| | | 2018 | | 2017 |
At the beginning of the year | | 863,337 | | 763,747 |
Transfers from investment property under construction | 21,482 | | 14,076 | |
Acquisitions | 53,518 | | 60,833 | |
Other capital expenditure | 2,356 | | - | |
Total investments | | 77,356 | | 74,909 |
Transfers to investment property under construction | | (12,898) | | - |
Disposals | | (1,240) | | (450) |
Net gain (loss) from fair value adjustments on investment property (like for like) | 18,786 | | 28,252 | |
Net gain (loss) from fair value adjustments on investment property | (3,910) | | (3,121) | |
In profit or loss | | 14,876 | | 25,131 |
In other comprehensive income | | - | | - |
Transfers out of level 3 | | - | | - |
Total investment property (level 3) | | 941,431 | | 863,337 |
Lease incentives | | 4,155 | | 1,531 |
At the end of the year | | 945,586 | | 864,868 |
The Fund’s investment properties are valued by external valuation experts on a quarterly basis. The external valuation expert is changed every three years. On 31 December 2018, these properties were revalued by independent professionally qualified valuation experts who hold a recognised relevant professional qualification and had recent experience in the locations and categories of the investment properties valued. The carrying values of investment property as at 31 December 2018, and 1 January 2018, are in line with the valuations reported by the external valuation experts.
Since the accounting effect of lease incentives granted is included under non-current assets the recognised amount € 4.2 million (2017: € 1.5 million) is deducted from the total fair value of investment properties.
Investments and investment property under construction | 2018 | 2017 |
Experience | 17,058 | 7,617 |
Convenience | 51,904 | 66,873 |
Other | 8,394 | 419 |
Total Investments and investment property under construction | 77,356 | 74,909 |
Disposals | 2018 | 2017 |
Experience | - | (450) |
Convenience | - | - |
Other | (1,240) | - |
Total disposals | (1,240) | (450) |
The significant assumptions with regard to the valuations are set out below.
2018 | | | | |
| | Experience | Convenience | Other | Total |
Current average rent (€/m²) | 365 | 203 | 179 | 229 |
Estimated rental value (€/m²) | 388 | 201 | 158 | 224 |
Gross initial yield | 3.9% | 6.2% | 8.3% | 5.5% |
Net initial yield | 3.6% | 4.9% | 6.3% | 4.5% |
Current vacancy rate (VVO m²) | 1.4% | 4.6% | 10.1% | 6.2% |
Average financial vacancy rate | 1.8% | 4.2% | 8.0% | 4.6% |
Long-term growth rental rate | 0.9% | 0.8% | 0.4% | 0.8% |
Average 10-years inflation rate (NRVT) | | | | 0.5% |
2017 | | | | |
| | Experience | Convenience | Other | Total |
Current average rent (€/m²) | 374 | 216 | 179 | 234 |
Estimated rental value (€/m²) | 400 | 203 | 162 | 228 |
Gross initial yield | 4.0% | 6.8% | 8.3% | 5.7% |
Net initial yield | 3.8% | 5.3% | 7.0% | 4.9% |
Current vacancy rate (VVO m²) | 1.1% | 8.1% | 6.6% | 5.9% |
Average financial vacancy rate | 0.8% | 6.6% | 6.2% | 4.3% |
Long-term growth rental rate | 1.9% | 1.1% | 1.0% | 1.5% |
Average 10-years inflation rate (NRVT) | | | | 0.5% |
The net valuation gain (loss) for the year included a positive fair value adjustment of € 31.6 million (2017: € 46.5 million) relating to investment properties that are measured at fair value at the end of the reporting period.
Direct operating expenses recognised in profit or loss include € 0.1 million (2017: € 0.1 million) relating to vacant investment property. Investment property includes buildings held under finance leases. The carrying amount is
€ nil (2017: € nil).
Sensitivity analysis
The appraisal of the portfolio implies a net initial yield of 4.5% (2017: 4.9%). If the yields used for the appraisals of investment properties on 31 December 2018 had been 100 basis points higher (2017: 100 basis points higher) than was the case at that time, the value of the investments would have been 16.9% lower (2017: 15.8% lower). In this situation, the Fund’s shareholders’ equity would have been € 170 million lower (2017: € 146 million lower).
The table below presents the sensitivity of the valuation to changes in the most significant assumptions.
| | | 2018 | | 2017 |
Change rental rates | -5% | 5% | -5% | 5% |
Value of the investment property change | (47,279) | 47,279 | (43,243) | 43,243 |
| | | 2018 | | 2017 |
Change net initial yield | – 25 bps | + 25 bps | – 25 bps | + 25 bps |
Value of the investment property | 55,079 | (115,183) | 31,818 | (53,625) |