the
deferred
components
Like for like budgeted FFO
20%
Total Shareholder
Return relative to EPRA
NA-REIT Europe Ex-UK
20%
Absolute Total
Shareholder Return
50%/150%
0.8 / 1.2
25%
50%/150%
0.8 / 1.2
100%
50%/150%
0.8 / 1.2
100%
Virtual shares
2 years
Average share price for the
previous 20 days
250% of deferred amount
Virtual shares
4 years
Average share price for
the previous 60 days
Virtual shares
multiplied by 250% of
the reference share
price on grant date
Virtual shares
4 years
Average share price for
previous 60 days
Virtual shares
multiplied by 250% of
the reference share
price on grant date
Performance target FFO for STI
As the amount of the STI for a financial year is mainly based on the achievement of a
funds from operations (‘FFO’), the Supervisory Board adapts its FFO target for a financial
year if the FFO is materially impacted by acquisitions and/or disposals. In doing so the
Supervisory Board makes sure that the Management Board is not incentivised to enter
into transactions to achieve any personal short-term benefits.
Min./Max. target achievement
Reflects the minimum performance that needs to be achieved in order for any pay-out to
occur (threshold), as well as the maximum performance that is considered in the pay-out
calculation (cap).
Discretionary factor
Reflects the discretionary factor that the Supervisory Board can apply to reflect the indi-
vidual performance of each board member.
alstria Annual Report 2014
145
Corporate Governance
Deferred component
Reflects the part of the variable remuneration, which is deferred.
Reference share price
This is the share price used to convert the target amount into virtual shares when they
are granted and to convert virtual shares into a pay-out amount at the end of the
deferral period.
Virtual shares
The number of virtual shares granted is equal to the amount of the deferred component
amount divided by the reference share price.
Pay-out amount
For the STI, the pay-out amount at the end of the deferral period is equal to the
number of virtual shares multiplied by the reference share price, thereby adding back
any dividend per alstria share paid by the Company during the deferral period.
For the LTI, the number of virtual shares is adjusted at the end of the deferral
period, reflecting the degree of achievement of the performance target. The pay-out
amount is equal to the number of virtual shares (i) multiplied by the reference share
price (ii) plus the dividend per alstria share paid during the deferral period and (iii)
multiplied by the discretionary factor.
The table below summarizes the number of virtual shares granted under the existing STI
and LTI program and outstanding as at December 31, 2014.
Start of
deferral
period
2013
2014
2011
2012
2013
2014
Reference
share price
in EUR
9.45
9.57
10.43
8.70
9.29
9.44
End of deferral
period
2015
2016
2015
2016
2017
2018
Olivier Elamine
Alexander Dexne
Number of
virtual shares
7,193
5,914
42,186
50,575
47,363
46,610
Number of
virtual shares
5,885
4,839
34,516
41,379
38,751
38,136
STI 2012
STI 2013
LTI 2011
LTI 2012
LTI 2013
LTI 2014
Ancillary benefits
The members of the Management Board furthermore receive ancillary benefits granted as
benefits in kind, which essentially consist of insurance premiums, pension benefits and
the private use of a company car.
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2. REMUNERATION OF THE MANAGEMENT BOARD IN THE FINANCIAL YEAR
2014
In the previous financial year the total target remuneration for the members of the
Management Board amounted to a total of EUR 2,186 k. The total amount paid to the
Management Board in that financial year amounted to a total of EUR 2,931 k (including
pay-outs on vested virtual shares from the STI 2011 and LTI 2010). The correctness of
the calculation of the pay-out amounts for the multi-year variable remuneration elements
was confirmed by an independent remuneration expert.
The individual Management Board remuneration is presented based on model tables
pursuant to the German Corporate Governance Code as amended on June 24, 2014.
No individual member of the Management Board was granted or rendered any benefits by
third parties with regard to Management Board work in financial year 2014.
We explicitly make reference to the fact that the hypothetical maximum amounts can
only be attained in the extraordinary situation that all the conditions named in the table
‘Conditions to attain maximum amounts for variable remuneration elements granted in
2014’ occur at the same time.
alstria Annual Report 2014
147
Corporate Governance
Remuneration for the members of the management board for financial years 2013 and 2014
in EUR k
Olivier Elamine
Alexander Dexne
Benefits granted
CEO
2013
2014
2014
(Min)
CFO
2014
(Max)10 2013
2014
2014
(Min)
2014
(Max)10
Total amount of fixed
compensation and
ancillary benefits
Fixed compensation1
Ancillary benefits2
Total amount of one-year
variable compensation
One-year variable
compensation (STI 2013)
One-year variable
compensation (STI 2014)
Total amount of multi-year
variable compensation
STI 2013 (1 plus 2 years)
STI 2014 (1 plus 2 years)
LTI 2013 (4 years)
LTI 2014 (4 years)
Total amount of fixed and
variable compensation
Service costs9
451
440
11
454
440
14
454
440
14
454
440
379
360
14
19
369
360
9
173
173
1733
-
-
1733
498
585
-
4407
498
-
585
-
-
4407
0
-
0
0
-
0
-
0
312
142
142
-
1423
-
3124
-
1423
2,240
-
2606
407
475
-
-
3607
407
-
475
-
1,9808
-
3607
369
360
9
0
-
0
0
-
0
-
0
369
360
9
255
-
2554
1,833
-
2136
-
1,6208
2,457
58
2,515
Total
1,206
1,210
539
3,091
986
1,122
1,125
454
3,006
928
84
85
85
85
58
918
58
976
369
58
427
1annual base salary according to service contracts
2includes benefits for company car
375% of the STI target value for the respective financial year
4maximum attainable pay-out amount for 75% of the STI after 1 year
525% of the STI target value for the respective financial year
6maximum attainable pay-out amount for 25% of the STI after 1 plus further 2 years
7LTI target value for the respective financial year
8maximum attainable pay-out amount for the LTI after the holding period of 4 years
9includes benefits for insurances and pension plans
10hypothetical maximum attainable pay-out amount under the condition that all assumptions described in the table ‘Conditions to
attain maximum amounts’ are fulfilled
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Corporate Governance
Allocation/benefits paid out
Olivier Elamine
Alexander Dexne
CEO
CFO
2014
2013
2014
2013
Total amount of fixed compensation and
ancillary benefits
Fixed compensation1
Ancillary benefits2
Total amount of one-year variable compensation
One-year variable compensation (STI 2012)3
One-year variable compensation (STI 2013)3
Total amount of multi-year variable compensation
STI 2010 (1 plus 2 years)4
STI 2011 (1 plus 2 years)4
LTI 2010 (4 years)5
Other
454
440
14
170
-
170
911
-
75
836
0
451
440
11
204
204
-
67
67
-
-
0
369
360
9
139
-
139
745
-
61
684
0
Total amount of fixed and variable compensation
1,535
722
1,253
Service cost6
Total
85
84
58
1,620
806
1,311
1annual base salary according to service contracts
2includes benefits for company car
3pay-out amount for 75% of the STI after 1 year for the respective previous year
4pay-out amount for 25% of the STI after 1 plus further 2 years
5pay-out amount for LTI after holding period of 4 years
6includes benefits for insurances and pension plans
379
360
19
167
167
-
54
54
-
-
0
600
58
658
Conditions to attain maximum
amounts for variable remunera-
tion elements granted in 2014:
One-year variable compensation:
Multi-year variable compensation:
LTI (4 years):
STI (1 plus 2 years):
1. FFO 2014 = EUR 70.146 m
(budgeted FFO of EUR 46.764 m is achieved by 150%)
2. SB passes resolution on discretionary factor of 1.2
1. absolute TSR ≥9%, i.e. total shareholder return for
alstria investors over 4 years of 9% p.a. or more
2. relative TSR (TSR vs. EPRA) ≥ 25%, i.e alstria overperforming
EPRA/NA-REIT Europe Index Ex UK by 25%
3. Company share price increases by 250% (share price of EUR 9.44
on granting date --> share price of EUR 23.6 on payment date after 4
years)
4. SB passes resolution on discretionary factor of 1.2
share price of Company shares increases by 250%
(e.g.: share price of EUR 9 on deferral date --> share price of
EUR 22.5 on payment date after 2 years)
alstria Annual Report 2014
149
Corporate Governance
3. OTHER MANDATORY DISCLOSURES
Benefits upon premature termination of Management Board duties
If membership of the Management Board is terminated, members have agreed to a post-
contractual non-compete agreement of up to twelve months, which may be waived by
alstria with a six months’ notice period. As long as alstria exercises this post-contractual
non-compete agreement, the members of the Management Board shall receive a
compensation payment for this period equivalent to their last fixed salary. In the event of
an early termination of a Management Board service contract by mutual agreement, the
members of the Management Board remain entitled to their remuneration claims during
the remaining term of the service contract. These are, however, capped at a value of two
years’ worth of remuneration. If the appointment is terminated due to the board
member’s death, the benefits to be paid by the Company amount to the fixed salary for
the month in which the member died in addition to an equal payment for the following
three months. The incentive payment for this period shall be paid pro rata up to and
including the month of death. The Management Board contracts do not include any
change of control clauses.
Additional information on share-based remuneration components
The long-term incentive plan (LTI) was implemented in 2010 and replaced the
Company’s stock option program of 2007. The stock option program of 2007 set out that
the members of the Management Board were granted a single tranche of stock options in
financial year 2007. These stock options were granted with an exercise price of
EUR 16.00. The seven-year term of the options expired in financial year 2014. The
options could only have been exercised, if the current share price of the Company had
exceeded the exercise price by 20% or more on at least seven non-consecutive trading
days of the Frankfurt Stock Exchange, before the start of the respective exercise period.
The defined performance target was a stock price of EUR 19.20, which was reached
during the entire term of the stock options granted in 2007. Thereby the Company’s
stock option program 2007 is terminated. In financial year 2014 no expenses were
incurred due to the stock options granted in financial year 2007.
REMUNERATION OF THE SUPERVISORY BOARD MEMBERS
1. Structure of the Supervisory Board remuneration
The members of the Supervisory Board each receive an annual fixed remuneration of an
amount of EUR 40 k. The Chairman of the Supervisory Board receives an additional
annual amount of EUR 20 k, the Vice-Chairman receives an additional amount of
EUR 10 k. Members who sit on the Supervisory Board for only part of a year receive a
remuneration pro rata temporis. Membership in the audit committee entails the member
to an additional remuneration of EUR 10 k, whereby the chair of the audit committee
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alstria Annual Report 2014
Corporate Governance
receives EUR 15 k. Membership in other committees does not entitle the members to any
additional elements of remuneration.
2. Remuneration of the Supervisory Board in financial year 2014
The total remuneration for the Supervisory Board members in 2014 amounted to
EUR 305 k. The individual remuneration of the Supervisory Board members for financial
years 2014 and 2013 is composed as follows:
EUR k
Supervisory Board
member
Alexander
Stuhlmann
Dr Johannes
Conradi
Benoît Hérault
Roger Lee
Richard Mully
Marianne Voigt
Total
Function on the
Supervisory Board
Function on the
Audit Committee
Remuneration
for 2013
Remuneration
for 2014
Chairman
n/a
60.00
60.00
Vice Chairman
Member
Member
Member
Member
Member
n/a
Member
n/a
Chairman
60.00
40.00
50.00
40.00
55.00
305.00
60.00
40.00
50.00
40.00
55.00
305.00
alstria Annual Report 2014
151
REIT disclosures
REIT DISCLOSURES
REIT DECLARATION
Statement of the management board
In relation with our financial statements according to Section 264 of the German
Commercial Code (Handelsgesetzbuch, HGB) and our consolidated financial statements
according to Section 315a HGB as per December 31, 2014, the management board issues
the following declaration regarding compliance with the requirements of Sections 11 to 15
of the REIT Act (German Real Estate Investment Trust Act) and regarding the calculation
of the composition of income subject to and not subject to income tax for the purpose of
Section 19 paragraph 3 REIT Act in conjunction with Section 19a REIT Act:
1. As per balance sheet date, 79.06% of alstria’s shares were free float according to
Section 11 paragraph 1 REIT Act. This was disclosed to the German Federal Financial
Supervisory Authority (BaFin).
2. In accordance with Section 11 paragraph 4 REIT Act, as per balance sheet date, no
shareholder owned directly 10 % or more of 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 pursuant to Section 12 paragraph 2 REIT Act
a) as per the balance sheet date the immovable assets amounted to
EUR 1,684,910 k which equals to 95.23 % of the assets, therefore at least 75 %
of the assets belong to the immovable assets;
b) the assets belonging to the property of REIT service companies as per bal-
ance sheet date which were included in the consolidated statements amount to a
maximum of 20 %, namely EUR 443 k and therefore 0.03 %.
4. In relation to the sum of the entire sales revenue plus the other earnings from
immovable assets pursuant to the consolidated financial statements according to
Section 12 paragraph 3 and 4 REIT Act
a)
for the financial year 2014, the entire sales revenues of the Group plus other
earnings from immovable assets amounted to EUR 120.0 m. This equals 100%
of total revenues plus other earnings from immovable assets;
b) the sum of the sales revenue plus the other earnings from immovable assets
of REIT service companies amounted to EUR 201 k in the financial year 2014.
This equals 0.17 % of total revenue plus other earnings from immovable assets.
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REIT disclosures
5. In the financial year 2014, a dividend payment of EUR 39,467 k for the prior financial
year was distributed to the shareholders. The financial year 2013 did not result in a net
income according to commercial law pursuant to Section 275 HGB.
6. alstria office REIT-AG’s dividend does not derive from already taxed parts of the profit.
7. Since 2009, the Group has realised 18.67 % of the average portfolio of its immovable
assets and therefore did not trade with real estate according to Section 14 REIT Act.
8. On balance sheet date the Group’s equity as shown in the consolidated financial
statements according to Section 12 paragraph 1 REIT Act was EUR 846.6 m. This equals
to 50.2 % of the value of the immovable assets which are shown in the consolidated
financial statements in conformance with Section 12 paragraph 1 REIT Act.
alstria office REIT-AG
Hamburg, February 13, 2015
Olivier Elamine
Alexander Dexne
CEO
CFO
alstria Annual Report 2014
153
REIT disclosures
REIT MEMORANDUM
We summarized the result of our audit in an auditor’s memorandum according to Section 1
(4) Clause 5 of the Act on German Real Estate Stock Corporations with listed Shares:
Auditor’s memorandum according to section 1 (4) of the Act on
German Real Estate Stock Corporations with listed Shares (REIT Act)
To alstria office REIT-AG, Hamburg
As auditor of the annual financial statements and the consolidated financial statements of
alstria office REIT-AG, Hamburg, for the financial year from January 1 to December 31,
2014, we have audited the information given in the attached declaration of the manage-
ment board members for the compliance with the requirements of Section 11 to 15 of the
REIT Act and the composition of the proceeds concerning the pre-taxation of proceeds ac-
cording to Section 19 (3) and Section 19a REIT Act as of December 31, 2014 (hereinafter
referred to as ‘REIT declaration’). The information given in the REIT declaration is in the
responsibility of the management board of the Company. Our responsibility is to express
an opinion on the information given based on our audit.
We conducted our audit considering the audit guidance promulgated 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 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 make a judgment with reasonable assurance if the
free float ratio and the maximum stock ownership per shareholder according to Section 11
(1) and (4) REIT Act agrees with the announcements due to Section 11 (5) REIT Act as of
December 31, 2014 and if the provided information concerning the requirements of
Section 12 to 15 REIT Act and the composition of the proceeds concerning the pre-taxation
of proceeds according to Section 19a REIT Act is appropriate. It was not part of our
engagement to fully assess the companies tax assessments or position. Within our audit
procedures we compared the information concerning the free float ratio and the maximum
stock ownership per shareholder according to Section 11 (1) and (4) REIT Act provided
within the REIT declaration with the announcements due to Section 11 (5) REIT Act as of
December 31, 2014 and agreed the provided information concerning the requirements of
Section 12 to 15 REIT Act with the information disclosed in the annual financial statements
and the consolidated financial statements of the Company. Furthermore we tested the
adjustments made to the valuation of immovable assets held as investment for their
compliance with Section 12 (1) REIT Act. We believe that our audit provides a reasonable
basis for our opinion.
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REIT disclosures
In our opinion based on the findings of our audit, the information given in the REIT
declaration concerning the free float ratio and the maximum stock ownership per
shareholder due to Section 11 (1) and (4) REIT Act agrees with the announcements made
according to Section 11 (5) REIT Act as of December 31, 2014 and the information
provided concerning the compliance with Section 12 to 15 REIT Act and the composition of
the proceeds concerning the pre-taxation of proceeds according to Section 19a REIT Act
are appropriate.
This memorandum is solely provided for submission to the tax authorities of the city of
Hamburg within the tax declaration according to Section 21 (2) REIT Act.
Hamburg/Germany, February 13, 2015
Deloitte & Touche GmbH
Wirtschaftsprüfungsgesellschaft
(Seal)
Signed: Reiher
Wirtschaftsprüfer
[German Public Auditor]
Signed: p.p. Blumhagen
Wirtschaftsprüferin
[German Public Auditor]
alstria Annual Report 2014
155
Other information
OTHER INFORMATION
GLOSSARY
AFFO
The adjusted funds from operations (AFFO) is equal to the FFO (funds from oper ations)
with adjustments made for capital expenditures used to maintain the quality of the under-
lying investment portfolio.
AktG
Abbreviation for ‘Aktiengesetz’ (German public limited Companies Act). This act regulates
the rights and obligations of corporations limited by shares (German “Aktiengesellschaft
en” or “AGs”) and their shareholders.
Annual financial statements
The annual financial statements include the balance sheet, the profit and loss account and
the notes of a company. In respect of a joint stock company, these are prepared by the
Management Board, audited by a chartered accountant for compliance and checked by the
Supervisory Board.
Annual General Meeting
At least once a year the shareholders of a joint stock company convene for the Annual
General Meeting. This meeting elects the Supervisory Board and the balance sheet auditor.
It passes resolutions
Asset Management
Value-driven management and /or optimisation of real estate investments through letting
management, refurbishment, repositioning and tenant management.
Average cost of debt
The cost of finance expressed as a percentage of the weighted average of borrowings dur-
ing the period.
Cash flow
The cash flow statement shows how the cash and cash equivalents of the Group changed
in the course of the financial year as a result of cash received and paid.
Contractual rent
At a given date, the contractual rent reflects the total annualised rent taking into consider-
ation all signed rental contracts.
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alstria Annual Report 2014
Other information
Contractual vacancy rate
Contractual vacancy rate is the amount of space as a per cent of the total area of the port-
folio on which there is no current or future signed lease contract.
CSR
Corporate social responsibility (CSR) is a form of corporate self-regulation integrated into a
business model. The term is used interchangeable with the terms ‘sustainability’, and ‘En-
vironmental, Social and Governance (ESG)’.
DAX
The German Share Index (DAX) reflects the value trend of the 30 most important German
shares. In addition to the market prices, the dividend payments are also included here.
DAX began at the end of 1987 with a value of 1,000.
Development pipeline
The development programme together with proposed developments.
Dividend
The share oft he distributed net profit of a company to which a shareholder is entitled in
line with the number of shares he holds.
EPRA
The European Public Real Estate Association (EPRA) index is the well-known international
index which tracks the performance of the largest European and North American listed
property companies. 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 office REIT-AG, financial analysts, investors, advisors and auditors.
ERV
The estimated market rental value of the total lettable space in a property, after deducting
head and equity rents, calculated by the Group’s external valuers.
Fair value (or open market value (OMV))
The estimated amount for which a property should exchange on the date of valuation be-
tween a willing buyer and a willing seller in an arm’s-length transaction after proper mar-
keting, wherein the parties had each acted knowledgeably, prudently and without compul-
sion. The fair value for alstria’s investment properties is reviewed regularly by external
appraisers.
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157
Other information
FFO
alstria calculates Funds From Operations as EBT, decreased/increased by the net gain/loss
from fair value adjustment on investment property, decreased/increased by the net
gain/loss from fair value adjustment on financial derivatives, increased/reduced by the
profit/loss on disposal of investment property, decreased/increased by the net gain/loss
from fair value adjustments on investment property of joint ventures, decreased/increased
by non-recurring items, plus non-cash-expenses and less cash taxes paid.
G-REIT
Real Estate Investment Trusts are public listed companies, fully tax transparent, which
solely invest in properties.
HGB
Abbreviation for “Handelsgesetzbuch” (German Commercial Code or German GAAP). This
act sets out core principles of German commercial law and accounting and reporting.
IFRS
The international financial reporting standards (IFRS) are adopted by the International
Accounting Standards Board (IASB). The objective is to achieve uniformity and transpar-
ency in the accounting principles that are used by companies and other organisations
worldwide for financial reporting. IFRS have to be applied for the consolidated financial
statements of listed companies since January 1, 2005.
Interest Rate Cap
Interest Rate Caps are derivatives which cap the payment obligations for variable cash
flows at a certain date in the future. In the case of an interest rate cap, the contracting
parties agree to compensate the difference between the variable interest rate for a specific
underlying and the agreed cap rate if the variable interest rate is higher than the cap rate.
This mostly aims to hedge against the risk of unexpected increase in interest rates.
Interest Rate Swap
Interest Rate Swaps are derivatives which agree the swap of variable and fixed cash flows
at a certain date in the future. In the case of an interest rate swap, the contracting parties
undertake to pay a fixed or a variable interest rate for a specific underlying to the respec-
tive other contracting party. This mostly aims to hedge against the risk of changes in in-
terest.
Investment property
Property, land and buildings, which are held as financial investments to earn rents or for
growth and not used for the Company’s own purpose. The value of the investment proper-
ty is determined according to IAS 40 and IFRS 13.
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Other information
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 financial and operating policies essential to the operation, perfor-
mance and financial position of the venture require each party’s consent.
LTV and net LTV
alstria calculates loan to value (LTV) by dividing the total loans outstanding to finance in-
vestment properties by the value of all mortgaged investment properties. The calculation
of alstria’s Net LTV also deducts the available non-restricted cash on the respective bal-
ance sheet date, which is deducted from the gross debt amount.
NAV (net asset value)
Reflects the economic equity of the Company. It is calculated from the value of assets less
debt.
NNNAV (triple net NAV)
The Company computes NNNAV as total equity as reported in the IFRS consolidated
statement of financial position, which accounts for the carrying amount and the fair value
of financial instruments and financial liabilities, adjusted for hidden reserves and hidden
losses in immovable assets and financial liabilities.
Office building
Property where at least 75 % of the lettable area is destined to office use (disregarding
potential ground floor retail).
Passing rent
Annual gross rental income as per a certain date, excluding the net effects of straight-
lining for lease incentives.
Property management
Property management is the management of real estate assets including the processes,
systems and man power required to manage the life cycle of a building.
SDAX
Small Cap Index; it contains, with variable weighting, the prices of the 50 most important,
in terms of market capitalisation and turnover, German joint stock companies which are
not included in DAX or MDAX. In addition to dividend payments, subscription right pro-
ceeds are also included when calculating the index.
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Other information
Share
The term share describes both the membership rights (holding in the joint stock company)
and the security which embodies these rights. The holder of a share (shareholder) is a
‘sharer’ in the assets of the joint stock company. Their rights are protected by the regula-
tions contained in the Companies Act.
Share capital
The capital stipulated in a corporation’s articles of association. The articles also specify the
number of shares into which the share capital is divided. The Company issues shares in
the amount of its share capital.
Supervisory Board
The Supervisory Board is one of the three executive bodies of a joint stock company: An-
nual General Meeting, Management Board and Supervisory Board. The Supervisory Board
appoints the Management Board and provides supervision and advice regarding manage-
ment of the Company’s business.
Sustainability
Alignment of an organisation’s products and services with stakeholder expectations, there-
by adding economic, environmental and social value.
Tenant incentives
Any incentive offered to occupiers to enter into a lease. Typically the incentive will be an
initial rent-free period, or a cash contribution to fit-out or similar costs.
WpHG
Abbreviation for ‘Wertpapierhandelsgesetz’ (German Securities Trading Act). The WpHG
regulates trading in securities such as shares or bonds in Germany. The ‘Bundesanstalt für
Finanzdienstleistungsaufsicht’ (BaFin – German Financial Services Supervisory Authority)
controls the upholding of this act.
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Other information
Publication of Q1
Interim report
Annual General Meeting
Shareholders’ Meeting
Ex-Dividend-Date
Publication of Q2
Half-year interim report
Publication of Q3
Interim report
Publication of sustainability report
FINANCIAL CALENDAR
Events 2015
May 5
May 6
May 7
August 4
November 3
CONTACT/IMPRINT
alstria office REIT-AG is a member of DIRK (Deutscher Investor Relations Verband, the
German Investor Relations Association).
Other reports issued by alstria office REIT-AG are posted on the Company’s website.
Forward-looking statements
This annual report contains forward-looking statements. These statements represent as-
sessments 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 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).
Contact Investor Relations
Ralf Dibbern
Phone „ +49 (0) 40 22 63 41-329
Fax „ +49 (0) 40 22 63 41-229
E-mail „ rdibbern@alstria.de
alstria Annual Report 2014
161
alstria offi ce REIT-AG
www.alstria.com
info@alstria.de
Bäckerbreitergang 75
20355 Hamburg, Germany
Tel. + 49 (0) 40 22 63 41-300
Fax + 49 (0) 40 22 63 41-310
Friedrichstrasse 19
40217 Düsseldorf, Germany
Tel. + 49 (0) 211 30 12 16-600
Fax + 49 (0) 211 30 12 16-615