24. Investment Property

Development of Investment Property

in € thousand

 

Investment property

 

Payments on account and plants under construction

 

Total

Carrying amount as of 1 January 2016

 

189,897

 

706

 

190,603

Acquisition or production cost

 

 

 

 

 

 

1 January 2016

 

322,909

 

706

 

323,615

Additions

 

1,864

 

971

 

2,835

Disposals

 

 

 

 

 

0

Reclassifications

 

 

 

 

 

0

31 December 2016

 

324,773

 

1,677

 

326,450

Accumulated depreciation, amortisation and impairment

 

 

 

 

 

 

1 January 2016

 

133,012

 

0

 

133,012

Additions

 

9,443

 

 

 

9,443

Disposals

 

 

 

 

 

0

Reclassifications

 

 

 

 

 

0

31 December 2016

 

142,456

 

0

 

142,456

Carrying amount as of 31 December 2016

 

182,317

 

1,677

 

183,994

 

 

 

 

 

 

 

Carrying amount as of 1 January 2017

 

182,317

 

1,677

 

183,994

Acquisition or production cost

 

 

 

 

 

 

1 January 2017

 

324,773

 

1,677

 

326,450

Additions

 

141

 

5,369

 

5,510

Disposals

 

- 96

 

 

 

-96

Reclassifications

 

 

 

 

 

0

31 December 2017

 

324,818

 

7,046

 

331,864

Accumulated depreciation, amortisation and impairment

 

 

 

 

 

 

1 January 2017

 

142,456

 

0

 

142,456

Additions

 

9,581

 

 

 

9,581

Disposals

 

- 57

 

 

 

- 57

Reclassifications

 

 

 

 

 

0

31 December 2017

 

151,980

 

0

 

151,980

Carrying amount as of 31 December 2017

 

172,838

 

7,046

 

179,884

The properties held as investment property are mainly warehouses converted to office space and other commercial real estate in Hamburg’s Speicherstadt historical warehouse district as well as logistics warehouses and surfaced areas.

The additions relate mainly to conversion costs in connection with changes of use.

Rental income from investment property at the end of the financial year was € 50,986 thousand (previous year: € 51,391 thousand). The direct operating expenses for investment property, which are fully attributable to rental income, amounted to € 17,033 thousand (previous year: € 16,117 thousand) at the end of the reporting year.

Fair value is calculated and measured annually by HHLA’s Real Estate segment. The associated inputs are classified as Level 3 in the fair value hierarchy, see Note 7.

Fair Value Reconciliation

in € thousand

 

2017

 

2016

as of 1 January

 

662,172

 

584,212

Change in fair value (not realised)

 

- 10,880

 

77,960

as of 31 December

 

651,292

 

662,172

The Valuation Method used to measure the Fair Value of Investment Property as well as the Key Unobservable Input Factors applied

Valuation method

Key unobservable input factors

Relationship between key unobservable input factors and measurement at fair value

 
 

The estimated fair value would increase (fall) if

Fair values are measured by applying the discounted cash flow method (DCF method) to the forecast net cash flows from managing the properties. This method is based on detailed forecasts of ten years or up to the end of the useful lives of properties with a remaining useful life of less than ten years. The cash flows are discounted using standard market interest rates. Property-specific fair value is determined on the basis of property-specific measurement criteria.

contractually agreed rental income

the contractually agreed rental income was higher (lower)

expected rent increases

the expected rent increases were higher (lower)

vacancy periods

the vacancy periods were shorter (longer)

level of occupancy

the level of occupancy was higher (lower)

rent-free periods

the rent-free periods were shorter (longer)

possible termination of the tenancy agreement

tenancy agreements were not terminated (were terminated)

re-leasing

the property was re-leased sooner (later)

operating, management and maintenance costs

operating, management and maintenance costs were lower (higher)

rent for the land

the rent was lower (higher)

discount rate
(3.88 bis 7.16 % p. a.)

the risk-adjusted discount rate was lower (higher)

The Valuation Method used to measure the Fair Value of Investment Property as well as the Key Unobservable Input Factors applied

Valuation method

 

Key unobservable input factors

 

Relationship between key unobservable input factors and measurement at fair value

 

 

 

 

The estimated fair value would increase (fall) if

Fair values are measured by applying the discounted cash flow method (DCF method) to the forecast net cash flows from managing the properties. This method is based on detailed forecasts of ten years or up to the end of the useful lives of properties with a remaining useful life of less than ten years. The cash flows are discounted using standard market interest rates. Property-specific fair value is determined on the basis of property-specific measurement criteria.

 

contractually agreed rental income

 

the expected rent increases were higher (lower)

 

expected rent increases

 

the expected rent increases were higher (lower)

 

vacancy periods

 

the vacancy periods were shorter (longer)

 

level of occupancy

 

the level of occupancy was higher (lower)

 

rent-free periods

 

the rent-free periods were shorter (longer)

 

possible termination of the tenancy agreement

 

tenancy agreements were not terminated (were terminated)

 

re-leasing

 

the property was re-leased sooner (later)

 

operating, management and maintenance costs

 

operating, management and maintenance costs were lower (higher)

 

rent of the land

 

the rent was lower (higher)

 

discount rate
(3.88 to 7.16 % p. a.)

 

the risk-adjusted discount rate was lower (higher)

Regarding existing restrictions on the disposal and use of buildings in connection with the letting of the associated properties from the Free and Hanseatic City of Hamburg, see the explanatory remarks on the lease agreements in Note 45.