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Financial statements

12 Investment property

  

2018

 

2017

At the beginning of the year

 

4,143,094

 

3,547,470

Transfers from investment property under construction

406,226

 

232,158

 

Investments

8,418

 

3,086

 

Total investments

 

414,644

 

235,244

Disposals

 

(37,249)

 

(52,054)

Net gain (loss) from fair value adjustments on investment property (like-for-like)

598,939

 

364,556

 

Net gain (loss) from fair value adjustments on investment property

66,495

 

47,878

 

In profit or loss

 

665,434

 

412,434

In other comprehensive income

 

-

 

-

Transfers out of level 3

 

-

 

-

Total investment property (level 3) at the end of the year

 

5,185,923

 

4,143,094

The Fund’s investment properties are valued by independent external appraisers on a quarterly basis. On 31 December 2018, these properties were revalued by independent professionally qualified valuation experts with experience in the locations and categories of the investment properties valued (level 3). 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. In estimating the fair value of the properties, the highest and best use of the properties is their current use. There was no change to the valuation technique during the year and there were no transfers between levels 2 and 3 during the year.

The specifications of transfers from investments and investment property under construction and also the disposals are set out below.

Investments and transfer from investment property under construction

2018

2017

Randstad

347,618

140,294

Mid East

38,573

14,979

Brabantstad

28,086

79,588

Non-core regions

367

383

Total investments and transfer from investment property under construction

414,644

235,244

Disposals

2018

2017

Randstad

(36,245)

(16,200)

Mid East

-

(3,183)

Brabantstad

-

-

Non-core regions

(1,004)

(32,671)

Total disposals

(37,249)

(52,054)

The significant assumptions with regard to the valuations are set out below.

2018

     
 

Randstad

Mid East

Brabantstad

Non-core regions

Total

Current average rent (€/unit)

1,109

897

933

847

1,055

Estimated rental value (€/unit)

1,183

925

938

868

1,116

Gross initial yield

3.9%

4.8%

4.4%

5.2%

4.1%

Net initial yield

2.9%

3.4%

3.3%

4.0%

3.0%

Current vacancy rate (no rental units)

1.5%

1.1%

0.8%

0.8%

1.3%

Current financial vacancy rate

2.8%

1.6%

0.9%

1.1%

2.5%

Long-term growth rental rate

2.6%

2.5%

2.5%

2.3%

2.6%

Average 10-year inflation rate (NRVT)

    

0.5%

2017

     
 

Randstad

Mid East

Brabantstad

Non-core regions

Total

Current average rent (€/unit)

1,076

868

916

824

1,025

Estimated rental value (€/unit)

1,112

881

925

838

1,056

Gross initial yield

4.5%

5.5%

4.8%

5.8%

4.6%

Net initial yield

3.3%

4.0%

2.7%

4.1%

3.3%

Current vacancy rate (no rental units)

1.4%

0.9%

2.6%

0.8%

1.3%

Current financial vacancy rate

2.3%

1.5%

3.1%

1.6%

2.2%

Long-term growth rental rate

2.5%

2.2%

2.3%

2.1%

2.4%

Average 10-year inflation rate (NRVT)

    

0.5%

The valuation of the investment properties took into account a vacancy period ranging from one (1) to three (3) months. There are no rental incentives.

The net valuation gain (loss) for the year included a positive fair value adjustment of € 667.4 million (2017: € 412.5 million) relating to investment properties that were measured at fair value at the end of the reporting period.

Direct operating expenses recognised in profit or loss include € 1.2 million (2017: € 1.1 million) relating to investment property that was vacant. Investment property includes buildings held under finance leases, the carrying amount of which is nil (2017: nil).

Sensitivity analysis

The appraisal of the portfolio implies a net initial yield of 3.0% (2017: 3.3%). 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 27.0% lower (2017: 25.5% lower). In this situation, the Fund’s shareholders’ equity would have been € 1,435 million lower (2017: € 1,088 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

(259,296)

259,296

(207,155)

207,155

  

2018

 

2017

Change net initial yield

– 25 bps

+ 25 bps

– 25 bps

+ 25 bps

Value of the investment property change

474,185

(400,876)

336,774

(289,680)

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