ANNUAL REPORT
2017
IFRS financial statements
KEY FIGURES
FIVE-YEAR OVERVIEW
EUR k
Revenues and Earnings
Revenues
Net rental income
Consolidated profit for the period1)
FFO1)
Earnings per share (EUR)1)
FFO per share (EUR)1)
1) Excluding minorities.
EUR k
Balance Sheet
Five-year overview
2017
2016
2015
2014
2013
193,680
172,279
296,987
113,834
1.94
0.74
202,663
179,014
176,872
116,410
1.16
0.76
115,337
102,140
-110,970
59,397
-1.15
0.61
101,782
104,224
90,020
36,953
47,626
0.47
0.60
93,249
38,945
45,328
0.49
0.57
Dec. 31,
2017
Dec. 31,
2016
Dec. 31,
2015
Dec. 31,
2014
Dec. 31,
2013
Investment property
3,331,858
2,999,099
3,260,467
1,645,840
1,632,362
Total assets
Equity
Liabilities
Net asset value (NAV) per share (EUR)
Diluted NAV per share (EUR)1)
Net LTV (%)
3,584,069
3,382,633
3,850,580
1,769,304
1,785,679
1,954,660
1,728,438
1,619,377
1,629,409
1,654,195
2,192,916
12.70
12.69
40.0
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
1) 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,
2017
Dec. 31,
2016
Dec. 31,
2015
Dec. 31,
2014
Dec. 31,
2013
57.1
100
2017
0.65
20.0
16.7
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
Dec. 31,
2017
Dec. 31,
2016
Dec. 31,
2015
Dec. 31,
2014
Dec. 31,
2013
12.71
12.45
4.6
5.0
9.4
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
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 2017
CONTENT
DETAIL INDEX GROUP MANAGEMENT REPORT .................................................... 2
GROUP MANAGEMENT REPORT ...................................................................... 3
ECONOMICS AND STRATEGY ....................................................................................... 3
FINANCIAL ANALYSIS ............................................................................................. 13
RISK AND OPPORTUNITY REPORT .............................................................................. 24
SUSTAINABILITY REPORT ........................................................................................ 41
DISCLOSURES REQUIRED BY TAKEOVER LAW ................................................................. 42
ADDITIONAL GROUP DISCLOSURE .............................................................................. 46
EXPECTED DEVELOPMENTS ...................................................................................... 47
DETAIL INDEX CONSOLIDATED FINANCIAL STATEMENTS ....................................... 49
CONSOLIDATED FINANCIAL STATEMENTS ......................................................... 50
CONSOLIDATED INCOME STATEMENT .......................................................................... 50
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ................................................ 51
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...................................................... 52
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................ 54
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...................................................... 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .................................................. 58
RESPONSIBILITY STATEMENT ...................................................................... 124
INDEPENDENT AUDITOR‘S REPORT............................................................... 125
CORPORATE GOVERNANCE ........................................................................ 135
REPORT OF THE SUPERVISORY BOARD ....................................................................... 135
CORPORATE GOVERNANCE STATEMENT ...................................................................... 143
REMUNERATION REPORT ....................................................................................... 155
REIT DISCLOSURES .................................................................................. 167
REIT DECLARATION .............................................................................................. 167
REIT MEMORANDUM ............................................................................................. 169
FINANCIAL CALENDAR/IMPRINT ................................................................... 171
FINANCIAL CALENDAR ........................................................................................... 171
CONTACT/IMPRINT .............................................................................................. 171
alstria Annual Report 2017
Group Management Report
DETAIL INDEX GROUP MANAGEMENT REPORT
ECONOMICS AND STRATEGY ....................................................................................... 3
ECONOMIC CONDITIONS ......................................................................................... 3
STRATEGY AND STRUCTURE .................................................................................... 5
PORTFOLIO OVERVIEW........................................................................................... 6
FINANCIAL ANALYSIS ............................................................................................. 13
EARNINGS POSITION ............................................................................................ 13
FINANCIAL AND ASSET POSITION ............................................................................. 17
CORPORATE MANAGEMENT ................................................................................... 23
RISK AND OPPORTUNITY REPORT .............................................................................. 24
RISK REPORT .................................................................................................... 24
REPORT ON OPPORTUNITIES .................................................................................. 39
SUSTAINABILITY REPORT ........................................................................................ 41
DISCLOSURES REQUIRED BY TAKEOVER LAW ................................................................. 42
ADDITIONAL GROUP DISCLOSURE .............................................................................. 46
EMPLOYEES ...................................................................................................... 46
REMUNERATION REPORT ...................................................................................... 46
CORPORATE GOVERNANCE GROUP DECLARATION PURSUANT TO SECTION 315D HGB (“HANDELS-
GESETZBUCH”: GERMAN COMMERCIAL CODE) ......................................................... 46
DIVIDEND ......................................................................................................... 46
EXPECTED DEVELOPMENTS ...................................................................................... 47
2
alstria Annual Report 2017
Group Management Report
GROUP MANAGEMENT REPORT
ECONOMICS AND STRATEGY
ECONOMIC CONDITIONS
Framework
The German economy again proved to be solid in 2017. Germany’s GDP increased by 2.2%, which was
its highest growth rate since 2011. As in the previous year, the growth was above the 10-year average
(+1.3%). This good development was also reflected in the German labour market, as the
unemployment rate decreased by 0.4 percentage points to 5.7%. The employment level reached a
peak of 44.3 million employees, which is 1.5% more than last year. This is the highest number since
the German reunification.*
The total volume of the German investment market for commercial real estate increased by 9.1% to
EUR 57.4 billion compared to the previous year. The transaction volume is above the EUR 50-billion
mark for the third time in a row. It can be concluded that Germany still offers great investment
opportunities due to its strong key economic and real estate figures.**
Overview of the German office-property market
Development of office rents
In 2017, according to the largest commercial real estate agencies, the average rents for office space
in six out of seven important commercial real estate markets - Berlin, Düsseldorf, Frankfurt, Hamburg,
Cologne, Munich, and Stuttgart - known as the Big 7 - exceeded the previous year’s levels, only
Hamburg remained stable at EUR 15.21/m². Frankfurt reached the highest average rent for office
space with EUR 20.35/m², followed by Berlin with EUR 19.23/m², Munich with EUR 17.31/m²,
Düsseldorf with EUR 15.08/m², Stuttgart with EUR 13.40/m², and Cologne with EUR 12.90/m².
Take-up in major German cities
According to the largest commercial real estate agencies, the vacancy rate of office properties in
German cities decreased from 5.7% in 2016 to 4.8% in 2017, which represents a total vacancy of
4.4 million m² (a decrease of 0.7 million m²) and the lowest value in the last 15 years. Among the Big
7, the highest vacancy rate was recorded in Frankfurt with 9.0%, followed by those in Düsseldorf with
8.0%, Hamburg with 4.8%, Cologne with 3.8%, Munich with 3.1%, Berlin with 2.7%, and Stuttgart with
2.4%.
* Annual Economic Report 2018 from the Federal Ministry of Economics and Energy.
** Sources of real estate market data in this chapter are Jones Lang LaSalle, Colliers International Deutschland GmbH, BNP Paribas Real Estate,
and CBRE GmbH.
alstria Annual Report 2017
3
Group Management Report
New lease-ups
In 2017, according to the largest commercial real estate agencies, new lease contracts were signed
for more than 4.2 million m² of office space in the Big 7 German cities. This reflects an increase of
0.2 million m², or 6%, compared to the previous year. The highest positive take-ups of office space
were registered in Munich with 989,200 m² (+27%), along with 930,075 m² (+6%) in Berlin, 710,500 m²
(+31%) in Frankfurt and 628,750 m² (+15%) in Hamburg. Compared to the aforementioned markets,
Cologne at 308,300 m² (-25%), Stuttgart at 261,550 m² (-37%), and Düsseldorf at 370,075 m² (-5%)
showed a decline in office space sales. In particular, these declines were attributed to the declining
supply of space.
New office supply
According to the largest commercial real estate agencies, the delivery of new office spaces amounted
to approx. 912,950 m² in 2017. Compared to last year, this was a decline of around 23%. Düsseldorf
(+89%) was the only city of the Big 7 that generated an increase in new office spaces compared to the
previous year. New office supply declined in the other Big 7 markets, including Berlin (-49%), followed
by Frankfurt (-42%), Hamburg (-36%), Cologne (-23%), Stuttgart (-16%), and Munich (-14%). For 2018,
an increase of the completion volume (approx. 1,300,000 m²) is forecasted.
Investment markets
According to the largest commercial real estate agencies, the positive trend in the investment
markets continued in fiscal year 2017. Total investment volume (EUR 57.4 billion for commercial
assets) was about 9.1% higher than the previous year’s result. The Big 7 cities recorded a transaction
volume of around EUR 30.4 billion. Through the increase in Berlin’s market volume, Berlin (EUR 7.6
billion; +51%) replaced Frankfurt (EUR 7.0 billion; +7%) at the top. Munich’s market had the third-
highest transaction volume of the Big 7 with EUR 5.7 billion (-13%), followed by Hamburg with
EUR 3.7 billion (-24%), Düsseldorf with EUR 3.1 billion (+30%), Cologne with EUR 2.1 billion (+23%),
and Stuttgart with EUR 1.3 billion (-31%). With regard to the deal structure, approx. 65% of the
commercial investment turnover in fiscal year 2017 was related to single-asset deals, while the share
of portfolio transactions amounted to 35%; these values are in accordance with those from the
previous year.
There were no apparent fundamental changes in investment strategies due to the price increases of
real estate, although there were indications of slightly higher risk tolerance. Although investors still
focused on core assets - which are characterised by their good condition, good location, and long-
term, attractive letting status - the investments in Value-Add, Core-Plus, and Opportunistic assets
expanded.
4
alstria Annual Report 2017
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. As of December 31, 2017, the alstria Group consisted of the corporate
parent, alstria office REIT-AG, and 57 direct and indirect subsidiaries (together hereafter referred to
as “alstria” or “the Group”). Operational decisions are made at the parent-company level. While
alstria office REIT-AG directly held more than 50% of the Company’s real estate assets (66 properties
with an overall market value of EUR 1.6 billion), the remaining real estate assets were held by 34
subsidiaries as of December 31, 2017.
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 existent 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 characterised 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 realised
through constant modernisation measures and reduced vacancy.
▪ The potential of value enhancements is realised through comprehensive repositioning and
asset development.
▪ Providing the best value for the money secures the lettability of the assets. Many tenants are
price sensitive, and only lessors who offer better value for money than the competition will
be successful.
The aim of this strategy is the steady development of revenues and funds from operations (FFO).
Due to its active Asset Management approach and its high level of discipline regarding prices, alstria
believes it 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’s portfolio has a weighted average of unexpired lease terms - WAULT - of around
4.7 years. Approx. 60% of its rental income is derived from a limited 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 pursues a nontrading strategy and focuses on long-term value creation by conducting
work on and within each building (i.e., Asset and Property Management). At alstria, these
alstria Annual Report 2017
5
Group Management Report
activities are handled internally, which differentiates the Company from its main public and
private competitors.
▪ A key element of alstria’s strategy is supporting tenants in optimising 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 optimising 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 bn)1)
Annual contractual rent (EUR m)
Valuation yield (%, annual contractual rent/market value)
Lettable area (m²)
EPRA vacancy rate (%)
WAULT (years)
Average rent/m² (EUR/month)
1) Including fair value of owner-occupied properties.
Real Estate Operations
Letting metrics
New leases (m²)1))
Renewals of leases (m²)
Dec. 31, 2017
Dec. 31, 2016
116
0
3.4
202.0
5.9
108
1
3.0
188.4
6.2
1,570,100
1,524,300
9.4
4.7
12.1
9.2
4.9
11.6
2017
98,300
147,100
2016
76,600
118,153
Change
21,700
28,947
1) New leases refer to letting of vacant space. This category does not include lease renewals, prolongations, or exercised renewal options.
Letting activities (as measured by new leases and lease extensions) were at a record level in fiscal
year 2017. The signings of the following lease contracts had a substantial impact on the positive
development of the new leases:
6
alstria Annual Report 2017
Group Management Report
Asset
Jagenbergstraße 1
City
Neuss
Hauptstätter Straße 65–67
Stuttgart
Am Seestern 1
Ernst-Merck-Straße 9
Horbeller Straße 11
Ernst-Merck-Straße 9
Düsseldorf
Hamburg
Cologne
Hamburg
Ingersheimer Straße 20
Stuttgart
Steinstraße 5-7
Goldsteinstraße 114
Platz der Einheit 1
Hamburg
Frankfurt
Frankfurt
Am Wehrhahn 33
Düsseldorf
Washingtonstraße 16/16a
Dresden
Bamlerstraße 1–5
Essen
Area1)
(m²)
8,7002)
8,400
7,600
5,850
4,7004)
4,300
3,4005)
3,000
2,300
2,250
1,900
1,630
1,500
Annual rent
(EUR k)
Lease length
(years)
Beginning of
lease contract
810
1,677
1,310
1,285
480
868
519
549
290
515
363
155
172
10.5
10.0
10.0
10.0
10.0
11.0
6.0
12.2
10.0
5.0
7.0
4.3
3.5
May 1, 2017
Jan. 1, 2018
Dec. 1, 2017
May 1, 20183)
Aug. 1, 2018
Oct. 1, 2018
Jan. 1, 2018
Apr. 1, 20183)
Mar. 1, 2018
July 1, 2017
Jun. 1, 2017
Sep. 1, 2017
Jan. 1, 2018
1) Office and ancillary space.
2) Thereof 6,700 m² extension of an existing lease and 2,000 m² of a new lease.
3) Earliest possible date.
4) Thereof 300 m² extension of an existing lease and 4,400 m² of a new lease.
5) Thereof 700 m² extension of an existing lease and 2,700 m² of a new lease.
For financial year 2018, reducing vacancy remains the operational focus.
Portfolio Valuation and Regions
As of December 31, 2017, external appraisers (Colliers International Valuation UK LLP and Savills
Advisory Services Germany GmbH & Co. KG) valued alstria’s portfolio in line with International
Financial Reporting Standards (IFRS) 13 requirements at market value. The valuation resulted in a
total market value for the investment properties of EUR 3,409 million.* Of this total market value,
approx. EUR 3,286 million, or over 96%, was located in core markets of the Company. The regional
split is shown in the table below:
Total portfolio by region
(% of market value)
Rhine-Ruhr
Hamburg
Rhine-Main
Stuttgart
Berlin
Others
Dec. 31, 2017
Dec. 31, 2016
Change (pp)
29
29
21
12
5
4
29
27
21
14
3
6
0
2
0
-2
2
-2
Furthermore, the focus is clearly on one asset class: Of the total lettable area, approx. 90% is office
space.**
* Inclusive assets held for sale.
** Office and storage.
alstria Annual Report 2017
7
Group Management Report
Tenants
The table below shows the ten largest tenants of alstria as of December 31, 2017:
alstria’s main tenants
(% of annual rent)
City of Hamburg
Daimler AG
GMG Generalmietgesellschaft
Zürich Versicherung AG
HOCHTIEF Aktiengesellschaft
Bilfinger SE
Residenz am Dom gem. Betriebsgesellschaft mbH
ATOS Origin
Württembergische Lebensversicherung AG
City of Berlin
Others
Dec. 31, 2017
Dec. 31, 2016
Change (pp)
12
12
10
4
4
3
2
1
1
1
50
13
12
10
5
4
3
2
1
1
1
48
-1
0
0
-1
0
0
0
0
0
0
2
The table below summarises the current lease expiry profile of the portfolio for the next three years:
Lease expiry profile
(% of annual rent)
2018
2019
2020
Transactions
Dec. 31, 2017
Dec. 31, 2016
Change (pp)
12.8
18.8
14.0
18.0
18.1
11.6
-5.2
0.7
2.4
alstria’s investment decisions are based on both analyses of local markets and individual inspections
of each asset. The latter focus 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. alstria completed the following transactions in fiscal
year 2017:
8
alstria Annual Report 2017
Group Management Report
Asset
Disposals
Max-Eyth-Straße 2
Zellescher Weg 21–25a
Vichystraße 7–9
City
Dortmund
Dresden
Bruchsal
Carl-Benz-Straße 15
Ludwigsburg
Doktorweg 2-4
Detmold
Frankfurter Straße 71–75
Eschborn
Eschersheimer Landstraße 55 Frankfurt
Sale/
acquisition
price(EUR k)1)
Annual
rent
(EUR k)2)
Avg. lease
length
(years)2)
Signing
SPA
Transfer of benefits
and burdens
4,200
10,500
13,400
19,600
11,300
16,200
44,000
4
695
1,048
1,690
816
1,086
1,625
2.2
2.0
4.1
5.3
4.7
16.1
1.8
Oct. 14, 2016
Feb. 28, 2017
Dec. 15, 2016
Feb. 1, 2017
Aug. 28, 2017
Oct. 31, 2017
Aug. 28, 2017
Oct. 31, 2017
Sept. 1, 2017
Dec. 31, 2017
Oct. 9, 2017
Jun 30, 20183)
Dec. 21, 2017
Mar 31, 20183)
Total Disposals
119,200
6,964
Disposals in the Joint Venture
Große Bleichen 23–274)
Hamburg
170,000
5,401
7.8
July 18, 2017
Aug. 31, 2017
Acquisitions
Friedrich-List-Straße 20
Essen
18,4005)
1,478
3.0
Mar. 2, 2017
Apr. 22, 2017
Portfolio
Am Borsigturm 13–19, 27–33
Berlin
Am Borsigturm 44–46, 52–54
Rankestraße 17 /
Schaperstraße 12
Berlin
Berlin
Willstätterstraße 11–15
Immermannstraße 59 /
Karlstraße 76
Kanzlerstraße 8
Am Wehrhahn 28–30
D2-Park 5
Essener Bogen 6 a–d
Essener Straße 97
Düsseldorf
Düsseldorf
Düsseldorf
Düsseldorf
Ratingen
Hamburg
Hamburg
Heidenkampsweg 44–46
Hamburg
Heidenkampsweg 99–101
Hamburg
Total Portfolio
Eichwiesenring 1
Sonninstraße 26–28
Total Acquisitions
Stuttgart
Hamburg
1,277
761
476
2,301
962
951
382
669
705
148
348
897
158,5005)
9,877
28,000
54,584
1,534
2,160
259,484
15,049
2.9
3.1
4.3
3.2
4.3
2.4
6.8
1.5
5.2
2.3
2.8
3.9
5.6
5.8
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Apr. 24, 2017
July 1, 2017
Dec. 20, 2017
Q2 20183)
Dec. 21, 2017
Feb. 1, 2018
1) Excluding transaction costs.
2) At the time of the signing of the sales and purchase agreement.
3) Expected.
4) The asset was sold by Alstria VI. Hamburgische Grundbesitz GmbH & Co. KG, a 49/51 percent joint venture between alstria office REIT-AG and
Quantum Immobilien AG.
5) All-in-costs of EUR 187.7 million (Friedrich-List-Straße EUR 19.7 million and portfolio EUR 168.0 million).
alstria Annual Report 2017
9
Group Management Report
Refurbishment projects
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 trans-
action in 2012. 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 re-
garding building services and flexibility, alstria decided to fundamentally revitalise the building. This
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 will allow for a highly
flexible and complete restructuring of the office floor plans. The new building technology applied by
the improvements corresponds to the highly flexible new design. Apart from the office areas, the new
two-storey entrances will be highlighted. Partial heightening of particular building parts, more effi-
cient building equipment, and roof terraces will increase the lettable area.
The refurbishment, which started in March 2016, is expected to be completed by mid-2018. The prop-
erty is currently in the marketing phase and the first rental success has already been achieved.
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 revitalise the building. This
comprises, among other improvements, the gutting of the office spaces and the attic. The roof will
also be partly renewed to enlarge the space on the 7th floor and convert this floor from storage to
office space.
The refurbishment, which started in October 2016, is expected to be completed by mid-2018. By
acquiring two anchor tenants, alstria has already been able to long-term let almost all of the newly
developed spaces.
10
alstria Annual Report 2017
Group Management Report
Besenbinderhof 41, Hamburg
The listed building from 1927 was built for the Public Health Department and acquired by alstria in
2006 as part of the primo-portfolio. The property is located close to the central station in Hamburg
and is characterised by its clinker front, with narrow clinker pillars. In the front part, the building has
a basement and five floors, and it decreases by one floor to the south. The building was built in typical
1920s style. Currently, the building is used as an office building. The property has 14 parking spaces,
which are accessible via a route from Nagelsweg.
As the offices do not meet today’s requirements in terms of space flexibility or the building’s technical
equipment, alstria decided to fundamentally revitalise the building. This current planning which is
still subject to the approval of the authorities includes the core removal of the office space, except
for the shell of the building. Over the course of this refurbishment, the original outer appearance (six
floors) is to be rebuilt by adding one floor to the main building. The building is supplemented by an
extension on the rear plot, which adds additional office space. The main entrance doors and staircase
houses remain with their 1920s charm. Beside the main entrance, two new entrances will be created
that resemble the main entrance in terms of style and materials.
The construction work, which is expected to continue until the end of 2019, will start in Septem-
ber 2018.
Amsinckstraße 28 and 34, Hamburg
The buildings Amsinckstraße 28 and 34 are located in the centre of Hamburg between the Kon-
torhausviertel, HafenCity, and the City Süd. The properties were built in 1991 and 1993 for official
use by the City of Hamburg. Amsinckstraße 28 has around 8,500 m² of total rental space and an
underground carpark with 73 parking spaces. In contrast, Amsinckstraße 34 has around 6,600 m² of
total rental space as well as an underground carpark with 64 parking spaces.
After several years of governmental utilisation, the properties do not meet the requirements of mod-
ern office buildings, so the buildings are undergoing extensive refurbishment. The aim of both pro-
jects is to change the building from single-tenant to multi-tenant utilisation with totally new office
areas that will adapt to the current standards. The technical equipment will be entirely restored. An
advantage of the rental areas is the highly flexible leasing possibilities. The focus is on the flexibility
and modernity of the offices, including high design standards. Due to the layout of Amsinckstraße 28,
modern offices with an industrial character as well as generous retail areas with high visibility are
possible to realise, especially on the ground floor.
The refurbishment is expected to be finished by the end of 2018.
alstria Annual Report 2017
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Group Management Report
Gustav-Nachtigal-Straße 3, Wiesbaden
The office skyscraper was built in 1984 and contains approximately 18,455 m² of total rental space as
well as an underground carpark with 160 parking spaces. The property is located about five minutes
east of Wiesbaden Main Station. It consists of eight upper and two basement floors. On the 8th floor
is a roof terrace with a view over Wiesbaden. On the ground floor are a spacious foyer, a general
conference area, offices, and a large canteen.
After more than 30 years of multi-tenant utilisation, neither the appearance nor the office
workstations meet today’s requirements. The entrance as well as all usable areas and offices are
being redesigned. The new multi-tenant rental units are being developed floor by floor via the central
core with elevators, three staircases, and newly arranged access doors, to make flexible rental
possible.
The revitalisation of the building is currently in the planning phase.
In 2017, alstria invested around EUR 59 million in ongoing refurbishment projects. Around
EUR 18 million of this amount was for development projects, and the remainder of EUR 41 million.
was invested in value-increasing tenant-improvement measures. The main part of the 2017 capital
expenditure investment was linked to the assets Momentum and Am Seestern in Düsseldorf, the Berlin
asset at Darwinstraße, the assets Bieberhaus and Steinstraße 5–7 in Hamburg, and KASTOR TOWER in
Frankfurt. Within the next two years, alstria is planning to invest around EUR 120 million into its
portfolio through development projects. 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.
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alstria Annual Report 2017
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FINANCIAL ANALYSIS
Financial year 2017 developed as expected for alstria. alstria’s original revenue and FFO forecasts for
2017 increased, for the most part, due to the transfer of newly acquired assets as of July 1, 2017. As
a result, the revenue forecast increased by EUR 8 million, from EUR 185 million to EUR 193 million,
for financial year 2017. As a consequence, the FFO post minorities forecast increased by EUR 5 million
from EUR 108 million to EUR 113 million. alstria’s 2017 revenues of approx. EUR 194 million were
within the frame of the adjusted forecast of EUR 193 million. The funds from operations post minor-
ities (FFO) amounted to EUR 114 million in the reporting period, which is also in line with the fore-
casted level of EUR 113 million for the alstria Group.
EARNINGS POSITION
Funds from operations (FFO)
FFO amounted to EUR 117,550 k (before minorities) or EUR 113,834 k (after minorities) in 2017, com-
pared to EUR 121,558 k (before minorities) or EUR 116,410 k (after minorities) in 2016. The FFO mar-
gin increased to 60.7% (i.e., by 0.7 percentage points; before minorities). As a result, FFO per share
was EUR 0.76 (before minorities) or EUR 0.74 (after minorities) in financial year 2017 (2016: EUR 0.79
before minorities; EUR 0.76 after minorities).*
The slight decrease mainly resulted from a decrease in net rental income by EUR 6,735 k.
EUR k
Pre-tax 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 the 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 (AFFO)3)
Number of shares as of December 31 (k)
FFO per share (EUR)
2017
299,084
-181,492
9,334
-19,693
-30,121
40,438
117,550
-3,716
113,834
-40,700
73,134
153,962
0.74
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
1) This is noncash income or expenses plus nonrecurring effects. The main effects in financial year 2016 were costs related to the takeover of
alstria office Prime (EUR 6,686 k), the costs 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). The main effects in financial year 2017 were prepayment penalties due to the partial
repurchase of existing bonds (EUR 31,981 k), expenses for the valuation of the limited partner capital (EUR 9,317 k), another operating income
from compensation payments by tenants (EUR 6,820 k) as well as costs related to the takeover of alstria office Prime (EUR 930 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) AFFO 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.
* This is calculated using the number of shares as of December 31, 2017, which was 153,961,654 (December 31, 2016: 153,231,217).
alstria Annual Report 2017
13
Group Management Report
Net operating result
alstria closed financial year 2017 with a net operating result (before financing costs and taxes) of
EUR 348,008 k, compared to EUR 247,109 k for the previous year.
As compared to the previous year, alstria had a higher other operating result, and a higher valuation
result. The following table shows the main figures of the income statements for financial years 2017
and 2016:
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
Revenues
2017
193,680
172,279
-21,856
-3,600
2016
202,663
179,014
-21,147
-9,028
146,823
148,839
181,492
19,693
72,806
25,464
348,008
247,109
In the reporting period, revenues totalled EUR 193,680 k (2016: EUR 202,663 k), which corresponds
to a decrease of EUR 8,983 k (or 4.4%) compared to previous year’s revenues. The decrease mainly
resulted from the disposal of assets in 2016.
Real estate operating expenses
Real estate operating expenses amounted to EUR 21,637 k (2016: EUR 23,445 k). The expense ratio
decreased from 11.6% in 2016 to 11.2% in 2017. This was mainly due to fire-protection measures that
needed to be implemented in two assets from the alstria office Prime-Portfolio in the first half of
2016.
Thus, the Group’s net rental income decreased by EUR 6,735 k to EUR 172,279 k (2016:
EUR 179,014 k).
Administrative and personnel expenses
Administrative expenses decreased by EUR 431 k to EUR 8,033 k, which was basically due to lower
depreciation and office area costs (2016: EUR 8,464 k). Personnel expenses were EUR 13,823 k for the
reporting period (2016: EUR 12,683 k). The 2017 increase was mostly a result of an increase of salaries
by EUR 587 k to EUR 6,629 k, due to an increased number of employees. Moreover, the remuneration
for virtual shares increased by EUR 487 k to EUR 1,488 k as a consequence of the appreciation of the
share price of the Company. Total administrative and personnel expenditures were around 11.3% of
total revenues and 0.6% of the value of the market value of the portfolio (2016: 10.4% and 0.7%
respectively).
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alstria Annual Report 2017
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Other operating result
alstria’s other operating result amounted to EUR -3,600 k during the reporting period
(2016: EUR -9,028 k). A EUR 5,354 k increase in income mainly resulted from compensation payments
by tenants in the amount of EUR 6,820 k.
Net result from fair value adjustments on investment property
In financial year 2017, the net result from fair value adjustments to investment properties was
EUR 181,492 k (2016: EUR 72,806 k). The growth was mainly linked to the increase in values of German
office real estate in the market.
Net result on disposals of investment property
In 2017, alstria was able to achieve a positive result of EUR 19,963 k from the disposal of properties.
The realised disposal gains mainly resulted from the sale of the Eschersheimer Landstraße asset in
Frankfurt.
Net financial result
EUR k
Interest expenses, corporate bonds
Interest expenses, convertible bond
Interest expenses, other loans
Interest result Schuldschein
Interest expenses, alstria office Prime portfolio loans
Interest expenses, syndicated loans
Interest result derivatives
Other interest expenses
Financial expenses
Financial income/interest income
Other financial expenses
Net financial result
2017
-23,314
-5,357
-3,399
-3,248
-186
0
0
-480
-35,984
816
-32,540
-67,708
2016
-20,496
-5,116
-4,074
-2,036
-6,728
-6,723
-207
0
-45,380
535
-5,949
-50,794
The financial expenses decreased by EUR 9,396 k to EUR 35,984 k due to the lower amount of money
borrowed in the 2017 financial year and a lower average interest rate.
The net financial result for the year as a whole decreased significantly by EUR 16,914 k to
EUR -67,708 k compared to the prior-year period. To optimise the maturity profile of the bond
portfolio of the Company, existing bonds with a nominal value of EUR 348,200 k were bought back on
the market and a new bond with a longer maturity and a nominal value of EUR 350,000 k was placed
on the market (see section "Financial Management" on page 18). The premium for the repurchase of
the bonds was EUR 29,172 k in line with the bond price at the time of the repurchase and is included
in the other financial expenses. Furthermore, the other financial result is burdened by the reversal
of the accrued incidental costs of the bond which were repurchased in the amount of EUR 2,809 k.
For details on the new loans, also refer to the “Financial management” section on page 18.
alstria Annual Report 2017
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Group Management Report
Share of the result of joint venture companies
In 2017, alstria’s share of earnings from joint venture companies was EUR 28,118 k (2016:
EUR 5,480 k), which was mainly attributable to the sale of the Kaisergalerie asset in Hamburg.
Valuation result of financial derivatives
To minimise the impact of interest-rate volatility on profits and losses, alstria uses financial
derivatives in the form of caps or swaps to hedge on floating-interest-rate loans. 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 504,266 k to EUR 152,630 k.
The net result from fair value adjustments on these financial derivatives amounted to EUR -9,334 k
in 2017 (2016: EUR -8,101 k).
While no appreciable valuation result arose in the 2017 financial year from the interest rate
derivatives financial instruments (EUR -41 k), the revaluation of the embedded derivative linked to
the convertible bond resulted in an expense of EUR -9,293 k. The fair value of the embedded
derivative is largely determined by the performance of the share price of alstria, as it affects the
market value of the potential repayment obligation in the event of conversion of the convertible
bond.
Further details and a tabular reconciliation can be found in section 6.5 of the consolidated financial
statements.
Consolidated net result
The consolidated net result amounted to EUR 296,987 k (2016: EUR 182,376 k) in the reporting period;
hence, it increased by EUR 114,611 k.
Overall, lower net rental income and lower net financial result were overcompensated by an improved
net result from fair value adjustments of investment properties as well as an increased share of
earnings from joint venture companies. Undiluted earnings per share amounted to EUR 1.94 for the
reporting period (2016: EUR 1.16).
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 in financial year 2016, its subsidiaries are now
included in the tax-free REIT structure.
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alstria Annual Report 2017
Group Management Report
FINANCIAL AND ASSET POSITION
Investment properties
The total value of investment properties at December 31, 2017 was EUR 3,331,858 k, compared to
EUR 2,999,099 k at the beginning of 2017. This increase in investment property value was mainly the
result of the acquisition of 13 assets as well as the increase in value of the investment portfolio
following the revaluation (EUR 181,492 k). This effect was slightly levelled out by the sale of five
assets. Two of the assets are reported under assets held for sale in the balance sheet as of December
31, 2017.
EUR k
Investment properties as of December 31, 2016
Investments
Acquisitions
Acquisition costs
Disposals
Reclassifications
Net loss/gain from fair value adjustments on investment property
Investment portfolio as of December 31, 2017
Advance payments
Investment properties as of December 31, 2017
Carrying amount of owner-occupied properties
Fair value of properties held for sale
Interests in joint ventures
Carrying amount of immovable assets
Adjustments to fair value of owner-occupied properties
Fair value of immovable assets
2,999,099
58,780
177,000
10,723
-42,800
-57,936
181,492
3,326,358
5,500
3,331,858
21,049
60,200
8,659
3,421,766
1,693
3,423,459
Cash position
Cash and cash equivalents decreased by EUR 145,411 k from EUR 247,489 k to EUR 102,078 k in the
reporting period. A positive cash flow of EUR 122,268 k was generated from operating activities.
Financing activities have shown net cash outflows of EUR 150,448 k. The cash used for financing
activities consists of the dividend payment of EUR 79,680 k, the payments for the acquisition of
minority interests in the former Deutsche Office in the amount of EUR 26,919 k, and the cash flows
from issuing and repayment of loans and bonds, resulting in net cash outflows of EUR -39,048 k.
Investing activities resulted in cash outflows of EUR 117,231 k. Real estate transactions led to cash
outflows of EUR 164,690 k, while cash and cash equivalents from the capital release received from a
joint venture were generated in the amount of EUR 49,850 k.
alstria Annual Report 2017
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Group Management Report
Equity metrics
Equity metrics
Equity (EUR k)
NAV per share (EUR)
Equity ratio (%)
G-REIT equity ratio (%)1)
Dec. 31, 2017
Dec. 31, 2016
1,954,660
1,728,438
12.70
54.5
57.1
11.28
51.1
56.7
Change
13.1%
12.6%
3.4 pp
0.4 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 226,222 k in 2017, reaching 1,954,660 k as of December 31, 2017. The
net consolidated result for financial year 2017 contributed to a higher equity of EUR 296,987 k. On
the other hand, dividend payments decreased the equity by EUR 79,680 k.*
Capital of noncontrolling shareholders
Liabilities due to minority interests represent the limited-partner capital of noncontrolling sharehold-
ers in alstria office Prime. In line with IFRS requirements the share capital owned by minority share-
holder in German partnerships is treated as a liability on the Company’s balance sheet.
Financial management
alstria’s financial management is carried out at the corporate level. Individual loans and corporate
bonds are taken out at both the property and the portfolio levels. alstria’s main financial goal is to
establish a sustainable long-term financial structure. Therefore, alstria diversifies its financing
sources and strives for a balanced maturity profile to enable coordinated and constant refinancing.
On June 15, 2017, alstria concluded a contract for an unsecured revolving credit line in the amount
of up to EUR 100 million and with a maturity date of three years. As of June 29, 2017, EUR 30 million
of the EUR 100 million was drawn for the partial financing of the new portfolio and was paid back on
December 29, 2017.
On November 1, 2017, parts of the convertible bond were converted, with a notional value of
EUR 5.7 million. The conversion resulted in the issue of 619,437 new shares by making use of the
conditionally increased capital provided for such purposes (Conditional Capital 2013).
On November 15, 2017, alstria issued a third unsecured, fixed-rate bond with a nominal value of
EUR 350 million. This corporate bond, which matures in November 2027, bears a fixed coupon of 1.5%.
The proceeds from the bond were used to partially repurchase existing bonds. A repurchase of
EUR 173.2 million was made for the bond maturing in 2021, as was a repurchase of EUR 175 million
for the bond maturing in 2023. The combined transaction was aimed at extending the average
maturity of the Company’s debt, and improving the maturity profile of its debt.
* See also the consolidated statement of changes in equity on page 56.
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alstria Annual Report 2017
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The loan facilities in place as of December 31, 2017, are as follows:
Liabilities
Loan #1
Loan #2
Loan #3
Loan #4
Loan #5
Total secured loans
Bond #1
Bond #2
Bond #3
Convertible bond
Schuldschein 10y/fixed
Schuldschein 7y/fixed
Schuldschein 4y/fixed
Maturity
June 28, 2024
Apr. 30, 2021
Mar. 28, 2024
June 30, 2026
July 31, 2021
Mar. 24, 2021
Apr. 12, 2023
Nov. 15, 2027
June 14, 2018
May 6, 2026
May 8, 2023
May 6, 2020
Schuldschein 7y/variable
May 8, 2023
Schuldschein 4y/variable
May 6, 2020
Revolving credit line
June 15, 2020
Total unsecured loans
Total
Net LTV
Principal amount
drawn as of
December 31,
2017
(EUR k)
LTV as of
December 31,
2017
(%)
Principal amount
drawn as of
December 31,
2016
(EUR k)
LTV
covenant
(%)
67,000
57,975
45,900
56,000
15,113
241,988
326,800
325,000
350,000
73,500
40,000
37,000
38,000
17,500
17,500
-
1,225,300
1,467,288
37.0
44.2
38.1
37.4
32.3
38.4
-
-
-
-
-
-
-
-
-
-
-
43.0
40.0
55.0
62.0
60.0
65.0
60.0
-
-
-
-
-
-
-
-
-
-
-
-
-
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
-
1,229,200
1,482,864
Average term to maturity for loans/bonds/convertible bond (years)
5.8
5.4
Dec. 31, 2017
Dec. 31, 2016
alstria Annual Report 2017
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Group Management Report
Maturity profile of financial debt as of December 31, 20171) in EUR million
399.9
379.5
350.0
73.5
55.5
112.9
96.0
0.0
0.0
0.0
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
1)Excluding regular amortisation.
Average cost of debt (% p.a.)
2017
2.1
2016
2.2
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%
On June 15, 2017, alstria concluded a contract for an unsecured revolving credit line in the amount
of EUR 100 million and a maturity date of three years. As of June 29, 2017, EUR 30 million of the
EUR 100 million were drawn. In the half-year financial report as per June 30, 2017, immediately after
the drawdown of the credit line, the calculation of and compliance with the covenants were stated.
On December 29, 2017 the EUR 30 million were paid back.
On November 15, 2017, alstria issued a third unsecured, fixed-rate bond. The proceeds from the bond
serve to partially refinance the existing bonds. The combined transaction aimed to extend the average
maturity of debt and improve the risk profile of debt.
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 calculation and publication of the ratio should be done at
* The following section refers to the Terms and Conditions of the Fixed Rate Notes, issued on November 24, 2015, April 12, 2016, and on
November 15, 2017 as well as to the Terms and Conditions of the Schuldschein issued on May 6, 2016 (for further information, please refer to
www.alstria.com). Capitalised terms have the meanings defined in the Terms and Conditions.
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alstria Annual Report 2017
Group Management Report
every reporting date following the issuance of the bond respective the Schuldschein, starting after
the fifth reporting date. The publication first took place in the annual report 2016.
EUR k
Earnings Before Interest and Taxes (EBIT)
Net profit/loss from fair value adjustments to investment property
Net profit/loss from fair value adjustments to financial derivatives
Profit/loss from the disposal of investment property
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)
1) Depreciation and amortisation and nonrecurring or exceptional items.
Cumulative 2017
366,792
-181,492
9,334
-19,693
5,617
-30,121
150,437
-35,482
5,035
-30,447
4.9
As of December 31, 2017, no covenants under the loan agreements and/or the terms and conditions
of the bonds/the Schuldschein have been breached.
Long-term loans
Long-term loans decreased by 5.8%, from EUR 1,466,521 k as of December 31, 2016, to EUR 1,381,965 k
as of December 31, 2017. The decrease resulted essentially from the reclassification of the convertible
bond from long-term to short-term debt (EUR 79,200 k). Moreover, alstria partially repaid three loans
in the amount of EUR 11,676 k. Furthermore, the issuing of alstria’s third unsecured, fixed-rate bond
with a nominal value of EUR 350,000 k increased the long-term loans in the fourth quarter of 2017,
whereby a partial repurchase of the existing bonds took place in the amount of EUR 348,200 k, which
sums the increase to the amount of EUR 1,800 k.
Short-term loans
Short-term loan obligations amounted to EUR 86,450 k on the reporting date (previous year:
EUR 19,330 k) and hence were EUR 67,120 k higher than in the previous reporting date. A main reason
for the high amount was the reclassification (EUR 79,200 k) of the convertible bond in the second
quarter of financial year 2017. In the fourth quarter of the reporting period, a notional value of EUR
5,700 k of the convertible bond was converted. Furthermore, short-term loans were mainly influenced
by accrued interest for the bonds (31.12.2017: EUR 11,344 k; 31.12.2016: EUR 16,408 k) and the
Schuldschein (31.12.2017: EUR 1,752 k; 31.12.2016: EUR 1,738 k), as of December 31, 2017.
Current liabilities
Current liabilities amounted to EUR 187,703 k (31.12.2016: EUR 104,996 k) and mainly consisted of
short-term loan obligations of EUR 86,450 k (31.12.2016: EUR 19,330 k) and of the current liabilities to
noncontrolling shareholders of EUR 47 k (31.12.2016: EUR 12,966 k). Another EUR 13,675 k of this total
was attributable to tax obligations (31.12.2016: EUR 20,104 k) that arose at the level of the
consolidated alstria office Prime companies. Moreover, current liabilities include trade payables
alstria Annual Report 2017
21
Group Management Report
(31.12.2017: EUR 7,268 k; 31.12.2016: EUR 4,584 k) and other current liabilities (31.12.2017:
EUR 49,204 k; 31.12.2016: EUR 45,334 k). The other current liabilities include liabilities from the real
estate transfer tax (31.12.2017: EUR 11,869 k; 31.12.2016: EUR 11,869 k), which were incurred at the
alstria office Prime level, provisions for outstanding invoices (31.12.2017: EUR 18,116 k; 31.12.2016:
EUR 16,223 k), prepayment of rents (31.12.2017: EUR 3,313 k; 31.12.2016: EUR 2,758 k), and received
deposits (31.12.2017: EUR 5,414 k; 31.12.2016: EUR 4,944 k).
22
alstria Annual Report 2017
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
funds from operations and is derived from real estate management. It excludes valuation effects and
other adjustments, such as non-cash expenses/income and non-recurring effects.*
alstria’s original revenue and FFO forecasts for 2017 increased in the most part due to the transfer of
benefits and burdens of the portfolio as of July 1, 2017. As a result, the revenue forecast increased
by EUR 8 million from EUR 185 million to EUR 193 million for financial year 2017. As a consequence,
the FFO forecast increased by EUR 5 million from EUR 108 million to EUR 113 million. Due to the Com-
pany’s good letting performance in financial year 2017, its revenues were approx. EUR 194 million
and were in line with the forecast. In financial year 2017, FFO totalled EUR 114 million, which is also
in line with the forecast of EUR 113 million.
The Company also monitors the progress of its Net 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 Net LTV was 40.0% as of December 31, 2017, compared to 40.9% at the end of
financial year 2016. The G-REIT equity ratio was 57.1%, compared to 56.7% in the previous year and
the minimum statutory rate of 45%.
* For further details, please refer to page 13.
alstria Annual Report 2017
23
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 minimise 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
24
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Group Management Report
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 materialise; the risk
owner is also responsible for the assigned risk category:
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.
Risk valuation
Risks are assessed according to their likelihood of occurrence and their magnitude of impact.
Accordingly, they are categorised 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 15.0
Greater than 15.0
Degree of impact
minor
low
moderate
high
critical
alstria Annual Report 2017
25
Group Management Report
Based on the likelihood that a specific risk event 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.
Risk classification
Probability
highly likely
likely
possible
unlikely
very unlikely
L
L
L
L
L
l
M
M
L
L
L
H
M
M
L
L
H
H
M
M
L
H
H
H
M
M
Degree of impact
minor
low
moderate
high
critical
L = low risk
M = medium risk
H = high risk
In 2017, 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 organisational 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
specialised 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,
26
alstria Annual Report 2017
Group Management Report
are reviewed regularly for accuracy and plausibility. This is conducted both for the consolidated fi-
nancial statements and for alstria’s individual financial statement. Accounting-related data are mon-
itored 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 optimise
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 2018 to 2020.
Corporate risks
Strategic risks
Likelihood
Risk
impact
Risk level
Change since
prior year
Market environment risks
unlikely
moderate
Shortfalls of rental payments risks
very unlikely
Risks in relation to changes
to the legal environment
Risks due to inefficient
organisational structures
Operational risks
Maintenance risks
Refurbishment projects risks
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
Interest rate risks
Liquidity risks
unlikely
moderate
unlikely
moderate
possible
possible
unlikely
unlikely
possible
possible
unlikely
high
high
high
moderate
low
low
high
low
unlikely
moderate
unlikely
unlikely
unlikely
unlikely
unlikely
unlikely
unlikely
moderate
moderate
high
high
high
high
moderate
Refinancing on unfavourable terms
Counterparty risks
very unlikely
very unlikely
high
high
L
L
L
M
M
M
L
L
L
L
L
L
L
L
M
M
M
M
L
L
L
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
unchanged
increased
unchanged
unchanged
unchanged
alstria Annual Report 2017
27
Group Management Report
Strategic risks
Strategic risk management addresses the factors that influence the Company’s market environment,
regulatory environment, and strategic corporate organisation.
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 identified as factors causing uncertainty in the previous years. 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 basically also affect the German markets through a decrease in demand for goods
and services from these markets. After the German market was already characterised as robust in the
previous year, there were signs of a strong economic upturn* in the current reporting period. There
are currently no indications of an end to this trend. For this reason, the market environment risks
remain at a low (L) level of risk.
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 due to inefficient organisational structures
Further risks exist as part of the business organisation’s strategic direction due to inefficient organi-
sational structures and the Company’s dependence on IT systems and structures. Both the organisa-
tional structure and the IT infrastructure support strategic and operational objectives. The risk of
strategic corporate organisation 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.
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.
* Please refer to: Deutsche Bundesbank, monthly report – January 2018, 70. year number 1, page 5, Frankfurt am Main.
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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 pre-
vious year, the overall vacancy risk was medium (M).
Shortfall of rental payments risks
An operational risk is a potential shortfall of rental payments from one or more major tenants; it
could be realised as a result of an economic downturn or a particular case. Because many 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 risks
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
categorised as medium (M), as it was in the previous year.
Refurbishment projects risks
alstria realises 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 strong economy, especially in the construction industry, led to increasing demands on the
procurement and execution of contracts. The risk resulting from refurbishment projects nevertheless
is still categorised as moderate (M).
HR risks (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
measures: selective, needs-oriented skill development for existing staff members; strengthening of
its image as an attractive employer; university marketing; promotion of employee motivation through
alstria Annual Report 2017
29
Group Management Report
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 risks
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. In view of the accumulation of attempted hacker attacks,
measures to combat such cyberattacks have intensified. Structural security measures are in place to
protect the computer centre. 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 materialise; as in the prior year, their possible consequences are considered to be
low (L).
Risks relating to 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
Considering the long-term nature of our business and the immovable nature of our assets, it is of key
importance to take into account the effect of climate change on our prospects. alstria is exposed to
the risk of increasingly numerous and changing regulations with regard to environmental or energy
efficiency restrictions that might limit the possibility of letting or operating certain buildings or im-
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alstria Annual Report 2017
Group Management Report
pose more stringent obligations upon them. alstria responds to these risks by evaluating and monitor-
ing legislative changes when acquiring, refurbishing or managing a property. In addition, individual
buildings located close to coastal areas and rivers, are exposed to possible structural damages result-
ing from extreme weather events. As a precautionary measure, the Company uses risk assessments of
insurance companies to determine which buildings need to be upgraded. In some cases, buildings or
building sites may contain undetected hazardous contaminants. The Company hedges these risks by
conducting due diligence reviews and by obtaining guarantees from sellers as part of acquisition pro-
cesses. alstria also has insurance covering its buildings from loss of rent during reconstruction, fire,
storm, or water damage.
All 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 2016 sustainability report.
Compliance risks
Risks resulting from not complying with 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 organised market and its registered office and management must be in Germany. Its
registered share capital must amount to at least EUR 15 million. 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
January 1, 2007.
Capital and investment management activities maintain the Company’s G-REIT status in order to
support its business activities.
alstria Annual Report 2017
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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 57.1% 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, 2020.
Risks resulting from fraud or non-compliance
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, thereby negatively affecting future business
opportunities. alstria has implemented a compliance organisation, which deals with adequate and
documented compliance rules and regulations and provides training to all employees concerning
compliance-related topics. The materialisation of compliance risks is assessed to be unlikely (L),
which is unchanged from the previous year.
Litigation risks
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.
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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 2016
Some 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 shareholders who declared an
objection during the cash- 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 application for the initiation of such a pro-
ceeding. 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 Arbi-
tration 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 from the limited
partnership. As of the date of the transformation notice published with the commercial 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 the aim of
establishing the enterprise value and adequate cash compensation. Subsequently, the adequate cash
compensation was subject to a mandatory 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 com-
pensation, the Company receives legal support from external advisors in the current proceeding.
Risks associated with the merger of Deutsche Office and Prime Office REIT-AG (PO REIT) in the
year 2014
In addition, 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. 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
alstria Annual Report 2017
33
Group Management Report
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 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 is 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 further civil rights
proceedings or 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. alstria
Group’s current Net LTV is 40.0%. This is a reasonable 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
34
alstria Annual Report 2017
Group Management Report
page 19). 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 before the 2021
financial year, when one out of three bonds matures. The two other bonds mature until the business
year 2023 and 2027, respectively, so that a diversified maturity profile exists and the refinancing of
the entire loans in one amount can be avoided (see the maturity profile of the loans on page 20). As
a result, the risk of refinancing on unfavourable terms was classified as low (L).
Breaches 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 (LTV) or to achieve a minimum 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 signifi-
cant leeway to the permitted leverage ratios. Hence, the risk of a breach of covenants is at present
classified as medium (M), as it was in the previous year.
Interest rate risks
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
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
long-term fixed-interest loans and bonds and is therefore not subject to interest rate risk up to its
maturity. The floating interest rate loans are mainly hedged by interest rate caps. For the possible
use of a new variable-rate credit line of up to EUR 100,000 k, which is not fully hedged by derivative
financial instruments, slightly increases the interest rate risk compared to the previous year currently
considered to be a medium risk (M).
alstria Annual Report 2017
35
Group Management Report
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.
Due to the refinancing implemented in recent years, including the placement of a convertible bond
and three corporate bonds with diversified maturity profiles, the substantial liquidity risk arising from
the repayment of all or most of alstria's credit commitments has been successful managed. 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 minimise 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
year-end by independent, internationally recognised experts. In summary, the risk of unexpected
devaluations is, as in the previous year, classified as moderate (M).
Counterparty risks
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
recognised 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 of 2007
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.
36
alstria Annual Report 2017
Group Management Report
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 restructuring, which has been implemented during the
business year, and in particular the conversion of the legal form of these companies into limited
partnerships, resulted in the taxation of hidden reserves and hidden liabilities existing within the
acquired companies. Afterwards the companies are tax transparent.
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 2017, only minor or immaterial changes were
noted in alstria’s risk level matrix for risks categorised as high (H) or medium (M). At the end of the
year, risks categorised as “high” accounted for 1.0% (December 31, 2016: 1.0%) of all identified risks
while risks categorised as “medium” accounted for 39.6% (December 31, 2016: 42.6%) of all identified
risks. On the one hand, this is due to the economic environment in alstria’s investment market, which
proves to be economically strong 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 long-term refinancing position mitigates the risk of higher borrowing costs in the
event of rising interest rates, the low LTV reduces the risk that could arise if the property valuations
should come under pressure, e.g. as a result of interest rate hikes.
The integration of alstria office Prime, which was taken over in the business year 2015, went according
to plan and has meanwhile been completed.
Sufficient precautionary measures have been undertaken to counteract identifiable risks.
alstria Annual Report 2017
37
Group Management Report
In addition to assessing the potential impact of the realisation 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 29.8 million 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.
38
alstria Annual Report 2017
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 addressing the Management supports the monitoring of growth initiatives within the
budget and planning-approval processes.
The alstria Management Board is regularly 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. 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 characterised 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 is aimed at identifying properties with the described opportunity structure. Its in-
vestment strategy therefore focuses on acquiring properties and portfolios with higher vacancy rates
that are thus open to additional growth opportunities through the stabilisation of these properties’
leases. Acquisitions will only be performed if the investment volume offers the prospect of achieving
a sustainable increase in value. In particular, the low LTV debt ratio offers opportunities in the form
of greater flexibility for acquiring real estate.
alstria Annual Report 2017
39
Group Management Report
Opportunities related to tenant relationships
Structured and active Property and Asset Management both ensures the quality of our leasing service
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 modernisation of a property opens up the opportunity
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 optimisation 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 40.0%; see the overview of loan facilities on page 19), 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.
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 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 4.7 years and potential increases in rents due to decreasing vacancy rates. 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 low LTV debt ratio offers the chance of greater flexibility for
acquiring real estate in the event that spontaneous opportunities arise.
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 asset management. The asset repositioning and refurbishment that alstria
is continuously undertaking will strengthen the basis for increased organic value across the portfolio.
40
alstria Annual Report 2017
Group Management Report
SUSTAINABILITY REPORT
In November 2017, alstria published its eighth sustainability report. The report is organised and pre-
sented based on the new GRI Standards and has received third-party assurance for all disclosed envi-
ronmental indicators. It provides information about alstria’s next steps toward a carbon-neutral econ-
omy and familiarises 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 organisation. To alstria, pursuing a
path of continuous improvement and innovation is what sustainability is all about.
2016 has been a successful year for alstria, cause the Company was able to meet the RE100 commit-
ments and managed through the procurement of renewable energy and climate-neutral natural gas
to reduce our carbon footprint by 31% compared to 2013. With a focus on improving the energy man-
agement system, alstria started applying smart metering systems across the portfolio and was
awarded the “immobilienmanager Award 2017” in the sustainability category for our “Mieter-
strompool” project. Finally, the Company achieved leadership level (A-) in the CDP rating for the
second time in a row.
For further information on the Company’s sustainability engagement, please refer to alstria’s annual
sustainability report 2016 at
www.alstria.com.
alstria Annual Report 2017
41
Group Management Report
DISCLOSURES REQUIRED BY TAKEOVER LAW
Disclosures and the explanatory report pursuant to Section 315a para. 1 of the German
Commercial Code (Handelsgesetzbuch, HGB)
Composition of subscribed capital
On the balance sheet date as of December 31, 2017, the share capital of alstria amounted to
EUR 153,961,654.00, divided into 153,961,654 no-par-value bearer shares. All shares are fully paid in
and 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 Cor-
poration 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 Sections 71b and 136 AktG, for example, 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, 2017, 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, it held approximately 12.6% 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 for any Employee Share Scheme in which employees do not directly exercise
the Control Rights
The employees who hold alstria shares exercise their rights of control as any other shareholders do,
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
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 authorised
42
alstria Annual Report 2017
Group Management Report
to make changes and amendments to, the Articles of Association that merely affect the wording
without passing a shareholder resolution in the General Meeting. In addition, the Supervisory Board
has, been authorised to adapt the wording of the Articles of Association to the utilisation of
Conditional Capital 2013, Authorised Capital 2017 and Conditional Capital III 2017 and, after
expiration of the applicable authorisation periods, by resolution of the Annual General Meetings on
May 29, 2013, and May 16, 2017.
Pursuant to Section 15 para. 5 of the Articles of Association in conjunction with Sections 179 para. 2
and 133 of the 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 in the reporting year by a resolution passed by the
Supervisory Board on December 7, 2017: Section 5 para. 1, 2 and 5 of the Articles of Association were
formally adapted to a capital increase executed from the Company’s Conditional Capital 2013.
Authority of Management Board regarding the issue and buyback of shares
1. Authorised Capital
The Articles of Association authorise the Management Board, with the approval of the Supervisory
Board, to increase the share capital through May 15, 2022, 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 30,646,243.00. 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 of the AktG), which are
regulated in Sections 5 para. 5, 6 and 7 of the Company’s Articles of Association.
a) Conditional Capital 2013
The share capital is conditionally increased by an amount of up to EUR 37,360,181.00 by
issuing up to 37,360,181 no-par-value bearer shares. The Management Board is authorised 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 of the AktG. The conditional capital increase is only carried out to the
extent that the holders of option rights or conversion rights; holders with conversion
obligations from bonds with warrants or convertible bonds profit participation rights; or
holders of participating bonds that were issued through November 28, 2014, based on the
authorisation resolved by the shareholders in the General Meeting on May 29, 2013, utilise
their option rights or conversion rights, or insofar as such holders have conversion obligations,
that 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.
alstria Annual Report 2017
43
Group Management Report
b) Conditional Capital III 2015
The
share
capital
is
conditionally
increased by
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
authorisation 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.
c) Conditional Capital III 2017
Furthermore, the share capital is conditionally increased by an amount of up to
EUR 1,000,000.00 by issuing up to 1,000,000 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 15, 2022, in accordance with
the authorisation of the General Meeting held on May 16, 2017. 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 16, 2017, the shareholders authorised the Management Board
to acquire shares of up to a total of 10% of the Company’s share capital in place at the time of
the authorisation’s issuance until May 15, 2022. The acquired shares and other treasury shares in
the possession of, or to be attributed to, alstria pursuant to Sections 71a et seq. of the AktG may
at no point in time amount to more than 10% of the share capital. Shares may be purchased
through a stock exchange, by means of a public offer to all shareholders, or by making use of
financial derivatives (put or call options, or a combination of both).
Significant agreements of alstria office REIT-AG that take effect upon a change of control
following a takeover bid
Some of alstria office REIT-AG’s financing agreements contain the clauses common to such contracts
regarding a change of control. In particular, the agreements entitle the lenders to request repayment
of the loans or an obligation by 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
44
alstria Annual Report 2017
Group Management Report
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 financial year 2013 also
provided termination rights or an adaption of the conversion price in case of a change of control. Such
a change of control will occur, 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, 2016
and 2017 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 1,283 million on the balance sheet date.
Compensation agreements with Management Board members and employees in case of a takeo-
ver bid
No compensation agreements with Management Board members or employees are in place that will
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.
alstria Annual Report 2017
45
Group Management Report
ADDITIONAL GROUP DISCLOSURE
EMPLOYEES
As of December 31, 2017, alstria had 121 employees (compared to 114 on December 31, 2016). The
annual average number of employees was 118 (compared to 105 in the previous year). These figures
exclude Management Board members.
REMUNERATION REPORT
Management Board members’ compensation comprises fixed and a variable component that are 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.
Members of the Supervisory Board receive fixed remuneration.
The remuneration report (see pages 155 to 166), 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 GROUP DECLARATION PURSUANT TO SECTION 315D HGB
(“HANDELS-GESETZBUCH”: GERMAN COMMERCIAL CODE)
The complete corporate governance declaration is published on alstria office REIT-AG’s website
(www.alstria.com). Thus, it is made permanently accessible to the public.
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 business year 2017:
To distribute a dividend of EUR 0.52 on each share of no par value entitled to the dividend for business
year 2017 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 April 26, 2018. The proposed dividend of EUR 0.52 per share
for the business year 2017 represents a total payment of EUR 80.1 million based on the number of
shares entitled to dividend at the balance sheet date.
Considering the new shares created by the capital increases between the end of the reporting period
and the preparation of the consolidated financial statement (see post-balance sheet date events page
117) the total payment amounts to EUR 88.3 million.
46
alstria Annual Report 2017
Group Management Report
EXPECTED DEVELOPMENTS
The report on expected developments contains statements related to anticipated future
developments. The Company’s development depends on various factors, some of which are beyond
alstria’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 very good condition. GDP growth was at 2.2% compared to the previous
year, which was the country’s strongest economic growth since 2011. The employment rate also
developed positively. The German government expects a GDP growth of 2.4% and a positive
development in the German labour market to the record mark of approximately 44.8 million for 2018.
German economic associations also estimate a positive economic development for 2018, they expect
as similar growth level as in 2017. The construction industry and related industries, in particular, have
a confidently outlook for the future.*
Development of the real estate market: Outlook for 2018
In connection with low interest rates, the importance of real estate as an investment class will still
be high. Continuing high demand for real estate in core areas is estimated in 2018. 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 financial year 2018 could have an impact on the projections.
Mainly due to expiring leases alstria is expecting revenues to decrease in 2018 by approximately
EUR 7 million to EUR 187 million, as compared to revenues in 2017.
For fiscal year 2018, the Company is expecting an FFO of around EUR 110 million. The year-on-year
decrease in FFO compared to the 2017 achieved FFO of EUR 114 million is mainly due to lower
revenues. This effect will be partially offset by a further reduction of financing costs.
* Please refer to Annual Economic Report 2018 from the Federal Ministry of Economics and Energy as well as ifo, IfW, IMK, RWI und IWH.
alstria Annual Report 2017
47
Group Management Report
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 20, 2018
48
alstria Annual Report 2017
Consolidated Financial Statements
DETAIL INDEX CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS ......................................................... 50
CONSOLIDATED INCOME STATEMENT .......................................................................... 50
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ................................................ 51
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...................................................... 52
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................ 54
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...................................................... 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .................................................. 58
1. BASIS OF PRESENTATION .................................................................................. 58
2. BASIS OF PREPARATION ................................................................................... 58
3. SEASONAL OR ECONOMIC EFFECTS ON BUSINESS ..................................................... 79
4. SEGMENT REPORTING ..................................................................................... 79
5. NOTES TO THE CONSOLIDATED INCOME STATEMENT ................................................ 80
6. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION – ASSETS ................. 86
7. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION – EQUITY AND
LIABILITIES .................................................................................................. 94
8. OTHER NOTES .............................................................................................. 102
9. RELATED PARTY RELATIONSHIPS ....................................................................... 103
10. EARNINGS PER SHARE .................................................................................... 104
11. DIVIDENDS PAID ............................................................................................ 105
12. EMPLOYEES ................................................................................................. 105
13. SHARE-BASED REMUNERATION .......................................................................... 105
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 ............................... 121
19. AUDITORS’ FEES ........................................................................................... 122
20. MANAGEMENT BOARD..................................................................................... 122
21. SUPERVISORY BOARD ..................................................................................... 122
alstria Annual Report 2017
49
Consolidated Financial Statements
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the period from January 1 to December 31, 2017
EUR k
Revenues
Income less expenses from passed-on operating expenses
Real estate operating expenses
Net rental income
Administrative expenses
Personnel expenses
Other operating income
Other operating expenses
Net result from fair value adjustments to
investment property
Net result from the disposal of investment property
Notes
5.1
5.2
5.3
5.4
5.5
5.6
5.7
6.1
5.8
2017
193,680
236
-21,637
172,279
-8,033
-13,823
10,771
-14,371
181,492
19,693
2016
202,663
-204
-23,445
179,014
-8,464
-12,683
5,417
-14,445
72,806
25,464
Net operating result
348,008
247,109
Net financial result
Share of the result of companies
accounted for at equity
Net loss from fair value adjustments to
financial derivatives
Pretax result
Income tax expenses
Consolidated profit/loss
Attributable to:
Shareholders of alstria office REIT-AG
Noncontrolling interests
Earnings per share in EUR
Basic earnings per share
Diluted earnings per share
5.9
2.2.3
5.9;
6.5
5.10
10
10
-67,708
-50,794
28,118
5,480
-9,334
-8,101
299,084
193,694
-2,097
296,987
-11,318
182,376
296,987
0
1.94
1.85
176,872
5,504
1.16
1.11
50
alstria Annual Report 2017
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period from January 1 to December 31, 2017
EUR k
Notes
2017
2016
Consolidated profit for the period
296,987
182,376
Items that might be classified on the income
statement in a future period:
Reclassification from cash flow hedging reserve
6.5
Other comprehensive income for the period
0
0
270
270
Total comprehensive income for the period
296,987
182,646
Total comprehensive income attributable to:
Shareholders
Noncontrolling interest
296,987
0
177,142
5,504
alstria Annual Report 2017
51
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of December 31, 2017
ASSETS
EUR k
Noncurrent assets
Investment property
Equity-accounted investments
Property, plant, and equipment
Intangible assets
Financial assets
Derivatives
Notes
2017
2016
6.1
6.2
6.3
6.3
6.4
6.5
3,331,858
2,999,099
8,659
22,442
313
36,567
14
30,381
6,858
329
34,803
109
Total noncurrent assets
3,399,853
3,071,579
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
6.6
7,153
7,257
6.6
6.7
6.8
0
25
14,760
102,078
0
5
25
41,578
247,489
0
60,200
14,700
184,216
311,054
Total assets
3,584,069
3,382,633
52
alstria Annual Report 2017
Consolidated Financial Statements
EUR k
Equity
Share capital
Capital surplus
Retained earnings
Total equity
Noncurrent liabilities
Limited partnership capital noncontrolling interests
Long-term loans and bonds, net of current portion
Derivatives
Other provisions
Other liabilities
Total noncurrent liabilities
Current liabilities
Limited partnership capital noncontrolling interests
Short-term loans
Trade payables
Notes
7.1
7.2
7.3
6.5
7.4
7.5
7.2
7.3
7.5
Profit participation rights
5.5; 13.2
Derivatives
Income tax liabilities
Other provisions
Other current liabilities
Total current liabilities
Total liabilities
6.5
7.6
7.4
7.5
EQUITY AND LIABILITIES
2017
2016
153,962
153,231
1,363,316
1,434,812
437,382
140,395
1,954,660
1,728,438
53,834
58,458
1,381,965
1,466,521
0
20,099
1,499
4,408
1,313
2,808
1,441,706
1,549,199
47
86,450
7,268
538
27,529
13,675
2,992
49,204
12,966
19,330
4,584
421
0
20,104
2,257
45,334
187,703
104,996
1,629,409
1,654,195
Total equity and liabilities
3,584,069
3,382,633
alstria Annual Report 2017
53
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ending December 31, 2017
EUR k
Notes
2017
2016
1. Cash flows from operating activities
Consolidated profit or loss for the period
296,987
182,376
5.9
5.9
5.9
5.10
8.3
5.8
6.3
Interest income
Interest expense
Other financial expenses
Result from income taxes
Unrealised valuation movements
Other noncash income (–)/expenses (+)
Gain (–)/loss (+) on disposal of investment properties
Depreciation and impairment of fixed assets (+)
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
-816
35,984
32,540
2,097
-535
45,380
5,949
11,318
-190,962
-69,947
5,174
-19,693
490
-765
494
-25,464
678
4,202
5,240
-7,293
166,276
147,158
817
-36,299
-8,526
64
-26,695
-32
Net cash generated from operating activities
122,268
120,495
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
-251,505
87,975
-1,160
-627
49,850
0
-1,764
-43,740
426,764
-4,771
-499
0
-1,000
-34,803
Net cash used in/generated from investing activities
8.3
-117,231
341,951
54
alstria Annual Report 2017
Consolidated Financial Statements
EUR k
Notes
2017
2016
3. Cash flows from financing activities
Cash received from cash equity contributions
Payments for the acquisition of minority interests
Proceeds from borrowing
Proceeds from the issuing of corporate bonds
Payments of dividends
7.1
7.1
7.3
7.3
11
0
-26,919
30,000
350,000
-79,680
34,803
-113
150,000
500,000
-76,564
Payments due to the redemption of bonds and borrowings
-389,876
-1,273,926
Payment of loan premium for redemption of corporate bonds
5.9
Payments of transaction costs for taking out loans
Payments for the termination/change of financial derivatives
-29,172
-4,861
60
0
-6,817
-2,593
Net cash used in financing activities
-150,448
-675,210
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 0 k
-145,411
247,489
-212,764
460,253
6.7
102,078
247,489
alstria Annual Report 2017
55
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period from January 1 to December 31, 2017
EUR k
Notes
Share
capital
Capital
surplus
Hedging
reserve
Retained
earnings
Equity
attributable
to the alstria
shareholders
Non-
controlling
interests
Total
equity
As of Jan. 1, 2017
153,231 1,434,812
0
140,395
1,728,438
0 1,728,438
Changes in the
financial year 2016
Consolidated profit
Total comprehensive
income
Payments of dividends
11
Share-based
remuneration (converti-
ble participation rights)
5.5;
13.2
0
0
0
0
0
0
-79,680
1,129
Conversion of converti-
ble participation rights
Conversion of
convertible bond
13.2
111
111
7.2
620
6,944
As of Dec. 31, 2017
7.1
153,962 1,363,316
0
0
0
0
0
0
0
296,987
296,987
296,987
296,987
0
0
0
0
-79,680
1,129
222
7,564
0
0
0
0
0
0
296,987
296,987
-79,680
1,129
222
7,564
437,382
1,954,660
0 1,954,660
56
alstria Annual Report 2017
Consolidated Financial Statements
For the period from January 1 to December 31, 2016
EUR k
Notes
Share
capital
Capital
surplus
Hedging
reserve
Retained
earnings
Equity
attributable
to the alstria
shareholders
Non-
controlling
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
income
Total comprehensive
income
Payments of dividends
11
0
0
0
0
0
0
0
-76,564
Proceeds from shares
issued against
contribution in kind
7.1
964
10,847
Change of minority
interest share within
equity due to the sale of
minority shares
7.1
Change of minority
interest share within
equity due to the pur-
chase of minority shares
Share-based
remuneration (converti-
ble participation rights)
7.1
5.5;
13.2
0
0
0
Conversion of converti-
ble participation rights
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
-71,153
140,395
1,728,438
0 1,728,438
alstria Annual Report 2017
57
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 and its subsidiaries´ main objectives (the Group or alstria) are the
acquisition, management, operation, and sale of owned real estate property and the holding of par-
ticipations in enterprises that acquire, manage, operate, and sell owned property.
alstria prepared its consolidated financial statements in accordance with International Financial Report-
ing Standards (IFRS), as adopted by the European Union, and with the additional requirements set forth
in Section 315e (1) of the German Commercial Code (HGB). The consolidated financial statements were
authorised for issue by the managing board on February 20, 2018.
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, the
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, 2017.
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.
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 summarised 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.
58
alstria Annual Report 2017
Consolidated Financial Statements
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, 2017:
EU
Endorsement
Nov. 6, 2017
Nov. 6, 2017
Standard/
interpretation
Amendments to
IAS 7
Amendments to
IAS 12
Content
Disclosure initiative
Recognition of deferred tax assets for un-
realised losses
Applicable for
f/y beginning
on/after
Jan. 1, 2017
Effects
Notes
disclosure
Jan. 1, 2017
Under review
On January 29, 2016, the IASB published amendments to IAS 7 as part of the Disclosure Initiative. The
amendments are effective for annual periods beginning on or after January 1, 2017. The main impact
is the first-time presentation of a reconciliation of changes in financial liabilities and related assets
during the financial year. The reconciliation calculation is shown in Section 7.3 of the Notes.
The amendment to IAS 12 has no impact on the Group's financial and asset position, as the REIT status
of alstria office REIT-AG results in extensive corporate income tax exemptions.
Other new or amended standards and interpretations that were to be applied for the first time in the
2017 financial year do not exist. As a result, the Company has not applied any further new or amended
standards and interpretations for the first time in the current financial year.
alstria Annual Report 2017
59
Consolidated Financial Statements
New and amended IFRSs and interpretations to existing standards that are not yet effective and
that the Group has not adopted early
EU
Endorsement
Standard/
interpretation
Nov. 22, 2016
IFRS 9
Sep. 22, 2016
IFRS 15
Content
New standard “Financial instruments: clas-
sification and measurement”
New standard “Revenue from
contracts with customers”
Oct. 31, 2017
Not yet
endorsed
Not yet
endorsed
Nov. 3, 2017
Not yet
endorsed
Not yet
endorsed
Not yet
endorsed
Not yet
endorsed
Not yet
endorsed
Not yet
endorsed
Not yet
endorsed
Not yet
endorsed
IFRS 16
New standard “Leases”
IFRS 17
Amendments to
IFRS 2
Amendments to
IFRS 4
Amendments to
IFRS 9
Amendments to
IAS 28
Amendments to
IFRS 10 and IAS 28
Amendments to
IAS 40
Annual Improve-
ments to IFRSs
Annual Improve-
ments to IFRSs
IFRIC 22
IFRIC 23
New standard “Insurance contracts”
Classification and measurement of share-
based payment transactions
Applying IFRS 9 financial instruments with
IFRS 4 insurance contracts
Prepayment Features with negative Com-
pensation
Amended by Long-term Interests in
Associates and Joint Ventures
Sale or contribution of assets
between an investor and its
associate or joint venture
Transfers of investment property
Improvements to IFRSs 2014−2016
Improvements to IFRSs 2015−2017
Foreign currency transactions and
advance consideration
Uncertainty over Income Tax Treatments
Clarifications issued for IFRS 15,
“Revenue from Contracts with Customers”
Oct. 31, 2017
IFRS 15
IFRS 9 Financial instruments
Applicable for
f/y beginning
on/after
Jan. 1, 2018
Jan. 1, 2018
Jan. 1, 2019
Effects
No material
effects
No material
effects
No material
effects
Jan. 1, 2021
None
Jan. 1, 2018
None
Jan. 1, 2018
None
Jan. 1, 2019
None
Jan. 1, 2019
None
postponed
Jan. 1, 2018
Jan. 1, 2017/
Jan. 1, 2018
None
Currently
None
None
Jan. 1, 2019
None
Jan. 1, 2018
Jan. 1, 2019
None
Currently
None
Jan. 1, 2018
None
The new standard IFRS 9 “Financial Instruments” contains rules for recognition, measurement, derec-
ognition, and hedge accounting. The IASB published the final version of the standard as part of the
completion of the various stages of its comprehensive project on financial instruments on July 24,
2014. This means that the accounting for financial instruments previously carried out under IAS 39
"Financial Instruments: Recognition and Measurement" can now be completely replaced by the ac-
counting under IFRS 9. The now-released version of IFRS 9 replaces all previous versions. The central
requirements of the final IFRS 9 can be summarised as follows:
▪ Compared with the previous standard, IAS 39 “Financial Instruments: Recognition and Meas-
urement,” the requirements of IFRS 9 with regard to the application and the entry and de-
recognition are largely unchanged.
▪ However, the regulations of IFRS 9 provide for a new classification model for financial assets
compared to IAS 39.
60
alstria Annual Report 2017
Consolidated Financial Statements
▪ The subsequent measurement of financial assets will in the future be based on three catego-
ries with different valuation standards and a different recognition of changes in value. The
categorisation results in both dependence on the contractual cash flows of the instrument
and the business model in which the instrument is held. Depending on the nature of these
conditions, they are measured at amortised cost using the effective interest method (AC cat-
egory), at fair value, with changes recognised in other comprehensive income (FVTOCI cate-
gory), or at fair value, where changes are recognised through profit or loss (FVTPL category).
Basically, these are mandatory categories. In addition, however, individual options are avail-
able to companies.
▪ For financial liabilities, however, the existing rules were largely adopted in IFRS 9. The only
major change concerns financial liabilities in the fair value option. For them, fair value fluc-
tuations due to changes in their own credit risk are to be recognised in other comprehensive
income.
▪ The new impairment model in IFRS 9 provides for three levels that will determine the amount
of losses to be recognised and interest received in the future. Thereafter, expected losses in
the amount of the present value of an expected 12-month loss are recognised on acquisition
(Level 1). If there is a significant increase in the risk of default, the risk provision must be
increased up to the amount of the expected losses of the entire residual maturity (Level 2).
If there is an objective indication of impairment, the interest must be collected on the basis
of the net book value (book value less risk provisions) (level 3).
▪ The revised hedge accounting rules continue to include the three types of hedge accounting
that are also available in IAS 39. However, the requirements of IFRS 9 provide more opportu-
nities for the application of hedge accounting and allow the reporting entity to better reflect
its risk management activities in the financial statements. The main changes concern the
extended scope of underlying transactions and hedges as well as new rules on the effective-
ness of hedging relationships, particularly the elimination of the previous 80-125% corridor.
▪
In addition to extensive transitional provisions, IFRS 9 is also associated with extensive dis-
closure requirements for both transition and ongoing application. Changes compared to IFRS 7
“Financial Instruments”: Notes mainly result from the provisions on impairment.
Based on an analysis of the Group's financial assets and financial liabilities as of December 31, 2017
and the facts and circumstances existing at the time, management has estimated the impact of IFRS 9
on the consolidated financial statements, which is summarised below:
Classification and valuation
With the exception of changes resulting from the application of the new impairment model in IFRS 9,
alstria's current financial assets and liabilities will continue to be accounted for in the future, as is
currently the case under IAS 39.
alstria Annual Report 2017
61
Consolidated Financial Statements
Impairment
With trade receivables and noncurrent financial assets, the Group only has assets that continue to be
measured at amortised cost. Despite future consideration of expected losses rather than losses in-
curred, management believes that there will be no material changes to the higher impairment
amounts resulting from the first-time application of the new standard.
Hedge accounting
As the new hedge accounting rules better reflect the Group's risk management, and as the range of
possible hedged items and hedges has widened, management believes that the existing hedges will
continue to be recognised as a hedge under IFRS 9.
Transition method
The new standard is effective for annual periods beginning on or after January 1, 2018. alstria will
apply IFRS 9 for the first time for the financial year beginning January 1, 2018; the adjustment of
prior-year figures is waived in accordance with the transitional provisions of IFRS 9.
Overall, management does not expect the application of the new hedge accounting rules in IFRS 9 to
have a material impact on the consolidated financial statements.
IFRS 15 Revenue from contracts with customer
IFRS 15 stipulates when and in what amount an IFRS reporting entity must recognise revenue. In
addition, the preparers of financial statements are required to provide the users of the financial
statements with more informative and relevant information than before.
The new standard, compared to current regulations, provides for a single, principle-based five-level
model that applies to all contracts with customers. According to this five-step model, the contract
with the customer must first be determined (step 1). In step 2, the independent performance obliga-
tions are to be identified in the contract. Subsequently (step 3), the transaction price is to be deter-
mined, with explicit provisions for the treatment of variable consideration, financing components,
payments to the customer, and barter transactions. After determining the transaction price, in step
4 the distribution of the transaction price to the individual performance obligations has to be carried
out. This is based on the individual selling prices of the individual performance obligations. Finally
(step 5), the proceeds can be recognised if the performance obligation has been met by the Company.
The prerequisite for this is the transfer of power of the disposal of goods or services to the customer.
When concluding a contract, it is to be determined under IFRS 15 whether the revenues resulting from
the contract are to be recognised at a specific time or over a period of time. It is first necessary to
clarify on the basis of certain criteria whether the power of disposal over the performance obligation
is transferred over a period of time. If this is not the case, the proceeds must be recognised at the
time at which the power of disposal is transferred to the customer.
62
alstria Annual Report 2017
Consolidated Financial Statements
Finally, the standard contains new, more extensive rules on disclosures about the proceeds of an IFRS
preparer's financial statements. In particular, qualitative and quantitative information should be pro-
vided on each of the following topics:
▪
its contracts with customers,
▪ significant discretionary decisions and their changes made in applying the revenue provisions
to these contracts, and
▪ any assets resulting from capitalised costs for obtaining and fulfilling a contract with a
customer.
In April 2016, the IASB published clarifications on IFRS 15 covering the following topics:
▪
identification of performance obligations (regarding autonomous identifiability in the context
of the contract),
▪ principal–agent relationships (regarding assessment of the control of goods or services prior to
transmission to the customer),
▪
licences (regarding determination of the type of licence granted as well as licence and
usage-based licence fees), and
▪ transitional provisions (regarding practical facilitation of the first-time application of the
standard).
The Group mainly generates revenues from the long-term leasing of real estate space. The accounting
of these revenues is based on IAS 17 or, in the future, on IFRS 16 and is not subject to the requirements
of IFRS 15. In addition, revenues are generated from the Group’s own provision of real estate man-
agement services, which, however, are of subordinate importance in relation to the Group's total
revenues. Proceeds from the sale of real estate assets are not reported under sales but in a separate
line item, “Net result from the disposal of investment property.”
Furthermore, the landlord's advance payments received from the tenants are collected. The advance
payments refer to services rendered to the tenant by third parties, such as energy suppliers, water-
works, facility managers, etc. When deciding whether to classify these prepaid service charges re-
ceived as revenue in accordance with IFRS 15, it depends on whether alstria is to be classified as a
principal or agent in the performance of the services. A company is a principal under IFRS 15 if it has
control over the transfer of a promised good or service to a customer. The power of disposal is held
by the person who is the primary service provider in relation to the good or service, carries the
inventory risk, and holds the pricing power. These three criteria are not in the power of alstria for
third-party services. Thus, the Group acts not as a principal but as an agent, with the result that the
advance operating expenses received for these services are not sales.
Based on the above analysis, IFRS 15 is not expected to have a material impact on the presentation
of Group’s revenues. Therefore, there are also no effects at the time of transition.
alstria Annual Report 2017
63
Consolidated Financial Statements
IFRS 16 Leases
IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treat-
ment in the financial statements of both lessors and lessees.
IFRS 16 is generally applicable to all leases. A lease according to the standard exists when the lessor
has contractually granted the lessee the right to control an identified asset for a specified period and,
in return, the lessor receives consideration from the lessee.
For lessees, the previous distinction between operate leasing and finance leasing is not made. In-
stead, the lessee has to account for the right of use of a leased asset (so-called "right-of-use asset"
or RoU asset) and a corresponding lease liability for the leasing payment obligations. Exceptions to
this are made only for short-term leases and leases for low-value assets. The amount of the RoU asset
at the time of acquisition is equal to the amount of the lease liability plus any initial direct costs of
the lessee. In subsequent periods, the RoU asset is valued at amortised cost (with two exceptions).
The lease liability is the present value of the lease payments that are paid during the term of the
lease. Subsequently, the book value of the lease liability is compounded using the interest rate used
for discounting and reduced by the lease payments made. Changes in the lease payments lead to a
revaluation of the lease liability.
For lessors, on the other hand, the accounting principles known from IAS 17 “Leases,” with a distinc-
tion between finance leases and operate leases, remain the same.
The list of criteria for the assessment of a finance lease was adopted unchanged from IAS 17. In
addition, the disclosure requirements for lessees and lessors in IFRS 16 have increased considerably
in comparison with IAS 17. The objective of the disclosure requirements is to provide information to
users of the financial statements so they can gain a better understanding of the effects of leases on
the net assets, financial position, and results of operations.
The first-time application of IFRS 16 is not expected to have a material impact on the consolidated
financial statements of the Company, as the Group has mainly concluded lease agreements for the
commercial leasing of its investment property, thereby acting as the lessor. The scope of the trans-
actions agreed by the Company as lessee, however, is of minor scope.
No significant impact on financial reporting is expected from the other new standards and amend-
ments to the existing standards listed above.
The Group did not adopt any new or amended standards or interpretations early in 2017.
64
alstria Annual Report 2017
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, the 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 the 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 recognised directly
in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recognised 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 2017
65
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 recognised 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 recognised in profit or loss as
incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised
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 recognised 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 recognised 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 recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognised 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
66
alstria Annual Report 2017
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 63 companies in
the financial year (2016: 69). As of the balance sheet date, 55 companies (prior year balance sheet
date: 63 companies) existed. In addition, two joint ventures and a noncontrolling interest 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
Headquarters
1 alstria office REIT-AG
2 alstria Bamlerstraße GP GmbH
3 alstria Gänsemarkt Drehbahn GP GmbH
4 alstria Englische Planke GP GmbH
5 alstria Halberstädter Straße GP GmbH
6 alstria Hamburger Straße 43 GP GmbH
7 alstria Ludwig-Erhard-Straße GP GmbH
8 alstria Mannheim/Wiesbaden GP GmbH
9 alstria Portfolio 1 GP GmbH
10 alstria Steinstraße 5 GP GmbH
11 alstria solutions GmbH
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
Hamburg
12 alstria office Bamlerstraße GmbH & Co. KG
1) Hamburg
13 alstria office Gänsemarkt Drehbahn GmbH & Co. KG
1) Hamburg
14 alstria office Englische Planke GmbH & Co. KG
1) Hamburg
15 alstria office Halberstädter Straße GmbH & Co. KG
1) Hamburg
16 alstria office Hamburger Straße 43 GmbH & Co. KG
1) Hamburg
17 alstria office Insterburger Straße GmbH & Co. KG
1) Hamburg
18 alstria office Mannheim/Wiesbaden GmbH & Co. KG
1) Hamburg
19 alstria Prime Portfolio GP GmbH
20 alstria Prime Portfolio 2 GP GmbH
21 alstria office Steinstraße 5 GmbH & Co. KG
22 beehive GmbH & Co. KG
27
28
26
24
25
23 alstria office Prime Portfolio GmbH & Co. KG
alstria office PP Holding I GmbH & Co. KG
(formerly German Acorn Portfolio Co I GmbH)
alstria office Kampstraße GmbH & Co. KG
(formerly GA Objekt 2001 Beteiligungs GmbH)
alstria office Berliner Straße GmbH & Co. KG
(formerly GA Objekt 2003 Beteiligungs GmbH)
alstria office Hanns-Klemm-Straße GmbH & Co. KG
(formerly GA Objekt 2005 Beteiligungs GmbH)
alstria office Maarweg GmbH & Co. KG
(formerly GA Objekt 2007 Beteiligungs GmbH)
alstria office Heerdter Lohweg GmbH & Co. KG
(formerly GA Objekt 2008 Beteiligungs GmbH)
alstria office Solmsstraße GmbH & Co. KG
(formerly GA Objekt 2011 Beteiligungs GmbH)
GA Fixtures and Facility Management
PortfolioCo I GmbH
alstria office PP Holding II GmbH & Co. KG
(formerly German Acorn Portfolio Co II GmbH)
alstria office Vichystraße GmbH & Co. KG
(formerly GA 5. Objekt 1004 Beteiligungs GmbH)
alstria office Wilhelminenstraße GmbH & Co. KG
(formerly GA 6. Objekt 1007 Beteiligungs GmbH)
alstria office Hauptstraße GmbH & Co. KG
(formerly GA 7. Objekt 1008 Beteiligungs GmbH)
30
29
34
35
31
32
33
36 GA 10. Objekt 1014 Beteiligungs GmbH
alstria office Frankfurter Straße GmbH & Co. KG
(formerly GA 11. Objekt 1015 Beteiligungs GmbH)
37
Hamburg
Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
2) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
2) Hamburg
1) Hamburg
Equity
interest in %
Parent
company
Held
by No. Business activity
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
94.0
94.0
94.0
94.0
94.0
94.0
94.0
94.0
1 General Partner
1 General Partner
1 General Partner
1 General Partner
1 General Partner
1 General Partner
1 General Partner
1 General Partner
1 General Partner
1 Service company
1 Own property
1 Own property
1 Own property
1 No activity
1 No activity
1 Own property
1 Own property
1 General Partner
1 General Partner
1 Own property
1 Service company
1
Intermediate holding
23
Intermediate holding
24 Own property
24 Own property
24 Own property
24 Own property
24 Own property
24 Own property
n/a
24 Own property
94.0
94.0
94.0
94.0
n/a
94.0
23
Intermediate holding
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
alstria Annual Report 2017
67
Consolidated Financial Statements
No. Company
alstria office Mergenthaler Allee GmbH & Co. KG
(formerly GA 12. Objekt 1016 Beteiligungs GmbH)
alstria office Am Hauptbahnhof GmbH & Co. KG
(formerly GA 13. Objekt 1019 Beteiligungs GmbH)
alstria office Berner Straße GmbH & Co. KG
(formerly GA 14. Objekt 1020 Beteiligungs GmbH)
alstria office Eschersheimer Landstraße GmbH & Co. KG
(formerly GA 15. Objekt 1021 Beteiligungs GmbH)
alstria office Kastor GmbH & Co. KG
(formerly GA 17. Objekt 1024 Beteiligungs GmbH)
alstria office Heidenkampsweg GmbH & Co. KG
(formerly GA 18. Objekt 1027 Beteiligungs GmbH)
alstria office Stiftsplatz GmbH & Co. KG
(formerly GA 19. Objekt 1028 Beteiligungs GmbH)
alstria office An den Dominikanern GmbH & Co. KG
(formerly GA 20. Objekt 1030 Beteiligungs GmbH)
alstria office Carl-Benz-Straße GmbH & Co. KG
(formerly GA 21. Objekt 1034 Beteiligungs GmbH)
alstria office Carl-Schurz-Straße GmbH & Co. KG
(formerly GA 23. Objekt 1036 Beteiligungs GmbH)
38
39
40
41
42
43
44
45
46
47
48 GA 24. Objekt 1037 Beteiligungs GmbH
alstria office Pempelfurtstraße GmbH & Co. KG
(formerly GA 25. Objekt 1038 Beteiligungs GmbH)
alstria office Josef-Wulff-Straße GmbH & Co. KG
(formerly GA 26. Objekt 1039 Beteiligungs GmbH)
alstria office Ingersheimer Straße GmbH & Co. KG
(formerly GA 27. Objekt 1040 Beteiligungs GmbH)
alstria office Frauenstraße GmbH & Co. KG
(formerly GA 28. Objekt 1042 Beteiligungs GmbH)
49
50
51
52
53 GA 29. Objekt 1043 Beteiligungs GmbH
alstria office Olof-Palme-Straße GmbH & Co. KG
(formerly GA 32. Objekt 1046 Beteiligungs GmbH)
54
55 GA 34. Objekt 1048 Beteiligungs GmbH
56 GA 35. Objekt 1049 Beteiligungs GmbH
alstria office Region Nord GmbH & Co. KG
(formerly GA Region Nord GmbH)
alstria office Region Süd GmbH & Co. KG
(formerly GA Region Süd GmbH)
alstria office Region Mitte GmbH & Co. KG
(formerly GA Region Mitte GmbH)
GA Fixtures and Facility Management
PortfolioCo II GmbH
alstria office PP Holding III GmbH & Co. KG
(formerly DO Portfolio Co III GmbH)
alstria office Vaihinger Straße GmbH & Co. KG
(formerly DO Objekt 3001 Stuttgart GmbH)
DO Fixtures and Facility Management
PortfolioCo III GmbH
57
58
59
60
61
62
63
Headquarters
Equity
interest in %
Held
by No. Business activity
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
2) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
2) Hamburg
1) Hamburg
2) Hamburg
2) Hamburg
1) Hamburg
1) Hamburg
1) Hamburg
2) Hamburg
1) Hamburg
1) Hamburg
2) Hamburg
94.0
94.0
94.0
94.0
94.0
94.0
94.0
94.0
94.0
94.0
n/a
94.0
94.0
94.0
94.0
n/a
94.0
n/a
n/a
94.0
94.0
94.0
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
32 Own property
n/a
32 Own property
94.0
94.0
23
Intermediate holding
61 Own property
n/a
61 Own property
1) The Company has made use of the exemption from the obligation to prepare annual financial statements in accordance with the provisions
applicable to corporations in accordance with Section 264b HGB.
2) Terminated as a result of a step-up merger in 2017.
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 the balance sheet
date consisted of the Company, 22 domestic subsidiaries, and 32 domestic second-tier subsidiaries.
Eight subsidiaries were terminated as a result of a step-up merger.
The reporting date for the consolidated financial statements is the same as the reporting date for the
Company and consolidated subsidiaries.
There have been no further changes to the consolidated Group in the 2017 financial year in comparison
to the consolidated financial statements as of December 31, 2016. All the Group companies are
property-management, holding, or general partner companies.
In the previous period, a real estate company was deconsolidated. The following tables show the
effects of these changes on the Group:
68
alstria Annual Report 2017
Consolidated Financial Statements
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
Prepayments received
Net assets disposed of
Gain on disposal of a subsidiary
EUR k
Consideration received
Net assets disposed of
Gain on disposal
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
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 equivalent balances disposed of
Net assets disposed of
2016
228,357
-1,769
226,588
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 7,733 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
Place of incorporation
and business
Hamburg, Germany
Alte Post General Partner GmbH i.L. n/a
Oststeinbek, Germany
Proportion of ownership, interest,
and voting rights held by the Group
Dec. 31, 2016
(%)
Dec. 31, 2017
(%)
49.0
49.0
49.0
49.0
The abovementioned joint ventures were accounted for by applying the equity method in these con-
solidated financial statements.
alstria Annual Report 2017
69
Consolidated Financial Statements
The following table provides the aggregated information of joint ventures whose carrying amounts
are not individually material:
EUR k
The Group’s share of profit (loss) from continuing operations
The Group’s share of total comprehensive income
2017
28,064
28,064
2016
5,500
5,500
EUR k
Dec. 31, 2017
Dec. 31, 2016
Aggregate carrying amount of the Group’s interests in these joint ventures
7,733
29,401
There were no unrecognised 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 926 k. The
Company was acquired in the 2017 business year and is considered immaterial. Its business is the
investment in innovative real estate technology concepts. The Company recorded a loss of EUR 54 k
in the reporting period.
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
recognised 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 particularly necessary to
70
alstria Annual Report 2017
Consolidated Financial Statements
▪ 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 6.5),
▪ 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).
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, 2017
Dec. 31, 2016
Investment property and properties held for sale excluding prepayments made
3,386,558
3,013,799
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
14
27,529
53,881
4,491
-2,773
114
20,099
71,424
3,570
-2,069
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 its 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,”
alstria Annual Report 2017
71
Consolidated Financial Statements
▪
leasing transactions that are within the scope of IAS 17 “Leases,” and
▪ measurements that have some similarities to fair value but are not fair value, such as net
realisable value in IAS 2 “Inventories” or value in IAS 36 “Impairment of assets.”
Fair value is not always available as a market price. It must often be determined based on various
valuation parameters. In addition, for financial-reporting purposes, fair value measurements are
categorised 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 capitalised in the year in which they arise.
For subsequent measurement, the Company uses the fair value model according to IFRS 13.61 et seq.,
which reflects an income-capitalisation approach combined with market conditions at the end of the
reporting period.
In the context of the fair value hierarchy described above, only inputs of Levels 2 and 3 are applicable
for property. The majority is categorised 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., property-
based capitalisation 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 categorised as Level 3. Information about the signif-
icant unobservable inputs used and their sensitivities on the fair values of the Group’s investment
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.
72
alstria Annual Report 2017
Consolidated Financial Statements
An investment property derecognised 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 derecognised.
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 maximising the use of relevant observable inputs and minimising 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, 2017 — 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 (Savills Advisory Services Germany GmbH &
Co. KG, Frankfurt am Main, Germany, and Colliers International UK Plc., London).
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 fulfils the requirements of the Red Book, a set of
international valuation standards the Royal Institution of Chartered Surveyors has 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).
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
alstria Annual Report 2017
73
Consolidated Financial Statements
▪
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,
capitalisation 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 (i.e., 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),
capitalisation 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 realised.
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 derecognised 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
disposal. Any gains or losses on the retirement or disposal of an investment property are recognised
in the income statement in the year of retirement or disposal.
Assets held for sale
Noncurrent 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 until the end of the reporting period. 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.
74
alstria Annual Report 2017
Consolidated Financial Statements
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 the 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 recognised at fair value or at the lower present
value of the minimum lease payments at the inception date of the lease. The corresponding leasing
liability is recorded as a lease commitment under other noncurrent liabilities. The resulting lease
payments are separated into interest and amortising 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 recognised 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 recognised.
Rental income from operating leases on investment properties is recognised 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 recognised at the time of the service or when they are
incurred.
Interest expenses and interest income are recognised using the effective interest method.
Income taxes
Current and deferred tax are recognised in profit or loss, except when they relate to items recognised
in other comprehensive incomes or directly in equity, in which case, the current and deferred tax are
also recognised in other comprehensive income or directly in equity, respectively.
alstria Annual Report 2017
75
Consolidated Financial Statements
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. In order to take effect, the determination of the
amount is based on the tax rates and tax laws applicable on the reporting date or soon after.
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
amortisation had been charged.
Property, plants, and equipment
Property, plants, and equipment are stated at a cost less than the accumulated depreciation and
accumulated impairment losses. They include owner-occupied real estate as well as operating and
office equipment. 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
recognised in profit or loss as incurred.
The depreciation of operating and office equipment is calculated on a straight-line basis over the
useful life of the asset (three to 21 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.
Intangible assets
The Group amortises intangible assets with finite useful lives on a straight-line basis over its respective
estimated useful lives. Estimated useful lives for patents, licences, 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
76
alstria Annual Report 2017
Consolidated Financial Statements
on their nature, financial instruments are classified as the following:
▪ held-to-maturity,
▪
▪
▪
financial assets and financial liabilities measured at cost or amortised 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 recognised 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 recognised 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 amortised 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.
Available-for-sale financial assets
Investments in equity instruments, debt instruments, and fund shares are measured at fair value, if
reliably measurable. Unrealised gains and losses, net of applicable deferred income tax expenses, are
recognised 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 amortised 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
alstria Annual Report 2017
77
Consolidated Financial Statements
portfolio basis are not made.
Financial liabilities
alstria measures financial liabilities, except for derivative financial instruments, at amortised 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 recognised in
either 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 is recognised in line item other comprehensive income, net of income taxes (applicable
deferred income tax), and any ineffective portion is recognised 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
recognised assets or liabilities or a firm commitment (fair value hedges) nor such financial derivatives
that qualify for the hedging of a net investment in a foreign operation (net-investment hedge).
Provisions
Provisions are recognised 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 recognised 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 recognised in profit
78
alstria Annual Report 2017
Consolidated Financial Statements
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 1,488 k (December 31, 2016: EUR 1,001 k) and a provision of EUR 2,887 k, as
reported in the consolidated financial statements as of December 31, 2017 (December 31, 2016:
EUR 2,890 k).
Further details on the share-based payment schemes are given in Note 13 and the remuneration
report, respectively.
3. SEASONAL OR ECONOMIC EFFECTS ON BUSINESS
The business activities of alstria office REIT-AG (primarily the generation of revenues from investment
properties) are not generally affected by seasonality. However, the sale of one or more large proper-
ties 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
alstria Annual Report 2017
79
Consolidated Financial Statements
comprises all of the Group’s 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 193,680 k (2016:
EUR 202,663 k), of which EUR 24,608 k (2016: EUR 26,192 k) and EUR 21,309 k (2016: EUR 23,098 k)
relate to leases to the Group’s two largest customers. No other single customer has contributed either
10% or more to the consolidated revenues in the 2016 or 2017 financial year.
5. NOTES TO THE CONSOLIDATED INCOME STATEMENT
5.1
Revenues
EUR k
Revenues from investment properties
2017
193,680
2016
202,663
Revenues from investment properties are mainly comprised of rental income from investment
properties. The rental income includes effects totalling EUR 1,984 k (2016: EUR 1,175 k), which are
attributable to rent-free periods.
In addition, revenues include income from asset management services in relation to the leased real
estate properties in the amount of EUR 2,429 k (2016: EUR 992 k).
Rental income from property leases contains variable rental income amounting to EUR 8,275 k
(2016: EUR 5,014 k). These are rental agreements in which the rental payments are linked to the
operating results of the tenants.
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
2017
35,118
1,637
36,755
-35,118
-1,401
-36,519
236
2016
36,349
1,799
38,148
-36,349
-2,003
-38,352
-204
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.
80
alstria Annual Report 2017
Consolidated Financial Statements
5.3
Real estate operating expenses
EUR k
Maintenance and refurbishment
Vacancy costs
Ongoing repairs
Insurance expenses
Legal and advisory fees
Electricity costs
Property management
Rent expenses
Facility management costs
Taxes on land and buildings
Nondeductable VAT
Other expenses
Total
5.4 Administrative expenses
EUR k
Legal and consulting fees
Audit fee (audit and audit-related services)
Communication and marketing
Travel expenses
Depreciation
Leasing costs
Supervisory Board compensation
Recruitment
Office equipment
Insurances
IT maintenance
Office area costs
Contributions
Training & workshops
Donations
Other
Total
2017
9,086
6,201
4,275
373
246
150
139
114
25
9
0
1,019
21,637
2017
2,642
757
670
507
490
436
353
309
299
213
205
205
191
151
58
547
8,033
2016
8,056
7,950
4,357
308
385
224
151
549
419
127
97
822
23,445
2016
2,425
634
734
487
678
264
347
300
198
259
375
232
126
122
76
1,207
8,464
alstria Annual Report 2017
81
Consolidated Financial Statements
5.5
Personnel expenses
EUR k
Salaries and wages
Social insurance contribution
Bonuses
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
Total
2017
7,338
1,225
1,986
2,773
1,488
1,285
142
359
13,823
2016
6,717
1,088
2,346
2,069
144
319
12,683
1,001
1,068
The increase in personnel expenses is based on a higher number of average employees and higher
share-based payments.
Convertible profit participation rights granted to employees not only grant the right to a conversion
when the conditions apply but also to an annual payment equivalent to the dividend amount paid out
per share. Therefore, expenses for share-based compensation resulting from the convertible profit
participation rights must be accounted for in equity (for the conversion right) and in liabilities (for the
dividend entitlement). Of the total expenses related to the profit participation rights — which
amounted to EUR 1,285 k — EUR 1,129 k were recognised in equity (2016: EUR 949 k), while EUR 156 k
were recorded as an item in liabilities (2016: EUR 119 k).
The employer’s contribution to statutory pension insurance, included in wages and salaries, amounts
to EUR 590 k for the 2017 financial year.
On average, the Group employed 118 employees in 2017 (2016: 105).
5.6 Other operating income
EUR k
Compensation payments and other recharges
Income from the reversal of accrued liabilities
Result from annual operational cost statements for prior years
Compensation for damages
Property management services
Payments on provisions on doubtful debts
Income from the reversal of provisions in relation to rental guarantees
Refunded property tax from previous years
Other
Total
2017
7,406
1,006
632
379
335
296
0
0
717
2016
2,001
1,432
0
0
165
43
931
345
500
10,771
5,417
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.
82
alstria Annual Report 2017
Consolidated Financial Statements
The derecognition of the operating cost overhang relates to prepayments received in previous business
years, which could be definitively collected after the final service charge calculation was made up by
the Company.
5.7 Other operating expenses
EUR k
Revaluation of the limited partnership capital noncontrolling interests
Transaction and restructuring costs following the alstria office Prime takeover
Property disposal costs
Impairment on trade receivables
Settlement agreements
Impairment of operating costs receivables
Remaining other operating expenses
Total
2017
9,210
1,971
1,160
698
676
0
656
2016
239
4,337
4,771
176
0
2,214
2,708
14,371
14,445
Other operating expenses are at the previous year’s level. Although the consequential costs resulting
from the integration of the Prime Portfolio declined significantly, there was a considerable amount
of additional costs resulting from the revaluation of the limited partnership noncontrolling interests.
Impairment on trade receivables mainly relates to tenants subject to insolvency or eviction
proceedings. The item also includes valuation allowances related to disputed invoicing of ancillary
costs. The increase compared to the previous year relates to high volume rental receivables of a small
number of tenants.
The previous year's other remaining operating expenses include EUR 2.5 million donations made in
that year for the promotion of charitable purposes.
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
Total
2017
119,200
-99,507
19,693
2016
459,213
-433,749
25,464
The total loss from the disposal of objects and portfolios sold below their carrying value amounted to
EUR 194 k in 2017 and EUR 7,952 k in 2016.
alstria Annual Report 2017
83
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 bonds
Interest expenses, convertible bond
Interest expenses, other loans
Interest result “Schuldschein”
Interest expenses, loan alstria office Prime Portfolio
Interest expenses, syndicated loan alstria
Interest result derivatives
Other interest expenses
Financial expenses
Fees, loan premium and effective interest costs in relation to the
repayment of loans and corporate bonds before maturity
Commitment fees
Agency fees
Other
Other financial expenses
Net financial result
2017
816
-23,314
-5,357
-3,399
-3,248
-186
0
0
-480
-35,984
-31,981
-152
-38
-369
-32,540
-67,708
2016
535
-20,496
-5,116
-4,074
-2,036
-6,728
-6,723
-207
0
-45,380
-5,111
-161
-134
-543
-5,949
-50,794
The total interest income and expenses for financial assets and liabilities other than financial deriv-
atives amounted to an interest income of EUR 816 k (2016: EUR 535 k) and EUR 35,984 k of interest
expenses (2016: EUR 45,173 k), respectively.
The total interest expenses calculated by applying the effective interest method for financial liabili-
ties (i.e., not recognised at fair value through profit or loss) amounted to EUR 2,122 k (interest ex-
penses, 2016: EUR 4,210 k).
The premium and the effective interest expense due to the repayment of loans or corporate bonds in
the amount of EUR 31,981 k relate to the proportionate repurchase of two corporate bonds prior to
their regular maturity (see also the explanations of corporate bonds in section 7.3 Loans and bonds).
As part of a tender offer for repurchase, bonds with a nominal value of EUR 348,200 k were bought
back in the market. The premium to be paid on the basis of the bond prices at the time of the
repurchase amounted to EUR 29,172 k. The reversal of the allocated accrued original ancillary costs
of the bond placement at the time of the repurchase amounted to EUR 2,809 k.
In neither of the two former financial years did the Group hold any financial assets available for sale.
Therefore, the net result from the disposal of financial assets available for sale amounted, as in the
previous year, to EUR 0.
84
alstria Annual Report 2017
Consolidated Financial Statements
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
2017
0
-25
-9,309
-9,334
2016
-270
-4,971
-2,860
-8,101
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 6.5.
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
2017
-2,097
0
-2,097
2016
-11,450
132
-11,318
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% as the
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 unrecognised deferred tax assets on losses
carried forward in prior years
Tax effects, prior periods
Other
Income tax income
2017
299,084
299,084
0
15.825%
0
0
-1,055
-1,042
-2,097
2016
193,694
153,752
39,942
15.825%
-6,321
-4,881
-32
-84
-11,318
alstria Annual Report 2017
85
Consolidated Financial Statements
As of December 31, 2017, the alstria office Prime Subgroup no longer has any trade tax losses to carry
forward.
6. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION – ASSETS
6.1
Investment property
This item, comprising investment properties held by the Company, breaks down as follows:
Fair values in EUR k
As of January 1
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)
2017
2016
2,999,099
3,260,467
187,723
58,780
-42,800
-43,100
-14,836
0
9,146
31,277
-360,500
-12,499
-1,920
322
72,806
Net result from the adjustment of the fair value of investment property
181,492
Subtotal
Prepayments made
As of December 31
3,326,358
2,999,099
5,500
0
3,331,858
2,999,099
In the 2017 financial year, seven properties were sold or reclassified as 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 trans-
action volume of assets held for sale amounted to EUR 60,200 k.
Acquisition
Disposal
Property transaction
Contract signed in 2016,
transferred in 2017
Contract signed and
transferred in 2017
Contract signed in 2017,
transfer expected for 2018
Total
Number of
properties
Transaction amount
in EUR k
Number of
properties
Transaction amount
in EUR k
0
13
2
15
0
176,900
82,584
259,484
2
3
2
7
14,700
44,300
60,200
119,200
Capital expenditure (EUR 58,780 k) comprises subsequent acquisition and production costs relating to
property acquisitions and refurbishment projects.
For more information on changes to the immovable property, please refer to the “Transactions”
section in the Group management report for the 2017 business year (see page 9).
Borrowing costs that would have had to be capitalised as construction costs were not incurred during
the reporting period (2016: EUR 0).
86
alstria Annual Report 2017
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 the amount of EUR 113,937 k is attributable to a change in unrealised losses.
As in the previous year, all real estate held as investment property measured at fair value is classified
as level 3 in the fair value 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 categorised, in determining
the appropriate classes of investment property.
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.
alstria Annual Report 2017
87
Consolidated Financial Statements
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).
Quantitative information about fair value measurements using unobservable inputs (alstria port-
folio) (level 3)
EUR k, unless stated otherwise
Portfolio
Fair Value on
Dec. 31, 2017
German offices
3,326,3581)
Number of properties:
Valuation
technique
hardcore
and top slice
114
0 ≤ WAULT ≤ 5 Years
German offices
2,200,974
Number of properties:
Unobservable
inputs
Estimated rental value
(EUR/m²/mo.)
Adjusted yield
Void period of office
leases expiring within
the next 5 years
[months]
80
5 < WAULT ≤ 10 Years
German offices
Number of properties:
27
WAULT > 10 Years
German offices
Number of properties:
7
hardcore and top
slice
Estimated rental value
(EUR/m²/mo.)
Adjusted yield
Void period of office
leases expiring within
the next 5 years
[months]
755,012
hardcore and top
slice
Estimated rental value
(EUR/m²/mo.)
Adjusted yield
Void period of office
leases expiring within
the next 5 years
[months]
370,372
hardcore and top
slice
Estimated rental value
(EUR/m²/mo.)
Adjusted yield
Void period of office
leases expiring within the
next 5 years [months]
Range
Min. Max.
Weighted
average
5.7
21.3
11.7
3.1%
9.0%
5.7%
0,0
24.0
16.0
5.7
3.8%
21.3
9.0%
11.8
6.0%
0,0
24.0
16.2
6.6
16.6
4.0%
7.7%
11.1
5.1%
0,0
18.0
13.8
9.5
15.8
3.1%
4.8%
12.6
3.8%
0,0
15.0
9.5
1) Fair Value of investment property without prepayments of EUR 5,500 k.
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 period 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.
88
alstria Annual Report 2017
Consolidated Financial Statements
The external assessors have carried out sensitivity analyses on their fair value assessments, which
show the effect of changes in capitalisation rates (adjusted yield) on fair market values.
Fair value of investment properties (EUR m)
Capitalisation rates
Dec. 31, 2017
Dec. 31, 2016
–0.25 %
0.00 %
0.25 %
3,523
3,332
3,162
3,144
2,999
2,861
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
Total
Dec. 31, 2017
Dec. 31, 2016
182,475
454,425
315,742
952,642
187,897
449,649
333,474
971,020
Disclosures concerning expenses/income as recorded in the income statement pursuant to
IAS 40.75 (f) include:
▪ EUR 193,680 k (2016: EUR 202,663 k) rental income from investment properties,
▪ EUR 15,436 k (2016: EUR 15,495 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 6,201 k (2016: EUR 7,950 k) operating expenses (including repairs and maintenance) aris-
ing 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 618,329 k (December 31, 2016: EUR 567,315 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 7,733 k (December 31, 2016:
EUR 29,401 k). In addition, alstria holds interests in an entity with a carrying amount of EUR 926 k.
alstria Annual Report 2017
89
Consolidated Financial Statements
For further information, please refer to Note 2.2.3.
6.3
Intangible assets and property, plant, and equipment
The intangible assets consist of software licences and licences to other rights of an amount of
EUR 189 k and EUR 124 k, respectively. The useful life of the intangible assets is estimated to be
between three and five years.
The alstria office REIT-AG occupies areas for its own use in five of its office buildings in Hamburg,
Berlin, Düsseldorf, and Frankfurt. Therefore, the owner-occupied areas of the properties are
categorised as “property, plant, and equipment,” according to IAS 16.
In the 2017 financial year, property space with a market value at the time of their initial use by alstria
in the amount of EUR 14,836 k were reclassified from the investment property to the property, plant
and equipment. As such, the real estate is depreciated on schedule.
The carrying amount of all own used areas equals EUR 21,049 k as of the balance sheet date, after
EUR 5,966 k on the previous year’s reporting date. The increase resulted from space for a new
administration building in Hamburg and the opening of an office in Berlin. Following the planned move
in the new headquarters in Hamburg at the beginning of 2018, the previously owner-occupied space
will be newly let and thus reclassified from property, plant, and equipment to investment property.
As in the previous year, two of these properties were pledged with a mortgage in order to secure
loans from the Group.
Additionally, operating and office equipment in the amount of EUR 1,393 k is shown under property,
plant, and equipment, after EUR 892 k on the previous year’s balance sheet date.
6.4
Financial Assets
The financial assets of EUR 36,567 k (December 31, 2017: 34,803 k) relate to long-term bank deposits
with a maturity until the 2021 financial year.
90
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Consolidated Financial Statements
6.5 Derivative financial instruments
The following derivative financial instruments were in place at the end of the reporting period:
Product
Strike p.a.
Maturity date
Notional
Fair value
Notional
Fair value
Dec. 31, 2017
Dec. 31, 2016
(%)
3.0000
0.2500
3.0000
3.0000
3.0000
Sep. 30, 2019
Dec. 31, 2017
Apr. 30, 2021
Dec. 17, 2018
Mar. 29, 20241)
Cap
Cap
Financial derivatives –
held for trading
Cap
Cap
Cap
Financial derivatives –
cash flow hedges
Total interest rate
derivatives
Embedded derivative
n/a
June 14, 2018
Total
1) Terminated before initial maturity.
2) Underlying number of shares subject to conversion in thousands.
(EUR k)
50,250
0
50,250
46,380
56,000
0
102,380
152,630
7,9872)
(EUR k)
0
0
0
14
0
0
14
14
-27,529
-27,515
(EUR k)
50,250
340,000
390,250
47,116
56,000
10,900
114,016
504,266
8,4082)
(EUR k)
10
5
15
46
3
50
99
114
-20,099
-19,985
The notional amount of the financial derivatives effective at the end of the reporting period is
EUR 152,630 k (December 31, 2016: EUR 504,266 k). This includes cash flow hedges and derivatives
not qualifying for cash flow hedging.
Derivatives of a notional amount of EUR 50,250 k (December 31, 2016: EUR 390,250 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 59 units, the bond has a notional value of EUR 73,500 k as of December 31, 2017. Due
to the terms and conditions of the convertible bond, the conversion right has to be separately ac-
counted for as an embedded derivative.
The value changes of the derivatives are reflected in various items in the balance sheet.
alstria Annual Report 2017
91
Consolidated Financial Statements
The following table shows the change in financial derivatives since December 31, 2016:
EUR k
Hedging instruments as of
January 1, 2017
Ineffective change in fair value cash flow hedges
Net result from fair value changes in financial
derivatives not qualifying for cash flow hedging
Termination
Reclassification due to change of maturity
Hedging instruments as of
December 31, 2017
Financial assets
Financial liabilities
Noncurrent
Current Noncurrent
Current
Total
109
-25
-10
-60
0
14
5
0
-5
0
0
0
-20,099
0
-2,868
0
22,967
0
0
-19,985
-25
-6,426
1,864
-22,967
-9,309
1,804
0
0
-27,529
-27,515
The ineffective portion that arises from cash flow hedges amounted to a fair value loss of EUR 25 k
(2016: loss of EUR 4,971 k) and is recognised in profit or loss.
Further losses totalling EUR 9,309 k (2016: loss of EUR 2,860 k), which were due to the market value
of the derivatives not included in hedge accounting, were recorded on the 2017 income statement.
Overall, this results in a total loss of EUR 9,334 k (2016: loss of EUR 8,101 k), which is presented as
the “net loss from fair value adjustments on financial derivatives.”
6.6
Receivables and other assets
Due to the specific nature of the business, the Group considers receivables due in up to one year to
be current. The following table presents an overview of the receivables of the Group:
EUR k
Trade receivables
Rent receivables
Other receivables
Accrued receivables for “rent-free periods”
VAT receivables
Prepayments made
Creditors with debit balance
Security deposits and other deposits granted
Deposit account
Pending purchase prices from real estate sales
Receivables and other assets
Other receivables
Dec. 31, 2017
Dec. 31, 2016
7,153
10,303
2,093
684
474
359
0
0
847
14,760
7,257
8,318
38
492
688
1,673
313
29,005
1,051
41,578
A total of EUR 10,303 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 pending purchase price for sold properties on the previous year’s balance sheet
date in the amount of EUR 29,005 k was made at the beginning of January 2017.
92
alstria Annual Report 2017
Consolidated Financial Statements
The fair value of all receivables is equal to their carrying amount.
Trade receivables were written down by EUR 698 k (December 31, 2016: EUR 196 k) due to rent
payments in arrears. Apart from trade receivables, no other receivables were impaired.
As of December 31, 2017, trade receivables of an amount of EUR 6,955 k (December 31, 2016:
EUR 5,859 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
Total
Dec. 31, 2017
Dec. 31, 2016
4,435
1,056
1,464
6,955
4,375
970
514
5,859
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.
6.7
Cash and cash equivalents
EUR k
Bank balances
Dec. 31, 2017
Dec. 31, 2016
102,078
247,489
Current accounts held with banks attract variable interest rates for on-call balances. As of the re-
porting date, no cash amounts were subject to restrictions.
As of the balance sheet date, EUR 13,278 k accrued for interest payment liabilities exists, which will
be payable in the course of the next twelve months (December 31, 2016: EUR 18,254 k).
In addition, cash and cash equivalents include EUR 5,414 k in rent deposits received from tenants and
held in trust by the Group (December 31, 2016: EUR 4,944 k). These tenant deposits, recognised under
cash and cash equivalents, are offset by an item included under Other Liabilities.
6.8 Assets held for sale
The assets held for sale comprise two properties. While one property was already transferred to the
buyer in the first quarter after the reporting period, the transfer of benefits and burdens of the other
property is still pending until the completion date of these consolidated financial statements and is
expected to take place by the end of the first half of the year. The sale of properties resulted in
disposal revenues of EUR 60,200 k.
The properties reported are not the properties shown in the previous year, which were sold as planned
in 2017.
alstria Annual Report 2017
93
Consolidated Financial Statements
EUR 17,062 k out of the income statement item “gain on disposal of investment property” relates to
the assets held for sale shown on 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.
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, 2017
Dec. 31, 2016
153,962
153,231
The conversion of profit participation rights (Note 13.2) in the second quarter of 2017 resulted in the
issuance of 111,000 new shares by making use of the conditionally increased capital provided for such
purposes. The share capital increased by EUR 111,000.
Fifty-seven shares with a notional amount of EUR 5,700 k of the convertible bond were converted in
the fourth quarter of 2017. The conversion resulted in an issuance of 619,437 new shares by making
use of the conditionally increased capital provided for such purposes (Conditional Capital 2013).
In total, due to the capital measures stated above, alstria office REIT-AG’s share capital increased to
EUR 153,961,654 (EUR 730,437 higher than on December 31, 2016). As of December 31, 2016, it is
represented 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 of shares outstanding:
Number of shares
Shares outstanding on Jan. 1
Conversion of convertible bond
Conversion of convertible participation rights
Issuance of new shares against contribution in kind for
takeover of alstria office Prime KG (former Deutsche Office AG)
2017
2016
153,231,217
152,164,285
619,437
111,000
0
0
102,750
964,182
As of Dec. 31
153,961,654
153,231,217
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alstria Annual Report 2017
Consolidated Financial Statements
Capital reserve
The capital reserve changed as follows during the financial year:
EUR k
As of Jan. 1
Payment of dividends
Conversion of convertible bond
Share-based remuneration
Conversion of convertible participation rights
Issuance of new shares against contribution in kind for takeover
of alstria office Prime KG (former Deutsche Office AG)
As of Dec. 31
2017
1,434,812
-79,680
6,944
1,129
111
0
1,363,316
2016
1,499,477
-76,564
0
949
103
10,847
1,434,812
The share premium resulting from the partial conversion of the convertible bond amounted to
EUR 6,944 k. It was recognised in the capital reserve.
The share premium resulting from the conversion of 111,000 profit participation rights resulted in an
increase in capital reserves of EUR 111 k.
Treasury shares
As of December 31, 2017, the Company held no treasury shares.
By resolution of the Annual General Meeting held on May 16, 2017, the Company’s authorisation to
acquire treasury shares was renewed. The resolution authorised alstria office REIT-AG to acquire up
to 10% of the capital stock until May 15, 2022. There is no intention to make use of this authorisation
at present.
Retained earnings
Retained earnings as of December 31, 2017, totalled EUR 437,382 k (December 31, 2016: profit car-
ried forward of EUR 140,395 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. Therefore, the amount of the dividend payouts was released from the capital reserve in 2017.
Authorised capital
The authorised capital 2016 of the Company in the amount of EUR 76,082 k was limited until May 11,
2018 and was replaced by the authorised capital 2017 by resolution of the Annual General Meeting on
May 16, 2017. The authorised capital 2017 allows the Management Board, with the approval of the
Supervisory Board, to increase the share capital of the company by May 15, 2022 by up to a total of
EUR 30,646 k. After partial utilization in January 2018, the Authorised Capital 2017 at the time of
authorisation for issue these consolidated financial statements amounts to EUR 15,323 k.
alstria Annual Report 2017
95
Consolidated Financial Statements
Conditional capital
The Company's share capital has been conditionally increased in order to grant conversion or subscrip-
tion rights on the basis of convertible bonds and to grant subscription rights to the employees of the
Company and its subsidiaries. As of 31 December 2016, the conditional capital amounted to
EUR 38,695 k. This was divided into conditional capital 2013 (EUR 37,980 k), conditional capital III
2012 (EUR 216 k) and conditional capital III 2015 (EUR 500 k).
In the year under review, conditional capital 2013 was used in the amount of EUR 619 k. Conditional
Capital III 2012 was used in the amount of EUR 111 k and has become obsolete. By resolution of the
Annual General Meeting on 16 May 2017, a new conditional capital III 2017 amounting to EUR 1,000 k
was created. As of December 31, 2017, the conditional capital totalled EUR 38,860 k. In January 2018,
Conditional Capital 2013 was again used in the amount of EUR 467 k. The contingent capital of the
company therefore amounts to EUR 38,393 k at the time of publication of these consolidated financial
statements.
7.2 Noncontrolling interests of limited partners
In addition to alstria office REIT-AG, other limited partners are minority shareholders in the subsidiary
alstria office Prime, which is included in the consolidated financial statements. From the Group’s
point of view, the equity of these limited partners is to be reported as debt capital in accordance
with IFRS. They are shown in the consolidated balance sheet under the item “limited partnerships of
noncontrolling interests”.
In the business year 2017, alstria office REIT-AG acquired 2,128,048 limited partner shares. A further
3,593,463 limited partner shares were redeemed against cash compensation by alstria office Prime.
By the end of the reporting period, the acquisition and redemption of limited partnership shares as
well as the change in value of the existing limited partnership shares of noncontrolling interests re-
sulted in expenses of EUR 9,317 k (2016: EUR 271 k). The fair value of the limited partnerships of
noncontrolling interests reported as of the balance sheet date amounted to EUR 53,881 k, whereby
EUR 53,834 k are to be classified as long-term and EUR 47 k as short-term. The fair value of this
financial liability is approximately equal to its carrying amount as of the balance sheet date.
96
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Consolidated Financial Statements
7.3
Financial liabilities
EUR k
Loans
Corporate bonds
Mortgage loans
Schuldschein
Convertible bond
Total
EUR k
Loans
Corporate bonds
Mortgage loans
Schuldschein
Convertible bond
Total
Noncurrent
Current
Total
Loan Accrued interest
Total current
Dec. 31, 2017
992,215
240,179
149,571
0
1,381,965
0
1,076
0
72,096
73,172
11,343
86
1,752
97
13,278
11,343
1,162
1,752
72,193
86,450
1,003,558
241,341
151,323
72,193
1,468,415
Noncurrent
Current
Total
Loan Accrued interest
Total current
Dec. 31, 2016
990,722
251,753
149,468
74,578
0
1,075
0
0
16,408
16,408
1,007,130
12
1,738
97
1,087
1,738
97
252,840
151,206
74,675
1,466,521
1,075
18,255
19,330
1,485,851
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, 2017, the total repayable amount of the corporate bonds, the bank loans, the
Schuldscheindarlehen, and the convertible bond drawn by alstria was EUR 1,467,287 k (December 31,
2016: EUR 1,482,864 k). The carrying amount of EUR 1,468,415 k (EUR 1,381,965 k, noncurrent, and
EUR 86,450 k, current) takes interest liabilities and accrued transaction costs into account. Financial
liabilities with a maturity of up to one year are recognised as current loans.
The following table shows the changes in financial liabilities:
EUR k
Long-term loans and bonds,
net of current portion
Short-term loans
Total
December
31, 2016
Payments of
the period
Reclassification non-
current/current
Changes in
fair value
December
31, 2017
1,466,521
19,330
1,485,851
-13,661
-1,076
-14,737
-80,276
9,3811)
1,381,965
80,276
-12,0802)
86,450
0
-2,699
1,468,415
1) Changes in deferred loan costs (effective interest).
2) Contains EUR 6,380 k of changes in the accrued interest and EUR 5,700 k of the non-cash reduction of the convertible bond due to its partial
conversion.
The cash changes in borrowings shown in the column "Payments of the period" include, in addition to
the cash inflows and outflows from loans and corporate bonds, the payments of transaction costs for
taking out loans.
alstria Annual Report 2017
97
Consolidated Financial Statements
Corporate bond I
In the fourth quarter of the 2015 business year, a bond loan in the total amount of EUR 500,000 k with
a maturity until March 24, 2021, and a coupon of 2.25% p.a. was issued.
As result of the invitation to tender for the existing corporate bond, on November 16, 2017, alstria
office REIT-AG repurchased shares with a notional amount of EUR 173,200 k. Following settlement of
the invitation and cancellation of the relevant bond notes, the outstanding notional value of the bond
still amounts to EUR 326,800 k.
The bond was recognised with its carrying amount of EUR 324,765 k; additionally, interest liabilities
in the amount of EUR 5,701 k were recognised per the balance sheet date. The fair value amounted
to EUR 345,526 k as of the balance sheet date.
Corporate bond II
In the second quarter of the previous year’s reporting period, a second bond loan in a total amount
of EUR 500,000 k with a maturity until April 12, 2023, and a coupon of 2.125% p.a. was issued. As
result of the invitation to tender for the existing corporate bond, on November 16, 2017, alstria office
REIT-AG repurchased shares with a notional amount of EUR 175,000 k. Following settlement of the
invitation and cancellation of the relevant bond notes, the outstanding notional value of the bond
still amounts to EUR 325,000 k.
The bond was recognised with its carrying amount of EUR 321,872 k; additionally, interest liabilities
in the amount of EUR 4,995 k were recognised per the balance sheet date. The fair value amounted
to EUR 348,969 k as of the balance sheet date.
Corporate bond III
In the fourth quarter of 2017, alstria office REIT-AG issued a corporate bond with a maturity until
November 2027, a total nominal value of EUR 350,000 k, and a coupon of 1.5% p.a. After deducting
the deferred loan ancillary costs, the notes were recognised at the end of the year with a carrying
amount of EUR 345,578 k. Interest liabilities amounting to EUR 647 thousand were accrued as of the
balance sheet date. The fair value (hierarchy level 1) amounted to EUR 339,605 k as of the balance
sheet date.
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 and ten years (see table on page 110). The fair
value amounted to EUR 162,983 k as of the balance sheet date.
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alstria Annual Report 2017
Consolidated Financial Statements
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 9.2019 during the 2017
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 5,900 k, EUR 73,500 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 amortised cost. The
derivative component is, however, valued at fair value at the end of subsequent reporting periods.
Upon conversion into shares, both components—which are discontinued upon conversion of the bond—
are reclassified as equity. The alstria office REIT-AG issued this bond based on the authorisation
received from the Annual General Meeting in 2013. The convertible loan has a carrying amount
without accrued interests of EUR 72,096 k and a market value of EUR 101,820 k. Under consideration
of the embedded derivative amounting to EUR - 27,592 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 74,227 k.
More information on the 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, 2016: 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 42,499 k (December 31, 2016: EUR 42,089 k). The fair value estimation is based on the discounted
alstria Annual Report 2017
99
Consolidated Financial Statements
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, 2017, the loans and the convertible bond were reduced by accrued transaction
costs of EUR 12,150 k (December 31, 2016: EUR 11,186 k).
The average debt maturity increased from 5.4 years as of December 31, 2016, to 5.8 years as of
December 31, 2017. The Group’s average interest rate decreased from 2.2% to 2.1% 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.
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 own used property
7.4 Other Provisions
Dec. 31, 2017
Dec. 31, 2016
1,076
238,811
239,887
1,076
251,564
252,640
Dec. 31, 2017
Dec. 31, 2016
246,330
241,027
5,303
256,930
256,158
772
EUR k
Other provisions
Provision virtual
share liabilities
Other
Total
Due
Due
up to
1 year
in more
than 1 year
Total
Dec. 31, 2017
up to
1 year
in more
than 1 year
Total
Dec. 31, 2016
1,388
1,604
2,992
1,499
0
1,499
2,887
1,604
4,491
1,577
680
2,257
1,313
0
1,313
2,890
680
3,570
100
alstria Annual Report 2017
Consolidated Financial Statements
The development of other provisions is shown in the following overview:
EUR k
Development of other provisions
Provision virtual share liabilities
Other
Total
Dec. 31, 2016
Consumption Resolution Additions Dec. 31, 2017
2,890
680
3,570
-1,491
-401
-1,892
0
0
0
1,488
1,325
2,813
2,887
1,604
4,491
As of the balance sheet date, EUR 2,887 k (December 31, 2016: EUR 2,890 k) was recognised as a
provision for awarding the Long- and Short-Term Incentive Plan (Note 13.1).
Other provisions include EUR 1,325 k of expenses that could result from claims for compensation by
third parties. These are mainly claims for alleged refunds, which are considered by alstria to be
unjustified. Further material legal disputes in which it is assumed that alstria office REIT-AG or one
of its Group companies will be used as obligated parties did not exist as of the balance sheet date.
7.5
Trade payables and other liabilities
EUR k
Trade payables
Other current liabilities
Accruals for outstanding invoices
Real estate transfer tax
Rent and security deposits received
Advance rent payments received
Value-added tax liabilities
Customers with credit balances
Salary obligations
Auditing costs
Other advance payments received
Supervisory Board compensation
Vacation provisions
Miscellaneous liabilities
Total
Due
Due
up to
1 year
in more
than 1 year
Total
Dec. 31,2017
up to
1 year
in more
than 1 year
Total
Dec. 31, 2016
7,268
18,116
11,869
5,414
3,313
3,213
2,167
2,039
527
500
353
288
1,405
49,204
0
0
0
7,268
4,584
18,116
16,223
11,869
11,869
0
0
0
4,408
9,822
4,944
2,808
0
0
0
0
0
0
0
0
0
3,313
2,758
3,213
2,798
2,167
2,288
2,039
2,177
527
500
353
288
495
0
271
211
1,405
1,300
0
0
0
0
0
0
0
0
0
4,408
53,612 45,334
2,808
4,584
16,223
11,869
7,752
2,758
2,798
2,288
2,177
495
0
271
211
1,300
48,142
The disclosed carrying amounts approximate their fair values.
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
merger, the real estate transfer tax obligation is still due.
alstria Annual Report 2017
101
Consolidated Financial Statements
7.6
Income tax liabilities
The recognition of deferred tax liabilities and income tax liabilities as of December 31, 2017, 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 realisation of hidden reserves as a
result of the inclusion of the companies in the tax-exempt REIT structure. As of December 31, 2017,
deferred tax liabilities are 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 0
(December 31, 2016: EUR 313 k) and liabilities worth EUR 5,414 k from rent deposits and EUR 4,408 k
from security deposits. As of December 31, 2016, EUR 4,944 k rent deposits and EUR 2,808 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 remuneration
Postemployment benefits
Total
2017
1,161
905
125
2,191
2016
1,159
905
124
2,188
On the reporting date, liabilities for the compensation of the Management Board members amounted
to EUR 339 k (2016: EUR 378 k).
As of December 31, 2017, 315,600 virtual shares had been granted to the members of the Management
Board (compared to 332,684 on December 31, 2016; see also Note 13.1).
Supervisory Board Pursuant to the Articles of Association, Supervisory Board members’ fixed annual
payments amounted to EUR 353 k (2016: EUR 347 k).
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 155–166), which is an integral part of
these Notes. This information is also presented in the corporate governance chapter.
8.2 Other financial commitments and contingencies
Other financial obligations from refurbishment projects and ongoing maintenance amounted to
EUR 24,317 k (2016: EUR 30,381 k).
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alstria Annual Report 2017
Consolidated Financial Statements
As of December 31, 2017, rental agreements for the administrative premises were subject to a
minimum lease term. Future financial obligations of EUR 576 k arose from other leasing agreements.
Of these, obligations totalling EUR 224 k have a residual maturity of up to one year; the remainder—
EUR 352 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 2017 financial year amounted to
EUR 122,268 k and was at a similar level compared to the previous year (EUR 120,495 k). The net cash
generated from operating activities includes other non-cash income and expenses in the amount of
EUR 5,174 k. These essentially relate to allocation to provisions and accrued liabilities in the amount
of EUR 5,183 k.
The cash flow from investing activities is affected by the inflow of cash and cash equivalents from
property disposals in the amount of EUR 87,975 k and cash distribution of a joint venture in the
amount of EUR 49,850 k, while investments in the investment property portfolio resulted in cash
outflows of EUR 251,505 k.
The cash flows from financing activities mainly reflect refinancing activities, with EUR 419,048 k in
payments for the redemption of bonds and borrowings, EUR 350,000 k cash proceeds from the
issuance of a corporate bond, and EUR 30,000 k proceeds from a new loan. Dividend payments
resulted in cash outflows of EUR 79,680 k.
Cash and cash equivalents reported in the cash flow statement relate to all the liquidity items
disclosed on the balance sheet (e.g., cash in 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.
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.
alstria Annual Report 2017
103
Consolidated Financial Statements
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 2017 were undertaken in terms of arm’s-length transactions or under conditions in
alstria office REIT-AG’s favour.
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 155 to 166 of the Corporate Governance Section).
9.3
Related party transactions
At the end of the reporting period, the Group recorded no receivables from or liabilities to joint
ventures. Furthermore, alstria office REIT-AG received EUR 10 k (2016: EUR 129 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 plus the weighted average of shares
that would be issued as a result of the dilutive potential ordinary shares’ conversion.
The following table 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)
2017
296,987
153,402
1.94
2016
176,872
152,866
1.16
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)
2017
299,153
161,390
1.85
2016
179,039
161,282
1.11
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.
104
alstria Annual Report 2017
Consolidated Financial Statements
alstria office REIT-AG is authorised to issue up to EUR 38,860 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 non-dilutive for the period
presented.
With regard to the capital increase and the conversions of the convertible bond that took place after
the balance sheet date, please refer to the information in section 15 “Significant events after the
balance sheet date”.
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.
11. DIVIDENDS PAID
EUR k
Dividends on ordinary shares1) not recognised as a liability as of Dec. 31
Dividend per share
1) Refers to all shares except treasury shares on the dividend payment date
2017
79,680
0.52
2016
76,564
0.50
At the Annual General Meeting held on May 16, 2017, alstria office REIT-AG resolved to distribute
dividends totalling EUR 79,680 k (EUR 0.52 per outstanding share). The dividends were distributed on
May 19, 2017. By comparison, the dividends paid out in 2016 totalled EUR 76,564 k (EUR 0.50 per
outstanding share).
12. EMPLOYEES
During the period from January 1 to December 31, 2017, the Company had 118 employees on average
(January 1 to December 31, 2016: 105 employees on average). The average was calculated based on
the total number of employees at the end of each quarter. On December 31, 2017, 121 people were
employed at alstria, excluding the Management Board members (December 31, 2016: 114 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
(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. An amount equal to the sum of the dividend per share the
alstria Annual Report 2017
105
Consolidated Financial Statements
Company paid to its shareholders between the grant date and the maturity date is added as well; 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 summarises the number of virtual shares granted under the existing STIP and LTIP
that remained outstanding as of December 31, 2017.
Start of deferral
period
Reference share
price in EUR
End of deferral
period
Olivier Elamine
Number of virtual
shares
Alexander Dexne
Number of virtual
shares
STI 2015
STI 2016
LTI 2014
LTI 2015
LTI 2016
LTI 2017
2016
2017
2014
2015
2016
2017
11.63
11.68
9.44
10.97
11.71
11.52
2018
2019
2018
2019
2020
2021
5,949
5,142
46,610
40,109
37,575
38,194
4,868
4,207
38,136
32,817
30,743
31,250
The development of the virtual shares through December 31, 2017, is shown in the following table:
Number of virtual shares
2017
2016
January 1
Granted in the reporting period
Converted into cash in the reporting period
December 31
LTI
312,104
69,444
-86,114
295,434
STI
20,580
9,349
-9,763
20,166
LTI
335,740
68,318
-91,954
312,104
STI
20,516
10,817
-10,753
20,580
The 9,763 virtual shares converted into cash under the STIP resulted in payments to the Management
Board in an amount of EUR 124 k within the 2017 business year. The conversion amount was the
106
alstria Annual Report 2017
Consolidated Financial Statements
weighted average price of the first 20 trading days in the 2017 calendar year plus the dividend paid
during the vesting period. It amounted to EUR 12.68, of which EUR 11.68 related to the share price
and EUR 1.00 related to the dividend paid. Under the LTIP, 86,114 virtual shares were converted,
resulting in a payout of EUR 1,371 k.
In 2017, the LTIP and the STIP generated remuneration expenses amounting to EUR 1,488 k (2016:
EUR 1,001 k) and provisions amounting to EUR 2,887 k (2016: EUR 2,890 k). The Group recognises 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. The Supervisory Board passed a resolution to fix the
details of the convertible profit participation rights program in accordance with an authorisation
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 authorisation granted by the general meeting of shareholders on April 24, 2012.
The main terms of the program can be summarised 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 2015
created by the Annual General Meeting in 2015. By the end of the reporting period, certificates were
granted corresponding to EUR 323,425 of conditional capital III 2015. In 2017, the Annual General
Meeting approved the establishment of additional conditional capital III 2017 with an aggregate
nominal value of up to EUR 1,000,000 for the conversion of 1,000,000 certificates. At the end of the
reporting period, certificates in relation to this conditional capital III 2017 had not been granted.
The certificates are issued as non-transferable 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 non-subsequent
trading days (market condition). For the 143,750 certificates issued on May 18, 2016, and the 179,675
certificates issued on May 19, 2017, this market condition was fulfilled until the end of the 2017
alstria Annual Report 2017
107
Consolidated Financial Statements
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, 2017
Expired due to termination of employment
Converted
Granted
December 31, 2017
May 7, 2015
May 18, 2016
May 19, 2017
111,000
0
-111,000
0
0
144,750
-1,000
0
0
143,750
0
-6,000
0
185,675
179,675
Total
255,750
-7,000
-111,000
185,675
323,425
The relevant amount for the conversion of 111,000 of the 2015 convertible profit participation rights
certificates was the relevant XETRA share price on the conversion date: EUR 12.01 per share.
Total expenses relating to convertible profit participation rights amounted to EUR 1,285k in 2017 (see
Note 5.5).
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)
Labour turnover rate (%)
Stock price as of valuation date (EUR)
Estimated fair value of one option for conversion
on the granting date
May 7, 2015
May 18, 2016
May 19, 2017
4.15
-0.18
19.30
2.00
2.00
9.10
12.05
8.77
4.28
-0.54
21.20
2.00
2.00
8.10
11.67
8.57
4.45
-0.69
18.37
2.00
2.00
8.00
11.62
8.02
Expected volatility is based on an average of the historical volatility of alstria and the comparable
listed companies.
108
alstria Annual Report 2017
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 minimise 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 use 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 non-derivative 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 of 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 2017
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 of December 31, 2017
Liabilities
Loan #1
Loan #2
Loan #3
Loan #4
Loan #5
Total secured loans
Bond #1
Bond #2
Bond #3
Convertible bond
Schuldschein 10y/fix
Schuldschein 7y/fix
Schuldschein 4y/fix
Maturity
June 28, 2024
Apr. 30, 2021
Mar. 28, 2024
June 30, 2026
July 31, 2021
Mar. 24, 2021
Apr. 12, 2023
Nov. 15, 2027
June 14, 2018
May 6, 2026
May 8, 2023
May 6, 2020
Schuldschein 7y/variable
May 8, 2023
Schuldschein 4y/variable
May 6, 2020
Revolving credit line
June 15, 2020
Total unsecured loans
Total
Net LTV
Principal amount
drawn as of
December 31,
2017
(EUR k)
LTV as of
Decemer 31,
2017
(%)
Principal amount
drawn as of
December 31,
2016
(EUR k)
LTV
covenant
(%)
67,000
57,975
45,900
56,000
15,113
241,988
326,800
325,000
350,000
73,500
40,000
37,000
38,000
17,500
17,500
-
1,225,300
1,467,288
37.0
44.2
38.1
37.4
32.3
38.4
-
-
-
–
–
–
–
–
–
-
-
43.0
40.0
55.0
62.0
60.0
65.0
60.0
–
-
-
-
–
–
–
–
–
–
-
–
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
-
1,229,200
1,482,864
Apart from the risks mentioned above, the Group is not exposed to any commodity or currency risks.
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
Financial year ending
Dec. 31, 2017
Variable interest
Mortgage bank loans
Schuldschein
Total
< 1 year
1–2 years
2–3 years
3–4 years
> 4 years
Total
1,076
0
1,076
1,076
0
1,076
1,076
17,500
18,576
69,858
131,800
204,886
0
17,500
35,000
69,858
149,300
239,886
110
alstria Annual Report 2017
Consolidated Financial Statements
< 1 year
1–2 years
2–3 years
3–4 years
> 4 years
Total
1,076
0
1,076
1,076
0
1,076
1,076
0
1,076
17,500
212,258
216,562
17,500
35,000
1,076
18,576
229,758
251,562
EUR k
Financial year ending
Dec. 31, 2016
Variable interest
Mortgage bank loans
Schuldschein
Total
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, 2017, are presented
on page 91.
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
2017
2,399
-700
2016
2,516
-753
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
2017
80
-10
2016
321
-65
alstria Annual Report 2017
111
Consolidated Financial Statements
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
2017
9
0
2016
1,247
-13
Impact from changes in alstria office REIT-AG’s share price (only relating to the embedded derivative):
EUR k
Share price compared to the 2017 year-end price (EUR 12.90)
+ 10 percent
– 10 percent
b) Credit risk
2017
-9,738
10,377
2016
-8,850
7,802
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.
c) Liquidity risk
The Company continually monitors the Group-wide risk of potential liquidity bottlenecks through the
use of 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 that 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 (e.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, 2017.
112
alstria Annual Report 2017
Consolidated Financial Statements
The following chart shows the related future undiscounted cash flows of financial liabilities:
EUR k
< 1 year 1–2 years 2–3 years 3–4 years 4–5 years >5 years
Total
Financial year ending Dec. 31, 2017
Corporate bond
Loans
Interest
Schuldschein
Convertible bond
Trade payables
Other liabilities
0
0
0
0
326,800
675,000 1,001,800
1,076
1,076
1,076
69,860
0
168,900
241,988
19,855
19,160
19,651
18,759
11,328
37,984
126,737
0
73,500
7,268
62,879
0
0
0
55,500
0
0
0
0
0
0
0
0
94,500
150,000
0
0
73,500
7,268
882
882
882
882
882
67,289
164,578
21,118
77,109
89,501 339,010 977,266 1,668,582
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
253,664
30,376
29,368
28,481
28,727
27,801
39,007
183,760
0
0
0
79.200
4,584
65,438
0
562
0
0
0
55,500
0
0
0
0
0
94,500
150,000
0
0
79.200
4,584
562
562
561
561
68,246
101,474 110,206
30,119
85,867 598,220 813,568 1,739,454
Details on the loans, borrowings, and bonds can be found in Note 7.3. The maturity profile of the
loans is shown on page 20 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 618,329 k (December 31, 2016:
EUR 567,315 k) were provided as collateral. The decline compared to the previous year’s balance
sheet date is based on the repayment of mortgage bank loans in favour 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 maximise 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 both December 31, 2017 and December 31, 2016.
The Company monitors its capital structure by using the LTV indicator as well as the performance
alstria Annual Report 2017
113
Consolidated Financial Statements
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
1) Within five years based on the average property value during this period.
2017
57.12
95.47
100.00
32.58
2016
56.67
90.17
100.00
32.75
G-REIT covenant
> 45
> 75
> 75
< 501)
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
Assets as per balance
sheet (EUR k) as of
Dec. 31, 2017
Financial assets
Derivatives
Total long-term
Trade receivables
Tax receivables
Receivables and other
assets
Cash and cash
equivalents
Loans and
receivables
at amor-
tised costs
36,567
0
36,567
7,153
25
0
0
0
0
36,567
14
36,581
7,153
25
14,760
10,303
4,457
102,078
0
102,078
Total short-term
124,016
10,303
113,713
Financial assets
Fair value
through
p/l)
Fair value –
other
income
0
14
14
0
0
0
0
0
Total
Fair
value
36,567
36,567
14
14
36,581
36,581
7,153
25
7,153
25
4,457
4,457
102,078
102,078
113,713
113,713
150,294
150,294
0
0
0
0
0
0
0
0
0
Total
160,597
10,303
150,280
14
114
alstria Annual Report 2017
Consolidated Financial Statements
Carrying
amount
Nonfinancial
liabilities
Financial liabilities
Liabilities as per
balance sheet
(EUR k) as of
Dec. 31, 2017
Ltd. equity of
noncontrolling
interests
53,834
Long-term loans
1,381,965
Other liabilities
4,408
Total long-term
Ltd. equity of
noncontrolling
interests
Short-term loans
Trade payables
Derivatives
Tax liabilities
Other liabilities
1,440,207
47
86,450
7,268
27,529
13,675
49,204
Total short-term
184,173
Total
1,624,380
Fair value
through p/l
Loans and
receivables at
amortised costs
Total
Fair
value
0
0
0
0
0
0
0
0
0
3,313
3,313
3,313
0
0
0
0
0
0
0
27,529
0
0
27,529
27,529
53,834
53,834
53,834
1,381,965
1,381,965
1,442,660
4,408
4,408
4,408
1,440,207
1.440,207
1,500,902
47
86,450
7,268
0
13,675
45,891
47
86,450
7,268
27,529
13,675
45,891
47
86,450
7,268
27,529
13,675
45,891
153,331
180,860
180,860
1,593,538
1,621,067
1,681,762
Carrying
amount
Nonfinan-
cial assets
Financial assets
Loans and
receivables
at amor-
tised costs
Fair value
through
p/l)
Fair value –
other
income
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
equivalents
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
alstria Annual Report 2017
115
Consolidated Financial Statements
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
Total long-term
Ltd. equity of
noncontrolling
interests
Short-term loans
Trade payables
Tax liabilities
Other liabilities
20,099
2,808
1,547,886
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
receivables at
amortised 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
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
2017
-41
-14,635
-10,015
-24,691
2016
-10,558
-1,484
-467
-12,509
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 maximise 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
116
alstria Annual Report 2017
Consolidated Financial Statements
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
Conversion convertible bond
As of January 4, 2018, 29 shares with a notional amount of EUR 2,900 k of the convertible bond were
converted. The conversion resulted in an issue of 315,152. As of January 31, 2018, further 14 shares
with a notional amount of EUR 1,400 k of the convertible bond were converted. The conversion re-
sulted in an issue of 152,142 new shares. The conversions into new shares were made by making use
of the conditionally increased capital provided for such purposes (Conditional Capital 2013).
Capital increase
A total of 15,323,121 new shares were issued for cash considerations. They increased alstria office
REIT-AG’s share capital by EUR 15,323,121.00. The capital increase was entered into the commercial
register on January 31, 2018.
As result of the conversions and the capital increase, alstria office REIT-AG’s share capital increased
by EUR 15,790,415.00 to EUR 169,752,069.00 value bearer shares from December 31, 2016 to Decem-
ber 31, 2017.
Transfer of benefits and burdens
With effective date February 1 2018, the benefits and burdens of one of the two properties for which
the notarial purchase agreement had already been signed during the reporting period were trans-
ferred.
Additionally, in January 2018, alstria signed a purchase contract for the disposal of a property. The
transaction price mounted to EUR 3,600 k, transfer of benefits and burden is expected until end of
June 2018. On February 20, 2018, the notarization of the sale of another property at a transaction
price of EUR 10,000 k took place. The transfer of the property to the buyer is expected in the third
quarter of 2018.
alstria Annual Report 2017
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:
Certain subsidiaries that have been included in the consolidated financial statements of alstria office
REIT-AG have claimed exemption from the obligation to prepare annual financial statements in ac-
cordance with the provisions applicable to corporations in accordance with Section 264b HGB. An
overview of the companies that made use of the exemption can be found in the table on page 67-68
in Section 2.2.2 of the Notes.
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 summarises the announcements pursuant to Art. 17 MAR as published by the Com-
pany during the reporting period:
Date
Topic
Apr 24, 2017
Acquisition of a portfolio of twelve office buildings in Hamburg, Düsseldorf, and Berlin
Nov 8, 2017
alstria issues a corporate bond with a nominal value of EUR 350,000,000 and invites holders of existing
corporate bonds to offer their bonds to alstria
Nov 16, 2017
alstria announces the indicative results of the invitation to tender existing corporate bonds
Jan 29, 2018
Capital increase of up to 15,323,121 new shares as well as Portfolio valuation gain 2017 expected to
amount to c. EUR 180 m
Jan 29, 2018
alstria successfully executed capital increase
118
alstria Annual Report 2017
Consolidated Financial Statements
17.2 Directors’ dealings
The following transactions regarding the shares of the Company (ISIN DE000A0LD2U1) have been re-
ported to the Company pursuant to Art. 19 MAR during the reporting period:
Name of person
subject to the dis-
closure requirement Function
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Alexander Dexne
Aggregated information for the transactions by Mr. Dexne on May 18, 2017:
Average weighted share price: EUR 11.74; aggregated volume: EUR 58,687.51
Transaction
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Place
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
XETRA
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
CFO
Transaction date
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
May 18, 2017; UTC + 2
Price per
share in
EUR
11.74
11.73
11.73
11.73
11.74
11.74
11.74
11.74
11.74
11.74
11.74
11.74
11.74
11.74
11.74
11.74
Volume
8,805.00
2,545.41
8,797.50
3,307.86
6,985.30
3,498.52
2,242.34
2,242.34
2,242.34
2,242.34
2,242.34
2,242.34
2,242.34
1,631.86
4,848.62
2,571.06
Name of person
subject to the dis-
closure requirement Function
Dr Johannes Conradi Chairman of the
Supervisory Board
Transaction
Buy
Place
XETRA
Transaction date
May 19, 2017; UTC + 2
Price per
share in
EUR
11.82
Volume
7,564.80
Dr Johannes Conradi Chairman of the
Buy
XETRA
May 19, 2017; UTC + 2
11.82
69,265.20
Supervisory Board
Dr Johannes Conradi Chairman of the
Supervisory Board
Dr Johannes Conradi Chairman of the
Supervisory Board
Buy
Buy
XETRA
May 19, 2017; UTC + 2
11.82
12,978.36
XETRA
May 19, 2017; UTC + 2
11.82
63,851.64
Aggregated information for the transactions by Dr Conradi on May 19, 2017:
Average weighted share price: EUR 11.82; aggregated volume: EUR 153,660.00
Name of person
subject to the dis-
closure requirement Function
Olivier Elamine
CEO
Olivier Elamine
Olivier Elamine
Olivier Elamine
Olivier Elamine
CEO
CEO
CEO
CEO
Transaction
Buy
Buy
Buy
Buy
Buy
Place
Outside a
trading venue
Outside a
trading venue
Outside a
trading venue
Outside a
trading venue
Outside a
trading venue
Transaction
date
May 19, 2017;
UTC + 2
May 19, 2017;
UTC + 2
May 19, 2017;
UTC + 2
May 19, 2017;
UTC + 2
May 19, 2017;
UTC + 2
Price per
share in
EUR
11.76
Volume
11,760.00
11.76
11,760.00
11.76
15,288.00
11.76
15,288.00
11.76
4,704.00
Aggregated information for the transactions by Mr. Elamine on May 19, 2017:
Average weighted share price: EUR 11.76; aggregated volume: EUR 58,800.00
alstria Annual Report 2017
119
Consolidated Financial Statements
Name of person
subject to the dis-
closure requirement Function
Dr Bernhard
Düttmann
Member of the
Supervisory
Board
Dr Bernhard
Düttmann
Member of the
Supervisory
Board
Transaction
automatic conversion
of a financial
instrument into shares
of the Company
automatic conversion
of a financial
instrument into shares
of the Company
Place
Outside a
trading
venue
Transaction
date
June 22,
2017;
UTC + 2
Outside a
trading
venue
June 22,
2017;
UTC + 2
Aggregated information for the transactions by Dr Düttmann on June 22, 2017:
Average weighted share price: EUR 10.71; aggregated volume: EUR 46,600.00
Price per
share in
EUR
10.80
Volume
25,380.00
10.61
21,220.00
Name of person
subject to the dis-
closure requirement Function
Richard Mully
Member of the
Supervisory
Board
Transaction
Buy
Place
XETRA
Price per
share in
EUR
12.25
Volume
122,500.00
Transaction
date
Sep 15,
2017;
UTC + 2
120
alstria Annual Report 2017
Consolidated Financial Statements
17.3 Voting right notifications
Information according to Section 160 para. 1 No. 8 German Stock Corporation Act (AktG): The follow-
ing table shows shareholdings in the Company that were in place on the balance sheet date of 2017,
were communicated to us pursuant to Section 33 para. 1 WpHG (Section 21 para. 1 WpHG old version),
and have been published pursuant to Section 40 para. 1 WpHG (Section 26 para. 1 WpHG old version).
Moreover, shareholdings were considered that were in place until the date of the preparation of the
financial statements, were communicated to us pursuant to Section 33 para. 1 WpHG (Section 21
para. 1 WpHG old version), and have been published pursuant to Section 40 para. 1 WpHG (Section 26
para. 1 WpHG old version). The Company did not receive any notifications pursuant to Section 20
para. 1 and 4 AktG or pursuant to Section 33 para. 2 WpHG (Section 21 para. 1a WpHG old version)
Contains 3% or more of
voting rights from
-
Prédica
GIC Private Limited
(4.71%) Euro Periwinkle
Private Limited (7.90%)
Euro Periwinkle
Private Limited
Euro Periwinkle
Private Limited
Euro Periwinkle
Private Limited
during the reporting period.
No. Shareholders, registered office
1 Prédica, Paris, France
2 SAS Rue la Boétie, Paris, France
3 Government of Singapore, acting by
and through the Ministry of Finance,
Singapour, Singapour
4 GIC Private Limited, Singapour,
Voting rights
(new) (in %)
3.0265
5.7691
Attribution
of voting
rights
Date of
change
Apr 5, 2016 No
Apr 12, 2016 Yes
12.61
Apr 22, 2016 Yes
Singapour
12.61
Apr 22, 2016 Yes
5 GIC (Realty) Private Limited,
Singapour, Singapour
6 Europe Realty Holdings Pte Ltd,
Singapour, Singapour
7 Euro Periwinkle Private Limited,
Singapour, Singapour
8 Cohen & Steers, Inc., New York, USA
9 Brookfield Investment Management
Inc., New York, USA
10 Julius Baer Group Ltd.,
Zurich, Switzerland
11 Kairos International SICAV,
Luxembourg, Luxembourg
12 BNP PARIBAS ASSET MANAGEMENT
France S.A.S., Paris, France
13 BlackRock, Inc., Wilmington, DE, USA
7.90
Apr 22, 2016 Yes
7.90
Apr 22, 2016 Yes
7.90
2.99
Apr 22, 2016 No
Oct 19, 2017 Yes
-
n/a
2.99
Jan 17, 2018 Yes
4.311)
Jan 30, 2018 Yes
n/a
Kairos International
SICAV
3.631)
Jan 30, 2018 No
3.19
4.041)
Nov 1, 2017 Yes
Dec 14, 2017 Yes
-
n/a
-
1) Contains financial instruments pursuant to Sec. 38 para. 1 No. 1 and No. 2 WpHG (Sec. 25 para. 1 No. 1 and No. 2 WpHG old version).
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 Group’s declaration of cor-
porate management according to HGB Section 315d.
alstria Annual Report 2017
121
Consolidated Financial Statements
19. AUDITORS’ FEES
On May 16, 2017, the general meeting elected Deloitte GmbH Wirtschaftsprüfungsgesellschaft
(Dammtorstrasse 12, Hamburg) as auditors of the separate and consolidated financial statements for
the 2017 financial year. The fees totalled EUR 757 k in 2017. Of this, EUR 628 k was attributable to
audit services, and EUR 129 k was attributable to other audit services. The other audit services relate
to the review of the Group’s quarterly reports, half-yearly financial reports and the sustainability
report as well as the preparation of a comfort letter.
20. MANAGEMENT BOARD
During the financial year, the Company’s members of the Management Board were:
Olivier Elamine
Hamburg, Germany
CEO of the Company
since April 26, 2017
COIMA RES S.p.A. SIIQ
Non-Executive Director
Alexander Dexne
since October 16, 2017
Hamburg, Germany
Brack Capital Properties N.V.
CFO of the Company
Chairman of the Board
The attached remuneration report contains the details of the principles used to define the Manage-
ment Board’s and Supervisory Board’s remuneration.
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 2017 financial year, the members of the Supervisory Board and their membership in super-
visory boards of German companies or comparable German or foreign controlling committees of com-
mercial enterprises were as follows:
Dr Johannes Conradi
Chairman
Hamburg, Germany
until March 31, 2017
since November 21,
2017
since November 21,
2017
Freshfields Bruckhaus Deringer
LLP
Elbphilharmonie Hamburg
Bau GmbH & Co. KG
Elbphilharmonie & Laeiszhalle
Betriebsgesellschaft mbH
Hamburg Musik gGmbH
Lawyer and Partner, Freshfields
Bruckhaus Deringer LLP
Global Head of Real Estate Member
of the German Management Group
Member of the Supervisory Board
Member of the Advisory Board
Member of the Supervisory Board
122
alstria Annual Report 2017
Consolidated Financial Statements
Richard Mully
Vice-Chairman
since July 1, 2017
Dr Bernhard Düttmann
office started per
January 3, 2017
since July 12, 2017
Cobham (Surrey),
United Kingdom
Actis LLP
Great Portland Estates plc
Standard Life Aberdeen PLC
(former Aberdeen Asset
Management PLC)
St Modwen Properties PLC
TPG Europe LLC
Director, Starr Street Limited
Senior Advisor
Non-Executive Director
Director
Director
Senior Advisor
Meerbusch, Germany
Executive consultant
CECONOMY AG
Member of the Supervisory Board
Stefanie Frensch
Berlin, Germany
BBU Verband Berlin-Brandenburgi-
scher Wohnungsunternehmen e.V.
Benoît Hérault
Uzès, France
Until August 31, 2017
Marie Birzard Wine & Spirits SA
(former Belvédère SA)
EUROSIC
Westbrock Partners
Marianne Voigt
Berlin, Germany
BDO AG Wirtschaftsprüfungsgesell-
schaft
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
The local court in Hamburg appointed Dr Bernhard Düttmann as a member of the Supervisory Board
effective on January 3, 2017 und limited to the end of the next general meeting of the shareholders.
The Company’s Annual General Meeting on May 16, 2017 appointed Dr Bernhard Düttmann as member
of the Supervisory Board of alstria office REIT-AG.
Hamburg, February 20, 2018
alstria office REIT-AG
The Management Board
Olivier Elamine
CEO
Alexander Dexne
CFO
alstria Annual Report 2017
123
Responsibility Statement
RESPONSIBILITY STATEMENT
To the best of our knowledge we confirm that, in accordance with the applicable reporting principles,
the consolidated financial statements 2017 give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group, and the Group management report 2017 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 20, 2018
alstria office REIT-AG
The Management Board
Olivier Elamine
CEO
Alexander Dexne
CFO
124
alstria Annual Report 2017
Independent Auditor‘s Report
INDEPENDENT AUDITOR‘S REPORT
To alstria office REIT-AG, Hamburg
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS AND THE GROUP
MANAGEMENT REPORT
Audit Opinions
We have audited the consolidated financial statements of alstria office REIT-AG, Hamburg, and its
subsidiaries (the Group), which comprise the consolidated statement of financial position as of De-
cember 31, 2017, the consolidated income statement and statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the
business year from January 1 to December 31, 2017, and the notes to the consolidated financial
statements, including a summary of significant accounting policies. In addition, we have audited the
group management report of alstria office REIT-AG, Hamburg, for the business year from January 1
to December 31, 2017. In accordance with German legal requirements, we have not audited the con-
tent of the group management report specified in the “Other information” section of our auditor’s
report.
In our opinion, on the basis of the knowledge obtained in the audit,
▪
the accompanying consolidated financial statements comply, in all material respects, with
the International Financial Reporting Standards (IFRS) as adopted by the EU, and the addi-
tional requirements of German commercial law pursuant to Section 315e (1) German Com-
mercial Code (HGB) and, in compliance with these requirements, give a true and fair view of
the assets, liabilities, and financial position of the Group as of December 31, 2017, and of its
financial performance for the business year from January 1 to December 31, 2017, and
▪
the accompanying group management report as a whole provides an appropriate view of the
Group's position. In all material aspects, this group management report is consistent with the
consolidated financial statements, complies with German legal requirements and appropri-
ately presents the opportunities and risks of future development. Our audit opinion on the
group management report does not cover the content of the group management report spec-
ified in the “Other information” section of our auditor’s report.
Pursuant to Section 322 (3) Sentence 1 German Commercial Code (HGB), we declare that our audit
has not led to any reservations relating to the legal compliance of the consolidated financial state-
ments and the group management report.
Basis for the Audit Opinions
We conducted our audit of the consolidated financial statements and of the group management report
in accordance with Section 317 German Commercial Code (HGB) and the EU Audit Regulation (No.
alstria Annual Report 2017
125
Independent Auditor‘s Report
537/2014, referred to subsequently as “EU Audit Regulation”) and in compliance with German Gen-
erally Accepted Standards for Financial Statement Audits promulgated by the Institut der
Wirtschaftsprüfer (IDW). Our responsibilities under these requirements and principles are further de-
scribed in the “Auditor’s Responsibility for the Audit of the Consolidated Financial Statements and of
the Group Management Report” section of our auditor’s report. We are independent of the group
entities in accordance with the requirements of European law and German commercial and profes-
sional law, and we have fulfilled our other German professional responsibilities in accordance with
these requirements. In addition, in accordance with Article 10 (2) Point (f) of the EU Audit Regulation,
we declare that we have not provided non-audit services under Article 5 (1) of the EU Audit Regula-
tion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions on the consolidated financial statements and the group management re-
port.
Key Audit Matters in the Audit of the Consolidated Financial Statements
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements for the business year from January 1 to December
31, 2017. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole and in forming our audit opinion thereon; we do not provide a separate audit
opinion on these matters.
In the following we present the key audit matters we have determined in the course of our audit:
1. Measurement of investment property
2. Purchase and sale of properties
3. Compliance with covenants and computation of associated key ratios
4. Revenue recognition
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Our presentation of these key audit matters has been structured as follows:
a) Description (including reference to corresponding information in the consolidated financial state-
ments)
b) Auditor’s response
1. Measurement of investment property
a) Properties with a total value of EUR 3,331.9 million are disclosed in the consolidated financial
statements of alstria office REIT-AG under the reporting line “Investment property”. The net pos-
itive impact in the consolidated income statement for the business year 2017, deriving from the
measurement of such property, amounted to EUR 181.5 million.
In accordance with IAS 40, in conjunction with IFRS 13, investment property is measured at fair
value. The measurement is carried out by two independent expert appraisers, who determine the
fair values using a capitalised earnings valuation model - the so-called “hardcore and top slice”
technique. The input parameters used for the purposes of the valuation are based on numerous
assumptions, so that the calculation of the fair value is discretionary in nature, and is thus subject
to considerable uncertainty. The most important associated input parameters are the assumed
rental income, the vacancy rate and the yield. Against this backdrop, and due to the great com-
plexity of the valuation model, this subject was of particular importance within the context of our
audit.
The disclosures of the executive directors with respect to the measurement of investment property
are included in sections 2.4 and 6.1 of the notes to the consolidated financial statements.
b) When conducting our audit, we examined the internal control system that was in place to assess
the fair values determined by the external appraisers and tested the controls that had been im-
plemented. We made a critical assessment of the competence, capabilities and objectivity of the
external appraisers. Together with our own internal real estate valuation experts, we examined
the conformity of the valuation technique applied with IAS 40, in conjunction with IFRS 13, and
made sample on-site visits, held critical discussions with the external experts and checked the
calculation logic supporting the values that had been determined. We checked the input parame-
ters used in the measurement process by reference to underlying contractual data, or respectively
- to the extent that they were based on assumptions and estimates - assessed their reasonableness
by reference to available market data. In addition, we audited the completeness and appropriate-
ness of the disclosures made in the notes to the consolidated financial statements in compliance
with IAS 40 and IFRS 13.
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2. Purchase and sale of properties
a) In business year 2017, three properties were sold for a combined selling price of EUR 44.3 million
and 13 properties were acquired for a total purchase price of EUR 177.0 million. The net gain
deriving from the sales, amounting to EUR 19.7 million, is recognised in the consolidated income
statement. The rights and obligations associated with the ownership of two further properties sold
had not yet passed over to the respective buyers. These properties, amounting to EUR 60.2 million,
are disclosed as assets held for sale. From our perspective, these transactions were of particular
importance in the context of our audit of the consolidated financial statements, due to their large
number, the underlying contractual bases, as well as their significant impact on the consolidated
financial statements.
The disclosures in respect to these property transactions are included in the group management
report under the section “PORTFOLIO OVERVIEW” and in the notes to the consolidated financial
statements in sections 2.4, 5.8, 6.1 and 6.9.
b) Within the context of our audit, we obtained an overview of the processes involved and the internal
control system in place to record and measure the amount of property purchases and sales. We
examined the underlying contractual documentation and, in particular, we audited the point in
time at which the rights and obligations associated with ownership were transferred, as well as
the related accounting treatment and the measurement of the amounts recorded as additions and
disposals. In this connection, we assessed compliance with the requirements for the accounting
disclosure of the properties as assets held for sale and their related measurement.
3. Compliance with covenants and computation of associated key ratios
a) In each of the business years 2015, 2016 und 2017, a corporate bond was placed and a bonded loan
(Schuldschein) was placed in 2016. The corporate bonds in 2015 and 2016 each had a respective
nominal value of EUR 500 million with terms to maturity up to March 24, 2021 and April 12, 2023
respectively. They bear respective interest rates of 2.250 % and 2.125 % p.a. Due to the partial
redemption of
the
corporate bonds,
their
remaining
carrying amounts as of
December 31, 2017 were EUR 327 million and EUR 325 million respectively. The bonded loan had
a nominal value of EUR 150 million, an average coupon rate of 2.07 % and an average term to
maturity of 7.1 years. The corporate bond placed in 2017 has a nominal value of EUR 350 million
and a term to maturity up to November 15, 2027. It bears interest at 1.500 % p.a. The conditions
associated with the corporate bonds and the bonded loan obligate alstria office REIT-AG to comply
with certain covenants. From our perspective, compliance with the covenants and the computation
of the associated key ratios were of particular importance in the context of our audit, due to the
materiality of the financial liabilities, as well as their significant impact on the consolidated fi-
nancial statements with respect to the financial position of the Group and also the presentation
and note disclosure obligations in the event of non-compliance with them.
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The disclosures relating to financial liabilities are included in section 7.3 of the notes to the con-
solidated financial statements and those relating to the covenants are included in the group man-
agement report in the section “FINANCIAL AND ASSET POSITION”.
b) In order to audit compliance with the covenants and the computation of the associated key ratios,
we examined the contractual bases of the covenants and checked the calculation logic supporting
the computation of the key ratios, we reconciled the input parameters used in the calculation to
information contained in the consolidated financial statements and other available information,
as well as checking the calculations of the related key ratios. We subsequently checked compliance
with the specified covenants by reference to the conditions specified for the corporate bonds and
the bonded loan.
4. Revenue recognition
a) The revenues recognised in the consolidated income statement, amounting to EUR 193.7 million
mainly include rental income deriving from investment property (EUR 191.3 million). The rental
income is based on the terms of rental agreements, which in part contain special conditions cov-
ering such things as rent-free periods or variable rents. The revenue recognition area was of par-
ticular importance for the purposes of our audit, due to the significant risks associated with reve-
nue recognition, as well as the large number of different contracts.
The disclosures with respect to revenue recognition are included in sections 2.4 und 5.1 of the
notes to the consolidated financial statements.
b) When conducting our audit, we examined the internal control system that was in place to record
revenue and tested the controls that had been implemented. By reference to the underlying rental
agreements, we conducted extensive analytical audit procedures and reconciled the revenues rec-
ognised in the consolidated income statement with the expected values that had been determined
by us. We also audited the linearization of income deriving from the rental agreements with ap-
plicable rent-free periods by testing the controls that had been implemented in this area and
subsequently carrying out analytical audit procedures. The revenue that was recorded was tested
on a sample basis to the underlying rental agreements. Fraud-related risks were confronted by
making detailed tests of journal entries.
Other information
The executive directors are responsible for the other information. The other information comprises
▪
the explanations contained in the group management report that are made in the section
entitled “SUSTAINABILITY REPORT” relating to the subject of sustainability and concerning
the sustainability report, which is referred to in the group management report,
the statement on corporate governance pursuant to Section 315d German Commercial Code
(HGB), which is referred to in the group management report,
the Corporate Governance Report pursuant to No. 3.10 of the German Corporate Governance
▪
▪
Code,
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▪
the executive directors’ confirmation relating to the consolidated financial statements and
to the group management report pursuant to Section 297 (2) Sentence 4 and Section 315 (1)
Sentence 5 German Commercial Code (HGB) respectively, and
▪ all remaining parts of the Annual Report, with the exception of the audited consolidated
financial statements and group management report, as well as the declaration of the execu-
tive directors for the compliance with the requirements of Section 11 to 15 REIT Act (REIT-
Gesetz) and the composition of the proceeds concerning the pre-taxation of proceeds accord-
ing to Section 19 (3) and Section 19a REIT Act and our auditor’s report.
Our audit opinions on the consolidated financial statements and on the group management report do
not cover the other information, and consequently we do not express an audit opinion or any other
form of assurance conclusion thereon.
In connection with our group audit, our responsibility is to read the other information and, in so doing,
to consider whether the other information
▪
is materially inconsistent with the consolidated financial statements, with the group manage-
ment report or our knowledge obtained in the audit, or
▪ otherwise appears to be materially misstated.
Responsibilities of the Executive Directors and the Supervisory Board for the Consolidated Fi-
nancial Statements and the Group Management Report
The executive directors are responsible for the preparation of the consolidated financial statements
that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements
of German commercial law pursuant to Section 315e (1) German Commercial Code (HGB) and that the
consolidated financial statements, in compliance with these requirements, give a true and fair view
of the assets, liabilities, financial position, and financial performance of the Group. In addition, the
executive directors are responsible for such internal control as they have determined necessary to
enable the preparation of consolidated financial statements that are free from material misstate-
ments, whether due to fraud or error.
In preparing the consolidated financial statements, the executive directors are responsible for as-
sessing the Group’s ability to continue as a going concern. They also have the responsibility for dis-
closing, as applicable, matters related to going concern. In addition, they are responsible for financial
reporting based on the going concern basis of accounting unless there is an intention to liquidate the
Group or to cease operations, or there is no realistic alternative but to do so.
Furthermore, the executive directors are responsible for the preparation of the group management
report that, as a whole, provides an appropriate view of the Group’s position and is, in all material
respects, consistent with the consolidated financial statements, complies with German legal require-
ments, and appropriately presents the opportunities and risks of future development. In addition, the
executive directors are responsible for such arrangements and measures (systems) as they have con-
sidered necessary to enable the preparation of a group management report that is in accordance with
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the applicable German legal requirements, and to be able to provide sufficient appropriate evidence
for the assertions in the group management report.
The supervisory board is responsible for overseeing the Group’s financial reporting process for the
preparation of the consolidated financial statements and the group management report.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the
Group Management Report
Our objectives are to obtain reasonable assurance about whether the consolidated financial state-
ments as a whole are free from material misstatements, whether due to fraud or to error, and whether
the group management report as a whole provides an appropriate view of the Group’s position and,
in all material respects, is consistent with the consolidated financial statements and the knowledge
obtained in the audit, complies with the German legal requirements and appropriately presents the
opportunities and risks of future development, as well as to issue an auditor’s report that includes
our audit opinions on the consolidated financial statements and on the group management report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Section 317 German Commercial Code (HGB) and the EU Audit Regulation and in
compliance with German Generally Accepted Standards for Financial Statements Audits promulgated
by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements and this group management report.
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We exercise professional judgement and maintain professional skepticism throughout the audit. We
also:
▪
Identify and assess the risks of material misstatements of the consolidated financial state-
ments and of the group management report, whether due to fraud or to error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is suffi-
cient and appropriate to provide a basis for our audit opinions. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the over-
ride of internal control.
▪ Obtain an understanding of internal control relevant to the audit of the consolidated financial
statements and of arrangements and measures relevant to the audit of the group management
report in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness these systems.
▪ Evaluate the appropriateness of accounting policies used by the executive directors and the
reasonableness of estimates made by the executive directors and related disclosures.
▪ Conclude on the appropriateness of the executive directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to con-
tinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in the auditor’s report to the related disclosures in the consolidated finan-
cial statements and in the group management report, or, if such disclosures are inadequate,
to modify our respective audit opinions. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
▪ Evaluate the overall presentation, structure and content of the consolidated financial state-
ments, including the disclosures, and whether the consolidated financial statements present
the underlying transactions and events in a manner that the consolidated financial statements
give a true and fair view of the net assets, liabilities, financial position and financial perfor-
mance of the Group in compliance with IFRSs as adopted by the EU and with the additional
requirements of German commercial law pursuant to Section 315e (1) German Commercial
Code (HGB).
▪ Obtain sufficient appropriate audit evidence regarding the financial information of the enti-
ties or business activities within the Group to express audit opinions on the consolidated fi-
nancial statements and on the group management report. We are responsible for the direc-
tion, supervision and performance of the group audit. We remain solely responsible for our
audit opinions.
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▪ Evaluate the consistency of the group management report with the consolidated financial
statements, its conformity with German law, and the view of the Group’s position it provides.
▪ Perform audit procedures on the prospective information presented by the executive direc-
tors in the group management report. On the basis of sufficient appropriate audit evidence
we evaluate, in particular, the significant assumptions used by the executive directors as a
basis for the prospective information, and evaluate the proper derivation of the prospective
information from these assumptions. We do not express a separate audit opinion on the pro-
spective information and on the assumptions used as a basis. There is a substantial unavoid-
able risk that future events will differ materially from the prospective information.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the
relevant independence requirements, and communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, the related
safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter.
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OTHER LEGAL AND REGULATORY REQUIREMENTS
Further Information pursuant to Article 10 of the EU Audit Regulation
We were elected as group auditor by the Annual General Meeting on May 16, 2017. We were engaged
by the supervisory board on May 16, 2017. We have been the group auditor of alstria office REIT-AG,
Hamburg, without interruption since the business year 2011.
We declare that the audit opinions expressed in this auditor’s report are consistent with the additional
report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit
report).
GERMAN PUBLIC AUDITOR RESPONSIBLE FOR THE ENGAGEMENT
The German Public Auditor responsible for the engagement is Annika Deutsch.
Hamburg, February 20, 2018
Deloitte GmbH
Wirtschaftsprüfungsgesellschaft
(Reiher)
Wirtschaftsprüfer
(Deutsch)
Wirtschaftsprüferin
[German Public Auditor] [German Public Auditor]
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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 to monitor the Company’s management. Furthermore, we present the main topics discussed by
the plenary Supervisory Board and its committees, in addition to the audit of the annual and
consolidated financial statements, the Company’s corporate governance during the reporting period,
and we 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 2017
were the financial and profit situation, bigger asset transactions and leases as well as the Company’s
strategic direction. Based on the Management Board’s reports we have deliberated intensively on the
Company’s performance and we have broadly discussed decisions and operations which have been
important to the Company. Furthermore, in the beginning of the financial year, the Supervisory Board
and the nomination and remuneration committee deliberated intensively on the appointment of the
Management Board members for another term and the further advancement of the remuneration
system for the Management and Supervisory Boards. In summer and autumn, the Supervisory Board
and the audit committee dealt in detail with the tender process for the audit for the financial year
2018. In late autumn, the Supervisory Board discussed the optimisation of the maturity profile for the
Company’s financing portfolio by the issuance of a bond with a total nominal amount of EUR 350
million and at the same time buying back parts of the bonds that were issued in the financial years
2015 and 2016.
SUPERVISION AND ADVISING OF THE COMPANY’S MANAGEMENT BOARD
During the 2017 reporting period, we performed the duties required by the statutory provisions and
the Company’s Articles of Association. We advised and supervised the Company’s Management Board
and its conducting of business. Moreover, we 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 and Supervisory Boards cooperated to determine 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
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Corporate Governance
the Management Board to exchange information and advice on matters concerning the Company’s
business strategy, planning, business development, current risks, risk management and compliance.
We have intensively consulted with the Management Board on all transactions requiring our approval.
After careful examination and consultation, the Supervisory Board voted on all matters brought to its
attention as dictated by law in the Articles of Association or rules of procedure. This also included
the Company’s budget planning.
MEETINGS OF THE SUPERVISORY BOARD
In financial year 2017, 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 98%. Additionally, we passed
written resolutions on four issues based on detailed documents. In 2018, the Supervisory Board met
for two additional meetings and passed two written resolutions 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 as well as its business performance, market situation and financial
results (quarterly interim statements and half-year financial reports, financial statements and
consolidated financial statements).
In its January 2017 extraordinary meeting, the Supervisory Board deliberated with the Management
Board regarding the Company’s strategy. The Supervisory Board appointed the Management Board
members for another term of office, advanced the Management Board remuneration system and as
well as the personal composition of the audit committee. In February 2017, the Supervisory Board
decided on the annual compliance statement jointly made with the Management Board regarding the
recommendations by the German Corporate Governance Code by way of a written circular resolution.
During its financial meeting in March 2017, the Supervisory Board dealt with the consolidated financial
statements, the financial statements as of December 31, 2016 and the management reports, and then
discussed them with the auditors. The Supervisory Board approved the financial statements of alstria
office REIT-AG and the consolidated financial statements as of December 31, 2016 and confirmed the
Management Board’s proposal regarding the appropriation of profits for financial year 2016. The
Supervisory Board passed a resolution on its report to the Annual General Meeting for financial year
2016 and on the corporate governance statement. The Management and Supervisory Boards discussed
different possibilities for the Company to acquire real estate portfolios. The Supervisory Board
resolved to establish a special committee for transactions and authorised this committee to grant all
necessary approvals and make all other declarations to the Supervisory board in connection with the
acquisition and financing of this real estate portfolio. The Supervisory Board deliberated with the
Management Board further on the advancement of the Supervisory Board remuneration system and
agreed on a self-commitment of all Supervisory Board members to acquire and hold Company shares.
Furthermore, the Management and Supervisory Boards discussed the agenda and proposals for
resolutions for the Annual General Meeting of the Company. In addition, the Supervisory Board
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Corporate Governance
discussed and decided on the amount of the long-term variable remuneration for the members of the
Management Board for financial year 2013 and of the short-term variable remuneration for financial
year 2016 based on the nomination and remuneration committee’s recommendations and after
carrying out a vertical remuneration comparison. It thereby considered the board members’ individual
performances and also discussed the parameters of the variable remuneration for the members of the
Management Board for financial year 2017.
In its ordinary meeting in May 2017, the Supervisory Board deliberated with the Management Board
on real estate disposals and acquisitions, determined the target quota for women’s participation in
the Supervisory and Management Boards of the Company and resolved on editorial amendments to
the Company’s Articles of Association due to a conditional capital increase of EUR 111,000.00, which
was executed in May 2017 for the purposes of the Company’s employee participation program. In an
extraordinary meeting held as a telephone conference in July 2017, the Supervisory and Management
Boards discussed real estate transactions and agreed on the disposal of two assets. In September
2017, the Supervisory Board allowed one Management Board member to serve as a non-executive
board member outside the alstria-group by way of a written circular resolution.
In the ordinary meeting in September 2017, the Management and Supervisory Boards agreed on the
framework for creating a budget for the financial year 2018 and deliberated on the optimisation of
the maturity profile for the financing portfolio of alstria office REIT-AG as well as the strategic use of
one asset. The Supervisory Board approved investments in one asset, established a Corporate Social
Responsibility Committee, which shall deal with corporate social responsibility issues, and dealt with
corporate governance topics. Members also discussed the good results from the review of the
composition and efficiency check of the work of the Supervisory Board, which the Supervisory Board
members had performed by means of questionnaires in summer 2017. In October 2017, the Supervisory
Board resolved on the basis of a recommendation by the audit committee regarding the proposed
resolution for the ordinary Annual General Meeting for the appointment of the auditors 2018 by way
of a written circular. This was based on the declaration of the audit committee that its
recommendation was free of undue influence by third parties and it had not entered into any
contractual clause that could restrict the choice within the meaning of Art. 16 para 6 of the EU Audit
Regulation.
In an extraordinary meeting held as a telephone conference in November 2017, the Supervisory and
Management Boards deliberated on the optimisation of the maturity profile for the financing portfolio
of alstria office REIT-AG and agreed on the issuance of a new bond with a total nominal amount of
EUR 350 million as well as buying back parts of the notes from the corporate bonds that were issued
in the financial years 2015 and 2016, with a total nominal amount of EUR 350 million. In December
2017, the Supervisory Board resolved editorial amendments to the Company’s Articles of Association
due to a capital increase of EUR 619,437.00 from conditional capital, executed in November 2017
from the conversion of parts of the convertible bonds, which was issued by the Company in 2013. In
its ordinary meeting in December 2017, the Supervisory and Management Boards discussed the
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Corporate Governance
Company and budget planning for the financial year 2018 and approved these. The Supervisory Board
advised the Management Board on planned real estate acquisitions and disposals as well as on the
possibilities to finance these acquisitions. The Supervisory Board continued its discussions on the
results of the composition and efficiency check of its work and agreed upon a profile of skills and
expertise containing the objectives for the composition of the Supervisory Board.
In its extraordinary meeting in January 2018, the Supervisory and Management Boards and external
advisors discussed the strategy for the Company in detail and resolved on the establishment of a
special committee capital increase, and they authorised this special committee to grant all necessary
approvals and make all other declarations required in connection with the execution of a capital
increase by up to 10% of the share capital against cash contributions by utilizing the Company’s
Authorised Capital 2017 (Sec. 5 para. 3, para. 4 and para. 4a of the Company’s Articles of Association).
In February 2018, the Supervisory Board resolved by way of two written circular resolutions on the
annual compliance statement regarding the recommendations by the German Corporate Governance
Code and on the Corporate Governance Report. In its financials meeting in March 2018, the
Supervisory Board particularly dealt with the consolidated financial statements and financial
statements for the year ending on December 31, 2017. 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 2017. Management Board and Supervisory Board
discussed the agenda and proposals for resolution for the Annual General Meeting of the Company for
financial year 2017. 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 four 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 [143 to 154] of the annual report.
In some cases, the committees prepare the resolutions that the Supervisory Board will pass by making
proposals. In some cases, the committees have been given decision-making powers, to the extent
permitted by law. During the ordinary Supervisory Board’s meetings, the committee’s chairmen report
on their committees’ work. In financial year 2017, the Supervisory Board’s committees focused on
the topics detailed below.
The audit committee held five meetings in financial year 2017. All of them were attended by the
Chief Financial Officer. 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, 2016
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. Furthermore,
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the audit committee dealt with the half-year financial report as of June 30, 2017 and discussed it
with the auditors and the Management Board prior to its publication. The Company’s risk situation
was addressed regularly. Further topics included a recommendation to the Supervisory Board
regarding the proposed resolution of the Supervisory Board for the choice of the auditors for the
financial year 2017 Annual General Meeting, the auditors’ independence and any additional services
to be 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, accounting process, risk management system and
key risks were discussed. Moreover, the effectiveness of the Company’s internal controlling audit and
compliance systems were discussed. The audit committee also dealt with the results of the Company’s
internal audit. By way of written circular resolution in June 2017, the audit committee resolved to
initiate and execute a tender process pursuant to Art. 16 Auditor regulation (regulation 537/2014 of
the European Parliament and Council) for the audit of the financial year 2018, which was addressed
by the audit committee in several meetings in the financial year 2017. In October 2017, after checking
the independence of the auditor and in accordance with the auditor regulation of the European Union,
the audit committee submitted two recommendations for the auditor for the financial year 2018 with
one reasoned preference.
The nomination and remuneration committee, which also carries out the tasks of a nomination
committee, met three times during financial year 2017. 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, providing the Supervisory Board
with corresponding resolution proposals. In light of the office terms of Management Board members
coming to an end in financial year 2017, the nomination and remuneration committee continued its
intensive deliberations in financial year 2016 regarding the personnel planning for the Management
Board in the financial year 2017. By involving an external independent remuneration expert, the
committee reviewed the possibilities to further advance the Management Board remuneration system.
In January 2017, the committee recommended the Supervisory Board to appoint both members of the
Management Board for another term in office. Moreover, the committee dealt with the succession
planning for the Supervisory Board, involving an external independent advisor and submitted a
proposal to the Supervisory Board for a resolution to the Annual General Meeting with regard to the
election of one new board member. Furthermore, the nomination and remuneration committee
reviewed the appropriateness of the existing Supervisory Board remuneration system and
recommended to propose adapting the remuneration of the Supervisory Board during the Annual
General Meeting. Finally, the nomination and remuneration committee dealt with the determination
of the target quota for women’s participation in the Supervisory and Management Boards and also
prepared a proposal for a resolution to the Supervisory Board in this matter.
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In financial year 2017, the finance and investment committee deliberated with the Management Board
on the financing strategy of alstria office REIT-AG and real estate transactions in five meetings. The
committee approved the acquisition of a real estate portfolio executed in financial year 2017, the
disposal of a logistics real estate portfolio and the conclusion of a financing agreement. Finally, the
finance and investment committee agreed on advisory services from the law firm Freshfields
Bruckhaus Deringer LLP, of which the Chairman of the Supervisory Board is a partner.
In the financial year 2017, the members of the newly established Corporate Social Responsibility
Committee came together for first discussions on the focal points of the future activities of the
committee.
The special committee transactions, established in March 2017, was composed of four members and
authorised to grant all necessary approvals and make all other declarations required in connection
with the acquisition of real estate portfolios and their financing. It met in the financial year 2017
once and approved the acquisition of a real estate portfolio and the conclusion of a financing
agreement.
The special committee capital increase, established in January 2018, had two meetings in January
2018. It approved, inter alia, according to its authorisation, the increase of the Company’s share
capital by up to 10% of the share capital against cash contributions by utilising the Company’s
Authorised Capital 2017 and excluding shareholders’ subscription rights.
The composition of the special committee is also described in the Company’s Corporate Governance
Statement on pages 143 to 154 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, 2017. All
reports were prepared by the Management Board and each 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 prepared the
Supervisory Board’s audit and dealt, in particular, with the key audit matters described in the
auditors’ opinion, including the audit procedures implemented. The audit committee 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 auditors reported on the scope, focal points
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and main findings of their audit, addressing, in particular, key audit matters and the audit procedures
implemented. The plenary meeting examined and discussed 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 2018, in accordance with Section 161 AktG; it was subsequently made
permanently available to shareholders on the Company’s website. In their declaration, the
Management and Supervisory Boards explained that most of the recommendations of the German
Corporate Governance Code have been, or will be, adopted. Furthermore, information on the
recommendations that have not been, or will not be, followed, is presented together with the reasons
for making these decisions.
Concerning its own composition, the Supervisory Board developed a profile of skills and expertise with
specific objectives for its composition and a diversity concept, which are published in the Company’s
Corporate Governance Report on pages 143 to 154 of the annual report, together with the status of
their implementation. Based on a self-assessment of the members of the Supervisory Board in summer
2017, it could be concluded that the composition of the Supervisory Board as of December 31, 2017
met these objectives and that the profile of skills and expertise was fulfilled.
No conflicts of interest concerning members of the Supervisory Board or Management Board arose
during financial year 2017.
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CHANGES IN THE SUPERVISORY BOARD
The local court (Amtsgericht) of Hamburg appointed Mr. Bernhard Düttmann as member of the
Supervisory Board, effective January 3, 2017. The court’s appointment was limited to the end of the
Annual General Meeting in the financial year 2017. This Annual General Meeting appointed Dr
Bernhard Düttmann as a member of the Supervisory Board until the end of the Annual General
Meeting, which shall resolve upon formal approvals of the actions of the supervisory board members
in the financial year 2020.
The Supervisory Board would like to thank the Management Board and all employees for their
dedication and their successful work in financial year 2017.
Hamburg, March 2018
For the Supervisory Board
Johannes Conradi
Chairman of the Supervisory Board
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CORPORATE GOVERNANCE STATEMENT
In this declaration, the Management Board and the Supervisory Board report on the corporate
governance of alstria office REIT-AG (“alstria”) pursuant to Section 289f and 315d of the German
Commercial Code (“HGB”) as well as Section 3.10 of the German Corporate Governance Code
(“Code”).
DECLARATION OF MANAGEMENT BOARD AND SUPERVISORY BOARD PURSUANT TO SECTION 161
GERMAN STOCK CORPORATION ACT ON THE GERMAN CORPORATE GOVERNANCE CODE
The suggestions and recommendations of the Government Commission, as appointed by the German
Federal Ministry of Justice, contain internationally and nationally recognised standards for effective
and responsible corporate management. The Company’s declaration of compliance with the
recommendations of the German Corporate Governance Code is published on the Company’s website
(www.alstria.com). After careful consideration, alstria has chosen not to comply with some of the
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 13, 2018:
Declaration of compliance, dated February 13, 2018
“Since the prior declaration of compliance, dated February 15, 2017, the Company has — apart from
the exceptions stated below — complied with the recommendations of the “Government Commission
German Corporate Governance Code” in the version as amended on February 7, 2017 (respectively,
until it came into force on April 24, 2017, in the version as amended on May 5, 2015). The Company
intends to continue to comply with the recommendations of the Code as amended on February 7,
2017, to the same extent:
Deductible for D&O insurance for the Supervisory Board, Section 3.8 of the Code
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 of the Code
The short-term incentive remuneration element of the Management Board is mainly based on the
achievement of a funds from operations (FFO) target or for grantings starting in financial year 2018
by means of the achieved FFO per share. In the event that the achieved FFO or FFO per share in a
financial year is positively and materially impacted by new acquisitions, the Supervisory Board adjusts
the FFO or FFO per share target accordingly. In doing so, the Supervisory Board ensures the
Management Board is not incentivised to enter into acquisitions by means of achieving personal short-
term benefits. The impact of any acquisition on the management remuneration is solely linked to
multi-year remuneration elements, therefore aligning the interest of the Management Board with
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those of the Company and its shareholders. Vice versa, the Supervisory Board adapts the FFO or FFO
per share target to disposals.
Determination of a level of benefits for the private pension plan, Section 4.2.3 of the Code
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 of the Code
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 are discussed with the audit committee of the
Supervisory Board prior to publication. The Management Board and Supervisory Board consider this
approach appropriate and adequate.”
CORPORATE MANAGEMENT PRACTICES
To achieve a value-oriented and trust-building corporate management, alstria applies a corporate
management practice to an extent beyond what is legally required.
Corporate Governance
The Management Board and the Supervisory Board of alstria are aware of their responsibilities
concerning the corporate governance of alstria regarding the Company’s shareholders, employees,
tenants and business partners. Good corporate governance is the basis for our decision-making and
supervising processes. It stands for a responsible, value and long-term success-driven governance and
supervision of the Company, a target-orientated and efficient cooperation between the Management
Board and the Supervisory Board, respect for the interests of our shareholders and employees,
transparency and responsibility in all entrepreneurial decisions as well as an appropriate handling of
risks.
alstria has already implemented many parts of the German Corporate Governance Code (as last
amended February 7, 2017) to an extent beyond what is legally required. alstria office REIT-AG com-
plied and complies with the recommendations of the German Corporate Governance Code with the
few exceptions named and reasoned in the declaration of compliance. Beyond that, alstria also com-
plied and complies with the suggestions of the German Corporate Governance Code in major parts.
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
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necessary. In this way, alstria ensures consistent compliance with these principles.
Integrity and compliance
A conduct of integrity is one of alstria’s most important principles. The entire Company shares the
understanding that the trust of alstria’s shareholders, tenants, employees and business partners
crucially depends on the behaviour of each employee. The Management Board of the Company has set
up a compliance organisation to ensure that the legal provisions and internal Company guidelines are
complied with and, moreover, that sets standards for treating business partners, competitors and
employees fairly.
A code of conduct lists guidelines for behaviour and provides orientation to resolve conflicts (e.g.,
conflicts of interest), thereby serving as a model for correct behaviour for all employees of the
Company. The code of conduct is published on the Company’s website.
The compliance officer is responsible for communicating these values by answering questions on the
implementation of the code of conduct 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 also has 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 will be punished. This can include anything from disciplinary measures to dismissal, a claim
for damages or even prosecution.
A conduct of integrity also is an essential condition for a trusting partnership and cooperation with our
business partners. For this reason, alstria has introduced a code of conduct for its service providers and
craftsmen, which defines fundamental legal and ethical requirements. The code is published on the
Company’s website and defines expectations of the Company in a behaviour of integrity and compliance
from business partners.
Communication and transparency
A transparent corporate governance and good communication with the shareholders and the public
contributes to strengthening investor and public trust in alstria’s work.
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 the 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 authorised
representative present at the Annual General Meeting or by sending voting instructions to their
proxies. The invitation to the Annual General Meeting includes an explanation of how voting
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instructions can be issued. 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
and 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.
Communication with the public
When sharing information with people outside the Company, the Management Board follows the
principles of transparency, promptness, openness and clarity, and a policy of equal treatment of its
shareholders. alstria informs its shareholders and the interested public about the Company’s situation
and significant business events in particular 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 and other financial instruments, share price tracking and
the Managers’ Transactions Disclosure pursuant to Article 19 of the Market Abuse Regulation
(Regulation (EC) No. 596/2014 of the European Parliament and the Council) (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.
Financial reporting
alstria regularly informs shareholders and third parties by publishing its consolidated and half-year
financial statements, as well as quarterly interim statements, during each financial year. For the
Company group’s accounting, the International Financial Reporting Standards (IFRS) as applied in the
European Union, are relevant. For legal reasons (calculating dividends, creditor protection), financial
statements for alstria office REIT-AG also are prepared in accordance with the HGB.
The Annual General Meeting appoints the independent auditor for alstria office REIT-AG and the
company group as well as for the audit review of the interim financial reports. 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 negotiates the respective auditing fees. 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 as well as in
the meeting of the audit committee regarding the deliberations on the half-year financial report and to
present the respective key findings of the audit. 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 2017 financial year and for further interim financial reports until the
next ordinary general meeting in 2018. WP/StB Annika Deutsch is the professionally qualified auditor in
charge for the financial statements of alstria office REIT-AG and the company group since financial year
2016 (and before for the financial years 2011 to 2013). Furthermore WP/StB Gerald Reiher is since
financial year 2011 the responsible partner for the entire engagement.
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In financial year 2017, the Supervisory Board and the audit committee conducted a tender process
for the audit performances for the financial year 2018 pursuant to Art. 16 of the auditor regulation
(regulation (EC) No. 537/2014 of the European Parliament and Council). In accordance with the audi-
tor regulation, the audit committee submitted two recommendations for the auditor for the financial
year 2018 with one reasoned preference. The Supervisory Board will make a proposal for resolution
to the Annual General Meeting in April 2018.
Sustainability
alstria’s sustainability approach is based on a three-pillar model, taking the impact of business on the
following pillars into account: economy, environment and social issues. As a commercial organisation,
alstria’s main objective is to optimise 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. The
Company 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 maximise 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.
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
and deliberates with it questions on strategy, planning, development of business, risk situation, risk
management and compliance of the Company. On notable events, which are of substantial meaning
for the evaluation of the situation and development as wells as the governance, the chairman of the
supervisory board informed without delay by 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,
the allocation of responsibilities between the individual members of the Management Board as well
as the reporting and information duties towards the Supervisory Board are stipulated in the rules of
procedure for the Management Board.
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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 must be approved.
The members of the Management Board are obligated to the Company’s interest. The members of the
Management Board must immediately disclose any conflicts of interest to the Supervisory Board. 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. 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.
There were no contracts regarding such business transaction between the Company and the
Management Board members, persons or companies in close association with them during the
reporting period. Each member of the Management Board serves on one supervisory board of a
company outside of the Group with approval of the Supervisory Board of the Company. A list of the
memberships of the Management Board in supervisory boards of listed companies or in supervisory
boards of companies with comparable requirements pursuant to Section 285 No. 10 HGB can be found
on pages [122] to [123] of the Company’s financial report.
Supervisory Board
In accordance with the articles of association, the Supervisory Board is composed of six members. 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.
The following changes took place in the composition of the Supervisory Board in 2017: After Hermann
Dambach resigned from the Supervisory Board, effective October 31, 2016, Dr Bernhard Düttmann was
appointed successor of Mr Dambach until the end of the ordinary Annual General Meeting in 2017 by
resolution of the Hamburg Local Court (Registration Court) to the Supervisory Board in January 2017.
The Annual General Meeting held on May 16, 2017, elected Dr Bernhard Düttmann as a member of the
Company’s Supervisory Board until the end of the Annual General Meeting, which resolves on the
discharge of the members for the financial year 2020.
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The Supervisory Board is composed of the following members:
Member
Profession
Appointed until
Dr Johannes Conradi (Chairman)
Lawyer and partner, Freshfields Bruckhaus Deringer LLP
Richard Mully (Vice Chairman)
Director, Starr Street Limited
Dr Bernhard Düttmann
Independent business consultant
Stefanie Frensch
Benoît Hérault
Marianne Voigt
Managing Director, HOWOGE Wohnungsbaugesellschaft mbH
Managing Director, Chambres de l’Artémise S.à r.l.
Managing Director, bettermarks GmbH
1) Until the close of the Annual General Meeting
20201)
20191)
20211)
20211)
20191)
20201)
The Supervisory Board considers all its members to be independent.
On the website of the Company (Company > Supervisory Board), a curriculum vitae for each member
of the Supervisory Board as well as an overview of other material activities besides the Supervisory
Board mandate can be found. A list of all memberships of the Supervisory Board members in supervisory
or similar controlling bodies in companies external to the Group pursuant to Section 285 No. 10 of the
HGB is presented as well on pages 122 to 123 of the annual report.
In its report to the Annual General Meeting, the Supervisory Board reports on its activities undertaken
in financial year 2017. The report is presented on pages 135 to 142 of the annual report.
Supervisory Board committees
The Supervisory Board has formed four standing committees: an audit committee, a finance and
investment committee, a nomination and remuneration committee and a solemnly advising corporate
social responsibility committee. Each committee that has a resolution-making competence has its
own rules of procedure to specify its concerns, tasks and resolution-making competence.
Audit committee
The audit committee monitors the Company’s accounting and the accounting process, risk
management, internal control, internal audit and compliance. Moreover, the audit committee deals
with the selection of the auditors, the necessary independence of the auditor and the respective
engagement, the key audit areas, the auditors’ compensation as well as the additional rendered
services by the auditor. In the complete 2017 financial year, the audit committee was composed of
Marianne Voigt as Chair and Benoît Hérault as a further member. Moreover, Richard Mully was a
member of the audit committee until January 18, 2017. On the same date, Dr Bernhard Düttmann
was elected as his successor to the audit committee.
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Finance and investment 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 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 2017 financial year, the finance
and investment committee composed of Richard Mully as Chair as well as Benoît Hérault and Stefanie
Frensch as further members.
Nomination and remuneration 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 the Annual General Meetings. In the financial
year 2017, the nomination and remuneration committee was composed of Dr Johannes Conradi as
Chair as well as Stefanie Frensch and Richard Mully as further members.
Corporate social responsibility committee
The corporate social responsibility committee, which was newly established in September 2017, will
deal with topics of corporate social responsibility and real estate innovations in the future. The
committee was composed of Dr Johannes Conradi as Chair as well as Richard Mully and Marianne Voigt
as further members.
Special committees
Additionally, the Supervisory Board established a special committee transactions in March 2017, which
was composed of Richard Mully as Chair as well as Dr Johannes Conradi, Stefanie Frensch and Benoît
Hérault as further members. The special committee transactions was authorised to grant all necessary
approvals and make all other declarations required in connection with the acquisition and financing
of real estate portfolios.
In January 2018 the Supervisory Board established a special committee capital increase, which was
comprised of Richard Mully as Chair as well as Dr Johannes Conradi, Stefanie Frensch and Benoît
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Hérault as further members. The special committee capital increase was authorised to grant all
necessary approvals and make all other declarations required in connection with the execution of a
capital increase from the Authorised Capital 2017 (Sec. 5 para. 3, 4 and 4a of the articles of
association) against cash contributions in the amount of up to ten percent of the Company’s share
capital.
The Supervisory Board reports on the activities of the committees of the Supervisory Board during the
2017 financial year in its report to the Annual General Meeting on pages 135 to 142 of the annual
report.
DETERMINATION TO PROMOTE WOMEN’S PARTICIPATION IN LEADING POSITIONS PURSUANT TO
SECTION 76 PARA. 4 AND SECTION 111 PARA. 5 AKTG
For the Company, employees and their development in the Company are of central meaning to achieve
sustainable success. The Management Board pursues diversity in filling its management positions and
aims to adequately consider women for these positions. The Management Board determined that the
number of females in the first management level below the Management Board should be no less than
30%. This target quota has been achieved with 41.7% as of December 31, 2017, and applies until
December 31, 2021. 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.
The Supervisory Board determined a target quota of at least 30% for the Supervisory Board. This quota
has been achieved with 33.33% and applies until December 31, 2021.
For the participation of women in the Management Board, the Supervisory Board determined a quota
of 0%. This quota has been achieved and applies until December 31, 2021. Since both Management
Board members are appointed until December 31, 2022, a change in the Management Board until then
is not foreseeable from today’s point of view. Also, pursuing a diversity concept for the Management
Board is not indicated against this background.
PROFILE OF SKILLS AND EXPERTISE WITH OBJECTIVES FOR THE COMPOSITION OF THE
SUPERVISORY BOARD AND DIVERSITY CONCEPTION
The aim of the alstria office REIT-AG’s Supervisory Board is to have members who are equipped with
the necessary skills and expertise to properly advise and control the Management Board. Therefore, in
December 2017, the Supervisory Board developed, with due consideration of the specific alstria situa-
tion, the following profile of skills and expertise and diversity conception pursuant to Section 289f HGB
and Section 5.4.1 of the German Corporate Governance Code, which specifies concrete objectives for
the composition of the Supervisory Board, which are to be considered in its proposals to the sharehold-
ers in the General Meeting regarding new elections to the Supervisory Board:
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Requirements for the single Supervisory Board members
General requirement profile
▪ Managerial or operational experience
▪ Willingness and ability to adequate content-related commitment
▪ Discretion and integrity
▪ Capacity for interaction and teamwork
▪
Leadership skills and persuasive power
▪ Willingness to participate in regular and independent advanced training
▪ Compliance with the limitation of the numbers of memberships as recommended by the
German Corporate Governance Code (see Section 5.4.5 German Corporate Governance Code).
Availability
Each member of the Supervisory Board must ensure that he or she has sufficient time to dedicate to
the proper fulfilment of the Supervisory Board mandate (see also Section 5.4.1 German Corporate
Governance Code). This means ensuring that the member
▪
can attend five ordinary Supervisory Board meetings per year, each of which requires
adequate preparation work and wrap-up,
▪ has sufficient time for the audit of the annual and consolidated financial statements,
▪
can in general attend the Annual General Meeting of shareholders in person (see para. 15 sec.
4 sentence 1 of the articles of association),
▪ depending on possible membership in one or more of the Supervisory Board committees, has
extra time to participate in these committee meetings and do the necessary preparation and
wrap-up for these meetings,
▪
can attend extraordinary meetings of the Supervisory Board or of a committee to deal with
special matters, as and when required (also on short notice).
Age limit
Members of the Supervisory Board should not be older than 70 years of age as a general rule (see for
the definition of an age limit Section 5.4.1 German Corporate Governance Code).
Length of membership
For each member, the membership in the Supervisory Board shall not exceed 20 years as a general
rule (see for the definition of a maximum length of mandate Section 5.4.1 German Corporate Gov-
ernance Code).
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Requirements relating to the composition of the Supervisory Board plenum
Expertise
▪ Viewed as a whole, the members must be familiar with the real estate sector (see Section
100 para. 5 second half-sentence of the German Stock Corporation Act).
▪ At least two members shall have expertise in the sectors of real estate transactions, asset
management and letting, project development and real estate valuation.
▪ At least one independent member of the Supervisory Board shall have expertise in accounting
or the audit of annual statements (see Section 100 para. 5 first half-sentence of the German
Stock Corporation Act, Section 5.3.2 German Corporate Governance Code).
▪ At least one member shall have expertise in the sectors of legal, human resources
management, corporate finance, IT/innovation/digitalisation, corporate social responsibility
and capital markets.
Experience abroad
At least two members of the Supervisory Board shall have acquired reasonable international experi-
ence.
Diversity and participation of women
The members of the Supervisory Board shall appoint new members, taking into account their back-
grounds, professional experiences and expertise, to provide the Supervisory Board with the most di-
verse sources of experience and expertise possible. For the female representation in the Supervisory
Board, a quota of at least 30% must be maintained.
Independence and conflicts of interest
At least four members of the Supervisory Board shall be independent, according to Section 5.4.2 of
the German Corporate Governance Code, i.e. 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.
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 (see for the disclosure of con-
flicts of interest Section 5.5.2 German Corporate Governance Code).
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Corporate Governance
Current composition
In December 2017, the Supervisory Board assessed the implementation of these targets and came to
the conclusion that all targets named above are met. The profile of skills and expertise is completely
met by the plenary body.
February 2018
The Management Board
The Supervisory Board
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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. Recently, the Supervisory Board adopted the remuneration system
that became effective January 1, 2018.
Below is a description of the remuneration system and a breakdown of the amounts of remuneration
for the members of the Management Board for financial year 2017, as well as a description of the
adjustments to the remuneration system which came into force on January 1, 2018.
1.
REMUNERATION SYSTEM IN FINANCIAL YEAR 2017
The remuneration system for the members of the Management Board, as applicable in financial year
2017, was developed by the Supervisory Board with the assistance of an external, independent remu-
neration expert. The shareholders approved it in the general meeting for the 2009 financial year. The
Supervisory Board is of the opinion that adequate remuneration for the members of the Management
Board has been provided in financial year 2017, which is based on customary market terms and con-
ditions and also takes the long-term success of the Company into account. Furthermore, the remu-
neration structure complies with the German Stock Corporation Act (AktG) and—except for the devi-
ations declared in the Compliance Statement according to Sec. 161 of the AktG—with the recommen-
dations of the German Corporate Governance Code.
The criteria for determining the appropriateness of the remuneration of the Management Board in-
clude, among other factors, 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 remu-
neration structure of the Company.
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 multi-
year targets with forward-looking characteristics, as described below. The system also establishes
caps for the different variable elements of the remuneration.
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.
* This remuneration report forms an integral part of the audited Group Management Report and Notes to the annual financial statements.
alstria Annual Report 2017
155
Corporate Governance
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 summarises the main characteristics of each of the two programs:
Proportion of total target
remuneration
20%
20%
20%
short-term incentive (STI)
long-term incentive (LTI)
Like-for-like budgeted funds
from operations (FFO)
Total shareholder return
(relative to EPRA
NA-REIT Europe Ex-UK)
Absolute total shareholder
return
Targets to assess
performance
Min. / max. target
achievements
Discretionary factor
50% / 150%
0.8 / 1.2
Deferred component
25%
50% / 150%
0.8 / 1.2
100%
50% / 150%
0.8 / 1.2
100%
Form of the deferred
component
Virtual shares
Virtual shares
Virtual shares
Deferral period
2 years
4 years
4 years
Reference share price
Average share price for the
previous 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 reference
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 incentivised 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.
Deferred component
This category reflects the part of the variable remuneration that is subject to a multi-year lockup.
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Corporate Governance
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.
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.
The table below summarises the number of virtual shares granted under the existing STI and LTI
programs in the reporting period and outstanding as of December 31, 2017.
Start of
deferral period
Reference share
price in EUR
End of
deferral period
Number of
virtual shares
Number of
virtual shares
Olivier Elamine
Alexander Dexne
STI 2015
STI 2016
LTI 2014
LTI 2015
LTI 2016
LTI 2017
2016
2017
2014
2015
2016
2017
11.63
11.68
9.44
10.97
11.71
11.52
2018
2019
2018
2019
2020
2021
5,949
5,142
46,610
40,109
37,575
38,194
4,868
4,207
38,136
32,817
30,743
31,250
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.
Termination of Membership in Management Board
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
alstria Annual Report 2017
157
Corporate Governance
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.
Benefits by Third Parties
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 2017 financial year.
2.
AMOUNT OF REMUNERATION IN THE 2017 FINANCIAL YEAR
In the last financial year, the total target remuneration for the members of the Management Board
amounted to EUR 2,190 k. The total amount paid to the Management Board in that financial year
amounted to EUR 2,792 k (including payouts on multi-year remuneration elements). The correctness
of the calculated payout amounts for the multi-year variable remuneration elements was confirmed
by an independent remuneration expert. The remuneration of individual Management Board members
is presented based on model tables pursuant to the German Corporate Governance Code, as amended
on February 7, 2017.
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 2017” 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.
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Benefits granted
Benefits granted
Olivier Elamine
CEO
Alexander Dexne
CFO
in EUR k
2016
2017
2017
(Min)
2017
(Max)10)
2016
2017
2017
(Min)
2017
(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 2016)
One-year variable compensation
(STI 2017)
Total amount of multi-year
variable compensation
STI 2016 (3 years)
STI 2017 (3 years)
LTI 2016 (4 years)
LTI 2017 (4 years)
Total amount of fixed and
variable compensation
Service costs9)
Total
448
440
8
447
440
7
173
173
1733)
-
-
1733)
498
498
585)
-
4407)
-
585)
-
-
4407)
447
440
7
0
-
0
0
-
0
-
0
447
440
7
378
360
18
381
360
21
312
142
142
-
1423)
-
381
360
21
0
-
381
360
21
255
-
3124)
-
1423)
0
2554)
2,240
407
407
-
2606)
-
475)
-
3607)
-
475)
-
0
-
0
-
1,833
-
2136)
-
1,9808)
-
3607)
0
1,6208)
1,119
1,118
447
2,999
84
84
84
84
1,203
1,202
531
3,083
927
58
985
930
58
988
381
2,469
58
58
439
2,527
1) Annual base salary according to service contracts.
2) 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 3 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) 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.
Conditions to attain maximum amounts for
variable remuneration elements granted
in 2017
One-year variable compensation
and
Multi-year variable compensation
LTI (4 years)
and
and
and
STI (3 years)
1. alstria FFO 2017 = EUR 170.7 m (budgeted FFO of approx. EUR 113.8 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
overperforming EPRA/NA-REIT Europe Index Ex UK by 25%)
3. Company share price increases by 250% (share price of EUR 11.52 on granting
date --> share price of EUR 28.80 on payment date after 4 years)
4. Supervisory Board passes resolution on discretionary factor of 1.2
Price of Company shares increases by 250% (e.g. share price of EUR 11.68 on
deferral date --> share price of EUR 29.20 on payment date)
alstria Annual Report 2017
159
Corporate Governance
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 2015)3)
One-year variable compensation (STI 2016)3)
Total amount of multi-year variable compensation
STI 2013 (3 years)4)
STI 2014 (3 years)4)
LTI 2012 (4 years)5)
LTI 2013 (4 years)5)
Total amount of fixed and variable compensation
Service cost6)
Total
1) Annual base salary according to service contracts.
2) Benefits related to company car.
3) Payout amount for 75% of the STI after 1 year.
4) Payout amount for 25% of the STI after 3 years.
5) Payout amount for LTI after holding period of 4 years.
6) Benefits for insurance and pension plans.
Olivier Elamine
Alexander Dexne
CEO
CFO
2016
2017
2016
2017
448
440
8
208
208
-
870
75
-
795
-
1,526
84
447
440
7
180
-
180
822
-
68
-
754
1,449
84
378
360
18
170
170
-
712
61
-
651
-
1,260
58
381
360
21
147
-
147
673
-
56
-
617
1,201
58
1,610
1,533
1,318
1,259
3. REMUNERATION SYSTEM SINCE THE 2018 FINANCIAL YEAR
In January 2017, the Supervisory Board resolved upon amendments to the system for the remuner-
ation of the members of the Management Board of alstria office REIT AG, which took effect on
January 1, 2018, and was approved by the shareholders in the Annual General Meeting in May 2017.
The amendments resolved by the Supervisory Board aim at better aligning the interests of the
Management Board and the shareholders of the Company, focusing on sustainable long-term value
creation and reducing complexity. The structure of the remuneration system is kept substantially
unchanged and only simplifications and amendments are made. The amounts of the fixed annual
remuneration and the target values for the variable remuneration remain unchanged. When re-
viewing and adapting the remuneration system for the members of the Management Board, the
Supervisory Board was advised by an external, independent remuneration expert.
Just as before, the criteria for appropriateness of the Management Board remuneration are the
duties of the individual Management Board member and his or her personal performance; the fi-
nancial situation, success, prospects, and sustainable development of the Company; the appropri-
ateness of the remuneration with consideration of the scope of comparison; and the Company’s
applicable remuneration structure.
The remuneration structure still consists of a fixed basic remuneration, a short-term and long-term
variable remuneration component, and ancillary benefits (payments in kind) for each member of
the Management Board. As required by the German Stock Corporation Act and the German Corpo-
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alstria Annual Report 2017
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rate Governance Code, the majority of the remuneration consists of variable remuneration compo-
nents that are mainly based on multi-year assessments with forward-looking characteristics. Fur-
thermore, Share Ownership Guidelines have been introduced under which the members of the Man-
agement Board are obliged to invest part of their remuneration in shares of the Company.
Overview of the essential amendments
STI
(Short-Term
Incentive)
LTI
(Long-Term
Incentive)
Share
Ownership
Guidelines
2017
FFO as target value
Threshold for the performance target:
50%
Discretionary
factor
to
reflect
2018
▪
▪
▪
FFO per share as target value
Threshold for the performance target:
70%
Discretionary
factor
to
reflect
individual performance: 0.8−1.2
individual performance: 0.7−1.3
75% cash payout / 25% payout in virtual
▪
100% cash payout
shares
Virtual shares with term of 4 years,
then payout in cash
Performance subject to absolute TSR
(50%) and relative TSR (EPRA/NAREIT
Europe Ex-UK Index) (50%)
Discretionary
factor
to
reflect
▪
▪
▪
Stock awards with term of min. 4
years, payout in Company shares
Performance subject to absolute TSR
(25%) and relative TSR (FTSE EPRA/
NAREIT Developed Europe Index) (75%)
Discretionary
factor
to
reflect
▪
▪
▪
▪
▪
▪
▪
individual performance: 0.8−1.2
individual performance: 0.7−1.3
▪
N/A
▪ Obligation of the members of the Man-
agement Board to acquire shares of
the Company amounting to three times
their fixed annual remuneration and to
hold the same until they leave their
office
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Corporate Governance
Variable Remuneration Elements
Short-Term Incentive Plan 2018
Just as before, the members of the Management Board receive a short-term variable remuneration
component (STI) with a target value in Euro in each financial year. Since January 1, 2018, the STI
is based on the budgeted funds from operations per share (FFO per share) as the performance
target (previously: funds from operations). The amount of the STI depends on the degree to which
the performance target is achieved, i.e. the relation between the FFO per share achieved in the
corresponding financial year and the budgeted FFO per share. The previous remuneration system
provided for a threshold of at least 50% of the performance target that must be met for payments
to be made. This threshold has been increased to at least 70% of the performance target to be met
for a payout, i.e. if the achieved FFO per share is not at least 70% of the budgeted FFO per share,
remuneration from the STI will not be granted. A maximum of 150% of the performance target can
be achieved (cap).
The achieved payout value is adjusted at the discretion of the Supervisory Board, i.e. multiplied
with a discretionary factor of 0.7 to 1.3 (previously: 0.8 to 1.2). This enables the Supervisory Board
to consider the individual performance of each Management Board member in addition to the per-
formance target achievement. Criteria for this may be, in particular, the individual performance
of each Management Board member in the relevant financial year as well as his or her tasks and
responsibilities within alstria and the alstria Group. In total the STI is limited to a maximum of 150%
of the target value (cap).
According to the remuneration system as applicable until the end of financial year 2017, only 75%
of the STI were paid out in cash to the Management Board members, and 25% of the STI were
converted into virtual shares which were subject to a minimum holding period of two years. Now,
the STI no longer provides for a long-term component with a conversion into virtual shares and will
be paid out completely in cash without deferral. This change aims to simplify the remuneration
system and was made in light of the Company’s introduction of Share Ownership Guidelines under
which the members of the Management Board are obliged to acquire and hold Company shares (for
details see below under Share Ownership Guidelines).
Long-Term Incentive Plan 2018
The members of the Management Board may still also be granted a long-term variable remuneration
component (LTI) in each financial year with a target value in Euro to be determined by the Super-
visory Board. The LTI is still being weighted more strongly than the STI. As of January 1, 2018, the
Long-Term Incentive Plan 2018 no longer provides for virtual shares but for stock awards which will
be converted into shares of the Company after a holding period of at least four years (previously:
cash payout). The absolute total shareholder return and the relative total shareholder return re-
main as performance targets. However, the relative total shareholder return has been given a
greater weighting of 75% (previously: 50%). In order to better align with real estate industry stand-
ards, the reference index for the relative total shareholder return is now the FTSE EPRA/NAREIT
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alstria Annual Report 2017
Corporate Governance
Developed Europe Index (previously: EPRA/NAREIT Europe Ex-UK Index). The individual perfor-
mance of the Management Board member is taken into account with a discretionary factor of 0.7
to 1.3 (previously: 0.8 to 1.2).
In detail:
The number of stock awards to be granted results from a target value defined by the Supervisory
Board in Euro and divided by the arithmetic mean of the share price of one alstria share (commer-
cially rounded to two decimal places) during the last 60 trading days prior to being granted. The
Management Board member must hold the stock awards for a holding period of at least four years
beginning with the granting date. The number of the stock awards will be adjusted at the end of
each respective holding period depending on the performance of the alstria share during the hold-
ing period. Twenty-five percent of the performance target determined by the Supervisory Board is
made up of the absolute total shareholder return derived from the “weighted average cost of
capital” (WACC) and compared to the XETRA-based Total Return Index. Seventy-five percent will
be calculated on the basis of the relative total shareholder return compared to the reference index
FTSE EPRA/NAREIT Developed Europe.
Furthermore, as with the STI, the individual performance of each Management Board member dur-
ing the holding period is taken into consideration with a discretionary factor which is determined
by the Supervisory Board within a corridor of 0.7 to 1.3. Criteria for this may be, in particular, the
individual performance of each Management Board member during the relevant holding period as
well as his or her tasks and responsibilities within alstria and the alstria Group. This allows these
factors to be taken into account in addition to the performance target achievement. After the
expiration of the holding period, the number of stock awards adjusted with regard to the perfor-
mance target achievement will be multiplied with the discretionary factor and thus determine the
alstria shares to be delivered for payout. Additionally, the dividends accumulated during the hold-
ing period for the payout shares are taken into account. This is the accumulated gross dividend
divided by the arithmetic mean of the alstria stock market price (rounded to two decimal places)
of the last 60 trading days prior to the relevant maturity date. The resulting stock awards will be
converted into alstria shares at a ratio of 1:1 and granted to the Management Board member. In
addition, the amount paid out in the Long-Term Incentive Plan 2018 is limited by a cap (to a max-
imum of 250% of the target value in Euro).
If the Company is not in a position to provide the alstria shares, the payout will be made in cash
(determined by the number of shares to be delivered multiplied with the arithmetic mean (com-
mercially rounded to two decimal places) of the alstria stock market price of the last 60 trading
days prior to the relevant maturity date.
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Corporate Governance
Ancillary Benefits
The Management Board members continue to receive payments in kind, which essentially consist
of insurance premiums and the private use of a company car. As a component of the remuneration,
taxes on these ancillary benefits are to be paid by each individual Management Board member.
Each Management Board member is in principle equally entitled to these ancillary benefits, but the
amount varies depending on the personal situation of each member. Moreover, as in the past, the
Company still grants the members of the Management Board a monthly cash amount for the purpose
of a private pension plan. These benefits now amount to 20% of each Management Board member’s
annual fixed salary. Pension entitlements do not exist.
Share Ownership Guidelines
Share Ownership Guidelines have been introduced for the first time. According to such guidelines,
the members of the Management Board are obliged since the beginning of financial year 2018 to
set up a portfolio of shares equivalent to three times the fixed annual remuneration over a period
of five years and to hold the same until they leave their office. The Share Ownership Guidelines
aim in particular at reconciling the interests of the members of the Management Board with those
of the shareholders and thus promoting sustainable entrepreneurial approaches.
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alstria Annual Report 2017
REMUNERATION OF THE SUPERVISORY BOARD MEMBERS
Corporate Governance
The remuneration system for the members of the Supervisory Board is being resolved upon by the
Annual General Meeting of the Company. The remuneration system which had been applicable until
the end of financial year 2017 was adjusted by the Annual General Meeting of the Company in May
2017, effective January 1, 2018. Please find below a description of the remuneration system for the
members of the Supervisory Board which was in effect in financial year 2017 as well as a description
of the amendments made.
1.
SUPERVISORY BOARD REMUNERATION IN THE 2017 FINANCIAL YEAR
For financial year 2017, the members of the Supervisory Board each received an annual fixed remu-
neration of EUR 42 k. The Chairman of the Supervisory Board received an additional annual amount of
EUR 21 k; the Vice-Chairman received an additional amount of EUR 10.5 k. Membership in the audit
committee entitled a member to an additional remuneration of EUR 10 k, while the chair of the audit
committee received EUR 15 k per year. Membership in the nomination and remuneration committee as
well as the finance and investment committee entitled a member to an additional annual remuneration
of EUR 5 k. The chairpersons of these committees are compensated with another EUR 2.5 k per year.
Membership in other committees did not entitle a member to additional remuneration. Members who
sit on the Supervisory Board for only part of a year receive a pro rata temporis remuneration.
The total remuneration for the Supervisory Board members in 2017 amounted to EUR 353 k. The remu-
neration for the individual Supervisory Board members for the 2016 and 2017 financial years is as
follows.
Supervisory Board member
Function on the
Supervisory Board
Dr. Johannes Conradi
Chairman
Function on the
Committees1) in
2017
NRC (ch)2)
Richard Mully
Vice-Chairman
AC2), NRC, FIC (ch)
Member
Member
Member
Member
AC2
NRC, FIC
AC, FIC
AC (ch)
Dr. Bernhard Düttmann
since January 3, 2017
Stefanie Frensch
since May 12, 2016
Benoît Hérault
Marianne Voigt
Alexander Stuhlmann
until May 12, 2016
Hermann Dambach
until October 31, 2016
Total
Remuneration
for 2016
EUR k
Remuneration
for 2017
EUR k
65.66
61.81
-
29.99
57.00
57.00
25.62
50.28
347.36
70.50
65.49
51.30
52.00
57.00
57.00
-
-
353.29
1) AC=audit committee, FIC=finance and investment committee, NRC=nomination and remuneration committee, ch=chair.
2) Temporarily.
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165
Corporate Governance
2. REMUNERATION OF THE SUPERVISORY BOARD SINCE THE 2018 FINANCIAL YEAR
The Annual General Meeting on May 16, 2017, resolved to adjust the remuneration system for the
Supervisory Board members effective January 1, 2018. In order to make the remuneration attractive
compared with other enterprises as well as to take into account the Supervisory Board members’
increasing workload and responsibility, a corresponding amendment of the remuneration was pro-
posed. Especially the comprehensive and time-consuming duties of the Chairman and deputy have
been taken into account more strongly by providing differentiation in remuneration levels of 1:1.5:3
for ordinary members of the Supervisory Board, Vice-Chairman, and Chairman. Furthermore, the
increased responsibility and workload of the chairpersons of the committees have been taken into
account by providing differentiation in remuneration levels of 1:2 for ordinary committee members
and chair.
In this context, the members of the Supervisory Board have agreed upon and entered into a binding
commitment to acquire shares of alstria office REIT-AG for an amount corresponding to one time the
adjusted fixed annual compensation for their activity as member, Chairman, or Vice-Chairman of the
Supervisory Board (without committees and before taxes) and declared that they will hold them for
the duration of their membership in the Company’s Supervisory Board (Self-Commitment). The Self-
Commitment has to be fulfilled within four years beginning January 1, 2018. By means of this Self-
Commitment the members of the Supervisory Board intend to adhere to the guiding principles of the
Share Ownership Guidelines introduced for the members of the Management Board and to declare
their sustained commitment to the Company.
Since the financial year 2018, the Chairman of the Supervisory Board receives a fixed remuneration
of EUR 150 k p.a., his or her deputy a remuneration of EUR 75 k p.a., and each ordinary member of
the Supervisory Board receives 50 k p.a.
In addition to this, each member of the audit committee receives a remuneration of EUR 10 k p.a.;
the chair of the audit committee receives an annual remuneration EUR 20 k p.a. Furthermore, each
member of the nomination and remuneration committee and of the finance and investment commit-
tee of the Supervisory Board receives a fixed remuneration in the amount of EUR 7.5 k p.a.; the chair
of the nomination and remuneration committee and the chair of the finance and investment com-
mittee each receive a remuneration in the amount of EUR 15 k p.a. Membership in other committees
does not entitle a member to any additional remuneration. Supervisory Board members who have
served the Supervisory Board on one of its above-mentioned committees for only part of a financial
year receive remuneration pro rata temporis.
166
alstria Annual Report 2017
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, 2017, 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, 72.41% 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 3,421,766 k
which equals to 95.47 % 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 1,496 k and therefore 0.04 %.
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 2017, the entire sales revenues of the Group plus other earnings
from immovable assets amounted to EUR 423.0 m. This equals 100% of total revenues plus
other earnings from immovable assets;
b)
the sum of the sales revenue plus the other earnings from immovable assets of REIT
service companies amounted to EUR 186 k in the financial year 2017. This equals 0.04 % of
total revenue plus other earnings from immovable assets.
alstria Annual Report 2017
167
REIT Disclosures
5. In the financial year 2017, a dividend payment of EUR 79,680 k for the prior financial year was
distributed to the shareholders. The financial year 2016 resulted in a net gain amounted to
EUR 25,814 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 2013, the Group has realised 32.58 % 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 1,954.7 m. This equals to 57.12 % of the value
of the immovable assets which are shown in the consolidated financial statements in conformance
with Section 12 paragraph 1 REIT Act.
Hamburg, February 20, 2018
alstria office REIT-AG
Olivier Elamine
CEO
Alexander Dexne
CFO
168
alstria Annual Report 2017
REIT Disclosures
REIT MEMORANDUM
We summarised 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, 2017, we have au-
dited 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 concerning the pre-taxation of proceeds according to Section 19 (3) and Section 19a REIT
Act as of December 31, 2017 (hereinafter referred to as “REIT declaration”). The information given
in the REIT declaration is in the responsibility of the management board of the Company. Our respon-
sibility 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, 2017 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, 2017 and agreed the provided information concerning the requirements
of Section 12 to 15 REIT Act with the information disclosed in the annual financial statements and the
consolidated financial statements of the Company. Furthermore we tested the adjustments made to
the valuation of immovable assets held as investment for their compliance with Section 12 (1) REIT
Act. We believe that our audit provides a reasonable basis for our opinion.
alstria Annual Report 2017
169
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, 2017 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 and is not to be used for other purposes.
Hamburg/Germany, February 20, 2018
Deloitte GmbH
Wirtschaftsprüfungsgesellschaft
(Seal)
Signed: Reiher
Wirtschaftsprüfer
Signed: Deutsch
Wirtschaftsprüferin
[German Public Auditor]
[German Public Auditor]
170
alstria Annual Report 2017
Financial Calendar/Imprint
FINANCIAL CALENDAR/IMPRINT
FINANCIAL CALENDAR
Events 2018
April 26
May 3
August 7
November 6
CONTACT/IMPRINT
Annual General Meeting
Publication of Q1
Interim report
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 materially from the results currently
expected.
Note
This report is published in German (original version) and English (non-binding translation).
Contact Investor Relations
Ralf Dibbern
Phone +49 (0) 40 22 63 41−329
Fax
+49 (0) 40 22 63 41−229
E-Mail
rdibbern@alstria.de
alstria Annual Report 2017
171
alstria office REIT-AG
www.alstria.com
info@alstria.de
Steinstrasse 7
20095 Hamburg, Germany
+ 49 (0) 40 / 22 63 41300
Danneckerstrasse 37
70182 Stuttgart, Germany
+ 49 (0) 711 / 33 50 0150
Elisabethstrasse 11
40217 Düsseldorf, Germany
+ 49 (0) 211 / 30 12 16600
Rankestrasse 17
10789 Berlin, Germany
+ 49 (0) 30 / 89 67 79500
Platz der Einheit 1
60327 Frankfurt / Main, Germany
+ 49 (0) 69 / 153 256740
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