Annual Report • Jun 20, 2009
Annual Report
Open in ViewerOpens in native device viewer
con
365
Just imagine. You call a customer centre and the phone only rings once or twice before a friendly voice answers. A well-informed employee answers your questions and sets everything in motion to find a solution to your problem. By the time you've finished your quick call, somebody else is already working on making sure your problem is solved by tomorrow. That is Deutsche Annington's vision.
This is the Deutsche Annington Group's way to a strong future. We have set our sights high: We want to be the best company in our industry: economically successful and at the same time setting standards in customer focus and service quality. Every day, we work on achieving our goal.
Back in the days when Frankfurt am Main was shortlisted to become the capital of the new Federal Republic of Germany, work started on the construction of an idyllic housing estate surrounded by greenery:
many hours 726 single-family houses and apartments as a new home for government workers. The course of history took a different turn but the bizonal housing estate was built – and became home to Birgit Bartl: In 1953, her parents moved into a brand-new one-bedroom apartment together with her grandmother. Birgit Bartl was born in 1958 and grew up there together with her brother, who was a year younger: "The apartment was very cramped, the windows were draughty and we had to have our baths in the living room. But that was how everybody lived here. And the garden made up for a lot."
After the death of her father, the charm of the housing estate brought her back to where she had spent her childhood. "The apartment was empty and we children had taken over the rental contract. The living area had been extended, the place was about to be modernised." Today Birgit Bartl lives with her two daughters in the 85 square metre apartment with garden and balcony. She has landscaped her parents' original garden, putting in a pond, a wooden deck, a stone wall and a garden shed. "Many residents stay in this estate until they die; it is like a green island in the middle of Griesheim. I certainly intend to as well," she laughs. "I would like to spend many more hours in my garden."
Deutsche Annington's success is measured by the satisfaction of its tenants. We regularly invest in our housing portfolio to make sure they feel at home in their apartments and houses – in 2008 it was some € R185 million.
8 weeks Ursula Brinkmann loves the new life in her housing estate. "I go to our new local café at least twice a week. It's great to have a meeting place just around the corner again," she enthuses. The non-profit association, IN VIA, which is financially supported by Deutsche Annington, opened the cosy café last autumn which is now well frequented. A sign that Preuswald is slowly returning to its former glory after difficult years. The district of Aachen was once a popular area to live in. Then things started to go downhill: the row of shops fell into disrepair; the estate got a bad reputation. Deutsche Annington bought the roughly 625 apartments at the beginning of 2008. Eight weeks after acquiring the properties, Deutsche Annington Rheinland opened a service office. After talking to residents during an open day, they knew what had to be done: the neighbourhood and local facilities had to be improved.
The café was the first step, followed by a bakery. In the summer of 2009, a shop selling fresh produce is being opened, which will also create jobs for disadvantaged young people. A service centre is also to be built to improve medical care. Parallel to all this, the estate is being extensively renovated: Smaller flats are being put together to provide new accommodation for families. The playground is also being given a facelift. Today, the district of Preuswald is now returning to what it once was – a desirable area to live in.
Deutsche Annington seeks contact with its tenants in various ways: through its customer centres but also through a mobile field service and local caretakers.
176 177 178 179 180 181 182 183 184 185 186 187 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236
Deutsche Annington provides a comprehensive customer service to help tenants and owners. Our centralised service is available to our customers six days a week .
15 minutes In less than 15 minutes the apartment of the condominium owner and caretaker, Reiner Fleschenberg, is toasty warm – thanks to the new gas condensing boiler which was installed last autumn and now reliably supplies the apartments in his block with heat. The old district heating station had become a real concern for the residents of the 124 apartments in the former railway workers' estate, Am Stadtgarten, in Essen. The system was unreliable. A solution had to be found quickly.
About half of the apartments were owned at that time by former tenants. They were organised in four condominium owners' associations managed by Deutsche Annington Service GmbH (DASG). Together, they looked for a solution: After intensive consultations, it was decided to install a separate heating system for each block. Carlo Scherrer, Head of the Technical Service and Planning department of DASG, organised the call for tenders together with a heating system planning expert and evaluated the quotes received. The modernisation work was also supervised by the professionals of DASG. In the end, the joint effort ensured that 0 285,000 was sensibly invested to the satisfaction of all those involved.
238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295
238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295
...on course ...available ... strong ... satisfied ...reliable
296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353
The demographic change is leading us in Germany to new ways of living. Nowadays, families, single people, single parents and pensioners all want to live in very different ways: some near a town, barrier-free, with a wide variety of services on hand, others in reasonably priced accommodation, with low ancillary costs, near to kindergartens and schools. People are becoming more mobile and moving house more frequently. Deutsche Annington is responding to this change. Today, we offer different accommodation for the different target groups, for example apartments with the additional service "Annington Wohnen Plus" for pensioners or low-priced flats at a fixed rent for students under the "Wohnsinn" programme. This is our way and we are staying true to it.
Like many other companies, we convince our customers by offering a good product. Naturally, that is first and foremost apartments. However, tenants are increasingly looking for services above and beyond simple accommodation: fast service, friendly and capable staff, prompt repairs, cost-optimised ancillary costs, fair rents. Tenants are customers. And customers expect us to be customerfocused. We know that and have set out to provide an excellent service. For it is only by unbeatable service that we can stand out from our competitors.
Deutsche Annington has to operate cost effectively. In this point we are no different from other companies offering accommodation. In Germany, that was different for many, many years after the Second World War: The absolute priority was to provide accommodation. Housing took on an almost sociopolitical dimension. Today, the problems of the post-war era are solved and there is now plenty of different accommodation available. So we also have to compete with other companies and are required to make offers tailored to the different target groups and work cost effectively. That is a good thing as we can only invest in our housing and our services if we work profitably. And that in turn is the fundamental requirement for achieving our main goal: satisfied tenants who feel at home in our apartments.
As a large housing company, we have strong negotiating power. We use this to sign contracts with good conditions for our tenants and set up new services. Thanks to our pooled purchasing power, we can get reasonable prices – whether for gardening or caretaker services, for elevator maintenance or heat meter-reading. And we pass on the savings to our customers.
The steady increase in heating and water charges in recent years means that ancillary costs are rising faster than the actual rents. We regularly do everything we can to cushion the rise in ancillary costs, for example by investing in new heating systems and thermal insulation. In this way, we ensure that our tenants can live as cheaply as possible.
And we think ahead. In 2008, we launched a refuse reduction initiative in a pilot project with Innotec Abfallmanagement GmbH. The 16,000 households taking part in the project saved an average of s 40 at the end of the year. Or in Dortmund: In the autumn of 2008, we negotiated a new gas supply contract for some 10,000 apartments, which means a two-digit percentage saving for the tenants.
When it comes to service, availability is key. In many industries, we are now used to also being able to reach somebody in the evenings and on Saturdays. Deutsche Annington is transferring these service standards of other branches of industry to the housing industry. Since 2007, we have been operating a round-the-clock hotline for repairs. Its availability rate is 97%. Our customers use the hotline so much that we are going one step further this year: In future, we will be centrally available for our customers – whether they want to rent an apartment or have a query about their ancillary cost bill.
In 2009, we are introducing a holistic IT solution. This makes paper tenant files a thing of the past. In future, we will have a virtual tenant and property file: If a customer calls us, the service clerk just needs to click once and the most important data come up on his screen. So he can answer all questions accurately and quickly – whether they are about the rental contract, the ancillary cost bill or garden main-
tenance. And if somebody is interested in an apartment, we can say where the nearest school is and where the nearest bus stop or train station is. Should the apartment then turn out to be in the wrong location, the service clerk can give some suitable alternatives. We have invested a lot to be able to offer our customers this service: we had to compile, sort and scan some 50 million sheets of paper from all locations.
Busy tones and messages such as "This is an automatic recording …" are a thing of the past. With its tenant and service centre, Deutsche Annington is pooling its expertise at one location. In future, our customers will be able to reach all contacts at one phone number. There is a specialist for every query. What happens if the tenant only speaks Turkish? No problem, our Turkish colleagues will be pleased to
help. The service staff of Deutsche Annington are trained real estate clerks who are our employees. Not people sitting in an anonymous call centre somewhere in the world.
And we are fast: We believe that we will be able to answer over 80% of customer queries and questions after the first call. No tenant has to call us several times before he finally gets the right person on the phone. He gets a clear answer to his questions. The staff of the tenant and service centre immediately take action: they arrange viewing appointments, answer questions about an apartment, explain the rental contract, handle complaints. If they can't answer a question immediately, they call back.
65 66 67 68 69 70 71 72 73 74 75 76 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 123 124 125 126 127 128 129 130 131 132 133 134 135 136
On the real estate market, size means pooled experience and strength. And this is something our tenants also benefit from! They can rely on us performing our work as a landlord to a high standard. That gives our customers a feeling of security. Rental contract, ancillary cost bill, user agreement – we design them so that both parties are happy. Repairs, replacements, modernisation work – we do work like this properly and without any fuss. For example, faults which are reported to the repair hotline are generally rectified within three days. We continuously think about our services and try to put ourselves in the shoes of our tenants. Be it offers of accommodation for the elderly or the sponsoring of the annual neighbourhood festival. A high degree of professionalism does not exclude personal dialogue with the individual: The Deutsche Annington staff who sit on the opposite side of the table to our tenants are people who always take the particular facts of the case into consideration.
Arranging for a repair or passing on an inquiry to customer support often takes far too long. That is not the case with Deutsche Annington: Our service centre staff can already access the local employee's diary while they are talking to the customer. And vice versa: Thanks to the central database, our local field workers, whether they be customer support staff or letting agents, all have access to the same information as their colleagues at headquarters. Several phone calls, clarification of misunderstandings or forgotten files are now all a thing of the past.
But competence is just as important as the information: our local employees and partners are well trained to handle every situation properly.
Our tenants enjoy a large number of benefits – some are even very unusual: The fact that they receive a customer newspaper with accommodation and consumer information, cinema vouchers and prize competitions delivered free of charge four times a year is now standard among good housing companies. We go further and negotiate special conditions for our tenants with companies whose products and services are interesting for our customers. For our tenants, the name Vodafone means cheap phone calls. If they buy their medicines from the mail-order pharmacy, Vivothek, they get a 10% discount, and anybody who moves house using Schenker gets a really competitive flat rate. Together with the German railway company, Deutsche Bahn, we are also even making sure our tenants are more mobile. In a first pilot project, tenants from Cologne can use the Bahn's car sharing offer "Flinkster" at special rates. This service picks them up direct from their front door.
A subject which is particularly dear to our hearts is accommodation for the elderly: Through our counselling service "Annington Wohnen Plus" we make it easier for our customers to continue living in their own four walls when they get older. And we are not standing still in this field, either. For example, in Gelsenkirchen we are working together with the charity, Caritas, to further develop the idea of sheltered, self-determined accommodation for the elderly.
Quite a few of our tenants live their whole lives in Deutsche Annington accommodation. Their district, their street has become home to them over the years. They would never move out voluntarily. Emmi von Weydenberg from Kiel, for example, moved into her apartment when Hans Albers was pulling crowds to the cinema as Baron von Münchhausen. That was back in 1943. And 79-year-old Anna Wessel from Duisburg has also remained loyal to Deutsche Annington: After the death of her husband, she moved out of her house, which had become too big for her, into a nice, suitable
ground-floor flat – without stairs and with a bathroom for the disabled. Others, such as Birgit Bartl from Frankfurt, return after many years to the place they grew up.
On average our tenants live for 15 years in one of our apartments. That is well above the national average. Tenant jubilees of 50 years and more are not at all rare at Deutsche Annington. Thanks to the large and varied number of apartments we have to offer, anybody who wants to move can often do so within the company. Moving from Flensburg in the north of Germany to Munich in the south is also no problem. After all, we have accommodation at more than 600 locations.
While rents have only increased in line with inflation since the beginning of this millennium, heating costs have really exploded. Therefore, improving the energy efficiency of our housing is particularly dear to our hearts. In 2008, Deutsche Annington invested a total of some s 185 million in modernisation and maintenance. Of this figure, s 37 million went into enhancing energy efficiency – that means into insulating facades, roofs and cellar ceilings. So in 2008 we cut our CO2 emissions by some 12,000 tonnes.
And we are also active in other fields: In Wuppertal and Cochem on the Moselle, we have launched pilot projects and fitted solar panels on the roofs in some housing estates. In Essen, we are planning a first project to test air heat pumps. Together with the energy management service provider, Ennovatis, we are currently examining whether heating costs can be cut by up to 15%, simply by optimal setting of the heating system. We are also pursuing another goal by using climate-active roof tiles: tiles which convert toxic nitrogen oxide into harmless substances which are rinsed away by the rain. So we can keep costs under control and protect the environment.
When answering the question of how satisfied our tenants are with our work, we do not just rely on our own feeling. The only people who can give us a clear picture of how well we are performing are our tenants themselves. Every day they know where we are good; and they also notice where we have to be even better. So that's why we ask them: regularly through surveys and customer satisfaction analyses and continually in direct talks and in customer service. We listen carefully to what they say. And we work on what they criticise today to find solutions which will turn one of our weaknesses into one of our strengths tomorrow.
365 days reliable ...
Through its two foundations, Deutsche Annington is committed to helping those people in society who need special support. Last year alone, we promised to support some 100 social, educational or cultural projects which had applied to the foundations for help. In 2008, some s 220,000 was granted and every cent is an investment in quality of life. The funds go to needy families so they can buy essentials such as school things for the children. Or to elderly people with small pensions so they can, for example, buy a new washing machine. Kindergartens and schools also need plenty of support: Here it is mostly a question of basic requirements such as giving the playground a facelift or
buying books. Sometimes a complete new kitchen is needed such as for the Flensburg initiative, Schutzengel, which looks after families with children.
Alongside work through its foundations, Deutsche Annington looks after the neighbourhoods where its residential estates are located. For they are where our tenants live and we want them to feel happy there. Just like in Aachen-Preuswald, we open a café as a place where neighbours can meet. Just like in Messstetten in Baden-Württemberg, we provide rooms for clubs which focus on fostering intercultural relations between families. And when a charity hands out free food to people in Barsinghausen, we make sure that the rooms it uses are free of charge.
Nearly all our properties are governed by social charters and voluntary undertakings. We have signed comprehensive and long-term tenant protection agreements which cover 99% of our portfolio and, in most cases, well exceed anything required by law. For example, former Viterra tenants have our "voluntary commitment to sell properties in a socially acceptable manner". And we have also signed voluntary social agreements for the apartments formerly owned by Bahn and RWE, the north-German Heimbau of Deutschbau as well as the Frankfurt-based companies Wohnbau Rhein-Main and FSG. Roughly a quarter of all our apartments are governed by long-term rent restrictions.
We seek and maintain regular dialogue with local council representatives to share experience and exchange views. Our management meets local council representatives roughly 500 times a year. We regularly talk to local tenants' associations and the umbrella organisation, the German Tenants' Association. Through our membership of umbrella housing industry associations, we are committed to moving our industry forward. Whether the GdW (Federal Association of German Housing and Real Estate Companies), DV (German Association of the Housing Industry, Urban and Regional Planning), ZIA (Central Real Estate Committee) or BfW (Federal Association of Private Real Estate and Housing Companies) – Deutsche Annington is aware of its responsibility as Germany's largest housing company.
Each community that lives together in a district is unique. A lot of people have to help if living together in a community is to work. As the landlord, Deutsche Annington only has limited influence in this respect. But we use what influence we have to work together with our tenants to change things: For example, in Bedburg-Kaster, there were disputes about litter. Together with our tenants and the town council we discussed how the situation could be improved. A "Banish Litter Day" was organised and everybody grabbed brooms and plastic bags to clear the estate of litter and other rubbish. And now a caretaker newly employed by Deutsche Annington makes sure things stay clean.
256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313313 314 315
. . . service
. . .performance
. . . customer proximity
256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313313 314 315
Philippstrasse 3 D-44803 Bochum Phone +49 234 314-0 Fax +49 234 314-1314 [email protected] www.deutsche-annington.com
The Deutsche Annington Real Estate Group lets and manages approximately 217,000 flats, employs 1,300 staff and is one of the leading residential property companies in Germany. The company offers apartments to rent and to purchase in about 630 locations nationwide, complemented by customer-focused services.
We see ourselves as a service-minded property holder and intend to grow profitably in the years to come. To achieve this, we will expand our portfolio through selective acquisitions and further improve the quality of our tenants' living conditions by offering attractive services.
| P million | 2006 | 2007 | 2008 | 2007/2008 Change in % |
|---|---|---|---|---|
| Income from property management | 898.8 | 1,075.1 | 1,029.1 | -4.3 |
| Gross profit from property management | 530.9 | 571.3 | 594.9 | 4.1 |
| Income from disposal of properties | 454.6 | 248.0 | 144.3 | -41.8 |
| Gross profit on disposal of properties | 131.3 | 74.7 | 50.8 | -32.0 |
| Adjusted EBITDA | 450.4 | 460.3 | 473.1 | 2.8 |
| FFO | 152.1 | 190.1 | 207.1 | 8.9 |
| Investments | 133.4 | 384.4 | 148.7 | -61.3 |
| Cash flow from operating activities | 789.9 | 540.6 | 483.3 | -10.6 |
| Cash flow from/used in investing activities | 20.9 | -313.9 | -117.2 | -62.7 |
| Cash flow used in financing activities | -589.1 | -566.7 | -479.0 | -15.5 |
| Total assets | 10,932.2 | 10,824.0 | 10,249.6 | -5.3 |
| Non-current assets | 7,059.9 | 7,989.4 | 7,892.5 | -1.2 |
| Current assets | 3,872.3 | 2,834.6 | 2,357.1 | -16.8 |
| Total equity | 1,688.7 | 1,739.4 | 1,456.1 | -16.3 |
| Return on equity in % | 15.4 | 16.1 | 14.2 | -1.9 % points |
| Number of residential units in portfolio (as at Dec. 31) | 185,438 | 190,221 | 189,218 | -0.5 |
| Number of units acquired (title transferred in 2008) | 3,311 | 8,007 | 1,364 | -83.0 |
| Number of units sold (recorded sales) | 7,601 | 3,945 | 2,542 | -35.6 |
| Number of employees (as at Dec. 31) | 1,385 | 1,406 | 1,302 | -7.4 |
Contact
Wijnand Donkers Dr Manfred Püschel
Deutsche Annington has long known that it can only achieve a sustained increase in the company's value with a long-term strategy. Such a strategy must be governed by stability, reliability and responsibility. After all, we are satisfying a fundamental human need and nobody should take that lightly.
Long-term success is only possible if our customers are satisfied with our services. On average, our customers live for 15 years in our apartments; that is six years more than the national average. We are pleased but not satisfied with this. As regards quality of service, the housing industry is not as advanced as other industries: we have a lot of catching up to do here.
Therefore, we have set ourselves a major goal for 2009: We want to create the right conditions for taking customer satisfaction to a higher level. We want our tenants and customers to be able to reach us even more easily. We want to solve problems even faster and we want to offer the best service – 365 days a year, up to 24 hours every day.
We made good progress towards achieving this goal last year – not least thanks to the great commitment of our staff at the 600+ locations in Germany where are properties are situated – and at our headquarters in Bochum, in the heart of the Ruhr area. We have thoroughly reviewed our entire company and decided to reorganise and better structure Deutsche Annington in important areas.
3
The improvements which we are now implementing step by step will, over the course of the year, lead to a reorganisation of our company. With this new structure, we have set out to achieve three key objectives: greater customer focus, more efficient processes and highly motivated employees. We have therefore adopted an approach which is to set standards in the housing industry. And we are investing some 0 70 million in this reorganisation. We are not introducing anything which has never been seen before. We are only implementing concepts which have already been used successfully in other indus tries for some time. They range from digital tenant files and dynamic field staff management to the latest technology for our staff.
What can we offer our customers in future? First of all, maximum availability: Alongside the repair hot line which is manned seven days a week, we have now also set up central tenant and service centres where we can be reached at the same number from all over Germany from 8 a.m. to 6 p.m. Mondays to Fridays and from 9 a.m. to 1 p.m. Saturdays.
Secondly, we intend to improve our service quality: In future we will be able to settle most queries during the first phone call. Our new tenant centres are manned by trained real estate specialists. They have been given high decision-making powers and can access the most important files directly from their terminals. We have digitalised more than 50 million pages of paper so in future we will have all relevant documents available in electronic form and be able to quickly give the customers the infor mation they need.
Thirdly, we want to be even faster: The electronic linking of inside and field staff, for example, makes it possible for our tenant centre staff to enter appointments directly in the field workers' diaries while they are on the phone to the customer. This example shows that the word 'service' will take on a new dimen sion in the housing industry in the next few years thanks to the organisational anchoring of the new solutions.
Economically we can look back on a successful 2008 – Deutsche Annington defied the financial crisis and the economic downswing. After good growth in the previous year, we managed to improve our earning power yet again in 2008. At 0 473 million, our adjusted EBITDA was 3% up on the already good pre-year figure. And the other metrics also developed well. For example, FFO, one of our key operating performance figures, rose sharply by 9% to 0 207 million.
Enhanced efficiency and successful performance data are the basis for these figures. In our core business segment, Property Management, we succeeded in reducing the vacancy rate yet again, to 3.9%, and at the same time raised average rents by 2.7%. With gross profit from property management up by 4% to 0 595 million, we managed to follow on from the positive economic growth of previous years. As planned, the number of units sold to tenants decreased. At the same time, however, we improved the margin on properties sold. Last year, we invested 0 185 million in our housing portfolio. These investments focused on improving housing quality and on our modernisation programme for the benefit of the climate, which was launched in 2008.
With 1,364 new apartments bought, we were careful about making acquisitions in 2008. We are proud of that. For in recent years we have developed a core competence in the analysis of real estate cycles. We only invest in acquisitions when we can realise value added, i.e. when the price is right. To do that, you need patience and must bide your time. This strategy has definitely paid off for us. Whilst many residential portfolios have changed owners at too high a price since 2006, we now see valuations of the portfolios on offer gradually returning to normal.
The situation on the financial markets has deteriorated further in the last twelve months. This led to rising margin and equity requirements for acquisitions and refinancing – that is, if a bank was prepared to grant a loan at all. Against this background, we see the fact that we were able to obtain new loans even at the end of 2008 as a positive sign. At that time, the loan market had practically ground to a halt. This shows that the capital markets regard the Deutsche Annington Real Estate Group as a reliable partner, even in critical times.
Our financing strategy is now paying off: Our borrowed capital is obtained through long-term loans with attractive conditions. This enables us to advance our operational projects according to plan, even in the current difficult economic environment.
This also includes reviewing the market values of our real estate portfolio every year and adjusting them to reflect the current market situation. This regular valuation is an important control instrument for us and the basis for strategic decisions.
In 2008, the demand for rented accommodation rose sharply whilst the demand for owner-occupied apartments fell. In anticipation of this development, we had already adjusted our sales strategy in the previous year and not put any additional properties up for sale. In contrast to 2007, we did not assign units which in previous years had been classified as having potential for sale to the privatisation portfolio but to the property management portfolio. Similarly, we revised the current value of our portfolio 4% downwards.
We are expecting the demand for accommodation to remain stable in the current year. In view of the recession, reasonably priced, medium-sized apartments, which make up the majority of our portfolio, are likely to be even more in demand. Therefore, we are confident that we can keep our positive earnings figures stable.
All in all, we are optimistic about the current year. With our further improved services, we will provide the best possible care for our tenants – and for us that also means always acting in a socially acceptable manner. Our efficiency will help us to remain successful, in economic terms as well.
Wijnand Donkers Dr Manfred Püschel
Chairman
Responsible for:
Acquisition, Customer Care, Purchasing, Tenants Service, Legal Affairs and Shareholdings, Human Resources Manage ment, Portfolio Management, Corporate Communications, Sales, Westfalen business unit, Nord/Ost business unit, Süd/Südwest business unit, Rheinland/Ruhr business unit
Born in 1962; Master of Business Administration; international management experience at BP p.l.c. with career steps in Europe and North America; last: Managing Director, BP Gas Marketing
Responsible for: Controlling, Finance, Accounting, Taxes, Auditing Deutsche Annington Informationssysteme GmbH, Deutsche Annington Service GmbH
Born in 1953; PhD in Business Economics; many years of management experience in the fields of planning and finance at various companies incl. VEBA, Stinnes and Raab Karcher; from 1998 to 2005 CFO of Viterra AG; since 2005 Managing Director of Deutsche Annington
Chairman and Chief Investment Officer of Terra Firma Capital Partners Limited, London
Financial Managing Director of Terra Firma Capital Partners Limited, London
Chairman of Citigroup Venture Capital, New York
Managing Director of Terra Firma Capital Partners Limited, London
Business Consultant, Esslingen
(until February 7, 2008),
Chairman of Annington Holdings PLC, London
(since August 1, 2008)
Business Consultant, Berlin
5
aa g e ment
In the face of the economic and financial crisis and the beginnings of a recession, the Deutsche Annington Real Estate Group demonstrated the viability of its business model last year. In 2008, we also started a comprehensive restructuring programme which will be completed in 2009.
We further strengthened our earning power in 2008. Adjusted EBITDA increased by 2.8% to 0 473.1 million and FFO by about 9% to 0 207.1 million, both proof of the sustainability of our business success.
In our core business, Property Management, we once again succeeded in reducing vacancy rates from 4.2% in 2007 to 3.9%. In the Sales segment, we sold 2,542 residential units. In 2008, acquisitions were well down on the previous year at 1,364 units.
We are expecting a stable development of business in 2009 despite the difficult economic environment.
9 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
Thanks to its consistent strategy of long-term property management, the Deutsche Annington Real Estate Group has established itself as one of the leading residential real estate companies in Germany. We continue to focus on three core business segments: property management, property sales and growth through acquisitions. In 2008, we reviewed our internal organisation and further developed our company with the help of our employees.
The Deutsche Annington Real Estate Group is one of the top housing companies in Germany with some 217,000 residential units managed and approx. 1,300 employees. The Group was established as part of the takeover of railway housing companies in 2001. Germany's largest residential real estate company was born in the summer of 2005 when Viterra was taken over by the Deutsche Annington Real Estate Group.
The Deutsche Annington Real Estate Group is, today, the largest private housing company in Germany. In total, we manage 189,218 apartments of our own, 43,795 garages and parking spaces as well as 1,428 commercial units. What's more, we also manage 28,441 apartments for other owners. The Deutsche Annington Real Estate Group offers accommodation in 630 cities, towns and villages throughout Germany. 68% of the apartments are situated in cities with more than 100,000 inhabitants; 32% are in medium-sized and small towns as well as villages.
f i n
a nci al st
at e
ents ma
na g e m
ent r epo r t M
aa g e ment
Units managed by the Deutsche Annington Real Estate Group (as at December 31, 2008)
| 189,218 |
|---|
| 28,441 |
| 1,428 |
| 43,795 |
Approx. 60% of our portfolio is concentrated in 20 major cities and towns. In each of these locations, we have between 2,000 and 18,000 residential units. The four biggest locations are Dortmund, Frankfurt am Main, Essen and Berlin. The vast majority of our housing stocks are in the states of former West Germany (95.8% including the German capital, Berlin), particularly in North Rhine-Westphalia (54%).
With our entire portfolio, we achieve an average monthly rent of e 4.91 per square metre (2007: e 4.78 per square metre). Roughly half of our apartments (52%) have living areas of up to 64 square metres. Thus the Deutsche Annington Real Estate Group is a major provider of reasonably priced, small and medium-sized apartments. Industry experts are currently predicting that the best market opportunities will be in this segment since the small household segment is growing disproportionately due to the rising numbers of single people in our society. Our customer satisfaction is high: On average, a tenant lives for about 15 years in a Deutsche Annington apartment, on a national average a tenancy lasts about nine years.
11 The 2008 Financial Year Structure, Strategy, Employees Economic Environment
Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
| Average living area |
Annualised | Monthly net rent |
Vacancy | |||||
|---|---|---|---|---|---|---|---|---|
| Portfolio as at Dec. 31, 2008 | Units | Share in % |
Living area in m2 |
per unit in m2 |
net rent* in P m |
Share in % |
per m2 * in P |
rate* in % |
| Deutsche Annington Nord GmbH | 19,637 | 10.4 | 1,261,256 | 64 | 76.6 | 10.7 | 5.07 | 3.9 |
| Deutsche Annington Ost GmbH | 16,581 | 8.8 | 1,083,266 | 65 | 64.4 | 9.0 | 4.92 | 8.3 |
| Deutsche Annington Rheinland GmbH | 23,893 | 12.6 | 1,614,128 | 68 | 100.9 | 14.1 | 5.20 | 3.9 |
| Deutsche Annington Ruhr GmbH | 37,088 | 19.6 | 2,297,799 | 62 | 126.6 | 17.7 | 4.60 | 4.1 |
| Deutsche Annington Süd GmbH | 16,752 | 8.9 | 1,103,626 | 66 | 64.6 | 9.0 | 4.89 | 1.6 |
| Deutsche Annington Süd-West GmbH | 32,062 | 16.9 | 2,117,449 | 66 | 139.2 | 19.6 | 5.48 | 2.7 |
| Deutsche Annington Westfalen GmbH | 43,205 | 22.8 | 2,643,754 | 61 | 142.6 | 19.9 | 4.46 | 3.6 |
| Total | 189,218 | 100 | 12,121,278 | 64 | 714.9 | 100 | 4.91 | 3.9 |
| Top 20 cities and towns | ||||||||
| Dortmund | 18,083 | 9.6 | 1,103,645 | 61 | 58.8 | 8.2 | 4.39 | 3.5 |
| Frankfurt | 10,757 | 5.7 | 668,429 | 62 | 50.5 | 7.1 | 6.29 | 1.2 |
| Essen | 10,756 | 5.7 | 666,896 | 62 | 38.9 | 5.5 | 4.82 | 4.1 |
| Berlin | 9,070 | 4.8 | 594,931 | 66 | 37.9 | 5.3 | 5.26 | 2.5 |
| Gelsenkirchen | 9,056 | 4.8 | 547,814 | 60 | 28.2 | 3.9 | 4.29 | 3.5 |
| Bochum | 7,888 | 4.2 | 458,361 | 58 | 26.1 | 3.6 | 4.68 | 3.0 |
| Munich | 5,364 | 2.8 | 356,493 | 66 | 24.9 | 3.5 | 5.82 | 0.5 |
| Duisburg | 5,096 | 2.7 | 304,606 | 60 | 16.7 | 2.3 | 4.54 | 3.3 |
| Bonn | 4,760 | 2.5 | 334,754 | 70 | 22.6 | 3.2 | 5.64 | 2.4 |
| Herne | 4,735 | 2.5 | 290,779 | 61 | 15.1 | 2.1 | 4.29 | 2.4 |
| Cologne | 4,707 | 2.5 | 307,235 | 65 | 20.9 | 2.9 | 5.70 | 2.8 |
| Gladbeck | 3,743 | 2.0 | 229,383 | 61 | 12.2 | 1.7 | 4.63 | 7.9 |
| Herten | 3,028 | 1.6 | 196,981 | 65 | 10.0 | 1.4 | 4.24 | 2.7 |
| Düsseldorf | 2,704 | 1.4 | 176,738 | 65 | 12.7 | 1.8 | 5.95 | 1.5 |
| Marl | 2,605 | 1.4 | 175,396 | 67 | 10.7 | 1.5 | 5.10 | 4.9 |
| Aachen | 2,259 | 1.2 | 150,312 | 67 | 8.5 | 1.2 | 4.73 | 2.3 |
| Bottrop | 2,246 | 1.2 | 141,615 | 63 | 7.9 | 1.1 | 4.65 | 3.8 |
| Wiesbaden | 2,103 | 1.1 | 136,353 | 65 | 10.5 | 1.5 | 6.43 | 3.7 |
| Bergkamen | 2,030 | 1.1 | 134,384 | 66 | 7.1 | 1.0 | 4.40 | 7.6 |
| Geesthacht | 2,008 | 1.0 | 114,664 | 57 | 7.3 | 1.0 | 5.32 | 6.5 |
| Subtotal for top 20 cities and towns | 112,998 | 59.7 | 7,089,769 | 63 | 427.5 | 59.8 | 5.01 | 3.2 |
| Other locations | 76,220 | 40.3 | 5,031,509 | 66 | 287.4 | 40.2 | 4.76 | 4.9 |
| Total | 189,218 | 100 | 12,121,278 | 64 | 714.9 | 100 | 4.91 | 3.9 |
* as at beginning of December
f i n
a nci al st
at e
ents ma
na g e m
ent r epo r t M
aa g e ment
In 2008, our Group was organised in seven regional companies which handled the local business, customer acquisition and support. Central services such as ancillary cost billing, rent accounting and receivables management were already pooled in service subsidiaries located in Bochum. As part of the restructuring planned for 2009, we will be centralising further services in Bochum, thus improving our efficiency.
The Deutsche Annington Real Estate Group would like to offer broad sections of the population reasonably priced accommodation and very good service. We see ourselves as a customer-minded service provider. Our toll-free repair hotline can be called 365 days a year. We have developed the free-of-charge "Annington Wohnen Plus" service for our older customers. Our tenants benefit from nationwide service agreements, which reduce ancillary costs, and a centralised quality management system, which constantly monitors the services provided by our contractors.
The Deutsche Annington Real Estate Group's aim is to grow both profitably and over a long period of time. We concentrate on three fields of business:
Through our non-profit foundations, we offer help in cases of social hardship and to people in need. Our foundations also promote intact neighbourhoods and vocational training. We are also involved in many social projects in the vicinity of our residential estates. We encourage a strong community spirit among our tenants by supporting tenants' festivals, initiatives and clubs. Parallel to this, we sponsor social projects for children and young people as well as cultural activities.
Our housing stocks come from the merger of various housing companies. When we took them over, comprehensive social clauses were generally agreed to protect the tenants. We work closely in the communities with all those involved in a spirit of trust and are committed to the development of urban districts and the conclusion of individual estate agreements. We are party to numerous regional cooperation agreements throughout Germany. We maintain dialogue with political representatives and tenants' associations. Our reliability in such matters is recognised by the German Tenants' Association and the German public alike.
13 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
Through the selective sale of apartments, we give many tenants the chance to fulfil their dream of owning their own home as an investment and provision for retirement. This mix of tenants and owners in our housing estates is an advantage because it creates a stable living environment. We aim to primarily sell to tenants, owner-occupiers and capital investors. We would stress that en-bloc sales are not part of our strategy. In the last ten years, some 50,000 families have bought an apartment from us or one of our predecessor companies.
In our business, we believe in focusing on the long-term development of our company and total commitment to this goal. Our mission is clearly defined: We want to be the best company in the housing industry, now and always. We systematically pursued this goal in 2008, launching a comprehensive internal project to enhance quality, expand our services and improve efficiency.
Through our HR development work, we want to provide our staff and managers with the skills they need to optimally handle the current and future challenges of their jobs. At the same time, we want to keep high performers in our company by offering them career prospects and promoting their personal development. To achieve this, the Deutsche Annington Real Estate Group uses personnel development rounds as an instrument to identify potential candidates for key positions and emerging leaders.
Alongside individual development of potential, our two HR development programmes, Management BASIS and Annington Professionals, are a key component of strategic HR and management development. They form the basis of a structured system for promoting staff potential and pave the way for a career in management or specialist areas. In 2008, we again pursued our strategy of continuous HR development with targeted training measures, focusing on professional and interdisciplinary seminars, language courses and dedicated in-house SAP training throughout Germany.
A computer-based, 360-degree feedback system was introduced for second-tier managers. They receive feedback from their superior, colleagues and staff. A concrete plan of action is then developed in a results workshop. In future, the results of this feedback survey are to be reflected in the variable component of the managers' pay. It is also planned to extend the process to other management levels.
The Advisory Round Table was set up in January 2008. It currently consists of 34 young candidates with potential at staff and team leader level; the Chairman of DAIG meets the candidates once every three months to discuss current issues.
The Deutsche Annington Real Estate Group currently employs 660 women, which is 50.7% of the total workforce. 229 employees (17.6%) have a part-time job. The Deutsche Annington Real Estate Group makes a special effort to be a family-friendly employer. Our "BALANCE 2010" project was launched in 2007 following our certification as a family-friendly company under the work and family audit, "audit berufundfamilie®" performed by the non-profit Hertie Foundation. We moved this project forward in 2008 in two working groups (balance family and balance body & mind). For example, we currently offer a large number of flexible working time models, have introduced a programme of preventive healthcare for our employees and help mothers to return quickly to working life.
Interest in a traineeship at Deutsche Annington has increased greatly: More than 1,900 applications were received for traineeships starting in 2008. 25 trainees were recruited in the Deutsche Annington Real Estate Group. The 24 third-year trainees all passed their exams before the Chamber of Industry and Commerce; 16 were given a fixed-term employment contract, two received a permanent contract. Last year, we offered a traineeship as a personnel services clerk for the first time. Furthermore, we introduced a new instrument for our trainees called the "learning workshop".
At the end of 2008, the Deutsche Annington Real Estate Group had 1,302 (2007: 1,406) people in its employ. In view of the restructuring planned for mid-2009 and the associated staff cutbacks, we already reduced jobs last year. This was mainly achieved by not refilling positions which had become vacant. The average age of employees in our Group is 43.3; the average number of years of service is 12.8.
2008 was dominated by an escalation of the crisis on the financial markets. Whilst the first quarter of 2008 proved to be surprisingly stable with gross domestic product (GDP) still showing positive growth, a downturn already followed in the second quarter. In September the already very difficult conditions on the credit markets continued to deteriorate and liquidity in the financial system fell to a level not seen before in this crisis. The collapse of the US investment bank, Lehman Brothers, on September 15 shook market confidence to its foundations. These developments contributed to a steady deterioration in the market mood and worldwide plummeting stock market prices.
The financial market crisis was sparked off by the crisis in the subprime mortgage market when the rising number of defaults on US subprime mortgages led to a considerable fall in the prices of collateralised securities. This mainly hit collateralised debt obligations (CDO) and US residential mortgage-backed securities (US RMBS). The revaluation of these securities led to wide-scale write-downs in the entire industry. There was growing uncertainty about the scale of these losses and what sectors would be affected. Interbank trading came to a standstill.
Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
The 2008 Financial Year
The extraordinarily critical conditions continued in October. Governments and central banks around the world reacted with interventions on a scale never seen before: the recapitalisation of well-known banks, generous injections of liquidity into the markets as well as interest rate cuts, the introduction or strengthening of protection for investors, the shoring-up of the interbank money market and the buy-up of critical assets. The financial market crisis then spread to the real economy. One of the first key industries to be hit was the car industry where the number of vehicles sold fell dramatically.
By the end of the year, companies in Germany were also reporting a fall in the number of orders received. According to the Federal Statistical Office, price and calendar-adjusted GDP only grew by 1.0% in 2008 (2007: 2.6%). In 2008, momentum for growth came solely from the domestic market. Gross capital expenditure made the greatest contribution to the development of the economy. Investment in plant and equipment rose by 5.3% (after 6.9% in 2007) and building investments grew by 2.7%. Price-adjusted, public sector spending increased by 2.2% in 2008 whilst private consumption expenditure stagnated. Net exports, that is to say the difference between exports and imports of goods and services, acted as a brake on economic development in 2008 (contribution to growth: -0.3 percentage points). The reason for this is the comparatively small rise in exports of only 3.9% (2007: 7.5%), whilst price-adjusted imports increased even slightly more than in the previous year by 5.2% (2007: 5.0%).
The German government already passed a first investment programme at the end of 2008 and agreed on a second package at the beginning of 2009 to mitigate the effects of the imminent recession. Altogether, the two packages mean expenditure of some e 70 billion. Parallel to this, nearly all governments all over the world are currently considering measures to support their national economies. The forecasts for economic development in 2009 differ, in some cases quite considerably, from each other. Most institutes and experts predict a historic economic slump in Germany and are expecting a decline of over 2%. The German government is also currently expecting GDP to shrink by 2.25%. That would be the sharpest recession since the foundation of the Federal Republic of Germany.
f i n
a nci al st
at e
ents ma
na g e m
ent r epo r t M
aa g e ment
According to the Federal Employment Agency, last year was one of the best years for the labour market. However, the figures for December showed that the economic crisis had meanwhile also reached the labour market. Unemployment rose from its lowest level for the year of 7.1% in November to 7.4% in December. On an annual average, the unemployment rate, related to the entire working population, ran at 7.8% (2007: 9%). The German government is expecting a significant increase in unemployment in 2009.
At the end of 2008, Immobilienverband Deutschland (IVD) warned of an imminent housing shortage in the old German states. In its report it stated that, due to slack construction activity and the steady rise in single-person households, the number of residential units vacant in some cities in the old German states had already fallen below the 1% mark. Thus, the vacancy rate was well below the turnover reserve of 2 to 3% which a functioning market needed to compensate for moves and renovation work. The IVD was already talking of a current housing shortage. The reasons it gave were the abolition of both reducing-balance depreciation on new properties and the home owners allowance. It believes that the current situation will not change as long as there are no incentives for building new homes.
Housing market experts share this opinion. For example, Empirica estimates that there will be an annual demand for 330,000 new residential units in the period up to 2010. Much fewer are currently being built. In 2007, only 210,700 residential units were completed (another roughly 25,000 were created as a result of conversion work on existing buildings). The figures for 2008 are also likely to be down again; according to the Federal Statistical Office, only about 130,000 residential building permits were issued between January and September 2008.
According to a study conducted by HSH Real Estate AG, the demand for accommodation will increase steadily until the year 2020 despite a shrinking population. The study states that the reason for this development is the growing number of single-person households. By 2020, the number of households will have risen by 1.1 million to 40.7 million. The number of one or two-person households will grow faster than that of family households. The large cities and surrounding areas as well as other metropolitan areas in the south and west of Germany will profit particularly from this trend.
The average per-capita living area rose in Germany to a new record of 41.9 square metres in 2007, according to a report of ifs Städtebauinstitut. In previous years, this figure was between 41.6 and 41.2 square metres. The main reason for the increase in per-capita living area is the smaller size of households. In 1990, an average household consisted of 2.27 people, whereas in 2007 this figure had fallen to only 2.07 people per household. The leaders in per-capita living area are the German states of Saarland, Rhineland-Palatinate as well as Lower Saxony; the states of Mecklenburg-Western Pomerania, Saxony and Hamburg bring up the rear.
17 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
According to the last surveys of the Federal Statistical Office, net rents hardly rose on a national average between 2002 and 2006, whereas the ancillary costs including heating increased sharply in the same period. An IVD study found that German tenants spend an average of one third of their household income on rent and ancillary costs. This figure is even 35% in the one hundred biggest cities. On the ancillary cost side, the biggest price driver again proved to be fossil fuels. Heating costs alone rose on average by 38% in the last five years and now account for up to 40% of the ancillary cost bill. The second biggest block of costs is water and sewage. According to the Federal Statistical Office, net rents continued to rise moderately, also after 2006: for example, the net rent in July 2008 had only increased by 1.3% compared with the same month in the previous year. At 1.7%, the rents for lower-priced units in used buildings are rising faster than those for other residential units (according to a study conducted by HSH Real Estate). A similar development is to be seen for apartments in big cities. Experts believe that this trend will continue.
a
Given the fact that the number of new residential buildings completed has been falling steadily in recent years, the Deutsche Annington Real Estate Group believes that rents will continue to rise, especially in cities. There the demand for used buildings will also increase further.
The prices of existing residential buildings fell in 2007 on a national average according to the figures last published by the Federal Statistical Office. According to this information, the price index for used residential buildings decreased in 2007 by 2.1% as an annual average compared with the previous year. The price index reflects the development of prices for owneroccupier apartments as well as single and two-family houses. In this segment, the price index showed an overall fall of 5.0% between 2000 and 2007. By contrast, prices for residential property in German cities continued to rise in 2007 according to "IVD-Wohnpreisspiegel 2008/2009". This shows that well appointed owner-occupier apartments in good to very good locations of German cities are still in demand.
German residential properties in good locations are still highly sought-after as an investment. When deciding what to buy, investors mainly go by the price and the sustainable value of a property. The most important factors as regards sustainable value are a positive demographic development, the growing number of households and the increasing living space per person. Investors are still concentrating on expanding towns and regions. Whilst the purchase prices and rents in the metropolises should continue rising, prices are likely to fall further in peripheral and economically weaker regions.
Despite the recession, nationwide price falls are not expected on the German residential real estate market according to Deutsche Bank Research. It is far more likely that house prices will stagnate. In contrast to the USA, the United Kingdom and other European and Asian markets, Germany did not have a real estate bubble which could now burst.
According to an analysis conducted by the Federal Office for Building and Regional Planning, the number of transactions for residential real estate portfolios in the first six months of 2008 was well below the figure for the same period in 2007. The trend was towards smaller portfolios with prices falling at the same time. The buyers of larger portfolios were almost exclusively foreign investors.
In the first half of 2008, the number of residential units sold was, at over 100,000 units, roughly on a par with the figure for the same period in the previous year but this is mainly due to the sale of Landesentwicklungsgesellschaft NRW (LEG NRW) with some 92,000 apartments. The other portfolio transactions were all for a maximum of 3,000 units and altogether made up a volume of 16,000 units sold. Between 1999 and 2007, most of the portfolios sold had an average size of approx. 10,000 units per transaction.
19 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
According to a survey conducted by the real estate association, ZIA, German real estate companies are planning acquisitions despite the current crisis on the financial markets. It may be more difficult to raise loans in the present climate but it is, nevertheless, still possible. However, according to ZIA, large financing packages of more than e 200 million are problematic. The prospects for residential properties are still considered to be good as they are relatively stable in value: 86% of the companies surveyed expect a stable development in the first half of 2009.
Despite the economic crisis, our business developed successfully in 2008. Gross profit from our core business segment, Property Management, rose from 0 571.3 million to 0 594.9 million. Although gross profit on disposal of properties fell from 0 74.7 million to 0 50.8 million because of the reduced number of sales, we further improved our margin. In 2008, we again stayed true to our acquisition policy of only buying portfolios at sensible prices; in total, we bought 1,364 units in 2008 and integrated them into our portfolio.
In the past year, the Deutsche Annington Real Estate Group improved its most important operating metrics: we again reduced the vacancy rate from 4.2% (2007) to 3.9%. We managed to raise our rents by 2.7% to e 4.91 per square metre (2007: e 4.78 per square metre). Although sales figures fell, the margin increased from 30.1% (2007) to 35.2%.
Our two most important metrics, adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) and FFO (funds from operations), also improved. In 2008, the Deutsche Annington Real Estate Group recorded adjusted EBITDA of e 473.1 million. Compared with 2007 (e 460.3 million), that is an increase of 2.8%. The repeated improvement in the earnings metric, FFO, from e 190.1 million to e 207.1 million is pleasing. That is growth of 8.9%. The Deutsche Annington Real Estate Group has thus demonstrated its sustained earning and financial power. For the reconciliation to adjusted EBITDA and FFO as well as further explanations on our key metrics, we refer you to the chapter Results of Operations, Net Assets and Financial Position starting on page 22.
| P million | 2008 | 2007 |
|---|---|---|
| Income from property management | 1,029.1 | 1,075.1 |
| Gross profit from property management | 594.9 | 571.3 |
| Income from disposal of properties | 144.3 | 248.0 |
| Gross profit on disposal of properties | 50.8 | 74.7 |
| Adjusted EBITDA | 473.1 | 460.3 |
| FFO | 207.1 | 190.1 |
| Investments | 148.7 | 384.4 |
| Number of employees (as at Dec. 31) | 1,302 | 1,406 |
| Number of units sold (recorded sales) | 2,542 | 3,945 |
| Sold inidvidually | 1,417 | 2,599 |
| Other sales | 1,125 | 1,346 |
| Number of units bought (transfer of title in 2008) | 1,364 | 8,007 |
| Number of residential units in portfolio (as at Dec. 31) | 189,218 | 190,221 |
Our core business segment, Property Management, covers our property letting and condominium administration activities. Our gross profit from property management rose by over 4% from e 571.3 million to e 594.9 million. This is mainly due to higher rental income which we achieved through buying properties, reducing the vacancy rate and raising rents in our portfolio.
With a vacancy rate of 3.9% (2007: 4.2%) we managed to further reduce voids in 2008. The vacancy rate also includes the apartments earmarked for sale and therefore vacant (2008: 0.6%): We do not re-let apartments which we plan to sell as it is easier to sell empty apartments to owner-occupiers.
In the 2008 financial year, we managed to raise our rents by 2.7%, which was slightly more than the inflation rate. The rent increases were partly a consequence of our modernisation measures since housing improvements allow landlords to pass on some of the costs to their
Total vacancy rate of DAIG from 2005 to 2008 in %
21 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
u r the r in f o rmation consoli dat e
f i n
a nci al st
at e
ents ma
na g e m
tenants. According to the Federal Statistical Office, prices in Germany rose by an annual average of 2.6% in 2008, the steepest increase for 14 years. The main reason was the sharply fluctuating oil price. Due to the economic crisis, experts are expecting inflation to run at not more than 1% in 2009.
Last year, we started a modernisation programme involving some e 66.6 million. Investments focused on energy-saving measures (thermal insulation of facades, roofs etc.) and on improving the quality of the housing (e.g. by adding on balconies). In addition, we invested e 118.0 million in further modernisation and maintenance work.
The Deutsche Annington Real Estate Group offers its customers a condominium administration service. This service is provided by our subsidiary Deutsche Annington Service GmbH. It manages the common property for the apartment owners in accordance with the Condominium Act. The company offers capital investors a full management service for their separate property. In addition, it provides the owners with services such as the maintenance and modernisation of separate and common property in apartment buildings. The restructuring performed in 2007 considerably improved the earning power of our subsidiary. At the end of 2008, Deutsche Annington Service GmbH was looking after 1,430 condominium owners' associations (2007: 1,916) with a total of 47,959 residential units and condominiums (2007: 53,766).
In 2008, gross profit on disposal of properties fell from e 74.7 million in 2007 to e 50.8 million. In 2008, we also continued our strategy of selective sales in view of the positive results from property management. Our sales primarily concentrate on the individual sale of specific housing stocks. In 2008, we sold a total of 2,542 residential units (2007: 3,945) throughout Germany, including 1,417 apartments (2007: 2,599) to individual buyers.
Last year, the Deutsche Annington Real Estate Group examined some 2,200 offers for sale with over 650,000 units. From our perspective, most of these offers were either too high in price or did not fit into our portfolio for various specific reasons. Therefore, we only integrated 1,364 units in 2008.
Last year, we started setting a new course for our business. In the first step, we asked both our customers and our employees to make suggestions for improvement. In a second step, interdisciplinary staff teams, backed up by external consultants, examined all our processes, identified potential for improvements and worked out proposals for a new organisational structure. In October 2008, we presented our project to the public and announced a timetable and plan of action for 2009.
We were again involved in many social projects in our housing estates in 2008. Furthermore, we donated some e 220,000 for social and cultural purposes through our two foundations as well as through sponsoring.
The past financial year was successful for the Deutsche Annington Real Estate Group. Gross profit from property management rose again compared with the previous year, voids were reduced and our process costs were cut. Our two most important key metrics, adjusted EBITDA and FFO, have improved yet again. The Deutsche Annington Real Estate Group is therefore maintaining its very good position on the residential property market.
In 2008, the Deutsche Annington Real Estate Group again increased its earning power. This is reflected in the key operating metrics: gross profit from property management rose by 4.1% to e 594.9 million, the vacancy rate fell to 3.9% and we managed to improve the margin on the sale of residential units from 30.1% to 35.2% despite the sluggish market. Moreover, a rise of e 12.8 million in adjusted EBITDA and an increase of 9% in FFO are proof of our successful course.
We steer our business by means of adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) and FFO (funds from operations). Adjusted EBITDA is earnings before interest, taxes, depreciation and amortisation adjusted for changes in the value of real estate and extraordinary effects. The FFO is a metric based on the cash flow available from operating activities. In addition to adjusted EBITDA, the recurring cash-effective net interest expense and taxes on income are taken into account in the FFO. Both metrics are not determined on the basis of particular IFRS requirements but are to be seen as a supplement to the other key result figures under IFRS. In our opinion, adjusted EBITDA and FFO give greater transparency in the assessment of the sustained earning power and financial strength of our business activities.
In the past financial year, the Deutsche Annington Real Estate Group significantly increased its gross profit from property management by 4.1% from e 571.3 million to e 594.9 million. We managed to make this improvement in our core business segment mainly by reducing voids, raising rents within the statutory limits and enhancing efficiency. We reduced our vacancy rate from 4.2% at the end of 2007 to 3.9% at the end of 2008. The new acquisitions of residential units led to an additional increase in rental income in 2008. Furthermore, we made repair management more efficient. This also had a positive effect on our result.
In 2008, cost of materials for the property management segment was e 69.6 million below the 2007 figure. This was mainly due to the fact that the income from ancillary cost billing rose sharply in 2007 as ancillary cost billing operations were stepped up. After optimisation of the billing processes, the ancillary costs still to be billed to the tenants for previous years decreased in early 2007. The cost of materials also includes modernisation and maintenance expenses of e 118.0 million.
23 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review
Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
Of the gross rental income in 2008, 71% was income from net rents and 29% from charges and costs passed on to the tenants in the ancillary cost bills. The main components of other income from property management are rent subsidies, income from condominium administration and income from property management activities for third parties.
January 1 to December 31
| P million | 2008 | 2007 |
|---|---|---|
| Gross rental income | 1,006.1 | 1,048.6 |
| Other income from property management | 23.0 | 26.5 |
| Cost of materials for property management | -434.2 | -503.8 |
| Gross profit from property management | 594.9 | 571.3 |
In 2008, we systematically continued our selective sales strategy and adjusted our sales programme again to the changed market conditions. Despite reducing the number of apartments for sale, we managed to improve the margin on our sales programme. The properties for sale under our sales programme are mainly from the portfolio of residential units carried in the balance sheet under trading properties. In total, we sold 2,542 units in 2008 (2007: 3,945).
January 1 to December 31
| P million | 2008 | 2007 |
|---|---|---|
| Income from disposal of properties | 144.3 | 248.0 |
| Carrying value of properties sold | -93.5 | -173.3 |
| Gross profit from sales | 50.8 | 74.7 |
| Margin | 35.2% | 30.1% |
The result of the revaluation of the investment properties and the review of the trading properties is shown under net valuation loss/gain on property. As in the year before, in 2008 we calculated the fair values of our entire real estate portfolio in a detailed internal valuation.
On the face of the balance sheet, we make a distinction between investment properties and trading properties. Properties planned for sale are shown under trading properties and recognised at cost. Properties held as financial investments are shown under investment properties and recognised at their fair values. Further information on how the fair values were determined is to be found in the section Fair Values starting on page 29.
The valuation of the investment properties led in 2008 to a valuation loss of e 479.9 million. In 2008, the Deutsche Annington Real Estate Group allocated residential units which we had classified as potential properties for privatisation in prior years to the property management portfolio and not to the privatisation portfolio as in 2007. The change in value of the trading properties resulted in income of e 52.1 million; this income was largely attributable to the remeasurement at fair value of the trading properties transferred to investment properties. Further details on this item can be found in the Notes to the consolidated financial statements, note 9. Overall, the consolidated profit before tax was therefore reduced by e 427.8 million as a result of the valuation of the real estate portfolio.
January 1 to December 31
| P million | 2008 | 2007 |
|---|---|---|
| Net income from fair value adjustments of investment properties | -479.9 | 197.6 |
| Changes in value of trading properties | 52.1 | 0.8 |
| Net valuation loss/gain on property | -427.8 | 198.4 |
In 2008, we improved adjusted EBITDA by e 12.8 million to e 473.1 million. We reduced other cost of materials, the other operating expenses and the personnel expenses, adjusted for restructuring components, in 2008. The other income and expenses which are not allocated to the different segmental results are included in the reconciliation to adjusted EBITDA.
The items listed here contain non-operating expenses and income. The non-operating result in 2008 is affected by the initiated restructuring project and by expenses for an acquisition project. In 2007, this item mainly contained expenses for legal and tax integration as well as for measures geared to the capital market.
January 1 to December 31
| P million | 2008 | 2007 |
|---|---|---|
| Gross profit from property management and sales | 645.7 | 646.0 |
| Other operating income | 56.8 | 61.6 |
| Income from investments and financial assets | 1.9 | 1.9 |
| Other cost of materials | -56.8 | -58.8 |
| Other operating expenses | -91.0 | -117.0 |
| Personnel expenses | -134.8 | -103.4 |
| Elimination of the non-operating result | 51.3 | 29.7 |
| Balance of other operating income and expenses | -172.6 | -185.7 |
| Adjusted EBITDA | 473.1 | 460.3 |
25 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review
Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
In the 2008 financial year, the FFO rose by 8.9% to e 207.1 million. In addition to the improved adjusted EBITDA, a major factor contributing to the improved FFO was the decrease in income tax expense from e 24.2 million to e 11.5 million in 2008. FFO is a financial metric not determined in accordance with IFRS which Deutsche Annington uses to show the funds generated in continuing operations.
January 1 to December 31
| P million | 2008 | 2007 |
|---|---|---|
| Adjusted EBITDA | 473.1 | 460.3 |
| Net interest expense in FFO | -254.5 | -246.0 |
| Income tax expense in FFO | -11.5 | -24.2 |
| FFO | 207.1 | 190.1 |
The reconciliation from adjusted EBITDA to the result from continuing operations shows three main effects: the change resulting from the net valuation loss/gain on property, the resultant effects on deferred taxes and the changes in income tax expense. The lower valuation of the investment properties led to deferred tax income in 2008. The change in current income tax expense is mainly due to the reduction in the tax rates, the restructuring expense in 2008 as well as income from taxes for previous years. On the other hand, there was no one-off expense for the EK 02 amount in 2008.
January 1 to December 31
| P million | 2008 | 2007 |
|---|---|---|
| Adjusted EBITDA | 473.1 | 460.3 |
| Non-operating result | -51.3 | -29.7 |
| Net valuation loss/gain on property | -427.8 | 198.4 |
| Depreciation and amortisation | -8.5 | -4.9 |
| Other interest and similar income | 19.7 | 28.6 |
| Interest and similar expense | -376.6 | -361.9 |
| Income tax expense from lump sum taxation of the EK 02 amount |
-0.5 | -197.8 |
| Current income tax | 17.3 | -23.9 |
| Deferred tax income/expense | 91.0 | -27.7 |
| Result from continuing operations | -263.6 | 41.4 |
Last year, the Deutsche Annington Real Estate Group slightly reduced the share of current liabilities in total equity and liabilities again from 9.1% to 8.3%. In 2008, Deutsche Annington invested e 148.7 million (2007: e 384.4 million), mainly in the purchase of residential units and modernisation projects.
| P million | 2008 | % | 2007 | % |
|---|---|---|---|---|
| Total non-current assets | 7,892.5 | 77.0 | 7,989.4 | 73.8 |
| Total current assets | 2,357.1 | 23.0 | 2,834.6 | 26.2 |
| Total assets | 10,249.6 | 100.0 | 10,824.0 | 100.0 |
| Equity | 1,456.1 | 14.2 | 1,739.4 | 16.1 |
| Total non-current liabilities | 7,939.7 | 77.5 | 8,096.9 | 74.8 |
| Total current liabilities | 853.8 | 8.3 | 987.7 | 9.1 |
The change in the fair values of investment properties (-e 479.9 million) in particular led to a decrease in total non-current assets. The purchases of residential units, the capitalised modernisation measures and the transfer of trading properties in an amount of e 312.1 million could only compensate this effect to a certain extent. Total current assets in 2008 were well down on the previous year's figure. This decrease is mainly due to the change in the trading properties. In the reporting period, residential units worth e 71.2 million were sold.
Last year, the Deutsche Annington Real Estate Group recorded cash flow from operating activities of e 483.3 million (2007: e 540.6 million). This figure includes cash inflow from the letting business and from the sale of trading properties. The decrease compared with the previous year is mainly a result of the downsizing of the sales programme. The cash flow used in investing activities fell compared with the previous year by e 196.7 million to e 117.2 million due to lower expenditure on the purchase of apartments. The financing activities led to a cash outflow of e 479.0 million (2007: e 566.7 million).
January 1 to December 31
| P million | 2008 | 2007 |
|---|---|---|
| Cash flow from operating activities | 483.3 | 540.6 |
| Cash flow used in investing activities | -117.2 | -313.9 |
| Cash flow used in financing activities | -479.0 | -566.7 |
| Net changes in cash and cash equivalents | -112.9 | -340.0 |
| Cash and cash equivalents at beginning of year | 366.4 | 706.4 |
| Cash and cash equivalents at year-end | 253.5 | 366.4 |
27 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review
Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
With its financing strategy Deutsche Annington pursued two major goals in 2008: debt reduction through continuous capital repayments and careful risk assessment of newly acquired portfolios. Given the massive credit crisis towards the end of the year, we regard the loan agreements signed in 2008 as a positive sign for the continued possibility of raising further funds. We also see this as proof that the financial market considers the Deutsche Annington Real Estate Group to be a reliable partner.
The financing strategy of the Deutsche Annington Real Estate Group is based on long-term loans. In addition to the classic bank loans in the form of mortgages, the Deutsche Annington Real Estate Group uses structured financing. The mortgages have long terms in some cases and fixed interest rates.
One special form of mortgage is the loans granted by promotional banks (e.g. Wfa) under the social housing construction programme. These funds have lower interest rates than mortgages and much longer terms.
Loan terms of up to seven years are agreed under structured financing programmes. It was pleasing to note that despite the crisis on the financial markets we still managed to obtain two seven-year loans described in greater detail below. The first of these financing packages contains variable interest rates based on the Euribor. In order to hedge against short-term changes in interest rates, the Deutsche Annington Real Estate Group contracts interest hedges in the form of fixed payer swaps in such cases. The term of these interest-hedging instruments depends on the term of the underlying loan, and the swap reduction on the loan repayment profile. The second loan agreed has a fixed interest rate.
In 2006, 31 companies of the Deutsche Annington Real Estate Group sold REF notes to German Residential Asset Note Distributor P.L.C. (GRAND) as part of securitisation transactions. The 31 issuing companies involved in the securitisation transaction in 2006 provided securities in the form of land charges, account pledge agreements and assignments. Furthermore, company shares were pledged. The average weighted interest rate under the securitisation transactions is 3.37% until July 2010. Under the contract terms, this interest rate will increase to 4.66% from July 2010 to the end of the term in July 2013. Repayments on these transactions are made using the proceeds from the sale of residential units as well as from current cash flow from the property letting business.
In April 2008, the Deutsche Annington Real Estate Group signed a loan agreement with Landesbank Hessen-Thüringen and SEB AG for max. e 300.0 million running until April 2015, of which e 288.0 million was utilised in 2008. The loan was worth e 275.0 million as at December 31, 2008. The loan was taken out to refinance the acquisition line of e 500.0 million provided by Barclays Capital and Citibank, of which e 287.2 million had been used at the time of repayment, as well as to finance the acquisition of another portfolio. Under the loan, the borrowers provided securities in the form of land charges, account pledge agreements and assignments. In addition, company shares were pledged. Interest on the drawings under this credit line is based on the 3-month Euribor. In order to hedge the interest rate risk over the entire term of the loan agreement, the borrowers contracted a fixed payer swap with an interest rate of 5.45% (including margin). The loan conditions include quarterly regular repayments and obligatory special repayments when residential units are sold. The above-mentioned acquisition line of e 500.0 million from Barclays Capital and Citibank was terminated in October 2008.
In December 2008, subsidiaries of Deutsche Annington Immobilien GmbH took out loans totalling e 6.1 million with Kreissparkasse Köln to finance the acquisition of a portfolio. The interest rate of this annuity loan is 4.45% and is fixed until December 31, 2015. Securities are provided in the form of land charges.
The bearer bonds issued in two tranches in 2006 in connection with the securitisation transaction (GRAND plc.) had a value of e 5,153.4 million at the end of the 2008 financial year (2007: e 5,309.4 million). Repayments of e 156.0 million and interest payments of e 178.5 million were made in 2008. As in the past, the contractually agreed covenants were observed.
In 2008, the market situation changed greatly as a result of the crisis on the financial markets. For example, the demands on margins and equity for acquisitions and refunding increased significantly. Since none of the four major acquisition credit lines of the Deutsche Annington Real Estate Group is due for refinancing before October 2011, the current portfolio of loans will not be affected by this market development for virtually the next three years. For further details on our liabilities, we refer to the Notes to the consolidated financial statements, note 29.
It is part of the strategy of Deutsche Annington to continue growing by acquisitions. We are planning to secure this growth using bank loans, structured financing programmes and equity in future as well.
29 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
The fair values of the Deutsche Annington properties are determined every year and adjusted to bring them into line with the current market situation. This valuation shows the direct impact of changes in the demand for properties for rent and purchase on the fair value of the Deutsche Annington real estate portfolio. In 2008, the demand for rented accommodation rose whilst the demand for owner-occupier apartments fell. Therefore, we transferred some of our housing stocks from trading properties to investment properties; the resulting changes in the fair values led to an overall lower valuation in 2008.
Calculating and showing the fair values gives greater transparency both outside and inside the company: It is an important instrument for the value-optimised control of the portfolio and serves as a basis for strategic decisions.
The Deutsche Annington Real Estate Group performed an internal valuation to determine the fair values of its entire stock of residential buildings, small commercial units, garages/parking spaces and undeveloped land as at December 31, 2008.
In 2007, the sales strategy was already adapted when it was decided not to include any more properties in the privatisation programmes for conversion into owner-occupier apartments. In line with this strategy, we have allocated residential units which we had classified as potential properties for privatisation in prior years to the property management portfolio and not to the privatisation portfolio as in 2007. Therefore, these properties were no longer valued using the comparative method but, as all other units for letting, using the income capitalisation method (see below).
The following criteria were applied in the valuation of the different segments of real estate:
The value of the entire portfolio of residential properties was determined on the basis of the International Valuation Standard Committee's definition of market value. It is not permitted to take into account either portfolio premiums and discounts, which can be observed when portfolios are sold in market transactions, or time restrictions in the marketing of individual properties. The method used by Deutsche Annington to determine fair values thus complies with IFRSs.
In line with our business model, a distinction was made between properties to be managed and properties to be sold individually:
We consider properties which are being sold individually to be part of the privatisation portfolio. Single-family houses in our portfolio which, in DAIG's opinion, are basically suitable for being sold individually, are also included in the privatisation portfolio. First, all buildings were valued according to a rating system with regard to their quality, their market attractiveness and their macro-location. The aspects considered in assessing the quality of the buildings included their age and an assessment of the technical condition of the buildings. This assessment was based on maintenance reports compiled by external companies for which the properties were inspected on a regular basis. The attractiveness was assessed on the basis of various factors including in particular the micro-location of the buildings, how built-up the area is and the average size of the apartments (living area and the number of rooms). The quality of the macro-location was derived from the purchasing power index in the particular postal code district and validated using location ratings provided by Feri EuroRatings Services AG.
For the privatisation portfolio, the Deutsche Annington Real Estate Group assumed that there are a certain number of apartments which, depending on the attractiveness, quality and macro-location, cannot be sold directly to tenants, owner-occupiers and capital investors and that these remaining apartments can only be sold at a discounted price in small packages (remainder share). The value of the privatisation share per building was determined using the comparative method, i.e. comparable figures based on the company's own sales and extensive market research. The value of the remainder share was determined according to a method similar to the income capitalisation method and specially tailored to the product.
The property management portfolio was valued using the income capitalisation method. The basis of the valuation is the net annual income per building which results from the annual net rent minus non-allocable ancillary costs, maintenance expenses and administrative expenses in accordance with the II. Berechnungsverordnung (II. BV; German Regulation on Calculations for Residential Buildings in Accordance with the Second Housing Construction Law, which stipulates how economic viability calculations for living space are to be performed) as well as any ground rent.
The modernisation work performed on our portfolio of residential units in 2007 and 2008 was included in the valuations by decreasing the current maintenance expenses and discounts on the capitalised interest rates. The Deutsche Annington Real Estate Group took void periods into consideration on the basis of assumed vacancy and re-letting scenarios and by applying market rents.
The capitalised value of potential yield returns was determined by capitalising the annual net yield at building level. The capitalised interest rates applied were derived from the current German real estate market and allocated to the buildings with the aid of the previously determined ratings. Special considerations such as long-term restricted rents, expiring rent restrictions or mining subsidence damage were allowed for by means of premiums and discounts.
31 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
The commercial properties in the portfolio are mainly small commercial units for the supply of the local community. They were also measured using the income capitalisation method. Different cost approaches were used to those for residential properties and the capitalised interest rates were adjusted to reflect the market specifics.
Undeveloped plots of land were measured according to their state of development, the likelihood of development and the local market situation on the basis of derived land guide prices.
In accordance with their letter of engagement, the auditors of the consolidated financial statements included these fair values in their audit of the consolidated financial statements and the Group management report. Thus, the result of this audit is included in the auditors' report on the audit of the consolidated financial statements and Group management report of the Deutsche Annington Real Estate Group for the year ended December 31, 2008.
The fair value of the stocks of residential buildings, small commercial units, garages and parking spaces as well as undeveloped land of the Deutsche Annington Real Estate Group as at December 31, 2008 was approx. e 9,819.8 million (2007: e 10,270 million). The decrease in the fair value compared with the previous year is a result of the aforementioned reclassification of properties formerly held for sale to investment properties. The fair values of the real estate portfolio by region are as follows:
| Residential units Other rental units |
Fair values in P million* | |||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | 2007 | ||
| Regional subsidiary | ||||||
| Deutsche Annington Nord GmbH | 19,637 | 19,878 | 4,932 | 4,975 | 986.8 | 989.5 |
| Deutsche Annington Ost GmbH | 16,581 | 17,335 | 2,898 | 2,964 | 751.3 | 778.0 |
| Deutsche Annington Rheinland GmbH | 23,893 | 24,086 | 8,099 | 8,110 | 1,509.5 | 1,523.5 |
| Deutsche Annington Ruhr GmbH | 37,088 | 36,844 | 6,515 | 6,452 | 1,636.2 | 1,728.6 |
| Deutsche Annington Süd GmbH | 16,752 | 16,949 | 8,098 | 8,169 | 1,128.0 | 1,146.8 |
| Deutsche Annington Süd-West GmbH | 32,062 | 31,928 | 8,307 | 8,031 | 2,011.4 | 1,996.0 |
| Deutsche Annington Westfalen GmbH | 43,205 | 43,201 | 6,374 | 6,465 | 1,725.6 | 2,024.7 |
| Undeveloped land | 71.0 | 82.9 | ||||
| 189,218 | 190,221 | 45,223 | 45,166 | 9,819.8 | 10,270.0 |
* Since the vast majority of the large commercial properties have been sold, the fair value of the remaining units is shown within the regional portfolios (fair value 2008: 0 6.8 million).
Last year, the Deutsche Annington Real Estate Group carefully monitored risks while seizing any opportunities which presented themselves. Thanks to sound financial management and operational improvements in the core business, we managed to reduce our short-term liabilities and again achieve a high cash flow. Demand for our properties proved to be very stable in 2008. The Deutsche Annington Real Estate Group was not exposed to any significant risks which might jeopardise the existence of the company.
The opportunity and risk management policy of the Deutsche Annington Real Estate Group is geared to systematically and continuously increasing the company's value. The company has communicated codes of conduct laid down in policies and other directives for managers and staff. They are backed by a variety of different monitoring mechanisms. Speculative business transactions are not permitted.
The company uses a comprehensive reporting system to identify and handle risks. In addition to detailed monthly controlling reports, the Chief Executive Officer and the Chief Financial Officer both give monthly reports to the Supervisory Board of Deutsche Annington. In addition to the controlling reports, there is also qualitative reporting in weekly reports which the managers submit to the managing directors of the company. In our opinion, this standardised process ensures that all managers of the subsidiaries and heads of department of the holding company report major issues regularly to the managing directors.
As things now stand, the Deutsche Annington Real Estate Group is not exposed to any risks which might directly or indirectly jeopardise the existence of the company.
33 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
Major risk fields or risks have been identified in the following areas:
Economic forecasts predict that the demographic development of German metropolitan areas will differ: According to these forecasts, there are regions to which substantial numbers of people will migrate (e.g. the Rhine-Main region, Munich, Stuttgart). Here, the demand for accommodation is likely to rise. By contrast, there will, in our opinion, be regions from which large numbers will move away. This may also include the Ruhr area. Here, the expected decline in the population as a result of lower birth rates will have an additional impact. However, this development is likely to be cushioned by a shift in the individual demand for living space: The number of one and two-person households is likely to rise steadily and demand for bigger apartments will, in our opinion, also grow parallel to this. Therefore, in future there may be fewer people but they will be living in bigger homes and the number of households will increase overall. Thus, a noticeable fall in demand for rented and owner-occupier accommodation in regions like the Ruhr area from which people will migrate is not likely to occur before 2020.
Although hardly any government subsidies are available at present for buying a home, we are expecting demand to remain stable at a low level thanks to the continued low interest rates on mortgages. Should the interest rates increase considerably in the next few years, this might have an effect on the demand for residential properties.
Changes in market prices may also affect demand for properties to buy and our acquisition strategy. Should the prices for residential portfolios increase more sharply than we expect, the Deutsche Annington Real Estate Group may possibly only be able to achieve its growth targets by incurring higher costs. Prices are currently falling slightly.
Furthermore, market players could start to sell off residential units on a large scale and thus cause prices to fall as a result of higher supply. The Deutsche Annington Real Estate Group is carefully watching the development of demand and will, if necessary, step up its sale-promoting measures.
As far as acquisitions are concerned, there are various government requirements restricting our rent increases and our sales programme for some of our housing stocks. Furthermore, there are also contractual and legal requirements impacting on the adjustment of our workforce structure to the changed market conditions.
A major objective in our core business segment, Property Management, is to reduce the vacancy rate. If the general macro-economic conditions deteriorate significantly here, the vacancy rate may also rise in the medium term and therefore result in lower rental income. However, as most of the housing offered by Deutsche Annington is in average locations and tends to be small to medium-sized apartments, we only expect a slight fluctuation in demand.
In the south of the Ruhr area, the many years of coal mining have left disused mine workings near the surface, which present a risk of mining damage to Deutsche Annington's land and buildings. At present, it is difficult to exactly estimate the associated economic risk as there are no or very few records for many of the old mine workings. Moreover, the law is still not clear on the question of liability for any damage which might occur. The Deutsche Annington Real Estate Group is countering this risk by conducting a systematic inspection of properties to identify potential mining damage. These results provide the basis for the Deutsche Annington Real Estate Group to successively take suitable remedial action and clarify the legal situation in the relevant cases.
Our valuation of the fair values of our real estate is based on assumptions which may develop differently in the next few years than we currently expect. For example, the valuation included not only building-specific parameters but also the quality of the building location. Should the estimate of the micro-location of the buildings and the quality of the macro-location (purchasing power index) change adversely in the next few years, the fair value of our entire real estate portfolio would also decrease.
Changes in the value of our investment properties are recorded as appropriation or impairment in the income statement and therefore have a direct impact on the earnings situation of our company.
The companies of the Deutsche Annington Real Estate Group are mainly financed by thirdparty loans, which take current tax law and tax regulations as well as the present interpretation of the law on deductibility of interest into account.
In its financing activities for its operational business, the Deutsche Annington Real Estate Group is exposed to risks arising from changes in interest rates. The Deutsche Annington Real Estate Group operates a systematic finance management system to limit these risks.
As a result of the economic and financial crisis, the financing conditions and financing options for the Deutsche Annington Real Estate Group are not as good now. In general, this may mean that the Deutsche Annington Real Estate Group will have to provide more equity when making acquisitions and/or refinancing funds in order to finance on acceptable economic conditions.
The Deutsche Annington Real Estate Group had cash on hand and deposits at banking institutions totalling e 253.5 million as at the balance-sheet date as well as credit lines of e 100.0 million so that the Deutsche Annington Real Estate Group's ability to service debt can be regarded as guaranteed at all times, even in the light of the economic and financial crisis.
A description of the derivative financial instruments used can be found in the Notes to the consolidated financial statements, note 35.
35 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
When managing our portfolio, we attach great importance to sustainability and make sure that energy-saving and low-emission technologies are used when maintenance work is carried out. In view of the increasing CO2 pollution of the environment, further environmental requirements are currently being discussed, particularly for owners of residential properties. The Deutsche Annington Real Estate Group is following the discussions and will actively participate in the debate through the housing associations it belongs to.
Other legal disputes beyond those allowed for in the balance sheet which might have a substantial negative impact on the economic situation of Deutsche Annington are neither pending nor, to our knowledge, has such a case been threatened. No major risks for the Deutsche Annington Real Estate Group can currently be identified in the information technology and human resources sectors.
In 2009, the recession will lead to falling sales in many branches of German industry. This does not apply to the rented accommodation market, possibly with the exception of luxury properties. The Deutsche Annington Real Estate Group believes that demand will remain stable. Demand could even rise for mediumsized, reasonably-priced apartments, which make up the majority of our rental units. Therefore, we are confident that we can stabilise adjusted EBITDA and FFO in 2009. We are even going a step further: Thanks to a comprehensive restructuring programme, we are creating a new organisation which will be much more customer-focused, more efficient and faster.
Deutsche Annington's strategy is to focus primarily on the value-enhancing management of its residential real estate. Therefore, we want to improve further in our core business in the coming year and intend to cut vacancy rates yet again. We believe that the predicted recession is likely to have a positive rather than a negative impact on the demand for reasonably-priced apartments and we are planning to increase our occupancy rates again in 2009. This year, we will be continuing the modernisation programme which we started in 2008 and investing considerable sums. We expect rent rises to be above the forecast inflation rate of 1%.
Selling individual residential units is still an attractive line of business for the Deutsche Annington Real Estate Group. The proceeds from the sale of apartments make a contribution to our high operating cash flow and permit us to optimise our portfolio. In the last two years, purchase prices stagnated in spite of the good economic environment and so the Deutsche Annington Real Estate Group did not expand its sales programme. In view of our high occupancy rates, renting is in many cases more profitable than selling. For 2009, we are assuming that demand for existing properties will remain at the level of the previous year as the purchase prices remained largely stable in 2008 and there was no massive slump in prices as in the USA.
In view of the current situation on the German residential real estate market, the Deutsche Annington Real Estate Group still sees good chances of achieving its growth targets through acquisitions. For the next two to three years we are even expecting an increase in the number of properties on offer. The financial crisis is exacerbating the precarious financial situation of local authorities: local government debt will rise sharply in 2009 as a result of the economic stimulus packages and revenue will fall while the expected rise in unemployment will push up public spending. Local authorities may be forced to consider selling their housing companies. At the same time, the market is changing: The first investors are selling their housing portfolios as their expected return on investment is not materialising and they cannot obtain such good financing conditions.
Our aim for the current year is to continue the company's stable course. This means for our key operating metrics, adjusted EBITDA and FFO, that we will not quite match the very good figure for 2008 in view of the forthcoming restructuring this year. We also plan to further simplify our processes and reduce our costs even more. Therefore, we have embarked on a comprehensive restructuring programme. All in all, the Deutsche Annington Real Estate Group intends to spend around e 70 million on this project. Some e 47 million was already expensed or set aside as a restructuring provision in 2008. The expenditure in 2008 mainly covered costs for the purchase and introduction of new software, consultancy fees as well as expense for a redundancy scheme to be implemented in 2009.
In the light of the probable development of rents and the measures initiated as part of the restructuring programme, we are currently expecting adjusted EBITDA and FFO to also remain at the 2009 level in 2010.
37 The 2008 Financial Year Structure, Strategy, Employees Economic Environment Business Review Results of Operations, Net Assets and Financial Position Funding Fair Values Risk Management Outlook and Start to 2009
The Deutsche Annington Real Estate Group aims to further increase customer satisfaction. In 2009, we will therefore systematically gear our organisation to the needs of our customers. The core features here are a tenant centre with a nationwide hotline for all tenants' questions, a service centre for handling standard procedures, such as the billing of ancillary costs, as well as a new, powerful field service organisation that will focus on providing a local service for the tenants.
We want to offer customers a high level of availability and make sure that most questions can already be answered in the first telephone call. The tenant centre, which can be reached at one telephone number throughout Germany, will be manned from Mondays to Fridays from 8 a.m. to 6 p.m. The employees working in the tenant centre will be trained in the real estate business and will be able to access all important information by mouse click. They will have a high level of decision-making authority and so be able to handle the vast majority of inquiries during the first telephone call. If that is not possible, special field workers will make an appointment to visit the customer. Inside and field workers will be networked with mobile communication technology to ensure a fast and flexible customer service. This new organisation will enable the Deutsche Annington Real Estate Group to considerably simplify its response procedures and break down bureaucratic structures. We will therefore be able to deal with tenants' inquiries more quickly and reliably than before. The aim is to create a considerably more efficient and economic company.
Unforeseen developments and events, particularly the development of the current economic and financial crisis, may force us to revise our expectations and may lead to deviations from our forecasts.
C o n s o l i d a t e d Financial Statements 2008 2008 40 Consolidated Income Statement
January 1 to December 31
| P million | Notes | 2008 | 2007 |
|---|---|---|---|
| Continuing operations | |||
| Gross rental income | 1,006.1 | 1,048.6 | |
| Other income from property management | 23.0 | 26.5 | |
| Income from property management | 6 | 1,029.1 | 1,075.1 |
| Income from sale of trading properties | 105.9 | 214.3 | |
| Carrying value of trading properties sold | -71.2 | -147.3 | |
| Income from disposal of investment properties | 38.4 | 33.7 | |
| Carrying value of investment properties sold | -22.3 | -26.0 | |
| Profit on disposal of properties | 7 | 50.8 | 74.7 |
| Net income from fair value adjustments of investment properties | 8 | -479.9 | 197.6 |
| Changes in value of trading properties | 9 | 52.1 | 0.8 |
| Cost of materials | 10 | -491.0 | -562.6 |
| Personnel expenses | 11 | -134.8 | -103.4 |
| Depreciation and amortisation | 12 | -8.5 | -4.9 |
| Other operating income | 13 | 56.8 | 61.9 |
| Other operating expenses | 14 | -91.0 | -117.0 |
| Financial income | 15 | 21.6 | 30.5 |
| Financial expenses | 16 | -376.6 | -361.9 |
| Profit before tax | -371.4 | 290.8 | |
| Income tax | 17 | 107.8 | -249.4 |
| Profit from continuing operations | -263.6 | 41.4 | |
| Discontinued operation | |||
| Profit from discontinued operation (net of income tax) | 32 | 5.9 | 6.4 |
| Profit for the period | -257.7 | 47.8 | |
| Attributable to: | |||
| Equity holders of DAIG | -256.9 | 46.3 | |
| Minority interests | -0.8 | 1.5 |
Also see the corresponding explanations in the Notes.
Consolidated Income Statement Consolidated Balance Sheet Consolidated Cash Flow Statement
Statement of Income and Expense Consolidated Statement of Changes in Equity Notes
| P million | Notes | Dec. 31, 2008 | Dec. 31, 2007 |
|---|---|---|---|
| Assets | |||
| Intangible assets | 18 | 14.0 | 13.7 |
| Property, plant and equipment | 19 | 12.8 | 17.1 |
| Investment properties | 20 | 7,780.2 | 7,870.6 |
| Financial assets | 21 | 46.6 | 48.1 |
| Other assets | 22 | 25.5 | 23.4 |
| Income tax receivables | 0.2 | - | |
| Deferred tax assets | 17 | 13.2 | 16.5 |
| Total non-current assets | 7,892.5 | 7,989.4 | |
| Inventories | 23 | 1,919.5 | 2,198.8 |
| Trade receivables | 24 | 86.0 | 137.6 |
| Other financial assets | 21 | 1.7 | 1.7 |
| Other assets | 22 | 19.1 | 22.9 |
| Income tax receivables | 77.3 | 107.2 | |
| Cash and cash equivalents | 25 | 253.5 | 366.4 |
| Total current assets | 2,357.1 | 2,834.6 | |
| Total assets | 10,249.6 | 10,824.0 | |
| Equity and liabilities Subscribed capital |
0.1 | 0.1 | |
| Capital reserves | 682.2 | 682.2 | |
| Retained earnings | 787.1 | 1,044.0 | |
| Other reserves Total equity attributable to equity holders of DAIG |
-22.7 1,446.7 |
2.9 1,729.2 |
|
| Minority interests | 9.4 | 10.2 | |
| Total equity | 26 | 1,456.1 | 1,739.4 |
| Provisions | 27 | 334.9 | 358.6 |
| Trade payables | 28 | 1.0 | 0.5 |
| Other financial liabilities | 29 | 6,911.7 | 6,931.9 |
| Income tax liabilities | 30 | 158.5 | 173.8 |
| Other liabilities | 31 | 5.1 | 4.7 |
| Deferred tax liabilities | 17 | 528.5 | 627.4 |
| Total non-current liabilities | 7,939.7 | 8,096.9 | |
| Provisions | 27 | 230.1 | 259.6 |
| Trade payables | 28 | 32.4 | 38.7 |
| Other financial liabilities | 29 | 194.5 | 283.8 |
| Income tax liabilities | 30 | 24.6 | 24.0 |
| Other liabilities | 31 | 372.2 | 381.6 |
| Total current liabilities | 853.8 | 987.7 | |
| Total liabilities | 8,793.5 | 9,084.6 | |
| Total equity and liabilities | 10,249.6 | 10,824.0 |
Also see the corresponding explanations in the Notes.
January 1 to December 31
| P million Notes |
2008 | 2007 |
|---|---|---|
| Profit for the period | -257.7 | 47.8 |
| Depreciation and amortisation 12 |
8.5 | 4.9 |
| Interest expenses/income | 356.8 | 344.0 |
| Results from disposals of investment properties | -16.1 | -7.7 |
| Results from disposals of other non-current assets | 0.0 | - |
| Result from sale of discontinued operation, net of income tax 32 |
-5.9 | -1.5 |
| Result from valuation of investment properties 8 |
479.9 | -197.6 |
| Changes in value of trading properties 9 |
-52.1 | -0.8 |
| Other earnings not affecting net income 13 |
-1.9 | -7.8 |
| Changes in inventories | 62.4 | 216.6 |
| Changes in receivables and other assets | 62.3 | 95.3 |
| Changes in provisions | -15.4 | -8.4 |
| Changes in liabilities | -35.8 | 82.6 |
| Changes in deferred taxes | -91.0 | 28.3 |
| Income tax paid | -10.7 | -55.1 |
| Cash flow from operating activities | 483.3 | 540.6 |
| Proceeds from disposals of investment properties | 30.5 | 29.9 |
| Proceeds from disposals of intangible assets and property, plant and equipment |
0.3 | 0.1 |
| Disposal/proceeds of discontinued operation (net of cash disposed of) 32 |
-20.8 | 14.1 |
| Proceeds received from disposals of financial investments | 0.1 | 0.1 |
| Acquisition of investment properties 20 |
-138.0 | -359.9 |
| Acquisition of intangible assets and property, plant and equipment 18 |
-4.2 | -2.5 |
| Acquisition of financial assets 21 |
-6.5 | -22.0 |
| Interest received | 21.4 | 26.3 |
| Cash flow from investing activities | -117.2 | -313.9 |
| Cash proceeds from issuing loans and notes 29 |
320.8 | 582.6 |
| Cash repayments of financial liabilities 29 |
-528.2 | -856.4 |
| Transaction costs | -4.6 | -5.5 |
| Interest paid | -267.0 | -287.4 |
| Cash flow from financing activities | -479.0 | -566.7 |
| Net changes in cash and cash equivalents | -112.9 | -340.0 |
| Cash and cash equivalents at beginning of year 25 |
366.4 | 706.4 |
| Cash and cash equivalents at year-end 25 |
253.5 | 366.4 |
Also see the corresponding explanations in the Notes.
| P million | 2008 | 2007 |
|---|---|---|
| Profit for the period | -257.7 | 47.8 |
| Cash flow hedges | ||
| Changes in the fair value of the period | -30.3 | 3.7 |
| Taxes on changes in the fair value | 4.3 | -0.8 |
| Reclassification affecting net income | 0.5 | - |
| Taxes on reclassification affecting net income | -0.1 | - |
| Other comprehensive income | -25.6 | 2.9 |
| Total comprehensive income | -283.3 | 50.7 |
| Attributable to: | ||
| Equity holders of DAIG | -282.5 | 49.2 |
| Minority interests | -0.8 | 1.5 |
| P million | Subscribed capital |
Capital reserves |
Retained earnings |
Other reserves |
Equity before minority interests |
Minority interests in equity |
Total equity |
|---|---|---|---|---|---|---|---|
| As of Jan. 1, 2008 | 0.1 | 682.2 | 1,044.0 | 2.9 | 1,729.2 | 10.2 | 1,739.4 |
| Profit for the period | -256.9 | -256.9 | -0.8 | -257.7 | |||
| Other comprehensive income | -25.6 | -25.6 | -25.6 | ||||
| Total comprehensive income | -256.9 | -25.6 | -282.5 | -0.8 | -283.3 | ||
| As of Dec. 31, 2008 | 0.1 | 682.2 | 787.1 | -22.7 | 1,446.7 | 9.4 | 1,456.1 |
| As of Jan. 1, 2007 | 0.1 | 682.2 | 997.7 | 0.0 | 1,680.0 | 8.7 | 1,688.7 |
| Profit for the period | 46.3 | 46.3 | 1.5 | 47.8 | |||
| Other comprehensive income | 2.9 | 2.9 | 2.9 | ||||
| Total comprehensive income | 46.3 | 2.9 | 49.2 | 1.5 | 50.7 | ||
| As of Dec. 31, 2007 | 0.1 | 682.2 | 1,044.0 | 2.9 | 1,729.2 | 10.2 | 1,739.4 |
Also see note (26) in the Notes.
a nci al st
at e m
ents ma
a g e m
ent r epo r t M
aa g e ment
As an integrated real estate company, the Deutsche Annington Real Estate Group (referred to in the following as DAIG) pursues three core activities: the long-term, value-enhancing management of its nationwide residential real estate portfolio, the selective sale of units in a socially acceptable manner, primarily to tenants, as well as the strategic acquisition of housing portfolios to achieve a sustained increase in the company's value. The parent company of DAIG is Monterey Holdings I S.à.r.l., Luxembourg. Deutsche Annington Immobilien GmbH is incorporated and domiciled in Germany; its registered office is located in Düsseldorf. The head office (principal place of business) is located at Philippstrasse 3, Bochum.
Deutsche Annington Immobilien GmbH has made use of the option under Section 315a, para. 3 of the German Commercial Code (HGB) and is thus not obliged to prepare consolidated financial statements in accordance with German commercial law.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted in the EU. Allowance has also been made for the supplementary provisions in accordance with Section 315a, para. 1 HGB.
The consolidated financial statements have been prepared on the cost basis except for investment properties, derivative financial instruments, available-for-sale financial assets and financial liabilities arising from binding share purchase offers to minority shareholders, which are measured at fair value. The income statement has been prepared using the nature of expense method and follows the recommendations of the European Public Real Estate Association (EPRA).
These consolidated financial statements are presented in euro, which is the Group's functional currency. Unless stated otherwise, all figures are shown in million euros (e million).
On March 30, 2009, the Management approved the consolidated financial statements of Deutsche Annington Immobilien GmbH for submission to the shareholders' meeting. It is the responsibility of the shareholders' meeting to examine the consolidated financial statements and declare whether it approves them.
Entities that are under the control of Deutsche Annington Immobilien GmbH are included in the consolidated financial statements as subsidiaries. Control is exercised when Deutsche Annington Immobilien GmbH is able to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities. Any potential voting rights are taken into account when assessing control. Subsidiaries are included in the consolidated financial statements from the date on which Deutsche Annington Immobilien GmbH obtains control until the day control ceases.
Business combinations are accounted for using the purchase method, the cost of acquisition being offset against the equity attributable to the parent company at the date of acquisition. Regardless of the share of the minority interest, the identifiable assets, liabilities and contingent liabilities of the acquiree are recognised in the consolidated financial statements at fair value, except for noncurrent assets (or disposal groups) classified as held for sale, which are recognised at fair value less costs to sell. Any excess of the cost of a business combination over DAIG's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill.
If DAIG's interest in the net fair value of the identifiable assets and liabilities exceeds the cost of the business combination, the values of the assets, liabilities and contingent liabilities as well as the costs of acquisition are reassessed and any remaining excess is recognised as income in the income statement.
The shares in the net assets of subsidiaries that are not attributable to DAIG are shown as a separate component of equity under minority interests.
Further share purchases after control has been obtained, i.e. the acquisition of minority interests, are accounted for as equity transactions. Any premiums or discounts on those purchases are recognised directly in equity.
For the term during which DAIG has granted put options to minority shareholders to purchase their shares in subsidiaries, such minority interests are recognised as financial liabilities and not as a separate component of equity.
Entities over which Deutsche Annington Immobilien GmbH has significant influence but not control are accounted for as associates. This is generally the case when 20% to 50% of the voting rights are held. Investments in associates are of minor significance to the Group's net assets, financial position and results of operations and therefore are accounted for at amortised cost.
A special purpose entity (SPE) is consolidated if, based on an evaluation of the substance of its relationship with Deutsche Annington Immobilien GmbH and the SPE's risks and rewards, Deutsche Annington Immobilien GmbH concludes that it controls the SPE.
The effects of the business transactions between the entities included in the DAIG consolidated financial statements are eliminated. The financial statements of Deutsche Annington Immobilien GmbH and all subsidiaries are prepared according to uniform accounting policies.
In addition to Deutsche Annington Immobilien GmbH, 122 (2007: 117) domestic companies and 1 foreign company (2007: 1) have been included in the consolidated financial statements of DAIG as at and for the year ended December 31, 2008.
The list of DAIG shareholdings is appended to these notes to the consolidated financial statements.
In the 2008 financial year, 7 companies (2007: 10) were acquired, which were not business operations at the time of acquisition. The purchase prices of these companies totalled e 0.2 million and were paid in full in cash.
The disposals in 2008 were the result of 2 mergers (2007: 2). No liquidations (2007: 1), intra-Group legal reorganisations (Anwachsung) (2007: 1) or sales (2007: 0) took place in the reporting year.
In the separate financial statements of Deutsche Annington Immobilien GmbH and the subsidiaries included in the consolidated financial statements, foreign currency transactions are translated into the functional currency at the exchange rate on the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the exchange rate prevailing on the balance-sheet date. Non-monetary items that are measured in terms of historical cost are recorded on the balancesheet date at the exchange rate on the date when they were first recognised. Non-monetary items that are measured at fair value are translated using the exchange rate on the date when the fair value was determined. Any resulting translation gains and losses are recorded in the income statement.
Income from property management includes income from the letting of investment properties and trading properties which is recognised, net of discounts, sales incentives, customer bonuses and rebates granted, on a straight-line basis over the duration of the contracts when the remuneration is contractually fixed or can be reliably determined and collection of the related receivable is probable.
Furthermore, the income from property management includes payments for ancillary costs made by DAIG in the current and prior years which are billed to tenants in the current year when the cost and the amount of revenue can be measured reliably. Ancillary costs which have yet to be billed are shown under inventories. Any advance payments made by tenants on these ancillary costs are shown under other liabilities.
Income from property sales is recognised as soon as the material risks and rewards of ownership have been transferred to the buyer and DAIG has no substantive further obligations. If DAIG only retains insignificant risks of ownership, the proceeds are recognised at the time of sale and a provision is recognised for the probable risk.
Expenses are recognised when they arise or at the time they are incurred. Interest is recognised as income or expense in the period in which it is incurred using the effective interest method.
Acquired intangible assets are capitalised at amortised cost and internally generated intangible assets at cost provided that the requirements of IAS 38 for the capitalisation of internally generated intangible assets are met. All intangible assets of DAIG have definite useful lives and are amortised on a straight-line basis over their estimated useful lives. Software and licences are amortised on the basis of a useful life of three years. Customer bases are amortised on a straight-line basis over ten years.
Items of property, plant and equipment are carried at amortised cost less accumulated depreciation and impairment losses and are depreciated over their respective estimated useful lives on a straightline basis.
Subsequent costs of replacing part of an item of property, plant and equipment are capitalised provided it is probable that future economic benefits associated with the item will flow to DAIG and the cost can be measured reliably.
Real estate used by the company itself is depreciated over 50 years; equipment, fixtures, furniture and office equipment are depreciated over periods of between three and thirteen years.
When DAIG acquires real estate properties, whether through a business combination or separately, the intended use determines whether those properties are classified as investment properties, trading properties or owner-occupied properties.
Investment properties are properties that are held for the purpose of earning rental income or for capital appreciation or both and are not owner-occupied or held for sale in the ordinary course of business. Investment properties include undeveloped land, land and land rights including buildings and land with inheritable rights of third parties. Properties which are capitalised under a finance lease in accordance with IAS 17 "Leases" and are covered by the definition of investment properties are also classified as investment properties. Property interests held under operating leases are not classified and accounted for as investment properties.
Investment properties are measured initially at cost. Related transaction costs, such as fees for legal services or real estate transfer taxes, are included in the initial measurement. Property held under a finance lease is recognised at the lower of the fair value of the property and the present value of the minimum lease payments upon initial recognition.
After initial recognition, investment properties are measured at fair value with any change therein recognised in profit or loss.
The fair value of investment properties is calculated using internationally recognised measurement methods. The main method used is the income capitalisation method, which is based on actual or market rents and a risk-adjusted capitalised interest rate. For a more detailed description of the determination of the fair values of investment properties, see note (20) Investment properties.
In line with the real estate trading strategy of DAIG, investment properties which are to be sold within the normal six-year business cycle and which are being prepared for sale, e.g. condominium declaration obtained after initial classification, are transferred to inventories. Should these properties classified as trading properties not have been sold within the six-year business cycle as intended, they are, at the latest at this date, re-transferred to the investment properties category in accordance with the provisions of IAS 8 "Changes in Accounting Estimates".
Investment properties are transferred to property, plant 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.
Leases are either classified as finance leases or operating leases. Leases where substantially all risks and rewards incidental to ownership are transferred to the lessee are accounted for as finance leases.
a g e ment
The leased asset and a corresponding liability are recognised at an amount equal to the lower of the fair value of the asset and the present value of the minimum lease payments. Subsequently, the asset is accounted for in accordance with the accounting policy applicable to that asset. The minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability.
All leases where not substantially all risks and rewards incidental to ownership are transferred are accounted for as operating leases.
Lease payments are recognised in income on a straight-line basis over the lease term. The assets subject to operating leases are presented in the balance sheet according to their nature.
Lease payments are recognised as an expense on a straight-line basis over the lease term.
In accordance with IAS 36 "Impairment of Assets", intangible assets as well as property, plant and equipment are tested for impairment whenever there is an indication of an impairment. An impairment loss is recognised when an asset's recoverable amount is less than its carrying amount. If the recoverable amount cannot be determined for the individual asset, the impairment test is conducted on the cash-generating unit to which the asset belongs. Impairment losses are recorded as expenses in the income statement.
An impairment loss recognised for prior periods is reversed if there has been a change in the estimates used to determine the asset's (or the cash-generating unit's) recoverable amount since the last impairment loss was recognised. The carrying amount of the asset (or the cash-generating unit) is increased to the newly estimated recoverable amount. The carrying amount is limited to the amount that would have been determined if no impairment loss had been recorded in prior years for the asset (or the cash-generating unit).
Contractually acquired financial assets are recognised in the balance sheet if the resulting rewards will flow to DAIG. A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred and DAIG neither retains control nor retains substantially all the risks and rewards of ownership of the financial asset.
Shares in associates not accounted for using the equity method are measured at cost as there is no price quoted on an active market and the fair value cannot be determined reliably.
Available-for-sale financial assets are initially measured at fair value and any changes therein – other than impairment losses – are recognised in equity. The fair value of available-for-sale financial assets is based on quoted market prices at the reporting date. When an available-for-sale financial asset is derecognised, the cumulative gain or loss recognised in equity is transferred to profit or loss. Regular way purchases or sales are accounted for at the date of the economic transfer of the asset to the purchaser.
Loans and receivables are stated at amortised cost using the effective interest method. Allowance is made for all discernible risks by appropriate deductions. An appropriate valuation allowance is made when it is estimated that certain receivables will be uncollectible.
Trading properties are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimated selling price is calculated on the basis of current market prices of comparable real estate.
Trading properties are residential properties which are to be sold within the normal six-year business cycle and for which a condominium declaration has been obtained. Should these properties have not been sold within the six-year business cycle, they are, at the latest at this date, transferred to the investment properties category in accordance with the provisions of IAS 8 "Changes in Accounting Estimates". Any difference between the fair value of the property at that date and its previous carrying amount is recognised in profit or loss.
The ancillary costs not yet charged are accounted for at cost; all discernible risks are allowed for by write-downs.
Borrowing costs are capitalised as part of the acquisition or production costs if they can be directly attributed to the acquisition, construction or production of a qualifying asset.
Cash and cash equivalents include cash on hand, cheques, deposits on bank accounts with an original term of up to three months as well as marketable securities.
This equity line item includes changes in equity not affecting net income except those resulting from capital transactions with equity holders (e.g. capital increases or dividend distributions). DAIG includes unrealised gains and losses from the fair value measurement of available-for-sale assets and derivative financial instruments under this item.
Income taxes for the current and prior periods are recognised as income tax liabilities to the extent that they have not yet been paid.
Obligations to pay lump-sum tax on the previously untaxed EK 02 amounts (see note [17] Income tax ) are measured at their present value to make appropriate allowance for the interest-free nature of the obligation.
Deferred tax is recognised using the liability method, providing for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. The carrying amount of a deferred tax asset is reviewed at each balance-sheet date. If necessary, the carrying amount of the deferred tax asset is reduced to the extent that it is no longer probable that sufficient taxable profit will be available.
Deferred taxes are measured at tax rates that have been enacted or substantially enacted and that are expected to apply to the period when the tax asset is realised or the liability is settled. The combined tax rate of corporate income tax and trade tax of 31.6% for 2008 was used to calculate domestic deferred taxes.
Deferred tax assets and liabilities are offset against each other only if DAIG has a legally enforceable right to set off the recognised amounts, when the same tax authority is involved and when the realisation period is the same. In accordance with the regulations of IAS 12 "Income Taxes", deferred tax assets and liabilities are not discounted.
The values of the pension obligations and the expenses necessary to cover these obligations are determined using the projected unit credit method according to IAS 19 "Employee Benefits" whereby current pensions and vested pension rights at the balance-sheet date as well as future increases in salaries and pensions are included in the valuation. An actuarial valuation is performed at every balance-sheet date.
The amount shown in the balance sheet is the present value of the defined benefit obligation after elimination of unrecognised actuarial gains and losses and unrecognised past service cost and after offsetting against the fair value of the plan assets.
Actuarial gains and losses arising are recognised using the corridor method. They are only recorded to income or expense when the balance of the accumulated unrecognised actuarial gains and losses determined per employer at the beginning of the business year exceeds the corridor of 10% of the greater of defined benefit obligation (DBO) and the fair value of plan assets. The excess is recognised in future periods over the expected average remaining working lives of the participating employees. If the obligations are obligations for employees who have already left the company's service, the excess is recognised in the financial year in the income statement.
Service cost is shown in personnel expenses. The service cost is the increase in the present value of a defined benefit obligation resulting from employee service in the reporting period. The interest expense on the annual costs is recorded in the financial result. Interest expense is the increase during a period in the present value of a defined benefit obligation which arises due to the fact that the benefit obligation is one period closer to being discharged.
Reinsurance policies that qualify as plan assets have been taken out to cover the pension obligations towards particular persons. Where the value of those reinsurance policies exceeds the related pension obligations, the excess is recognised as an asset and shown under other assets.
Other provisions are recognised when there is a present obligation, either legal or constructive, as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Non-current provisions are discounted if the resulting effect is material. The carrying amount of discounted provisions increases in each period to reflect the passage of time and the unwinding of the discount is recognised within interest expense. The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Provisions for environmental remediation are recognised when it is probable that an outflow of resources will be required to settle the obligation and the amount of the liability can be reliably estimated.
Provisions for restructuring are recognised when the Group has set up a detailed formal plan for restructuring and has no realistic possibility of withdrawing from these obligations.
Provisions for onerous contracts are recognised when the expected benefits from a contract are lower than the unavoidable cost of meeting the obligations under the contract. The provision is stated at the lower of the net cost of continuing with the contract and the cost of terminating the contract, i.e. a possible indemnity or fine for breach or non-fulfilment of contract.
Provisions for warranties are recognised when the related goods or services are sold. The amount recognised is based on historical warranty data.
Financial liabilities under contracts are recognised if a resulting claim can be made against DAIG. Financial liabilities are derecognised when DAIG's obligations specified in the contract expire or are discharged or cancelled.
Loans bearing no interest or interest below market rates in return for occupancy rights at rents below the prevailing market rates are recorded at present value.
Liabilities from finance leases are recognised at the fair value of the leased object or the lower present value of the minimum lease payments.
ment
a g e m
With the exception of derivative financial instruments and financial liabilities arising from binding share purchase offers to minority shareholders, financial liabilities are shown at amortised cost using the effective interest method.
Financial liabilities arising from binding share purchase offers to minority shareholders are measured at fair value. Fair value is determined using mathematical financial models, e.g. the income capitalisation method; if the purchase price offered for the shares is higher than the fair value, the purchase price is recognised.
Debt discounts and debt issue costs are directly allocated to financial liabilities.
All derivative instruments, irrespective of the purpose or the intended use, are initially accounted for at their fair values as assets or liabilities in the balance sheet. The fair values of the derivative financial instruments are calculated using standard market valuation methods for such instruments on the basis of the market data available on the valuation date. The fair values of instruments which are used to hedge interest rate risks are determined by discounting future cash flows using market interest rates over the remaining term of the instruments.
With derivatives that are not designated as a hedging instrument, changes in the fair value are recorded in profit or loss.
With derivatives designated as hedging instruments, the recording of changes in the fair value depends on the type of hedge:
With a fair value hedge, the changes in the fair value of the derivative financial instruments and of the underlying hedged items attributable to the hedged risk are recognised in the income statement.
With a cash flow hedge, the changes in fair value of the derivative hedging instrument are recognised in equity to the extent that the hedge is effective. Amounts accumulated in equity are recycled in the income statement at the same time the underlying hedged item affects net income. To the extent that the hedge is ineffective, the change in fair value is immediately recognised in profit or loss.
The companies of DAIG receive grants from public authorities in the form of construction subsidies, expenses subsidies, expenses loans and low-interest loans.
Government grants are regularly recorded as income over the periods necessary to match them with the related costs which they are intended to compensate.
Construction cost subsidies are, where they relate to construction measures, deducted from the construction costs and amortised as income over the useful life of the relevant assets. Construction cost subsidies relating to maintenance work which cannot be capitalised are immediately recognised in income.
Expenses subsidies granted in the form of rent, interest and other expenses subsidies are recorded as income and shown within other income from property management.
The low-interest loans are grants from public authorities, which are recorded at net present value. The difference between nominal value and net present value is recognised in income over the maturity term of the corresponding loans.
A contingent liability is a possible obligation towards third parties that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events for which an outflow of resources is not probable or the amount of which cannot be estimated with sufficient reliability. According to IAS 37 "Provisions, Contingent Liabilities and Contingent Assets", contingent liabilities are not recognised.
If the carrying amount of a non-current asset or a disposal group is expected to be recovered primarily through a sale transaction rather than through continuing use, the non-current asset or disposal group is classified as held for sale. The non-current asset or the disposal group must be available for immediate sale and the sale must be highly probable.
Immediately before classification as held for sale, the carrying amounts of the non-current assets (and all assets and liabilities of a disposal group) are measured in accordance with applicable IFRSs. Upon initial classification as held for sale, non-current assets and disposal groups are recognised at the lower of carrying amount and fair value less costs to sell.
Non-current assets that are classified as held for sale or are part of a disposal group held for sale are not depreciated; however, interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are recognised.
A discontinued operation is a component of an entity which represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, is part of a single, coordinated plan to dispose of a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale.
The comparative income statement is restated as if the operation had been discontinued from the start of the comparative period.
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and contingent liabilities at the balance-sheet date as well as reported amounts of income and expenses during the reporting period. These estimates and assumptions mainly relate to the uniform definition of useful lives, the assumptions made on the value of land and buildings, the recognition and measurement of provisions as well as the realisation of future tax benefits. The actual amounts may differ from the estimates as the business environment may develop differently than assumed. In this case, the assumptions and, where necessary, the carrying amounts of the assets or liabilities affected are adjusted accordingly.
aa g e ment
m
54
Assumptions and estimates are reviewed on an ongoing basis and are based on experience and other factors, including expectations regarding future events which appear reasonable under the given circumstances.
The estimates and assumptions which may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities mainly relate to the determination of the fair value of investment properties.
The best evidence of fair value of investment properties is current prices in an active market for comparable properties. If, however, such information is not available, DAIG uses standard valuation techniques such as the income capitalisation method. In determining the fair value by using the income capitalisation method, DAIG takes, among others, the following estimates and assumptions into consideration: the annual net rent, future anticipated rental income, void periods and administrative and maintenance expenses. The interest rate to determine the capitalised value is derived by using a rating system. DAIG regularly compares its valuations to actual market data as well as to actual transactions.
Furthermore, in preparing consolidated financial statements, DAIG needs to estimate its income tax obligations. This involves estimating the actual tax exposure as well as assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. Judgments are required in determining the consolidated provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each balance-sheet date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Judgment is required in determining the amounts of deferred tax assets and whether those assets can be utilised.
At the time when the consolidated financial statements were prepared, there was no reason to assume that the assumptions and best possible estimates made on the basis of the circumstances at the balance-sheet date would change materially.
Other judgments that DAIG's management has made in the process of applying the entity's accounting policies and that may have a significant effect on the amounts recognised in the consolidated financial statements include the following:
DAIG measures investment properties at fair value. If management had opted to use the cost model as permitted under IAS 40, the carrying amounts of the investment properties as well as the corresponding figures in the income statement would differ significantly.
DAIG recognises actuarial gains and losses according to the corridor method. The application of a different option to recognise actuarial gains and losses, as permitted under IAS 19, would lead to a significantly different carrying amount of the recognised provision for pensions and would also have a significant effect on the income statement.
The application of numerous new Standards, Interpretations and Amendments to existing Standards became mandatory for the 2008 financial year.
The following amended Standard became effective for the 2008 financial year but is not relevant to DAIG's operations:
• Amendments to IAS 39 "Financial Instruments: Recognition and Measurement" and IFRS 7 "Financial Instruments: Disclosures" (These Amendments relate to the retrospective reclassification of certain financial instruments.)
The following Interpretations became effective for the 2008 financial year but are not relevant to DAIG's operations:
Application of the following Standard was not yet mandatory for the 2008 financial year. However, DAIG opted for early application:
•Amendment to IAS 1 "Presentation of Financial Statements"
As part of the convergence efforts, the revised IAS 1 is to be further aligned to the US-GAAP standards and thus facilitate analysis and comparison of financial statements. The new Standard is to be adopted for financial years beginning on or after January 1, 2009. DAIG has already opted for early adoption of the Amendments to IAS 1 and included a statement of income and expenses recognised within equity in the consolidated financial statements.
m
ent r epo r t M
aa g e ment
d
Application of the following Standards, Interpretations and Amendments to existing Standards was not yet mandatory for the 2008 financial year. DAIG did not choose to apply them in advance, either. Their application will be mandatory for the financial years following the dates stated in the following table:
| to existing Standards | New Standards, Interpretations and Amendments | Effective date for DAIG |
|---|---|---|
| Amendments | ||
| IAS 23 | "Borrowing Costs" | Jan. 1, 2009 |
| IAS 27 | "Consolidated and Separate Financial Statements" | Jan. 1, 2010* |
| IAS 32 | "Financial Instruments: Presentation" and IAS 1 "Presentation of Financial Statements" |
Jan. 1, 2009 |
| IAS 39 | "Financial Instruments: Recognition and Measurement" | Jan. 1, 2010 |
| IFRS 1 | "First Time Adoption of IFRS: Restructuring " | Jan. 1, 2009* |
| IFRS 2 | "Share-Based Payment" | Jan. 1, 2009 |
| IFRS 3 | "Business Combinations" | Jan. 1, 2010* |
| Standards | ||
| IFRS 8 | "Operating Segments" | Jan. 1, 2009 |
| Interpretations | ||
| IFRIC 12 | "Service Concession Arrangements" | Jan. 1, 2008* |
| IFRIC 13 | "Customer Loyalty Programmes" | Jan. 1, 2009 |
| IFRIC 15 | "Agreements for the Construction of Real Estate" | Jan. 1, 2009* |
| IFRIC 16 | "Hedges of a Net Investment in a Foreign Operation" | Jan. 1, 2009* |
| IFRIC 17 | "Distributions of Non-Cash Assets to Owners" | Jan. 1, 2010* |
* not yet endorsed
The main change from the previous Standard is the removal of the option of immediately recognising as an expense borrowing costs that can be attributed directly to the acquisition, construction or production of a qualifying asset. In future, an entity is therefore required to capitalise such borrowing costs as part of the acquisition costs of the qualifying assets. The Amendments to IAS 23 are to be applied to financial years beginning on or after January 1, 2009. The changes to IAS 23 are not expected to have any effect on the consolidated financial statements of DAIG.
Amendments to IAS 27 "Consolidated and Separate Financial Statements"
The main Amendments to IAS 27 relate to the accounting for transactions between non-controlling and controlling shareholders as well as accounting on loss of control of a subsidiary. Transactions which do not result in loss of control are to be recorded as an equity transaction to not affect net income. Furthermore, the Standard regulates how a deconsolidation gain is to be calculated and how any remaining investment in the former subsidiary is to be measured. The Amendments to IAS 27 are to be applied to financial years beginning on or after July 1, 2009; earlier application is permitted. The changes to IAS 27 are not expected to have any effect on the consolidated financial statements of DAIG.
Amendments to IAS 32 "Financial Instruments: Presentation" and IAS 1 "Presentation of Financial Statements"
The Amendments relate essentially to questions regarding the demarcation between equity and borrowed capital. In particular, the revision now permits, under certain circumstances, the option of classifying puttable instruments as equity. The Amendments to IAS 32 are to be applied to financial years beginning on or after January 1, 2009. The changes to IAS 32 are not expected to have any effect on the consolidated financial statements of DAIG.
The revised IAS 39 stipulates how the basic principles of hedge accounting are to be applied in two special situations – the designation of inflation risks as an underlying transaction and the designation of a unilateral risk as an underlying transaction. The Amendments to IAS 39 are to be applied to financial years beginning on or after July 1, 2009, earlier application is permitted. The changes to IAS 39 are not expected to have any effect on the consolidated financial statements of DAIG.
The Amendments relate solely to the formal structure of IFRS 1, whilst the contents are unchanged. The new structure is to improve the clarity and applicability of the Standard. The revised IFRS 1 supersedes the current IFRS 1 and is to be applied to financial years beginning on or after January 1, 2009. The changes to IFRS 1 will not have any effect on the consolidated financial statements of DAIG.
The Amendments to IFRS 2 clarify that exercise conditions are only service and goal fulfilment conditions. Furthermore, it is stipulated that the accounting rules on early termination of a plan apply regardless of whether the plan is terminated by the company or another party. The changes are to be applied retrospectively to financial years beginning on or after January 1, 2009. The changes to IFRS 2 are not expected to have any effect on the consolidated financial statements of DAIG.
The main changes include the accounting treatment of minority interests and the remeasurement, through profit or loss, of already existing shares at the time control was gained for successive company acquisitions as well as rules on the recognition of acquisition costs and acquisition-related costs. According to the revised IFRS 3, minority interests may be measured at fair value or as a proportionate share of net assets. The revised Standard is to be applied to financial years beginning on or after July 1, 2009. The changes to IFRS 3 are not likely to have any effect on the consolidated financial statements of DAIG.
IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of SFAS 131. The Standard requires a publicly traded company or, in the case of consolidated financial statements, a publicly traded parent company to adopt the "management approach" to reporting on the financial performance of its operating segments. Operating segments are defined by the Standard as components of an entity whose operating results are regularly reviewed by the entity's chief operating decision-maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. The Standard is to be applied to financial years beginning on or after January 1, 2009. The changes to IFRS 8 are not expected to have any effect on the consolidated financial statements of DAIG.
a g e ment
Service concessions are arrangements whereby a government or public sector entity grants contracts for the supply of public services to private-sector operators. IFRIC 12 specifies how service concession operators should apply existing IFRSs to account for the obligations they undertake and rights they receive under those service concession arrangements. The Interpretation is to be applied to financial years beginning on or after January 1, 2008. IFRIC 12 is not likely to have any effect on the consolidated financial statements of DAIG.
The Interpretation IFRIC 13 addresses the accounting for customer loyalty programmes which are operated by manufacturers or service providers themselves or by third parties. IFRIC 13 requires that the revenue from sales be divided into two components. One component relates to the current business which is generated by the award credits. The other component is the future business which results from the credits which the customers are to redeem. This component is to be deferred as a liability until the customers redeem the credits and the entity fulfils its obligation according to the customer loyalty programmes. IFRIC 13 is to be applied to financial years beginning on or after July 1, 2008. IFRIC 13 is not expected to have any effect on the consolidated financial statements of DAIG.
The aim of the Interpretation IFRIC 15 is to standardise accounting practice for the recognition of revenue among real estate developers for sales of units, such as apartments or houses, before construction is complete. IFRIC 15 defines criteria according to which accounting is to be performed either in accordance with IAS 11 "Construction Contracts" or in accordance with IAS 18 "Revenue". The Interpretation is to be applied to financial years beginning on or after January 1, 2009. IFRIC 15 is not likely to have any effect on the consolidated financial statements of DAIG.
The Interpretation IFRIC 16 deals with the clarification of issues connected with accounting for hedges of foreign currency risks within an entity or its foreign operations. IFRIC 16 regulates what is to be regarded as a risk when hedging a net investment in a foreign operation and where in the group the hedging instrument for reducing the risk may be held. The Interpretation is to be applied to financial years beginning on or after October 1, 2008. IFRIC 16 is not likely to have any effect on the consolidated financial statements of DAIG.
The Interpretation IFRIC 17 regulates how a company must measure assets other than cash which it transfers to the owners as a profit distribution. A dividend obligation is to be recognised if the dividend has been approved by the bodies responsible and is no longer at the discretion of the entity. This dividend obligation is to be recognised at the fair value of the net assets payable. The difference between the dividend obligation and the carrying amount of the asset payable is recognised in profit or loss. IFRIC 17 enters into effect for financial years beginning on or after July 1, 2009; earlier application is permitted. IFRIC 17 is not likely to have any effect on the consolidated financial statements of DAIG.
a
a
The income from property management breaks down as follows:
| P million | 2008 | 2007 |
|---|---|---|
| Rental income | 711.1 | 681.4 |
| Ancillary costs (charged) | 295.0 | 367.2 |
| Gross rental income | 1,006.1 | 1,048.6 |
| Other income from property management | 23.0 | 26.5 |
| Income from property management | 1,029.1 | 1,075.1 |
At e 295.0 million, the ancillary costs charged were well below the previous year's figure of e 367.2 million. After the optimisation of the billing processes, the ancillary costs from previous years still to be charged to the tenants were reduced at the beginning of 2007.
In 2008, a book gain of e 34.7 million (2007: e 67.0 million) was recorded from the sale of trading properties.
A book gain of e 16.1 million (2007: e 7.7 million) was realised from the disposal of investment properties.
Investment properties are measured according to the fair value model. That means that the carrying amount of investment properties is the fair value of those properties. Any gains or losses from a change in fair value are recognised in the income statement. The measurement of the investment properties led to a net valuation loss as at December 31, 2008 of e 479.9 million (2007: net gain of e 197.6 million). Further explanations on the measurement of investment properties are given under note (20) Investment properties.
Properties that are held for sale in the ordinary course of business are classified as trading properties and are shown within inventories. If the carrying amount exceeds the net realisable value, trading properties are written down to net realisable value item by item. In the financial year, impairment losses totalling e 29.8 million (2007: e 37.9 million) for several properties were recognised as an expense. Impairment losses of e 9.0 million (2007: e 1.3 million) performed in prior periods were reversed. Before the retransfer of trading properties to investment properties, a fair value adjustment on these properties is performed to affect net income. The fair value adjustment on trading properties transferred to investment properties amounted to e 72.9 million in 2008 (2007: e 37.4 million).
| P million | 2008 | 2007 |
|---|---|---|
| Expenses for ancillary costs | 316.2 | 383.9 |
| Expenses for maintenance and modernisation | 118.0 | 119.9 |
| Other cost of purchased goods and services | 56.8 | 58.8 |
| 491.0 | 562.6 |
The sharp decrease in the expenses for ancillary costs mainly results from the optimisation of the billing processes (see note [6] Income from property management).
| P million | 2008 | 2007 |
|---|---|---|
| Wages and salaries | 119.0 | 84.7 |
| Social security, pensions and other employee benefits | 15.8 | 18.7 |
| 134.8 | 103.4 |
Personnel expenses contain costs for restructuring measures, pre-retirement part-time work arrangements and other severance payments totalling e 35.2 million (2007: e 6.1 million).
The personnel expenses include e 2.4 million (2007: e 2.7 million) for the Long Term Incentive Plan (LTIP) (see note [27] Provisions). The obligations towards members of the management for benefits under LTIP were assumed by Monterey Holdings I S.à.r.l., Luxembourg, (see note [40] Related party transactions).
In the year under review, employers' contributions to the statutory pension insurances totalling e 7.2 million (2007: e 7.2 million) were paid.
As at December 31, 2008, 1,302 people (2007: 1,406) were employed at DAIG. On an annual average, 1,322 people (2007: 1,390) were employed. The figures do not include apprentices and trainees.
Amortisation and impairments of intangible assets totalled e 3.2 million (2007: e 2.5 million). Of this figure, capitalised customer bases accounted for e 1.6 million (2007: e 1.5 million) and impairments of concessions, industrial rights, licences and similar rights for e 0.6 million. Depreciation and impairments of property, plant and equipment amounted to e 5.3 million (2007: e 2.4 million). Of this figure, impairments of owner-occupied real estate accounted for e 4.0 million.
| P million | 2008 | 2007 |
|---|---|---|
| Income from compensation paid and cost reimbursements | 19.4 | 13.2 |
| Income from the reversal of provisions | 14.9 | 23.1 |
| Income from the reversal of impairment losses | 1.0 | 3.5 |
| Recognition of negative goodwill | - | 7.8 |
| Other | 21.5 | 14.3 |
| 56.8 | 61.9 |
Income from compensation paid and cost reimbursements includes e 9.7 million in compensation paid by insurance companies (2007: e 9.0 million).
The other operating expenses break down as follows:
| P million | 2008 | 2007 |
|---|---|---|
| Auditors' and consultants' fees | 27.4 | 16.5 |
| Impairment losses on receivables | 11.0 | 15.9 |
| Rents, leases, ground rents | 9.7 | 11.5 |
| IT and administrative services | 4.8 | 5.7 |
| Surveying costs | 2.3 | 1.3 |
| Legal and notary costs | 2.1 | 4.3 |
| Advertising costs | 1.9 | 7.1 |
| Sales incidentals | 1.4 | 4.2 |
| Other | 30.4 | 50.5 |
| 91.0 | 117.0 |
The increase in the auditors' and consultants' fees compared with the previous year is mainly due to the consultancy services provided in connection with the planned reorganisation of the company from 2009.
| P million | 2008 | 2007 |
|---|---|---|
| Income from other investments | 1.9 | 1.9 |
| Income from non-current securities and non-current loans | 1.9 | 1.9 |
| Other interest and similar income | 17.8 | 26.7 |
| 21.6 | 30.5 |
ment
a g e m
The financial expenses of e 376.6 million (2007: e 361.9 million) mainly relate to interest expense on financial liabilities measured at amortised cost.
Interest expense contains interest accretion to provisions, thereof e 12.2 million (2007: e 10.7 million) relating to provisions for pensions and e 3.8 million (2007: e 1.7 million) relating to miscellaneous other provisions.
Furthermore, a e 9.2 million addition of accrued interest concerning the obligation to pay lumpsum tax on the previously untaxed so-called EK 02 amounts is included in financial expenses.
Derivatives were measured at their fair value. To the extent that the hedge was ineffective, the change in the fair value of e 6.5 million was recognised as an increase (2007: e 0.9 million as a reduction) in interest expense.
A reconciliation of net interest to net interest from non-derivative financial instruments is shown in the table below:
| P million | 2008 | 2007 |
|---|---|---|
| Interest income | 17.8 | 26.7 |
| Interest expense | -376.6 | -361.9 |
| Net interest | -358.8 | -335.2 |
| less | ||
| Interest income from provisions for pensions in acc. with IAS 19 | 12.2 | 10.7 |
| Interest income from provisions in acc. with IAS 37 | 3.1 | 1.4 |
| Interest income from the measurement of derivatives at fair value in acc. with IAS 39 |
6.5 | -0.9 |
| Net interest from non-derivative financial instruments | -337.0 | -324.0 |
The net interest from non-derivative financial instruments breaks down into the measurement categories in accordance with IAS 39 as follows:
| P million | Measurement cat egory in acc. with IAS 39* |
2008 | 2007 |
|---|---|---|---|
| Loans and receivables | LaR | 17.1 | 26.3 |
| Available-for-sale financial assets | AfS | 0.1 | 0.1 |
| Financial liabilities measured at amortised cost | FLAC | -354.2 | -350.4 |
| -337.0 | -324.0 |
* See note (33) Additional disclosures on financial instruments.
| P million | 2008 | 2007 |
|---|---|---|
| Current income tax | 7.8 | 24.2 |
| Lump-sum taxation of the previously untaxed so-called EK 02 amounts |
0.5 | 197.8 |
| Aperiodical current income tax | -25.1 | -0.3 |
| Deferred income tax | -91.0 | 27.7 |
| -107.8 | 249.4 |
The current tax expense is determined on the basis of the taxable income for the reporting period. For the 2008 financial year, the combined tax rate of corporate income tax and solidarity surcharge is 15.8% of earnings (2007: 26.4%). Including German municipal trade tax at nearly 15.8% (in consideration of deductibility for corporate income tax purposes), the combined tax rate is 31.6% in 2008 (2007: 40%).
The enactment of the 2008 Annual Tax Act (Jahressteuergesetz 2008) led to lump-sum taxation of the previously untaxed so-called EK 02 amounts at a tax rate of 3%. The resultant tax is payable as from 2008 in ten equal annual instalments.
Deferred taxes are the expected tax charges or benefits arising from the difference between the carrying amounts of assets and liabilities in the consolidated financial statements and the tax bases used to calculate the taxable income (tax balance sheet).
Deferred tax liabilities are generally recorded for all taxable temporary differences. Deferred tax assets are recognised only to the extent that the realisation of the respective benefit is probable. Based on the profits of the past and the expected profits in the foreseeable future, allowances are only accounted for if this criterion is not fulfilled.
Therefore, no deferred tax assets were recognised in the balance sheet for deductible temporary differences (excluding loss carryforwards) totalling e 43.3 million (2007: e 44.2 million) and no deferred trade tax for deductible temporary differences of e 103.9 million (2007: e 108.2 million) as their future utilisation is unlikely.
Such deferred tax assets and liabilities are not recognised where the temporary difference arises from initial recognition of goodwill in connection with a business combination or the initial recognition (other than a business combination) of other assets and liabilities in a transaction which neither affects taxable income nor net income.
Deferred taxes are determined using the combined tax rate of corporate income tax and trade tax of 31.6% (2007: 31.6%). The effects of the extended trade tax exemption ("erweiterte Grundstückskürzung") in accordance with the German Trade Tax Act were taken into consideration in the measurement of deferred taxes.
In Germany, according to the rules on loss carryforwards, unutilised loss carryforwards may be partly or completely lost – depending on the extent of share transfers. Furthermore, tax loss carryforwards for corporate income tax and trade tax purposes may only be offset against taxable income of e 1.0 million and 60% of taxable income exceeding e 1.0 million.
Deferred taxes on loss carryforwards are recognised as assets provided that it is likely that there will be sufficient income in the following years for those loss carryforwards to be utilised and loss carryforwards have not lapsed as a result of share transfers.
As at December 31, 2008, the unutilised corporate income tax loss carryforwards totalled e 978.0 million (2007: e 885.0 million) and the unutilised trade tax loss carryforwards amounted to e 495.3 million (2007: e 469.0 million), for which deferred tax assets have been recognised since their realisation is probable.
The measurement of deferred tax assets on tax loss carryforwards in 2008 led to tax income of e 1.1 million (2007: tax expense of e 69.1 million – mainly due to the changes in the rules on loss carryforwards as a result of the 2008 Business Tax Reform (Unternehmensteuerreformgesetz).
Tax reductions due to the utilisation of tax loss carryforwards for which no deferred tax assets existed led in the 2008 financial year to a reduction in the tax burden of e 2.0 million (2007: e 0.5 million).
No deferred taxes were recognised in the balance sheet for unutilised corporate income tax loss carryforwards of e 941.3 million (2007: e 817.4 million). These loss carryforwards relate exclusively to German companies and, under current tax law, there are no restrictions either with regard to time or the amount of the loss carryforward. In addition, there are further trade tax loss carryforwards of e 467.7 million (2007: e 456.5 million) which have an unlimited carryforward and which have not led to deferred tax assets.
A reconciliation between actual income taxes and expected tax expense which is the product of the accounting profit from continuing operations multiplied by the average tax rate applicable in Germany is shown in the table below. The combined tax rate for 2008 of 31.6% (2007: 40.0%) results from corporate income tax of 15.0% (2007: 25.0%) plus a solidarity surcharge of 5.5% and the average trade tax.
| P million | 2008 | 2007 |
|---|---|---|
| Operating profit before income taxes | -371.4 | 290.8 |
| Income tax rate of the company in % | 31.6 | 40.0 |
| Expected tax expense | -117.4 | 116.3 |
| Trade tax effects | -0.2 | -15.0 |
| Non-deductible operating expenses | 3.4 | 10.4 |
| Tax-free income | -0.1 | -0.3 |
| Effect of change in tax rate | - | -140.0 |
| Lump-sum taxation of the untaxed so-called EK 02 amounts | 0.5 | 197.8 |
| Change in the deferred tax assets on loss carryforwards | -1.1 | 69.1 |
| Additional losses for which no deferred tax asset is recognised | 32.9 | 13.0 |
| Utilisation of loss carryforwards without deferred tax assets | -2.0 | -0.5 |
| Effects of taxes from prior years | -25.1 | -0.3 |
| Tax rate differences at foreign Group companies | - | 0.4 |
| Tax-free effect from first-time consolidations | - | -3.1 |
| Other (net) | 1.3 | 1.6 |
| Actual income taxes | -107.8 | 249.4 |
| Actual tax rate in % | 29.0 | 85.8 |
The deferred taxes refer to temporary differences in balance sheet items and unutilised loss carryforwards as follows:
| P million | Dec. 31, 2008 | Dec. 31, 2007 |
|---|---|---|
| Investment properties | 23.1 | 2.6 |
| Property, plant and equipment | 0.6 | 0.1 |
| Inventories | 28.0 | 37.8 |
| Prepaid expenses | 8.8 | 9.4 |
| Provisions for pensions | 18.2 | 20.7 |
| Other provisions | 11.7 | 12.9 |
| Liabilities | 22.9 | 24.6 |
| Deferred income | 0.5 | - |
| Unutilised loss carryforwards | 10.1 | 12.6 |
| Deferred tax assets | 123.9 | 120.7 |
aa g e ment
| P million | Dec. 31, 2008 | Dec. 31, 2007 |
|---|---|---|
| Intangible assets | 3.1 | 3.5 |
| Investment properties | 465.9 | 517.7 |
| Property, plant and equipment | 0.3 | 0.9 |
| Inventories | 80.0 | 94.3 |
| Financial assets | 0.2 | - |
| Receivables | - | 1.0 |
| Prepaid expenses | 0.2 | - |
| Other provisions | 8.4 | 8.9 |
| Liabilities | 75.0 | 99.2 |
| Deferred income | 6.1 | 6.1 |
| Deferred tax liabilities | 639.2 | 731.6 |
| Net deferred tax liabilities | 515.3 | 610.9 |
Deferred tax assets and liabilities are netted against each other when the same company and the same tax authority are involved and the realisation period is the same. As a result, the following deferred tax assets and liabilities are stated in the balance sheet as at December 31, 2008:
| P million | Dec. 31, 2008 | Dec. 31, 2007 |
|---|---|---|
| Deferred tax assets | 13.2 | 16.5 |
| Deferred tax liabilities | 528.5 | 627.4 |
| Net deferred tax liabilities | 515.3 | 610.9 |
The change in deferred taxes in the reporting period recognised directly in equity amounts to - e 4.2 million (2007: e 0.8 million).
Deferred tax liabilities on unremitted earnings of subsidiaries are not recognised as they are expected to be permanently invested or are not subject to taxation (outside basis differences).
| P million | Concessions, industrial rights, licences and similar rights |
Self developed software |
Customer relation ships and similar rights |
Total |
|---|---|---|---|---|
| Cost | ||||
| Balance on Jan. 1, 2008 | 7.5 | 1.2 | 15.8 | 24.5 |
| Additions | 0.8 | 2.8 | - | 3.6 |
| Disposals | -0.9 | - | - | -0.9 |
| Balance on Dec. 31, 2008 | 7.4 | 4.0 | 15.8 | 27.2 |
| Accumulated amortisation | ||||
| Balance on Jan. 1, 2008 | 5.9 | 0.2 | 4.7 | 10.8 |
| Amortisation in 2008 | 0.7 | 0.3 | 1.6 | 2.6 |
| Impairment | 0.6 | - | - | 0.6 |
| Disposals | -0.8 | - | - | -0.8 |
| Balance on Dec. 31, 2008 | 6.4 | 0.5 | 6.3 | 13.2 |
| Carrying amounts | ||||
| Balance on Dec. 31, 2008 | 1.0 | 3.5 | 9.5 | 14.0 |
| Cost | ||||
| Balance on Jan. 1, 2007 | 7.5 | - | 15.8 | 23.3 |
| Additions | 0.5 | 1.2 | - | 1.7 |
| Disposals | -0.5 | - | - | -0.5 |
| Balance on Dec. 31, 2007 | 7.5 | 1.2 | 15.8 | 24.5 |
| Accumulated amortisation | ||||
| Balance on Jan. 1, 2007 | 5.6 | - | 3.2 | 8.8 |
| Amortisation in 2007 | 0.8 | 0.2 | 1.5 | 2.5 |
| Disposals | -0.5 | - | - | -0.5 |
| Balance on Dec. 31, 2007 | 5.9 | 0.2 | 4.7 | 10.8 |
| Carrying amounts | ||||
| Balance on Dec. 31, 2007 | 1.6 | 1.0 | 11.1 | 13.7 |
df i n
a nci al st
at e m
ents ma
a g e m
ent r epo r t M
aa g e ment
| P million | Owner occupied properties |
Technical equipment, plant and machinery |
Other equipment, fixtures, furniture and office equipment |
Construction in progress, pre-construc tion expenses |
Total |
|---|---|---|---|---|---|
| Cost | |||||
| Balance on Jan. 1, 2008 | 13.5 | 0.9 | 23.3 | - | 37.7 |
| Additions | - | - | 0.7 | - | 0.7 |
| Disposals | - | - | -5.1 | - | -5.1 |
| Transfers | 0.5 | - | -0.1 | - | 0.4 |
| Balance on Dec. 31, 2008 | 14.0 | 0.9 | 18.8 | - | 33.7 |
| Accumulated depreciation | |||||
| Balance on Jan. 1, 2008 | 0.4 | 0.8 | 19.4 | - | 20.6 |
| Depreciation in 2008 | 0.2 | 0.0 | 1.1 | - | 1.3 |
| Impairment | 4.0 | - | - | - | 4.0 |
| Disposals | - | 0.0 | -5.0 | - | -5.0 |
| Transfers | -0.1 | 0.1 | 0.0 | - | 0.0 |
| Balance on Dec. 31, 2008 | 4.5 | 0.9 | 15.5 | - | 20.9 |
| Carrying amounts | |||||
| Balance on Dec. 31, 2008 | 9.5 | 0.0 | 3.3 | - | 12.8 |
| Cost | |||||
| Balance on Jan. 1, 2007 | 13.5 | 0.8 | 25.8 | 1.1 | 41.2 |
| Additions | 0.0 | - | 0.8 | - | 0.8 |
| Disposals | - | 0.0 | -3.2 | 0.0 | -3.2 |
| Transfers | - | 0.1 | -0.1 | -1.1 | -1.1 |
| Balance on Dec. 31, 2007 | 13.5 | 0.9 | 23.3 | 0.0 | 37.7 |
| Accumulated depreciation | |||||
| Balance on Jan. 1, 2007 | 0.2 | 0.7 | 20.4 | 0.8 | 22.1 |
| Depreciation in 2007 | 0.2 | 0.1 | 2.2 | 0.0 | 2.5 |
| Disposals | 0.0 | 0.0 | -3.2 | 0.0 | -3.2 |
| Transfers | - | 0.0 | 0.0 | -0.8 | -0.8 |
| Balance on Dec. 31, 2007 | 0.4 | 0.8 | 19.4 | 0.0 | 20.6 |
| Carrying amounts | |||||
| Balance on Dec. 31, 2007 | 13.1 | 0.1 | 3.9 | 0.0 | 17.1 |
As at December 31, 2008, carrying amounts of owner-occupied properties amounting to e 6.7 million (2007: e 10.3 million) are encumbered with land charges in favour of different lenders.
| P million | |
|---|---|
| Balance on Jan. 1, 2008 | 7,870.6 |
| Additions | 75.9 |
| Capitalised modernisation costs | 66.6 |
| Transfer from advance payments | 1.0 |
| Transfer to trading properties | -43.2 |
| Transfer from trading properties | 312.1 |
| Transfer to property, plant and equipment | -0.6 |
| Disposals | -22.3 |
| Fair value adjustment | -479.9 |
| Balance on Dec. 31, 2008 | 7,780.2 |
| Balance on Jan. 1, 2007 | 6,908.6 |
| Additions due to changes in scope of consolidation | 188.9 |
| Additions | 365.6 |
| Capitalised modernisation costs | 9.2 |
| Transfer to trading properties | -10.3 |
| Transfer from trading properties | 236.7 |
| Transfer from property, plant and equipment | 0.3 |
| Disposals | -26.0 |
| Fair value adjustment | 197.6 |
The additions of e 75.9 million (2007: 365.6 million) relate to the acquisition of a total of 1,364 residential units (2007: 4,659) and 11 commercial properties.
Due to a change in the assessment of their marketability, properties totalling e 312.1 million (2007: e 236.7 million) were transferred from trading properties to investment properties.
The investment properties include leased assets which are defined as finance leases according to IAS 17 and are treated as if they were the Group's economic property. They amount to e 32.2 million (2007: e 32.1 million) and relate to the Spree-Bellevue (Spree-Schlange) property in Berlin. The property has been leased from DB Immobilienfonds 11 Spree Schlange von Quistorp KG until 2044. The leasing agreement includes an obligation to pay compensation for loss of use as agreed by contract. At the end of 2028, each fund subscriber is entitled to return his share to the property fund at a fixed redemption price. If all of the fund investors make use of this option, DAIG is obliged to acquire the property at a fixed purchase price after deduction of borrowings. If more than 75% of the shares are returned in this way, DAIG has a call option for the purchase of all fund shares. Details of minimum lease payments are given under note (29) Other financial liabilities.
aa g e ment The carrying amounts of the investment properties are predominantly encumbered with land charges in favour of different lenders; also see note (28) Trade payables.
The long-term leases on commercial properties are non-cancellable operating leases. The minimum future leasing receipts from these leases are due as follows:
| P million | 2008 | 2007 |
|---|---|---|
| Total minimum lease payments | 13.2 | 23.5 |
| Due within one year | 1.6 | 5.7 |
| Due in 1 to 5 years | 9.2 | 11.1 |
| Due after 5 years | 2.4 | 6.7 |
As from 2008, the minimum lease payments of Viterra Logistikimmobilien GmbH & Co. KG, Essen, are not included as the company's commercial properties were sold in December 2007.
The fair values of the real estate portfolios were determined in accordance with IAS 40.
DAIG performed an internal valuation to determine the fair values of its entire stock of residential buildings, small commercial units, garages and parking spaces as well as undeveloped land as at December 31, 2008.
In 2007, the sales strategy was already adapted when it was decided not to include any more properties in the privatisation programmes for conversion into owner-occupier apartments. In line with this strategy, we have allocated residential units which we had classified as potential properties for privatisation in prior years to the property management portfolio and not to the privatisation portfolio as in 2007. The properties affected were therefore no longer measured using the comparative method but, as all other property management units, using the income capitalisation method (see below). As a result of this change, the fair value decreased by approx. e 520.0 million.
The following criteria were applied in the valuation of the different segments of real estate:
The value of the entire portfolio of residential properties was determined on the basis of the International Valuation Standard Committee's definition of market value. It is not permitted to take into account either portfolio premiums and discounts, which can be observed when portfolios are sold in market transactions, or time restrictions in the marketing of individual properties. The determination of fair values by DAIG thus complies with the IFRS regulations.
In line with the DAIG business model, a distinction was made between properties to be managed and properties to be sold individually (privatisation portfolio):
DAIG considers properties which are being sold individually to be part of the privatisation portfolio. Single-family houses in our portfolio which, in DAIG's opinion, are basically suitable for being sold individually, are also included in the privatisation portfolio. First, all buildings were valued according to a rating system with regard to their quality, their market attractiveness and their macro-location. The aspects considered in assessing the quality of the buildings included their age and an assessment of the technical condition of the buildings. This assessment was based on maintenance reports compiled by external companies for which the properties were inspected on a regular basis. The attractiveness was assessed on the basis of various factors including in particular the micro-location of the buildings, how built-up the area is and the average size of the apartments (living area and the number of rooms). The quality of the macro-location was derived from the purchasing power index in the particular postal code district and validated using location ratings provided by Feri EuroRatings Services AG.
For the privatisation portfolio, DAIG assumed that there are a certain number of apartments which, depending on the attractiveness, quality and macro-location, cannot be sold directly to tenants, owner-occupiers and capital investors and that these remaining apartments can only be sold at a discounted price in small packages (remainder share). The value of the privatisation share per building was derived from comparable figures based on the company's own sales and extensive market research. The value of the remainder share was determined according to a method similar to the income capitalisation method and specially tailored to the product.
The property management portfolio was valued using the income capitalisation method. The basis of the valuation is the net annual income per building which results from the annual net rent minus non-allocable ancillary costs, maintenance expenses and administrative expenses in accordance with the II. Berechnungsverordnung (German Regulation on Calculations for Residential Buildings in Accordance with the Second Housing Construction Law) as well as any ground rent.
The modernisation work performed on the portfolio of residential units in 2007 and 2008 was included in the valuations by decreasing the current maintenance expenses and discounts on the capitalised interest rates.
Void periods were taken into consideration on the basis of assumed vacancy and re-letting scenarios and by applying market rents.
The capitalised value of potential yield returns was determined by capitalising the annual net yield at building level. The capitalised interest rates applied were derived from the current German real estate market and allocated to the buildings with the aid of the previously determined ratings. Special considerations such as long-term restricted rents, expiring rent restrictions or mining subsidence damage were allowed for by means of premiums and discounts.
The commercial properties in the portfolio are mainly small commercial units for the supply of the local residential area. They were also measured using the income capitalisation method. Amongst others different cost approaches were used to those for residential properties and the capitalised interest rates were adjusted to reflect the market specifics.
Undeveloped plots of land were measured according to their state of development, the likelihood of development and the local market situation on the basis of derived land guide prices.
aa g e ment
a nci al st
The fair value of the real estate portfolio of residential buildings, small commercial units, garages, parking spaces and undeveloped land of DAIG as at December 31, 2008 was approx. e 9,819.8 million (2007: e 10,270.0 million). The decrease in the fair value compared with the previous year is a result of the aforementioned regrouping of privatisation potential.
The fair value of the real estate portfolio by region is as follows:
| Residential units | Other units | Fair values in P million | |||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||
| Regional subsidiary | |||||||
| Deutsche Annington Nord GmbH | 19,637 | 19,878 | 4,932 | 4,975 | 986.8 | 989.5 | |
| Deutsche Annington Ost GmbH | 16,581 | 17,335 | 2,898 | 2,964 | 751.3 | 778.0 | |
| Deutsche Annington Rheinland GmbH | 23,893 | 24,086 | 8,099 | 8,110 | 1,509.5 | 1,523.5 | |
| Deutsche Annington Ruhr GmbH | 37,088 | 36,844 | 6,515 | 6,452 | 1,636.2 | 1,728.6 | |
| Deutsche Annington Süd GmbH | 16,752 | 16,949 | 8,098 | 8,169 | 1,128.0 | 1,146.8 | |
| Deutsche Annington Süd-West GmbH | 32,062 | 31,928 | 8,307 | 8,031 | 2,011.4 | 1,996.0 | |
| Deutsche Annington Westfalen GmbH | 43,205 | 43,201 | 6,374 | 6,465 | 1,725.6 | 2,024.7 | |
| Undeveloped land | 71.0 | 82.9 | |||||
| 189,218 | 190,221 | 45,223 | 45,166 | 9,819.8 | 10,270.0 | ||
| thereof | |||||||
| Investment properties | 7,780.2 | 7,870.6 | |||||
| Trading properties and owner-occupied properties |
2,039.6 | 2,399.4 |
Since the vast majority of the large commercial units have been sold, the fair value of the remaining units is shown within the regional portfolios (fair value 2008: e 6.8 million).
When acquiring 13,895 WohnBau Rhein-Main AG apartments in 1999, a number of commitments to Deutsche Post and Deutsche Post Wohnen were made, including an undertaking by the then Viterra that it would serve no notice to vacate for personal use until 2009. Tenants and their spouses may not be served notice to vacate for personal use if they are aged 60 or over. Furthermore, when residential units are converted into owner-occupier apartments, there is an obligation to give tenants first right of refusal. Of the 13,895 residential units originally acquired, 10,106 were still in the residential portfolio of DAIG as at December 31, 2008.
The 63,626 residential units which DAIG acquired from Bundeseisenbahnvermögen in 2000 are subject to the following restrictions on sale: Not more than 50% may be sold within the first ten years with the exception of housing stock in the new German states. If residential units in the new German states are sold, 25% of the proceeds must be paid to Deutsche Bundesbahn and a further 25% (less sales costs) must be invested in the modernisation and maintenance of the remaining housing stocks in the new German states. Furthermore, residential property used as such by a specified category of people may only be sold to them or to people named by them. Multi-family houses and owner-occupier apartments may only be sold to parties other than the specified category of people if more than half of the apartments in a block are already rented by tenants who do not fall under the specified category. Of the 63,626 residential units originally acquired, 44,970 were still in the residential portfolio of DAIG as at December 31, 2008.
The 10,413 Frankfurter Siedlungsgesellschaft mbH residential units acquired from the German federal government in 2001 and 2002 are subject to the restriction on sale that an annual sales programme must be agreed with the government. In addition, until November 2011, residential units must first be offered for sale to the tenant. Residential units may only be sold to persons other than the tenant if 50% of the residential units in a building have previously been sold to tenants or owner-occupiers (vacant residential units). Tenants aged 65 or over whose residential unit is sold have a right to live in it for life. Of the 10,413 residential units originally acquired, 7,662 were still in the residential portfolio of DAIG as at December 31, 2008.
In 2006/2007, DAIG acquired various housing stocks (2,773 residential units) from Corpus Immobiliengruppe and in particular entered into the following social obligations: Tenants and their spouses who have rented an apartment at various contractually stipulated times in the past may not be served notice to vacate for personal use if they are aged 60 or over. No notice may be served to other tenants until after certain contractually fixed dates. If the apartments are sold, the tenants are to be given first right of refusal until after certain contractually fixed dates. Of the 2,773 residential units originally acquired, 2,754 were still in the residential portfolio of DAIG as at December 31, 2008.
In connection with the issuing of REF notes to German Residential Asset Note Distributor plc. (GRAND) in 2006, DAIG is obliged to use a certain part of the proceeds from the disposal of properties for the repayment of these REF notes. Overall, DAIG has to ensure that the aggregated disposal proceeds less any sales costs cover these fixed repayments. If DAIG does not meet this requirement, it has to fund the difference out of its own cash. If DAIG is not able to fund this shortfall, it is not allowed to sell any further properties.
ment
a g e m
| Dec. 31, 2008 | Dec. 31, 2007 | |||
|---|---|---|---|---|
| P million | non-current | current | non-current | current |
| Other investments | 1.7 | - | 1.7 | - |
| Loans to related companies | 34.7 | - | 34.9 | - |
| Long-term securities | 2.7 | - | 2.3 | - |
| Other long-term loans | 5.4 | - | 0.7 | - |
| Derivatives | - | - | 6.4 | - |
| Restricted cash | 2.1 | - | 2.1 | - |
| Dividends from other investments | - | 1.7 | - | 1.7 |
| 46.6 | 1.7 | 48.1 | 1.7 |
The carrying amount of financial assets is the maximum risk of loss.
The loans to related companies not yet due relate to a loan to the property fund DB Immobilienfonds 11 Spree Schlange von Quistorp KG.
The increase in other long-term loans compared with 2007 is partly due to the granting of an interest-free loan to Wohnimmobilien-Kooperation Deutsche Annington e.V., Düsseldorf. The loan is for a nominal amount of e 4.1 million and runs for 10 years. Initial recognition at fair value led to discounting of e 1.3 million.
Furthermore, B&O Service und Messtechnik AG, Bad Aibling, was granted a loan of e 2.0 million. The interest rate on the loan is 4%. To secure repayment, B&O has provided collateral in the form of an absolute, unconditional, time-unlimited bank guarantee of e 2.0 million.
The other long-term loans to employees are deducted from the salary pro rata temporis on the due date as part of payroll accounting.
Derivatives are explained in detail in note (35) Derivative financial instruments.
As part of financing, cash restrictions were imposed on DAIG in respect of credit balances with banks totalling e 2.1 million (2007: e 2.1 million). Bank deposits to which cash restrictions apply for at least twelve months after the balance-sheet date are stated as non-current financial assets.
| Dec. 31, 2008 | Dec. 31, 2007 | |||||
|---|---|---|---|---|---|---|
| P million | non-current current |
non-current | current | |||
| Advance payments | - | 0.5 | - | 1.0 | ||
| Insurance claims | 11.1 | 2.9 | 9.2 | 3.5 | ||
| Miscellaneous other assets | 13.6 | 13.7 | 13.3 | 16.7 | ||
| Prepaid expenses | 0.8 | 2.0 | 0.9 | 1.7 | ||
| 25.5 | 19.1 | 23.4 | 22.9 |
While the indirect obligation arising from pension obligations transferred to former affiliated companies of the Viterra Group is shown under provisions for pensions, a corresponding asset of e 11.3 million (2007: e 12.9 million) is shown under non-current miscellaneous other assets.
Furthermore, in 2008 non-current miscellaneous other assets included an amount of e 1.9 million owed by Monterey Holdings I S.à.r.l., Luxembourg; see also note (40) Related party transactions.
| P million | Dec. 31, 2008 | Dec. 31, 2007 |
|---|---|---|
| Trading properties | 1,625.2 | 1,910.3 |
| Ancillary costs | 294.3 | 288.5 |
| 1,919.5 | 2,198.8 |
The trading properties of DAIG developed as follows:
| P million | |
|---|---|
| Balance on Jan. 1, 2008 | 1,910.3 |
| Additions | 2.9 |
| Transfer from investment properties | 43.2 |
| Transfer to investment properties | -312.1 |
| Disposals | -71.2 |
| Value adjustments | 52.1 |
| Balance on Dec. 31, 2008 | 1,625.2 |
| Balance on Jan. 1, 2007 | 2,270.5 |
| Additions | 12.4 |
| Transfer from investment properties | 10.3 |
| Transfer to investment properties | -236.7 |
| Transfer from construction in progress | 0.3 |
| Disposals | -147.3 |
| Value adjustments | 0.8 |
The carrying amounts of the trading properties are predominantly encumbered with land charges in favour of different lenders; see note (29) Other financial liabilities.
For information on restraints on disposal of trading properties, see note (20) Investment properties.
at e m
ents ma
a g e m
ent r epo r t M
aa g e ment
The trade receivables break down as follows:
| Impaired | Not impaired | Carrying amount |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| past due by | |||||||||
| P million | Gross amount |
Impair ment losses |
neither impaired nor past due |
less than 30 days |
between 30 and 90 days |
between 91 and 180 days |
between 181 and 360 days |
more than 360 days |
Maximum risk of loss |
| Receivables from the sale of properties |
4.3 | -2.3 | 42.3 | 5.8 | 1.3 | 0.0 | 6.7 | 8.5 | 66.6 * |
| Receivables from property letting |
31.3 | -13.1 | 18.2 | ||||||
| Receivables from property management |
1.2 | 1.2 | |||||||
| Balance on Dec. 31, 2008 | 35.6 | -15.4 | 43.5 | 5.8 | 1.3 | 0.0 | 6.7 | 8.5 | 86.0 |
| Receivables from the sale of properties |
4.8 | -3.3 | 66.9 | 0.0 | 0.5 | 3.9 | 1.9 | 43.9 | 118.6 * |
| Receivables from property letting |
32.8 | -15.5 | 17.3 | ||||||
| Receivables from property management |
1.5 | 1.5 | |||||||
| Receivables from other supplies and services |
0.2 | 0.2 | |||||||
| Balance on Dec. 31, 2007 | 37.6 | -18.8 | 68.6 | 0.0 | 0.5 | 3.9 | 1.9 | 43.9 | 137.6 |
* The maximum risk of loss on the receivables from the sale of properties is limited to the margin and the transaction unwinding costs as the title to the properties remains with DAIG as security until receipt of payment.
The carrying amounts of current trade receivables correspond to their fair values.
As regards the trade receivables which are neither impaired nor past due, there was no indication on the balance-sheet date that the debtors would not meet their payment obligations.
The sharp decrease in total trade receivables which are all short-term to e 86.0 million (2007: e 137.6 million) is mainly due to amounts received from the sale of properties.
Receivables from the sale of properties arise in most cases on economic transfer of title. The due date of the receivable may, however, depend on the fulfilment of contractual obligations. A large number of purchase contracts provide for the purchase price to be deposited in an escrow account. Impairment losses up to the amount of the posted proceeds from sales are recorded for doubtful debts.
Receivables from property letting generally arise at the beginning of a month. Whilst an impairment loss was made on 25% of the outstanding rent receivables under existing rental contracts due at December 31, 2008, an impairment loss of the full amount of the outstanding rent receivables due under rental contracts which had ended by the balance-sheet date was made.
On the other hand, impairments of 12.5% are made on receivables from ancillary cost bills not yet due under existing rental contracts and impairments of 50% are incurred on receivables from ancillary cost bills not yet due under rental contracts which had ended by the balance-sheet date.
After considering the benefits and cost, no further breakdown of the receivables from property management and the receivables from other supplies and services by due dates has been made as this information is neither material nor relevant to the assessment of the credit risk.
| P million | Trade receivables |
|---|---|
| Impairment losses as at Jan. 1, 2008 | 18.8 |
| Addition | 7.9 |
| Utilisation | -11.2 |
| Reversal | -0.1 |
| Impairment losses as at Dec. 31, 2008 | 15.4 |
Impairment losses on trade receivables developed as follows:
No impairment losses were made on other financial receivables either in the reporting year or in the prior period.
The following table shows the expenses for the full derecognition of receivables as well as income from the receipt of derecognised receivables:
| P million | 2008 | 2007 |
|---|---|---|
| Expenses for the derecognition of receivables | 1.3 | 2.0 |
| Income from the receipt of derecognised receivables | 0.5 | 0.5 |
Cash and cash equivalents include cash on hand, cheques and deposits at banking institutions with an original term of up to three months totalling e 251.1 million (2007: e 363.5 million). Furthermore, the item contains marketable securities of e 2.4 million (2007: e 2.9 million).
The deposits at banking institutions include an amount of e 84.7 million (2007: e 124.2 million), which was pledged in connection with borrowings. Of these accounts, e 38.4 million (2007: e 66.4 million) are restricted. The marketable securities are also restricted with regard to their use.
a nci al st
at e m
ents ma
a g e m
ent r epo r t M
aa g e ment Bank deposits to which cash restrictions apply for at least twelve months after the balance-sheet date are stated as non-current financial assets.
The subscribed capital of Deutsche Annington Immobilien GmbH is unchanged at e 75,000 and has been fully paid in. Monterey Holdings I S.à.r.l., Luxembourg, is the parent company of DAIG. The subscribed capital is split into shares in the nominal amounts of e 25,000, e 26,000, e 23,250 and e 750.
The capital reserve amounts to e 682.2 million and did not change during the 2008 financial year.
The other reserves contain cumulative changes in equity not affecting income. The hedge effective portion of the cumulative net change in the fair value of cash flow hedging instruments is shown within this reserve until the underlying hedged item affects net income. Furthermore, the other reserves include the cumulative net change in the fair value of available-for-sale financial assets until the asset is derecognised.
The development of the Group's equity is shown in the consolidated statement of changes in equity.
Shares of third parties in Group companies are shown under minority interests.
The aims of the DAIG capital management system are to:
As part of the opportunities and risk management of DAIG, the members of the management are given monthly reports on the development of results and the development of the Group's equity.
The equity situation of the subsidiaries is regularly examined.
| Dec. 31, 2008 | Dec. 31, 2007 | |||
|---|---|---|---|---|
| P million | non-current | current | non-current | current |
| Provisions for pensions and similar obligations | 263.4 | - | 268.4 | - |
| Provisions for taxes (current income taxes excl. deferred taxes) |
- | 97.1 | - | 133.6 |
| Other provisions | ||||
| Environmental remediation | 32.2 | 1.3 | 29.8 | 2.1 |
| Personnel cost (excluding restructuring) | 23.1 | 37.2 | 24.3 | 31.3 |
| Restructuring | - | 33.7 | - | 2.4 |
| Contractually agreed guarantees | 1.8 | 2.6 | 15.4 | 3.9 |
| Outstanding trade invoices | - | 17.3 | - | 17.4 |
| Follow-up costs from property sales | - | 2.4 | - | 2.7 |
| Miscellaneous other provisions | 14.4 | 38.5 | 20.7 | 66.2 |
| 71.5 | 133.0 | 90.2 | 126.0 | |
| 334.9 | 230.1 | 358.6 | 259.6 |
| P million | Jan. 1, 2008 |
Additions | Reversals | Change in scope of consolida tion |
Transfer carryover |
Interest portion |
Utilisa tion |
Dec. 31, 2008 |
|---|---|---|---|---|---|---|---|---|
| Other provisions | ||||||||
| Environmental remediation |
31.9 | 4.2 | -2.0 | - | - | 2.4 | -3.0 | 33.5 |
| Personnel costs (excluding restructuring) |
55.6 | 22.5 | -5.1 | - | - | 1.3 | -14.0 | 60.3 |
| Restructuring | 2.4 | 33.7 | -0.6 | - | - | - | -1.8 | 33.7 |
| Contractually agreed guarantees |
19.3 | 0.3 | -8.5 | - | - | - | -6.7 | 4.4 |
| Outstanding trade invoices |
17.4 | 12.4 | -3.5 | - | - | - | -9.0 | 17.3 |
| Follow-up costs from property sales |
2.7 | 1.5 | -1.4 | - | 0.0 | - | -0.4 | 2.4 |
| Miscellaneous other provisions |
86.9 | 5.7 | -11.6 | - | 0.0 | -0.6 | -27.5 | 52.9 |
| 216.2 | 80.3 | -32.7 | - | 0.0 | 3.1 | -62.4 | 204.5 |
aa g e ment
DAIG has pension obligations towards various employees which are based on the length of service. Defined benefit and defined contribution obligations – for which DAIG guarantees a certain level of benefit – are provided for through provisions for pensions. DAIG has taken out reinsurance contracts for individual people against payment of a one-off contribution. The conclusion of further reinsurance policies is not planned.
Pension plan obligations and the expenses necessary to cover these obligations are determined using the projected unit credit method prescribed by IAS 19, whereby current pensions and vested rights as well as expected future increases in salaries and pensions are included in the measurement. The following actuarial assumptions were made at the reporting date – in each case related to the end of the year and with economic effect for the following year. The expected return on plan assets has, on the other hand, already been taken into account in the interest cost in the respective current financial year.
Actuarial assumptions:
| in % | 2008 | 2007 |
|---|---|---|
| Discount rate | 5.85 | 5.50 |
| Projected salary increases | 2.75 | 2.75 |
| Projected pension payment increases | 2.00 | 2.00 |
| Expected return on plan assets | 4.50 | 4.50 |
Plan assets comprise solely reinsurance contracts. The value of the reinsurance contracts for certain people is higher than the related pension obligations. Until 2007, the expected return was only determined for the share of the value of the reinsurance policies to be classified as plan assets at the beginning of the year. From 2008, the entire value of the reinsurance policies was recognised as plan assets; a corresponding other asset in the amount of the difference is recognised. The amount by which the fair values of the assets exceed the obligation is shown under non-current other assets.
The defined benefit obligation (DBO) has developed as follows:
| P million | 2008 | 2007 |
|---|---|---|
| Defined benefit obligation as at Jan. 1 | 255.0 | 291.1 |
| Interest cost | 13.5 | 12.0 |
| Current service cost | 2.1 | 3.0 |
| Actuarial gains | -2.7 | -32.8 |
| Benefits paid | -18.4 | -18.6 |
| Transfer of transitional payments to pensions | - | 0.3 |
| Defined benefit obligation as at Dec. 31 | 249.5 | 255.0 |
The following table shows a reconciliation of the defined benefit obligation to the provision for pensions recognised in the balance sheet:
| P million | Dec. 31, 2008 | Dec. 31, 2007 |
|---|---|---|
| Present value of funded obligations | 18.5 | 22.0 |
| Present value of unfunded obligations | 231.0 | 233.0 |
| Total present value of obligations (DBO) | 249.5 | 255.0 |
| Fair value of plan assets | -18.8 | -17.9 |
| Unrecognised actuarial gains | 32.2 | 31.3 |
| Net liability recognised in the balance sheet | 262.9 | 268.4 |
| Other asset to be recognised | 0.5 | - |
| Provisions for pensions recognised in the balance sheet | 263.4 | 268.4 |
The total net periodic pension cost comprises the following:
| P million | 2008 | 2007 |
|---|---|---|
| Interest cost | 13.5 | 12.0 |
| Current service cost | 2.1 | 3.0 |
| Expected return on plan assets | -0.8 | -0.8 |
| Amortisation to be allowed for | -1.9 | - |
| 12.9 | 14.2 |
The actual return on plan assets amounted to e 0.9 million (2007: e 0.9 million).
The change in the fair value of plan assets is as follows:
| P million | 2008 | 2007 |
|---|---|---|
| Fair value of plan assets as at Jan. 1 | 17.9 | 17.6 |
| Other asset to be recognised | 0.5 | - |
| Expected return on plan assets | 0.8 | 0.8 |
| Actuarial gains | 0.1 | 0.1 |
| Benefits paid | -0.5 | -0.6 |
| Fair value of plan assets as at Dec. 31 | 18.8 | 17.9 |
a g e m
ent r epo r t M
aa g e ment
| P million | 2008 | 2007 | 2006 | 2005 | 2004 |
|---|---|---|---|---|---|
| Present value of the defined benefit obligation |
249.5 | 255.0 | 291.1 | 309.9 | 37.8 |
| Fair value of plan assets | -18.8 | -17.9 | -17.6 | -17.1 | - |
| Deficit in the plan | 230.7 | 237.1 | 273.5 | 292.8 | 37.8 |
The present value of the defined benefit obligation, the fair value of plan assets and the corresponding funded status developed in the past five years as follows:
The following table shows the experience adjustments arising on the plan liability during the respective period and the difference between the actual and expected return on plan assets.
| 2008 | 2007 | 2006 | |
|---|---|---|---|
| Experience adjustments arising on plan liability (in %) |
2.6 | 2.1 | -2.9 |
| Experience adjustments arising on plan assets (in %) | 0.6 | 0.7 | 1.7 |
| Difference between actual and expected return on plan assets (P million) |
0.1 | 0.1 | 0.1 |
The provisions for pensions contain liabilities of e 11.3 million (2007: e 12.9 million) for pension obligations transferred to former affiliated companies of the Viterra Group relating to vested rights and the payment of current pensions. A corresponding non-current receivable is shown under miscellaneous other assets.
Reversals of provisions are generally offset against the expense items for which they were originally established.
The provisions for environmental remediation refer to site remediation of locations of the former Raab Karcher companies. Remediation has either already begun or an agreement has been reached with the authorities as to how the damage is to be remedied. The cost estimates are based on expert opinions detailing the anticipated duration of the remediation work and the anticipated cost.
The personnel obligations are provisions for pre-retirement part-time work arrangements, bonuses, severance payments beyond restructuring and other personnel expenses. The other personnel expenses include a provision for the Long-Term Incentive Plan (LTIP). The DAIG compensation system for the key management and the senior managers includes not only a basic salary and variable salary components but also a long-term component, the LTIP. All individual incentive agreements previously concluded were cancelled when this LTIP was introduced in 2007. The compensation under LTIP is in part linked to the occurrence of certain events (e.g. IPO, trade sale) or to certain retention periods. The amount of compensation to be paid to the key management largely depends on DAIG's performance in the period up to the occurrence of the event(s) triggering payment.
The other provisions as at December 31, 2008 include a provision of e 9.2 million (2007: e 9.8 million) for the LTIP.
The restructuring provisions relate to personnel expenses which will be incurred as a result of staff cuts in connection with the planned reorganisation of the company as from 2009. The company's restructuring plans were publicly announced and a timetable and plan of action presented in October 2008.
During the normal course of business, Deutsche Annington Immobilien GmbH and its subsidiaries give product warranties to the buyers of owner-occupier houses and apartments, commercial buildings and land. As at December 31, 2008, provisions of e 1.1 million (2007: e 3.4 million) had been recognised for these product warranties in the DAIG consolidated financial statements.
Outstanding trade invoices and follow-up costs from property sales relate to unbilled goods and services as well as contractually agreed completion work.
The miscellaneous other provisions include, among others, future costs connected with heat contracting which cannot be passed on to tenants as well as costs for entering transfers of title, unbilled acquisition incidentals and litigation costs.
| 28 | Trade payables |
|---|---|
| Dec. 31, 2008 | Dec. 31, 2007 | |||
|---|---|---|---|---|
| P million | non-current | current | non-current | current |
| Liabilities | ||||
| from property letting | - | 22.4 | - | 22.6 |
| from other goods and services | 1.0 | 10.0 | 0.5 | 16.1 |
| 1.0 | 32.4 | 0.5 | 38.7 |
| Dec. 31, 2008 | Dec. 31, 2007 | |||
|---|---|---|---|---|
| P million | non-current | current | non-current | current |
| Other financial liabilities | ||||
| Banks | 1,360.2 | 125.0 | 1,428.0 | 84.7 |
| Other creditors | 5,523.4 | 61.7 | 5,503.8 | 192.0 |
| Derivatives | 28.1 | - | 0.1 | - |
| Miscellaneous other financial liabilities | - | 7.8 | - | 7.1 |
| 6,911.7 | 194.5 | 6,931.9 | 283.8 |
at e m
ents ma
a g e m
ent r epo r t M
aa g e ment
| Nominal obligation Dec. 31, |
Average interest |
Maturity of the nominal values is as follows: | |||||||
|---|---|---|---|---|---|---|---|---|---|
| P million | 2008 | Maturity | rate | 2009 | 2010 | 2011 | 2012 | 2013 | from 2014 |
| Securitisation transactions | |||||||||
| GRAND plc. | 5,153.4 | 2013 | 3.37 % | 80.4 | 63.9 | 122.7 | 133.3 | 4,753.1 | 0.0 |
| Hallam Finance plc. | 200.0 | 2011 | 3.89 % | 8.0 | 8.0 | 184.0 | 0.0 | 0.0 | 0.0 |
| Acquisition loans | |||||||||
| Acquisition financing I | 232.2 | 2013 | 4.73 % | 2.0 | 2.0 | 2.0 | 2.0 | 224.2 | 0.0 |
| Acquisition financing II | 275.0 | 2015 | 5.45 % | 2.9 | 4.2 | 4.4 | 4.6 | 4.7 | 254.2 |
| Mortgages | 1,409.3 | 2031 | 3.40 % | 133.4 | 74.0 | 86.1 | 81.2 | 66.1 | 968.5 |
| (thereof prolongations) | (90.1) | (32.6) | (44.9) | (43.3) | (30.8) | (23.6) | |||
| 7,269.9 | 226.7 | 152.1 | 399.2 | 221.1 | 5,048.1 | 1,222.7 |
The maturities and average interest rates of the nominal values of the liabilities to banks and the liabilities to other creditors are as follows:
Of the nominal obligations to creditors, e 7,266.4 million (2007: e 7,204.5 million) are secured by land charges and other collateral (account pledge agreements, assignments, pledges of company shares and guarantees).
The nominal interest rates on the financial liabilities to banks and other creditors are between 0.0% and 8.0% (average weighted approx. 3.51%). None of the financial liabilities contain any short-term interest rate risks as they relate either to loans with long-term fixed interest rates or, in the cases of loans with variable interest rates, they are loans which are interest rate-hedged by fixed payer swaps.
Loans bearing no interest or interest below market rates in return for occupancy rights at rents below the prevailing market rates are stated at their present values in the balance sheet.
In 2008, scheduled repayments of e 213.6 million and unscheduled repayments of e 314.5 million were made. New loans of e 324.4 million were taken out. These new loans include e 22.5 million to fund acquisitions and e 3.8 million to cover liabilities assumed as part of the acquisition of real estates.
In 2007, a loan agreement was concluded with Barclays Capital for the financing of acquisitions. The agreement running until the end of 2013 was originally for an amount of e 250.0 million. At December 31, 2008, the value of the loan was e 232.2 million (2007: e 235.6 million). As part of this loan agreement, the borrowers provided securities in the form of land charges, account pledge agreements and assignments. Furthermore, company shares were pledged. These securities can only be realised by the secured parties if the borrowers substantially infringe the loan agreement (e.g. fail to fulfil the financial covenants). Interest on the utilisations is based on the 3-month Euribor. In order to hedge the interest rate risk over the entire term of the loan agreement, the borrowers contracted fixed payer swaps. The average interest rate for this financing is – after allowing for the interest hedges – 4.73% (incl. margin). Capital repayments are obligatory when residential units are sold and to maintain the contractually agreed debt-equity ratio.
In April 2008, DAIG signed a loan agreement running until April 2015 with Landesbank Hessen-Thüringen and SEB AG for a maximum of e 300.0 million. A total of e 288.0 million was utilised. The loan had a value of e 275.0 million as at December 31, 2008. The purpose of this loan agreement was to refinance the acquisition line of credit concluded with Barclays Capital and Citibank for a total of e 500.0 million, e 287.2 million of which had been drawn at the time of repayment, as well as to fund a further portfolio acquisition. As part of the loan agreement, the borrowers provided securities in the form of land charges, account pledge agreements and assignments. Furthermore, company shares were pledged. Interest on the loan is based on the 3-month Euribor. In order to hedge the interest rate risk over the entire term of the loan agreement, the borrowers contracted a fixed payer swap with an interest rate of 5.45% (incl. margin). This loan agreement provides for regular quarterly capital repayments as well as obligatory special capital repayments when residential units are sold.
The aforementioned e 500.0 million acquisition line from Barclays Capital and Citibank was terminated in October 2008.
In December 2008, subsidiaries of DAIG signed loan agreements with Kreissparkasse Köln for a total of e 6.1 million to finance the acquisition of a portfolio. The interest rate of this annuity loan is 4.45% and is fixed until December 31, 2015. Securities have been provided in the form of land charges. These loans will be paid out in 2009.
The bearer bonds issued in two tranches in 2006 in connection with the securitisation transaction (GRAND plc.) had a value of e 5,153.4 million at the end of the 2008 financial year (2007: e 5,309.4 million). The average weighted interest rate is 3.37% up to July 2010 and, on the basis of contractual agreements, rises to 4.66% from July 2010 until the end of the term in July 2013. In 2008, capital repayments of e 156.0 million and interest payments of e 178.5 million were made. The contractually agreed debt-equity ratio was therefore clearly undercut. As part of the loan agreement, the borrowers provided securities in the form of land charges, account pledge agreements and assignments. These securities can only be realised by the secured parties if the borrowers substantially infringe the loan agreement (e.g. fail to fulfil the financial covenants).
Liabilities to other creditors include as at December 31, 2008 a liability of e 88.4 million from finance lease (2007: e 87.9 million) (Spree-Bellevue property). The following table shows the total minimum lease payments and reconciliation to their present value.
| Dec. 31, 2008 | Dec. 31, 2007 | |||||
|---|---|---|---|---|---|---|
| P million | Total minimum lease payments |
Interest portion |
Present value |
Total minimum lease payments |
Interest portion |
Present value |
| Due within one year | 4.2 | 0.2 | 4.0 | 4.5 | 0.3 | 4.2 |
| Due in 1 to 5 years | 17.6 | 3.1 | 14.5 | 17.3 | 3.0 | 14.3 |
| Due after 5 years | 248.4 | 178.5 | 69.9 | 252.9 | 183.5 | 69.4 |
| 270.2 | 181.8 | 88.4 | 274.7 | 186.8 | 87.9 |
Income tax liabilities result from the lump-sum taxation of the previously untaxed so-called EK 02 amounts at a rate of 3% introduced under the 2008 Annual Tax Act (Jahressteuergesetz 2008). The tax is to be paid starting from 2008 in ten equal annual instalments.
| Dec. 31, 2008 | Dec. 31, 2007 | |||
|---|---|---|---|---|
| P million | non-current current |
non-current | current | |
| Advance payments | - | 314.1 | - | 307.7 |
| Liabilities from deferred interest | - | 43.1 | - | 42.5 |
| Miscellaneous other liabilities | 4.1 | 13.7 | 3.8 | 29.4 |
| Deferred income | 1.0 | 1.3 | 0.9 | 2.0 |
| 5.1 | 372.2 | 4.7 | 381.6 |
The advance payments are mainly payments made in instalments by tenants for ancillary costs.
The miscellaneous other liabilities mainly include other tax liabilities of e 2.5 million (2007: e 2.6 million). A subsequent adjustment of the acquisition cost of Viterra amounting to e 15.0 million was paid at the beginning of 2008.
In 2006, DAIG decided to focus on its core business, the letting, buying and selling of housing units, and to sell the Development division. The entire Development division was classified as a discontinued operation. The parts of the division still remaining at December 31, 2006 were classified as a disposal group held for sale and were sold in December 2007.
The results of the discontinued operation break down as follows:
| P million | 2008 | 2007 |
|---|---|---|
| Income | - | 21.1 |
| Expenses | - | -11.3 |
| Results from operating activities | - | 9.8 |
| Income tax | - | -4.9 |
| Results from operating activities, net of income tax | - | 4.9 |
| Profit on sale of discontinued operation before income tax | 6.5 | 3.8 |
| Income tax on profit on sale of discontinued operation | -0.6 | -2.3 |
| Profit on sale of discontinued operation | 5.9 | 1.5 |
The cash flows from the discontinued operation are as follows:
| P million | 2008 | 2007 |
|---|---|---|
| Net cash used in/from operating activities | -7.4 | 22.3 |
| Net cash used in/from investing activities | -20.8 | 14.4 |
| Net cash used in financing activities | - | -17.6 |
| Net cash used in/from discontinued operation | -28.2 | 19.1 |
Of the negative cash flow from operating activities in 2008, e 7.4 million is due to payments of supplementary trade tax.
At the end of 2006, a settlement was signed between DAIG and Deutsche Post in which it was agreed that the commercial properties of Viterra Logistikimmobilien GmbH & Co. KG, Essen, originally sold to DAIG had to be bought back by Deutsche Post with effect from December 31, 2007. The resulting subsequent adjustment of the acquisition cost of Viterra paid to E.ON led in February 2008 to a negative cash flow from investing activities of the discontinued operation of e 15.0 million. A further –e 5.8 million (2007: –e 1.2 million) results from the utilisation of provisions established in connection with the sale of the business operation.
The tax on discontinued operation income differs as follows from the hypothetical amount arrived at by applying a tax rate of 31.6% (2007: 40%) to profit before income tax:
| 2008 | 2007 |
|---|---|
| 6.5 | 13.6 |
| 31.6 | 40.0 |
| 2.1 | 5.5 |
| - | 0.7 |
| - | 1.0 |
| -2.4 | - |
| 0.9 | - |
| 0.6 | 7.2 |
| 52.8 | |
| 9.2 |
ment
ag e
| Measurement categories and classes: | Amounts recognised in balance sheet | |||||
|---|---|---|---|---|---|---|
| Measure | ||||||
| ment category |
Carrying | |||||
| P million | in acc. with IAS 39 |
amounts Dec. 31, 2008 |
Face value |
Amortised cost |
Acquisition cost |
|
| Assets | ||||||
| Cash and cash equivalents | ||||||
| Cash | LaR | 253.5 | 253.5 | |||
| Restricted cash | LaR | 2.1 | 2.1 | |||
| Trade and other receivables | ||||||
| Receivables from the sale of properties | LaR | 66.6 | 66.6 | |||
| Receivables from property letting | LaR | 18.2 | 18.2 | |||
| Receivables from property management | LaR | 1.2 | 1.2 | |||
| Reveivables from other supplies and services | LaR | 0.0 | 0.0 | |||
| Other financial receivables | ||||||
| Loans to related companies | LaR | 34.7 | 34.7 | |||
| Other long-term loans | LaR | 5.4 | 5.4 | |||
| Dividends from other investments | LaR | 1.7 | 1.7 | |||
| Other non-derivative financial assets | ||||||
| Long-term securities | AfS | 2.7 | ||||
| Other investments | AfS | 1.7 | 1.7 | |||
| Hedged derivative financial assets | ||||||
| Cash flow hedges | n.a. | 0.0 | ||||
| Liabilities | ||||||
| Trade and other payables | ||||||
| Liabilities from property letting | FLAC | 22.4 | 22.4 | |||
| Liabilities from other goods and services | FLAC | 11.0 | 11.0 | |||
| Other non-derivative financial liabilities | ||||||
| Liabilities to banks | FLAC | 1,485.2 | 1,485.2 | |||
| Liabilities to other creditors | FLAC | |||||
| 5,496.7 | 5,496.7 | |||||
| Miscellaneous other financial liabilities | n.a. | 7.8 | ||||
| Liabilities from finance leases | n.a. | 88.4 | ||||
| Hedged derivative financial liabilities | ||||||
| Cash flow hedges | n.a. | 28.1 | ||||
| thereof aggregated by measurement categories in accordance with IAS 39: |
||||||
| Loans and receivables | LaR | 383.4 | 255.6 | 127.8 | 0.0 | |
| Available-for-sale financial assets | AfS | 4.4 | 0.0 | 0.0 | 1.7 | |
| Financial liabilities measured at amortised cost | FLAC | 7,015.3 | 0.0 | 7,015.3 | 0.0 | |
| Financial liabilities not covered by IAS 39 | ||||||
| Employee benefits in accordance with IAS 19 | ||||||
| Gross presentation: right to reimbursement corresponding to indirect obligation arising from transferred pension obligations |
11.3 | |||||
| Amount by which the fair value of plan assets exceeds the corresponding obligation |
0.5 | |||||
| Provisions for pensions and similar obligations | 263.4 | |||||
| Measure ment category in acc. with |
Carrying amounts Dec. 31, |
Face | Amortised | Acquisition | Fair value affecting |
Fair value recognised |
Amounts recognised in balance Fair value sheet in acc. Dec. 31, with IAS 17 2007 |
|---|---|---|---|---|---|---|---|
| LaR | 366.4 | 366.4 | 366.4 | ||||
| LaR | 2.1 | 2.1 | 2.1 | ||||
| 118.6 | |||||||
| LaR | 17.3 | 17.3 | 17.3 | ||||
| LaR | 1.5 | 1.5 | 1.5 | ||||
| LaR | 0.2 | 0.2 | 0.2 | ||||
| 34.9 | |||||||
| LaR | 0.7 | 0.7 | 0.7 | ||||
| LaR | 1.7 | 1.7 | 1.7 | ||||
| 2.3 | |||||||
| 1.7 | |||||||
| n.a. | 6.4 | 0.9 | 5.5 | 6.4 | |||
| FLAC | 22.6 | 22.6 | 22.6 | ||||
| FLAC | 16.6 | 16.6 | 16.6 | ||||
| 1,505.9 | |||||||
| FLAC | 5,607.9 | 5,607.9 | 5,535.0 | ||||
| n.a. | 7.1 | 7.1 | 7.1 | ||||
| n.a. | 87.9 | 87.9 92.3 |
|||||
| 0.1 | |||||||
| LaR | 543.4 | 368.5 | 174.9 | 0.0 | 0.0 | 0.0 | 543.4 |
| AfS | 4.0 | 0.0 | 0.0 | 1.7 | 0.0 | 2.3 | 4.0 |
| FLAC | 7,159.8 | 0.0 | 7,159.8 | 0.0 | 0.0 | 0.0 | 7,080.1 |
| 12.9 | |||||||
| 0.5 | |||||||
| 268.4 | |||||||
| Fair value Dec. 31, 2008 253.5 2.1 66.6 18.2 1.2 0.0 41.3 5.4 1.7 2.7 AfS AfS 1.7 0.0 22.4 11.0 1,567.0 FLAC 5,675.9 7.8 109.6 28.1 390.0 4.4 7,276.3 |
IAS 39 2007 LaR 118.6 LaR 34.9 2.3 1.7 1,512.7 n.a. 0.1 |
value | cost 118.6 34.9 1,512.7 |
cost 1.7 |
net income | Amounts recognised in balance sheet according to IAS 39 in equity 2.3 0.1 |
df i n
a nci al st
at e m
ents ma
a g e m
ent r epo r t M
aa g e ment
Cash and cash equivalents, trade and other receivables and other financial receivables mainly have short maturities, therefore their carrying amounts at the balance-sheet date correspond to their fair values.
The fair values of the other non-current financial receivables correspond to the present values of the payments associated with the assets, taking into account the relevant current interest parameters.
Other investments are measured at cost as there is no price quoted on an active market and the fair market value cannot be determined reliably. Other investments are mainly VBW Bauen und Wohnen GmbH, Bochum, e 0.9 million (2007: e 0.9 million), Hellerhof GmbH, Frankfurt am Main, e 0.3 million (2007: e 0.3 million) as well as WoWi Media GmbH & Co. KG, Hamburg, e 0.3 million (2007: e 0.0 million).
The fair values of cash flow hedges shown under derivatives are determined by discounting the future cash flows using the current interest rate structure curve at the balance-sheet date.
Liabilities from property letting and liabilities from other goods and services usually have short maturities; the values accounted for approximate the fair values.
The fair values of the other non-derivative financial liabilities are also measured by discounting the future cash flows using the current risk-adjusted interest rate structure curve at the balance-sheet date.
| Measure | from subsequent measurement | |||||||
|---|---|---|---|---|---|---|---|---|
| ment category in acc. with |
from | Income from other long-term |
Impair ment |
Derecog nised |
Derecog nised |
Income from other invest |
||
| P million | IAS 39 | interest | loans | losses | receivables | liabilities | ments | Net result |
| 2008 | ||||||||
| Loans and receivables | LaR | 17.1 | 1.9 | -7.8 | -0.8 | - | - | 10.4 |
| Available-for-sale financial assets | AfS | 0.1 | - | 0.0 | - | - | 1.9 | 2.0 |
| Financial liabilities measured at amortised cost |
FLAC | -354.2 | - | - | - | 0.9 | - | -353.3 |
| Total | -337.0 | 1.9 | -7.8 | -0.8 | 0.9 | 1.9 | -340.9 | |
| 2007 | ||||||||
| Loans and receivables | LaR | 26.3 | 1.9 | -10.4 | -1.5 | - | - | 16.3 |
| Available-for-sale financial assets | AfS | 0.1 | - | 0.0 | - | - | 1.9 | 2.0 |
| Financial liabilities measured at amortised cost |
FLAC | -350.4 | - | - | - | - | - | -350.4 |
| Total | -324.0 | 1.9 | -10.4 | -1.5 | 0.0 | 1.9 | -332.1 |
DAIG records the components of the net result under financial income and financial expenses.
Impairment losses which can be assigned to the measurement category "Loans and receivables" (LaR) as well as income and expenses in connection with derecognised receivables are shown under other operating income or other operating expenses.
The income from derecognised liabilities assigned to the measurement category "Financial liabilities measured at amortised cost" (FLAC) was shown under other operating income.
In the course of its business activities, DAIG is exposed to various financial risks. The Group-wide risk management system focuses on the unpredictability of developments on the financial markets and its aim is to minimise the potentially negative impact on the financial position of the Group and avoid risk concentrations. These risks and their management are described in detail as follows:
DAIG is exposed to interest rate risks in the course of its ordinary activities. Floating-rate debt exposes DAIG to a cash flow interest rate risk. DAIG uses derivative financial instruments to limit or eliminate these risks. These derivative financial instruments are used for hedging risks connected with operational business and never for speculative purposes.
The market is continually monitored as part of the management of interest rate risks. A continual analysis verifies whether any market changes have a negative influence on DAIG's interest rate situation. Where possible and sensible, derivative financial instruments are used in these cases. Furthermore, variable interest liabilities are directly interest rate-hedged on the day of their payout with a fixed payer swap in order to safeguard the company against future interest rate fluctuations.
DAIG's policies permit the use of derivatives only if they are associated with underlying assets or liabilities, contractual rights or obligations and planned operating transactions.
In the DAIG Group, there are no significant concentrations of potential credit risks. Contracts for derivative financial instruments and financial transactions are only concluded with banks of good standing. DAIG has a Group-wide policy to ensure that rental contracts are only made with tenants with a good credit history. Valuation allowances are provided for the risk of loss of financial assets.
ment
a g e m
Under the conditions of loan agreements, DAIG is obliged to fulfil certain financial covenants such as the debt service coverage ratio and debt-equity ratio. If these financial covenants are not fulfilled, the lender may call in the loan. In 2008, DAIG fulfilled all financial covenants agreed. As part of risk management, the fulfilment of these financial covenants is continually monitored on the basis of current extrapolations and budgetary accounting. On the basis of the current corporate planning, DAIG is confident that these financial covenants will also be fulfilled in future.
(a) Currency risks
Owing to the limited internationality of DAIG's business, there are – as in 2007 – no substantive currency risks.
(b) Price risks
DAIG is – as in 2007 – exposed to property price and market rental risks.
DAIG uses a liquidity forecast and a liquidity plan to manage the liquidity risks.
The following table shows the forecast for (undiscounted) cash flows of the non-derivative financial liabilities and derivative financial instruments with negative fair values:
| Carrying | Cash flows | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| P million | amount as at Dec. 31, 2008 |
2009 Interest Repayment |
2010 Interest Repayment |
2011 to 2015 Interest Repayment |
|||||
| Other non-derivative financial liabilities: |
|||||||||
| Banks | 1,485.2 | 54.2 | 118.3 | 48.1 | 65.3 | 207.6 | 745.7 | ||
| Other creditors | 5,496.7 | 191.2 | 108.4 | 204.0 | 86.8 | 673.1 | 5,266.5 | ||
| Miscellaneous other financial liabilities |
7.8 | 0.0 | 0.0 | 2.5 | |||||
| Liabilities from finance leases | 88.4 | 4.2 | 4.3 | 22.6 | |||||
| Hedged derivative financial assets |
|||||||||
| Cash flow hedges | 28.1 | 7.2 | 0.0 | 9.7 | 0.0 | 17.8 | 0.0 |
In order to safeguard DAIG's solvency and financial flexibility at all times, a liquidity reserve is kept available in the form of credit lines and, where necessary, cash.
| P million | Credit lines Dec. 31, 2008 |
Utilisation Dec. 31, 2008 |
Unutilised credit lines Dec. 31, 2008 |
Unutilised credit lines Dec. 31, 2007 |
|---|---|---|---|---|
| Due within: | ||||
| < 1 year | 100.0 | 0.0 | 100.0 | 105.0 |
| > 1 year | 0.0 | 0.0 | 0.0 | 0.0 |
| 100.0 | 0.0 | 100.0 | 105.0 |
As a result of the economic and financial crisis, the financing conditions and financing options for DAIG are now not as good. In general, this may mean that DAIG will have to provide more equity when making acquisitions and/or refinancing funds in order to obtain economically acceptable conditions.
DAIG had cash on hand and deposits at banks totalling e 251.1 million as at the balance-sheet date. Given these cash and cash equivalents and the above-mentioned financing reserves from credit lines, DAIG's ability to service debt can be regarded as guaranteed at all times even in the light of the economic and financial crisis.
Ten fixed payer swaps have been contracted to hedge the interest rate risk of two acquisition lines of credit, which were taken out in particular to fund portfolio acquisitions by subsidiaries of Deutsche Annington Immobilien GmbH.
As part of the refinancing of acquisition financing II, interest hedges with Barclays Capital and Citibank were redeemed and continued with swaps contracted with Landesbank Hessen-Thüringen and SEB AG. The nominal volume of the interest rate swaps increased to e 525.6 million as at December 31, 2008. Interest rates vary between 4.075% and 4.400% with swap periods of 6.25 to 6.75 years.
| P million | Nominal value | Beginning of term | End of term | Average interest rate |
|---|---|---|---|---|
| Acquisition financing I | ||||
| Hedged item | 237.2 | Dec. 29, 2006 | Dec. 31,2013 | 3-m EU RIBOR |
| Interest rate swaps | 237.6 | Jul. 20, 2007 | Oct. 20, 2013 | 4.205% |
| Acquisition financing II | ||||
| Hedged item | 288.0 | Apr. 18, 2008 | Apr. 20, 2015 | 3-m EU RIBOR |
| Interest rate swaps | 288.0 | Jul. 21, 2008 | Apr. 20, 2015 | 4.400% |
ment
a
As part of the cash flow hedge accounting, the derivatives as at December 31, 2008 were shown at their negative clean present fair values totalling e 28.1 million under other financial liabilities.
As a result of the valuation, e 25.6 million was deducted from equity not affecting net income. A loss from ineffectiveness amounting to e 2.3 million in 2008, after deduction of deferred taxes, was recognised in the income statement.
An interest rate swap, which was no longer part of hedging at March 31, 2008, was redesignated in the second quarter of 2008. The lack of hedging led to a loss of e 2.7 million in the reporting period after deduction of deferred taxes.
On the basis of the valuation as at December 31, 2008, DAIG has used a sensitivity analysis to determine the change in equity given a hypothetical shift in the interest rate structure of 50 basis points in each case:
| Change in equity | ||||||||
|---|---|---|---|---|---|---|---|---|
| P million | Other reserves not affecting income |
Ineffective portions affecting net income |
Total | |||||
| + 50 basis points | +10.8 | +0.4 | +11.2 | |||||
| – 50 basis points | -11.1 | -0.4 | -11.5 |
All the derivative financial instruments used by DAIG are part of effective hedging as required by IAS 39.
When determining the cash flow from operating activities using the indirect method, the profit for the period was adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, as well as items of income or expense associated with investing or financing cash flows. Therefore, direct comparison with the corresponding changes in the consolidated balance sheet items is not possible.
The income from the sale of trading properties is shown in cash flow from operating activities, the proceeds from the disposal of intangible assets, property, plant and equipment and investment properties are shown in cash flow from investing activities.
Exercising the IAS 7 option, interest received is shown under cash flow from investing activities and interest paid is shown under cash flow from financing activities.
Acquisition of investment properties shows the investments adjusted for non-cash debt assumptions. As part of the acquisition of various housing stocks, loan liabilities of e 3.8 million (2007: e 14.7 million) were assumed. The item "Cash proceeds from issuing loans and notes" has been adjusted accordingly.
The cash proceeds from issuing loans and notes mainly include the loans taken out to fund real estate newly acquired in the reporting year. They do not include loan liabilities which already existed and were assumed as part of a real estate acquisition.
Cash repayments of financial liabilities refer to the loan liabilities repaid in the reporting year. These include the repayment of the acquisition line of e 500.0 million which was provided by Barclays Capital and Citibank, of which e 287.2 million had been utilised at the time of repayment. The refinancing with Landesbank Hessen-Thüringen and SEB AG is shown in the cash proceeds from issuing loans and notes.
Of the cash and cash equivalents, restraints on disposal apply to e 40.8 million (2007: e 69.3 million).
Contingent liabilities exist for cases in which Deutsche Annington Immobilien GmbH and its subsidiaries give guarantees to various contractual counterparts.
Contingent liabilities to third parties are mainly guarantees for warranty claims and contract performance guarantees. The terms are in many cases limited to an agreed time or depend on the term of the loan to which they apply. In some cases, the term is unlimited.
As part of the divestment of companies, the legal predecessor of the subsidiary Deutsche Annington Beteiligungsverwaltungs GmbH signed letters of indemnity with the buyers relating to tax, legal and other risks. The assurances agreed were normal for commitments given in such transactions. The terms of the agreements are generally two to three years, in a few cases also 10, 15 or max. 30 years.
The future minimum lease payment obligations arising from such agreements as a result of the fact that they are non-cancellable operating leases are due as follows:
| P million | Dec. 31, 2008 | Dec. 31, 2007 |
|---|---|---|
| Total minimum lease payments | 269.2 | 254.2 |
| Due within one year | 12.6 | 12.3 |
| Due in 1 to 5 years | 38.4 | 39.6 |
| Due after 5 years | 218.2 | 202.3 |
Payments of e 12.9 million (2007: e 14.2 million) under rental, tenancy and leasing agreements were recognised as expenses in 2008.
The lease payments relate particularly to rented real estate and ground rent.
Furthermore, there are financial obligations from the commissioning of future services of e 154.8 million (2007: e 151.0 million).
DAIG is involved in litigation resulting from operating activities, both as the plaintiff and the defendant. These legal disputes and claims for damages are routine resulting from the normal course of business. They are in particular disputes under the Law of Tenancy and sales disputes.
None of these legal disputes and claims for damages will have a material effect on the balance sheet, profits or liquidity of DAIG.
The members of the Management and the Supervisory Board and members of their immediate families do not personally have any business relations with DAIG companies other than in their capacity as members of the Management or Supervisory Board.
There are also no business relations between DAIG companies and affiliated and associated DAIG companies or with members of the management or supervisory bodies of consolidated DAIG companies or members of their immediate families.
Monterey Holdings I S.à.r.l., Luxembourg, has assumed the existing obligations towards the members of the management for the payments under the Long-Term Incentive Plan (LTIP). DAIG discloses within other assets a receivable from Monterey Holdings I S.à.r.l., Luxembourg, of e 1.9 million, which is the amount of the obligations assumed.
In 2005, consultancy agreements were signed with Terra Firma Capital Partners Limited, London, and terrafirma GmbH, Frankfurt am Main. In 2008, services totalling e 1.1 million were provided (2007: e 1.7 million).
In 2008, Citibank N.A. and its subsidiary, Citigroup Global Markets Limited, had the following business relations with DAIG:
In May 2007, an acquisition line of credit for a total of e 500.0 million was signed with Barclays Capital and Citibank. This acquisition line was terminated in October 2008 and the loan amounts utilised repaid. A detailed description of the financing has already been given under note (29) Other financial liabilities.
As part of the refinancing of the acquisition loans, the fixed payer swaps with Citibank N. A., London Branch, used for hedging purposes, were also redeemed and replaced by new interest rate swaps with Landesbank Hessen-Thüringen and SEB AG respectively. The positive clean present fair value of e 5.0 million was realised through the redemption of these fixed payer swaps with Citibank N. A., London Branch.
In 2006, Citibank and DAIG signed cooperation agreements on future projects. The agreements end in March 2009.
In 2008, DAIG already signed purchase agreements, thus entering into a commitment to purchase 108 housing units and five commercial properties at a price of e 7.1 million; transfer of ownership will not take place until after December 31, 2008.
The members of the Supervisory Board received e 101.9 k for their work in 2008 (2007: e 71.4 k).
The total remuneration of the Management amounted to e 3.1 million (2007 e 6.7 million). Of this figure, e 1.7 million (2007: e 0.8 million) was for fixed remuneration components including benefits in kind and other remuneration. The variable remuneration of e 1.4 million (2007: e 5.9 million) refers to bonuses and in 2007 to payments under the Long Term Incentive Plan.
The pension obligations (DBO) to former managing directors and their surviving dependants amount to e 1.0 million (2007: e 4.1 million) and the pension obligations to current managing directors and their surviving dependants amount to e 3.1 million (2007: e 3.2 million).
aa g e ment
Chairman and Chief Investment Officer of Terra Firma Capital Partners Limited, London
Phillip Wesley Burns, Financial Managing Director of Terra Firma Capital Partners Limited, London
William T. Comfort, Chairman of Citigroup Venture Capital, New York
Fraser Duncan, Managing Director of Terra Firma Capital Partners Limited, London
Wolfgang König, Business Consultant, Esslingen
Sir Thomas Macpherson (until February 7, 2008), Chairman of Annington Holdings PLC, London
Prof. Dr Klaus Rauscher (since August 1, 2008) Business Consultant, Berlin
The Supervisory Board does not have the rights and obligations provided for in the German Stock Corporation Law (Aktiengesetz).
Wijnand Donkers, Chairman
Dr Manfred Püschel
Dr Wulf Böttger (from April 1, 2008 to February 5, 2009)
Düsseldorf, March 30, 2009
Wijnand Donkers Dr Manfred Püschel
We have audited the consolidated financial statements prepared by Deutsche Annington Immobilien GmbH, Düsseldorf – comprising the balance sheet, income statement, statement of changes in equity, cash flow statement and the notes – together with the group management report for the financial year from January 1 to December 31, 2008. The preparation of the consolidated financial statements and the group management report in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a, para. 1 HGB are the responsibility of the parent company's management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the parent company's management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315a, para. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.
Essen, March 31, 2009
KPMG AG Wirtschaftsprüfungsgesellschaft (formerly KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft)
Beumer Huperz
Wirtschaftsprüfer Wirtschaftsprüfer
101
Further Information 2008 102 List of
| n | |||
|---|---|---|---|
| п u |
H I. |
T | Ш ı |
| m Ħ |
П | R π |
и ı Ш |
List of DAIG shareholdings as at December 31, 2008
| Company | Seat | Interest % |
|
|---|---|---|---|
| Deutsche Annington Immobilien GmbH | Düsseldorf | 100.00 | |
| A. | Consolidated companies | ||
| Baugesellschaft Bayern mbH | Munich | 94.90 | |
| Bundesbahn Wohnungsbaugesellschaft Kassel Gesellschaft mit beschränkter Haftung | Kassel | 94.90 | |
| Bundesbahn-Wohnungsbaugesellschaft Regensburg mbH | Regensburg | 94.90 | |
| BWG Frankfurt am Main Bundesbahn-Wohnungsgesellschaft mbH | Frankfurt | 94.90 | |
| DA DMB Netherlands B.V. | Eindhoven/NL | 100.00 | |
| Deutsche Annington Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington Beteiligungsverwaltungs GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington Bewirtschaftungs GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington Consulting GmbH | Bochum | 100.00 | |
| Deutsche Annington DEWG GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington DEWG Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington DID Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington Dienstleistungen Holding GmbH i.L. | Düsseldorf | 100.00 | |
| Deutsche Annington DMB Eins GmbH | Bochum | 100.00 | |
| Deutsche Annington Dritte Beteiligungsgesellschaft mbH | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Augsburg GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Augsburg Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG Essen Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Essen Bewirtschaftungs GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Essen Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG Frankfurt Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Frankfurt Bewirtschaftungs GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Frankfurt Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG Karlsruhe Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Karlsruhe Bewirtschaftungs GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Karlsruhe Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG Kassel Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Kassel Bewirtschaftungs GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Kassel Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG Köln Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Köln Bewirtschaftungs GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Köln Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG Mainz GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Mainz Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG München Bestands GmbH & Co. KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG München Bewirtschaftungs GmbH & Co. KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG München Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG Nürnberg GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Nürnberg Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington EWG Regensburg GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington EWG Regensburg Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington Finance GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington Fundus Immobiliengesellschaft mbH | Cologne | 100.00 | |
| Deutsche Annington Fünfte Beteiligungsgesellschaft mbH | Düsseldorf | 100.00 | |
| Deutsche Annington Haus GmbH | Kiel | 100.00 | |
| Deutsche Annington Heimbau Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington Heimbau Bewirtschaftungs GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington Heimbau GmbH | Kiel | 100.00 | |
| Deutsche Annington Heimbau Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington Holdings Drei GmbH | Bochum | 100.00 | |
| Deutsche Annington Holdings Eins GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington Holdings Fünf GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington Holdings Vier GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington Holdings Zwei GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington Immobiliendienstleistung Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington Immobilien-Dienstleistungen GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington Informationssysteme GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington Interim DAMIRA GmbH | Düsseldorf | 100.00 | |
| Deutsche Annington MIRA Bestands GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington MIRA Bewirtschaftungs GmbH & Co.KG | Düsseldorf | 100.00 | |
| Deutsche Annington MIRA Verwaltungs GmbH | Düsseldorf | 99.60 | |
| Deutsche Annington Nord GmbH | Kiel | 100.00 | |
| Deutsche Annington Ost GmbH | Berlin | 100.00 | |
Overview of the Residential Portfolio Data Contact
| Interest% Company Seat Deutsche Annington Revisionsgesellschaft mb H Düsseldorf 100.00 Deutsche Annington Rheinland Gmb H Düsseldorf 100.00 Deutsche Annington Rheinland Immobiliengesellschaft mb H Cologne 100.00 Deutsche Annington Rhein-Ruhr Gmb H & Co.K G Essen 100.00 Deutsche Annington Ruhr Gmb H Essen 100.00 Deutsche Annington Service Gmb H Frankfurt 100.00 Deutsche Annington Süd Gmb H Munich 100.00 Deutsche Annington Süd-West Gmb H Frankfurt 100.00 Deutsche Annington Vermögensgesellschaft mb H & Co.K G Düsseldorf 100.00 Deutsche Annington Verwaltungs Gmb H Bochum 100.00 Deutsche Annington Vierte Beteiligungsgesellschaft mb H Düsseldorf 99.60 Deutsche Annington Westfalen Gmb H Dortmund 100.00 Deutsche Annington WOGE Drei Verwaltungs Gmb H Düsseldorf 99.60 Deutsche Annington WOGE Eins Verwaltungs Gmb H Düsseldorf 99.60 Deutsche Annington WOGE Fünf Bestands Gmb H & Co. K G Düsseldorf 100.00 Deutsche Annington WOGE Fünf Bewirtschaftungs Gmb H & Co. K G Düsseldorf 100.00 Deutsche Annington WOGE Fünf Verwaltungs Gmb H Düsseldorf 100.00 Deutsche Annington WOGE Sechs Bestands Gmb H & Co.K G Bochum 100.00 Deutsche Annington WOGE Sechs Bewirtschaftungs Gmb H & Co.K G Bochum 100.00 Deutsche Annington WOGE Sechs Verwaltungs Gmb H Bochum 100.00 Deutsche Annington WOGE Sieben Bestands Gmb H & Co.K G Bochum 100.00 Deutsche Annington WOGE Sieben Bewirtschaftungs Gmb H & Co.K G Bochum 100.00 Deutsche Annington WOGE Sieben Verwaltungs Gmb H Düsseldorf 100.00 Deutsche Annington WOGE Vier Bestands Gmb H & Co.K G Düsseldorf 100.00 Deutsche Annington WOGE Vier Gmb H & Co.K G Düsseldorf 100.00 Deutsche Annington Wohnungsgesellschaft I Bestands Gmb H & Co.K G Düsseldorf 100.00 Deutsche Annington Wohnungsgesellschaft I mb H Essen 100.00 Deutsche Annington Wohnungsgesellschaft III Bestands Gmb H & Co.K G Düsseldorf 100.00 Deutsche Annington Wohnungsgesellschaft III mb H Bochum 100.00 Deutsche Annington Zweite Beteiligungsgesellschaft mb H Essen 100.00 Deutsche Eisenbahn-Wohnungs Gesellschaft mb H Leipzig 100.00 Eisenbahn Siedlungsgesellschaft Augsburg mb H ( Siegau) Augsburg 94.90 Eisenbahn-Wohnungsbau Gesellschaft Karlsruhe Gmb H Karlsruhe 94.90 Eisenbahn-Wohnungsbaugesellschaft Köln mb H Cologne 94.90 Eisenbahn-Wohnungsbaugesellschaft Nürnberg Gmb H Nuremberg 94.90 Frankfurter Siedlungsgesellschaft mb H Düsseldorf 100.00 FSG Immobilien Gmb H & Co.K G Düsseldorf 100.00 FSG Immobilien Verwaltungs Gmb H Düsseldorf 99.60 FSG - Holding Gmb H Düsseldorf 94.80 Grundstücksgesellschaft Eins Stauffenbergstraße mb H Berlin 100.00 Immobilienfonds Koblenz-Karthause Wolfgang Hober K G Düsseldorf 86.51 JA N A NA Grundstücksgesellschaft mb H & Co.K G Grünwald 94.90 KAD URA Grundstücksges. mb H & Co.K G Grünwald 92.51 LE MON DA S Grundstücksgesellschaft mb H & Co.K G Grünwald 94.90 LE VON Grundstücksgesellschaft mb H & Co.K G Grünwald 94.90 MAKAB Beteiligungs Eins Gmb H Düsseldorf 100.00 MAKAB Grundstücksgesellschaft mb H & Co. K G Grünwald 94.90 MAKA NA Beteiligungsgesellschaft Eins Gmb H Düsseldorf 100.00 MAKA NA Beteiligungsgesellschaft Zwei Gmb H Düsseldorf 100.00 MAKA NA Grundstücksgesellschaft mb H & Co. K G Grünwald 94.90 MANG A NA Grundstücksgesellschaft mb H & Co.K G Grünwald 94.90 MELC AR T Grundstücks-Verwaltungsgesellschaft mb H Grünwald 94.80 M IRA Grundstücksgesellschaft mb H Düsseldorf 94.90 M I RIS Beteiligungs Eins Gmb H Düsseldorf 100.00 M I RIS Grundstücksgesellschaft mb H & Co.K G Grünwald 94.90 " Siege" Siedlungsgesellschaft für das Verkehrspersonal mb H Mainz Mainz 94.90 Viterra Holdings Eins Gmb H Düsseldorf 100.00 Viterra Holdings Zwei Gmb H Düsseldorf 100.00 Viterra Logistikimmobilien Gmb H & Co. K G Essen 99.96 Wohnungsgesellschaft Ruhr Niederrhein mb H Essen Essen 94.90 Net income Interest% Equity for the year P '000 P '000 Company Seat Other investments > 20 % interest |
|||
|---|---|---|---|
| Equity | for the year | ||||
|---|---|---|---|---|---|
| Company | Seat | Interest% | P '000 | P '000 | |
| B. | Other investments > 20 % interest | ||||
f
| Portfolio as at Dec. 31, 2008 | Units | Share in % |
Living area in m2 |
Average living area per unit in m2 |
Annualised net rent* in P m |
Share in % |
Monthly net rent per m2 * in P |
Vacancy rate* in % |
|
|---|---|---|---|---|---|---|---|---|---|
| Top 20 cities and towns | |||||||||
| 1 | Dortmund | 18,083 | 9.6 | 1,103,645 | 61 | 58.8 | 8.2 | 4.39 | 3.5 |
| 2 | Frankfurt | 10,757 | 5.7 | 668,429 | 62 | 50.5 | 7.1 | 6.29 | 1.2 |
| 3 | Essen | 10,756 | 5.7 | 666,896 | 62 | 38.9 | 5.5 | 4.82 | 4.1 |
| 4 | Berlin | 9,070 | 4.8 | 594,931 | 66 | 37.9 | 5.3 | 5.26 | 2.5 |
| 5 | Gelsenkirchen | 9,056 | 4.8 | 547,814 | 60 | 28.2 | 3.9 | 4.29 | 3.5 |
| 6 | Bochum | 7,888 | 4.2 | 458,361 | 58 | 26.1 | 3.6 | 4.68 | 3.0 |
| 7 | Munich | 5,364 | 2.8 | 356,493 | 66 | 24.9 | 3.5 | 5.82 | 0.5 |
| 8 | Duisburg | 5,096 | 2.7 | 304,606 | 60 | 16.7 | 2.3 | 4.54 | 3.3 |
| 9 | Bonn | 4,760 | 2.5 | 334,754 | 70 | 22.6 | 3.2 | 5.64 | 2.4 |
| 10 | Herne | 4,735 | 2.5 | 290,779 | 61 | 15.1 | 2.1 | 4.29 | 2.4 |
| 11 | Cologne | 4,707 | 2.5 | 307,235 | 65 | 20.9 | 2.9 | 5.70 | 2.8 |
| 12 | Gladbeck | 3,743 | 2.0 | 229,383 | 61 | 12.2 | 1.7 | 4.63 | 7.9 |
| 13 | Herten | 3,028 | 1.6 | 196,981 | 65 | 10.0 | 1.4 | 4.24 | 2.7 |
| 14 | Düsseldorf | 2,704 | 1.4 | 176,738 | 65 | 12.7 | 1.8 | 5.95 | 1.5 |
| 15 | Marl | 2,605 | 1.4 | 175,396 | 67 | 10.7 | 1.5 | 5.10 | 4.9 |
| 16 | Aachen | 2,259 | 1.2 | 150,312 | 67 | 8.5 | 1.2 | 4.73 | 2.3 |
| 17 | Bottrop | 2,246 | 1.2 | 141,615 | 63 | 7.9 | 1.1 | 4.65 | 3.8 |
| 18 | Wiesbaden | 2,103 | 1.1 | 136,353 | 65 | 10.5 | 1.5 | 6.43 | 3.7 |
| 19 | Bergkamen | 2,030 | 1.1 | 134,384 | 66 | 7.1 | 1.0 | 4.40 | 7.6 |
| 20 | Geesthacht | 2,008 | 1.0 | 114,664 | 57 | 7.3 | 1.0 | 5.32 | 6.5 |
| Subtotal for top 20 cities and towns |
112,998 | 59.7 | 7,089,769 | 63 | 427.5 | 59.8 | 5.01 | 3.2 | |
| Other locations | 76,220 | 40.3 | 5,031,509 | 66 | 287.4 | 40.2 | 4.76 | 4.9 | |
| Total | 189,218 | 100 | 12,121,278 | 64 | 714.9 | 100 | 4.91 | 3.9 |
* as at beginning of December
Units managed by the Deutsche Annington Real Estate Group (as at December 31, 2008)
| ● Own apartments | 189,218 |
|---|---|
| ● Apartments owned by others 28,441 | |
| ● Commercial units | 1,428 |
| ● Garages and parking spaces | 43,795 |
Structure of the Deutsche Annington residential portfolio by German states
| ● North Rhine-Westphalia | 54.0% |
|---|---|
| ● Hesse | 12.2% |
| ● Bavaria and Baden-Württemberg |
11.5% |
| ● Schleswig-Holstein | |
| and Hamburg | 6.9% |
| ● Berlin | 4.8% |
| ● Five new states | 4.2% |
| ● Lower Saxony and Bremen | 3.4% |
| ● Rhineland-Palatinate | |
| and Saarland | 3.0% |
Philippstrasse 3 44803 Bochum Phone +49 234 314-0 Fax +49 234 314-1314 [email protected] www.deutsche-annington.com
This Annual Report is published in German and English. The German version is always the authoritative text. Further information on the company can be found on the website at www.deutsche-annington.com.
This present Annual Report for Deutsche Annington Immobilien GmbH contains statements on future developments. They reflect the current view of the Management and are based on appropriate evaluations and expectations. These statements are not intended as guarantees that these expectations will be fulfilled. The Annual Report has also been generated using references. These references have been carefully selected and have been taken from credible sources. We nevertheless point out that Deutsche Annington has not examined the veracity of the sources.
Published by: the Management of Deutsche Annington Immobilien GmbH
Concept and realisation: Berichtsmanufaktur GmbH, Hamburg
Photos: Deutsche Annington Immobilien GmbH
Status: April 2009 © Deutsche Annington Immobilien GmbH, Bochum, Germany
ted
Philippstrasse 3 44803 Bochum Phone +49 234 314-0 Fax +49 234 314-1314 [email protected] www.deutsche-annington.com
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.