ANNUAL REPORT
2016
PROF
ITABI
LITY
TRANS
PAREN
CY
CONTI
NUITY
SOL
VENCY
DIA
LOGUE
SUS
TAIN
ABIL
ITY
Five-year overview
KEY FIGURES
FIVE-YEAR OVERVIEW ACCORDING TO IFRS
EUR k
Revenues and Earnings
Revenues
Net rental income
Consolidated profit1)
FFO1)
Earnings per share (EUR)1)
FFO per share (EUR)1)
1) Without minority shares.
EUR k
Balance sheet
2016
2015
2014
2013
2012
202,663
179,014
115,337
102,140
176,872
−110,970
116,410
59,397
1.16
0.76
−1.15
0.61
101,782
104,224
101,286
90,020
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
Dec. 31,
2016
Dec. 31,
2015
Dec. 31,
2014
Dec. 31,
2013
Dec. 31,
2012
Investment property
2,999,099
3,260,467
1,645,840
1,632,362
1,622,988
Total assets
Equity1)
Liabilities
NAV per share (EUR)1)
Diluted NAV per share (EUR)1),2)
Net LTV (%)
3,382,633
3,850,580
1,769,304
1,785,679
1,786,893
1,728,438
1,619,377
1,654,195
2,192,916
11.28
11.28
40.9
10.64
10.68
49.3
846,593
922,711
10.71
10.67
50.4
844,114
941,565
10.69
10.60
50.7
829,287
957,606
10.51
n/a
47.8
1) Without minority shares.
2) Dilution based on potential conversion of convertible bond.
G-REIT figures
G-REIT equity ratio (%)
Revenues including other income from
investment properties (%)
EPRA1) key figures
EPRA earnings per share (EUR)
EPRA cost ratio A (%)2)
EPRA cost ratio B (%)3)
EPRA NAV per share (EUR)
EPRA NNNAV per share (EUR)
EPRA net initial yield (%)
EPRA “topped-up” net initial yield (%)
EPRA vacancy rate (%)
Dec. 31,
2016
Dec. 31,
2015
Dec. 31,
2014
Dec. 31,
2013
Dec. 31,
2012
56.7
100
2016
0.57
20.6
16.6
49.4
100
2015
0.42
26.1
22.1
50.2
100
2014
0.59
22.9
19.8
50.9
100
2013
0.57
21.7
18.6
50.0
100
2012
0.55
21.6
18.5
Dec. 31,
2016
Dec. 31,
2015
Dec. 31,
2014
Dec. 31,
2013
Dec. 31,
2012
11.31
10.81
5.0
5.4
9.2
10.91
10.66
5.0
5.3
11.2
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
1) For further information, please refer to EPRA Best Practices Recommendations, www.epra.com.
2) Including vacancy costs.
3) Excluding vacancy costs.
alstria Annual Report 2016
CONTENT
DETAIL INDEX GROUP MANAGEMENT REPORT .................................................... 2
GROUP MANAGEMENT REPORT ...................................................................... 3
ECONOMICS AND STRATEGY ....................................................................................... 3
FINANCIAL ANALYSIS ............................................................................................. 11
RISK AND OPPORTUNITY REPORT .............................................................................. 23
SUSTAINABILITY REPORT ........................................................................................ 40
DISCLOSURES REQUIRED BY TAKEOVER LAW ................................................................. 41
ADDITIONAL GROUP DISCLOSURE .............................................................................. 44
EXPECTED DEVELOPMENTS ...................................................................................... 45
DETAIL INDEX CONSOLIDATED FINANCIAL STATEMENTS ....................................... 47
CONSOLIDATED FINANCIAL STATEMENTS ......................................................... 48
CONSOLIDATED INCOME STATEMENT .......................................................................... 48
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ................................................ 49
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...................................................... 50
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................ 52
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...................................................... 54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .................................................. 56
RESPONSIBILITY STATEMENT ................................................................................... 123
INDEPENDENT AUDITOR’S REPORT ............................................................................ 124
CORPORATE GOVERNANCE ........................................................................ 126
REPORT OF THE SUPERVISORY BOARD ....................................................................... 126
CORPORATE GOVERNANCE STATEMENT ...................................................................... 133
REMUNERATION REPORT ....................................................................................... 143
REIT DISCLOSURES .................................................................................. 150
REIT DECLARATION .............................................................................................. 150
REIT MEMORANDUM ............................................................................................. 152
OTHER INFORMATION .............................................................................. 154
FINANCIAL CALENDAR ........................................................................................... 154
CONTACT/IMPRINT .............................................................................................. 154
alstria Annual Report 2016
Group Management Report
DETAIL INDEX GROUP MANAGEMENT REPORT
ECONOMICS AND STRATEGY ....................................................................................... 3
ECONOMIC CONDITIONS ......................................................................................... 3
STRATEGY AND STRUCTURE .................................................................................... 5
PORTFOLIO OVERVIEW ........................................................................................... 6
FINANCIAL ANALYSIS ............................................................................................. 11
EARNINGS POSITION ............................................................................................ 11
FINANCIAL AND ASSET POSITION ............................................................................. 16
CORPORATE MANAGEMENT ................................................................................... 22
RISK AND OPPORTUNITY REPORT .............................................................................. 23
RISK REPORT .................................................................................................... 23
REPORT ON OPPORTUNITIES .................................................................................. 38
SUSTAINABILITY REPORT ........................................................................................ 40
DISCLOSURES REQUIRED BY TAKEOVER LAW ................................................................. 41
ADDITIONAL GROUP DISCLOSURE .............................................................................. 44
EMPLOYEES ...................................................................................................... 44
REMUNERATION REPORT ...................................................................................... 44
CORPORATE GOVERNANCE DECLARATION PURSUANT TO SECTION 289A HGB
(“HANDELS-GESETZBUCH”: GERMAN COMMERCIAL CODE) .......................................... 45
DIVIDEND ......................................................................................................... 45
EXPECTED DEVELOPMENTS ...................................................................................... 45
2
alstria Annual Report 2016
Group Management Report
GROUP MANAGEMENT REPORT
ECONOMICS AND STRATEGY
ECONOMIC CONDITIONS
Framework
The German economy proved to be solid again in 2016. Germany’s GDP increased by 1.9%, a slightly
higher growth rate than in 2015 (1.7%) and again above the average growth for the last 10 years
(+1.4%).* This development was also reflected in the German labor market, as the unemployment rate
decreased by 0.6 percentage points to 5.8%. The employment level reached a peak of 43.8 m
employees, which is 0.7% more than last year.**
The German real estate market developed in a slightly negative manner in 2016 after six years
(2010−2015) of continued rises. The total investment volume on the commercial real estate market
dropped to approx. EUR 52.9 b, which was 4% lower than in the previous year. This volume reduction
was caused by a shortage of adequate commercial real estate. Germany still offers great investment
opportunities due to its strong economic and real estate key figures.***
Overview of the German office-property market
Development of office rents
In 2016, the average rents for office space remained mostly at previous year’s level in the most
important commercial real estate markets – Berlin, Düsseldorf, Frankfurt/Main, Hamburg, Cologne,
Munich, and Stuttgart – known as the Big 7. Average rent slightly decreased to EUR 18.70 per sqm in
Frankfurt and increased to EUR 16.30 per sqm in Berlin. Average rents were EUR 16.00 per sqm in
Munich, EUR 15.10 per sqm in Hamburg, EUR 14.90 per sqm in Düsseldorf, EUR 13.00 per sqm in
Stuttgart, and EUR 11.85 per sqm in Cologne.
Take-up in major German cities
The vacancy rate of office properties in German cities decreased from 6.4% in 2015 to 5.5% in 2016,
which represents a total vacancy of 5.1 m sqm (a decrease of 0.6 m sqm). Among the Big 7, the
highest vacancy rate was noted in Frankfurt (9.1%), followed by those in Düsseldorf (8.1%),
Hamburg (5.6%), Cologne (4.7%), Munich (4.5%), Berlin (4.3%), and Stuttgart (3.7%).
* Federal Statistics Office (Statistisches Bundesamt).
** Federal Employment Agency (Bundesagentur für Arbeit).
*** Numbers referred to in this section are sourced from Jones Lang Lasalle’s market reports, except of the numbers in the chapter “Develop-
ment of office rents”, which are sourced from Collier’s office market report.
alstria Annual Report 2016
3
Group Management Report
New lease-ups
In 2016, new lease contracts were signed for more than 3.98 m sqm of office space in the Big 7 German
cities. This reflects an increase of 0.3 m sqm, or 9.3%, compared to the previous year. The highest
increases were registered in Cologne (41.2%), Stuttgart (38.6%), and Frankfurt (34.2%), followed by
minor increases in Berlin (3.9%), Munich (2.0%), and Hamburg (1.9%). A decrease was registered only
in Düsseldorf (−19.6%).
New office supply
In 2016, the delivery of new office and commercial spaces amounted to approx. 1,100,000 sqm.
Compared to last year, this was an increase of around 28%. The most significant increase took place
in Hamburg (109.3%), followed by smaller increases in Stuttgart (42.3%), Frankfurt (28.9%), Munich
(26.1%), Berlin (16.8%), and Cologne (6.1%). In Düsseldorf (−40.2%), the delivery of new office and
commercial spaces was lower than the previous year‘s. For 2017, a slight decrease of the completion
volume (approx. 800,000 to 1,000,000 sqm) is forecasted.
Investment markets
The positive trend in the investment markets did not continue in fiscal year 2016. Total investment
volume was about 4% (EUR 52.9 bn for commercial assets) lower than the previous year’s result. The
transaction volume in 2016 also did not reach previous year’s result. The Big 7 cities recorded a
transaction volume of around EUR 29.6 bn, of which approx. one quarter was registered in Frankfurt
(EUR 7.3 bn). With regard to the deal structure, approx. 65% of the commercial investment turnover
in fiscal year 2016 was related to single-asset deals, and the share of portfolio transactions amounted
to 35%; these values are in accordance with those from the previous year.
There was no apparent fundamental change in investment strategies due to the price increase of real
estate, although there were indications of a slightly higher risk tolerance. Although investors still
focused on core assets, which are characterized by their good condition, good location, and long-
term, attractive letting status, the investments in Value-Add, Core-Plus, and opportunistic assets
expanded.
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alstria Annual Report 2016
Group Management Report
STRATEGY AND STRUCTURE
alstria office REIT-AG (hereafter referred to as “the Company”) is a real estate company listed on the
Frankfurt Stock Exchange. In December 2016 DO Deutsche Office AG, which had been consolidated
into the alstria Group by the end of 2015, was converted into alstria office Prime Portfolio GmbH &
Co. KG (hereafter referred to as “alstria office Prime”) and relocated to Hamburg. Hence, as of De-
cember 31, 2016, the alstria Group consisted of the corporate parent, alstria office REIT-AG, and 62
direct and indirect subsidiaries (hereafter referred to as “alstria” or “the Group”). Operational deci-
sions are made at the parent-company level. While alstria office REIT-AG directly held more than 50%
of the Company’s assets, 36 subsidiaries held 52 assets as of December 31, 2016.
For its portfolio, alstria pursues a long-term investment strategy, which 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 extant office space is sufficient to meet the demand for office space.
The markets’ vacancy rates will remain relatively stable on average.
alstria faces these challenges with a long-term strategy that is characterized by high price discipline
in terms of its acquisitions and by active Asset and Property Management. Key aspects of this
management approach are as follows:
The focus is on the tenant. Only those who know the needs of their tenants will have
successful letting activities in the long run.
Continuous investments secure the quality of the assets. Increased value can only be realized
through constant modernization measures and reduced vacancy.
Value enhancements’ potential is realized through comprehensive repositioning and asset de-
velopment.
Providing the best value for the money secures the lettability of the assets. Many tenants are
price sensitive, and only lessors who offer better conditions than the competition are suc-
cessful.
The aim of this strategy is the steady development of revenues and operating profit (FFO).
Due to its active Asset Management approach and its high level of discipline regarding prices, alstria
has been able to achieve above-average returns in past years. The precondition that this will remain
true for the future is supported by the following facts:
alstria has a long-term lease portfolio (with a weighted average unexpired lease term – WAULT
– of around 4.9 years). Approx. 60% of its rental income is derived from a small number of
high-quality tenants. Around 30% of its rental income is generated from public authorities or
institutions, which are not immediately affected by economic developments.
alstria Annual Report 2016
5
Group Management Report
alstria pursues a nontrading-strategy and focuses on long-term value creation by conducting
work on and within each building (i.e., classic Asset and Property Management). At alstria,
these activities are handled internally, which positively differentiates the Company from its
competitors. In the end of financial year 2016, alstria office Prime’s Real Estate Operations
Management (Asset and Property Management), which had been partly conducted by external
service providers, was also integrated into alstria’s operations.
A key element of alstria’s strategy is supporting tenants in optimizing their real estate
operating costs. From the tenants’ point of view, real estate operating expenses are crucial
in the decision-making process for rental agreements. alstria believes that optimizing costs
using active Asset and Property Management will offer new potential for successful letting
activities.
PORTFOLIO OVERVIEW
Key metrics of the portfolio
Key metrics
Number of properties
Number of joint-venture properties
Market value (EUR b)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, 2016
Dec. 31, 2015
108
1
3.0
188.4
6.2
120
1
3.3
208.3
6.3
1,524,300
1,724,100
11.3
4.9
11.6
11.8
5.2
11.5
1) Including fair value of owner-occupied properties.
2) The contractual vacancy rate includes vacancies in assets of the Company’s development pipeline.
Real Estate Operations
Letting metrics
New leases (in sqm)2)
Renewals of leases (in sqm)
2016
76,600
118,153
20151)
35,700
38,800
Change
40,900
79,353
1) This includes the letting metrics from the alstria office Prime portfolio for November and December 2015.
2) New leases refer to letting of vacant space. This category does not include lease renewals, prolongations, or exercised renewal options.
Vacancy metrics
Vacancy rate (%)1)
EPRA vacancy rate (%)
Vacancy (sqm)
thereof vacancy in development projects (sqm)
1) Without assets held for sale.
Dec. 31, 2016
Dec. 31, 2015
11.3
9.2
171,700
35,200
11.8
11.2
198,300
27,700
Change
−0.5 pp
−2 pp
−26,600
7,500
In fiscal year 2016, letting activities (as measured by new leases and lease extensions) were at a good
level.
6
alstria Annual Report 2016
Group Management Report
A new lease with the City of Berlin at Darwinstraße 14-18 had a substantial impact on the positive
development of new leases in the year 2016. The lease at Darwinstraße 14-18 for around 17,600 sqm
of office and ancillary space is expected to start on March 1, 2017, and has a lease term of ten years.
With the signature of this lease, the building is now fully let.
Furthermore, alstria signed three new leases in Frankfurt at Platz der Einheit 1 (KASTOR TOWER). The
first lease, for approx. 5,600 sqm of office and ancillary space, started on June 15, 2016. The second
lease, totalling approx. 3,500 sqm of office and ancillary space, will commence by the end of the first
quarter of 2017. The third lease, signed in December, is for approx. 4,300 sqm of office and ancillary
space; it will start on April 1, 2017. These new leases have reduced the vacancy in the 30,600 sqm
building from 71% to 26%.
Moreover, alstria signed a new lease in Hamburg-Bergedorf, at Ludwig-Rosenberg-Ring 41, for approx.
3,800 sqm of office and ancillary space. This lease will start on June 1, 2017 and has a term of
10 years.
For financial year 2017, reducing vacancy remains the operational focus.
Portfolio Valuation and Regions
As of December 31, 2016, external appraisers (Colliers International for alstria’s assets and CBRE
GmbH for the alstria office Prime subgroup’s assets) valued alstria’s portfolio pursuant to IFRS 13.
The valuation resulted in a total market value for the investment properties of EUR 3,022 m.* Of this
total market value, approx. EUR 2,747 m, or over 91%, was located in the Rhine-Ruhr, Hamburg,
Rhine-Main, and Stuttgart regions. In the table below, the investment focus on the selected locations
becomes obvious:
Total portfolio by region
% of market value
Rhine-Ruhr
Hamburg
Rhine-Main
Stuttgart
Berlin
Hanover
Saxony
Munich
Others
* Inclusive assets held for sale
Dec. 31, 2016
Dec. 31, 2015
Change (pp)
29
27
21
14
3
1
1
0
4
25
23
20
14
7
1
1
3
6
4
4
1
0
−4
0
0
−3
−2
alstria Annual Report 2016
7
Group Management Report
Tenants
Another main characteristic of alstria’s portfolio is its focus on a small number of major tenants.
alstria’s main tenants
% of annual rent
Stadt Hamburg
Daimler AG
GMG Generalmietgesellschaft
Zürich Versicherung AG
HOCHTIEF Aktiengesellschaft
Bilfinger SE
Residenz am Dom gemeinn. Betriebsgesellschaft mbH
Württembergische Lebensversicherung AG
Stadt Berlin
Allianz Deutschland AG
Others
Dec. 31, 2016
Dec. 31, 2015
Change (pp)
13
12
10
5
4
3
2
1
1
0
49
14
11
9
4
4
3
2
1
0
7
45
−1
1
1
1
0
0
0
0
1
−7
4
Furthermore, the focus is clearly on one asset class. Of the total lettable area, approx. 88% is office
space.*
Lease expiry profile
% of annual rent
2017
2018
2019
Transactions
Dec. 31, 2016
Dec. 31, 2015
Change (pp)
11.8
18.0
18.1
17.3
12.0
22.3
−5.5
6.0
−4.2
alstria’s investment decisions are based on both the analyses of local markets and individual inspec-
tions of each asset. The latter focuses on the attributes of location, size, and quality (relative to
those of direct competitors’ assets) and the long-term potential for value growth. alstria’s strategy
is aimed at both increasing its portfolio to a critical size at every location and retracting from the
markets that do not adhere to alstria’s core investment focus. Following this strategy, alstria sold the
Frankenportfolio (two assets in Nuremberg, one in Erlangen, and one in Weiterstadt), two assets in
Ismaning and individual assets in Munich, Hamburg, Berlin, Leipzig, and Heilbronn. While the asset in
Hamburg was legally transferred in the second quarter, the assets in Munich, Berlin, and Leipzig were
transferred in the third quarter of the reporting period. The transfer of benefits and burdens of the
Frankenportfolio and the assets in Ismaning and Heilbronn took place in the last quarter of fiscal year
2016.
Furthermore, alstria sold one asset in Dortmund and one in Dresden. The transfer of benefits and
burdens for the Dresden asset took place on February 1, 2017. The transfer of the Dortmund asset is
* Office and storage.
8
alstria Annual Report 2016
Group Management Report
expected during the first quarter of 2017. In financial year 2016, alstria signed a purchase agreement
for the acquisition of an asset in Berlin, which was transferred on November 1, 2016.
In summary, alstria was involved in the following transactions in 2016:
Asset
Disposals
City
Sales
price
(EUR k)1)
Annual
rent
(EUR k)2)
Avg. lease
length
(years)2)
Signing
SPA
Transfer of
benefits and
burdens
14,000
13,395
44,387
5,920
26,830
228,431
9,450
14,100
18,400
33,650
7,350
11,200
15,100
17,000
4,200
10,500
55
888
1,222
78
1,774
13,996
832
1,050
1,304
2,161
442
1,377
1,075
998
4
695
473,913
27,951
38,000
8,350
46,350
2,336
526
2,862
Landshuter Allee 174
Munich
Dieselstraße 18
Ditzingen
Hofmannstraße 51
Munich
Wandsbeker Chaussee 220 Hamburg
Taunusstraße 34−36
An den Treptowers 33)
Munich
Berlin
Ludwig-Erhard-Straße 49
Leipzig
Gutenbergstraße 1
Ismaning
Oskar-Messter-Straße 22−24 Ismaning
Bahnhofstraße 1−5
Heilbronn
Feldstraße 16
Weiterstadt
Nägelsbachstraße 26 /
Nürnberger Straße 41
Erlangen
Lina-Ammon-Straße 19
Nuremberg
Richard-Wagner-Platz 1
Nuremberg
Max-Eyth-Straße 24)
Dortmund
Zellescher Weg 21−25a4)
Dresden
Total
Acquisitions
Gasstraße 18
Hamburg
Tempelhofer Damm 146
Berlin
Total
1) Excluding transaction costs.
2) At the time of the transfer of benefits and burdens.
3) Share deal.
4) Balance sheet as reported under assets held for sale.
5) Expected.
Refurbishment projects
0.2
June 11, 2015
June 30, 2016
19.8
Aug. 31,2015
June 25, 2016
2.0
2.7
Nov. 5, 2015
June 30, 2016
May 19, 2016
June 30, 2016
5.4
June 27, 2016
Aug. 31, 2016
2.7
1.5
6.7
3.7
5.1
2.1
2.3
4.0
3.6
1.0
1.9
3.2
7.8
July 8, 2016
Sep. 30, 2016
Aug. 3, 2016
Sep. 30, 2016
Sep. 13, 2016
Dec. 31, 2016
Sep. 13, 2016
Dec. 31, 2016
Sep. 28, 2016
Nov. 30, 2016
Sep. 30, 2016
Dec. 31, 2016
Oct. 11, 2016
Dec. 31, 2016
Oct. 11, 2016
Dec. 31, 2016
Oct. 11, 2016
Dec. 31, 2016
Oct. 14, 2016
Feb. 28, 20175)
Dec. 15, 2016
Feb. 1, 2017
Nov. 26, 2015
Jan. 1, 2016
Aug. 25, 2016
Nov. 1, 2016
alstria has achieved significant progress with respect to its development projects:
Momentum (Wehrhahn Center), Düsseldorf
The Momentum complex, which was built in 1985, is situated in the well-established city submarket.
alstria acquired the complex, which consists of five interconnected parts, as part of a portfolio
transaction. While the basements of the buildings host retail areas, the other six stories contain office
space. The two underground carparks, which are situated in two of the basements, provide space for
more than 500 vehicles. Since the office spaces no longer meet the current demands regarding
building services and flexibility, alstria decided to fundamentally revitalize the building. This
alstria Annual Report 2016
9
Group Management Report
comprises, among other improvements, the total gutting of the building down to the shell construction
and the application of a new façade with a modern axis grid. These changes allow for a highly flexible
and complete restructuring of the office floor plans. The new building technology corresponds to the
highly flexible new design. Apart from the office areas, the new two-story entrances will be high-
lighted. Partial heightening of particular building parts, more efficient building equipment, and roof
terraces will heighten the lettable area.
The refurbishment, which started in March 2016, is expected to be completed by the end of 2017.
Bieberhaus, Hamburg
The listed Bieberhaus was built in 1909 and purchased by alstria in 2007. The building, with its historic
façade, is located close to the central station in Hamburg. The ground floor hosts retail areas, and
the other six stories contain office space. Moreover, the Ohnsorg Theater (which was fully refurbished
in 2012) is located in part of the building.
As the tax authority has moved out, the office spaces no longer meet current demands regarding
building services and flexibility, so alstria has decided to fundamentally revitalize the building. This
comprises, among other improvements, the gutting of the offices spaces and the attic. The roof will
also be partly renewed to enlarge the space on the 7th floor so as to convert this floor from storage
to office space.
The refurbishment, which started in October 2016, is expected to be completed by mid-2018.
In 2016, alstria invested around EUR 31 m in ongoing refurbishment projects.* Around EUR 9 m of this
amount was for development projects, and the remainder was invested in value-increasing tenant-
improvement measures. The main part of the 2016 capital expenditure investment was linked to the
Berlin asset at Darwinstraße, the Momentum in Düsseldorf, the KASTOR TOWER in Frankfurt, and the
asset at Harburger Ring in Hamburg. Within the next two years, alstria is planning to invest around
EUR 100 m into its portfolio. The major single projects are the developments of the Momentum
(Wehrhahn Center) in Düsseldorf and the Bieberhaus in Hamburg. This investment plan is part of
alstria’s ongoing asset-value-enhancement program. The volume of these investments, however, also
depends on ongoing lease negotiations with existing and potential tenants.
* Without Joint Venture Kaisergalerie.
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alstria Annual Report 2016
Group Management Report
FINANCIAL ANALYSIS
Due to the takeover of alstria office Prime on October 27, 2015, the earnings position and the financial
and asset position shown on the consolidated financial statement as of December 31, 2016, and
December 31, 2015, are not directly comparable.
Financial year 2016 developed as expected for alstria. Its 2016 revenues of approx. EUR 203 m
were slightly higher than the revenues of EUR 200 m that were forecasted in 2015. The funds from
operations (FFO) amounted to EUR 116 m in the reporting period, which is in line with the forecasted
level of EUR 115 m for the alstria Group.
EARNINGS POSITION
Revenues
In the reporting period, revenues totalled EUR 202,663 k (2015: EUR 115,337 k), which corresponds
an increase of EUR 87,326 k (or 75.7%) compared to the revenues in the previous year. This includes
revenues of EUR 103,483 k from alstria office Prime. The revenues of the alstria subgroup increased
by around 2.0%. The main reasons for this increase were the acquisition of new assets and the letting
of vacant areas. As a result, net rental income for the overall Group amounted to EUR 179,014 k
(2015: EUR 102,140 k).
Real estate operating expenses
Real estate operating expenses amounted to EUR 23,445 k (2015: EUR 12,774 k). Of this amount,
EUR 12,329 k is attributable to the alstria office Prime subgroup. The cost ratio slightly increased
from 11.1% in 2015 to 11.6% in 2016. This is mainly caused by fire-protection measures for two assets
in the alstria office Prime portfolio.
Administrative and personnel expenses
Administrative expenses were EUR 8,464 k, an increase of EUR 2,081 k compared to financial year
2015 (EUR 6,383 k). The growth was caused by the generally higher administrative expenses due to
the takeover of alstria office Prime. Personnel expenses were EUR 12,683 k for the reporting period
in comparison to EUR 12,068 k for the previous year. In 2015 a one-time settlement payment of
EUR 1,200 k was included in the personnel expenses. In 2016 the increase is mostly a result of taking
over the employees of alstria office Prime and integrating the property management of the subgroup.
The sum of the administrative and personnel expenditures corresponds to roughly 10.4% of total
revenues (2015: 16.0%).
Other operating result
alstria’s other operating result amounted to EUR −9,028 k during the reporting period
(2015: EUR −154,611 k). The other operating result in 2015 was mainly influenced by the amortization
of the goodwill in the amount of EUR 144,795 k; this was caused by the initial consolidation after the
takeover of alstria office Prime.
alstria Annual Report 2016
11
Group Management Report
Net result from fair value adjustments on investment property
In financial year 2016, the net result from fair value adjustments to investment properties was
EUR 72,806 k, an increase of EUR 76,998 k compared to the value for financial year 2015. The growth
was mainly influenced by the new, positive valuations of Darwinstraße in Berlin (EUR 24,333 k),
Momentum in Düsseldorf (EUR 19,540 k), and KASTOR TOWER (EUR 17,856 k).
Net result on disposals of investment property
In 2016, alstria was able to achieve a positive result of EUR 25,464 k from the disposal of properties.
The realized disposal gains mainly resulted from the sale of the Treptowers asset in Berlin.
Net operating result
alstria closed its financial year 2016 with a net operating result (before financing costs and taxes) of
EUR 247,109 k, which compares to EUR −62,459 k for the previous year. As compared to the previous
year, alstria had a higher net rental income, a higher other operating result, and a higher valuation
result.
The following table shows the main figures of the income statements for financial years 2016 and
2015:
EUR k
Revenues
Net rental income
Administrative and personnel expenses
Other operating result
Operating income
Net result from fair value adjustments to investment properties
Net result from disposals of investment properties
Net operating result
2016
202,663
179,014
−21,147
2015
115,337
102,140
−18,451
−9,028
−154,611
148,839
−70,922
72,806
25,464
−4,192
12,655
247,109
−62,459
12
alstria Annual Report 2016
Group Management Report
Net financial result
EUR k
Interest expenses, corporate bonds
Interest expenses, Deutsche Office portfolio loans
Interest expenses, syndicated loans
Interest expenses, convertible bonds
Interest expenses, other loans
Interest result Schuldschein
Interest result derivatives
Other interest expenses
Financial expenses
Financial income/interest income
Other financial expenses
Net financial result
2016
−20,496
−6,728
−6,723
−5,116
−4,074
−2,036
−207
0
−45,380
535
−5,949
−50,794
2015
−1,241
−3,969
−8,531
−4,623
−9,013
0
−6,650
−3
−34,030
128
−9,431
−43,333
Change
(%)
n/a
−69.5
+21.2
−10.7
+54.8
n/a
96.9
n/a
−33.4
n/a
+36.9
−17.2
The negative net financial result increased by EUR 7,461 k to EUR 50,794 k. Despite the fact that
alstria office Prime was consolidated for the entire reporting period, financial expenses only increased
by EUR 11.350 k (or 33%) to EUR 45.380 k. The reasons for this disproportionately low growth are,
first, an improved debt ratio, and second, the refinancing of bonds and Schuldschein under more
favourable conditions.
The “Other financial expenses” include prepayment penalties for the premature repayment of loans.
For details on the new loans, also refer to the “Financial and asset position” section on page 16.
Share of the result of joint venture companies
In 2016, alstria’s share of earnings from joint venture companies was EUR 5,480 k (2015: EUR 1,988 k),
which is mainly attributable to the higher valuation of the Kaisergalerie asset in Hamburg.
Valuation result of financial derivatives
To minimize the impact of interest-rate volatility on profit and loss, alstria uses financial derivatives
in the form of caps or swaps to hedge on floating-interest-rate loans. On the balance sheet date, all
the Group’s floating-interest-rate loans were hedged using such derivative financial instruments. Due
to refinancing with fixed-interest bonds and the reduction of floating-interest-rate loans, the nominal
value of the interest-hedging instruments decreased from EUR 1,558,499 k to EUR 504,266 k.
The net result from fair value adjustments on these financial derivatives amounted to EUR −8,101 k
in 2016 (2015: EUR −6,763 k).
Due to the still-low yield curve in financial year 2016, the interest-rate derivatives were devalued by
an amount of EUR 10,558 k. An opposing effect increased the valuation of the embedded derivate in
relation to the convertible bond by EUR 2,727 k. The value of the embedded derivate is essentially
determined by alstria’s share-price development because this influences the market value of potential
alstria Annual Report 2016
13
Group Management Report
repayment obligations in case of a conversion of the convertible bond.
Further details and a tabular reconciliation can be found in section 6.6 of the consolidated financial
statements.
Consolidated net result
The consolidated net result amounted to EUR 182,376 k (2015: EUR -111,379 k) in the reporting
period; hence, it increased by EUR 293,755 k.
The growth of the net result was mainly influenced by the positive result from the disposal of assets
and the positive valuation of investment properties. Furthermore, the full-year consolidation of alstria
office Prime has conducted to a higher operating result. A significant main driver of the previous
year’s negative result was the amortization of the goodwill that resulted from the first-time
consolidation of alstria office Prime. As of December 31, 2015, this goodwill has been amortized in
the full amount of EUR 144,795 k. Undiluted earnings per share amounted to EUR 1.16 for the
reporting period (2015: EUR -1.15).
REIT-AGs are fully exempt from the German corporate income tax and trade tax. However, tax
obligations can arise to a minor extent for REIT subsidiaries. Because of the takeover of alstria office
Prime, companies that are not yet subject to the REIT tax exemption have been consolidated into the
Group. With the transformation of alstria office Prime, its subsidiaries are now included in the tax-
free REIT structure. Any hidden reserves with a significant taxable amount had to be disclosed. Hence,
the Group had higher tax-payment obligations in financial year 2016 than in the previous year.
14
alstria Annual Report 2016
Group Management Report
Funds from operations
FFO amounted to EUR 121,558 k (including minority shareholders) or EUR 116,410 k (excluding minor-
ity shareholders) in 2016, compared to EUR 59,998 k (including) or EUR 59,397 k (excluding) in 2015.
The FFO ratio increased to 60.0% (i.e., by 8.0 percentage points; including minority shareholders). As
a result, FFO per share* was EUR 0.79 (including minority shareholders) or EUR 0.76 (excluding minor-
ity shareholders) in financial year 2016 (2015: EUR 0.62 including minority shareholders; EUR 0.61
excluding minority shareholders). The reasons for this increase are the integration of alstria office
Prime, more favourable refinancing, and synergy effects in administrative and personnel expenses.
EUR k
Pretax income (EBT)
Net profit/loss from fair value adjustments on
investment properties
Net profit/loss from fair value adjustments on
financial derivatives
Profit/loss from the disposal of investment properties
Fair value and other adjustments in joint venture
Other adjustments1)
Funds from operations (FFO)2)
Attributable to minority shareholders
Attributable to alstria office REIT-AG shareholders
Maintenance and re-letting
Adjusted funds from operations – (A)FFO3)
Number of shares (k)4)
FFO per share (EUR k)
2016
193,694
−72,806
8,101
−25,464
−3,852
21,885
121,558
−5,148
116,410
−22,226
94,184
153,231
0.76
2015
−110,567
4,192
6,763
−12,655
−1,301
173,566
59,998
−601
59,397
−16,162
43,235
96,718
0.61
1) This is noncash income or expenses plus nonrecurring effects. The main effects in financial year 2015 were the amortization of the goodwill
(EUR 144,795 k), the higher legal and advisory costs that were incurred in connection with the takeover of alstria office Prime (EUR 9,765 k),
and the nonrecurring effects from repayment fees for the premature termination of loans (EUR 9,162 k). The main effects in financial year
2016 were cost related to the takeover of alstria office Prime (EUR 6,686 k), the cost of sales (EUR 4,771 k) and the noncash effect from the
dissolution of effective interests due to the premature repayment of loans (EUR 3,392 k).
2) (A)FFO is not a measure of operating performance or liquidity under generally accepted accounting principles, in particular IFRS, and it should
not be considered an alternative to the Company’s income or cash-flow measures as determined in accordance with IFRS. Furthermore, there
is no standard definition for (A)FFO. Thus, alstria’s (A)FFO values and the measures with similar names presented by other companies may not
be comparable.
3) (A)FFO is equal to FFO after adjustments are made for capital expenditures used to maintain the quality of the underlying investment portfolio
and expenses for lease-ups.
4) The number of shares as of December 31, 2016 was 153,231,217; in 2015, the average number of shares was 96,718,329 due to the takeover
of alstria office Prime.
* This is calculated using the number of shares as of December 31, 2016, which was 153,231,217; the average number of shares in 2015 was
96,718,329.
alstria Annual Report 2016
15
Group Management Report
FINANCIAL AND ASSET POSITION
Investment properties
The total value of investment properties at year end was EUR 2,999,099 k, compared to
EUR 3,260,467 k at the beginning of the year. This decrease in investment property value is mainly
the result of the disposal of 13 assets. The valuation result amounted to EUR 72,806 k, compared to
EUR −4,192 k in 2015.
EUR k
Investment properties as of Dec. 31, 2015
Investments
Acquisitions
Disposals
Reclassifications
Net loss/gain from fair value adjustments on
investment properties
Property portfolio as of Dec. 31, 2016
Prepayment
Investment properties as of Dec. 31, 2016
Carrying amount of owner occupied properties
Fair value of properties held for sale
Interests in joint ventures
Carrying amount of immovable assets
Financial management
3,260,467
31,277
9,146
−360,500
−14,097
72,806
2,999,099
5,967
14,700
30,381
3,050,147
2,575
3,052,722
alstria’s financial management is carried out at the corporate level. Individual loans and corporate
bonds are taken out at both the property level and the portfolio level. alstria’s main financial goal is
to establish a sustainable long-term financial structure. Therefore, alstria diversifies its sources of
financing and strives for a balanced maturity profile to enable coordinated and constant refinancing.
On February 22, 2016, the loan to finance the Herkules portfolio, with a nominal value of EUR 332 m,
was repaid prematurely. The refinancing was made using proceeds from a bond that had been issued
in November 2015.
On April 12, 2016, alstria issued a second unsecured, fixed-rate bond with a nominal value of
EUR 500 m. This corporate bond, which matures in April 2023, bears a fixed coupon of 2.125%. The
proceeds from the bond serve to refinance bank liabilities.
With the proceeds from the second bond, the Company was able to refinance further bank liabilities.
On May 31, 2016, the loan agreement for the financing of the Homer portfolio (with a nominal value
of EUR 333 m), which had been terminated prematurely, was repaid in total. Furthermore, as of
June 30, 2016, another three loans from the alstria office Prime portfolio (with a total nominal value
of EUR 129 m) were terminated prior to maturity.
In addition to the placement of the bond on May 6, 2016, the Company issued a Schuldschein (senior
16
alstria Annual Report 2016
Group Management Report
unsecured debt) with a nominal value of EUR 150 m. The Schuldschein, with an average coupon of
2.07%, has an average maturity of 7.1 years. The proceeds have been used to refinance existing bank
debt.
Furthermore, during the reporting period, alstria extended two loans. One loan, for a nominal amount
of EUR 67 m, was extended for another eight years. The second prolongation concerns a loan with a
nominal amount of EUR 56 m and a maturity of ten years. In the process of the prolongation, the
margin on these two loans reduced from 1.29% to 0.84% on average.
The syndicated loan, which has existed since September 30, 2013 and which had an initial amount of
EUR 544 m, was repaid prematurely on December 30, 2016. The loan had validated EUR 471 m as of
December 31, 2015. In financial year 2016, alstria made further repayments of EUR 159 m.
The loan facilities in place as of December 31, 2016, are as follows:
Liabilities
Syndicated loan #11)
Syndicated loan #22)
Syndicated loan #33)
Loan #14)
Loan #24)
Loan #35)
Loan #46)
Loan #5
Loan #6
Loan #76)
Loan #8
Total loans
Bond (1st tranche)
Bond (2nd tranche)
Convertible bond
Schuldschein 10y/fixed
Schuldschein 4y/fixed
Schuldschein 7y/fixed
Schuldschein 7y/variable
Schuldschein 4y/variable
Total
Net LTV
Maturity
Sep. 30, 2020
Feb. 22, 2016
Sep. 30, 2018
June 30, 2017
Dec. 31, 2018
Dec. 30, 2017
June 28, 2024
Apr. 30, 2021
Mar. 28, 2024
June 30, 2026
July 31, 2021
Mar. 24, 2021
Apr. 12, 2023
June 14, 2018
May 6, 2026
May 8, 2023
May 6, 2020
May 8, 2023
May 6, 2020
Principal amount
drawn as of
Dec. 31, 2016
EUR k
LTV as of
Dec. 31,
2016
%
Principal amount
drawn as of
Dec. 31, 2015
EUR k
LTV cove-
nant %
0
0
0
0
0
0
67,000
58,896
56,500
56,000
15,268
253,664
500,000
500,000
79,200
40,000
37,000
38,000
17,500
17,500
-
-
-
-
-
-
39.1
49.0
47.8
44.0
50.6
44.7
-
-
-
-
-
-
-
-
1,482,864
49.1
40.9
-
-
-
-
-
-
65.0
65.0
75.0
65.0
60.0
–
-
-
–
-
-
-
-
-
–
470,556
331,910
336,320
58,868
53,432
18,507
67,000
60,048
56,500
56,000
15,423
1,524,564
500,000
-
79,200
-
-
-
-
-
2,103,764
1) Loan agreement terminated; withdrawal occurred on December 30, 2016.
2) Loan agreement terminated; withdrawal occurred on February 22, 2016.
3) Loan agreement terminated; withdrawal occurred on May 31, 2016.
4) Loan agreement terminated; withdrawal occurred on June 30, 2016.
5) Loan agreement terminated; withdrawal occurred on June 30, 2016 / July 4, 2016.
6) Refinanced in the second quarter of 2016.
alstria Annual Report 2016
17
Group Management Report
Average term to maturity for loans/bonds/convertible bonds (years)
5.4
3.6
Dec. 31, 2016
Dec. 31, 2015
Maturity profile of financial debt as of December 31, 20161) in EUR m
774
574
79
56
-
-
2017
2018
2019
2020
2021
from 2022
1) Excluding regular amortization.
Average cost of debt (% p.a.)
2016
2.2
2015
2.8
18
alstria Annual Report 2016
Group Management Report
Compliance with and calculation of the Covenants, referring to §11 of the Terms and Conditions*
In case of the incurrence of new Financial Indebtedness for purposes other than the refinancing of
existing liabilities, alstria needs to comply with the following covenants:
The ratio of Consolidated Net Financial Indebtedness to Total Assets will not exceed 60%.
The ratio of Secured Consolidated Net Financial Indebtedness to Total Assets will not exceed
45%.
The ratio of Unencumbered Assets to Unsecured Consolidated Net Financial Indebtedness will
be more than 150%.
From the issuance date of the first bond (November 24, 2015) up to the reporting date, alstria incurred
two
further
Financial
Indebtednesses
to
refinance
existing
Secured
Financial
Indebtedness. Additionally, in the second quarter of 2016, alstria prolonged two existing loans prior
to maturity.
Furthermore, alstria needs to maintain a ratio of the Consolidated Adjusted EBITDA over Net Cash
Interest of not less than 1.80 to 1.00. The initial calculation and publication of the ratio should be
done after the fifth reporting date following the issuance of the bond and thus together with this 2016
annual report.
EUR k
Earnings Before Interest and Taxes (EBIT)
Net profit/loss from fair value adjustments to investment properties
Net profit/loss from fair value adjustments to financial derivatives
Profit/loss from the disposal of investment properties
Other adjustments1)
Fair value and other adjustments in joint venture
Consolidated Adjusted EBITDA
Cash interest and other financing charges
One-off financing charges
Net Cash Interest
Consolidated Coverage Ratio (min. 1.80 to 1.00)
Cumulative 2016
244,488
−72,806
8,101
−25,464
11,843
−3,852
162,310
−26,631
1,617
−25,014
6.49
1) Depreciation and amortization and nonrecurring or exceptional items. The main effects in financial year 2016 were cost related to the takeover
of alstria office Prime (EUR 4,337 k) and the cost of sales (EUR 4,771 k).
As of December 31, 2016, no covenants have been breached under the loan agreements, the bond’s
terms and conditions, and/or the conditions of the Schuldschein.
* The following section refers to the Terms and Conditions of the Fixed Rate Notes, issued on November 24, 2015, and on May 6, 2016 as well as
to the Terms and Conditions of the Schuldschein issued on April 12, 2016 (for further information, please refer to www.alstria.com). Capitalized
terms have the meanings defined in the Terms and Conditions.
alstria Annual Report 2016
19
Group Management Report
Cash position
Cash and cash equivalents decreased from EUR 460,253 k to EUR 247,489 k during the reporting
period. This reduction is essentially due to refinancing measures. In financial year 2016, alstria raised
new debt equal to EUR 650,000 k in the form of a bond (EUR 500,000 k) and a Schuldschein
(EUR 150,000 k). In return, the repayment of loans led to a cash outflow of EUR 1,273,926 k, and the
payment of dividends led to a cash outflow of EUR 76,564 k. Net cash inflow from property
transactions increased to EUR 341,951 k, and a positive cash flow of EUR 120,495 k was generated
from operating activities.
Equity Metrics
Equity metrics
Equity (EUR k)
Thereof non-controlling interests
NAV per share (EUR)
Equity ratio (%)
G-REIT equity ratio (%)1)
Dec. 31, 2016
Dec. 31, 2015
Change
1,728,438
1,657,664
-
11.28
51.1
56.7
38,287
10.64
43.0
49.4
4.3%
n/a
6.0%
8.1 pp
7.3 pp
1) This is defined as total equity divided by the carrying amount for immovable assets. The minimum requirement according to G-REIT regulations
is 45%.
Total equity increased by EUR 70,774 k in 2016, reaching 1,728,438 k as of December 31, 2016. The
net consolidated result for financial year 2016 contributed to a higher equity of EUR 182,376 k. On
the other hand, dividend payments decreased the equity by EUR 76,564 k. The Non-controlling
interests refer to the equity of the minority shareholders of alstria office Prime. Following the
conversion of the legal form, the shares are no longer shown as equity. The capital of minority
shareholders is now shown as liabilities.*
Capital of noncontrolling shareholders
Liabilities due to minority interests are the limited-partner capital of noncontrolling shareholders in
alstria office Prime. The limited-partner capital of the minority shareholders, according to IFRS, is
treated as a liability in the consolidated statements (as applicable).
Long-term loans
Long-term loans decreased by 14.5%, from EUR 1,715,590 k as of December 31, 2015 to
EUR 1,466,521 k as of December 31, 2016. The decrease resulted essentially from the repayment of
the syndicated loan on December 30, 2016, as this loan had amounted to EUR 470,556 k as of December
31, 2015. Moreover, in the first half of financial year 2016, alstria completely repaid its loans for the
financing of the Herkules Portfolio and the Homer Portfolio, which had amounted to EUR 668,230 k as
of December 31, 2015 (EUR 343,272 k of this amount was reported under short-term loans in 2015).
* See also the consolidated statement of changes in equity at page 54.
20
alstria Annual Report 2016
Group Management Report
Three additional loans from the alstria office Prime portfolio were repaid prior to maturity; these had
amounted to EUR 130,808 k as of December 31, 2015.
By contrast, in the second quarter of the reporting year, alstria issued a bond with a total nominal
amount of EUR 500,000 k and placed a Schuldschein in the amount of EUR 150,000 k.
Short-term loans
Short-term loan obligations amounted to EUR 19,330 k on the reporting date (previous year:
EUR 376,402 k) and hence were EUR 357,072 k lower than in the previous year. A main reason for the
high amount in 2015 was the premature repayment of a loan for the financing of the Herkules Portfolio,
which was already reported under short-term loans in 2015. As of December 31, 2016, short-term loans
were mainly influenced by the interest for the bonds (2016: EUR 16,408 k; 2015: EUR 1,168 k) and the
Schuldschein (2016: EUR 1,738 k; 2015: EUR 0 k).
Current liabilities
Current liabilities amounted to EUR 104,996 k (2015: EUR 448,911 k) and mainly consisted of the above-
mentioned short-term loan obligations of EUR 19,330 k (2015: EUR 376,402 k) and of the current
liabilities to minority shareholders of EUR 12,966 k (2015: EUR 0 k). Another EUR 20,104 k of this total
was attributable to tax obligations (2015: EUR 8,687 k), which arose nearly exclusively at the level of
the consolidated alstria office Prime companies. Moreover, current liabilities include trade payables
(2016: EUR 4,584 k; 2015: EUR 9,415 k) and other current liabilities (2016: EUR 45,334 k; 2015:
EUR 52,251 k). The other current liabilities include liabilities from the real estate transfer tax
(EUR 11,869 k; 2015: EUR 13,199 k), which were incurred at the alstria office Prime level, provisions
for outstanding invoices (2016: EUR 16,223 k; 2015: EUR 19,744 k), prepayment of rents
(2016: EUR 2,758 k; 2015: EUR 3,960 k), and received deposits (2016: EUR 4,944 k; 2015: EUR 5,094 k).
Trade payables of the previous year’s balance sheet have been adjusted in line with the presentation
in the previous year’s consolidated financial statement. As of December 31, 2015, an amount of
EUR 20,477 k was shown. This included outstanding invoices in the amount of EUR 11,062 k, which have
been reclassified under other current liabilities.
alstria Annual Report 2016
21
Group Management Report
CORPORATE MANAGEMENT
alstria proactively focuses on the following key financial performance indicators: revenues and FFO.
Revenues mainly comprise rental income derived from the Company’s leasing activities. FFO is the
operating result and is derived from real estate management. It excludes valuation effects and other
adjustments, such as non-cash expenses/income and non-recurring effects.*
For financial year 2016, the Company forecasted revenues of EUR 200 m and an FFO of EUR 115 m.
Due to the Company’s good letting performance in financial year 2016, its revenues were approx.
EUR 203 m, slightly higher than in the forecast. In financial year 2016, FFO totalled EUR 116 m
(without minorities), which is in line with the forecast.
The Company also monitors the progress of its LTV, its G-REIT equity ratio, and its liquidity, whereby
these are not classified as for the internal control of the Company most relevant performance
indicators. alstria’s LTV for the loan financing was 44.7% as of December 31, 2016, compared to 52.1%
at the end of financial year 2015. The G-REIT equity ratio was 56.7%, compared to 49.4% in the
previous year and the minimum statutory rate of 45%.
* For further details, please refer to page 15.
22
alstria Annual Report 2016
Group Management Report
RISK AND OPPORTUNITY REPORT
RISK REPORT
Risk Management
alstria has implemented a Group-wide system for structured risk management and early warning 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’s risk-management strategy
is to minimize – or, where possible, completely avoid – the risks associated with entrepreneurial
activity in order to safeguard the company against losses and against risks to the company’s going
concerns. The company’s risk identification allows for the early identification of potential new risks
on an ongoing basis. Risk-mitigation measures are defined so that alstria can undertake the necessary
steps to circumvent any identified risks (i.e., to insure, diversify, manage, or avoid those risks).
For alstria, risk management involves the targeted securing of existing and future potential for success
and improvements in the quality of the Company’s planning processes.
alstria’s risk-management system is an integral part of its management and control system. The risk-
management system is integrated into its regular reporting to the Management Board and Supervisory
Board, which ensures that risks are dealt with proactively and efficiently. The risk-management
system thereby focuses on full coverage of the risks. The identification and assessment of
opportunities is not part of alstria’s risk-management system.
Structure of the risk-management system
Risk management is coordinated independently from individual business divisions. The risk manager
prepares a risk report on a quarterly basis and provides it to the Management Board. This report is based
on the reports from the risk owners – those who are responsible for particular areas of risk.
alstria faces various areas of risk within the context of its business activities; these are divided into the
following four risk categories:
> strategic risks
> operational risks
> compliance risks
> financial risks
Each risk category is assigned to a so-called risk owner. Inherent to the risk owner’s position in the
Company is that he or she represents the area in which the identified risks could materialize; the risk
owner is also responsible for the assigned risk category:
alstria Annual Report 2016
23
Group Management Report
alstria‘s areas of risk and risk categories
Risk category
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 the responsible departments and the Supervisory Board conduct.
In addition, the divisions report their respective risks and opportunities to the Management Board in
weekly meetings. The Management Board must be immediately notified of any risks that represent a
potential economic loss of more than EUR 2.0 m via ad hoc announcements.
Risk valuation
Risks are assessed according to their likelihood of occurrence and their magnitude of impact.
Accordingly, they are categorized as “high,” “medium” or “low.” The potential damage includes any
potential negative deviation from alstria’s forecasts and objectives.
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
Between 0.0 and 0.6
Between 0.6 and 1.5
Between 1.5 and 6.0
Between 6.0 and 15
Greater than 15
Degree of impact
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, each risk is classified as “high,” “medium” or “low” according
to the following matrix.
24
alstria Annual Report 2016
Group Management Report
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
minor
low
moderate
high
critical
Risk classification
Probability
highly likely
likely
possible
unlikely
very unlikely
Degree of impact
L = low risk
M = medium risk
H = high risk
In 2016, the Company’s risk-management system was not exposed to any significant changes from the
previous year.
Key characteristics of the accounting-related internal control and risk-management system
Regarding the reporting process, the objective of the control and risk-management system is to make
sure that the reporting is consistent and in line with legal requirements, generally accepted
accounting principles, 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 organizational terms,
the divisions’ treasury, controlling, and accounting divisions are responsible for control.
The monitoring measures consist of elements that are incorporated in the process as well as
independent external elements. 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 with the appropriate expertise and
specialized departments such as controlling, legal, and treasury perform monitoring and control
functions as part of the various processes.
The Management Board, the Supervisory Board (in particular, the Audit Committee), and a firm of
auditors are all involved in the monitoring system. These groups perform various checks that are
independent of the Company’s processes.
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 Company’s controlling department.
All items and main accounts for the consolidated companies’ income statements and balance sheets,
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
alstria Annual Report 2016
25
Group Management Report
financial statements and for alstria’s individual financial statement. Accounting-related data are
monitored monthly or quarterly, depending on the frequency of their preparation.
The accounting-related risk-management system forms part of the alstria Group’s risk-management
system. The risk owner responsible for the “finance” area monitors the risks that are relevant to the
accuracy of accounting-related data. Risks are identified on a quarterly basis and are assessed and
documented by the risk-management committee. Appropriate action is taken to monitor and optimize
accounting-related risks throughout the Group.
Description and assessment of risks
In accordance with alstria’s risk-management system, all material risks inherent to the future devel-
opment of the Group’s position and performance are described in this chapter. The individual risks
that are described relate to the planning period from 2017 to 2019.
Corporate risks
Strategic risks
Likelihood
Risk
impact
Risk level
Change since
prior year
Market environment
unlikely
moderate
unlikely
moderate
unlikely
moderate
Shortfalls of rental payments
very unlikely
Risks in relation to changes
to the legal environment
Risk due to inefficient
organizational structures
Operational risks
Maintenance risks
Refurbishment projects
Vacancy risk
Risks relating to property transactions
HR risks
IT risks
Environmental risks
Compliance risks
Risks resulting from not complying
with G-REIT legislation
Risks arising from fraud or
non-compliance
Litigation risks
Financial risks
Valuation risks
Breaches of covenants
Tax risks
Liquidity risks
possible
possible
unlikely
unlikely
possible
possible
unlikely
unlikely
unlikely
unlikely
unlikely
unlikely
unlikely
Refinancing on unfavourable terms
very unlikely
Interest rate risks
Counterparty risks
very unlikely
very unlikely
high
high
high
moderate
low
low
high
low
moderate
moderate
high
high
high
moderate
high
high
high
unlikely
moderate
26
alstria Annual Report 2016
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
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
decreased
decreased
unchanged
Group Management Report
Strategic risks
Strategic risk management addresses the factors that influence the Company’s market environment,
regulatory environment, and strategic corporate organization.
Market environment risks
For the Group, market environment risks are derived from macroeconomic 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 lower demand for rental areas in office properties. For
alstria, this would lead to a higher risk of vacant space or to lower rental income. The slowing of
growth in developing and emerging countries, the increasing political instability of certain countries
in crisis, the continuing low interest rates of the European Central Bank, and the discussion about
certain states’ high debt were all been identified as factors causing uncertainty in the previous year’s
balance sheet. While the developments described are no longer the focus of public debate, the
planned exit of Great Britain from the EU and the change of government in the USA have been added
as uncertainties. These developments might also affect the German markets through a decrease in
demand for goods and services from these markets. To date, however, the German market has proven
to be unimpressed, as it has been stable in spite of such circumstances.
Regarding the overall strategic risk situation that can be linked to the macroeconomic environment,
no direct risk can currently be identified.
As long as there is no substantial change in the economic environment, the market environment’s risk
level will remain stable and low (L).
Risks in relation to changes in 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 key regulatory requirements and on the corporate constitution of the
alstria companies. These include alstria’s classification as a REIT and other regulations concerning
publicly listed companies. New laws and regulations may result in new regulatory requirements and
thus in higher expenses.
Overall, risks regarding the legal environment are, like in the previous year, classified as low (L).
Risk of inefficient organizational structures
Further risks exist as part of the business organization’s strategic direction due to inefficient organi-
zational structures and the Company’s dependence on IT systems and structures. Both the organiza-
tional structure and the IT infrastructure support strategic and operational objectives. The risk of
strategic corporate organization therefore remains low (L).
Operational risks
alstria’s operational risk management deals with property-specific risks and with general business
risks. This includes vacancy risk, tenants’ creditworthiness, and the risk of falling market rents.
alstria Annual Report 2016
27
Group Management Report
Personnel-related risks, such as loss of know-how and competencies due to staff fluctuations, 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, and the control of lease terms
and termination clauses, are designed to help identify potential dangers and risks.
Vacancy risk
In the case of lease terminations, leases that are not extended, and existing vacancies, there is a risk
that the rental area will not be re-let as planned, resulting in 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 large rental areas expired.
However, the re-letting activities for these areas achieved a highly positive response. As in the
previous year, the overall vacancy risk is medium (M).
Shortfall of rental payments
An operational risk is a potential shortfall of rental payments from one or more major tenants; it
could be realized as a result of an economic downturn or a particular case. Because all of alstria’s
main tenants are public or highly rated institutions, the risk of a shortfall in payments is currently, as
in the previous year, limited (L).
Maintenance risk
To plan for the requirements of maintenance measures, the Company makes assumptions about a
property’s condition and the intended standard. Undetected defects, repair requirements resulting
from external damage, new legal requirements regarding the condition of the building, and an
incorrect assessment of the maintenance requirements could all result in higher-than-planned
maintenance costs. Due to alstria’s still-high maintenance budgets, the maintenance risk is
categorized as medium (M), as it was in the previous year.
Refurbishment projects
alstria realizes a significant number of refurbishment projects. All risks related to these projects are
managed through extensive project control and through a related budget-management process.
Potential risks include those of delayed completion, budget overrun, and deficiencies in construction.
The risk resulting from refurbishment projects is categorized as moderate (M), which is unchanged
from the end of the previous reporting period.
Employees
The skills and motivations of alstria’s employees are decisive factors in the company’s success. The
risk of losing knowledge results from the fluctuation of staff and from the inability to recruit
sufficiently qualified experts to fill vacancies 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
28
alstria Annual Report 2016
Group Management Report
measures: selective, needs-oriented skill development for existing staff; strengthening of its image
as an attractive employer; university marketing; promotion of 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 alstria’s 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 in operating activities.
alstria protects itself against IT risks through constant examination and enhancement of the
information technology that it deploys. In addition, it has installed modern hardware and software
solutions and safeguards against attacks. Structural security measures are in place to protect the
computer center. All data are backed up daily in an internal data depository and once per week in a
separate data depository. Workstations have access restrictions so that employees are only able to
access the systems that they need for their work. Therefore, overall IT risks are assessed to be unlikely
to materialize; as in the prior year, their possible consequences are considered to be low (L).
Property transactions
alstria is exposed to risks related to the acquisition and disposal of real estate properties. Related
risks include the partial or complete failure to detect the risks and liabilities associated with
properties during the due diligence process. In case of the disposal of real estate assets, alstria usually
gives certain warranties to the potential purchaser regarding factual and legal matters for the
property in question. The possibility that alstria’s management is not aware of risks that are covered
by certain elements and warranties given in a sales agreement cannot be fully ruled out. As a result,
there is generally a risk that a prospective purchaser may charge alstria (as the seller) with breach of
warranty. From a purchasing perspective, alstria is exposed to the risks that hidden deficiencies on
land and/or property are not observed or that unfavourable contractual agreements are transferred
to the Company, resulting in additional future costs.
In both acquisition and selling proceedings, alstria responds to these risks with thorough technical,
legal, and tax analyses of 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 and from possible damage resulting
from natural events such as fire or flooding. In some cases, alstria’s buildings may contain undetected
hazardous materials (such as asbestos) to an unanticipated extent. These buildings might also be
affected by environmental risks or liabilities, such as pre-existing pollution and soil contamination.
alstria Annual Report 2016
29
Group Management Report
To mitigate these risks, alstria undertakes a due-diligence examination when acquiring new properties
in addition to warranties issued by the sellers.
alstria’s environmental risk management considers climate change. Specific insurance policies cover-
ing the impacts of natural catastrophes are in place, where applicable. All the environmental risks
described above are considered to be at a low (L) level, the same as in the previous year.
For a detailed description of the Company’s environmental risks, please refer to the “Climate effect
on our business” section in the 2015/2016 sustainability report.
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 an attractive profile to investors and to distinguish itself in the capital
markets as a REIT. The REIT shares are traded on 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. Following are the most significant requirements. The G-REIT must be a stock corporation
listed on an organized 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.
Due to the consistent monitoring of compliance with all described REIT criteria, the risk of non-com-
pliance is considered to be low (L), as in the previous year.
REIT corporations are exempt from German corporate income tax (KSt) and German trade tax (GewSt).
This tax exemption has been applied for the Company with retrospective effect starting on Janu-
ary 1, 2007.
Capital and investment management activities maintain the Company’s G-REIT status in order to
support its business activities and maximize shareholder value.
alstria manages its capital structure and makes adjustments in response to changes in economic con-
ditions. In order to maintain or adjust the capital structure, the Company can issue new shares or
make a capital repayment to its shareholders.
30
alstria Annual Report 2016
Group Management Report
According to Section 15 of the REIT Act, alstria’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, how-
ever, 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 56.7% on the balance sheet date. Accordingly, alstria complies with the
minimum G-REIT equity ratio requirement according to Section 15 of the 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 a G-REIT and its tax exemption. Therefore, alstria cannot lose its G-REIT status as a result
of failing to meet the 45% threshold within the three-year forecast period through December 31, 2019.
Compliance risks
alstria depends on all employees and management respecting the compliance standards in place.
alstria’s business expects employees and the members of management to comply with laws, policies,
and procedures as prescribed by the 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 an adverse
material 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 organization, 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),
which is unchanged from the previous year.
Litigation
alstria office REIT-AG or any of its subsidiaries could be involved in pending or foreseeable court or
arbitration proceedings that might have a significant impact on the Group’s business position at any
time. Other risks might arise from legal actions taken to address warranty claims, repayment claims,
or any other claims brought forward in connection with divested properties or implemented
development projects over the last few years.
Risks associated with the change of legal form of DO Deutsche Office AG into the limited part-
nership alstria office Prime Portfolio GmbH & Co. KG in the year 2016
Some shareholders of former DO Deutsche Office AG have filed voidance and nullity suits (Sec. 246,
249 AktG) against the resolution of the annual general meeting of former DO Deutsche Office AG on
July 12, 2016, to transform DO Deutsche Office AG into the limited partnership alstria office Prime
Portfolio GmbH & Co. KG (associated with the transfer of the company’s domicile and changes to the
company name).
alstria Annual Report 2016
31
Group Management Report
On the basis of the clearance decision taken by the 18th Civil Chamber of the Cologne Higher Regional
Court on December 7, 2016, the change of legal form was registered with the commercial register of
the local court in Cologne and subsequently on the same day with the commercial register of the local
court in Hamburg. With this, the change of the legal form has become effective.
After an exchange of various written pleadings by the parties to the proceeding, a first court hearing
was held on January 13, 2017. A decision has yet not been made. If the suits were found to be
successful, alstria office Prime Portfolio GmbH & Co. KG would be obliged to compensate the plaintiffs
for damages incurred by them as a consequence of the registration of the transformation. These
potential claims for compensation might result in a financial burden and hence have an adverse im-
pact on the net assets, financial position, and results from operations of the Group. However, the
registration of the transformation is not affected by the outcome of the proceeding.
Furthermore, several shareholders of former DO Deutsche Office AG have taken the view that the
amount of the cash compensation that was offered to those former DO Deutsche Office AG sharehold-
ers who declared an objection during the annual general meeting of DO Deutsche Office AG on
July 12, 2016, and declared to exit the limited partnership alstria office Prime Portfolio GmbH &
Co. KG, was set too low. For this reason, these shareholders used the opportunity to have the fairness
of the cash compensation reviewed in a judicial arbitration proceeding and filed the necessary appli-
cation for the initiation of such proceeding. In the event that the court rules in a final decision that
the cash compensation has to be improved by the company, such a decision will, in accordance with
Section 13 of the German Arbitration Proceedings Act, be effective for and against all the shareholders
of former DO Deutsche Office AG who are entitled to cash compensation, e.g., all shareholders who
declared an objection during the annual general meeting of DO Deutsche Office AG on July 12, 2016.
This means that the additional cash compensation fixed by the court will also be paid to shareholders
who have not filed an application in the arbitration proceeding and/or have already declared their
exit to the limited partnership. As of the date of the transformation notice published with the com-
mercial register of the local court in Hamburg, the additional cash compensation will have to be made
with an annual interest of five percentage points above the base lending rate effective at that time.
This right to an additional cash compensation of an unlimited amount with interest might result in a
financial burden and hence have an adverse impact on the net assets, financial position, and results
from operations of the Group. Prior to the transformation, the company obtained an expert opinion
with a view to establish the enterprise value and the adequate cash compensation. Subsequently, the
adequate cash compensation was subject to a mandatory audit by an independent expert, as pre-
scribed by law. In addition to measures implemented before the litigation to reduce the risk of an
additional cash compensation, the company receives legal support from external advisors in the cur-
rent proceeding.
32
alstria Annual Report 2016
Group Management Report
Risks associated with the merger of Deutsche Office and Prime Office REIT-AG (PO REIT) in the
year 2014
Some shareholders of PO REIT, which was dissolved due to the merger, have taken the view that the
exchange ratio set for former PO REIT shares to shares of the Company was too low at their expense.
For this reason, they used the opportunity to have the fairness of the exchange ratio reviewed in
judicial arbitration proceedings and filed the necessary applications to the Munich District Court for
the initiation of such proceedings. After an exchange of various written pleadings by the parties to
the proceedings, a first court hearing was held on February 12, 2015. At first instance, the Munich
District Court rejected the applications for an additional cash payment in favour of the former PO
REIT shareholders in a ruling on August 21, 2015. Four applicants and their common legal
representative have appealed against this ruling, and the proceedings will now be continued at second
instance before the Munich Higher Regional Court. In the event that the court rules in a final decision
that the exchange ratio has to be improved by means of a cash payment to be made by the Company,
such a decision will be effective for and against all the shareholders of PO REIT in accordance with
Section 13 of the German Arbitration Proceedings Act. This means that the additional cash payment
fixed by the court will also be paid to shareholders who have not filed an application in the arbitration
proceedings. As of the date of the merger notice published by the acquiring entity in the Commercial
Register, the additional cash payment will have to be made with an annual interest of five percentage
points above the base lending rate effective at that time. This right to an additional payment of an
unlimited amount with interest, which in itself may be substantial due to the length of the
proceedings and the level of the statutory interest rate, might result in a significant financial burden
and hence have an adverse impact on the net assets, financial position, and results from operations
of the alstria Group. Mutual due diligence was performed prior to the merger, and the Company
obtained an expert opinion with a view to establish the enterprise values and the exchange ratio.
Subsequently, the calculated exchange ratio was subject to a mandatory merger audit by an
independent expert, as prescribed by law. In addition to measures implemented before the litigation
to reduce the risk of an additional cash payment, the Company receives legal support from external
advisors in the current proceedings.
The effects of the described lawsuits on the risk of litigation as well as the general risk situation are
considered low due to the expected low likelihood of occurrence. Provisions were not made.
Apart from these lawsuits, neither alstria office REIT-AG nor any of its subsidiaries are involved in
pending or foreseeable court or arbitration proceedings that 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
alstria Annual Report 2016
33
Group Management Report
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 it was in the previous year.
Financial risks
Due to alstria’s refinancing strategy, its financial risk situation remained stable compared to the
previous year’s reporting period.
Refinancing risks
The main financial instruments used by the Group are fixed-interest bonds. In addition, there are
mortgage-backed bank loans and derivative financial instruments. The main purpose of the bonds and
the bank loans is to finance alstria’s business activities. Derivative financial instruments include
interest 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 Net LTV is 40.9%. This is a reasonable or even low ratio compared to the average
leverage of German real estate companies. The Group’s bank loan LTVs on the balance sheet date
are well below the LTVs permitted under the respective loan agreements (see an overview of loan
facilities on page 17). The risk of a covenant breach was thus encountered effectively. The
creditworthiness of alstria was classified by the rating agency Standard & Poor’s as unchanged at BBB
(“Investment Grade”) at the end of the reporting period.
The refinancing of the majority of alstria’s bonds and bank loans is not required prior to financial year
2021 (see the maturity profile of the loans on page 18). As a result, the risk of refinancing on
unfavourable terms is to be classified at the present time as low (L). As of the previous year’s
reporting date, the risk was still moderate (M) due to outstanding short-term refinancing.
Breach of Covenants
In the process of taking out loans and the issuance of a Schuldschein, alstria agrees to comply with
certain covenants, such as not to exceed a certain level of debt (loan-to-value) or to achieve a mini-
mum income (debt service coverage ratios) from mortgaged properties. In the event of a breach of
these covenants, consequences would arise, such as increased credit margins or, in the worst case,
an extraordinary termination of a loan by the lender. The Group’s current LTV ratios as described
above, give significant leeway to the permitted leverage ratios. Hence, the risk of a breach of cove-
nants 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 caps and swaps if applicable
in order to limit the Company’s exposure to interest rate fluctuations. It still provides enough
34
alstria Annual Report 2016
Group Management Report
flexibility to allow for the disposal of real estate assets, avoiding any costs associated with 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 relate to interest caps in order to cap
the interest at a set maximum.
As of the balance sheet date, the main part of funding consists of fixed-interest bonds and is therefore
not subject to interest rate risk up to its maturity. As a consequence of the hedging of floating
interests and long-term fixed-interest loans and bonds, the interest rate risk is currently considered
to be low (L). At the end of the previous reporting date the risk was categorized as medium (M).
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.
Having implemented refinancing in the previous years, including the placement of a convertible bond
and a corporate bond, the major liquidity risk resulting from balloon repayments on loan facilities
was successfully averted. Since the main part of the loans and bonds will not be due until the year
2021, the liquidity risk resulting from repayment obligations is currently, as in the previous year,
low (L).
Valuation risks
The fair value of the real estate properties owned by the Company reflects the market value as
determined by independent appraisers. 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 factors include declining rent levels, decreasing
demand, and 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 minimize these risks, regional diversification of investment portfolios,
consistent focus on the individual needs of tenants, and detailed market research and analysis (broker
reports) are applied. In addition, the market value of all of alstria’s assets is determined annually at
alstria Annual Report 2016
35
Group Management Report
year-end by independent, internationally recognized 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 insurance, and others). alstria’s counterparties in these contracts are internationally
recognized institutions that 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 regarding the reliability of rating agencies’ assessments. In response to this concern, alstria
makes use of other sources of information to verify 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).
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 REIT status or at a subsidiary level. Additionally the Group as a whole faces
risks from value-added tax, real transfer tax and property tax. Furthermore, it is possible that changes
in tax laws or their interpretations can result in a higher tax liability for prior tax periods that have
not yet been finally approved. As consequence of the takeover of the alstria office Prime Group,
companies are included in the consolidated financial statements that are not subject to the
regulations of the REIT legislation. The planned restructuring, which has already been implemented
in part during the business year, and in particular the conversion of the legal form of these companies
into limited partnerships, results in the taxation of hidden reserves and hidden liabilities existing
within the acquired companies. The resulting tax expenses are taken into account through
December 31, 2016, given the current tax provisions.
Due to the income tax exemption as a REIT and 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 a tax liability status could result in high tax obligations over the three-year risk period, the
risk impact is considered to be significant. This results in an overall tax risk level that is moderate
(M), which is unchanged from the previous year’s average tax 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 the financial year 2016, only minor or immaterial changes were
noted in alstria’s risk level matrix for risks categorized as high (H) or medium (M). At the end of the
year, risks categorized as “high” accounted for 1.0% (December 31, 2015: 0.0%) of all identified risks
36
alstria Annual Report 2016
Group Management Report
while risks categorized as “medium” accounted for 42.6% (December 31, 2015: 47.1%) of all identified
risks.
On the one hand, this is due to the economic environment in Germany, which still proves to be
relatively stable despite the market risks described above. On the other hand, the company’s stable
funding position, conservative level of debt, and solid REIT equity ratio support this assessment. The
integration of alstria office Prime, taken over in the previous year, is proceeding as planned. The risks
associated with the
implementation of organizational employee-related and system-based
integration, have been considered in the individual risk areas.
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 27.5 m as of the balance sheet
date.
In our view, the risks described in our aggregated risk report do not threaten our ability to continue
as a going concern either individually or cumulatively, given their likelihood of occurrence and po-
tential level of impact. This applies both to the individual Group companies and the Group.
alstria Annual Report 2016
37
Group Management Report
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 those opportunities and transform
them into business success.
Growth and earnings opportunities result both from alstria’s existing real estate portfolio and from
its acquisition of properties. Depending on the property’s position in the life cycle, opportunities may
be found in repositioning and development, in strengthening tenant relationships, or in selling the
property.
The Company’s financing activities safeguard the necessary funding to implement these activities.
Here, opportunities are based on ensuring sustainable financing, including equity funding, on
favourable terms.
The evaluation of opportunities is carried out in the context of annual budget planning and on an
ongoing, occasional basis during the year. The process starts with a careful analysis of the market
environment and of the market opportunities related to the properties held in the portfolio. These
include the assessment of criteria such as tenant needs, property categories, and regulatory changes.
Regular reporting supports the monitoring of growth initiatives within the budget and planning-
approval processes.
The alstria Management Board is regularly (usually 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 revenues. An indicator-based report coordinated by the central controlling depart-
ment is provided to the Management Board; in this report, the planned performance indicators are
compared to the actual figures. In addition, financial and liquidity planning and forecasts are updated,
and changes to the project scope are clarified.
Opportunities related to real estate acquisitions
The location of a property is essential for its attractiveness. Opportunities arise when a regional
market is characterized by favourable demographics and real estate dynamics. Together with optimal
property management, this results in opportunities for long-term capital appreciation. alstria’s ac-
quisition strategy aims to identify properties with the described opportunity structure. Its investment
strategy therefore focuses on the acquisition of properties and portfolios that have higher vacancy
rates and thus are open to additional growth opportunities through the stabilization of these proper-
ties’ leases. The acquisition will only be performed if the investment volume offers the prospect of
achieving a sustainable increase in value.
Opportunities related to tenant relationships
Structured and active property and asset management both ensures the quality of our leasing service
38
alstria Annual Report 2016
Group Management Report
and is the basis for sustainable tenant relationships. Opportunities arise through a flexible response
to existing or potential tenants’ needs. The Company has the knowledge and resources to provide
solutions and to implement tenants’ requirements. This gives rise to opportunities to generate
sustainable, 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
that require refurbishment or repositioning. The modernization of a property opens up the oppor-
tunity for value creation by reshaping the asset for the next 20 to 30 years and strengthening its
future attractiveness in the market and for tenants.
Opportunities arising from financing
alstria’s financing strategy is focused on the optimal provision of funds to invest in new properties
and development projects. Opportunities arise from the optimization of these financing terms. This
requires implementing long-term and flexible funding at favourable conditions and safeguarding
financial covenants at all times. A significant opportunity also arises out of a low debt ratio (the net
LTV of bank loans is currently 40.9%; see the overview of loan facilities on page 17), representing a
comfortable base for future funding and growth. Funding options include mortgage loans, corporate
bonds, and equity funding. Opportunities arise from the diversification of funding sources and with
regard to the rating obtained in the previous year.
Overall summary of the Opportunities Report
alstria’s current financial situation involves a stable financial position at favourable interest rates
until about mid−2021. The rating received from S&P allows for greater flexibility in terms of new
funding sources. Concerning revenues, alstria benefits from long-term rental agreements with an
average lease length of approximately 4.9 years and potential increases in rents due to decreasing
vacancy rates and adjustments on the consumer price index. In addition, the Company possesses a
range of properties that offer attractive and value-adding refurbishment opportunities. alstria’s
portfolio is well-balanced and contains many first-class anchor buildings with high-quality tenants.
The takeover of alstria office Prime provides opportunities because this group’s portfolios open up
growth opportunities through the lease of vacant office space. Furthermore, the alstria office Prime
portfolio enabled a better focus on office properties and a geographical focus on Germany’s
metropolitan regions; in addition to the synergies and other economies of scale, the portfolio also
allowed a greater presence and more efficiency in alstria’s key markets.
Therefore, alstria is well-positioned to continue its buy-and-manage strategy and to successfully
identify and implement relevant future market opportunities. alstria’s core competence is the
management of assets. The asset repositioning and refurbishment that alstria is continuously
undertaking will strengthen the basis for increased organic value across the portfolio.
alstria Annual Report 2016
39
Group Management Report
SUSTAINABILITY REPORT
In November 2016, alstria published its seventh sustainability report. The report is organized and
presented based on the GRI G4 reporting framework and has received for the first time a third-party
assurance for all disclosed environmental performance indicators. It provides information about al-
stria’s next steps toward a carbon-neutral economy and familiarizes the reader with the Company’s
corporate responsibility strategy.
alstria’s vision with regard to sustainability goes beyond the reporting exercise itself. Its sustainability
approach is embedded in every decision across all levels of the organization. To alstria, pursuing a
path of continuous improvement and innovation is what sustainability is all about.
Over the course of 2016, alstria has successfully implemented a framework agreement for procuring
100% of its electricity from renewable sources and 100% climate-neutral natural gas over a four-year
period. This contract covers all landlord-shared services in alstria’s portfolio as well as its corporate
offices. Because of this action, alstria was able to save approximately 11,000 t CO2, which is equiva-
lent to the amount needed to power approximately 600 German households. With a focus on increas-
ing the operational control of its own offices, alstria has continued to utilize an energy management
system that complies with the ISO 50001 standard. Finally, alstria continues to play a pivotal role in
real estate and has been recognized for the second consecutive year by the Climate Disclosure Project
as a sector and country leader (A-rating).
For further information on the Company’s sustainability engagement, please refer to alstria’s annual
sustainability report 2015/2016 at
www.alstria.com.
40
alstria Annual Report 2016
Group Management Report
DISCLOSURES REQUIRED BY TAKEOVER LAW
Disclosures and the explanatory report pursuant to Sections 289 para. 4, 315 para. 4 of the
German Commercial Code (Handelsgesetzbuch, HGB).
COMPOSITION OF SUBSCRIBED CAPITAL
On the balance sheet date as of December 31, 2016, the share capital of alstria amounted to
EUR 153,231,217.00, divided into 153,231,217 no-par-value bearer shares. All shares have equal rights
and obligations. Each share entitles the bearer to one vote at the general shareholders’ meetings and
is decisive for the shareholder’s share in the profits 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.
SHAREHOLDINGS EXCEEDING 10% OF THE VOTING RIGHTS
On the balance sheet date as of December 31, 2016, alstria was not aware of any shareholders directly
holding more than 10% of the voting rights. The Government of Singapore notified us in April 2016
that via controlled undertakings they held approximately 12.61% of alstria’s shares. In addition, please
refer to the disclosures in the Notes under no. 17.3 Voting Right Notifications.
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 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
alstria Annual Report 2016
41
Group Management Report
appointed by the Supervisory Board 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 are made pursuant to Sections 179 and 133 AktG. Pursuant
to Section 12 para. 2 of the Articles of Association, the Supervisory Board is furthermore authorized
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 2016 and, after expiration of the applicable
authorization periods, by resolution of the Annual General Meetings on May 29, 2013, and May 12,
2016.
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.
The Articles of Association were last amended by resolution passed by the Supervisory Board on Sep-
tember 8, 2016: Section 5 para. 1, 2 and 8 of the Articles of Association were formally adapted to a
capital increase executed from the Company’s Conditional Capitals III 2012.
AUTHORITY OF MANAGEMENT BOARD REGARDING THE ISSUE AND BUYBACK OF SHARES
1. Authorized Capital
The Articles of Association authorize the Management Board, with the approval of the Supervisory
Board, to increase the share capital through May 11, 2018, by issuing new no-par-value bearer
shares against contributions in cash and/or kind once or repeatedly up to a total amount of
EUR 76,082,142.00. 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 regu-
lated in Sections 5 para. 5, 6 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 37,979,618.00 by
issuing up to 37,979,618 no-par-value bearer shares. The Management Board is authorized to
determine 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 to the extent that
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 that were issued through November 28, 2014, based on the authorization resolved by
42
alstria Annual Report 2016
Group Management Report
the shareholders in the general meeting on May 29, 2013, utilize 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 2012
The share capital is conditionally increased in an amount of up to EUR 215,750.00 by issuing
up to 215,750 no-par-value bearer shares. The conditional capital increase exclusively serves
shares to the holders of convertible profit participation certificates issued by the Company
through April 23, 2017, in accordance with the authorization of the general meeting held on
April 24, 2012. The conditional capital increase is only carried out to the extent that issued
convertible profit participation certificates are converted into shares of the Company and no
treasury shares are used for servicing 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 2015
Furthermore, the share capital is conditionally increased in an amount of up to
EUR 500,000.00 by issuing up to 500,000 no-par-value bearer shares. The conditional capital
increase shall be used exclusively to grant shares to the holders of convertible profit
participation certificates issued by the Company through May 5, 2020 in accordance with the
authorization of the general meeting held on May 6, 2015. The conditional capital increase is
only carried out to the extent that 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 May 12, 2016, the shareholders authorized 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 authorization until May 11, 2021. 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).
alstria Annual Report 2016
43
Group Management Report
SIGNIFICANT AGREEMENTS OF ALSTRIA OFFICE REIT-AG THAT TAKE EFFECT UPON A CHANGE OF
CONTROL FOLLOWING A TAKEOVER BID
Significant financing agreements of alstria office REIT-AG contain the clauses common to such con-
tracts regarding a change of control. In particular, the agreements entitle the lenders to request
repayment of the loans or an obligation of alstria to repay the loans in the event that any person,
company, or a group of persons should acquire, directly or indirectly, 50% of the voting rights or a
controlling influence in alstria. However, for some financing agreements, the repayment obligation is
subject to a downgrade of the Company’s rating, occurring within 120 days of the change of control.
The terms and conditions of the convertible bond issued by the Company in the financial year 2013
also provided termination rights or an adaption of the conversion price in the case of a change of
control. 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 terms and conditions of the fixed-interest bonds the Company issued in financial years 2015 and
2016 entitle each bond holder to request the Company to redeem or purchase his bond for 101% of
the principal amount of such bond plus unpaid interest accrued, if any person, company, or group of
persons should acquire, directly or indirectly, more than 50% of the voting rights in alstria and within
120 days after such change of control the rating for the Company or the bond is downgraded.
The total volume of obligations under those agreements with corresponding change of control clauses
amounted to approximately EUR 1,288 m on 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 of December 31, 2016, alstria had 114 employees (compared to 93 on December 31, 2015). The
annual average number of employees was 105 (compared to 72 in the previous year). These figures
exclude Management Board members.
REMUNERATION REPORT
Management Board members’ compensation comprises a fixed and a variable component that is 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.
44
alstria Annual Report 2016
Group Management Report
Members of the Supervisory Board receive fixed remuneration.
The remuneration report (see pages 143 to 149), which contains details of the principles for the
remuneration of the Management Board and Supervisory Board, forms an integral part of the audited
Group Management Report.
CORPORATE GOVERNANCE DECLARATION PURSUANT TO SECTION 289A HGB (“HANDELS-GE-
SETZBUCH”: GERMAN COMMERCIAL CODE)
The complete corporate governance declaration is published on alstria office REIT-AG’s website
(www.alstria.com).
DIVIDEND
At the Annual Shareholders’ Meeting, the Managing Board intends, in agreement with the Supervisory
Board, to submit the following proposal to allocate the unappropriated net income of alstria office
REIT-AG for the business year 2016: to distribute a dividend of EUR 0.52 on each share of no par value
entitled to the dividend for business year 2016 existing at the date of the Annual Shareholders’
Meeting, with the remaining amount to be carried forward. Payment of the proposed dividend is
contingent upon approval by alstria shareholders at the Annual Shareholders’ Meeting on Mai 16, 2017.
The proposed dividend of EUR 0,52 per share for the business year 2016 represents a total payment
of EUR 79.7 m based on the number of shares entitled to dividend at the balance sheet date.
EXPECTED DEVELOPMENTS
The report on expected developments contains statements related to anticipated future
developments. The Company’s development 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 in a very good condition. The GDP growth was at 1.9% compared to the
previous year, which is the strongest economic growth since 2011. The employment rate also
developed positively in 2016. The German government expects a GDP growth of 1.4% and a positive
development in the German labor market of 0.7% for 2017.*
German economic associations also estimate a positive economic development for 2017, although
they expect lower growth in comparison to 2016. The construction industry and related industries, in
particular, look confidently to the future.
* Please refer to Annual Economic Report 2017 (Bundesministerium für Wirtschaft und Energie), as well as the economic forecast of Tagesschau.
alstria Annual Report 2016
45
Group Management Report
Development of the real estate market: Outlook for 2017
In connection with low interest rates, the importance of real estate as a class of investment is still
going to be at a high level. In 2017 a continuing high demand for real estate in core areas is estimated.
Due to the limited investment offerings, the tendency to invest in value-added assets will continue.
Outlook for the alstria Group
Based on the expected stability of the German economy and of the real estate market, the Company
does not expect significant changes in alstria’s direct environment. However, unexpected changes in
terms of interest rates, further property acquisitions, property disposals, or other changes in the
assumptions for the financial year 2017 could have an impact on the projections.
Due to the disposals in 2016, alstria is expecting revenues to decrease in 2017 by approximately
EUR 18 m to EUR 185 m as compared to revenues in 2016.
For fiscal year 2017, the Company is expecting an FFO of around EUR 108 m. The year-on-year
decrease in FFO compared the 2016 FFO of EUR 116 m is mainly due to lower revenues resulting from
the disposals in financial year 2016. This effect will be partially offset by a further reduction of
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 over a longer period of time.
Hamburg, February 21, 2017
46
alstria Annual Report 2016
Consolidated Financial Statements
DETAIL INDEX CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS ......................................................... 48
CONSOLIDATED INCOME STATEMENT .......................................................................... 48
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ................................................ 49
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...................................................... 50
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................ 52
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...................................................... 54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .................................................. 56
1. BASIS OF PRESENTATION .................................................................................. 56
2. BASIS OF PREPARATION ................................................................................... 56
3. SEASONAL OR ECONOMIC EFFECTS ON BUSINESS ..................................................... 75
4. SEGMENT REPORTING ..................................................................................... 75
5. NOTES TO THE CONSOLIDATED INCOME STATEMENT ................................................ 75
6. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION –ASSETS .................. 83
7. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION –EQUITY AND
LIABILITIES .................................................................................................. 93
8. OTHER NOTES .............................................................................................. 101
9. RELATED PARTY RELATIONSHIPS ....................................................................... 102
10. EARNINGS PER SHARE..................................................................................... 103
11. DIVIDENDS PAID ............................................................................................ 104
12. EMPLOYEES ................................................................................................. 104
13. SHARE-BASED REMUNERATION .......................................................................... 104
14. FINANCIAL RISK MANAGEMENT .......................................................................... 109
15. SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD .............................. 117
16. UTILISATION OF EXEMPTING PROVISIONS ............................................................. 118
17. DISCLOSURES PURSUANT TO THE WERTPAPIERHANDELSGESETZ [GERMAN
SECURITIES TRADING ACT] AND EUROPEAN MARKET ABUSE REGULATION [MAR] .............. 118
18. DECLARATION OF COMPLIANCE PURSUANT TO AKTG SECTION 161 ............................... 120
19. AUDITORS’ FEES ........................................................................................... 120
20. MANAGEMENT BOARD ..................................................................................... 120
21. SUPERVISORY BOARD ..................................................................................... 121
RESPONSIBILITY STATEMENT ................................................................................... 123
INDEPENDENT AUDITOR’S REPORT ............................................................................ 124
alstria Annual Report 2016
47
Consolidated Financial Statements
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the period from January 1 to December 31, 2016
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
Goodwill impairment
Net result from fair value adjustments to
investment property
Gain on disposal of investment property
Net operating result
Notes
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.7
6.1
5.8
2016
202,663
−204
−23,445
179,014
−8,464
−12,683
5,417
−14,445
2015
115,337
−423
−12,774
102,140
−6,383
−12,068
4,043
−13,859
0
−144,795
72,806
25,464
−4,192
12,655
247,109
−62,459
Net financial result
5.9
−50,794
−43,333
Share of the result of companies
accounted for at equity
Net loss from fair value adjustments to
financial derivatives
Pretax result
2.2.3
5,480
1,988
5.9;6.6
−8,101
−6,763
193,694
−110,567
Income tax expenses
Consolidated profit/loss
5.10
−11,318
182,376
−812
−111,379
Attributable to:
Shareholders of alstria office REIT-AG
Noncontrolling interests
Earnings per share in EUR
Basic earnings per share
Diluted earnings per share
176,872
5,504
−110,970
−409
10
10
1.16
1.11
−1.15
−1.04
48
alstria Annual Report 2016
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period from January 1 to December 31, 2016
EUR k
Consolidated profit for the period
Items that might be classified on the income
statement in a future period:
Valuation cash flow hedges
Reclassification from cash flow
hedging reserve
Other comprehensive income for the period
Total comprehensive income for the period
Total comprehensive income attributable to:
Shareholders
Noncontrolling interest
Notes
6.6
6.6
2016
182,376
2015
−111,379
0
270
270
−444
3,269
2,825
182,646
−108,554
177,142
5,504
−108,145
−409
alstria Annual Report 2016
49
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of December 31, 2016
ASSETS
EUR k
Noncurrent assets
Investment property
Equity-accounted investments
Property, plant, and equipment
Intangible assets
Financial assets
Derivatives
Notes
2016
2015
6.1
6.2
6.3
6.4
6.5
6.6
2,999,099
3,260,467
30,381
6,858
329
34,803
109
23,900
5,161
607
0
8,462
Total noncurrent assets
3,071,579
3,298,597
Current assets
Trade receivables
Accounts receivable from joint ventures
Income tax receivables
Other receivables
Cash and cash equivalents
thereof restricted
Assets held for sale
Total current assets
6.7
7,257
12,578
6.7
6.8
6.9
5
25
41,578
247,489
0
14,700
311,054
0
226
9,783
460,253
32,036
69,143
551,983
Total assets
3,382,633
3,850,580
50
alstria Annual Report 2016
Consolidated Financial Statements
EUR k
Equity
Share capital
Capital surplus
Hedging reserve
Retained earnings
Notes
7.1
EQUITY AND LIABILITIES
2016
2015
153,231
152,164
1,434,812
1,499,477
0
140,395
−270
−31,994
Equity attributable to owners of the parent company
1,728,438
1,619,377
Noncontrolling interests
Total equity
Noncurrent liabilities
Limited partnership capital noncontrolling interests
Long-term loans and bonds, net of current portion
Derivatives
Other provisions
Other liabilities
Deferred tax liabilities
Total noncurrent liabilities
Current liabilities
Limited partnership capital noncontrolling interests
Short-term loans
Trade payables
Profit participation rights
Income tax liabilities
Other provisions
Other current liabilities
Total current liabilities
Total liabilities
7.2
0
38,287
1,728,438
1,657,664
7.2
7.3
6.6
7.4
7.5
5.10; 7.6
7.2
7.3
7.5
5.5;13.2
7.6
7.4
7.5
58,458
0
1,466,521
1,715,590
20,099
23,208
1,313
2,808
0
3,221
1,854
132
1,549,199
1,744,005
12,966
19,330
4,584
421
20,104
2,257
45,334
0
376,402
9,415
362
8,687
1,794
52,251
104,996
448,911
1,654,195
2,192,916
Total equity and liabilities
3,382,633
3,850,580
alstria Annual Report 2016
51
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ending December 31, 2016
EUR k
Notes
2016
2015
1. Cash flows from operating activities
Consolidated profit or loss for the period
182,376
−111,379
Interest income
Interest expense
Result from income taxes
Unrealized valuation movements
Impairment of goodwill
Other noncash income (–)/expenses (+)
Gain (–)/loss (+) on disposal of investment
properties
5.9
5.9
5.10
6.4
8.3
5.8
−535
51,329
11,318
−69,947
0
494
−128
43,461
812
8,952
144,795
2,329
−25,464
−12,654
Depreciation and impairment of fixed assets (+)
6.3;6.4
678
426
Increase (–)/decrease (+) in trade receivables
and other assets not attributed to investing
or financing activities
Increase (+)/decrease (–) in trade payables and
other liabilities not attributed to investing
or financing activities
Cash generated from operations
Interest received
Interest paid
Income taxes paid
Net cash generated from operating activities
2. Cash flows from investing activities
Acquisition of investment properties
Proceeds from the sale of investment properties
Payment of transaction cost in relation to the sale
of investment properties
Acquisition of other property, plants, and equipment
Proceeds from the equity release of interests
in joint ventures
Payments for capital contribution in affiliates
Payments for investment in financial assets
Net cash due to business combination
4,202
2,642
−7,293
147,158
64
−26,695
−32
120,495
−43.740
426.764
−4.771
−499
1,916
81,172
128
−35,559
−110
45,631
−78,531
80,698
−1,980
−142
0
12,636
−1.000
−34.803
0
0
0
116,029
128,710
Net cash generated from investing activities
8.3
341,951
52
alstria Annual Report 2016
Consolidated Financial Statements
EUR k
Notes
2016
2015
3. Cash flows from financing activities
Cash received from cash equity contributions
Payments of transaction costs for capital contributions in
cash and in kind
Payments for the acquisition of minority interests
Proceeds from the issuing of a ‘Schuldschein’
Proceeds from the issuing of a corporate bond
Payments of dividends
Payments due to the redemption
of bonds and borrowings
7.1
7.1
7.1
7.3
7.3
11
34,803
102,725
0
−113
150,000
500,000
−76,564
−2,336
0
0
500,000
−43,470
−1,273,926
−292,512
Payments of transaction costs for taking out loans
−6,817
−5,899
Payments for the termination/change
of financial derivatives
Net cash used in/generated from financing activities
−2,593
−675,210
−35,741
222,767
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 32,036 k
−212,764
397,108
460,253
63,145
6.8
247,489
460,253
alstria Annual Report 2016
53
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period from January 1 to December 31, 2016
EUR k
Notes
Share
capital
Capital
surplus
Hedging
reserve
Retained
earnings
Equity at-
tributable to
the alstria
shareholders
Noncon-
trolling
interests
Total
equity
As of Jan. 1, 2016
152,164 1,499,477
−270
−31,994
1,619,377
38,287 1,657,664
Changes in the
financial year 2016
Consolidated profit
Other comprehensive in-
come
Total comprehensive
income
Payments of dividends
11
0
0
0
0
0
0
0
−76,564
Proceeds from shares is-
sued against contribu-
tion in kind
Change of minority in-
terest share within eq-
uity due to the sale of
minority shares
Change of minority in-
terest share within eq-
uity due to the purchase
of minority shares
Share-based
remuneration (converti-
ble participation rights)
Conversion of converti-
ble participation rights
7.1
964
10,847
7.1
7.1
5.5;
13.2
0
0
0
13.2
103
0
0
949
103
Conversion of legal form
of minority interests to a
limited partnership
As of Dec. 31, 2016
7.2
7.1
0
0
153,231 1,434,812
0
176,872
176,872
5,504
182,376
270
0
270
0
270
270
176,872
177,142
5,504
182,646
0
0
0
0
0
0
0
0
0
0
0
0
0
0
−76,564
0
−76,564
11,811
−11,811
0
0
34,803
34,803
0
−113
−113
949
206
0
0
949
206
−4,483
−4,483
−66,670
−71,154
140,395
1,728,438
0 1,728,438
54
alstria Annual Report 2016
Consolidated Financial Statements
For the period from January 1 to December 31, 2015
EUR k
Notes
Share
capital
Capital
surplus
Hedging
reserve
Retained
earnings
Equity at-
tributable to
the alstria
shareholders
Noncon-
trolling
interests
Total
equity
As of Jan. 1, 2015
79,018
691,693
−3,095
78,977
846,593
0
846,593
Changes in the
financial year 2015
Consolidated profit
Other comprehensive in-
come
Total comprehensive
income
Noncontrolling interest
from Deutsche Office
takeover
Payments of dividends
11
0
0
0
0
0
0
0
0
0
−43,470
Proceeds from shares is-
sued against contribu-
tion in cash
Proceeds from shares is-
sued against contribu-
tion in kind
7.1
7,903
94,822
7.1
65,067
757,616
Transaction costs of issu-
ing shares
Share-based
remuneration (converti-
ble participation rights)
7.1
5.5;
3.2
0
0
Conversion of converti-
ble participation rights
Conversion of converti-
ble bonds
13.2
156
7.1
20
−2,336
752
156
243
0
−110,970
−110,970
−409
−111,379
2,825
0
2,825
0
2,825
2,825
−110,970
−108,145
−409
−108,554
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
38,696
38,696
−43,470
0
−43,470
102,725
0
102,725
822,683
−2,336
752
312
263
0
0
0
0
0
822,683
−2,336
752
312
263
As of Dec. 31, 2015
7.1 152,164 1,499,477
−270
−31,994
1,619,377
38,287 1,657,664
alstria Annual Report 2016
55
Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
alstria office REIT-AG (the Company) is a listed real estate property corporation under the scope of the
G-REIT Act. The Company’s objective is the acquisition, management, operation, and sale of owned
real estate property and the holding of participations in enterprises that acquire, manage, operate,
and sell owned property.
The accompanying consolidated financial statements present the operations of alstria office REIT-AG
and its subsidiaries (the Group or alstria). They have been prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the European Union, and with the additional re-
quirements set forth in Section 315a (1) of the German Commercial Code (HGB). The financial state-
ments are also in accordance with IFRS, as issued by the International Accounting Standards Board
(IASB). The consolidated financial statements were authorized for issue by the managing board on Feb-
ruary 21, 2017.
In the previous business year, alstria office REIT-AG acquired the majority of the shares in former
DO Deutsche Office AG, Cologne, Germany (hereinafter referred to as “Deutsche Office AG”). The ordi-
nary capital increase of alstria generating the new alstria shares required as compensation for the ac-
quisition was entered in the commercial register at the local-regional court of Hamburg on Octo-
ber 27, 2015. With the registration of the new alstria shares in the commercial register, the Company
gained control over the Deutsche Office AG, resulting in the first-time consolidation of Deutsche Office
AG on October 27, 2015. With an effective date of December 9, 2016, Deutsche Office AG was legally
converted into the legal form of a Kommanditgesellschat [limited partnership]. At the same time, the
company name of Deutsche Office AG was changed to “alstria office Prime Portfolio GmbH & Co. KG”
(hereinafter “alstria office Prime KG” or “alstria office Prime,” if the subgroup of alstria office Prime
KG is designated).
alstria office REIT-AG’s registered office and address is Bäckerbreitergang 75, 20355 Hamburg,
Germany. Registration was done at the commercial register at the local court of Hamburg under HRB
No. 99204.
alstria prepares and reports its consolidated financial statements in euros (EUR). Due to rounding,
numbers presented may not add up precisely to the totals provided.
The financial year ends on December 31 of each calendar year. The consolidated financial statements
presented in this report were prepared for the period from January 1 to December 31, 2016.
2. BASIS OF PREPARATION
Apart from investment property (land and buildings) and certain financial instruments that are meas-
ured 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.
56
alstria Annual Report 2016
Consolidated Financial Statements
The preparation of financial statements in conformity with the IFRSs requires the use of certain crit-
ical accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. Areas involving a higher degree of judgement or complexity
or items wherein assumptions and estimates have a significant impact on the consolidated financial
statements are disclosed in Note 2.3.
Single items are summarized in the consolidated statement of financial position and the income state-
ment. They are commented on in the notes to the financial statements.
Assets and liabilities are classified as noncurrent and current, respectively. Current items are defined
as items that are due in less than one year and vice versa.
Due to the merger with alstria office Prime KG, which was at that time still under the company name
Deutsche Office AG, implemented on October 27, 2015, Group data for 2016 are only comparable to
a limited extent with figures posted for 2015.
2.1
Changes in accounting policies and mandatory disclosures
Effects resulting from new and amended IFRSs
The Company adopted the following new standards and amendments to standards for the first time
for the financial year beginning January 1, 2016:
Applicable for f/y
beginning on/af-
ter
Effects
Jan. 1, 2016
None
Jan. 1, 2016
None
EU
Endorsement
Nov. 24, 2015
Sept. 22, 2016
Standard/
interpretation
Amendments to
IFRS 11
Amendments to
IFRS 10, IFRS 12 and
IAS 28
Content
Accounting for acquisitions of
interests in joint operations
Investment entities: applying the
consolidation exception
Dec. 18, 2015
Amendments to IAS 1
Disclosure initiative
Dec. 02, 2015
Nov. 23, 2015
Dec. 17, 2014
Dec. 18, 2015
Dec. 17, 2014
Dec. 15, 2015
Amendments to
IAS 16 and IAS 38
Amendments to
IAS 16 and IAS 41
Amendments to
IAS 19
Amendments to
IAS 27
Annual Improvements
to IFRSs
Annual Improvements
to IFRSs
Clarification of acceptable methods
of depreciation
Agriculture: bearer plants
Jan. 1, 2016
Jan. 1, 2016
Jan. 1, 2016
Notes disclo-
sure
None
None
Defined benefit plans: employee
contributions (Amendments to
IAS 19, ‘Employee Benefits’)
Equity method in separate
financial statements
Improvements to IFRSs 2010−2012
Feb. 1, 2015
Improvements to IFRSs 2012−2014
Jan. 1, 2016
Feb. 1, 2015
None
Jan. 1, 2016
None
None
None
The amendments to IAS 1 aim to clarify perceived impediments to preparers exercising their judge-
ment in presenting financial reports. In doing so, assessments of the materiality, presentation, and
disclosures are to be performed in such a way that the relevance of the information for the final
addressee is retained and not obscured by a sprawling generic repetition by standard quotes and
redundancies by the presentation of the same facts at different points in the annual report. The Group
has implemented these requirements.
alstria Annual Report 2016
57
Consolidated Financial Statements
Furthermore, there are no significant impacts on financial reporting from the listed amendments and
annual improvement projects.
New and amended IFRSs and interpretations to existing standards that are not yet effective and
that the Group has not adopted early
Applicable for f/y
beginning on/af-
ter
Jan. 1, 2018
Effects
No material
effects
Jan. 1, 2016
n/a
Jan. 1, 2018
Jan. 1, 2019
Jan. 1, 2018
Jan. 1, 2018
Notes disclo-
sure
No material
effects
No material
effects
No material
effects
postponed
Under review
EU
Endorsement
Standard/
interpretation
Nov. 22, 2016
IFRS 9
Standard shall
not be en-
dorsed
IFRS 14
Sep. 22, 2016
IFRS 15
Content
New standard “Financial instruments:
classification and measurement”
New standard “Regulatory
deferral accounts”
New standard “Revenue from
contracts with customers”
IFRS 16
New standard “Leases”
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
Amendments to
IFRS 2
Amendments to
IFRS 4
Amendments to
IFRS 10 and IAS 28
Amendments to
IAS 7
Amendments to
IAS 12
Amendments to
IAS 40
Annual Improvements
to IFRSs
IFRIC 22
clarifications
IFRS 15
Classification and measurement of
share-based payment transactions
Applying IFRS 9 financial instruments
with IFRS 4 insurance contracts
Sale or contribution of assets
between an investor and its
associate or joint venture
Disclosure initiative
Jan. 1, 2017
Notes disclo-
sure
Recognition of deferred tax assets for
unrealised losses
Jan. 1, 2017
Under review
Transfers of investment property
Jan. 1, 2018
Under review
Improvements to IFRSs 2014−2016
Foreign currency transactions and ad-
vance consideration
Clarifications issued for IFRS 15, “Reve-
nue from Contracts with Customers”
Jan. 1, 2017/
Jan. 1, 2018
Jan. 1, 2018
Jan. 1, 2018
None
None
None
The Group has not yet assessed the full impact of IFRS 9 on its reported figures. The classification and
measurement of the currently used financial instruments is not expected to be affected by IFRS 9.
The provisions on the revenues from contracts with customers, which were recast in accordance with
IFRS 15, in all likelihood do not have any significant impact on the presentation of the Group's reve-
nues. The same applies to the first-time adoption of IFRS 16. The standard will not have any material
effects on the Company’s consolidated financial statements because the Company primarily has com-
mercial property lease agreements for its investment property portfolio and thus mainly acts as a
lessor. The scope of transactions in which the Company is engaged as a lessee is immaterial.
No significant impact on financial reporting is expected from the other new standards and amend-
ments to existing standards as listed above.
The Group did not adopt any new or amended standards or interpretations early in 2016.
58
alstria Annual Report 2016
Consolidated Financial Statements
2.2
Basis of consolidation
2.2.1 Subsidiaries
The consolidated financial statements incorporate the financial statements of alstria office REIT-AG
and entities controlled by the Company and its subsidiaries. Control is achieved when the Company
does the following:
has power over the investee;
is exposed or has rights to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether it controls an investee if facts and circumstances indicate changes
to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases
when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of profit or loss
and other comprehensive income from the date the Company gains control until the date when the
Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the Company’s
owners and noncontrolling interests. The total comprehensive income of the subsidiaries is
attributed to the Company’s owners and noncontrolling interests, even if this results in the
noncontrolling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to align their
accounting policies with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions
between members of the Group are eliminated in full upon consolidation.
a) Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing
control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the
Group’s interests and noncontrolling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any difference between the amount by which the noncontrolling
interests are adjusted and the fair value of the consideration paid or received is recognized directly
in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is
calculated as the difference between
(i) the aggregate of the fair value of the consideration received and the fair value of any
retained interest and
alstria Annual Report 2016
59
Consolidated Financial Statements
(ii) the previous carrying amount of the assets (including goodwill) and liabilities of the
subsidiary and any noncontrolling interests.
All amounts previously recognized in other comprehensive income in relation to that subsidiary are
accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary
(i.e., reclassified to profit or
loss or transferred to another category of equity, as
specified/permitted by applicable IFRSs).
b) Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of
the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the
Group to the former owners of the acquiree, and the equity interests issued by the Group in exchange
for control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as
incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized
at their fair value.
Good will is measured as the excess of the sum of the consideration transferred, the amount of any
noncontrolling interests in the acquiree, and the fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable
assets acquired and the liabilities assumed. After reassessment, if the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any noncontrolling interests in the acquiree and fair value
of the acquirer’s previously held interest in the acquiree fit and the excess is recognized immediately
in profit or loss as a bargain purchase gain.
Noncontrolling interests that are present ownership interests and entitle their holders to a
proportionate share of the entity’s net assets in the event of liquidation may be initially measured
either at fair value or at the noncontrolling interests’ proportionate share of the recognized amounts
of the acquiree’s identifiable net assets. The choice of measurement is made on a transaction -by-
transaction basis. Other types of noncontrolling interests are measured at fair value or, when
applicable, on the basis specified in another IFRS.
When a business combination is achieved in stages, the Group’s previously held equity interest in
the acquiree is remeasured to its acquisition-date fair value, and the resulting gain or loss, if any, is
recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognized in other comprehensive incomes are reclassified as profit
or loss, where such treatment would be appropriate if that interest were disposed of.
Significant companies wherein alstria office REIT-AG is directly or indirectly able to significantly
influence financial and operating decisions (associates) or directly or indirectly share control (joint
60
alstria Annual Report 2016
Consolidated Financial Statements
ventures), are accounted for using the equity method.
2.2.2 Fully consolidated subsidiaries
The Group of consolidated companies, including alstria office REIT-AG, comprised 69 companies in
the financial year (2015: 93). As of the balance-sheet date, 63 companies (prior year balance-sheet
date: 67 companies) existed. In addition, two joint ventures and a noncontrolling interest acquired
in December 2016 have been accounted for using the equity method.
In the consolidated financial statements of alstria office REIT-AG, the following companies are in-
cluded:
No. Company
1
2
3
4
5
6
7
8
9
alstria office REIT-AG
alstria Bamlerstraße GP GmbH
alstria Gänsemarkt Drehbahn GP GmbH
alstria Englische Planke GP GmbH
alstria Halberstädter Straße GP GmbH
alstria Hamburger Straße 43 GP GmbH
alstria Ludwig-Erhard-Straße GP GmbH
alstria Mannheim/Wiesbaden GP GmbH
alstria Portfolio 1 GP GmbH
10
alstria Steinstraße 5 GP GmbH
11
alstria solutions GmbH
alstria office Bamlerstraße GmbH & Co.
KG
alstria office Gänsemarkt Drehbahn GmbH
& Co. KG
alstria office Englische Planke GmbH &
Co. KG
alstria office Halberstädter Straße GmbH
& Co. KG
alstria office Hamburger Straße 43 GmbH
& Co. KG
alstria office Insterburger Straße GmbH &
Co. KG
12
13
14
15
16
17
18
19
20
21
22
alstria office Ludwig-Erhard-Straße GmbH
& Co. KG
1)
Hamburg
alstria office Mannheim/Wiesbaden GmbH
& Co. KG
alstria Prime Portfolio GP GmbH
alstria Prime Portfolio 2 GP GmbH
2)
2)
alstria office Steinstraße 5 GmbH & Co.
KG
23
beehive GmbH & Co. KG
alstria office Prime Portfolio GmbH & Co.
KG (former DO Deutsche Office AG)
24
25
German Acorn PortfolioCo I GmbH
26
GA Regionen PortfolioCo I GmbH
3)
Cologne
27
GA Objekt 2001 Beteiligungs GmbH
28
GA Objekt 2003 Beteiligungs GmbH
29
GA Objekt 2005 Beteiligungs GmbH
Cologne
Cologne
Cologne
Head-
quarters
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Cologne
Equity interest
in % Held by No.
Business activity
Parent company
Asset-management; holding
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
90.9
90.9
90.9
90.9
90.9
90.9
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
24
25
25
25
25
General partner
General partner
General partner
General partner
General partner
General partner
General partner
General partner
General partner
Service company
Own property
Own property
Own property
No activity
Own property
Own property
Own property
Own property
General partner
General partner
Own property
Service company
Intermediate holding
Intermediate holding
Own property
Own property
Own property
Own property
alstria Annual Report 2016
61
Consolidated Financial Statements
No. Company
30
GA Objekt 2007 Beteiligungs GmbH
31
GA Objekt 2008 Beteiligungs GmbH
32
GA Objekt 2009 Beteiligungs GmbH
33
GA Objekt 2010 Beteiligungs GmbH
3)
3)
34
GA Objekt 2011 Beteiligungs GmbH
Head-
quarters
Cologne
Cologne
Cologne
Cologne
Cologne
35
GA Objekt 2012 Beteiligungs GmbH
4)
Cologne
GA Fixtures and Facility Management
PortfolioCo I GmbH
36
37
German Acorn PortfolioCo II GmbH
38
GA 5. Objekt 1004 Beteiligungs GmbH
GA 6. Objekt 1007 Beteiligungs GmbH
GA 7. Objekt 1008 Beteiligungs GmbH
Cologne
Cologne
Cologne
Cologne
Cologne
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
GA 8. Objekt 1011 Beteiligungs GmbH
3)
Cologne
GA 10. Objekt 1014 Beteiligungs GmbH
GA 11. Objekt 1015 Beteiligungs GmbH
GA 12. Objekt 1016 Beteiligungs GmbH
GA 13. Objekt 1019 Beteiligungs GmbH
GA 14. Objekt 1020 Beteiligungs GmbH
GA 15. Objekt 1021 Beteiligungs GmbH
GA 17. Objekt 1024 Beteiligungs GmbH
GA 18. Objekt 1027 Beteiligungs GmbH
GA 19. Objekt 1028 Beteiligungs GmbH
GA 20. Objekt 1030 Beteiligungs GmbH
GA 21. Objekt 1034 Beteiligungs GmbH
GA 23. Objekt 1036 Beteiligungs GmbH
GA 24. Objekt 1037 Beteiligungs GmbH
GA 25. Objekt 1038 Beteiligungs GmbH
GA 26. Objekt 1039 Beteiligungs GmbH
GA 27. Objekt 1040 Beteiligungs GmbH
GA 28. Objekt 1042 Beteiligungs GmbH
GA 29. Objekt 1043 Beteiligungs GmbH
GA 32. Objekt 1046 Beteiligungs GmbH
GA 34. Objekt 1048 Beteiligungs GmbH
GA 35. Objekt 1049 Beteiligungs GmbH
GA Region Nord GmbH
GA Region Süd GmbH
GA Region Mitte GmbH
GA Fixtures and Facility Management
PortfolioCo II GmbH
DO PortfolioCo III GmbH
DO Objekt 3001 Stuttgart GmbH
DO Fixtures and Facility Management
PortfolioCo III GmbH
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Cologne
Equity interest
in % Held by No.
Business activity
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
90.9
25
25
25
25
25
25
25
24
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
37
24
67
67
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Intermediate holding
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Own property
Intermediate holding
Own property
Own property
1) Terminated as a result of a step-up merger to limited partner in 2016.
2) Established in December 2016.
3) Terminated as a result of a step-up merger in 2016.
4) Disposal in 2016.
62
alstria Annual Report 2016
Consolidated Financial Statements
Alongside alstria office REIT-AG, the consolidation embraced companies in which the Company
directly or indirectly held the majority of voting rights. The consolidated group at balance-sheet date
consisted of the Company, 22 domestic subsidiaries, and 40 domestic second-tier subsidiaries. Two
subsidiaries (limited partner companies) were established in the 2016 business year. Five subsidiaries
were terminated as a result of a step-up merger, and one subsidiary was sold.
The reporting date for the consolidated financial statements is the same as the reporting date for the
Company and consolidated subsidiaries.
In the period under review, a real estate company was deconsolidated. The following tables show the
effects of these changes on the Group:
Consideration received
EUR k
Deferred sales proceeds
Consideration received in cash and cash equivalents
Total consideration received
Assets and liabilities over which control was lost
EUR k
Cash and cash equivalents
Investment property
Receivables and other assets
Liabilities
Prepaiments received
Net assets disposed of
Gain on disposal of a subsidiary
EUR k
Consideration received
Net assets disposed of
Gain on disposal
The gain on disposal was included in the income statement as a “gain on disposal of
investment property.”
Net cash inflow on disposal of a subsidiary
EUR k
Consideration received in cash and cash equivalents
Less cash and cash equivalents balances disposed of
Net assets disposed of
2016
228,357
228,357
228,357
2016
1,769
209,300
209
−188
−1,469
209,621
2016
228,357
209,621
18,736
2016
228,357
−1,769
226,588
alstria Annual Report 2016
63
Consolidated Financial Statements
There have been no further changes to the consolidated Group in the 2016 financial year in comparison
to the consolidated financial statements as of December 31, 2015. All Group companies are property-
management, holding, or general partner companies.
2.2.3 Interests in joint ventures and noncontrolling interests
The Group holds interests in two joint ventures that had a carrying amount of EUR 29,401 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
Principal
activity
Hold and manage
of real estate
Alte Post General Partner GmbH i.L. n/a
Oststeinbek, Germany
Hamburg, Germany
49.0
49.0
49.0
49.0
Proportion of ownership,
interest and voting rights
held by the Group
Place of incorporation
and business
Dec. 31, 2016
(%)
Dec. 31, 2015
(%)
The abovementioned joint ventures were accounted for by applying the equity method in these con-
solidated financial statements.
The following table provides the aggregated information of joint ventures that are not individual
material:
EUR k
The Group’s share of profit (loss) from continuing operations
The Group’s share of total comprehensive income
2016
5,500
5,500
2015
1,988
1,988
EUR k
Aggregate carrying amount of the Group’s interests in these
joint ventures
Dec. 31, 2016
Dec. 31, 2015
29,401
23,900
There were no unrecognized shares of losses of a joint venture or any significant restrictions as to the
ability of joint ventures to transfer cash funds to the Group.
Furthermore, alstria holds a noncontrolling interest in an affiliate in an amount of EUR 980 k. The
company was acquired in the 2016 business year and is considered immaterial. Its business is the
investment in innovative real estate technology concepts. The company recorded a loss of EUR 20 k
in the reporting period.
64
alstria Annual Report 2016
Consolidated Financial Statements
2.3
Key judgments and estimates
To a certain degree, estimates, assessments, and assumptions must 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 that such
estimates, assessments, and assumptions affect are described hereafter. Actual amounts may differ
from the estimates. Changes in the estimates, assessments, and assumptions can have a material
impact on the consolidated financial statements.
2.3.1 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
recognized in the financial statements:
Operating lease commitments—Group as lessor. The Group has entered into commercial property
leases in its investment-property portfolio. Based on an evaluation of the terms and conditions of the
arrangements, the Group has determined that all significant risks and rewards of ownership of these
properties remain with the Group. As a result, the contracts are treated and accounted for as oper-
ating leases.
2.3.2 Estimates and assumptions
Significant key sources of estimation uncertainty and key assumptions concerning the future as of the
balance-sheet date relate to the following balance-sheet items. 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 (see section 6.1),
determine the fair value of derivative financial instruments, including the embedded derivative
(see section 6.6),
determine the fair value of virtual shares granted to management (see section 13.1),
determine the fair value of limited partnership capital of noncontrolling interests (see section
7.2),
determine the fair value of other provisions (see section 7.4), and
determine the fair value of convertible profit participation certificates (see section 13.2).
alstria Annual Report 2016
65
Consolidated Financial Statements
At the end of the 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
Dec. 31, 2016
Dec. 31, 2015
Investment property and properties held for sale excluding
prepayments made
Positive fair values of derivatives
Negative fair values of derivatives
Limited partnership capital of noncontrolling interests
Other provisions
Valuation of convertible profit
participation rights and virtual shares
3,013,799
3,289,705
114
20,099
71,424
3,570
−2,069
8,462
23,208
0
5,014
−3,428
2.4
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 in-
vestment property, at their fair value at each reporting date.
The fair value of an asset or liability is determined based on the assumptions that market participants
would use in pricing the asset or liability, regardless of whether that price is directly observable or
estimated by applying another valuation technique. In estimating fair value, it is assumed that the
transaction during which the disposal of the asset or the transfer of the liability occurs takes place
either
in the principal market for the asset or liability or
in the most advantageous market for the asset or the liability if no principal market exists.
The Group must have access to the principal market or the most advantageous market.
Fair value for measurement and/or disclosure purposes in these consolidated financial statements is
determined on such a basis. Hereby excluded are the following:
share-based payment transactions that 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
realizable value in IAS 2 “Inventories” or value in IAS 36 “Impairment of assets.”
Fair value is not always available as a market price. It often must be determined based on various
valuation parameters. In addition, for financial-reporting purposes, fair value measurements are
66
alstria Annual Report 2016
Consolidated Financial Statements
categorized as Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements
are observable and the significance of the inputs to the fair value measurement in its entirety, which
are described as follows:
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.
Investment property
Investment properties are properties held to earn rental income and/or for capital appreciation
(including property under construction for such purposes). They are not used in production or for
administrative purposes. This includes properties that are in production and are intended to serve the
aforementioned purposes. Investment properties are measured initially at cost at the time of purchase
or construction, including transaction costs. 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 capitalized 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 Levels 2 and 3 are appli-
cable for property. The majority is categorized as Level 3. Inputs used in the valuation approach the
Group has adopted for all of its properties include rental revenues, adjusted yield figures (e.g., prop-
erty-based capitalization rates), and vacancy periods. These inputs can hardly be observed in markets,
and they are considered 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 invest-
ment property is presented in Note 6.1.
Gains and losses arising from changes in the fair value of investment properties are included in profit
or loss in the period in which they arise.
alstria Annual Report 2016
67
Consolidated Financial Statements
An investment property derecognized upon disposal or when the investment property is permanently
withdrawn from use and future economic benefits are expected from the disposal. Any gain or loss
arising upon derecognition of the property (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the
property is derecognized.
Investment properties are transferred to property, plants, and equipment when there is a change in
use evidenced by the commencement of owner occupation. The properties’ deemed cost for
subsequent accounting corresponds to the fair value at the date of reclassification.
Valuation process for investment properties
The fair value hierarchy does not make any statements concerning the applied valuation techniques.
The basis for deriving fair value 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 are 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, fair value was 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. No fundamental change to the valuation method has occurred during the year.
External real estate experts conducted the valuation of investment property at fair value on Decem-
ber 31, 2016 — as of last year — according to internationally accepted valuation methods in accord-
ance with IFRS using the “hardcore-and-top-slice” method. The fair value measurement was per-
formed by accredited, external, and independent experts (CBRE GmbH, Frankfurt am Main, Germany,
and Colliers International UK Plc., London). The fair value of the investment properties held by alstria
office Prime were determined using a different valuation method in the previous year. A DCF-based
evaluation method was used. The change in the valuation method did not have any impact on the
consolidated financial statements because both methods lead to the same valuation result.
Description of the hardcore-and-top-slice method
According to the hardcore-and-top-slice method, rental income is horizontally segmented. The
hardcore portion represents the prevailing contractual rent. The top slice represents the difference
between market and contractual rent. This method fulfills the requirements of the Red Book, a set
of international valuation standards the Royal Institution of Chartered Surveyors set forth. In addition,
the method used by the independent experts is also appropriate and suitable for determining market
values in accordance with the provisions of the International Valuation Standards (IVS, or the White
Book).
68
alstria Annual Report 2016
Consolidated Financial Statements
To derive the fair value, the properties, which the independent experts evaluated, were divided into
two groups and valued accordingly. Group 1 contained properties with anchor lease terms of five
years or fewer, 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 fewer: hardcore-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,
the necessary maintenance costs to re-let the properties at a comparable rent level,
re-lets at market rents,
capitalization rates reflecting the individual risk of the property and market activity (compa-
rable transactions),
non-allocable operating costs of an amount of 5% of market rents per annum, and
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: hardcore-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 and contractual rent),
capitalization rates reflecting the individual risk of the property and market activity (compa-
rable transactions),
non-allocable operating costs in the amount of 5% of market rents per annum, and
the net selling price.
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 prop-
erties are shown in Note 6.1.
The valuation method described also applies to investment properties in which development projects
are realized.
Gains or losses arising from changes in the fair values of investment property are disclosed in the
income statement under the item “Net gain/loss from fair value adjustments on investment property”
in the year in which they arise.
Investment properties are derecognized when they have been disposed of or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its
alstria Annual Report 2016
69
Consolidated Financial Statements
disposal. Any gains or losses on the retirement or disposal of an investment property are recognized
in the income statement in the year of retirement or disposal.
Assets held for sale
Non-current assets intended for disposal under an asset deal are reported separately as being held
for sale in the consolidated financial statements if the formally required resolution of the Board —
and, when above a certain level of transaction volume, the Supervisory Board — for the sale of a
property is met while the consolidated financial statements are being prepared. If the disposal is to
take the form of a share deal, noncurrent assets and other assets and liabilities held for sale are
reported separately on the consolidated balance sheet.
Assets held for sale are measured at fair value on the date of reclassification and each subsequent
reporting date. Gains or losses from measuring individual assets held for sale, and disposal groups are
reported under gain or loss on disposal of investment property until they have been sold.
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 recognized 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 interest and amortizing portions.
Operating leases
Lease agreements that alstria has entered into with commercial tenants are classified as operating
leases under IFRS. Accordingly, alstria acts as a lessor in many different types of operating lease
agreements for investment properties. All of the Group’s leases are classified as operating leases, as
all significant risks and rewards of the Group’s real estate remain at alstria. These leases generate
the majority of proceeds and income for alstria. Furthermore, to a limited extent, alstria is the lessee
within the scope of operating lease agreements.
Revenue and expense recognition
Revenues and other operating expenses are basically recognized when it is probable that the economic
benefits will flow to the Group and only when the amount becomes reliably measurable.
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 recognized.
70
alstria Annual Report 2016
Consolidated Financial Statements
Rental income from operating leases on investment properties is recognized on a straight-line basis
over the terms of the relevant lease, regardless of the payment date. 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 recognized using the effective interest method.
Income taxes
Current and deferred tax are recognized in profit or loss, except when they relate to items recognized
in other comprehensive incomes or directly in equity, in which case, the current and deferred tax are
also recognized in other comprehensive income or directly in equity, respectively.
As a REIT-AG, the parent company, alstria office REIT-AG, is exempt from corporation and trade taxes.
Current tax assets and liabilities for the current and prior periods are shown as the amount expected
to be recovered from or paid to the tax authorities. The determination of the amount is based on the
tax rates and tax laws applicable on the reporting date or soon after to take effect.
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.
Impairments of assets
Assets are tested for impairment when 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 but not above the maximum value that would have resulted if normal
amortization had been charged.
Property, plants and equipment
Property, plants, and equipment are stated at cost less the accumulated depreciation and
accumulated impairment losses. Such costs include replacement costs as part of the plant and
equipment when that cost is incurred if the recognition criteria are met. All other repair and
maintenance costs are recognized in profit or loss as incurred.
The depreciation of plant and equipment is calculated on a straight-line basis over the useful life of
the asset (three to 22 years). The useful life of owner-occupied property is estimated at 33 to 50
years. While the building is depreciated on a scheduled basis, the land is not subject to depreciation.
alstria Annual Report 2016
71
Consolidated Financial Statements
Intangible assets
The Group amortizes intangible assets with finite useful lives on a straight-line basis over their
respective estimated useful lives. Estimated useful lives for patents, licenses and other similar rights
generally range from three to five years. Currently, the Company does not have intangible assets with
indefinite useful lives.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity. alstria does not use the option to designate financial
assets or financial liabilities at fair value through profit or loss at inception (fair value option). Based
on their nature, financial instruments are classified as the following:
held-to-maturity,
financial assets and financial liabilities measured at cost or amortized cost,
financial assets and financial liabilities measured at fair value, and
receivables from finance leases.
Regular purchases or sales of financial assets are accounted for at the trade date. Initially, financial
instruments are recognized at their fair value. Transaction costs are only included in determining the
carrying amount if the financial instruments are not measured at fair value through profit or loss.
Receivables from finance leases are recognized at an amount equal to the net investment in the lease.
Subsequently, financial assets and liabilities are measured according to the category to which they
are assigned the following:
cash and cash equivalents,
available-for-sale financial assets,
loans and receivables,
financial liabilities measured at amortized cost, or
financial assets and liabilities classified as held for trading.
Cash and cash equivalents
The Company considers all highly liquid investments with less than three months’ maturity from the
date of acquisition to be cash equivalents.
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 matur-
ities of three months or fewer, and bank overdrafts.
Cash and cash equivalents are measured at cost.
72
alstria Annual Report 2016
Consolidated Financial Statements
Available-for-sale financial assets
Investments in equity instruments, debt instruments and fund shares are measured at fair value, if
reliably measurable. Unrealized gains and losses, net of applicable deferred income tax expenses, are
recognized in line item other comprehensive income net of income taxes. Provided that fair value
cannot be reliably determined, alstria measures available-for-sale financial assets at cost. During the
last two reporting periods and to the date of this note, alstria did not use any available-for-sale
financial assets.
Loans and receivables
Financial assets classified as loans and receivables are measured at amortized cost using the effective-
interest method less any impairment losses. The allowance for doubtful accounts involves significant
management judgment and review of individual receivables based on individual customer
creditworthiness, current economic trends and analysis of historical bad debts. Allowances on a
portfolio basis are not made.
Financial liabilities
alstria measures financial liabilities, except for derivative financial instruments, at amortized cost
using the effective-interest method.
Derivative financial instruments
Derivative financial instruments, such as interest rate swap contracts are measured at fair value and
classified as being held for trading unless they are designated as hedging instruments, for which hedge
accounting is applied. Changes in the fair value of derivative financial instruments are recognized
either in net income or, in the case of a cash flow hedge, in line item other comprehensive income,
net of income taxes (applicable deferred income tax). Certain derivative instruments embedded in
host contracts are also accounted for separately as derivatives.
Cash flow hedges
The effective portion of changes in the fair value of derivative instruments designated as cash flow
hedges are recognized in line item other comprehensive income, net of income taxes (applicable
deferred income tax), and any ineffective portion is recognized immediately in net income. Amounts
accumulated in equity are reclassified into net income during the same periods in which the hedged
item affects net income.
Other Hedges
The Group neither uses any financial derivatives that qualify for the hedging of the fair value of
recognized 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).
alstria Annual Report 2016
73
Consolidated Financial Statements
Provisions
Provisions are recognized when a present obligation to third parties exists as a result of a past event,
a future outflow of resources is probable, and 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 not current, they are discounted. Provisions are not offset
with reimbursements.
A debt resulting from the termination of employment (severance) is recognized when the Group may
not withdraw the offering of such services or, if earlier, the Group has recorded costs related to
restructuring.
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 using a modified Black-Scholes option-pricing
model at the grant date. It measures the total personnel expense, which is to be recognized in profit
and loss for the service period and which, in turn, increases equity (paid-in capital) by the same
amount. Equity settled awards are granted to the Group’s employees in the form of convertible profit
participation certificates, the fair value of which was estimated at the respective granting dates by
applying a binary barrier-option model based on the Black-Scholes model; assumptions included an
automatic conversion once the barrier was reached. The model took the terms and conditions upon
which the instruments were granted into account. This valuation required the Company to make
estimates concerning these parameters, which are therefore subject to uncertainty.
Until settlement liability awards are measured at fair value on each balance-sheet date, they are
classified as provisions. The expense of the period comprises the addition to and reversal of the
provision between two reporting dates and the dividend equivalent paid during the period.
Cash-settled liability awards relate to virtual shares granted to the management board. The virtual
shares are measured at each balance-sheet date and are accounted for as provisions. The proportional
expense incurred in the period comprises the addition to and 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 share-based incentive plan. The resulting personnel expenses incurred an addition to
provisions of EUR 1,001 k (December 31, 2015: EUR 2,616 k) and a provision of EUR 2,890 k, as
reported in the consolidated financial statements as of December 31, 2016 (December 31, 2015:
EUR 3,470 k).
Further details on the share-based payment schemes are given in Note 13 and the remuneration
report, respectively.
74
alstria Annual Report 2016
Consolidated Financial Statements
3. SEASONAL OR ECONOMIC EFFECTS ON BUSINESS
The business activities of alstria office REIT-AG (primarily, the generation of revenues from invest-
ment 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 interest rates might lead to a modified valuation of the
investment property and derivatives.
4. 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 that
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, who is responsible for allocating resources to the operating segments
of an entity and assessing their performance. The Group’s chief operating decision maker is the
management board.
A larger number of tenants generate revenues. Total revenues amount to EUR 202,663 k (2015:
EUR 115,337 k), of which EUR 26,192 k (2015: EUR 28,387 k) and EUR 23,098 k (2015: EUR 15,656 k)
relate to leases to the Group’s two largest customers. No other single customer has either in the 2015
or 2016 financial year contributed 10% or more to the consolidated revenues.
5. NOTES TO THE CONSOLIDATED INCOME STATEMENT
5.1
Revenues
EUR k
Revenues from investment properties
2016
202,663
2015
115,337
Revenues from investment properties are mainly comprised of rental income from investment
properties. The rental income includes effects totaling EUR 1,175 k (2015: EUR 423 k) are attributable
to rent-free periods.
If the business combination had taken place by January 1, 2015, the rental income from investment
properties would have amounted to EUR 203,863 k.
Rental income from property leases contains variable rental income amounting to EUR 5,014 k
(2015: 844 k). These are rental agreements in which the rental payments are linked to the operating
results of the tenants.
alstria Annual Report 2016
75
Consolidated Financial Statements
5.2
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
2016
36,349
1,799
38,148
−36,349
−2,003
−38,352
−204
2015
18,652
564
19,216
−18,710
−929
−19,639
−423
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.
5.3
Real estate operating expenses
EUR k
Maintenance and refurbishment
Vacancy costs
Ongoing repairs
Rent expenses
Facility management costs
Legal and advisory fees
Insurance expenses
Electricity costs
Property management
Taxes on land and buildings
Nondeductable VAT
Other expenses
2016
8,056
7,950
4,357
549
419
385
308
224
151
127
97
822
2015
4,796
4,689
1,605
0
0
450
168
0
543
101
0
422
23,445
12,774
76
alstria Annual Report 2016
Consolidated Financial Statements
5.4 Administrative expenses
EUR k
Legal and consulting fees
Communication and marketing
Depreciation
Audit fee (audit and audit-related services)
Travel expenses
IT maintenance
Supervisory Board compensation
Recruitment
Leasing costs
Insurances
Office area costs
Contributions
Training & workshops
Donations
Other
5.5
Personnel expenses
EUR k
Salaries and wages
Social insurance contribution
Bonuses
Severance expenses
Expenses for share-based compensation
thereof relating to virtual shares
thereof relating to the convertible profit
participation certificates
Amounts for retirement provisions and disability
Management Board
Other
2016
2,425
734
678
634
487
375
347
300
264
259
232
126
122
76
1,405
8.464
2016
6,717
1,088
2,346
0
2,069
2015
2,514
465
426
568
446
195
353
161
214
160
170
87
76
78
470
6,383
2015
4,826
730
1,679
1,200
3,428
1,001
1,068
2,616
812
144
319
12,683
203
2
12,068
The increase in salaries and wages, social insurance contribution, and bonuses is the result of the full-
year inclusion of alstria office Prime in the consolidated financial statements. Share-based payments
and severance costs were lower than in the previous year. Regarding balance, this resulted in a slight
increase in personnel expenses.
The severance expenses in the 2015 business year resulted from the socially acceptable termination of
employment relationships in the course of the integration of alstria office Prime.
Convertible profit participation rights granted to employees do not only grant the right to a conversion
when the conditions apply but to an annual payment equivalent to the dividend amount paid out per
alstria Annual Report 2016
77
Consolidated Financial Statements
share. Therefore, expenses for share-based compensation resulting from the convertible profit
participation rights must be accounted for in equity (for the conversion right) and in liabilities (for the
dividend entitlement). Of the total expenses related to the profit participation rights — which
amounted to EUR 1,068 k — EUR 949 k were recognized in equity (2015: EUR 752 k), while EUR 119 k
were recorded as an item in liabilities (2015: EUR 60 k).
The employer’s contribution to statutory pension insurance, included in wages and salaries, amount
to EUR 559 k for the 2016 financial year.
On average, the Group employed 105 employees in 2016 (2015: 72).
5.6 Other operating income
EUR k
Compensation payments and other recharges
Income from the reversal of accrued liabilities
Income from the reversal of provisions
in relation to rental guarantees
Refunded property tax from previous years
Property management services
Payments on provisions on doubtful debts
Compensation for damages
Other
2016
2,001
1,432
931
345
165
43
0
500
2015
1,026
1,107
882
0
144
0
120
764
5,417
4,043
Compensation payments and other charges result from early termination of leases and refurbishment
activities conducted by alstria. The latter refers to refurbishments the tenants had originally
committed themselves to upon entering into the leasing contracts.
An explanation for the reversal of provisions for rental guarantees can be found
in
Note 7.4.
5.7 Other operating expenses and goodwill impairment
Other operating expenses
EUR k
Property disposal costs
Transaction costs alstria office Prime takeover
Impairment of operating costs receivables
Impairment on trade receivables
Rating expenses
Legal and advisory fees
Land tax
Remaining other operating expenses
2016
4,771
4,337
2,214
176
0
0
0
2,947
14,445
2015
0
9,765
1,253
363
975
300
292
911
13,859
78
alstria Annual Report 2016
Consolidated Financial Statements
Other operating expenses are at the previous year’s level. Though the consequential costs resulting
from the takeover of the Prime Portfolio declined significantly, there was a considerable amount of
additional costs resulting from the high volume of property disposals. In the previous year, property
disposal costs of EUR 689 k were shown under other administrative expenses. Because the costs of
disposal are not allocated to the Group’s general organizational expenses, they were reclassified from
other administrative expenses to other operating expenses starting in the 2016 financial year.
The transaction costs of the takeover in the reporting period are essentially expenses for legal advice
and confirmation services for the conversion implementation of the acquired companies’ legal form.
Impairment on operating costs receivables relate to property operating costs for the years 2014 and
2015, which were chargeable to the tenant and, finally, could not be collected.
Under rating expenses in 2015, the onetime costs of obtaining a credit classification (issuer rating) of
the Company were recorded.
The remaining other operating expenses include EUR 2.5 m donations made in the year under review
for the promotion of charitable purposes.
Impairment on trade mainly relates to tenants subject to insolvency or eviction proceedings. The item
also includes valuation allowances related to disputed invoicing of ancillary costs.
Goodwill impairment
The amortization of goodwill in the previous year amounting to EUR 144,795 k relates to goodwill
from the business combination with alstria office Prime (formerly Deutsche Office) in 2015.
5.8 Net result on the disposal of investment property
EUR k
Proceeds from the disposal of investment property
Carrying amount of investment property disposed
2016
459,213
−433,749
25,464
2015
159,350
−146,695
12,655
The total loss from the disposal of objects and portfolios sold below their carrying value amounted to
EUR 7,952 k in 2016 and EUR 846 k in 2015.
alstria Annual Report 2016
79
Consolidated Financial Statements
5.9
Financial and valuation result
The financial result breaks down as follows:
EUR k
Income from financial instruments
Interest expenses, corporate bond
Interest expenses, loan Deutsche Office Portfolio
Interest expenses, syndicated loan alstria
Interest expenses, convertible bond
Interest expenses, other loans
Interest result “Schuldschein”
Interest result derivatives
Other interest expenses
Financial expenses
Fees and effective interest costs for repayment of loans before maturity
Bank charges
Agency fees
Other
Other financial expenses
Net financial result
2016
535
−20,496
−6,728
−6,723
−5,116
−4,074
−2,036
−207
0
−45,380
−5,111
−161
−134
−543
−5,949
−50,794
2015
128
−1,241
−3,969
−8,531
−4,623
−9,013
0
−6,650
−3
−34,030
−9,162
0
−268
−1
−9,431
−43,333
The total interest income and expenses for financial assets and liabilities other than financial deriv-
atives amounted to an interest income of EUR 535 k (2015: EUR 128 k) and EUR 44,154 k of interest
expenses (2015: EUR 27,380 k), respectively.
The total interest expenses calculated by applying the effective interest method for financial liabili-
ties (i.e., not recognized at fair value through profit or loss) amounted to EUR 4,210 k (interest ex-
penses, 2015: EUR 3,113 k).
The prepayment penalty is due to the termination of loans before the normal end of the term.
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.
Fair value adjustments on financial derivatives resulted in a net loss:
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
2016
−270
−4,971
−2,860
2015
−3,269
−66
−3,428
−8,101
−6,763
80
alstria Annual Report 2016
Consolidated Financial Statements
In 2016, a loss amounting to EUR 270 k related to cumulative losses from fair value adjustments of
cash-flow hedge derivatives, which were recorded in equity. The adjustments resulted from the fact
that the originally hedged transactions are no longer expected to occur.
Further details and explanations on derivatives are presented in Note 6.6.
5.10
Income tax expenses
On January 1, 2007, alstria office REIT-AG obtained G-REIT status. 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.
With the acquisition of the alstria office Prime, however, companies were included in the consolidated
financial circle that are not subject to the REIT exemption. This resulted in expenses for income
taxation at the level of the alstria office Prime Subgroup.
The sources of income tax expenses can be broken down as follows:
EUR k
Current tax expenses
Deferred tax result
From temporary differences
Tax result
2016
−11,450
132
−11,318
2015
−804
−8
−812
At the beginning of the financial year, alstria office Prime and its group companies had the legal form
of a corporation. The determination of the tax expense is based on the assumption that the legal form
of the companies were converted from corporations to partnerships with a tax effect within the 2016
financial year. As a result, the alstria office Prime Group has been included in a tax-exempt REIT
structure with the effect that all hidden reserves and liabilities contained in the assets and liabilities
have to be realized. Taxation of hidden reserves and liabilities resulted in current tax expenses of
EUR 7,193 k.
alstria Annual Report 2016
81
Consolidated Financial Statements
The reconciliation between theoretical income tax based on pretax earnings and reported income tax
is based on a taxation rate of 15.83% (15.0% as the rate of corporate income tax and 5.5% solidarity
surcharge):
EUR k
Loss before income taxes
Not considered due to REIT regime
Relevant loss before taxes
Average tax rate
Theoretical tax income (+)
Effect of unrecognized deferred tax assets on losses
carried forward in prior years
Loss of losses carried forward due to majority shareholder
Tax effects, prior periods
Other
Income tax income
2016
193,694
153,752
39,942
15.825%
−6,321
−4,881
0
−32
−84
−11,318
2015
−110,567
−103,808
−6,759
15.825%
1,070
−1,301
−1,215
571
63
−812
Due to the inclusion of alstria office Prime in the tax-exempt REIT structure, temporary differences
may not result in any future tax assets or tax liabilities. As a result, there are no deferred tax deferrals
to be formed as of December 31, 2016.
As of December 31, 2016, the alstria office Prime Subgroup has no corporate income tax losses carried
forward and business tax losses carried forward of EUR 13,717 k, for which no deferred tax assets
have been recognized.
82
alstria Annual Report 2016
Consolidated Financial Statements
6. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION –ASSETS
6.1
Investment property
This item, comprised of all investment properties held by the Company, breaks down as follows:
Fair values in EUR k
As of January 1
Additions due to business combination Deutsche Office
Property acquisition
Capital expenditure
Disposals
Transfers to held for sale
Transfers to property, plant, & equipment (own used property)
Transfers from property, plant, & equipment (own used property)
Net result from the adjustment of the fair value
of investment property
Subtotal
Prepayments made
As of December 31
2016
3,260,467
0
9,146
31,277
−360,500
−12,499
−1,920
322
72,806
2,999,099
-
2,999,099
2015
1,645,840
1,645,210
12,710
27,813
−53,575
−53,245
0
0
−4,192
3,220,561
39,906
3,260,467
In the 2016 financial year, thirteen properties were reclassified to assets held for sale. Two of the
properties are still included in the items held for sale at the end of the financial year. The transaction
volume of assets held for sale amounted to EUR 14,700 k.
Property disposals
Contract signed in 2015, transferred in 2016
Number of properties
3
Contract signed and transferred in 2016
Contract signed in 2016, transfer expected for
2016
11
2
16
Transaction amount
in EUR k
71,782
387,431
14,700
473,913
Capital expenditure (EUR 31,277 k) is comprised of subsequent acquisition and production costs
relating to property acquisitions and refurbishment projects.
Furthermore, the Group acquired one investment property for which the transfer of benefits and
burdens was completed in the reporting period. The transaction volume for the properties amounted
to EUR 9,146 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 2016 business year (see page 8).
Borrowing costs that would have had to be capitalized as construction costs were not incurred during
the reporting period (2015: EUR 0).
alstria Annual Report 2016
83
Consolidated Financial Statements
The alstria office REIT-AG applied 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 2.4.
The item on the income statement “net result from fair value adjustments on investment property”
of an amount of EUR 42,530 k is attributable to a change in unrealized losses.
As in the previous year, all real estate held as investment property measured at fair value are classi-
fied as level 3 in the valuation hierarchy.
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 categorized, in determining
the appropriate classes of investment property.
The Deutsche Office acquired in the context of the business combination as of end October 2015 uses
a DCF valuation method for property valuation, while alstria Subgroup makes use of the so-called
hardcore-and-top-slice method for real estate valuation. Both valuation techniques are generally
accepted methods for fair value determination. Both use unobservable input parameters. However,
the unobservable input parameters differ in part.
The representation of the range of the respective unobservable input parameter must therefore be
distinguished.
Valuation according to the “hardcore-and-top-slice” method for the investment properties of
alstria Subgroup
The following factors help 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.
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 distinction
is made between objects with a short, medium, and long WAULT.
As a result, three appropriate classes of investment properties have emerged:
Germany – Office – Level 3 – short WAULT (0–5 years),
Germany – Office – Level 3 – medium WAULT (> 5–10 years), and
Germany – Office – Level 3 – long WAULT (> 10 years).
84
alstria Annual Report 2016
Consolidated Financial Statements
Quantitative information about fair value measurements using unobservable inputs (alstria port-
folio) (level 3)
EUR k, unless stated otherwise
Portfolio
Fair Value at
Dec. 31, 2016
German offices
2,999,099
Number of properties:
Valuation tech-
nique
hardcore
and top slice
Unobservable
inputs
Range
Min. Max.
Weighted
average
Estimated rental value
(EUR/m2/mo.)
Adjusted yield
Void period of office
leases expiring within
the next 5 years months]
3.9
3.7%
19.6
8.7%
11.1
5.9%
3.0
30.0
9.4
106
0 ≤ WAULT ≤ 5 Years
German offices
Number of properties:
72
5 < WAULT ≤ 10 Years
German offices
1,880,109
hardcore and top
slice
Estimated rental value
(EUR/m2/mo.)
Adjusted yield
Void period of office
leases expiring within
the next 5 years months]
4.5
4.0%
19.6
8.7%
11.2
6.2%
3.0
30.0
12.4
802,759
hardcore and top
slice
Estimated rental value
(EUR/m2/mo.)
3.9
17.8
10.7
Number of properties:
Adjusted yield
4.0%
7.0%
5.4%
26
WAULT > 10 Years
German offices
Void period of office
leases expiring within
the next 5 years months]
3.0
18.0
3.3
316,231
hardcore and top
slice
Estimated rental value
(EUR/m2/mo.)
9.5
17.2
12.2
Number of properties:
Adjusted yield
3.7%
6.9%
4.5%
8
Void period of office
leases expiring within the
next 5 years [months]
3.0
18.0
1.3
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.
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 assessors have carried out sensitivity analyses on their fair value assessments, which
show the effect of changes in capitalization rates (adjusted yield) on fair market values.
alstria Annual Report 2016
85
Consolidated Financial Statements
Fair value of investment properties (EUR m)
Capitalization rates
Dec. 31, 2016
Dec. 31, 2015
–0.25 %
0.00 %
0.25 %
3,144
2,999
2,861
3,374
3,221
3,078
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 noncancelable leases have
remaining maturity of between one and 19 years. Most leases include an indexation clause allowing
rental charges to be raised annually according to prevailing market conditions.
Future minimum rental charges receivable as agreed on in noncancelable operating leases are as
follows:
EUR k
Within 1 year
After 1 year but not longer than 5 years
Longer than 5 years
Dec. 31, 2016
Dec. 31, 2015
187,897
449,649
333,474
971,020
210,785
519,953
393,134
1,123,872
Disclosures concerning expenses/income as recorded in the income statement pursuant to
IAS 40.75 (f) include:
> EUR 202,663 k (2015: EUR 115,337 k) rental income from investment properties;
> EUR 15,495 k (2015: EUR 8,086 k) operating expenses (including repairs and maintenance) directly
allocable to investment properties from which rental income was generated during the period under
review; and
> EUR 7,950 k (2015: EUR 4,689 k) operating expenses (including repairs and maintenance) arising
from investment properties that did not generate rental income during the period under review.
Investment properties, held-for-sale properties, and own used properties of an amount of
EUR 567,315 k (December 31, 2015: EUR 3,036,702 k) served as collateral for bank loans.
6.2
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 29,401 k (December 31, 2015:
EUR 23,900 k). In addition, alstria holds interests in an entity with a carrying amount of EUR 980 k.
For further information, please refer to Note 2.2.3.
86
alstria Annual Report 2016
Consolidated Financial Statements
6.3
Property, plant and equipment
EUR k
Acquisition and production cost
As of January 1, 2016
Transfer from investment property
Transfer to investment property
Additions
Disposals
As of December 31, 2016
Accumulated amortization, deprecia-
tion, and write-downs
As of January 1, 2016
Additions
Transfer to investment property
Disposals
As of December 31, 2016
Net book values as of
December 31, 2016
EUR k
Acquisition and production cost
As of January 1, 2015
Additions due to business combinations
Additions
Disposals
As of December 31, 2015
Accumulated amortization, deprecia-
tion, and write-downs
As of January 1, 2015
Additions
Disposals
As of December 31, 2015
Net book values as of
December 31, 2015
Plant
Furniture and
fixtures
Owner-occupied
property
Total 2016
853
0
0
30
0
883
613
21
0
−2
632
251
1,107
0
0
333
−150
1,290
632
145
0
−128
649
641
5,003
1,920
−322
56
0
6,657
557
153
−19
0
691
6,963
1,920
−322
419
−150
8,830
1,802
319
−19
−130
1,972
5,966
6,858
Plant
Furniture and fix-
tures
Owner-occupied
property
Total 2015
5,002
7,025
1,048
150
0
−345
853
933
25
−345
613
240
1,107
5,003
975
73
59
0
540
92
0
632
475
0
1
0
467
90
0
557
223
60
−345
6,963
1,940
207
−345
1,802
4,446
5,161
The useful life of the assets is estimated to be from 2 to 22 years for plant, furniture, and fixtures
and from 33.33 to 50 years for owner-occupied properties.
A plant is comprised of miscellaneous items, such as fire extinguishers and operational devices. The
furniture and fixtures include the devices used in the administrative offices.
The alstria office REIT-AG occupies areas for its own use in three of its office buildings in Hamburg,
Düsseldorf, and Frankfurt. Therefore, the owner-occupied areas of the properties are categorized as
“property, plant, and equipment,” according to IAS 16.
alstria Annual Report 2016
87
Consolidated Financial Statements
To secure Group liabilities, one of the properties is pledged via land charges. During the previous
year, two own used properties served as pledge for mortgage loans.
6.4
Intangible assets
EUR k
Licenses
Licenses
Goodwill
Total 2015
2016
2015
Acquisition and production cost
As of Jan. 1
2,363
1,883
Additions due to business combinations
Additions
As of Dec. 31
Accumulated amortization, depreciation,
and
write-downs
As of Jan. 1
Additions
As of Dec. 31
Net book values as of Dec. 31
0
80
400
80
0
144,795
0
1,883
145,195
80
2,443
2,363
144,795
147,158
1,757
357
2,114
329
1,539
218
1,756
607
0
144,795
1,539
145,013
144,795
146,552
0
607
The useful life of the intangible assets is estimated to be between three to five years.
The intangible assets consist of software licenses and licenses to other rights of an amount of
EUR 266 k and EUR 63 k, respectively.
The goodwill of EUR 144,795 k resulting from the alstria office Prime takeover was to be amortized
in the full amount in the 2015 business year.
6.5 Assets held for sale
The financial assets of EUR 34,803 k relate to long-term bank deposits with a maturity until the 2021
financial year.
88
alstria Annual Report 2016
Consolidated Financial Statements
6.6 Derivative financial instruments
The following derivative financial instruments were in place at the end of reporting period:
Product
Strike p.a.
Maturity date
Notional
Fair value
Notional
Fair value
Dec. 31, 2016
Dec. 31, 2015
Cap
Cap
Cap
Swap
Swap
Cap
Swap
Swap
Financial derivatives –
held for trading
Cap
Cap
Cap
Financial derivatives –
cash flow hedges
Total interest rate
derivatives
Embedded
derivative
Total
(%)
3.0000
0.2500
0.0000
0.1100
0.0000
1,2500
0.0000
0.0000
3.0000
3.0000
3.0000
(EUR k)
(EUR k)
Sep. 30, 2019
50,250
Dec. 31, 2017
340,000
Sep. 30, 2020
Dec. 18, 2020
Dec. 30, 2019
Sep. 30, 2018
Dec. 18, 2018
Sep. 30, 2018
Mar. 29, 2024
Apr. 30, 2021
Dec. 17, 2018
-
-
-
-
-
-
390,250
10,900
47,116
56,000
114,016
10
5
-
-
-
-
-
-
15
50
46
3
99
(EUR k)
50,250
340,000
380,870
172,156
53,155
174,370
155,944
117,000
(EUR k)
43
213
7,113
651
133
70
−180
−202
1,443,745
7,841
10,900
47,854
56,000
114,754
116
100
23
239
504,266
114
1,558,499
8,080
n/a
June 14, 2018
8,4081)
−20,099
8,2411)
−19,985
−22,826
−14,746
1) Underlying number of shares subject to conversion in thousands.
The notional amount of the financial derivatives effective at the end of the reporting period is
EUR 504,266 k (December 31, 2015: EUR 1,558,499 k). This includes cash flow hedges and derivatives
not qualifying for cash flow hedging.
Derivatives of a notional amount of EUR 390,250 k (December 31, 2015: EUR 1,443,745 k) are not
designated as a cash flow hedge.
On June 7, 2013, alstria issued a convertible bond for a total amount of EUR 79,400 k. After the
conversion of two units, the bond has a notional value of EUR 79,200 k as of December 31, 2016. Due
to the terms and conditions of the convertible bond, the conversion right has to be separately ac-
counted as an embedded derivative.
The value changes of the derivatives are reflected in various items in the balance sheet.
alstria Annual Report 2016
89
Consolidated Financial Statements
The following table shows the change in financial derivatives since December 31, 2015:
EUR k
Hedging instruments as of
January 1, 2016
Ineffective change in fair values cash
flow hedges
Net result from fair value changes in
financial derivatives not
qualifying for cash flow hedging
Reclassification of cumulated loss
from equity to income statement
Termination
Reclassification due to change of
maturity
Hedging instruments as of
December 31, 2016
Cash flow
hedge
reserve
Financial assets
Financial liabilities
Noncurrent
Current
Noncurrent
Total
−270
8,462
0
0
270
0
0
0
−4,971
−1,293
-
−2,084
−5
109
0
0
0
-
0
5
5
−23,208
−14,746
0
−4,971
−1,567
−2,860
-
4,676
0
-
2,592
0
−20,099
−19,985
A decrease in the fair values of derivatives effective in a cash flow hedge was not recognized in the
equity’s hedging reserve anymore in the 2016 business year. During the 2015 business year, a decrease
of EUR 444 k was still recorded.
The ineffective portion that arises from cash flow hedges amounted to a fair value loss of EUR 4,971 k
(2015: loss of EUR 65 k) and is recognized in profit or loss.
Further losses totaling EUR 2,860 k (2015: loss of EUR 3,428 k), which were due to the market value
of the derivatives not included in hedge accounting, were recorded in the 2016 income statement.
A loss of EUR 270 k (2015: loss of EUR 3,269 k) shown in the income statement relates to cumulative
losses reclassified from cash flow hedges for which the forecast transaction is no longer expected to
occur, as the respective loans were repaid prematurely.
Overall, this results in a total loss of EUR 8,101 k (2015: loss of EUR 6,763 k), which is presented as
the “net loss from fair value adjustments on financial derivatives.”
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alstria Annual Report 2016
Consolidated Financial Statements
6.7
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
Other receivables
Pending purchase prices from real estate sales
Accrued receivables for “Rent free periods”
Security deposits and other deposits granted
Creditors with debit balance
Prepayments made
Deposit account
VAT receivables
Receivables and other assets
Other receivables
Dec. 31, 2016
Dec. 31, 2015
7,257
29,005
8,318
1,673
688
492
313
38
1,051
41,578
12,578
0
7,143
20
100
266
629
506
1,119
9,783
A total of EUR 8,318 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 lease agreements (rental
smoothing).
The payment of the outstanding purchase price for sold properties in the amount of EUR 29,005 k was
made at the beginning of January 2017.
The fair value of all receivables is equal to their carrying amount.
Trade receivables were written down by EUR 196 k (December 31, 2015: EUR 753 k), due to rent
payments in arrears. Apart from trade receivables, no other receivables were impaired.
As of December 31, 2016, trade receivables of an amount of EUR 5,859 k (December 31, 2015:
EUR 3,719 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 aging analysis of these trade receivables is as follows:
EUR k
Trade receivables
Up to 3 months
From 3 to 6 months
More than 6 months
Dec. 31, 2016
Dec. 31, 2015
4,375
970
514
5,859
2,471
403
845
3,719
Receivables from rental agreements and property disposals, as well as insurance receivables and
derivative financial instruments, have been assigned to the lenders (Note 7.3) to secure the Group’s
mortgage-backed loans.
alstria Annual Report 2016
91
Consolidated Financial Statements
6.8
Cash and cash equivalents
EUR k
Bank balances
Dec. 31, 2016
Dec. 31, 2015
247,489
460,253
Current accounts held with banks attract variable interest rates for on-call balances. At the reporting
date, no cash amounts were subject to restrictions.
As of the balance sheet date, EUR 18,254 k accrued for interest payment liabilities exists, which will
be payable in the course of the next twelve months (December 31, 2015: EUR 7,242 k).
In addition, cash and cash equivalents include EUR 4,821 k in rent deposits received from tenants and
held in trust by the Group (December 31, 2015: EUR 4,154 k). These tenant deposits, recognized under
cash and cash equivalents, are offset by an item included under Other Liabilities.
6.9 Assets held for sale
The assets held for sale comprise two properties. The transfer of benefits and burdens is still pending
until the completion date of these consolidated financial statements. The sale of properties resulted
in disposal revenues of EUR 14,700 k.
The properties reported are not the properties shown in the previous year, which were sold as planned
in 2016.
EUR 2,200 k out of the income statement item “gain on disposal of investment property” relate to
the assets held for sale shown at the balance sheet date.
The valuation of assets held for sale is based on the contract prices and, therefore, included within
level 1 of the fair value hierarchy.
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Consolidated Financial Statements
7. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION –EQUITY AND LIABILITIES
7.1
Equity
For detailed information on equity, please refer to the consolidated statement of changes in consol-
idated equity.
Share Capital
Please refer to the consolidated statement of changes in equity for details.
Thousand
Ordinary shares of EUR 1 each
Dec. 31, 2016
Dec. 31, 2015
153,231
152,164
The conversion of profit participation rights (Note 13.2) in the second quarter of 2016 resulted in the
issuance of 102,750 new shares by making use of the conditionally increased capital provided for such
purposes. The share capital increased by EUR 102,750.
In the course of the previous year’s acquisition of Deutsche Office, the former majority shareholder
of Deutsche Office was granted an option for later conversion of shares. In exercising this option,
alstria office REIT-AG acquired additional shares of Deutsche Office. In return for each share of
Deutsche Office, 0.381 new shares of alstria office REIT-AG were granted. The exchange ratio is equal
to the exchange ratio of the 2015 tender offer.
To create the new shares of alstria office REIT-AG, the Company made a capital increase in the
amount of EUR 964,182 by partially making use of authorized capital and by excluding the sharehold-
ers’ subscription rights.
In total, due to the capital measures stated above, alstria office REIT-AG’s share capital increased to
EUR 153,231,217 (EUR 1,066,932 higher than on December 31, 2015). As of June 30, 2016, it is repre-
sented by 153,231,217 no-par value bearer shares.
The majority of the Company’s shares are in free float.
The following table shows the reconciliation of the number in shares outstanding:
Number of shares
Shares outstanding on Jan. 1
Issue of new shares against contribution in cash
Conversion of convertible bond
Conversion of convertible participation rights
Issue of new shares against contribution in kind for takeover
of alstria office Prime KG (former Deutsche Office AG)
As of Dec. 31
2016
152,164,285
0
0
102,750
964,182
153,231,217
2015
79,018,487
7,901,847
20,382
156,000
65,067,569
152,164,285
alstria Annual Report 2016
93
Consolidated Financial Statements
Capital reserve
The capital reserve changed as follows during the financial year:
EUR k
As of Jan. 1
Issue of new shares against cash
Transaction costs of issue of shares against cash
Payment of dividends
Conversion of convertible bond
Share-based remuneration
Conversion of convertible participation rights
Issue of new shares against contribution in kind for takeover of
alstria office Prime KG (former Deutsche Office AG)
Transaction costs of issue of shares against contribution in kind
As of Dec. 31
2016
1,499,477
0
0
−76,564
0
949
103
10,847
0
1,434,812
2015
691,693
94,822
−1,338
−43,470
243
752
156
757,616
−997
1,499,477
The exchange in shares described above was made based on alstria’s stock exchange share price of
EUR 12.25 per share. Consequently, the 964,182 newly created alstria shares led to proceeds of
EUR 11,811 k. These proceeds exceeded the nominal share capital by EUR 10,847 k and were recog-
nized in the capital reserves.
The share premium resulting from the conversion of 102,750 profit participation rights resulted in an
increase in capital reserves of EUR 103 k.
Hedging reserve
EUR k
Hedging reserve
Dec. 31, 2016
Dec. 31, 2015
0
–270
This reserve relates to the accumulated portion of the gain or loss on hedging instruments within the
cash flow hedge (which has been determined to be an effective hedge). The net change of EUR 270 k
relates to reclassifications of the cumulated devaluations for the cash flow hedges; the forecasted
and hedged transactions are no longer expected to occur due to the redemption of loans prior to their
maturity. At the balance sheet date, the Group has no further derivative financial instruments (that
are designated in an effective hedging relationship and that have an effective change in value), and
the amount of the reserve at the end of the reporting period is EUR 0.
Treasury shares
As of December 31, 2016, the Company held no treasury shares.
By resolution of the Annual General Meeting held on May 12, 2016, the Company’s authorization to
acquire treasury shares was renewed. The resolution authorized alstria office REIT-AG to acquire up
to 10% of the capital stock until May 11, 2021. There is no intention to make use of this authorization
at present.
94
alstria Annual Report 2016
Consolidated Financial Statements
Retained earnings
Retained earnings as of December 31, 2016, totaled an amount of EUR 140,395 k (December 31, 2016:
loss carried forward of EUR 31,994 k). alstria office REIT-AG’s standalone positive retained earnings
could not generate the payment of the dividend, according to German GAAP [HGB] at the dividend’s
due date. This is why the amount of the dividend payouts was released from the capital reserve in
2016.
Authorized capital
On the occasion of the alstria office Prime KG acquisition in the fourth quarter of the 2015 business
year (at that time named ‘Deutsche Office AG’), authorized capital in the amount of EUR 2,750 k was
used of the authorized capital of EUR 39,509 k approved by the Annual General Meeting in May 2015
(2015 authorized capital). In the 2016 business year, another EUR 964 k of the 2015 authorized capital
was used for the takeover of shares in Deutsche Office AG. Thus, an amount of EUR 35,759 k remains
per December 31, 2016. The approval of 2016 authorized capital enables a capital increase of
EUR 76,082 k. The authorization expires on May 11, 2018.
Conditional capital
The share capital is conditionally increased to grant option and conversion rights, as well as to redeem
option and conversion obligations. As of December 31, 2015, alstria’s conditional capital amounted
to EUR 38,798 k. It was divided into conditional capital 2013 (EUR 37,980 k), conditional capital III
2012 (EUR 318 k), and conditional capital III 2015 (500 k), respectively. In the reporting period, con-
ditional capital III 2012 was used in an amount of EUR 103 k. As of December 31, 2016, the Company’s
conditional capital amounted to a total of EUR 38,695 k.
7.2 Noncontrolling interests of limited partners
The change in legal form of the alstria office Prime from a stock corporation [AG] into a private
limited partnership [KG] with effect from December 9, 2016, meant the share capital changed into
limited partnership capital. Limited shareholders became limited partners. Whereas equity capital of
minority shareholders in the consolidated balance sheet is shown under “noncontrolling interest” as
a component of equity, this, according to IFRS, does not apply to the contributions of limited partners.
Though they are equity under German commercial law, they are to be reported as liabilities in the
consolidated financial statements according to IFRS. As a result, the noncontrolling interests were to
be reclassified into long-term or short-term liabilities, depending on the term.
The value of the first-time recognition under liabilities was at the fair value at the time the resolution
was adopted by the Annual General Meeting of Deutsche Office AG. The resulting difference in the
value of the noncontrolling interests was recorded in retained earnings without effect on income
statements. A reconciliation is shown in the consolidated statement of changes in equity on page 54.
alstria Annual Report 2016
95
Consolidated Financial Statements
At the end of the reporting period, there was an increase in the value of the noncontrolling interests
of EUR 271 k. From the Group’s point of view, this means an increase in liabilities amounting to
EUR 239 k as other operating expenses and in the amount of TEUR 32 k as other interest expenses. As
of the balance sheet date, the fair value of this financial liability approximates its carrying amount.
7.3
Financial liabilities
EUR k
Loans
Syndicated loan alstria
Mortgage loans
Schuldschein
Convertible bond
Total
EUR k
Loans
Syndicated loan alstria
Loan Prime Office portfolio
Loan Herkules portfolio
Loan Homer portfolio
Other loans
Corporate bond
Convertible bond
Total
Noncurrent
Current
Total
Loan
0
1,075
0
0
Accrued
interest
Total
current
Dec. 31,
2016
16,408
16,408
1,007,130
12
1,738
97
1,087
252,840
1,738
151,206
97
74,675
990,722
251,753
149,468
74,578
1,466,521
1,075
18,255
19,330
1,485,851
Noncurrent
Current
Total
Accrued
interest
Total
current Dec. 31, 2015
Loan
27,401
2,937
440,217
127,574
20
0
27,421
2,937
0
330,472
5,154
335,626
328,330
252,451
495,378
71,640
7,052
1,298
0
0
1,715,590
369.160
595
208
1,168
97
7.242
7,647
1,507
1,168
97
376,402
2,091,992
467,638
130,511
335,626
335,977
253,957
496,546
71,737
The table presents the long-term loans and the net of the current portion as stated under noncurrent
liabilities. Furthermore, it shows the current amount due within one year, recorded as an item in
short-term loans in current liabilities.
As of December 31, 2016, the total repayable amount of the corporate bonds, the bank loans, the
Schuldscheindarlehen, and the convertible bond drawn by alstria was EUR 1,482,864 k (December 31,
2015: EUR 2,103,764 k). The carrying amount of EUR 1,485,851 k (EUR 1,466,521 k, noncurrent, and
EUR 19,330 k, current) takes interest liabilities and transaction costs to be allocated under the
effective interest method, taking liabilities into account. Financial liabilities with a maturity of up to
one year are recognized as current loans.
Corporate bond I
In the fourth quarter of the 2015 business year, a bond loan in a total amount of EUR 500,000 k and a
coupon of 2.25% p.a. was issued. The bond has a maturity until March 24, 2021, and was recognized
96
alstria Annual Report 2016
Consolidated Financial Statements
with its carrying amount of EUR 496,225 k; additionally, interest liabilities in the amount of
EUR 8,723 k were recognized per the balance sheet date. The fair value amounted at balance sheet
date to EUR 528,300 k.
Corporate bond II
In the second quarter of the reporting period, a second bond loan in a total amount of EUR 500,000 k
and a coupon of 2.125% p.a. was issued. The bond has a maturity until April 12, 2023, and was
recognized with its carrying amount of EUR 494,467 k; additionally, interest liabilities in the amount
of EUR 7,685 k were recognized per the balance sheet date. The fair value amounted at balance sheet
date to EUR 523,650 k.
Mortgage loans
These are property-related—mainly floating-rate—bank loans. The loans are secured by mortgages
and other collateral customary for bank loans.
Schuldschein
As of May 6, 2016, alstria issued a Schuldschein [debenture bond] with a nominal value of
EUR 150,000 k. The Schuldschein has an average coupon of 2.07% p.a. payable according to end-of-
year convention and a staggered term of between four to ten years (see table on page 110). The fair
value amounted to EUR 169,624 k at the balance sheet date.
Convertible bond
In the second quarter of the 2013 financial year, alstria office REIT-AG issued a convertible bond,
generating proceeds of EUR 79,400 k. The convertible bond has a maturity term of five years. It will
be redeemed at 100% of its principal amount. It 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 9.4192 during the 2016
financial year.
The issuing volume resulting from the convertible bond loan amounted to EUR 79,400 k. After having
exercised conversion rights for a notional value of EUR 200 k, EUR 79,200 k of the convertible bond
remains included in the financial liabilities. 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 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 amortized 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. The alstria office REIT-AG issued this bond based on the authorization
alstria Annual Report 2016
97
Consolidated Financial Statements
received from the Annual General Meeting in 2013. The convertible loan has a carrying amount
without accrued interests of EUR 74,578 k and a market value of EUR 100,941 k. Under consideration
of the embedded derivative amounting to EUR−20,099 k contained in the convertible bond, which is
accounted for under the noncurrent derivative liabilities and reflects part of the difference between
carrying amount and market value, the fair value of the convertible bond liability amounts to
EUR 80,842 k.
Syndicated loan alstria
The syndicated loan facility existing from September 30, 2013, and totaling EUR 544,100 k was
completely repaid on December 30, 2016. As of the previous year’s balance sheet date, the
outstanding loan amount was EUR 470,556 k.
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 14.1 of the notes.
Further details regarding the loan liabilities
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 of the main part of the mortgage loans, there are no significant
differences between the carrying amounts and the fair value of these loans, with the exception of
transaction costs.
A total of EUR 37,100 k (December 31, 2015: EUR 37,100 k) in financial liabilities from mortgage loans
relates to a fixed interest rate loan. At the end of the reporting period, the loan had a fair value of
EUR 42,089 k (December 31, 2015: EUR 41,338 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 of December 31, 2016, the loans and the convertible bond were reduced by accrued transaction
costs of EUR 11,186 k (December 31, 2015: EUR 12,352 k).
The average debt maturity increased from 3.6 years as of December 31, 2015, to 5.7 years as of
December 31, 2016. The Group’s average interest rate decreased from 2.8% to 2.2% from balance
sheet date to balance sheet date.
The carrying amounts of the loans are all reported in euros. With the exception of the fixed rate loan,
the corporate bonds, the Schuldschein, 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.
98
alstria Annual Report 2016
Consolidated Financial Statements
The liabilities exposed to an interest rate risk are due as follows:
EUR k
Up to 1 year
More than 1 year
Total
The following loans are secured by land charges:
EUR k
Financial liabilities secured by land charges
thereof on investment property
thereof on held for sale property
thereof on own used property
7.4 Other Provisions
Dec. 31, 2016
Dec. 31, 2015
1,076
251,564
252,640
371,069
1,115,704
1,486,773
Dec. 31, 2016
Dec. 31, 2015
256,930
256,158
0
772
1,523,710
1,462,806
56,458
4,446
EUR k
Other provisions
Rental guarantee
Provision virtual
share liabilities
Other
Total
Due
Due
up to
1 year
in more
than1 year
Total
Dec. 31, 2016
up to 1
year
in more than 1
year
Total
Dec. 31, 2015
0
1,577
680
2,257
0
0
0
1,244
1,313
0
1,313
2,890
680
1,494
300
3,570
1,794
1,976
0
3,220
1,244
3,470
300
5,014
The development of other provisions is shown in the following overview:
EUR k
development of other provisions
Rental guarantee
Provision virtual share liabilities
Other
Total
Dec. 31, 2015
Consumption Resolution Additions Dec. 31, 2016
1,244
3,470
300
5,014
−385
−1,581
0
−1,966
−859
0
0
−859
0
1,001
380
1,381
0
2,890
680
3,570
In connection with property sales, the Group had committed itself to compensating buyers for possible
shortfalls in rental income for rental agreements in place with certain tenants and not extended at
the disposal date. In the 2016 financial year, it was agreed all claims and obligations arising from the
original rental guarantee agreement would be extinguished in return for a final payment of EUR 385 k.
In addition, EUR 2,890 k (December 31, 2015: EUR 3,470 k) were recognized as a provision for
awarding the Long- and Short-Term Incentive Plan (Note 13.1).
alstria Annual Report 2016
99
Consolidated Financial Statements
Other provisions were made for potential litigation costs. At the balance sheet date, there were no
significant legal proceedings in which it was assumed alstria office REIT-AG or its affiliates could be
subject to claims 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.
7.5
Trade payables and other liabilities
EUR k
Trade payables
Due
Due
up to
1 year
4,584
in more
than 1 year
Total
Dec. 31,
2016
up to
1 year
in more
than 1
year
Total
Dec. 31,
2015
0
4,584
9,415
0
9,415
Other current liabilities
Accruals for outstanding
invoices
Real estate transfer tax
Rent and security deposits received
Value added tax liabilities
Advance rent payments
received
Customers with credit balances
Salary obligations
Auditing costs
Supervisory Board compensation
Miscellaneous liabilities
Total
16,223
11,869
4,944
2,798
2,758
2,288
2,177
495
271
1,511
45,334
0
0
2,808
0
0
0
0
0
0
0
16,223
11,869
7,752
2,798
2,758
2,288
2,177
495
271
19,744
14,909
5,094
1,381
3,960
439
4,528
743
353
1,511
1,100
0
0
1,854
0
0
0
0
0
0
0
19,744
14,909
6,948
1,381
3,960
439
4,528
743
353
1,100
2,808
48,142
52,251
1,854
54,105
The disclosed carrying amounts approximate their fair values.
Trade payables of the previous year’s balance sheet date have been adjusted in line with the presen-
tation in the previous year’s consolidated financial statements. As of December 31, 2015,
EUR 20,477 k had been reported. EUR 11,062 k were related to outstanding invoices and were reclas-
sified accordingly. They are included in other liabilities in the amount of EUR 19,744 k.
Real estate transfer tax in an amount of EUR 11,869 k resulted from the merger between Deutsche
Office and the Prime Office REIT-AG in the year 2013. For two properties transferred within the mer-
ger, the real estate transfer tax obligation is still due.
The decrease in salary obligations is mainly due to the restructuring charges payable for the previous
year as a result of the takeover of alstria office Prime.
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alstria Annual Report 2016
Consolidated Financial Statements
7.6 Deferred tax liabilities and income tax liabilities
The recognition of deferred tax liabilities and income tax liabilities as of December 31, 2016, is de-
scribed in Note 5.10 regarding income tax expenses. Obligations from income taxes arise almost ex-
clusively at the level of the Alstria office Prime companies acquired through the business combination
on October 27, 2015.
The tax liabilities mainly resulted from taxes arising out of the realization of hidden reserves as a
result of the inclusion of the companies in the tax-exempt REIT structure. As of December 31, 2016,
deferred tax liabilities were no longer to be formed.
7.7
Trust assets and liabilities
At the end of the reporting period, alstria office REIT-AG held trust assets worth EUR 313 k
(December 31, 2015: EUR 629 k) and liabilities worth EUR 4,944 k from rent deposits and EUR 2,808 k
from security deposits. As of December 31, 2015, EUR 4,154 k rent deposits and EUR 2,794 k security
deposits existed.
8. OTHER NOTES
8.1
Compensation of the Management Board and Supervisory Board
Management Board The following total remuneration was granted to the members of the Manage-
ment Board, according to IAS 24.17 and HGB Section 314, para. 1, no. 6:
EUR k
Short-term benefits
Share-based payments
Postemployment benefits
Total
2016
1,159
905
124
2,188
2015
1,162
905
125
2,192
On the reporting date, liabilities for the compensation of the Management Board members amounted
to EUR 378 k (2015: EUR 378 k).
As of December 31, 2016, 332.684 virtual shares had been granted to the members of the Management
Board (compared to 356,256 on December 31, 2015; see also Note 13.1).
Supervisory Board Pursuant to the Articles of Association, Supervisory Board members’ fixed annual
payments amounted to EUR 347 k (2015: EUR 353 k). For services as member of the Supervisory Board
of a subsidiary, four members of the Supervisory Board of alstria office REIT-AG received
remunerations of EUR 56 k in addition.
Further information on disclosures from HGB Section 314, para. 1, no. 6a (German Commercial Code)
and IAS 24.17 is provided in the remuneration report (see pages 143–149), which is an integral part of
these Notes. This information is also presented in the corporate governance chapter.
alstria Annual Report 2016
101
Consolidated Financial Statements
8.2 Other financial commitments and contingencies
Other financial obligations from refurbishment projects and ongoing maintenance amounted to
EUR 30.381 k (2015: EUR 17,250 k).
As of December 31, 2016, no rental agreements for the administrative premises were subject to a
minimum lease term. Future financial obligations of EUR 243 k arose from other leasing agreements.
Of these, obligations totaling EUR 134 k have a residual maturity of up to one year; the remainder —
EUR 109 k — has a remaining maturity of one to five years.
8.3
Consolidated cash flow statement
The cash flow statement shows how the Group’s cash and cash equivalents have changed over the
course of the financial year as a result of cash received and paid. In accordance with IAS 7, a distinc-
tion 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.
The net cash generated from operating activities for the 2016 financial year amounted to
EUR 120,495 k, which was considerably higher than the amount in the 2015 comparison period
(EUR 45,631 k). This is due to the inclusion of alstria office Prime in the consolidated financial
statements for the whole year and the shift in the interest payment date in the next business year
for most of the interest expense.
The cash flow from investing activities is affected by the inflow of cash and cash equivalents from
property disposals in the amount of EUR 426,764 k, while investments in the investment property
portfolio resulted in cash outflows of EUR 43,740 k and EUR 34,803 k in other financial instruments.
The cash flows from financing activities mainly reflect refinancing activities, with EUR 1.273,926 k in
payments for the redemption of borrowings, EUR 500,000 k in cash proceeds from the issuance of a
corporate bond, and EUR 150.000 k proceeds from the issuance of a Schuldschein. Dividend payments
resulted in cash outflows of EUR 76,564 k.
Cash and cash equivalents reported in the cash flow statement relate to all the liquidity items
disclosed in the balance sheet (e.g., cash at hand and bank balances).
9. RELATED PARTY RELATIONSHIPS
9.1
Preliminary remarks
Related parties are the Management Board, the members of the Supervisory Board, the managing
directors of subsidiaries and second-tier subsidiaries, and their close relatives. Related parties also
include entities with a controlling influence over the Group and entities with joint control or
significant influence over alstria office REIT-AG.
102
alstria Annual Report 2016
Consolidated Financial Statements
The majority of alstria office REIT-AG’s shares are free-floating 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 2016 have been undertaken in terms of arm’s-length transactions or under conditions
in alstria office REIT-AG’s favor.
9.2
Remuneration of key management personnel
For a detailed description of the remuneration of key management personnel, please refer to Note
9.1 and the remuneration report (see pages 143–149 of the Corporate Governance Section).
9.3
Related party transactions
At the end of the reporting period, the Group recorded no further receivables from or liabilities to
joint ventures. Furthermore, alstria office REIT-AG received EUR 129 k (2015: EUR 87 k) from the joint
venture as compensation for services connected to real estate.
No further transactions with related parties were completed during the reporting period.
10. 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 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 as all the dilutive potential ordinary shares are converted 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)
2016
176,872
152,866
1.16
2015
−110,970
96,718
−1.15
alstria Annual Report 2016
103
Consolidated Financial Statements
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)
2016
179,039
161,282
1.11
2015
−108,792
104,959
−1.04
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 had not been
satisfied as of the end of the reporting period.
There were 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 authorized to issue up to EUR 38,695 k in shares as conditional capital. These
contingently issuable shares could dilute basic earnings per share in the future, but they were not
included in the calculation of diluted earnings per share because they are nondilutive for the period
presented.
11. DIVIDENDS PAID
EUR k
Dividends on ordinary shares1) not recognized
as a liability as of Dec. 31
Dividend per share
1) Refers to all shares except treasury shares on the dividend payment date
2016
2015
76,564
0.50
43,470
0.50
At the Annual General Meeting held on May 12, 2016, alstria office REIT-AG resolved to distribute
dividends totaling EUR 76,564 k (EUR 0.50 per outstanding share). The dividends were distributed on
May 13, 2016. By comparison, the dividends paid out in 2015 totaled EUR 43,470 k (EUR 0.50 per
outstanding share).
12. EMPLOYEES
During the period from January 1 to December 31, 2016, the Company had 105 employees on average
(January 1 to December 31, 2015: 72 employees on average). The average was calculated based on
the total number of employees at the end of each quarter. On December 31, 2016, 114 people were
employed at alstria, excluding the Management Board members (December 31, 2015: 93 people).
13. SHARE-BASED REMUNERATION
13.1
Share-based remuneration for Management Board members
On March 2, 2010, the Company’s supervisory board established a new share-based remuneration
system as a means of providing 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
104
alstria Annual Report 2016
Consolidated Financial Statements
(LTIP), and a short-term component, the Short-Term Incentive Plan (STIP). These plans offer cash-
settled and share-based payment transactions, respectively.
Under the LTIP, alstria office REIT-AG grants virtual shares, which entitle the recipient to a 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 60 trading
days prior to the relevant maturity date, plus an amount equal to the sum of the dividend per share
the Company paid to its shareholders between the grant date and the maturity date; in no event can
the payment be higher than 250% of the average stock market price of alstria’s shares on the Frankfurt
Stock Exchange in the 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; it is subject to each
participant’s individual performance during the holding period.
The assessment of the target achievement depends equally on the absolute return of the alstria share
price (absolute total shareholder return) and on the relative performance of alstria’s share in relation
to the EPRA/NA-REIT Index Europe Ex UK (relative total shareholder return).
Since the 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.
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 expiration 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 STIP and LTIP
that remained outstanding as of December 31, 2016.
Start of defer-
ral period
Reference
share price
in EUR
End of
deferral
period Number of virtual shares
Number of virtual
shares
Olivier Elamine
Alexander Dexne
STI 2014
STI 2015
LTI 2013
LTI 2014
LTI 2015
LTI 2016
2015
2016
2013
2014
2015
2016
10.97
11.63
9.29
9.44
10.97
11.71
2017
2018
2017
2018
2019
2020
5,370
5,949
47,363
46,610
40,109
37,575
4,393
4,868
38,751
38,136
32,817
30,743
alstria Annual Report 2016
105
Consolidated Financial Statements
The development of the virtual shares through December 31, 2016, is shown in the following table:
Number of virtual shares
January 1
Granted in the reporting period
Converted into cash in the
reporting period
December 31
2016
LTI
335,740
68,318
−91,954
312,104
STI
20,516
10,817
−10,753
20,580
2015
LTI
339,516
72,926
−76,702
335,740
STI
23,831
9,763
−13,078
20,516
The 10,753 virtual shares converted into cash under the STIP resulted in payments to the Management
Board in an amount of EUR 136 k within the 2016 business year. The conversion amount was the
weighted average price of the first 20 trading days in the 2016 calendar year plus the dividend paid
during the vesting period. It amounted to EUR 12.64, of which EUR 11.64 related to the share price
and EUR 1.00 related to the dividend paid. Under the LTIP, 91,954 virtual shares were converted,
resulting in a payout of EUR 1,446 k.
In 2016, the LTIP and the STIP generated remuneration expenses amounting to EUR 1,001 k (2015:
EUR 2,616 k) and provisions amounting to EUR 2,890 k (2015: EUR 3,470 k). The Group recognizes the
liabilities arising from the vested virtual shares under other provisions.
13.2 Convertible profit participation rights program
On September 5, 2007, the Supervisory Board of the Company resolved the issuance of convertible
profit participation certificates (“certificates”) to employees of the Company and of companies in
which alstria office REIT-AG directly or indirectly holds a majority interest. Members of alstria office
REIT-AG’s Management Board are not considered employees of the Company in terms of this
convertible profit participation rights program. With a resolution, the Supervisory Board fixed the
details of the convertible profit participation rights program in accordance with an authorization
granted by the General Meeting of shareholders on March 15, 2007. The convertible profit
participation rights program was renewed by the Supervisory Board with minor modifications in 2012
in accordance with an authorization granted by the general meeting of shareholders on April 24, 2012.
The main terms of the program can be summarized as follow:
The nominal amount of each certificate is EUR 1.00, which is payable upon issuance. Under the
program, a maximum of 500,000 certificates may be granted for using the conditional capital III (2012–
2017) created by the Annual General Meeting in 2012. By the end of the reporting period, certificates
were granted corresponding to EUR 426,050 of conditional capital. In 2016, the Annual General
Meeting approved the establishment of additional conditional capital III (2015–2020) with an aggregate
nominal value of up to EUR 500 k for the conversion of 500,000 certificates. At the end of the reporting
period, certificates in relation to this conditional capital (2015–2020) had been granted for
EUR 144.750.
106
alstria Annual Report 2016
Consolidated Financial Statements
The certificates are issued as nontransferable rights and are not sellable, pledgeable, or otherwise
chargeable.
The maximum term of each certificate is five years.
During its term, each certificate entitles the holder to a disbursement corresponding to the amount
of the dividend per share that the Company paid for a full business year. For certificates held by a
beneficiary for less than a full business year, the profit share is reduced pro rata temporis.
Each certificate shall be converted into one non-par-value bearer share in the Company on the second,
third, fourth, or fifth anniversary of the issue date if the Company’s then-current stock exchange
share price has exceeded the price on the issue date by 5% or more on at least seven nonsubsequent
trading days (market condition). For the 111,000 certificates issued on May 7, 2015, and the 144,750
certificates issued on May 18, 2016, this market condition was fulfilled until the end of the 2016
financial year.
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 of the Company’s share capital to which the certificate entitles the holder;
this amount shall be payable in addition to the offer price.
The fair values of the inherent options for conversion were estimated on the respective granting dates
using a binary barrier option model based on the Black-Scholes model, and 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 program
were in existence during the year:
Number of certificates
Granting date of
tranche
January 1, 2016
Expired due to termination of em-
ployment
Converted
Granted
December 31, 2016
May 22, 2014
May 7, 2015
May 18, 2016
102.750
121.000
Total
223.750
−10.000
−102.750
0
0
0
0
−102.750
0
0
−10.000
0
0
111.000
144.750
255.750
144.750
144.750
The relevant amount for the conversion of 102,750 of the 2014 convertible profit participation rights
certificates was the XETRA closing price on the conversion date: EUR 11.46 per share. Total expenses
relating to convertible profit participation rights amounted to EUR 1,068 k in 2016 (see Note 5.5).
alstria Annual Report 2016
107
Consolidated Financial Statements
The following table lists the inputs used to determine 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)
Labor turnover rate (%)
Stock price as of valuation date (EUR)
Estimated fair value of one option for conversion
on the granting date
May 22, 2014 May 7, 2015 May 18, 2016
5.18
0.06
21.50
2.00
2.00
10.00
9.65
4.15
−0.18
19.30
2.00
2.00
9.10
12.05
4.28
−0.54
21.20
2.00
2.00
8.10
11.67
6.77
8.77
8.57
Expected volatility is based on an average of the historical volatility of alstria and the comparable
listed companies.
108
alstria Annual Report 2016
Consolidated Financial Statements
14. FINANCIAL RISK MANAGEMENT
14.1 Managing financial risk factors
The group’s activities expose it to a variety of financial risks related to interest rates, credit, and
liquidity. The group’s overall risk management program focuses on the unpredictability of financial
markets and seeks to minimize potential adverse effects on the group’s financial performance.
Therefore, sources of funding are diversified and a balanced maturity profile is planned, enabling a
coordinated and continuous refinancing process.
The financial instruments that the Group chiefly uses are corporate bonds, bank loans, a Schuldschein,
a convertible bond, and derivative financial instruments. The main purpose of the debt funding is to
finance alstria’s business activities. In addition, the Group also owns various financial assets, such as
cash and short-term deposits, which arise directly from business activities.
The Group uses derivative financial instruments to hedge floating rate loans. The treasury function
(group treasury) within the finance and controlling department carries out the management of
financial risks. The group treasury identifies, evaluates, and hedges financial risks in close cooperation
with the CFO. The Management Board provides written principles for overall risk management and
policies that cover specific areas, such as interest rate risk and credit risk, making use of derivative
and nonderivative financial instruments as well as excess liquidity investment.
Derivative financial instruments comprise interest caps. The purpose of these derivative financial
instruments is to hedge against the interest risks that arise from the Group’s business activities and
funding.
The main risks arising from the Group’s financial instruments relate to cash flow, interest rates, and
liquidity. The Group is exposed to credit risks mainly due to derivative financial instruments being
held as assets and due to 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 an economic slowdown are seen mainly in the potential default of
payment by a major tenant. Due to the fact that all the Company’s main tenants are public institutions
or are highly rated, the risk of such defaults is currently limited.
The loan agreements of alstria Group allow for loan-to-value (LTV) ratios as outlined by the following
table. As represented in the overview, the Group managed to keep its LTV below the LTV of the loan
at the relevant date — in some cases significantly. The risk of a breach of covenant is effectively
countered.
alstria Annual Report 2016
109
Consolidated Financial Statements
The following table presents the single-LTV ratios and covenants for the Group’s loans as of the end
of the reporting period:
Existing loan agreements as per December 31, 2016
Liabilities
Maturity
Interest rate
p.a.
Syndicated loan #11)
Sep. 30, 2020
Syndicated loan #22)
Feb. 22, 2016
Syndicated loan #33)
Sep. 30, 2018
Loan #14)
Loan #24)
Loan #35)
Loan #46)
Loan #5
Loan #6
Loan #76)
Loan #8
Total loans
Bond (1st tranche)
Bond (2nd tranche)
June 30, 2017
Dec. 31, 2018
Dec. 30, 2017
June 28, 2024
Apr. 30, 2021
Mar. 28, 2024
June 30,2026
July 31, 2021
Mar. 24, 2021
Apr. 12, 2023
Convertible bond
June 14, 2018
Schuldschein 10J./fixed
May 6, 2026
Schuldschein 4J./fixed
May 8, 2023
Schuldschein 7J./fixed
May 6, 2020
Schuldschein 7J./variable
May 8, 2023
Schuldschein 4J./variable
May 6, 2020
Total
Net LTV
3M-EURIBOR
+ 1.150%
3M-EURIBOR
+ 1.300%
3M-EURIBOR
+ 1.280%
3M-EURIBOR
+ 1.142%
3M-EURIBOR
+ 1.150%
2.250%
2.125%
2.750%
2.750%
2.270%
1.547%
6M-EURIBOR
+ 2.000%
6M-EURIBOR
+ 1.600%
Principal
amount
drawn as of
Dec. 31, 2016
EUR k
LTV as of
Dec. 31,
2016
%
LTV cove-
nant %
Principal
amount
drawn as of
Dec. 31, 2015
EUR k
0
0
0
0
0
0
-
-
-
-
-
-
-
-
-
-
-
-
67,000
39.1
65.0
470,556
331,910
336,320
58,868
53,432
18,507
67,000
58,896
49.0
65.0
60,048
56,500
47.8
75.0
56,500
56,000
44.0
65.0
56,000
15,268
253,664
500,000
500,000
79,200
40,000
37,000
38,000
17,500
17,500
50.6
44.7
-
-
-
-
-
-
-
-
1,482,864
49.1
40.9
60.0
15,423
–
-
-
–
-
-
-
-
-
–
1,524,564
500,000
-
79,200
-
-
-
-
-
2,103,764
1) Loan agreement terminated, withdrawal occurred on December 30, 2016.
2) Loan agreement terminated, withdrawal occurred on February 22, 2016.
3) Loan agreement terminated, withdrawal occurred on May 31, 2016.
4) Loan agreement terminated, withdrawal occurred on June 30, 2016.
5) Loan agreement terminated, withdrawal occurred on June 30, 2016 /July 4, 2016.
6) Refinanced in the second quarter of 2016.
Apart from the risks mentioned above, the Group is not exposed to any commodity or currency risks.
110
alstria Annual Report 2016
Consolidated Financial Statements
a) Interest rate risk
The following tables display the carrying amount of the Group’s financial instruments that 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 end-
ing Dec. 31, 2016
Variable interest
Mortgage bank loans
Schuldschein
Total
1,076
0
1,076
1,076
0
1,076
1,076
0
1,076
1,076
212,258
216,562
17,500
18,576
17,500
35,000
229,758
251,562
EUR k
< 1 year
1–2 years
2–3 years
3–4 years
> 4 years
Total
Financial year end-
ing Dec. 31, 2015
Variable interest
Syndicated loans al-
stria
Deutsche Office
portfolio loans
Other loans
Total
27,401
0
0
0
443,155
470,556
342,516
1,152
84,094
921
372,892
56,921
155
67,921
14,803
74,841
814,460
201,757
371,069
85,015
429,813
68,076
532,799
1,486,773
With its noncurrent financial liabilities with variable interest rates, alstria 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 derivative financial
instruments were acquired to secure the interest expense. The derivatives’ terms to maturity generally
correspond to those of the loans. The derivative financial instruments relate to interest caps; 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 of December 31, 2016, are presented
on page 89.
These interest rate caps are also used to hedge the obligation underlying the loans.
The following table shows the sensitivity of the Company’s loans to consolidated profit or loss and
equity due to a reasonably possible change in 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.
Interest expenses per annum
EUR k
+ 100 bps
– 50 bps
2016
2,516
−753
2015
7,382
−484
111
alstria Annual Report 2016
Consolidated Financial Statements
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 in respective fair market values:
aa) Impact on equity
Financial derivatives qualifying for cash flow hedge accounting
EUR k
+ 100 bps
– 50 bps
2016
321
−65
ab) Impact on income statements and on equity
Financial derivatives not qualifying for cash flow hedge accounting
Impact from 3-month EURIBOR interest rate changes:
EUR k
+ 100 bps
– 50 bps
2016
1,247
−13
2015
13,771
−3,574
2015
19,361
−8,926
Impact from changes in alstria office REIT-AG’s share price (only relating to the embedded derivative):
EUR k
Share price compared to the 2016 year-
end price (EUR 11.91)
+ 10 percent
– 10 percent
b) Credit risk
2016
2015
−8,850
7,802
−8,512
7,587
Except for those relating to accounts receivable balances, credit risks are managed at the group level.
The department responsible for managing the operating business property oversees and analyses credit
risks in relation to each reletting activity before the standard payment and lease terms and conditions
are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits
with banks and financial institutions, and credit exposures to customers (including outstanding
receivables and other compensatory commitments). Only banks and financial institutions 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 tenant’s credit quality is assessed, taking into account his or her financial
position, past experience, and other factors. Credit limits are generally not provided to tenants. Lease
receivables from tenants are settled in bank transfers, which are 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.
112
alstria Annual Report 2016
Consolidated Financial Statements
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 Group’s long-term refinancing strategy ensures these
medium- and long-term liquidity requirements are met. Such forecasting considers the Group’s debt-
financing plans, covenant compliance, compliance with internal balance sheet targets, and, if
applicable, external regulatory or legal requirements (i. g., G-REIT equity ratio).
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 of December 31, 2016.
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 ending Dec. 31, 2016
Corporate bond
Loans
Interest
Schuldschein
Convertible bond
Trade payables
Other liabilities
0
0
0
0
500,000
500,000
1,000,000
1,076
1,076
1,076
1,078
69,858
179,500
30,376
29,368
28,481
28,727
27,801
39,007
0
0
0
79.200
4,584
65,438
0
562
0
0
0
55,500
0
0
0
0
0
94,500
0
0
562
562
561
561
253,664
183,760
150,000
79.200
4,584
68,246
101,474 110,206
30,119 85,867 598,220
813,568
1,739,454
EUR k
< 1 year 1–2 years 2–3 years 3–4 years 4–5 years >5 years
Total
Financial year ending Dec. 31, 2015
Interest
Loans
Corporate bond
Convertible bond
Financial derivatives
Trade payables
Other liabilities
32,669
33,369
31,407
23,961
21,868
16,767
160,041
370,838
85,015
429,813
68,076
444,232
126,359
1,524,333
0
0
374
9,415
59,032
0
0
290
0
309
0
79,200
0
0
0
0
−385
−1,613
−2,059
0
309
0
309
0
309
500,000
500,000
0
0
0
309
79,200
−3,393
9,415
60,577
472,328 118,983 540,344 90,733 464,350
643,435
2,330,173
Details on the loans, borrowings, and bonds can be found in Note 7.3. The maturity profile of the
loans is shown on page 18 in the Group Management Report. To secure the bank loans, receivables
from rental and property purchase agreements and from insurance and derivative financial
instruments were assigned to the lenders; liens were granted on bank accounts, and charges were
registered on the land. Obligations arising from floating-interest bank loans were fully secured. Land
charges for real estate properties with a carrying amount of EUR 567,315 k (December 31, 2015:
EUR 3,036,702 k) were provided as collateral. The decline compared to the previous year’s balance
alstria Annual Report 2016
113
Consolidated Financial Statements
sheet date is based on the repayment of mortgage bank loans in favor of corporate bonds and
promissory notes.
14.2 Capital management
Capital management activities are aimed at maintaining the Company’s classification as a REIT in
order to support its business activities and maximize shareholder value.
The Group actively manages its capital structure and makes adjustments in response to changes in
economic conditions. To maintain or adjust the capital structure, the Group can make a capital re-
payment to its shareholders or issue new shares. No changes had been made to the aims, guidelines,
and processes as of December 31, 2016, or as of December 31, 2015.
The Company monitors its capital structure by using the LTV indicator as well as the performance
indicators relevant for its 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 at between 45% and 55%, within the relevant term provided by the REIT
law. 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 according to G-REIT law
Immovable assets
Revenues gained from immovable assets
Income gained from disposal of
immovable assets
2016
56.67
90.17
100.00
32.75
2015
49.37
87.21
100.00
14.64
G-REIT covenant
> 45
> 75
> 75
< 501)
1) Within five years based on the average property value during this period.
114
alstria Annual Report 2016
Consolidated Financial Statements
The following table shows the carrying amount and fair value of all financial instruments disclosed in
the consolidated financial statements:
Carrying
amount
Nonfinan-
cial assets
Financial assets
Loans and
receivables
at amor-
tized costs
Fair value
through
p/l)
Fair value –
other in-
come
Assets as per balance
sheet (EUR k) as of
Dec. 31, 2016
Financial assets
Derivatives
Total long-term
Trade receivables
Derivatives
Tax receivables
Receivables and other
assets
Cash and cash equiva-
lents
Total short-term
Total
34,803
109
34,912
7,257
5
25
0
0
0
0
0
34,803
0
34,803
7,257
0
25
41,578
8,318
33,260
247,489
296,354
331,266
0
247,489
8,318
8,318
288,031
322,834
0
10
10
0
5
0
0
0
5
0
99
99
0
0
0
0
0
0
Total
Fair
value
34,803
34,803
109
109
34,912
34,912
7,257
7,257
5
25
5
25
33,260
33,260
247,489
247,489
288,036
288,036
15
99
322,948
322,948
Carrying
amount
Nonfinancial
liabilities
Financial liabilities
Liabilities as per
balance sheet
(EUR k) as of
Dec. 31, 2016
Ltd. equity of
noncontrolling
interests
58,458
Long-term loans
1,466,521
Derivatives
Other liabilities
20,099
2,808
Total long-term
1,547,886
Ltd. equity of
noncontrolling
interests
Short-term loans
Trade payables
Tax liabilities
Other liabilities
12,966
19,330
4,584
20,104
45,334
Total short-term
102,319
Total
1,650,205
Fair value
through p/l
Loans and re-
ceivables at
amortized costs
Total
Fair
value
0
0
0
0
0
0
0
0
0
2,758
2,758
2,758
0
0
20,099
0
58,458
58,458
58,458
1,466,521
1,466,521
1,546,813
0
2,808
20,099
2,808
20,099
2,808
20,099
1,527,787
1,547,886
1,628,178
0
0
0
0
0
0
12,966
19,330
4,584
20,104
42,576
12,966
19,330
4,584
20,104
42,576
12,966
19,330
4,584
20,104
42,576
99,560
99,560
99,560
20,099
1,627,347
1,647,446
1,727,738
alstria Annual Report 2016
115
Consolidated Financial Statements
Carrying
amount
Nonfinan-
cial assets
Financial assets
Assets as per balance
sheet (EUR k) as of
Dec. 31, 2015
Derivatives
Total long-term
Trade receivables
Derivatives
Tax receivables
Receivables and other
assets
Cash and cash equiva-
lents
Total short-term
Total
Loans and
receivables
at amor-
tized costs
0
0
12,578
0
226
0
0
0
0
8,462
8,462
12,578
0
226
9,783
7,305
2,478
460,253
482,840
491,302
0
460,253
475,535
7,305
7,305
Fair value
through
p/l)
Fair value –
other in-
come
1,110
1,110
7,352
7,352
0
0
0
0
0
0
0
0
0
0
0
0
Total
8,462
8,462
12,578
0
226
Fair
value
8,462
8,462
12,578
0
226
2,478
2,478
460,253
460,253
475,535
475,535
475,535
1,110
7,352
483,997
483,997
Carrying
amount
Nonfinancial
liabilities
Financial liabilities
Liabilities as per
balance sheet
(EUR k) as of
Dec. 31, 2015
Long-term loans
1,715,590
Derivatives
Other liabilities
23,208
1,854
Total long-term
1,740,652
Short-term loans
376,402
Trade payables
Tax liabilities
Other liabilities
9,415
8,687
52,251
Total short-term
446,755
Total
2,187,407
Fair value
through p/l)
Loans and re-
ceivables at
amortized costs
Total
Fair
value
0
1,715,590
1,715,590
1,718,212
23,208
1,854
25,062
0
9,415
8,687
0
18,102
43,164
0
0
23,208
1,854
23,208
1,854
1,715,590
1,740,652
1,743,274
376,402
376,402
376,402
0
0
9,415
8,687
48,291
48,291
9,415
8,687
49,923
424,693
442,795
444,427
2,140,283
2,183,447
2,187,701
0
0
0
0
0
0
0
3,960
3,960
3,960
116
alstria Annual Report 2016
Consolidated Financial Statements
Independent experts determined the fair value of the derivative financial instruments by discounting
the expected future cash flows at prevailing market interest rates.
The net gains and losses from these financial instruments are as follows:
EUR k
Fair value - hedging instruments
Fair value - financial liabilities
Loans and receivables
Total
2016
−10,558
−1,484
−467
−12,509
2015
−2,890
−3,233
−625
−6,748
The net losses during the reporting period resulted from valuation losses and, in the case of loans and
receivables, from write-downs of trade receivables.
14.3 Determination of fair value
The fair value of financial instruments that are not traded in an active market (i.e., over-the-counter
derivatives) is determined using valuation techniques. These valuation techniques maximize the use
of observable market data where it is available and rely on entity-specific estimates as little as pos-
sible. 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 discount-
ing the expected future cash flows at prevailing market interest rates. Future cash flows were esti-
mated at the end of the reporting period based on forward interest rates from observable yield curves
and on contractually agreed interest rates. These rates are discounted to reflect the credit risk of
the various counterparties.
All of the Group’s financial instruments, which are measured at fair value in the balance sheet, are
valued by applying the level 2 valuation measurement approach. This only applies to the Group’s
financial derivatives, as no other financial instruments are measured in the balance sheet at fair
value.
15. SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD
In October 2016, alstria signed a purchase contract for the disposal of an asset in Dortmund. The
transfer of benefits and burden is expected to take place on February 28, 2017, after the reporting
period.
Additionally, alstria signed a purchase contract for the disposal of an asset in Dresden on December
15, 2016. The transfer of benefits and burden took place on February 1, 2017, after the reporting
period.
alstria Annual Report 2016
117
Consolidated Financial Statements
16. 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 Mannheim/Wiesbaden GmbH & Co. KG, Hamburg
alstria office Prime Portfolio GmbH & Co. KG, Hamburg
alstria office Steinstrasse 5 GmbH & Co. KG, Hamburg
beehive GmbH & Co. KG, Hamburg
17. DISCLOSURES PURSUANT TO THE WERTPAPIERHANDELSGESETZ [GERMAN SECURITIES TRAD-
ING ACT] AND EUROPEAN MARKET ABUSE REGULATION [MAR]
17.1 Ad hoc announcements
The following table summarizes the announcements pursuant to Section 15 para. 1 German Securities
Trading Act (WpHG) or Art. 17 MAR published by the Company during the reporting period:
Date
Apr. 5, 2016
May 3, 2016
July 8, 2016
Topic
alstria office REIT-AG issues additional corporate bond
alstria office REIT-AG acquires additional approximately 1.4% of DO Deutsche Office AG
alstria office REIT-AG: DO Deutsche Office AG sells ‘An den Treptowers 3’ building in Berlin
118
alstria Annual Report 2016
Consolidated Financial Statements
17.2 Directors’ dealings
The following transaction has been reported to the Company pursuant to Section 15a para. 1 WpHG
during the reporting period:
Name of person subject to the disclosure requirement
Olivier Elamine
Transaction
Function
Classification of the financial instrument
ISIN
Transaction
Place
Transaction date
Price per share in EUR
Number of shares
Deal volume in EUR
17.3 Voting right notifications
CEO
Share
DE000A0LD2U1
Buy
Direct trade
May 13, 2016
11.722615
6,500
76,197.00
Information according to Section 160 para. 1 No. 8 German Stock Corporation Act (Aktiengesetz,
AktG). The following table shows shareholdings in the Company that were in place on the 2016 balance
sheet date and that were communicated to us pursuant to Section 21 para. 1 WpHG and have been
published pursuant to Section 26 para. 1 WpHG. Moreover, shareholdings 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 paras. 1 and 4 AktG or pursuant
to Section 21 para. 1a WpHG during the reporting period.
Shareholders,
registered office
No.
Voting rights
(new) (in %) Date of change
Attribution of
voting rights
Contains 3% or more of
voting rights from
1
2
3
4
5
6
7
8
9
10
11
BNP Paribas Asset Management S.A.S.,
Paris, France
Prédica, Paris, France
SAS Rue la Boétie, Paris, France
Government of Singapore, acting by and
through the Ministry of Finance, Singapore,
Singapore
GIC Private Limited, Singapore, Singapore
GIC (Realty) Private Limited, Singapore,
Singapore
Europe Realty Holdings Pte Ltd, Singapore,
Singapore
Euro Periwinkle Private Limited, Singa-
pore, Singapore
Oaktree Capital Group Holdings GP, LLC,
Wilmington, Delaware, USA
Cohen & Steers, Inc., New York, USA
Brookfield Investment Management Inc.,
New York, USA
3.08
Mar. 18, 2016
3.0265
Apr. 5, 2016
5.7691
Apr. 12, 2016
12.61
12.61
Apr. 22, 2016
Apr. 22, 2016
Yes
No
Yes
Yes
-
-
Prédica
GIC Private Limited (4.71%)
Euro Periwinkle Private Limited
(7.90%)
Yes Euro Periwinkle Private Limited
7.90
Apr. 22, 2016
Yes Euro Periwinkle Private Limited
7.90
Apr. 22, 2016
Yes Euro Periwinkle Private Limited
7.90
Apr. 22, 2016
1.08
3.32
Sep. 9, 2016
Oct. 10, 2016
3.01
Jan. 9, 2017
No
Yes
Yes
Yes
-
-
-
-
alstria Annual Report 2016
119
Consolidated Financial Statements
18. DECLARATION OF COMPLIANCE PURSUANT TO AKTG SECTION 161
The Management Board and the Supervisory Board have submitted the declaration of compliance that
is required by AktG Section 161 with respect to the recommendations of the German Corporate Gov-
ernance Code as developed by a government commission. It is permanently available to the public on
alstria office REIT-AG’s website (www.alstria.com) and is included in the declaration of corporate
management according to HGB Section 289a.
19. AUDITORS’ FEES
On May 12, 2016, the general meeting elected Deloitte & Touche GmbH Wirtschaftsprüfungsgesell-
schaft (Dammtorstrasse 12, Hamburg) as auditors of the separate and consolidated financial state-
ments for the 2016 financial year. The fees totaled EUR 704 k in 2016. Of this, EUR 517 k was attribut-
able to audit services and EUR 187 k to other audit services.
20. 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 used to define the Management
Board’s and Supervisory Board’s remuneration.
120
alstria Annual Report 2016
Consolidated Financial Statements
21. SUPERVISORY BOARD
Pursuant to the Company’s Articles of Association (Section 9), the Supervisory Board consists of six
members, who are elected at the general meeting of the shareholders.
During the 2016 financial year, the members of the Supervisory Board were as follow:
Dr. Johannes Conradi
Chairman since
May 12, 2016
Hamburg, Germany
Lawyer and Partner, Freshfields
Bruckhaus Deringer LLP
Freshfields Bruckhaus
Deringer LLP
EBS Universität für Wirtschaft
und Recht – Real Estate Manage-
ment Institute
Elbphilharmonie Hamburg
Bau GmbH & Co. KG
Global Head of Real Estate
Member of the German Manage-
ment Group
Member of the Board of Trustees
Member of the Supervisory Board
Richard Mully
Vice-Chairman since
November 30, 2016
Cobham (Surrey),
United Kingdom
Director, Starr Street Limited
Aberdeen Asset Management PLC Director
since December 1, 2016 Great Portland Estates plc
until April 4, 2016
ISG plc
St Modwen Properties PLC
Nonexecutive Director
Director
Director
Stefanie Frensch
office started on
May 12, 2016
Berlin, Germany
BBV Verband Berlin-Brandenbur-
gischer Wohnungsunternehmen
e.V.
Benoît Hérault
Uzès, France
Belvédère SA
EUROSIC
Westbrock Partners
Marianne Voigt
Berlin, Germany
since December 8, 2016 BDO AG Wirtschafts-
prüfungsgesellschaft
DO Deutsche Office AG
until December 9, 2016
Managing Director, HOWOGE
Wohnungsbaugesellschaft mbH
Chairman of the audit committee
Managing Director, Chambres
de l’Artémise S.à r.l.
Chairman of the Board
Board member, Chairman of the
remuneration committee
Senior advisor for France
Managing Director,
bettermarks GmbH
Member of the Supervisory Board
Member of the Supervisory Board
Hermann T. Dambach
Vice-Chairman
office ended
October 31, 2016
Bad Homburg, Germany
Investment Manager,
Oaktree GmbH
Railpool GmbH
Chairman of the Advisory Board
alstria Annual Report 2016
121
Alexander Stuhlmann
Chairman
office ended
May 12, 2016
since July 1, 2016
until December 9, 2016
Consolidated Financial Statements
Hamburg, Germany
Management Consultant
Bauhaus Wohnkonzept GmbH
Capital Stage AG
C.E. Danger GmbH & Co. KG
DO Deutsche Office AG
Ernst Russ AG
Euro-Aviation
Versicherungs AG
Frank Beteiligungs-
gesellschaft mbH
GEV AG (Frank-Gruppe)
HASPA Finanzholding
Siedlungsbaugesellschaft
Hermann und Paul Frank mbH &
Co. KG
Chairman of the Advisory Board
Vice-Chairman of the
Supervisory Board
Member of the Advisory Board
Member of the Supervisory Board
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 Advisory Board
At the Company’s May 12, 2016, Annual General Meeting, the shareholders elected Ms. Stefanie
Frensch, director of HOWOGE Wohnungsbaugesellschaft mbH, Berlin, Germany, as a member of the
Supervisory Board of alstria office REIT-AG.
At the end of the Annual General Meeting held on May 12, 2016, Mr. Alexander Stuhlmann’s supervi-
sory membership term ended.
With an effective date of October 31, 2016, Mr. Hermann T. Dambach, investment manager of Oaktree
GmbH, Bad Homburg, Germany, resigned as a member of the Supervisory Board.
After the end of the reporting period, Dr. Bernhard Düttmann, executive consultant, Meerbusch, Ger-
many, was appointed as a member of the Supervisory Board on January 3, 2017.
Hamburg, February 21, 2017
alstria office REIT-AG
The Management Board
Olivier Elamine
Alexander Dexne
CEO
CFO
122
alstria Annual Report 2016
Responsibility Statement
RESPONSIBILITY STATEMENT
To the best of our knowledge we confirm that, in accordance with the applicable reporting principles,
the consolidated financial statements 2016 give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group, and the Group management report 2016 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 21, 2017
alstria office REIT-AG
The Management Board
Olivier Elamine
Alexander Dexne
CEO
CFO
alstria Annual Report 2016
123
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
We have audited the consolidated financial statements prepared by alstria office REIT-AG,
Hamburg/Germany, - comprising the income statement, the statement of comprehensive income, the
statement of financial position, the statement of cash flows, the statement of changes in equity and
the notes to the consolidated financial statements, as well as the group management report for the
financial year from January 1 until December 31, 2016. 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 Sec. 315a (1)
German Commercial Code (HGB) 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 Sec. 317 German
Commercial Code (HGB) and German generally accepted standards for the audit of financial
statements promulgated by the Institute of Public Auditors in Germany (IDW). Those standards require
that we plan and perform the audit such that misstatements materially affecting the presentation of
the net assets, financial position and results of operations in the consolidated financial statements in
accordance with the applicable financial reporting framework and in the group 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.
124
alstria Annual Report 2016
Independent Auditor’s Report
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, as well as the additional
requirements of German commercial law pursuant to Sec. 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 consistent with the consolidated financial statements,
complies with the legal requirements 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 21, 2017
Deloitte GmbH
Wirtschaftsprüfungsgesellschaft
[seal]
Signed: Reiher
Wirtschaftsprüfer
Signed: Deutsch
Wirtschaftsprüferin
[German Public Auditor]
[German Public Auditor]
alstria Annual Report 2016
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, the Company’s corporate governance during the
reporting period and the report on changes to the supervisory board.
MAIN POINTS OF DISCUSSION
The main points of discussion for the Supervisory Board and its committees during financial year 2016
were the financial reports, asset transactions and leases, the issuance of a bond by alstria office REIT-
AG with a total nominal amount of EUR 500 million, the placement of alstria’s first promissory note
(Schuldscheindarlehen) with a nominal value of EUR 150 million, the preparation for the
reappointment of the members of the Management Board for another term of office, the refinement
of the Management Board remuneration system and the succession planning for the supervisory board
due to two vacancies.
SUPERVISION AND ADVISING OF THE COMPANY’S MANAGEMENT BOARD
During the 2016 reporting period, 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 its 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 the financial
situation of the Company. Furthermore, we were informed about issues concerning the Company’s
planning, important business events and current risks, risk management and 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.
126
alstria Annual Report 2016
Corporate Governance
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. This also included the
Company’s budget planning.
MEETINGS OF THE SUPERVISORY BOARD
In financial year 2016, the Supervisory Board held four ordinary and three extraordinary meetings. All
members of the Supervisory Board attended a minimum of at least half of the meetings. The presence
of the members in the meetings of the Supervisory Board averaged approximately 92%. Additionally,
we passed written resolutions on five issues based on detailed documents. In 2017, the Supervisory
Board met for two additional meetings and passed one written resolution prior to the finalization of
this report.
In all ordinary meetings, the Supervisory Board and the Management Board discussed the situation
and development of the Company, its business performance, its market situation and its financial
results (quarterly interim statements and half-year financial reports, financial statements and
consolidated financial statements).
In its extraordinary meeting in January 2016, the Supervisory Board deliberated with the Management
Board on the strategy for the Company, a lease project, a potential portfolio acquisition and corporate
governance issues. The Supervisory Board further dealt with succession planning for the Supervisory
Board. In February 2016, the Supervisory Board decided by way of written circular resolution on the
annual compliance statement regarding the recommendations by the German Corporate Governance
Code.
During its financial meeting in March 2016, the Supervisory Board dealt with the consolidated financial
statements, the financial statements as of December 31, 2015 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 of December 31, 2015, and
confirmed the Management Board’s proposal regarding the appropriation of the profits for financial
year 2015. The Supervisory Board passed a resolution on its report to the Annual General Meeting for
financial year 2015 and on the corporate governance statement. The Management Board and
Supervisory Board also discussed the agenda and proposals for resolution for the Annual General
Meeting of the Company and the sale of shares in a subsidiary, and the Supervisory Board gave its
consent on a capital expenditure and a lease of an asset in Berlin. Furthermore, the Supervisory Board
gave its consent to the placement of a promissory note (Schuldscheindarlehen). Finally, the
Supervisory Board discussed and decided on the amount of the long-term variable remuneration for
the members of the Management Board for financial year 2012 and of the short-term variable
remuneration for financial year 2015, based on the nomination and remuneration committee’s
recommendation, and after carrying out a vertical remuneration comparison. It thereby considered
alstria Annual Report 2016
127
Corporate Governance
the board members’ individual performances and also discussed the parameters for the variable
remuneration for the members of the Management Board for financial year 2016.
In April 2016, the Supervisory Board passed three written circular resolutions on the sale of shares in
a subsidiary, the appointment of the Management Board members as managing directors of a newly
established subsidiary and the entering into a put option agreement.
In its extraordinary meeting, held as telephone conference in May 2016, the Supervisory Board joined
the Management Board’s amendment of the proposal for a resolution, presented to the Annual General
Meeting, on the appropriation of the annual net profit for financial year 2015. The proposal was
amended because, due to the takeover of former DO Deutsche Office AG and resulting capital increase
from authorized capital executed in May 2016, new shares were issued. In turn, this increase resulted
in an increase in the number of shares entitled to the dividend for financial year 2015, making the
amendment necessary.
In its regular meeting in May 2016, the Supervisory Board elected a new chairman after the term of
office for its former chairman had come to an end. Further topics have included the composition of
the permanent committees of the Supervisory Board, the risk profile of the Company and a disposal
of an asset in Berlin. In June 2016, the Supervisory Board approved, by way of written resolution, two
amendment agreements regarding two financing agreements. In its extraordinary meeting in July
2016, which was held as telephone conference, the supervisory board deliberated with the
Management Board on the disposal of an asset in Berlin and gave its approval.
The Management Board and the Supervisory Board discussed potential acquisitions, lease projects and
capital expenditures on single assets in the regular Supervisory Board Meeting in September 2016.
After having deliberated in detail the day before with an external lawyer, in this meeting, the
Supervisory Board resolved on updates for the rules of procedures for the Supervisory Board and its
permanent committees as well as for the Management Board. The Supervisory Board further resolved
on editorial amendments to the Company’s Articles of Association due to conditional capital increases
of EUR 102,750.00, executed in May 2016 for the purposes of the Company’s employee participation
program. The Supervisory Board finally deliberated and resolved on the composition of its permanent
committees.
After intensive discussion with the Management Board, the Supervisory Board passed resolutions
regarding business and budget planning for financial year 2017 in its ordinary meeting in November
2016. The Supervisory Board discussed the succession planning for the Supervisory Board and the
personnel planning for the Management Board in the light of the terms of office of the Management
Board members, which will come to an end at the end of financial year 2017. The Supervisory Board
deliberated in detail, with an external independent remuneration expert, on a proposal made by its
nomination and remuneration committee regarding the further development of the remuneration
system in place, and the further terms and conditions of the Management Board service contracts for
a new term of office. The Supervisory Board discussed a review made by the external independent
128
alstria Annual Report 2016
Corporate Governance
remuneration expert on the appropriateness of the Supervisory Board remuneration in place. The
Supervisory Board discussed and resolved the detailed objectives regarding the composition of the
Supervisory Board (Diversity Statement), and reviewed the positive result of the efficiency check of
its work, which the Supervisory Board members had performed by means of questionnaires.
In its extraordinary meeting in January 2017, the Supervisory Board and the Management Board
discussed the strategy for the Company in detail, and discussed and resolved on the further
appointment of the members of the Management Board for another term of office and the
amendments to the Management Board remuneration system. In February 2017, the Supervisory Board
resolved by way of written circular resolution on the annual compliance statement regarding the
recommendations by the German Corporate Governance Code. In its financials meeting in March 2017,
the Supervisory Board particularly dealt with the consolidated financial statements and financial
statements for the year ending on December 31, 2016. It further reviewed the Management Board’s
recommendation for profit appropriation. The Supervisory Board passed a resolution on its report for
the Annual General Meeting for financial year 2016 as well as the Corporate Governance Report.
Management Board and Supervisory Board discussed the agenda and proposals for resolution for the
annual General Meeting of the Company for financial year 2016. The Supervisory Board also dealt with
variable remuneration for the members of the Management Board.
COMMITTEES OF THE SUPERVISORY BOARD
According to the Company’s Articles of Association, the Supervisory Board has six members. It has
formed three permanent committees to support it in its work, each of which are composed of at least
three members. The composition of the committees is described in the Company’s Corporate Govern-
ance Statement on pages 133 to 142 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 that 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 2016, the Supervisory Board’s committees focused on the
following topics:
The audit committee held four meetings in financial year 2016. 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 financial statements as of December 31, 2015, 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 included the
recommendation to the Supervisory Board regarding the proposed resolution for the Annual General
Meeting for the choice of the auditors, the auditors’ independence and any additional services to be
alstria Annual Report 2016
129
Corporate Governance
performed by them. Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Hamburg branch, was 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.
The nomination and remuneration committee, which also carries out the tasks of a nomination
committee, met seven times during financial year 2016. The committee discussed the amount of
variable remuneration for the members of the Management Board. In light of this discussion, each
Management Board member’s individual performance was discussed. The committee furthermore
discussed the objectives regarding the composition of the Supervisory Board, providing the
Supervisory Board with corresponding resolution proposals. The nomination and remuneration
committee dealt in detail with the personnel planning for the Management Board in the light of the
office terms of both Management Board members coming to an end in financial year 2017. The
committee discussed with an external independent remuneration expert possibilities to further
develop the Management Board remuneration system as well as the appropriateness of the Supervisory
Board remuneration system in place. Finally, the committee dealt twice with the succession planning
for the Supervisory Board, each time appointing an external advisor, and in two cases prepared
proposals for resolution to the Annual General Meeting for the Supervisory Board with regard to the
election of Supervisory Board members.
In financial year 2016, the finance and investment committee deliberated with the Management Board
on a real-estate transaction in three meetings and approved three disposals executed in financial year
2016. The committee resolved by way of written circular resolution on advisory services from the law
firm Freshfields Bruckhaus Deringer LLP, of which the Chairman of the Supervisory Board is a partner.
During financial year 2016, two special committees held meetings:
In May 2015, the Supervisory Board established a special committee that was comprised of three
members. The committee was authorized to grant all necessary approvals and make all other
declarations required in connection with the takeover of former DO Deutsche Office AG. In financial
year 2016, the special committee came together in one meeting and resolved on editorial
amendments of the Articles of Association due to the increase in the share capital by EUR 964,182.00
against contributions in kind executed in May 2016.
In September 2015, the Supervisory Board established a special committee that was comprised of four
members. The committee was authorized to grant all necessary approvals and make all other
declarations required in connection with the issuance of bonds. The special committee came together
in one meeting to discuss the issuance of a corporate bond, and approved by way of written circular
a resolution on the issuance of a bond as well as all connected actions and resolutions. Benoît Hérault
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Corporate Governance
and Hermann Dambach could not participate in the meeting due to important competing
appointments.
The composition of the special committees is also described in the Company’s Corporate Governance
Statement on pages 133 to 142 of the annual report.
AUDIT OF THE ANNUAL FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS
Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Hamburg branch, audited the financial statements
and 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, 2016. 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, the auditors’ report and 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 committee, the auditors
presented the essential results of their audit (including the audit of the internal control and risk-
management system) and were available to answer questions. The audit committee conducted the
Supervisory Board’s audit and reported to the plenary Supervisory Board in the presence of the
auditors of the financial statements of alstria office REIT-AG and its consolidated financial
statements. 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 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.
CORPORATE GOVERNANCE
In the reporting period, the Supervisory Board also dealt with whether alstria office REIT-AG fulfilled
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 2017, 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.
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131
Corporate Governance
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 autumn 2016, we were able to conclude that the composition of the Supervisory Board met these
objectives as of December 31, 2016. The Supervisory Board member Hermann Dambach abstained
from voting on the proposal for the appropriation of the annual net profit for financial year 2015 due
to a conflict of interest, and did not attend the extraordinary Supervisory Board meeting scheduled
for this purpose in May 2016. When the Supervisory Board elected its Chairman and the Vice-Chairman,
the candidates abstained from voting. No conflicts of interest concerning members of the Management
Board arose during financial year 2016.
CHANGES IN THE SUPERVISORY BOARD
The term of Mr. Alexander Stuhlmann, who had been a member of the Supervisory Board and chaired
the Supervisory Board since 2007, came to an end with the Annual General Meeting in financial year
2016. Thereupon, the Annual General Meeting elected Mrs. Stefanie Frensch as member of the
Supervisory Board until the Annual General Meeting in financial year 2021. In its meeting on
May 12, 2016, the Supervisory Board elected Mr. Johannes Conradi as new chairman of the Supervisory
Board.
Mr. Hermann Dambach, who had been elected as member of the Supervisory Board until the Annual
General Meeting in financial year 2021 and who used to be Vice-Chairman of the Supervisory Board,
resigned from the Supervisory Board effective October 31, 2016. The local court (Amtsgericht) of
Hamburg appointed Mr. Bernhard Düttmann as successor for Mr. Hermann Dambach on the Supervisory
Board, effective January 3, 2017. In the meeting on November 30, 2016, the Supervisory Board elected
Mr. Richard Mully as Vice-Chairman of the Supervisory Board.
The Supervisory Board would like to thank Mr. Stuhlmann and Mr. Dambach for their valuable
commitment to the Company.
The Supervisory Board would like to thank the Management Board and all employees for their
dedication and their successful work in financial year 2016.
Hamburg, March 2017
For the Supervisory Board
Johannes Conradi
Chairman of the Supervisory Board
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alstria Annual Report 2016
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, among other ways, 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 a description of the Company’s Management Board and
Supervisory Board composition, as well as its corporate governance structures, information on the
target quota for women’s participation in the Supervisory Board, Management Board and the first
management level below the Management Board and information on corporate governance practices
and the declaration of compliance according to Section 161 of the German Stock Corporation Act.
MANAGEMENT BOARD AND 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.
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 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 contracts with regard to such business transaction
during the reporting period.
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133
Corporate Governance
The members of the Management Board are appointed by the Supervisory Board, who monitors and
advises the Management Board on management issues. The Management Board involves the
Supervisory Board in all decisions of fundamental importance to the 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 (modernization 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.
Supervisory Board
In accordance with the Articles of Association, the Supervisory Board is composed of six members. The
Supervisory Board is currently comprised of the following members:
Member
Profession
Appointed until
Dr. Johannes Conradi
(Chairman)
Richard Mully
(Vice-Chairman)
Lawyer and partner,
Freshfields Bruckhaus Deringer LLP
Director, Starr Street Limited
Dr. Bernhard Düttmann
Independent business consultant
Stefanie Frensch
Managing Director, HOWOGE Wohnungsbaugesellschaft mbH
Benoît Hérault
Marianne Voigt
Managing Director, Chambres de l’Artémise S.à r.l.
Managing Director, bettermarks GmbH
1) Until the end of the Annual General Meeting.
2) Judicial Appointment.
20201)
20191)
20171),2)
20211)
20191)
20201)
The following changes took place in the composition of the Supervisory Board in 2016: Stefanie Frensch
was elected as member of the Company’s Supervisory Board by the Annual General Meeting held on
May 12, 2016. With the close of this Annual General Meeting, the office term of the Chairman of the
Supervisory Board, Alexander Stuhlmann, ended. On the same day, the Supervisory Board elected Dr.
Johannes Conradi as Chairman of the Supervisory. Vice-Chairman Hermann Dambach resigned from the
Supervisory Board, effective October 31, 2016. In the meeting on November 30, 2016, the Supervisory
Board elected Richard Mully as new Vice-Chairman of the Supervisory Board. Dr. Bernhard Düttmann
was appointed successor of Mr. Dambach by resolution of the Hamburg Local Court (Registration Court)
to the Supervisory Board in January 2017.
A list on all memberships of the Supervisory Board members in supervisory or similar controlling bodies
in companies external to the Company group pursuant to Section 285, No. 10, of the HGB is presented
on pages 121 to 122 of the annual report.
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alstria Annual Report 2016
Corporate Governance
No former Management Board members 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.
With due consideration of the specific alstria situation, the Supervisory Board specified the following
goals for its composition as recently as November 2016, 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 should be reliable and, as a group, possess the
knowledge, competence and professional experience necessary to properly carry out their
duties as Supervisory Board members.
2. Women
For the female representation in the Supervisory Board, a quota of at least 30% is determined.
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—which could cause a substantial and not temporary conflict of interest—with
the Company, its executive bodies, a controlling shareholder or an enterprise associated with
the latter.
5.
Independent financial expert
At least one independent member of the Supervisory Board should have expertise in
accounting or the audit of annual 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 should not be older than 70 years of age as a general rule.
8. Length of membership
The membership in the Supervisory Board shall not exceed 20 years as a general rule.
In November 2016, the Supervisory Board assessed the implementation of these targets and came to
the conclusion that all targets named above are met as of the reporting date.
Aside from the objectives for its composition, the Supervisory Board also regularly reviews its
efficiency. Therefore, the work of the Supervisory Board is analyzed in a structured and transparent
manner to sustainably improve the processes and structure.
In its report to the Annual General Meeting, the Supervisory Board reports on its activities undertaken
in financial year 2016. The report is presented on pages 126 to 132 of the annual report.
alstria Annual Report 2016
135
Corporate Governance
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 management, internal control, internal
audit and compliance. In the complete 2016 financial year, the audit committee was comprised of
Marianne Voigt as Chair and Benoît Hérault as a member. Dr. Johannes Conradi was a member of the
audit committee until May 12, 2016. On the same date, Richard Mully was elected as his successor to
become a member of the audit committee.
The finance and investment committee discusses the Company’s financing strategy and approves the
acquisition or disposal of real estate property or other assets worth between EUR 30 m and
EUR 100 m, as well as financing agreements with a financing volume 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 finance and investment committee, furthermore, approves 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 contracts with Supervisory Board members, according
to Section 114 of the German Stock Corporation Act (Aktiengesetz, AktG). In the complete 2016
financial year, the finance and investment committee comprised Richard Mully as Chair and Benoît
Hérault as a member. Hermann Dambach was a member of the finance and investment committee
until he resigned as a member of the Supervisory Board effective October 31, 2016. Effective
September 8, 2016, Stefanie Frensch was elected to become a further member of the finance and
investment committee.
The nomination and remuneration 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 and 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 the financial year
2016, the nomination and remuneration committee was comprised as follows: Alexander Stuhlmann
was Chairman of the committee until his term of office ended with the close of the Annual General
Meeting on May 12, 2016. Effective the same date, Dr. Johannes Conradi was elected to be the
Chairman of the committee. Richard Mully was a member of the nomination and remuneration
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Corporate Governance
committee during the entire 2016 financial year. Furthermore, Hermann Dambach was a member of
the committee until he resigned from the Supervisory Board, effective October 31, 2016. Effective
September 8, 2016, Stefanie Frensch was elected to become a further member of the nomination and
remuneration committee.
Additionally, two special committees established by the Supervisory Board in 2015 acted in the 2016
financial year:
In May 2015, the Supervisory Board established a special committee authorized to grant all necessary
approvals and make all other declarations required in connection with the takeover of DO Deutsche
Office AG. The committee comprised Dr. Johannes Conradi as Chair and Benoît Hérault and Richard
Mully as members.
In September 2015, the Supervisory Board established a further special committee authorized to grant
all necessary approvals and make all other declarations required in connection with the issuance of
bonds. The committee comprised Dr. Johannes Conradi as Chair and Hermann Dambach, Benoît
Hérault and Richard Mully as members.
The Supervisory Board reports on the activities of the committees of the Supervisory Board during
2016 financial year in its report to the Annual General Meeting on pages 126 to 132 of the annual
report.
TARGET QUOTAS FOR WOMEN’S PARTICIPATION
The Management Board pays attention to diversity in filling its management positions and aims to
adequately consider women for these positions. In September 2015, the Management Board
determined the women quota for the first management level below the Management Board shall not
fall below 27.3%. This target quota has been achieved as of December 31, 2016, and applies, for the
time being, until June 30, 2017. In lack of a further management level with decision-making
competence and budget responsibility, a target quota of women’s participation for the second
management level was not to be determined.
Also, in September 2015, the Supervisory Board determined—and in November 2016, confirmed—a
target quota of at least 30% for the Supervisory Board. This quota is currently achieved: On December
31, 2016, the women quota in the Supervisory Board amounted to 33.34%. For the participation of
women in the Management Board, the Supervisory Board determined a quota of 0% in September 2015.
This quota has been achieved and applies until June 30, 2017.
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137
COMMUNICATION AND TRANSPARENCY
Corporate Governance
A transparent corporate governance and good communication with the shareholders and the public
contribute to strengthening investor and public trust in alstria’s work.
Communication with the public
When sharing information with people outside 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
Company’s situation and significant business events through financial reports, analyst and press
conferences, press and ad-hoc announcements and the Annual General Meeting. The alstria website
includes information on the Company and its shares, especially concerning its financial reports, share
price tracking and Managers’ Transactions Disclosure pursuant to Article 19 of the Market Abuse
Regulation (Directors’ Dealings). Moreover, alstria’s financial reports and website include a financial
calendar that indicates all dates of importance to shareholders. The announcements and pieces of
information are additionally published in English.
Relationship to the shareholders
alstria respects the rights of its shareholders and makes the 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, to an adequate
number of voting rights per share (one share, one vote) and to participate in our Annual General
Meeting. Shareholders have the option of exercising their voting rights personally, via an authorized
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 authorizing a proxy, shareholders now have the possibility to vote prior to the date
of the Annual General Meeting. This is why an additional option of voting by written mail would not
facilitate the exercise of the shareholders’ rights.
It is possible to send invitations and documents for General Meetings to the shareholders electronically
upon request. The invitation and the documents are to be made available for viewing prior to the
upcoming Annual General Meetings pursuant to the legal provisions that will be published on the
Company’s website 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.
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alstria Annual Report 2016
Corporate Governance
Financial reporting
alstria regularly informs shareholders and third parties by publishing its consolidate and half-year
financial statements, as well as quarterly interim 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 HGB.
The consolidated financial statements and the financial statements of alstria office REIT-AG are audited
by the independent auditor as appointed by the shareholders in the Annual General Meeting and by the
Supervisory Board. After examining its independence and following the election of the Annual General
Meeting, the audit committee of the Supervisory Board appoints an external auditing firm to audit the
financial
statements
and
negotiate
the
respective
auditing
fees. Deloitte 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 the 2016 financial year and for further
interim financial reports until the next ordinary general meeting in 2017. 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.
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 it considers the 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. The result of
this approach is that alstria might not always make decisions that maximize its short-term benefits,
striving to always take the path that will yield the best long-term prospects for the Company.
alstria’s sustainability approach, its achievements in its three defined areas of sustainability and 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.
COMPLIANCE
Complying with the legal provisions and treating business partners and competitors fairly is one of
alstria’s most important principles. In doing so, alstria regards itself as not only being bound to the law.
In accordance with Section 4.1.3 of the German Corporate Governance Code, the Management Board
ensures compliance with the legal provisions and Company guidelines throughout all of the Group’s
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139
Corporate Governance
companies. The entire Company shares the understanding that the trust of alstria’s shareholders,
tenants, employees and business partners crucially depend on the behavior of each individual employee.
For this reason, alstria has developed a code of conduct, listing guidelines for behavior and providing
orientation to resolve conflicts (e.g., conflicts of interest), thereby serving as a model for correct
behavior for all employees of the Company. The code of conduct is published on the Company’s
website.
alstria has set up a compliance organization 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 the violators
punished. This can include anything from disciplinary measures to dismissal, a claim for damages or even
prosecution.
GERMAN CORPORATE GOVERNANCE CODE
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 May 5, 2015) to an extent
beyond 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
recognized 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 Code’s recommendations. 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 15, 2017:
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alstria Annual Report 2016
Corporate Governance
DECLARATION OF COMPLIANCE, DATED FEBRUARY 15, 2017
“Since the prior declaration of compliance, dated February 25, 2016, 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 5, 2015. The Company intends to continue
to comply with the recommendations of the Code as amended on May 5, 2015, to the same extent:
Deductible for D&O insurance for the Supervisory Board, Section 3.8
The D&O insurance for the alstria office REIT-AG Supervisory Board does not comprise a deductible.
The Supervisory Board believes its members 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 ensures the Management Board is not
incentivized 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 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 financial reports by the Supervisory Board or its audit committee and the
Management Board prior to their publication, Section 7.1.2
The quarterly interim statements are made available to the Supervisory Board prior to their
publication and are discussed with the Supervisory Board in detail soon after publication. In the event
of considerable differences to the budget or business plan as approved by the Supervisory Board, the
Supervisory Board is given the opportunity to discuss the figures with the Management Board before
they are published. Half-year financial reports will be discusses with the audit committee of the
Supervisory Board prior to publication beginning financial year 2017. The Management Board and
Supervisory Board consider this approach appropriate and adequate.”
alstria Annual Report 2016
141
Corporate Governance
All other recommendations of the German Corporate Governance Code dated May 5, 2015, 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 the future.
March 2017
The Management Board
The Supervisory Board
142
alstria Annual Report 2016
Corporate Governance
REMUNERATION REPORT*
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 adequate remuneration
for the members of the Management Board is provided, which is based on customary market terms
and conditions and 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 meet-
ing for the 2009 financial year. Since then, it has been applied without changes. The remuneration
structure complies with the German Stock Corporation Act (AktG) and—except for the deviations de-
clared in the Compliance Statement according to Sec. 161 of the 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, include, 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 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.
THE MANAGEMENT BOARD REMUNERATION STRUCTURE
The Supervisory Board determines the target remuneration for each board member. The target remu-
neration for each Management Board member is comprised of a fixed, basic salary, short-term and
long-term variable components, and ancillary benefits (benefits in kind). The majority of the target
remuneration is made up of variable components that are dependent on achieving annual or multiyear
targets, as described below. The system also establishes 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.
alstria Annual Report 2016
143
Corporate Governance
Fixed Remuneration
The fixed element of the remuneration is a basic salary, which is independent of performance and is
paid as a salary on a pro rata basis each month. The fixed element of the remuneration amounts to
approximately 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 remu-
neration, excluding any ancillary benefits for the financial year, 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 re-
muneration
20%
Targets to assess perfor-
mance
Min. / max. target achieve-
ments
Discretionary factor
Like-for-like budgeted FFO
50% / 150%
0.8 / 1.2
Deferred component
25%
20%
20%
Total Shareholder Re-
turn (relative to EPRA
NA-REIT Europe Ex-UK)
Absolute Total Shareholder
Return
50% / 150%
0.8 / 1.2
100%
50% / 150%
0.8 / 1.2
100%
Form of the deferred com-
ponent
Virtual shares
Virtual shares
Virtual shares
Deferral period
2 years
4 years
4 years
Reference share price
Average share price for the pre-
vious 20 days
Average share price for
the previous 60 days
Average share price for the
previous 60 days
Payout cap for the deferred
components
250% of deferred amount
Virtual shares multiplied
by 250% of the refer-
ence share price on
grant date
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 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 ensures the
Management Board is not incentivized to enter into transactions to achieve any personal short-term
benefits.
Min./Max. target achievements
This category reflects the minimum performance that needs to be achieved in order for any payout
to occur (threshold), as well as the maximum performance that is considered in the payout calcula-
tion (cap).
Discretionary factor
This category reflects the factor that the Supervisory Board can apply to reflect the individual per-
formance of each board member.
144
alstria Annual Report 2016
Corporate Governance
Deferred component
This category reflects the part of the variable remuneration that is subject to a multiyear lockup.
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 payout 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 divided by
the reference share price.
Payout amount
For the STI, the payout 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 performance target achievement. The payout amount is equal to the number of
achieved virtual shares multiplied by the reference share price, added to the dividend per alstria
share paid during the deferral period, and then multiplied by the discretionary factor.
The table below summarizes the number of virtual shares granted under the existing STI and LTI
programs in the reporting period and outstanding as of December 31, 2016.
Start of de-
ferral period
Reference share
price in EUR
End of
deferral period
Number of
virtual shares
Number of
virtual shares
Olivier Elamine
Alexander Dexne
STI 2014
STI 2015
LTI 2013
LTI 2014
LTI 2015
LTI 2016
2015
2016
2013
2014
2015
2016
10.97
11.63
9.29
9.44
10.97
11.71
2017
2018
2017
2018
2019
2020
5,370
5,949
47,363
46,610
40,109
37,575
4,393
4,868
38,751
38,136
32,817
30,743
Ancillary Benefits
Furthermore, the members of the Management Board receive ancillary benefits granted as benefits
in kind, which essentially consist of insurance premiums, pension benefits, and the private use of a
company car.
2.
REMUNERATION OF THE MANAGEMENT BOARD IN THE 2016 FINANCIAL YEAR
In the last financial year, the total target remuneration for the members of the Management Board
amounted to EUR 2,188 k. The total amount paid to the Management Board in that financial year
amounted to EUR 2,928 k (including payouts on multiyear remuneration elements). The correctness
of the calculated payout amounts for the multiyear variable remuneration elements was confirmed
by an independent remuneration expert.
alstria Annual Report 2016
145
Corporate Governance
The remuneration of individual Management Board members is presented based on model tables pur-
suant to the German Corporate Governance Code, as amended on May 5, 2015.
The “Benefits granted” table shows the fixed remuneration and the target values of the variable
remuneration elements granted in the respective business year as well as hypothetical minimum and
maximum amounts for a future payout of the variable remuneration elements. We explicitly make
reference to the fact that the hypothetical maximum amounts could only be attained in the extraor-
dinary situation where all the conditions named in the “Conditions to attain maximum amounts for
variable remuneration elements granted in 2016” table occurred at the same time.
The “Allocation/benefits paid out” table shows the fixed remuneration and the amounts paid out in
the respective business year as variable remuneration elements.
Benefits granted
in EUR k
Benefits granted
Olivier Elamine
CEO
Alexander Dexne
CFO
2015
2016
2016
(Min)
2016
(Max)10)
2015
2016
2016
(Min)
2016
(Max)10)
Total amount of fixed compensa-
tion and ancillary benefits
Fixed compensation1)
Ancillary benefits2)
Total amount of one-year variable
compensation
One-year variable compensation
(STI 2015)
One-year variable compensation
(STI 2016)
Total amount of multiyear varia-
ble compensation
STI 2015 (1 plus 2 years)
STI 2016 (1 plus 2 years)
LTI 2015 (4 years)
LTI 2016 (4 years)
Total amount of fixed and varia-
ble compensation
Service costs9)
Total
450
440
10
448
440
8
173
173
1733)
-
-
1733)
498
585)
-
4407)
498
-
585)
-
-
4407)
448
440
8
0
-
0
0
-
0
-
0
448
440
8
380
360
20
378
360
18
378
360
18
312
142
142
-
1423)
-
3124)
-
1423)
2,240
407
407
-
2606)
475)
-
-
3607)
-
475)
-
1,9808)
-
3607)
0
-
0
0
-
0
-
0
1,121
1,119
84
84
1,205
1,203
448
84
532
3,000
84
3,084
929
58
987
927
58
985
378
58
436
378
360
18
255
-
2554)
1,833
-
2136)
-
1,6208)
2,466
58
2,524
1) Annual base salary according to service contracts.
2) Includes benefits related to company car.
3) 75% of the STI target value for the respective financial year.
4) Maximum attainable payout amount for 75% of the STI after 1 year:
(target value STI x 0.75 x 1.5 x 1.2).
5) 25% of the STI target value for the respective financial year.
6) Maximum attainable payout amount for 25% of the STI after 1 year plus 2 further years:
((target value STI x 0.25 x 1.5 x 1.2) x 2.5).
7) LTI target value for the respective financial year.
8) Maximum attainable payout amount for the LTI after the holding period of 4 years:
(1.5 x granted virtual shares x (2.5 x share price on grant date) x 1.2).
9) Includes benefits for insurance and pension plans.
10) Hypothetical maximum attainable payout amount under the condition that all assumptions described in the “Conditions to attain maximum
amounts” table are fulfilled.
146
alstria Annual Report 2016
Corporate Governance
Conditions to attain maximum amounts for
variable remuneration elements granted
in 2016
One-year variable compensation
and
Multiyear variable compensation
LTI (4 years)
and
and
and
1. alstria FFO 2016 = EUR 172.5 m (budgeted FFO of approx. EUR 115 m is
achieved by 150%)
2. Supervisory Board passes resolution on discretionary factor of 1.2
1. Absolute Total Shareholder Return ≥ 9% (i.e., total shareholder return for
alstria investors over 4 years of 9% p.a. or more)
2. Relative Total Shareholder Return (TSR vs. EPRA) ≥ 25% (i.e., alstria overper-
forming EPRA/NA-REIT Europe Index Ex UK by 25%)
3. Company share price increases by 250% (share price of EUR 11.71 on granting
date --> share price of EUR 29.28 on payment date after 4 years)
4. Supervisory Board passes resolution on discretionary factor of 1.2
STI (1 plus 2 years)
Price of Company shares increases by 250% (e.g., share price of EUR 11 on de-
ferral date --> share price of EUR 27.50 on payment date after 2 years)
Benefits paid out
in EUR k
Allocation/benefits paid out
Total amount of fixed compensation and ancillary benefits
Fixed compensation1)
Ancillary benefits2)
Total amount of one-year variable compensation
One-year variable compensation (STI 2014)3)
One-year variable compensation (STI 2015)3)
Total amount of multiyear variable compensation
STI 2012 (1 plus 2 years)4)
STI 2013 (1 plus 2 years)4)
LTI 2011 (4 years)5)
LTI 2012 (4 years)5)
Total amount of fixed and variable compensation
Service cost6)
Total
1) Annual base salary according to service contracts.
2) Includes benefits related to company car.
3) Payout amount for 75% of the STI after 1 year for the respective previous year.
4) Payout amount for 25% of the STI after 1 year plus 2 further years.
5) Payout amount for LTI after holding period of 4 years.
6) Includes benefits for insurance and pension plans.
Olivier Elamine
Alexander Dexne
CEO
CFO
2015
2016
2015
2016
450
440
10
177
177
-
350
86
-
264
-
977
84
448
440
8
208
-
208
870
-
75
-
795
1,526
84
1,061
1,610
380
360
20
145
145
-
286
70
-
216
-
811
58
869
378
360
18
170
-
170
712
-
61
-
651
1,260
58
1,318
In 2016, the LTI for 2012 was paid out. Over the four-year holding period, the Absolute Total Share-
holder Return on an alstria share was 11.90% per annum, and the Absolute Total Shareholder Return
performance target was capped at 150%. The average Relative Total Shareholder Return for an
alstria share was 1.68% per annum. As a result, approximately 115% of the virtual shares vested,
leading to a final LTI payout amounting to approximately 181% of the target value for the LTI for
2012.
alstria Annual Report 2016
147
Corporate Governance
In 2015, the LTI for 2011 was paid out. Over the four-year holding period, the Absolute Total Share-
holder Return for an alstria share was 5.8% per annum, and the average Relative Total Shareholder
Return for an alstria share was −10.9% per annum. The threshold for the performance target of the
Relative Total Shareholder Return was not met. As a result, approximately 48% of the virtual shares
vested, leading to a final LTI payout amounting to approximately 60% of the target value for the
LTI for 2011.
3.
OTHER MANDATORY DISCLOSURES
If membership to the Management Board is terminated, members have agreed to a postcontractual
noncompete agreement of up to twelve months, which may be waived by alstria with a six-month
notice period. As long as alstria exercises this postcontractual noncompete 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 will 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.
No individual member of the Management Board was granted or rendered any benefits by third parties
with regard to the Management Board’s work in the 2016 financial year.
148
alstria Annual Report 2016
Corporate Governance
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 EUR 42 k. The
Chairman of the Supervisory Board receives an additional annual amount of EUR 21 k; the Vice-Chair-
man receives an additional amount of EUR 10.5 k. Membership in the Audit Committee entitles the
member to an additional remuneration of EUR 10 k, while the chair of the audit committee receives
EUR 15 k per year. Membership in the nomination and remuneration committee as well as the finance
and investment committee entitles the member to an additional annual remuneration of EUR 5 k. The
chairmen of these committees are compensated with another EUR 2.5 k per year. Members who sit on
the Supervisory Board for only part of a year receive a pro rata temporis remuneration.
2.
REMUNERATION OF THE SUPERVISORY BOARD IN THE 2016 FINANCIAL YEAR
The total remuneration for the Supervisory Board members in 2016 amounted to EUR 347 k. The remu-
neration for the individual Supervisory Board members for the 2015 and 2016 financial years is as
follows:
in EUR k
Supervisory
Board member
Function on the Su-
pervisory Board
Dr. Johannes Conradi
Chairman2)
Function on the
Committees1) in
2016
A2), B (ch)2)
A2), B, C (ch)
B2), C2)
A, C
A (ch)
Vice-Chairman2)
Member2)
Member
Member
Chairman2)
B (ch)2), C2)
Vice-Chairman2)
B2), C2)
Member2)
Remuneration for
2015
Remuneration for
2016
65.63
54.50
-
47.85
57.00
75.08
9.92
42.74
352.72
65.66
61.81
29.99
57.00
57.00
25.62
50.28
-
347.36
Richard Mully
Stefanie Frensch
since May 12, 2016
Benoît Hérault
Marianne Voigt
Alexander Stuhlmann
until May 12, 2016
Hermann Dambach
until October 31, 2016
Roger Lee
until October 27, 2015
Total
1) A=audit committee, B=nomination and remuneration committee, C=finance and investment committee, ch=chair.
2) Temporarily.
alstria Annual Report 2016
149
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, 2016, 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, 75.22% 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 3,050,147 k which
equals to 90.17 % 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 balance sheet
date which were included in the consolidated statements amount to a maximum of 20 %,
namely EUR 1,546 k and therefore 0.05 %.
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 2016, the entire sales revenues of the Group plus other earnings
from immovable assets amounted to EUR 306.4 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 186 k in the financial year 2016. This equals 0.06 % of
total revenue plus other earnings from immovable assets.
150
alstria Annual Report 2016
REIT Disclosures
5. In the financial year 2016, a dividend payment of EUR 76,564 k for the prior financial year was
distributed to the shareholders. The financial year 2015 resulted in a net loss amounted to
EUR 174,132 k 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 2012, the Group has realised 32.75 % 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 1,728.4 m. This equals to 56.67 % 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 21, 2017
Olivier Elamine
CEO
Alexander Dexne
CFO
alstria Annual Report 2016
151
REIT MEMORANDUM
REIT Disclosures
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, 2016, we have audited the
information given in the attached declaration of the management board members for the compliance
with the requirements of Section 11 to 15 of the REIT Act and the composition of the proceeds con-
cerning the pre-taxation of proceeds according to Section 19 (3) and Section 19a REIT Act as of Decem-
ber 31, 2016 (hereinafter referred to as ‘REIT declaration’). The information given in the REIT decla-
ration 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, 2016 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,
2016 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 state-
ments 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.
152
alstria Annual Report 2016
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, 2016 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 21, 2017
Deloitte GmbH
Wirtschaftsprüfungsgesellschaft
(Seal)
Signed: Reiher
Wirtschaftsprüfer
Signed: Deutsch
Wirtschaftsprüferin
[German Public Auditor]
[German Public Auditor]
alstria Annual Report 2016
153
Other information
OTHER INFORMATION
FINANCIAL CALENDAR
Events 2017
May 9
May 16
August 8
November 7
CONTACT/IMPRINT
Publication of Q1
Interim report
Annual General Meeting
Publication of Q2
Half-year interim report
Publication of Q3
Interim report
Publication of sustainability report
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 assessments which
we have made on the basis of the information available to us at the time. Should the assumptions on
which the statements are based not occur, or if risks should arise the actual results could differ mate-
rially 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
154
alstria Annual Report 2016
alstria office REIT-AG
www.alstria.com
info@alstria.de
Bäckerbreitergang 75
20355 Hamburg, Germany
T + 49 (0) 40 / 22 63 41-300
F + 49 (0) 40 / 22 63 41-310
Platz der Einheit 1
60327 Frankfurt / Main, Germany
T + 49 (0) 69 / 153 256-740
F + 49 (0) 69 / 153 256-745
Elisabethstrasse 11
40217 Düsseldorf, Germany
T + 49 (0) 211 / 30 12 16-600
F + 49 (0) 211 / 30 12 16-615
Danneckerstrasse 37
70182 Stuttgart, Germany
T + 49 (0) 711 / 33 50 01-50
F + 49 (0) 711 / 33 50 01-55
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