Annual Report • Apr 15, 2020
Annual Report
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ACCENTRO Real Estate AG
ANNUAL REPORT for the fi nancial year 1 January to 31 December 2019
Cover: visualisation of condominiums Berlin-Mitte, Torstr.
This annual report includes the consolidated fi nancial statements of ACCENTRO Real Estate AG and the combined management report and Group management report for the 2019 fi nancial year.
This translation of the original German version has been prepared for the convenience of our English-speaking shareholders. The German version is authoritative.
The above-mentioned versions of the annual report are available as download at www.accentro.ag or may be requested free of charge by writing to: ACCENTRO Real Estate AG, Kantstr. 44/45, 10625 Berlin, Germany
| ACCENTRO Real Estate AG | 2019 | 2018 |
|---|---|---|
| Income statement | TEUR | TEUR |
| Group sales | 143,274 | 205,609 |
| Group sales (2018: consolidated revenues for Continuing Operation without Gehrensee revenues) |
143,274 | 163,189 |
| Gross profi t / loss (interim result) | 41,174 | 43,162 |
| EBIT | 39,804 | 32,864 |
| EBT | 32,488 | 23,975 |
| Consolidated income | 26,299 | 18,301 |
| Interest coverage ratio (ICR)* | 5.41 | 3.68 |
* EBIT in relation to balance of interest expense and interest income
| ACCENTRO Real Estate AG | 31 Dec. 2019 | 31 Dec. 2018 |
|---|---|---|
| Balance sheet ratios | TEUR | TEUR |
| Non-current assets | 102,508 | 81,109 |
| Current assets | 478,250 | 393,096 |
| Shareholders' equity | 220,811 | 199,104 |
| Equity ratio | 38.0% | 44.2% |
| Total assets | 580,757 | 474,205 |
| Loan to Cost (LtC)* | 55.9% | 50.3% |
* Net fi nancial debt divided by gross assets
| Prime Standard |
|---|
| DE000A0KFKB3 |
| A0KFKB |
| 32,437,934 |
| 11.91% |
| EUR 9.78 |
| EUR 6.70 |
| EUR 7.65 |
| EUR 248,150,195 |
* Closing prices in Xetra trading
| ■ Letter to the Shareholders | 9 |
|---|---|
| ------------------------------ | --- |
| ■ Preliminary Remarks | 22 | |
|---|---|---|
| ■ Basic Structure of the Group | 22 | |
| ■ Economic Report | 24 | 04 |
| ■ Report on the Individual | ||
| Financial Statements of | ||
| ACCENTRO Real Estate AG | 33 | |
| ■ Forecast, Opportunity and | ||
| Risk Report | 39 | |
| ■ Internal Control System and | ||
| Risk Management in Regard | ||
| to the Group Accounting Process | 50 | |
| ■ Disclosures Pursuant to Sections | ||
| 289a, 315a, |
03
Statement of Changes in Equity 70 ■ Notes to the Consolidated Financial Statements 73 ■ Responsibility Statement 125 ■ Group Auditor's Report 126
| ■ Directors and Officers | 136 |
|---|---|
| ■ Forward-looking Statements | 137 |
| ■ Financial Calendar | 138 |
| ■ Credits | 139 |
| Letter to the Shareholders | 9 |
|---|---|
| Report of the Supervisory Board | 10 |
| Corporate Governance Report | 13 |
| ACCENTRO Real Estate AG Stock Performance | 16 |
Property Riehmers Hofgarten Berlin-Kreuzberg, Großbeerenstr. 56e
At this time, we proudly look back on a very success ful 2019 fi nancial year. At c. EUR 40 million, the funds from operations (EBIT) are the highest in the Company's history.
But even beyond the fi gures, there is plenty of cause for optimism:
The extra fi nancial leverage puts us in a position to take the next big step in our ongoing expansion. The fi rst assets have already been acquired, and others will follow soon.
We expect our current assets to experience another steep increase before the end of 2020, and our key operating performance indicators to keep showing upward growth.
There is one bitter pill to swallow: We are seeing a fl urry of government interventions at the moment – mainly in Berlin, but increasingly on the national level as well. We need to keep a close eye on these developments in order to adjust our roadmap accordingly.
However, since the fundamentals, especially the level of interest rates and the demographic growth, ensure that the market environment remains favourable, we believe the medium-term outlook is auspicious and look forward to the times ahead.
The Management Board Jacopo Mingazzini CEO
During fi nancial year 2019, the Supervisory Board of ACCENTRO Real Estate AG conscientiously and continuously performed its duties as required by law and the Articles of Association. There were regular meetings as well as individual discussions. The Supervisory Board was also available to advise the Management Board outside the meetings and monitored its activities. It was always involved comprehensively and at an early stage by the Management Board in important decisions, informed itself about the course of business, plans for business expansion and all relevant issues aff ecting the Company and adopted the necessary resolutions. The Supervisory Board was directly involved in all decisions of fundamental importance to the Company.
There were no personnel changes in the Supervisory Board in the 2019 fi nancial year. Axel Harloff , Dr Dirk Hoff mann and Natig Ganiyev were re-elected for a term of fi ve years by resolution of the shareholders in general meeting on 14 May 2019. Mr Axel Harloff was re-elected Chairman of the Supervisory Board at the Supervisory Board meeting on 14 May 2019.
There were also no personnel changes in the Management Board of ACCENTRO Real Estate AG in fi nancial year 2019. Mr Jacopo Mingazzini has been the sole member of the Management Board of the Company since 1 September 2014.
The Management Board reports to the Supervisory Board at regular joint meetings.
The Supervisory Board held four meetings in the reporting period, on 14 March, 14 May, 5 September and 3 December 2019. Outside of these regular Supervisory Board meetings, there was also a constant exchange of views between the Management and Supervisory Boards. All decisions and measures requiring approval were discussed in detail, and resolutions were adopted on the basis of the deliberations and the resulting proposed resolution of the Management Board. The Supervisory Board has thus fulfi lled the duties incumbent upon it according to the law and the Articles of Association. No member of the Supervisory Board attended less than half of the meetings. Confl icts of interest on the part of members of the Management and Supervisory Boards were neither reported nor occurred in the past fi nancial year.
In addition, the Management Board informed the Supervisory Board in written quarterly reports about the course and situation of the Company as well as about the business policy pursued and other fundamental questions of corporate planning.
In accordance with the Articles of Association, the Supervisory Board consists of three members. In this light, the Supervisory Board has not formed any committees. All members of the Supervisory Board have dealt with the entirety of the tasks of the Supervisory Board within the framework of their activities.
The Supervisory and Management Boards of ACCENTRO Real Estate AG are jointly of the opinion that the German Corporate Governance Code (GCGC) contains nationally and internationally recognised standards for good and responsible corporate governance that serve to manage and monitor German listed companies.
Pursuant to Sec. 161 of the German Corporation Act (AktG), the management and supervisory boards of a listed company are required to issue an annual declaration on the extent to which the recommendations of the "Government Commission on the German Corporate Governance Code" have been and are being complied with. The declaration refers to the Code in its version dated 7 February 2017, which was published in the Federal Gazette (Bundesanzeiger) on 24 April 2017. The text of the declaration is published on the Company's website (www.accentro.ag) and in this annual report.
In addition, the declaration of compliance together with the annual fi nancial statements and management report as well as the other documents requiring disclosure have been published in the Bundesanzeiger and submitted to the company register.
The Supervisory Board proposes that Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Hamburg, be appointed as auditor for the fi nancial year from 1 January to 31 December 2019.
The annual fi nancial statements of the Company and the consolidated fi nancial statements, including the management report and consolidated management report, for the 2019 fi nancial year presented by the Management Board have been audited by the appointed auditor and given an unqualifi ed auditor's opinion.
The Management Board submitted the annual fi nancial statements and the management report, the consolidated fi nancial statements and the consolidated management report, as well as the auditor's reports on the audit of the annual fi nancial statements and the consolidated fi nancial statements and the Management Board's proposal for the appropriation of net income to the Supervisory Board in due time for the audit. At its balance sheet meeting on 18 March 2020, the Supervisory Board discussed in detail with the Management Board the documents relating to the annual fi nancial statements and the reports, in particular questions concerning the valuation of current and non-current assets.
At this meeting, the auditor reported on the main results of the audit and was available to the Supervisory Board to provide additional information. On the basis of its own audit of the annual fi nancial statements, the consolidated fi nancial statements, the management reports for the Company and the Group, the Supervisory Board agrees with the results of the audit by the auditor and notes that no objections are to be raised according to the conclusive fi ndings of its audit. By resolution of 18 March 2020, the Supervisory Board approved the annual fi nancial statements, which are thus adopted pursuant to Sec. 172 of the Corporation Act, and the consolidated fi nancial statements.
The Supervisory Board has examined and approved the report on relations with affi liated companies prepared by the Management Board pursuant to Sec. 312 of the Corporation Act. According to the conclusive fi ndings of its audit, the Supervisory Board raised no objections to the declaration of the Management Board at the end of its report pursuant to Sec. 312 of the Corporation Act.
The auditor, Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Hamburg, raised no objections in their audit of this report; the results of the audit are in line with the fi ndings of the Supervisory Board. The auditor has issued an unqualifi ed auditor's opinion:
"Having duly audited and assessed the report in accordance with our professional duties, we confi rm that:
The Supervisory Board is composed of shareholder representatives pursuant to Sec. 96 of the Corporation Act.
The Supervisory Board would like to thank the Management Board and all employees of ACCENTRO Real Estate AG for their performance, their high level of commitment and their loyalty.
Berlin, 18 March 2020
Axel Harloff Chairman of the Supervisory Board
Pursuant to Sec. 161 of the German Corporation Act (AktG), the management and supervisory boards of a listed company are required to issue an annual declaration on the extent to which the recommendations of the "Government Commission on the German Corporate Governance Code" have been and are being complied with. The declaration below refers to the Code in its version dated 7 February 2017, which was published in the Bundesanzeiger on 24 April 2017. The text of the declaration is published on the Company's website (www.accentro.ag).
"ACCENTRO Real Estate AG has complied with the recommendations of the German Corporate Governance Code as amended since the last declaration of conformity was issued in March 2019 with the following exceptions and intends to continue to comply with the Code's recommendations in the coming fi nancial year with the following exceptions:
The Company did not broadcast the 2019 general shareholders' meeting and does not intend to broadcast the 2020 general shareholders' meeting via state-of-the-art communication media.
The D&O insurance policy concluded as a group contract currently does not provide for a deductible for the members of the Supervisory Board. The Company is of the opinion that such a deductible is not necessary for the members of the Supervisory Board to encourage them to properly perform their supervisory duties.
The Management Board is currently refraining from setting up a compliance management system and whistleblower system. In view of the manageable corporate structures and business processes as well as fl at hierarchies, the need for a compliance management and whistleblower system has so far been comparatively low. The close involvement of the Management Board in the main business transactions and projects as well as business routines ensures ongoing monitoring of any risks of potential legal violations within the Company. Regular exchange takes place between employees and the Management Board, and an internal culture of trust is fostered.
The Management Board of ACCENTRO Real Estate AG pursues the goal of promoting women and has set itself the goal of recruiting additional women for management positions. However, the Management Board is of the opinion that the aspect of diversity, which includes consideration of women, should not be the sole decisive criterion for fi lling management positions. In the interests of the Company, leadership and management skills as well as professional competence in the respective business areas and areas of responsibility and acquired professional experience are of primary importance.
At variance with Section 4.2.1 of the Code, the Management Board of ACCENTRO Real Estate AG currently consists of only one person. The Supervisory and Management Boards are of the opinion that the size of the Company justifi es this. Nevertheless, the Management and Supervisory Boards regularly review whether the development of the business makes it necessary to expand the Management Board.
The total remuneration of the Management Board currently comprises fi xed and variable components, but no remuneration components with a long-term incentive eff ect or association with risk. In addition, the recommendation that the variable components of the total remuneration should take into account any negative development of the Company has not been and will not be complied with. In the opinion of the Supervisory Board, neither of these is necessary to ensure the loyalty of the Management Board and its commitment to the Company. No maximum compensation limits or a severance payment cap for departing Management Board members have been agreed at present, as the Supervisory Board does not consider this necessary.
Due to the age structure of the Management Board, no age limit has been set and no long-term succession plan has been made at this time.
The Supervisory and Management Boards expressly welcome all eff orts to counteract gender discrimination and any other form of discrimination and to appropriately promote diversity. When appointing members of the Management Board, the Supervisory Board attaches exclusive importance to the competence, qualifi cations and experience of the persons in question; other characteristics such as gender or national affi liation were and are therefore of no signifi cance for this decision.
The Supervisory Board has so far refrained from setting up committees (e.g. an audit committee or a nomination committee) and will continue to do so in the future, because the Supervisory Board believes that, given the number of three members, it is possible to work effi ciently even if all members are represented, and the formation of committees, which must comprise at least two persons, or a quorum of at least three, does not seem appropriate for a Supervisory Board of this size.
At present, the Company does not comply with the Code's recommendation on the formulation of concrete objectives for the composition of the Supervisory Board and a competence profi le for the entire body and the publication thereof in the Corporate Governance Report, which in particular includes adequate participation of women. The legal requirements for meeting a specifi ed minimum participation rate for women will be complied with in the coming elections to the Supervisory Board. In the opinion of the Supervisory Board, neither the age limit nor the limitation on the length of service are necessary for the eff ective and successful work of the Supervisory Board. The Supervisory Board will examine to what extent these recommendations can be complied with in the future.
The current Supervisory Board member Dr. Dirk Hoff mann is Chairman of the Supervisory Board of Adler Real Estate AG, Berlin (until the end of February 2020), Chairman of the Supervisory Board of Westgrund AG, Berlin, and Chairman of the Supervisory Board of Squadra Immobilien GmbH & Co. KG. Axel Harloff is Chairman of the Supervisory Board of Consus Real Estate AG, Berlin and Member of the Board of Management of ERWE Immobilien AG, Frankfurt am Main. Mr Natig Ganiyev is a member of the Supervisory Board of Malta Montenegro Wind Power JV Ltd, Malta.
The Supervisory Board should not include any members who hold board positions with major competitors. This could have been the case with Mr Hoff mann and Mr Harloff . However, no material confl icts of interest arose.
Currently, quarterly reports are not discussed with the Supervisory Board prior to publication. The Management Board informs the Supervisory Board in writing on a quarterly basis about the situation of the Company and the course of business.
ACCENTRO Real Estate AG generally publishes its interim reports 45 days after the end of the reporting period. In exceptional cases, there may be a slight delay due to special organisational procedures. The legal requirements in accordance with Sec. 115 of the German Securities Trading Act (WpHG) are complied with in all cases."
Berlin, 6 March 2020 Management Board and Supervisory Board ACCENTRO Real Estate AG
The German Stock Index (DAX) ended 2019 with a growth of around 25%, the best year-end result in seven years.
The European Central Bank, having suspended its bond purchases at the end of 2018, relaxed its monetary policy again in 2019 due to weaker economic signals, and thus triggered another boom cycle on the stock market. However, the ongoing trade row between the US and China, and concerns over the prospect of a "no-deal" withdrawal of the UK from the EU caused jitters on the capital markets in 2019 as in previous years.
ACCENTRO's stock, just like the stock of Berlin-based property asset holders, suff ered from the turbulent mood on Berlin's real estate market, particularly in June 2019. Real estate investors responded nervously to the intensifying discussions on the subject of expropriating major Berlin-based real estate companies, and of plans to introduce a rent cap for the next fi ve years.
However, the ACCENTRO share price recovered slowly and gained 6.25% during the second half year of 2019.
The ACCENTRO share price equalled EUR 9.68 on the fi rst trading day of 2019 (Xetra), decreased by 20.97% over the course of the year and closed at EUR 7.65 on 30 December 2019, the last trading day of the 2019 fi nancial year.
The average daily trading volume (Xetra) of the ACCENTRO stock was 2,262 units during the 2019 fi nancial year. Overall, 0.57 million shares of ACCENTRO Real Estate AG were traded in the Xetra trading system between 2 January 2019 and 30 December 2019. The comparatively low trading volume is mainly explained by the Company's relatively small free fl oat of 11.91%.
Due to the softened share price, the market capitalisation of ACCENTRO AG decreased by EUR 65.9 million during the 2019 fi nancial year, declining from EUR 314.0 million to EUR 248.1 million.
ANNUAL REPORT 2019 ACCENTRO Real Estate AG REPORTS ACCENTRO Real Estate AG Stock Performance
ACCENTRO Share Price Development from 1 January to 31 December 2019
ACCENTRO share price development during the fi nancial year 2019
By the end of the 2019 fi nancial year, the subscribed capital of ACCENTRO Real Estate AG totalled EUR 32.44 million. It represents 32,437,934 no-par value bearer shares and experienced no change during the 2019 fi nancial year.
As of 31 December 2019, a total of 83.31% of the ACCENTRO AG stock was held by Brookline Real Estate S.à r.l., while ADLER Real Estate AG owned 4.78% and the free fl oat accounted for 11.91%.
The adjacent chart provides an overview of the shareholding structure.
Shareholder structure as of 31 December 2019 (fi gures based on shareholder disclosures)
| Company shares | |
|---|---|
| Stock market segment | Prime Standard |
| ISIN | DE000A0KFKB3 |
| German Securities Code Number (WKN) | A0KFKB |
| Number of shares as of 31 December 2019 | 32,437,934 |
| Free fl oat | 11.91% |
| Share price high (1 January – 31 December 2019)* | EUR 9.78 |
| Share price low (1 January – 31 December 2019)* | EUR 6.70 |
| Closing price on 30 December 2019* | EUR 7.65 |
| Market capitalisation on 30 December 2019* | EUR 248,150,195 |
* Closing prices in Xetra trading
Special priority was given to regular disclosures and the dialogue with the capital market during the 2019 fi nancial year. In that same 2019 fi nancial year now concluded, ACCENTRO Real Estate AG attended the following fi nancial analyst events:
The corporate development of ACCENTRO Real Estate AG is continuously monitored by analysts. The latest analyst assessments returned the following ratings for the ACCENTRO stock:
| ■ 18 Dec. 2019 | Baader Helvea Equity Research | stock rating: "Buy" | upside target: EUR 10.00 |
|---|---|---|---|
| ■ 22 Nov. 2019 | Kepler Cheuvreux | stock rating: "Buy" | upside target: EUR 10.50 |
| ■ 13 Nov. 2019 | ODDO BHF | stock rating: "Hold" | upside target: EUR 8.00 |
| ■ 11 Nov. 2019 | Quirin Privatbank | stock rating: "Buy" | upside target: EUR 10.50 |
| ■ 07 Nov. 2019 | SRC Research | stock rating: "Buy" | upside target: EUR 10.00 |
| Preliminary Remarks | 22 |
|---|---|
| Basic Structure of the Group | 22 |
| Economic Report | 24 |
| Report on the Individual Financial Statements of ACCENTRO Real Estate AG |
33 |
| Forecast, Opportunity and Risk Report | 39 |
| Internal Control System and Risk Management in Regard to the Group Accounting Process |
50 |
| Disclosures Pursuant to Sections 289a, 315a, German Commercial Code (HGB) |
52 |
| Corporate Governance Statement Pursuant to Sections 289f, 315d, German Commercial Code (HGB) |
58 |
| Remuneration Report | 59 |
| Closing Statement of the Management Board on the Dependency Report |
60 |
Condominiums Berlin-Zehlendorf, Clayallee 228-234
The consolidated fi nancial statements of ACCENTRO Real Estate AG (hereinafter "ACCENTRO AG") on which this report is based have been prepared in accordance with the International Financial Reporting Standards (IFRS) the way they are to be applied in the European Union.
All monetary fi gures in this report are quoted in Euro (EUR). Both individual and total fi gures represent the value with the smallest rounding diff erence. Adding the values of the individual line items may result in minor diff erences compared to the reported totals.
ACCENTRO AG is a listed property company focusing on residential real estate located in Germany. The business activities of ACCENTRO AG and its subsidiaries (hereinafter "ACCENTRO AG" or "ACCENTRO Group") are exclusively limited, geographically speaking, to real estate in economically attractive locations in Germany.
The business activities of the ACCENTRO Group include the operation and trading of residential properties and individual apartments, especially the retailing of apartments to owner-occupiers and buy-to-let investors within the framework of retail privatisations of housing portfolios. The focus here is on tenantsensitive housing privatisations. At the same time, the ACCENTRO Group transacts block sales of residential units to institutional investors (portfolio sales) in order to exploit opportunities. The privatisation services provided by the ACCENTRO Group involve both the retailing of apartments from the proprietary property stock of the ACCENTRO Group and the delivery of privatisation services on behalf of third parties.
ACCENTRO AG is the parent company of the ACCENTRO Group. ACCENTRO AG acts as an operationally active holding company for a number of member companies in which the housing stock is concentrated, and for one service company focused on the business of housing privatisation. For companies in which it holds a controlling interest, ACCENTRO AG assumes the top-down responsibilities of corporate controlling, funding, and administration within the ACCENTRO Group. ACCENTRO AG's sphere of ownership
includes core divisions such as Legal, Accounting, Controlling, Risk Management, Funding, Purchasing, Asset Management and IT.
The ACCENTRO Group consists of several property holding companies directly managed by ACCENTRO AG in which the real estate assets of the ACCENTRO Group are held. All of the companies are consolidated in the consolidated fi nancial statements of ACCENTRO AG, so that there are no non-consolidated subsidiaries. For a list of the individual subsidiaries and associates of ACCENTRO AG, please see the notes to the consolidated fi nancial statements.
ACCENTRO AG holds several strategic investments in property development companies which are not controlled by ACCENTRO AG and which are therefore not included as subsidiaries in its consolidated fi nancial statements. The pro-rata net income of these companies and their changes in value, if any, are recognised as at-equity earnings in the Income Statement. Wherever the equity interest amounts to less than 20%, its contribution to operating income is reported as investment income.
The ACCENTRO AG Group's in-house reporting makes no distinction by segments because the Group activities are limited exclusively to the buying and selling of residential real estate in Germany. As in previous years, this annual report therefore includes no segment reporting.
ACCENTRO AG uses the consolidated earnings before interest and taxes (EBIT) as fi nancial performance indicator for corporate management purposes. Here, the key control variable is the sales performance of the properties, defi nitive factors including the number of condominium reservations placed by potential buyers, among others, and the actual selling prices realised. This variable is aggregated both as number of fl ats involved and as sales total. The other factors that the control system takes into account include the operating income of each sub-portfolio or of each property. In addition, control variables such as the number of new clients, viewings, and reservations serve as early indicators of the Company's performance. For the purposes of management reporting, EBIT and sales are taken as basis, since the other control variables are used for the individual management of each property and are not aggregated at the company level.
Factors aggregated on the level of the parent Group include prompt and regular updates on the liquidity position. The liquidity planning for the next 12 months is conducted on a rolling basis. This centrally controlled responsibility helps to monitor the fi nancial stability of the corporate Group. An integral part of this control is the continuous measurement of the liquidity fl ows on the level of each company.
In 2020, ACCENTRO AG moreover agreed to fulfi l fi nancial covenants, which are elaborated in the notes to the consolidated fi nancial statements, in conjunction with its successful issuance of a new corporate bond over EUR 250 million.
According to the Federal Statistical Offi ce (Destatis), the German economy grew by another 0.6% year on year in 2019. However, the growth of the gross domestic product (GDP), adjusted for infl ation, which has been sustained for the past ten years, was said to have continued to slow down and to have dropped below the ten-year average of +1.3%. According to the Federal Statistical Offi ce, growth in 2019 was driven mainly by consumption. Private consumer spending (+1.6%) and government consumption spending (+2.5%) grew faster than over the past two years.
The development of the German real estate market during the 2019 fi nancial year benefi ted once more from the European Central Bank's accommodative monetary policy. An interest hike that had been anticipated at the beginning of the year failed to materialise during the 2019 fi nancial year. In January 2020, the European Central Bank announced that it would maintain its highly accommodative monetary policy longterm, so that the real estate sector will continue to benefi t from persistently favourable terms of fi nancing.
According to a survey on the real estate price trend in Germany that bulwiengesa AG published in January 2020, the housing market remains the driving force in the bulwiengesa Real Estate Index. The residential sub-index, which covers the most important market for ACCENTRO AG, continued to rise sharply in 2019, albeit at a slower rate than the previous year (5.5%, down from +7.0%). Across Germany, selling prices for new-build condominiums (+6.8%), attached houses (+6.8%) and plots zoned for detached homes (+7.3%) grew faster than residential rent rates for new-build (+3.6%) or existing (+2.5%) units. The real estate sector benefi ted from the stable labour market, the positive demographics in the cities and the accommodative monetary policy of the European Central Bank, which ensured favourable terms of fi nancing.
Driven by an intensifying housing shortage, the low supply elasticity kept driving up real estate prices in the metropolises. According to the Federal Statistical Offi ce, roughly 319,200 new fl ats were approved during the fi rst eleven months of 2019, a year-on-year increase by 1.3% only. The building industry's orders on hand in the housing construction segment have gone up rapidly for 2020. But given the current lack of construction capacities, the number of completions is actually expected to keep declining and the construction backlog to keep expanding.
Aside from the persistent shortage of labour in the construction industry, there are legal uncertainties and macro-societal debates to consider, e. g. those concerning the rent cap, the tax on the increase in land value, rules for the preservation of fauna, fl ora, habitats, the conservation of energy or a modifi cation of the legal framework governing share deals, all of which pose challenges to the real estate industry, complicating and delaying the construction of urgently needed residential accommodation.
Still, German residential real estate remains as popular as ever among private and institutional investors inside and outside Germany despite the steady price growth. The sustained demand is attributable, on the one hand, to the attractive terms of fi nancing and, on the other hand, to the lack of alternative investment opportunities of comparable appeal. According to a survey done by BNP Paribas Real Estate on the German residential investment market in 2019, c. EUR 19.5 billion were spent on larger-scale residential portfolios of 30 or more residential units in Germany, the second-highest year-end total in 15 years.
Rent control measures like the rent cap in Berlin or the rent freeze in major German cities or even the debate revolving around the option to expropriate certain housing companies have not scared off investors, or at least not domestic ones. German buyers invested EUR 17.8 billion nationwide in 2019, a one-year increase by 41%, while foreign investors accounted for merely 8.5% of the investment total anymore.
According to BNP Paribas Real Estate, Germany's "Big Seven" cities (Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart) registered a revenue growth of 25%. Sales in Berlin – the most important market for ACCENTRO AG – reported a sales total of EUR 4.2 billion or roughly 50% of the total revenues generated by big-ticket housing sales in Germany's seven Class A cities.
ACCENTRO AG intends to keep moving forward with its expansion plans in fi scal 2020, and to enlarge its property holdings nationwide. With its current inventory both in metropolises and in swarm cities marked by high growth upside, ACCENTRO AG is facing the new year with a bright outlook.
The very positive business performance of the ACCENTRO Group in the 2019 fi nancial year evolved in a market environment that remained very favourable and that was marked by keen demand for residential property not just in Germany's metro regions. A robust boom cycle informs both the situation on the letting end of the market and the demand for condominiums generated by owner-occupiers or buy-to-let investors.
As announced, we continued to push forward with our regional diversifi cation in the course of the fi nancial year by picking up a larger real estate portfolio in Upper Bavaria and real estate holdings in the Rhine-Main region.
In last year's forecast report, we predicted modest growth in revenues based on a projected EUR 163.3 million and moderate EBIT growth in the lower double-digit percentage range. In December 2019, we revised our forecast to a predicted revenue total of just over EUR 140 million and a prospective EBIT total in excess of EUR 40 million. Among the main reasons for falling short of the sales revenues originally are
delays in the wind-down of several privatisation projects in Berlin. The transfers of benefi ts and burdens are now expected to take place in 2020. At EUR 40 million, the new EBIT forecast exceeds the previous year's EBIT by 21% despite the anticipated drop in sales. Defi nitive for the reassuring trend in EBIT, in addition to a large-scale portfolio sale in December 2019, were the positive eff ects from the valuation of our investment properties. With revenues of EUR 143 million and EBIT of EUR 40 million, ACCENTRO AG believes to have met its adjusted forecast for the 2019 fi nancial year. Indeed, at EUR 26.3 million, the ACCENTRO Group achieved one of its fi nest annual results ever and the highest EBIT in the Company's history.
By acquiring 812 units in the course of the 2019 fi nancial year, the Company laid the ground for continued stable revenues in its privatisation business.
The ACCENTRO Group's key revenue and earnings fi gures developed as follows during the 2019 fi nancial year:
| 2019 fi nancial year |
2018 fi nancial year |
|
|---|---|---|
| EUR million | EUR million | |
| Revenues | 143.3 | 205.6 |
| EBIT | 39.8 | 32.9 |
| Consolidated income | 26.3 | 18.3 |
At EUR 143.3 million, consolidated sales cleared the adjusted forecast target while predictably falling short of the sales total of the 2018 fi nancial year, which was driven by one-off events.
EBIT climbed to EUR 39.8 million, a 21% increase year on year. The Group therefore exceeded its moderate growth forecast of a lower double-digit percentage growth that was made last year. The growth was boosted not least by a positive diff erence in value over EUR 11.4 million from the transfer of properties from inventories to investment properties (see 5.2 in the notes to the consolidated fi nancial statements) and a large-scale portfolio sale in December 2019. The volume of retailed apartments declined year on year, with 325 fl ats sold in 2019 (previous year: 487 fl ats; 2017: 488 fl ats). Nonetheless, revenues from apartment retail sales remained largely constant at EUR 71.6 million (previous year: EUR 73.0 million). The share of large-scale real estate transactions remained more or less stable at 42.6% (previous year: 40%).
As in the previous year, the net rental income experienced another modest increase by EUR 0.4 million as a result of the continuous portfolio expansion. At fi rst glance, the net service income seems to have remained stable at EUR 2.4 million (previous year: EUR 2.3 million). However, the prior-year fi gure included a commission for brokering a large real estate portfolio in an investment company in Berlin, whereas the relevant revenue in 2019 represents purely net commission income generated in the new-build property segment and commissions for sales brokered on behalf of collaboration partners in the existing-property segment.
Net income in the amount of EUR 1.2 million (previous year EUR 0.0 million) from companies included at equity represents pro-rata profi ts from the sale of the projects Havelländer Rosenpark (EUR 0.9 million) and Urbanstraße 5 (EUR 0.4 million) as well as pro-rata net income updating at-equity valuations in the amount of EUR –0.2 million.
Based on a potential analysis and the resulting business strategy for some of its properties, the Group decided to reclassify these and transferred them from inventories (IAS 2) to investment properties (IAS 40) during the 2019 fi nancial year. The corresponding fair value adjustment produced a positive result of EUR 11.4 million. For details, see note 5.2 in the notes to the consolidated fi nancial statements.
At EUR 1.2 million, the other operating income experienced further drop by EUR 1.7 million year on year. Key factor here was the derecognition of liabilities in the amount of EUR 0.9 million in connection with VAT issues concerning property developers. Analogously, a receivable over the same amount was also derecognised, thereby increasing the other operating expenses.
The other operating expenses in the amount of EUR 6.1 million (previous year: EUR 5.1 million) include, as they did the previous year, expenses for general advisory services, particularly in the areas of taxes, legal, and general strategic issues, among other expenses. Also recognised in this item are rental expenses for the Company's business premises, acquisition costs, as well as information, advertising and entertaining expenses. The year-on-year increase is mainly attributable to the derecognition of a sales tax receivable in connection with past property development projects. This derecognition item is off set by other operating income over the same amount.
Total payroll and benefi t costs for the reporting period experienced another signifi cant increase by EUR 1.2 million to EUR 5.8 million (previous year: EUR 4.6 million). As previously announced in the forecast report section of the 2018 annual report, this was caused by the continued expansion of the workforce, so that 5 more staff were on the payroll by 31 December 2019 than had been by year-end 2018, although not all of the jobs created represent full-time positions. The average job growth across all half- and full-time positions was equivalent to 9 full-time positions.
The net interest result of the 2019 fi nancial year equalled EUR –7.4 million, down from EUR –8.9 million the previous year. Despite a signifi cant increase in fi nancial liabilities by EUR 85.7 million and a rise in interest expense by EUR 2.3 million during the 2019 fi nancial year, the simultaneous increase in interest income by EUR 3.9 million more than balanced the expense. The increase in interest income results from a enlarged volume of granted loans and from special interest claims in connection with short-term loans.
The earnings before taxes equalled EUR 32.5 million, thus exceeding the prior year level (EUR 24.0 million) by 35.5%. Income tax expenses amounted to EUR 6.2 million during the reporting period and were thus only slightly below the prior-year level (EUR 5.7 million). The tax ratio for the 2019 fi nancial year is 19.0% (previous year: 23.7%). The main reason why the actual tax rate is lower than the Group tax rate is the strategy to sell real estate by way of share deals, which benefi t from a lower tax regime.
For more details on the composition and amount of expenses and income, please see the notes to the consolidated fi nancial statements.
| Key Figures from the Cash Flow Statement | 2019 fi nancial year |
2018 fi nancial year |
|---|---|---|
| EUR million | EUR million | |
| Cash fl ow from operating activities | –75.7 | –48.4 |
| Cash fl ow from investing activities | 2.4 | –51.2 |
| Cash fl ow from fi nancing activities | 81.0 | 111.4 |
| Net change in cash and cash equivalents | 7.8 | 11.8 |
| Increase in cash and cash equivalents from the addition of fully consolidated companies |
0.2 | 2.7 |
| Change in restricted cash and cash equivalents/ adjustment of cash and cash equivalents |
1.2 | 1.1 |
| Decrease in cash and cash equivalents from the disposal of fully consolidated companies |
–0.5 | –6.7 |
| Cash and cash equivalents at the beginning of the period | 15.5 | 6.5 |
| Cash and cash equivalents at the end of the period | 24.2 | 15.5 |
During the 2019 fi nancial year, the cash fl ow from operating activities equalled EUR –75.7 million (previous year: EUR –48.4 million). It breaks down into cash fl ow from operations in the amount of EUR 4.4 million (previous year: EUR –0.6 million) and a net cash outfl ow toward the further expansion of the inventory assets in the amount of EUR –80.1 million (previous year: EUR –47.7 million). The operating cash fl ow includes cash infl ows in the amount of EUR 1.1 million (previous year: EUR 0.1 million) from dividends and proceeds from the sale of corporate investments accounted for using the equity method. Liabilities decreased by EUR 8.6 million while tax payments of EUR 5.2 million impacted the operating cash fl ow.
A positive impact on the cash fl ow from operating activities is generated by rent payments and the amounts deposited in return for inventory properties sold. The operating cash fl ow is burdened by the sum total of operating expenditures, including the income tax payments and payments toward the expansion of the inventory real estate assets. For more details on the amount and composition of the Group's cash fl ows, please see the consolidated cash fl ow statement and the notes to the consolidated fi nancial statements, section 5.20.
The cash fl ow from investing activities during the 2019 fi nancial year was positive at EUR 2.4 million (previous year: EUR –51.2 million). The positive cash fl ow was mainly generated by the repayment of EUR 5.8 million in loans granted, the sum being off set by cash outfl ows in the amount of EUR 1.9 million for new loans granted and by investments in property, plant and equipment in the amount of EUR 1.6 million. The investments in property, plant and equipment concerned primarily the interior fi t-out and restructuring works in the new head offi ce on Kantstr. that the Company relocated to in early 2020.
The positive cash fl ow from fi nancing activities in the amount of EUR 81.0 million (previous year: EUR 111.4 million) is primarily attributable to borrowings from banks in the amount of EUR 127.5 million, which were off set by payments of interest and principal in the amount of EUR 34.2 million. EUR 5.2 million, the same as the year before, was paid out as dividend to ACCENTRO AG shareholders.
| 31.12.2019 | 31.12.2018 | |||
|---|---|---|---|---|
| EUR million | % | EUR million | % | |
| Assets | 580.8 | 100.0% | 474.2 | 100.0% |
| Non-current assets | 102.5 | 17.7% | 81.1 | 17.1% |
| Current assets less liquid assets | 454.1 | 78.1% | 377.6 | 79.6% |
| Cash and cash equivalents | 24.2 | 4.2% | 15.5 | 3.3% |
| Debt and equity | 580.8 | 100% | 474.2 | 100% |
| Equity | 220.8 | 38.0% | 199.1 | 42.0% |
| Non-current liabilities | 215.9 | 37.2% | 176.4 | 37.2% |
| Current liabilities | 144.0 | 24.8% | 98.7 | 20.8% |
At 62.0%, the debt-to-equity ratio (debt capital/total capital) showed a modest year-on-year increase by the end of the year under review (previous year: 58.0%), which is mainly explained by a largely uniform increase in shareholders' equity (EUR +21.7 million) and an increase in liabilities (EUR +84.8 million). Further borrowings caused the LtC (net fi nancial indebtedness/gross asset value) to rise to 55.9% (previous year: 50.3%) as expected.
At 4.2%, the ratio of cash and cash equivalents to total assets was slightly above the level of the prior year balance sheet date (3.3%). This is explained by a 56,1% increase in cash and cash equivalents compared to EUR 24.2 million in 2018, while assets grew by 22.5% during the same period of time.
The Group was able to meet its fi nancial obligations at all times. Rolling liquidity planning makes it possible to detect potential liquidity bottlenecks early on and to seize countermeasures to defl ect them if necessary.
The fi nancing schemes of ACCENTRO AG rest on several mainstays. In addition to bank loans collateralised by land charges, the Company employs capital-market-based fi nancing arrangements in the form of corporate bonds.
Largely as a result of fresh borrowing to fi nance property acquisitions, non-current liabilities increased from 22.4% to a total of EUR 215.9 million. Current liabilities rose by 45.9% to EUR 144.0 million. The fi gure refl ects the increase in current fi nancial liabilities based on the sales planning for the 2020 fi nancial year, supplemented by planned premature loan repayments from funds raised through the bond issue in February 2020.
Cash and cash equivalents amounted to EUR 24.2 million as of 31 December 2019, compared to EUR 15.5 million as of 31 December 2018. ACCENTRO AG assumes that all of the loans to be renegotiated during the 2020 fi nancial year will be renewed on a rotating basis or repaid. Considering the cash infl ow from the corporate bond placed in February 2020, ACCENTRO Real Estate AG deems its fi nancing requirements secured through the end of the 2020 fi nancial year. No fi nancing arrangements in foreign currencies were taken out by ACCENTRO AG.
In 2019, the consolidated net income of EUR 26.3 million prompted a further increase in shareholders' equity from EUR 199.1 million at year-end 2018 to EUR 220.8 million by 31 December 2019. At 38.0%, the equity ratio was largely kept on a high level (previous year: 42.0%) despite a 22.5% increase in total assets and a reduction in equity due to the dividend payment in the amount of EUR 5.2 million in May 2019.
Total assets increased signifi cantly again, this time by EUR 106.6 million (22.5%) to EUR 580.8 million (31 December 2018: EUR 474.2 million). It was the fi rst time ever that the total assets of ACCENTRO AG crossed the mark of half a billion euros. Material changes to each balance sheet item are detailed in the summary below, and are subsequently elaborated.
| 31 December 2019 |
31 December 2018 |
Change | |
|---|---|---|---|
| EUR million | EUR million | EUR million | |
| Non-current assets | 102.5 | 81.1 | +21.4 |
| Owner-occupied properties and buildings | 24.1 | 23.4 | +0.7 |
| Investment properties | 34.5 | 0.0 | +34.5 |
| Non-current other receivables and other assets | 14.8 | 28.8 | –14.0 |
| Other non-current assets | 29.1 | 28.9 | +0.2 |
| Current assets | 478.3 | 393.1 | +85.2 |
| Inventory properties | 416.6 | 345.2 | +71.4 |
| Trade receivables | 10.6 | 18.6 | –8.0 |
| Other current assets | 51.1 | 29.3 | +21.8 |
| Equity | 220.8 | 199.1 | +21.7 |
| Non-current liabilities | 215.9 | 176.4 | +39.5 |
| Financial liabilities and bonds | 213.7 | 175.3 | +38.4 |
| Other non-current liabilities | 2.2 | 1.1 | +1.1 |
| Current liabilities | 144.0 | 98.7 | +45.3 |
| Current fi nancial liabilities and bonds | 103.9 | 55.9 | +48.0 |
| Other current liabilities and accrued expenses | 40.1 | 42.8 | –2.7 |
The non-current assets increased by EUR 21.4 million. The main reason for this was the reclassifi cation of a portfolio of real estate in Berlin, which was originally recognised under inventories, to non-current assets and its recognition as investment properties. For more details, see note 5.2 in the notes to the consolidated fi nancial statements. Conversely, other receivables and other assets, as well as trade receivables, were reclassifi ed as current because these are expected to be collected during the fi rst half of the 2020 fi nancial year.
Non-current other receivables and other assets essentially comprise lendings to companies that are associated with ACCENTRO AG via equity investments. Since ACCENTRO AG does not control these companies, they are not fully consolidated in the consolidated fi nancial statements of ACCENTRO AG.
The other non-current assets include essentially a non-depreciable goodwill in the amount of EUR 17.8 million, corporate investments in non-consolidated companies in the amount of EUR 9.3 million, and property, plant and equipment in the amount of EUR 1 million.
Current assets increased by EUR 85.2 million to EUR 478.3 million (previous year: EUR 393.1 million), and represent primarily the trading portfolio properties recognised in inventories. For 812 residential units acquired for a combined purchase price of EUR 164.8 million, the transfer of benefi ts and burdens took place during the 2019 fi nancial year. For another 84 residential units acquired for a purchase price of EUR 13.0 million, the sale and purchase agreements were signed in 2019, while their benefi ts and burdens will be transferred and recognised in the 2020 fi nancial year. At the same time, 830 residential units (previous year: 1,615) worth EUR 95.5 million (previous year: EUR 156.6 million) in acquisition costs were sold, so that the inventory assets, taking into account the refurbishment measures completed in the course of the year and down-payments recently made, increased by EUR 71.4 million.
The decrease in current trade receivables is mainly explained by the balance sheet date as such, because the purchase price receivable of EUR 11.2 million from a property portfolio sold at the end of 2018 was only paid in March 2019, as agreed.
In addition to cash and cash equivalents in the amount of EUR 24.2 million (previous year: EUR 15.5 million), other current assets break down as follows for the 2019 fi nancial year: The accounts receivable from operating costs not yet invoiced add up to EUR 7.0 million (EUR 8.1 million). Short-term loans rose to EUR 16.9 million (previous year: EUR 2.7 million). The increase was mainly caused by the reclassifi cation from non-current assets due to their debt maturity structure. Income tax receivables amounted to EUR 0.9 million (previous year: EUR 1.1 million) as of the balance sheet date. For the fi rst time, the 2019 fi nancial statements include contract assets from a period-based revenue recognition in connection with the development of attic apartments in the amount of EUR 1.2 million. The remaining accounts receivable break down into a multitude of minor amounts.
ACCENTRO AG succeeded in enlarging its stock of inventory properties by another EUR 71.3 million worth of assets during the 2019 fi nancial year. With its consistently expanded inventory, ACCENTRO takes a confi dent view of the future. This assessment is based specifi cally on the continuous expansion of ACCENTRO's property holdings outside Berlin.
The Group Management Report of the previous year predicted a slight increase in revenues and a moderate, low double-digit percentage growth in EBIT. In December 2019, we revised the forecast, predicting a higher EBIT fi gure and a lower revenue total. The actual fi gures added up to EUR 143.3 million in revenues and EUR 39.8 million in EBIT, and included a fi rst-time valuation eff ect in the amount of EUR 11.4 million. At EUR 39.8 million, it was the highest EBIT total in the Company's history.
Considering that the EBIT forecast was achieved, ACCENTRO AG is fully satisfi ed with the earnings performance. Then again, the prerequisites for a sustained positive fi nancial performance of the ACCENTRO Group were put in place during the 2019 fi nancial year through the continued expansion of the trading portfolio and the set-up of several collaborative ventures.
Despite dividend payments and a substantial increase in total assets, the equity ratio remained stable on a high level of 38.0% (prior period: 42.0%).
The professional know-how and commitment of employees and managers represent key prerequisites for the business performance of the ACCENTRO Group.
To help retain employee knowledge and skills, the ACCENTRO Group puts a premium on ensuring attractive working conditions. This includes, above all, a competitive compensation system that is constantly monitored and adjusted as needed. Group employees also benefi t from options for continued professional development as needed or whenever the opportunity presents itself.
An important non-fi nancial success factor for ACCENTRO AG is the Company's reputation, particularly the reputation of its subsidiary ACCENTRO GmbH. ACCENTRO GmbH has been active in the privatisation business since 1999, and is Germany's leader in this fi eld today.
For some years now, ACCENTRO GmbH has concentrated on the booming market of Berlin, exploiting its highly auspicious development. By setting up its own trading portfolio outside Berlin, ACCENTRO Group will keep expanding its position as attractive and reliable partner in the area of tenant-sensitive housing privatisation. The business success of the ACCENTRO Group in the privatisation business is monitored by continuously keeping count of the condominiums sold, so that the trend in sales represents yet another, non-fi nancial performance indicator.
In a bid to widen its circle of buyers beyond the German-speaking clientele, ACCENTRO GmbH recently started an ongoing eff ort to expand its international footprint by engaging new groups of leads who are interested in German real estate but do not wish to buy entire portfolios.
ACCENTRO AG is a holding company. It controls the operations of subsidiaries that own the Group's real estate holdings outright. In addition, it is the parent company of a service provider focusing on the housing privatisation business. For companies in which it holds a controlling interest, ACCENTRO AG assumes the top-down responsibilities of corporate controlling, funding, and administration within the ACCENTRO Group. ACCENTRO AG's sphere of ownership includes core divisions such as Legal, Accounting, Controlling, Risk Management, Funding, Purchasing, Asset Management and IT.
The Company's business performance, along with its opportunities and risks, is inseparably linked to the economic development of the Group entities. To properly understand the economic development of ACCENTRO AG and its defi nitive infl uencing factors, it is therefore of the essence to consider the ACCENTRO Group as a whole. The reporting on the situation and the presentation of the opportunities and risks of the Group therefore apply essentially to ACCENTRO AG as an individual enterprise.
The separate fi nancial statement of ACCENTRO AG underlying this report was compiled according to the regulations of the German Commercial Code (HGB) for large stock corporations and the supplementary regulations of the German Stock Corporation Act (AktG).
ACCENTRO AG is a residential property company listed on the regulated market and is also listed, inter alia, on the Frankfurt Stock Exchange.
The very positive business performance of the ACCENTRO Group and of ACCENTRO AG during the 2019 fi nancial year unfolded in a market environment that remained very favourable and that was marked by keen demand for residential property not just in Germany's metro regions.
ACCENTRO AG managed to top its EBIT target considerably due to anticipated profi t transfers and certain divestitures it undertook. The separate fi nancial statement of ACCENTRO AG reports EUR 24.3 million (previous year: EUR 19.3 million) in earnings before taxes, which clearly exceeds the forecast (net income on a level with the previous year). In line with the forecast, there was no signifi cant increase in total assets (+8.5%).
Primary reasons for the growth in net income include the increase in other operating income and the improvement in net interest income, while net income from investments declined signifi cantly.
Once again, total payroll expenses went up by a hefty 34.8% or EUR 1.0 million in absolute fi gures. The average number of employees increased by 8 persons, an increase of 33.3%.
Profi t-transfer agreements with three subsidiaries generated a net income from investments in the amount of EUR 7.1 million (previous year: EUR 18.6 million).
The net interest result improved noticeably year on year. While the 2018 fi nancial year had returned a net interest result of EUR 0.7 million, the net interest income in the period under review totalled EUR 6.6 million.
ACCENTRO AG pursues its business activities through autonomous subsidiaries. As an operating holding company, the company performs standard management, administrative and fi nancing functions for its Group companies. The earnings position of ACCENTRO AG is defi ned, on the one hand, by the contributions to operating income from equity investments, and, on the other hand, from its funding role within the Group and its expenses in this function.
| 1 Jan. 2019 – 31 Dec. 2019 |
1 Jan. 2018 – 31 Dec. 2018 |
Change | |
|---|---|---|---|
| TEUR | TEUR | TEUR | |
| Revenues | 291 | 0 | +291 |
| Other operating income | 18,802 | 9,264 | +9,538 |
| Operating income | 19,094 | 9,264 | +9,830 |
| Cost of materials | –195 | –645 | +450 |
| Payroll and benefi t costs | –4,038 | –2,995 | –1,043 |
| Depreciation and amortisation of intangible as sets and property, plant and equipment |
–139 | –95 | –44 |
| Write-downs on fi nancial investments | 0 | –5 | +5 |
| Miscellaneous operating expenses | –4,150 | –5,637 | +1,487 |
| Net income from investments (including profi t-shifting) |
7,100 | 18,635 | –11,534 |
| Income from securities | 1 | 1 | 0 |
| Operating income (EBIT) | 17,674 | 18,524 | –849 |
| Net interest income | 6,607 | 740 | +5,867 |
| Pre-tax profi t | 24,280 | 19,264 | +5,017 |
| Income taxes and other taxes | –1,903 | –3,827 | +1,923 |
| Profi t/loss for the year | 22,378 | 15,437 | +6,940 |
The earnings position of ACCENTRO AG developed as follows during the 2019 fi nancial year:
Revenues of EUR 0.3 million (previous year: EUR 0.0 million) break down into fees for project management tasks and technical supervision of joint sales projects in cooperation with third-party project partners.
The other operating income grew substantially year on year, rising from EUR 9.3 million to EUR 18.8 million. The income earned during the 2019 fi nancial year essentially breaks down into sales of subsidiaries in the amount of EUR 13.9 million. a merger gain in the amount of EUR 3.8 million, the dissolution of provisions in the amount of EUR 0.9 million, and EUR 1.2 million worth of miscellaneous other income.
The cost of materials in 2019 is largely attributable to an extra land transfer tax payment that become due after the legal form of a limited partnership was changed to that of a private limited company in 2014. The Group objects to the tax calculation by the inland revenue authority and is contesting it.
Total payroll and benefi t costs increased by EUR 1.0 million. ACCENTRO AG employed an average of 36 people (previous year: 27) during the 2019 fi nancial year, apprentices and management board included.
At EUR 4.2 million, the other operating expenses dropped noticeably year on year (EUR 5.6 million). The cost reduction by EUR 1.5 million is mainly explained by the absence of fees that were incurred in the same context during the 2018 fi nancial year in connection with the bond issuance and advisory costs.
Net income from investments in the amount of EUR 7.1 million dropped sharply year on year (EUR 18.6 million) due to the decrease in income from profi t-transfer agreements.
The interest balance equalled EUR 6.6 million during the period under review (previous year: EUR 0.7 million). It is largely characterised by an increase in interest income by EUR 6.0 million while the interest expense remained more or less stable. The increase results from an enlarged volume of granted loans and from special interest claims in connection with short-term loans.
As the pre-tax earnings amounted to EUR 24.3 million only (previous year: EUR 19.3 million), the income tax load was on a relatively low level at EUR 1.9 million (previous year: EUR 3.8 million) because of largely tax-exempt income from divestitures and merger gain.
The fi nancial and assets position of ACCENTRO AG is defi nitively characterised by its activities as fi nancial holding company. The following overview lists the main non-current assets, along with their yearon-year change:
| 31 Dec. 2019 | 31 Dec. 2018 | Change | |||
|---|---|---|---|---|---|
| TEUR | % | TEUR | % | TEUR | |
| Assets | 338,328 | 100.0 | 311,777 | 100.0 | +26,551 |
| Financial investments | 44,458 | 13.2 | 45,539 | 14.6 | –991 |
| Plant, equipment and software | 733 | 0.2 | 282 | 0.1 | +355 |
| Advance payments for fi nancial investments |
0 | 0 | 1,203 | 0.4 | –1,203 |
| Trade receivables | 241 | 0.1 | 355 | 0.1 | –114 |
| Receivables from affi liates | 259,079 | 76.6 | 239,902 | 77.0 | +19,177 |
| Receivables from equity investments | 3,635 | 1.1 | 4,701 | 1.5 | –1,066 |
| Loans to third parties | 11,234 | 3.3 | 10,165 | 3.3 | +1,069 |
| Cash and cash equivalents | 16,054 | 4.7 | 6,132 | 2.0 | +9,922 |
| Other assets | 2,894 | 0.8 | 3,498 | 1.0 | –694 |
| Equity and liabilities | 338,328 | 100.0 | 311,777 | 100.0 | +26,551 |
| Equity | 176,055 | 52.0 | 158,800 | 50.9 | +17,255 |
| Bonds/bank debt | 100,000 | 29.6 | 100,008 | 32.1 | –8 |
| Liabilities to associates | 48,250 | 14.3 | 38,978 | 12.5 | +9,272 |
| Provisions | 11,370 | 3.4 | 10,470 | 3.4 | +900 |
| Other liabilities | 2,653 | 0.8 | 3,521 | 1.1 | –868 |
Total assets increased by EUR 26.6 million from EUR 311.8 million to EUR 338.3 million. The asset and fi nancial position is defi nitively infl uenced by fi nancial investments, debt fi nancing via bonds, and the performance of receivables and payables vis-à-vis associates.
ANNUAL REPORT 2019 COMBINED MANAGEMENT REPORT ACCENTRO Real Estate AG Report on the Individual Financial Statements of ACCENTRO Real Estate AG
The development is primarily defi ned by the increase in receivables from associates and an increased cash position.
The accounts receivable from associates and equity investments increased by EUR 18.1 million to EUR 262.7 million during the fi nancial year. The increase breaks down as follows:
On balance, the liabilities from bonds and bank loans experienced only negligible changes during the 2019 fi nancial year. One single bond liability remained by year-end, amounting to EUR 100 million.
The payables to associates increased by EUR 9.3 million to a total of EUR 48.3 million. The primary reason for the increase is that two loans were taken out from two subsidiaries (EUR 20.2 million) while liabilities were simultaneously reduced by EUR 10.9 million because the companies were merged.
ACCENTRO AG complied with collateral agreements from facility agreements (covenants) and the bond terms of the 2018/2021 corporate bond placed in 2018.
The Company was able to meet its fi nancial obligations at all times during the 2019 fi nancial year.
The share capital and the additional paid-in capital of ACCENTRO AG increased slightly after shares were issued to employees of ACCENTRO AG in the course of the year under review. Some of the shares issued were held by ACCENTRO AG at the end of 2018, thereby reducing the share capital and the capital reserves. In addition, the share capital of ACCENTRO AG increased by EUR 22.4 million as a result of the Company's net income.
The distribution of a dividend in the amount of EUR 5.2 million had a converse eff ect. The Company's shareholder equity rose to EUR 176.1 million. The equity ratio (shareholder equity/total assets) went up by 1.1% year on year to 52.0% (previous year: 50.9%).
The earnings position of the ACCENTRO Group, which is defi nitive for the fi nancial performance of ACCENTRO AG as its holding company, developed positively during the 2019 fi nancial year, and the stated objectives were achieved.
Against this background, we are very satisfi ed with the earnings performance. While total assets had been expected to remain unchanged and earnings to match the prior-year level in the 2019 fi nancial year, both predictions were exceeded.
The prerequisites for a sustained positive fi nancial performance of the ACCENTRO Group were put in place during the 2019 fi nancial year through the continued expansion of the trading portfolio. We expect ACCENTRO AG's separate fi nancial statements to show a modestly positive net income well below the prior-year level. The year 2019 was characterised by a merger gain and companies sold, events that are not expected to repeat themselves in 2020. On the contrary, the separate fi nancial statement of ACCENTRO AG will be signifi cantly encumbered by the costs of the bond issuance in February 2020. The issuance of a new EUR 250 million bond in February 2020, paired with the redemption of the EUR 100 million bond, is expected to cause a signifi cant increase in total assets.
The following statements on the Group's future business performance and the relevant factors considered decisive, are based on the corporate planning from December 2019 and concern the development of market, sector and company. In our planning eff orts, we assume that the economic and social parameters will remain largely unchanged and be characterised by slow economic growth, low unemployment and a continuation of the low-interest cycle. In principle, forecasts are exposed to the obvious risk that actual developments may deviate both in trend and scope from the predictions made. The material risks to which the ACCENTRO Group is exposed are detailed in the Opportunity and Risk Report.
Backed by the forecasts of scientifi c surveys, we consider our assumption to be realistic. For one thing, the Federal Ministry for Economic Aff airs and Energy wrote in its monthly report for February 2020: "The German economy continues to go through a slow economic cycle. […] Early indicators continue to point to moderate employment growth and only minor changes in unemployment. […] In the meantime, however, risks from the international trade environment have increased due to the spread of the Corona virus. It is too early at this time to appraise the associated economic impact on China and its trading partners."
At the time of this writing, the corona virus is spreading rapidly and is gradually paralysing public life. ACCENTRO has so far not received any cancellations of condominium purchases or a noticeable slackening in the number of requests for purchase information. In fact, the acquisition of real estate could actually gain in signifi cance as a safe form of investment. However, the constraints currently imposed on everyday life could cause transactions to be considerably delayed so that our forecasts may not be met.
The ZIA German Property Federation suggested in its Spring Report 2020, published on 11 February 2020, that demand for new-build construction will decline due to a lower migration infl ow from outside Germany, which in turn will curb the demand for housing. Given the persistently low level of interest, the ZIA believes that the price growth on Germany's residential real estate market will continue and that specifi cally conurbations will see further price hikes.
Although we agree with the core statements of the ZIA forecast, we do not expect the outlined trend to impact the business model of ACCENTRO in any way. The persistently low level of interest rates, the increasing tendency among banks to charge even private investors and savings accounts with negative interest rates will cause the search for investment alternatives to intensify. We assume that an even
higher number of investors than now will invest in real estate to escape the negative interest rate environment for classic savings products.
As in the 2019 fi nancial year, the corporate strategy and operating activities of the coming years will focus on the privatisation of residential real estate, and on the creation of homeownership options for a broad-based population cohort. In this line of business, ACCENTRO AG will focus on the privatisation of fl ats from its proprietary stock as well as on behalf of third parties. This is the focus of the acquisition strategy that ACCENTRO AG pursues.
In the 2020 fi nancial year, we expect the ACCENTRO Group to see a lower double-digit percentage growth in revenues year on year, combined with EBIT on a level with the previous year. Based on the completed expansion of the trading portfolio, and given the exclusive focus on privatisation activities, the earnings performance is expected to remain largely stable. The further expansion of the trading portfolio as planned in the wake of the successful bond issuance in 2020 will cause total assets to grow signifi cantly in the upper double-digit percentage range.
The continued expansion of the trading portfolio and the cash outfl ow for capital expenditures will probably push the operating cash fl ow back deep into the negative range during the 2020 fi nancial year because these investments are grouped with the operational division. The cash fl ow was indeed negative for the operational division in 2019, as predicted by the Forecast Report, adding up to EUR –75.7 million. The situation is unlikely to change in the foreseeable future because ACCENTRO AG plans to keep pursuing the steady expansion of its trading portfolio.
At the level of its separate fi nancial statements under German HGB guidance, ACCENTRO AG expects to see a modestly positive result in the 2020 fi nancial year, albeit well below the prior-year level. The issuance of a new corporate bond over EUR 250 million in February 2020 will cause a signifi cant increase in total assets at the level of the separate fi nancial statements.
On top of that, we assume that the fi nancial covenants of the 2020/2023 bond will be fulfi lled during the 2020 fi nancial year. The 2018/2021 corporate bond was fully repaid during the 2020 fi nancial year.
In terms of employee retention, our plans for 2020 seek to continue the current strategy of trying to retain our employees long-term and to keep the churn rate to a minimum. As projected, the workforce increased by nominal total of 9 jobs, although it should be added that not all of the new jobs represent full-time positions. Five persons left the Company in the course of the 2019 fi nancial year. As expected, the fl uctuation is relatively low. The workforce is likely to keep growing at a modest pace in 2020 to stay abreast of the Company's ongoing growth.
The risk management system of the ACCENTRO Group is designed to safeguard the value-add potential of the Group's business activities, and to permit their exploitation in a manner that will translate into sustainable growth of the Group's goodwill. It is an integral part of this system to engage potentially unfavourable developments and events in a structured approach that enables the Management Board to take countermeasures in good time before material damage is caused.
Having the function of detecting and communicating signifi cant risk factors promptly, particularly those that are highly relevant in terms of income and liquidity and that could therefore jeopardise the Group's continued existence, the ACCENTRO Group's risk management system is integrated in the planning, reporting and controlling processes of ACCENTRO AG at an organisational level. The system is managed on a centralised basis by ACCENTRO AG, and comprises the systematic identifi cation, analysis, assessment and monitoring of material risks by the Company's Management Board. Given the manageable corporate structures and business processes, the degree of formalisation has so far been kept comparatively low for the sake of effi ciency.
The close involvement of the Management Board in the main business transactions and projects ensures that emerging risks are monitored on an ongoing basis. The monthly reporting to the Management Board explicitly addresses threats to which ACCENTRO AG is exposed, and proposes ways to minimise them.
The risk management system deployed by the ACCENTRO Group includes the following key elements:
In addition, the Management Board has commissioned a third-party auditing company to carry out an internal audit to assess the eff ectiveness of the risk management on an ongoing basis and to suggest improvements.
The key elements of the risk management system are itemised in the subsequent overview of the risk management process:
The ACCENTRO Group is exposed to a multitude of diff erent risks which, individually or collectively, could adversely aff ect its net assets, fi nancial and earnings position, and its future economic development. It needs to be remembered that the changes resulting from the composition of the various threats that were relevant for the ACCENTRO Group during the 2018 fi nancial year remained relevant in the 2019 fi nancial year. We believe that the subsequently listed risks ensure a rather exhaustive representation.
The main risks for our business model within the current market environment include specifi cally sales risks, risks arising from the property selection, and risks emerging from the regulatory environment.
The economic success of the ACCENTRO Group is defi nitively dependent on the selection and acquisition of real estate suitable for apartment retailing to owner-occupiers and buy-to-let investors. This comes with the risk of misjudging or overlooking the structural, legal, economic and other encumbrances that may compromise the properties selected for purchase. On top of that, assumptions made with respect to the earnings potential of a given property could subsequently prove to have been partially or entirely incorrect. In particular, the management of the respective property could fall short of the expected results, or apartments earmarked for sale could prove impossible to sell in the planned quantity, on the planned terms, and/or within the planned time frame, as a result of an incorrect assessment of the attractiveness of the property's location and other factors that investors deem crucial for their decision whether or not to buy.
These property-specifi c risks are addressed by subjecting the respective properties to due diligences. Within the framework of the property appraisals, the refurbishment, maintenance and modernisation requirements to be expected are identifi ed while the capitalised earnings value and the debt serviceability in general are examined in accordance with applicable bank standards.
Especially in Germany's metro regions and in certain university cities, it is becoming noticeably more diffi cult to acquire real estate at reasonable prices. To cushion this eff ect, ACCENTRO AG is increasingly buying property outside the Berlin conurbation.
Generally speaking, the letting risk represents a subordinate risk for ACCENTRO AG's business model, because vacant fl ats sell for higher prices than occupied fl ats. A more material risk poses the impairment of a property as a result of poor performance by third-party service providers in the area of property management. It is a risk addressed through active asset management and property management. This includes our lettings management and steps taken to ensure the competitiveness of properties within the local occupier markets. These steps include specifi cally the constant monitoring of the service providers, proper maintenance along with refurbishments and modernisation measures necessary to preserve or enhance the attractiveness of the properties for tenants and buyers.
Going forward, the ACCENTRO Group expects risks in this area to increase signifi cantly. While construction risks used to be limited essentially to straightforward refurbishments and improvements for the purpose of enhancing the marketability of its housing stock, the Company has also engaged in costly major refurbishments and topping-up developments involving occupied real estate in several locations since 2016. This sort of activity is subject to noticeably higher coordination and investment requirements.
To the extent that construction measures are required for let properties or properties acquired for privatisation or leased by the Group, there is a risk that the resulting construction costs could signifi cantly exceed forecasts. This risk is countered through detailed construction cost planning and strict monitoring.
Uncertainties regarding whether, when and under what constraints and/or subsidiary conditions the building-law planning consents for the projects is granted may also create construction risks. This means that the Company relies to some extent on the discretion exercised by certain authorities and on the adequacy of that authority's human resources. It also means that disputes with residents and neighbours may signifi cantly delay or negatively impact the planning approval process. These circumstances could bring about a situation in which planned building works prove impossible to complete at the assumed costs or within the planned time frame or to be completed at all. That is why risk factors of this sort are thoroughly examined in the run-up to a given construction measure.
ACCENTRO AG hired employees with relevant experience to address these risks, and will continue to expand the staff capacity in this division going forward.
Insofar as the ACCENTRO Group relies on third-party sales partners to handle its housing privatisation sales, business success depends to a large extent on the Group's ability to fi nd and retain qualifi ed estate agents long-term. This is supposed to be achieved primarily by off ering attractive payment terms and by keeping a large property stock on hand.
In the fi eld of housing privatisation sales, the business success of the ACCENTRO Group is also defi nitively infl uenced by the willingness of owner-occupiers and buy-to-let investors to buy the fl ats off ered for sale. The willingness to buy may be infl uenced, on the one hand, by developments within the sphere of the respective properties, such as a deterioration of the location's social environment or structural issues, but also by general developments, such as the economic situation and employment trends, on the other hand. There is a risk that such developments could impact the willingness to buy to the extent that fl ats available for sale prove impossible to sell on the intended scale, on the planned terms and/or within the intended time frame.
Within the framework of its third-party sales activities, the ACCENTRO Group entered into a number of agreements that include purchase guarantees. Under these agreements, ACCENTRO assumes the obligation to take over any property assets unsold at the end of the marketing period defi ned in the respective agreement at a purchase price agreed with the property developer. The possibility of having to acquire these properties at the agreed purchase price plus the real estate transfer tax due for the acquisition exposes the Company to the risk that it may not reasonably hope to realise the usual margins when reselling the properties. With regard to the guarantees that ACCENTRO entered into as of 31 December 2019, an extension of the sales phase was agreed with the seller. The project is now expected to conclude with the sale of all remaining units by mid-year 2020. As of the balance sheet date, active purchase guarantees added up to EUR 44.8 million.
The disposal of a 75% equity interest in the Gehrensee project as of 30 June 2018 and the acquisition of equity interests in several development schemes in the course of 2018 created a new risk situation going forward. There were other collaborative ventures pursued in 2019. Substantial funds of ACCENTRO AG are tied up in these projects that will not be released until the projects are concluded. Any delay in the completion of a given project could cause liquidity risks for ACCENTRO AG. To manage this risk, the Management Board of ACCENTRO AG appointed a controller who is responsible for the equity investment management. In addition, each project is assigned a dedicated manager by ACCENTRO who closely monitors the project.
In the course of its business activities, the Group of ACCENTRO AG is exposed to a number of fi nancing, liquidity and interest rate risks that are addressed via the supervisory and control measures described below.
Extensive liquidity planning instruments both in the short- and medium-term sectors are used to match ongoing business processes with the planning data on the level of the parent Group, of the business units, and of key subsidiaries. The Management Board is regularly and exhaustively briefed about the current liquidity and the latest liquidity forecast.
In relation to the existing loans for fi nancing the properties held by the Group, the refi nancing of the ongoing business activities, and the new borrowing required to acquire additional properties, there is a risk that company-specifi c and market-specifi c developments can make it harder to borrow funds and/ or can make such borrowing possible only on less favourable terms. If this were to create issues for the repayment of current loans, creditors could initiate coercive realisations of mortgage collateral. Such fi re sales would create serious fi nancial issues for ACCENTRO AG. This risk is addressed by observing and analysing the fi nancing market. For instance, ACCENTRO AG diversifi es the Group's fi nancing risks by exploiting fi nancing alternatives in addition to classic loan fi nancing, e. g. by issuing corporate bonds or convertible bonds.
The current business activity of the ACCENTRO Group is to a large degree infl uenced by the availability of fi nancing options. If banks were to adopt a restrictive lending policy over extended periods of time, it could adversely aff ect the business performance and growth of the ACCENTRO Group. In order to address this risk, the ACCENTRO Group collaborates with various banks, and closely monitors fi nancing market trends. In addition, alternative funding options through the capital market are exploited in addition to bank fi nancing, including the issuance of bonds, for instance.
The privatisation segment is exposed to the risk that a measure may not have been completed at maturity and that a loan rollover is either impossible altogether or possible only on unfavourable terms and/or at increased costs. This risk is countered by repaying a disproportionally high amount through partial sales, and by negotiating longer loan terms. The ACCENTRO Group also signed loan agreements with more than one bank, so as to counter the associated risks.
As of the balance sheet date of 31 December 2019, the consolidated group had taken out loans and issued corporate bonds in a total amount of c. EUR 99.2 million (previous year: EUR 106.3 million) that are subject to covenants agreed with the banks or specifi ed in the bond terms with respect to debt service coverage ratios or debt-to-equity ratios (fi nancial covenants). The corporate bond over EUR 100 million was subject to the following covenants:
Breaches of these covenants could trigger payments into blocked accounts or early repayment obligations on the basis of a contractually agreed escalation procedure. If certain credit terms were introduced, for instance in the event of a change of control, there is a chance that the corporate bond would be prematurely called for redemption. The use of appropriate monitoring methods is supposed to detect
early signs of a risk that covenants might be breached, and to allow time to seize adequate countermeasures to prevent any such breach. All fi nancial covenants were upheld during the 2019 fi nancial year.
ACCENTRO raised fresh growth capital in February 2020 by issuing a new bond over EUR 250 million. In the same context, the fi nancial covenants were also restructured to take suffi cient account of ACCENTRO's future growth course. This concerns specifi cally the loan-to-value (LtV) ratio based on a total asset value approach, the interest coverage ratio, and the limitation of secured fi nancial liabilities in relation to the total asset value.
Interest rate risks exist for debt coming up for rollover fi nancing or refi nancing as well as for loans the company plans to take out to fi nance properties. In the privatisation sector, sensitivity analyses are conducted both in the context of drafting the business plans and in line with the continuous risk monitoring so as to be able to predict the possible ramifi cations of interest rate changes for the Group's economic performance. The ongoing disproportionate repayments from properties sold rarely make long fi xed-interest periods a sensible proposition.
The direct impact of changes in the general interest rate level on the Company's performance through changes in cash fl ow pose a small risk compared to the conceivable indirect impact of changes in the general interest rate level on real estate demand (for more details on this, see the elaboration on economic risks).
The risk of bad debts in connection with trading residential real estate is mitigated by delaying the property handover in the apartment retailing business until the purchase price has been paid in full. The same goes for necessary refurbishment measures in properties. Due to the Company's broadly diversifi ed customer structure, especially in apartment retailing, bad debt risks in relation to purchase price payments for the retailed apartments are negligible when considered in isolation. Portfolio transactions occasionally take the form of sales on credit. However, credit periods are granted only after ACCENTRO AG has verifi ed the clients' solvency. Since the transfer of the title in the land register does not take place until the purchase price has been paid, the risk is limited to the reversion of the property title.
Within the framework of their business activities, the ACCENTRO Group member companies could become embroiled in legal disputes and face (potential) warranty and damage claims without being in a position to assert counterclaims against third parties. Warranty risks arise specifi cally in those cases in which no exclusion of liability has been agreed for property sales.
In connection with the sale of individual apartments, the companies of the ACCENTRO Group and their third-party sales partners also provide advisory services that could trigger third-party claims for damages.
Adequate provisions have been set aside to meet all currently existing legal risks. There are currently no other legal risks, particularly no risks from legal disputes, that could have a signifi cant impact on the fi nancial position of the ACCENTRO Group.
The senior management roles of the ACCENTRO Group that supervise the business performance are staff ed with a comparatively small number of employees. Any loss of these employees, especially of the sole member of the Management Board, would cause signifi cant disruptions in the course of business.
The ACCENTRO Group has so far generated its revenues exclusively in Germany. Here, particularly a deterioration in national economic conditions, combined with an increase in the number of unemployed, could lead to a (steep) drop in demand for real estate investments. Moreover, the market environment in Germany is indirectly infl uenced by international economic developments, too. In 2020, the focus will mainly be on the slowing global economy in the context of the spreading COVID-19 pandemic.
Of particular importance for the real estate demand in Germany is the national trend in interest rates. An increase in the interest rate level would hamper real estate investments because of the prospect of a growing interest load. In addition, the borrowing costs of the loans taken out by ACCENTRO Group member companies would increase, which in turn would have negative eff ects on earnings. ACCENTRO believes that the current low level of interest rates, which will remain in place in the near future, coupled with a robust domestic labour market and the fact that negative interest is passed on to savers, will continue to fuel demand for real estate as investment.
A deterioration of the parameters on the German real estate market could adversely aff ect the business performance of the ACCENTRO Group. Softening property prices would make it harder to realise sales profi ts, and diminish the earnings in the privatisation sector. At the same time, access to aff ordable real estate could be compromised if potential sellers refrain from selling because of the deteriorated price level.
Moreover, the development of the property sector is decisively infl uenced by the availability of fi nancing instruments. A persistently restrictive lending policy could negatively impact the demand for real estate in general, and thus result in impairments for the inventory properties of the ACCENTRO Group, and in lower privatisation proceeds.
The demand for condominiums in Germany depends, in addition to the absolute and possibly negative demographic growth, on the trend in the number of persons per household.
Since the business activities of the ACCENTRO Group are governed by certain legal parameters for real estate, they could be aff ected by changes in national and/or European legal standards, as well as by changes in the interpretation or application of existing legal standards. Relevant regulations include landlord-tenant law, public construction law, and tax law.
So far, ACCENTRO has focused its activities primarily on the real estate market in Berlin. It is therefore of the essence to keep a close eye on the ramifi cations of political decisions for our core market in Berlin, most notably the developments in the area of historic district protection, the exercise of the right of fi rst refusal by the boroughs and the political manipulation of rental tones. Two regulatory instruments for the purpose of rent control are already in force, one being the "rent freeze" ("Mietpreisbremse"), the other the "rent cap" ("Mietendeckel"). The ACCENTRO AG expects the enforcement of these instruments to have minor consequences for its own rental income. But rent freeze and rent cap could make it harder in future to privatise residential property at economically attractive prices, though it should be added that these rent control tools had not signifi cantly impacted our sales performance yet by the time this annual report was cleared for publication. It should also be added that the advantage of getting to exploit potentially eroding cost prices will not fully compensate for the adverse trend in selling prices, which means that, in sum, the margins earned might be slimmer. The Management Board is employing its early warning indicators to analyse potentially adverse eff ects.
On 18 August 2019, the Christian Democrat / Social Democrat coalition committee of the German Parliament resolved the "reduction of the conversion of rental fl ats into condominiums." The Federal Ministry of the Interior, Building and Community is currently working on a draft bill that would impose a comprehensive condominium conversion ban. Such a condominium conversion ban would have direct ramifi cations for the Company's current business model, which is why ACCENTRO is closely following the legislative process while analysing said ramifi cations for the current business model.
To a certain extent, the business success of the ACCENTRO Group depends disproportionately on a small number of projects and inventories that account for a signifi cant share of its revenues. Aside from the client dependence that is generally associable with the fact, there is a risk that possible delays or issues arising in the context of the privatisation of this portfolio would disproportionately impact the business success of the ACCENTRO Group.
The ACCENTRO Group invests primarily in the real estate market of Berlin. Accordingly, if Berlin as real estate location were to develop a generally adverse trend, the development could defi nitively impair the assets, fi nances and earnings of the ACCENTRO Group. This goes above all for regulatory measures aff ecting the market in Berlin, such as the rent cap decreed by the Senate of Berlin in early 2020.
Moreover, specifi c one-off risks keep arising in connection with construction work, especially the threats of cost overruns, project delays, payment default risks, which can arise in connection with building measures that involve portfolios acquired by the ACCENTRO Group, for instance in the context of modernisations.
48
In addition to the risks outlined above, there are general infl uences that are unforeseeable and therefore hard to control. These include, without being limited to, political changes, social infl uences and risk factors such as pandemics, natural disasters or terrorist attacks. Such infl uences could adversely aff ect the economic situation and indirectly impair the further economic performance of the ACCENTRO Group.
With the premature redemption of the corporate bond with a nominal value of EUR 100 million and the placement of a new three-year bond over EUR 250 million in February 2020, ACCENTRO successfully continued to expand its capital market-based fi nancing. Doing so has noticeably improved the risk situation of the ACCENTRO Group in regard to fi nancing. Owing to the persistently favourable market environment and the bright marketing prospects, ACCENTRO Group as a going concern is exposed to no discernible risks at this time. For our own planning purposes, it is therefore assumed that we will continue to operate successfully on the market. That being said, the increasing number of government interventions on the market have increased the risk profi le over that of the past years.
Meanwhile, the ACCENTRO Group continued to expand its trading portfolio by acquiring new real estate during the 2019 fi nancial year. The portfolio now extends across Germany and include cities in Bavaria, the metro regions Hamburg and Leipzig, as well as the cities or campus towns of Cologne, Rostock and Berlin, and even the holiday islands on the Baltic seaboard. Especially its strong position in Berlin continues to present an opportunity for ACCENTRO AG to exploit the still exceptional dynamic of Berlin's housing market. From ACCENTRO's point of view, the continued zoning of historic district protection areas in Berlin, paired with the rent cap, presents opportunities along with the threats. Investors with a short-term horizon could be forced by the poor rental upside potential to divest themselves of their real estate holdings. ACCENTRO expects real estate prices to deteriorate in historic district protection areas, a situation that could translate into buying opportunities.
The sales activities are to be expanded in the new-build residential segment. To this end, the expansion of collaborative ventures with mid-market developers is to be intensifi ed.
The Gehrensee project, in which we are involved via the Belle-Époque joint venture, represents a signifi cant project in housing policy terms because of the large number of residential units it will deliver, and presents an opportunity for ACCENTRO to earn a high share of the project profi ts. As the construction project progresses, ACCENTRO will start generating income even ahead of the project completion.
Its subsidiary ACCENTRO GmbH has a leading position in Germany's privatisation sector. This presents an opportunity for ACCENTRO AG, too, as it permits the Group to expand faster than the competition and simultaneously to have easier access to new properties earmarked for privatisation. The robust market
position in connection with the demonstrable track record in apartment retailing also implies the chance to acquire new third-party contracts for privatisation services.
Taken together, the above factors form the basis for a successful implementation of the corporate strategy, and will keep facilitating fundraising eff orts both on the capital markets and among banks in future.
In light of the anticipated development of Germany's housing demand and the generally auspicious parameters of the country's residential property market, the Company continues to see a growing business potential in future. This assessment is backed by the lively interest of owner-occupiers and buy-to-let investors in properties, particularly in condominiums, that are acquired either as buy-to-let investments or (in the case of owner-occupiers) as components of private pension plans. The latter aspect, by the way, is bound to gain in signifi cance, and substantially so.
The ACCENTRO Group intends to keep boosting its revenues through geographic expansion and commitments in joint ventures paired with the expansion of collaborative activities in the area of new-build construction projects. On the basis of a stable business performance and viable cost income ratios, the Company expects to see its income and fi nancial position to stabilise on a sustained high level.
The fi nancial risk management of the ACCENTRO Group focuses on controlling and limiting the fi nancial risks arising from its operating activities. The underlying idea is essentially to counteract signifi cant bad-debt losses that could jeopardise the economic development of the Company. Another objective of fi nancial risk management is to ensure optimised Group fi nancing. A permanently adequate provision of the Company with fi nancial resources is monitored by a continuous supervision of its rolling cash plan.
The appropriateness of the risk early warning system implemented by the Group is examined by the auditor in the course of the annual audit of ACCENTRO AG's external fi nancial reporting. Potential improvements identifi ed as a result are subsequently incorporated into the system.
To safeguard the adequacy of the fi nancial reporting in the consolidated fi nancial statements, the Group Management Report and the quarterly reports, ACCENTRO AG has integrated preventive and monitoring control measures for accounting and accounting-related business processes into its internal control system (ICS). Such measures include, without being limited to, a segregation of functions, predefi ned approval principles and systems-based procedures for processing accounting-related data. Essential organisational measures are detailed in an ICS manual that specifi es the core business processes of the Company. If necessary, third-party advisers are brought in to address special aspects of fi nancial accounting processes.
Internal Control System and Risk Management
To improve the eff ectiveness of its business processes, the Group of ACCENTRO AG has implemented an internal audit system managed by a third-party service provider. It assists the various departments of ACCENTRO AG in achieving their objectives by using a systematic and target-oriented approach to measure the effi ciency of the risk management, the controls, and the managing and monitoring processes, and to help with eff orts to enhance them. At the same time, it supports the Management Board of ACCENTRO AG in its control and supervisory functions. Two internal audits were carried out during the 2019 fi nancial year, and another two internal audits are currently in preparation for the 2020 fi nancial year.
The consistency of accounting processes of the subsidiaries included in the consolidated fi nancial statements is guaranteed by central coordination and execution of the accounting at the parent Company. The reliability of the IFRS accounting records of the consolidated companies and their consolidation in the Group accounting process is principally ensured by the centralised Group accounting that is done by the parent Company. The separate IFRS accounts of the companies included in the consolidation for the Group accounting process are reviewed by various experts at the parent Company before being reconciled with the Group's fi nancial statements.
ACCENTRO AG is a stock corporation (Aktiengesellschaft) based in Germany and has issued voting shares that are listed on an organised market as defi ned by Sec. 2, Art. 7, German Securities Acquisition and Takeover Act (WpÜG), namely the Regulated Market of the Frankfurt Stock Exchange (Prime Standard).
The legal managing and representative body of ACCENTRO AG is the Management Board. The composition of the Management Board and the appointment of its members are based on Sections 76, 84 and 85, AktG, in conjunction with Sec. 6 of the Company's Articles of Association. According to these, the Management Board is composed of one or several members. The number of board members is defi ned by the Supervisory Board. The Supervisory Board may appoint up to fi ve members and appoint one of these members as chairman of the board. At the moment, the Company's Management Board consists of just one person.
In accordance with Sec. 84, AktG, the members of the Management Board are appointed by the Supervisory Board for a maximum term of fi ve years. They may be reappointed or their term be extended for a maximum of fi ve years in each case. At the moment, the contract signed with the sole member of the Management Board specifi es a term of three years. The appointment and reappointment of members requires a corresponding resolution by the Supervisory Board to be principally passed pursuant to the provisions of Sec. 84, AktG. The Supervisory Board may revoke the appointment of a member of the Management Board for good cause before the end of his or her term of offi ce.
On 8 February 2018, the Supervisory Board resolved to appoint Jacopo Mingazzini as CEO of ACCENTRO AG for another three years.
In accordance with Sec. 179, AktG, any amendment to the Articles of Association requires a resolution by the General Meeting. This does not apply to amendments and additions to the Articles of Association that relate solely to their wording, the responsibility for which has been transferred to the Supervisory Board in accordance with Sec. 11, Art. 2, Articles of Association.
Pursuant to Sections 133 and 179, AktG, in combination with Sec. 15, Art. 3, of the Articles of Association, resolutions by the Annual General Meeting on amendments to the Articles of Association require a simple majority of the votes cast and a simple majority of the share capital represented when the resolution is adopted, unless a larger majority is prescribed by law or the Articles of Association in a given case.
The Company's Articles of Association so far in eff ect were revised in their entirety by resolution of the Annual General Meeting on 14 May 2019.
The subscribed capital (share capital) of ACCENTRO Real Estate AG amounted to EUR 32,437,934.00 as of 31 December 2019. It breaks down into 32,437,934 no-par value bearer shares. The Group does not issue diff erent classes of shares.
In accordance with the resolution by the Annual General Meeting of 15 May 2018, the Management Board is also authorised, subject to the Supervisory Board's consent, to issue convertible bonds and/ or warrant bonds or participation rights with or without conversion or subscription rights (also referred to collectively below as "bonds") over a total nominal amount of up to EUR 200,000,000.00 and with maturities of 20 years or less on one or more occasions up to and including 14 May 2023.
The bearers of bonds mentioned in the foregoing sentence can be granted conversion or subscription rights for up to 25,000,000 bearer shares of the Company with a proportionate share of the share capital in a total amount of EUR 25,000,000.00 or less. The conversion and subscription rights may be serviced from contingent capital resolved by the Annual General Meeting on 15 May 2018 or to be resolved by future Annual General Meetings from existing or future authorised capital and/or from a cash capital increase and/or from existing shares and/or may provide for a cash settlement instead of the delivery of shares. Whenever bonds are issued, shareholders are entitled to a statutory subscription right unless the subscription right is excluded in accordance with the provisions below.
The Management Board is authorised, with the approval of the Supervisory Board, to deny the statutory subscription right to shareholders in the following cases:
relating to shares issued or disposed of on the basis of a diff erent corresponding authorisation with pre-emption rights ruled out under direct or mutatis mutandis application of Sec. 186, Art. 3, Sent. 4, AktG, if such inclusion is required by law;
The Management Board is also responsible, with the approval of the Supervisory Board, for determining the further details of the issue and features of the bonds, including in particular the term, issue and exercise periods, termination, issue price, interest rate, denomination, adjustment of the subscription price and grounds for a conversion obligation.
Moreover, the Management Board was authorised through a resolution passed by the Annual General Meeting on 15 May 2017 to issue on one or more occasions before 14 May 2020 up to 1,800,000 options to current or new members of the board and the top tier management, which options entitle their bearers, subject to the options terms, to acquire new no-par value bearer shares in ACCENTRO Real Estate AG (2017 stock option program). To the extent that options are to be issued to members of the Company's Management Board, only the Supervisory Board is entitled to issue the options. The options issued under the 2017 stock option program can only be exercised within 10 years of the date on which they may be exercised for the fi rst time.
The Management Board of ACCENTRO Real Estate AG is authorised, assuming the Supervisory Board's consent – and the Supervisory Board alone being authorised if the Management Board itself is concerned – to specify the structural details of the 2017 stock option program. These include specifi cally:
In the notes to the annual fi nancial statements or in the annual report, the Management Board must report on the utilization of the 2017 stock option program and the options granted to the benefi ciaries in this context for each fi nancial year in accordance with relevant statutory provisions. During the 2019 fi nancial year, the Management Board did not take advantage of its authorisation to use the 2017 stock option program.
On 14 May 2019, the Annual General Meeting resolved to cancel the remaining Contingent Capital 2014. The authorisation resolution of 27 February 2013 to issue convertible bonds and/or bonds with warrants and/or participation rights with conversion or subscription rights had expired on 26 February 2018. There were no outstanding conversion or subscription rights that had to be redeemed using this contingent capital.
To deliver on its stock option program, whose options are granted until 14 May 2020 based on the authorisation by the Annual General Meeting of 15 May 2017, the Company's share capital was increased by up to EUR 1,800,000.00 through the issuance of up to 1,800,000 new no-par-value bearer shares (Contingent Capital 2017). The contingent capital increase will go ahead only if bearers of the issued options exercise their right to subscribe shares of the Company, and if the Company draws on the Contingent Capital 2017 to settle these options.
The share capital is conditionally increased by up to EUR 14,418,967.00 by issuing up to 14,418,967 new no-par value bearer shares carrying dividend rights from the beginning of the fi nancial year in which they are issued (Contingent Capital 2019). The funds raised via the contingent capital increase are used to service debenture bonds issued on the basis of the authorisation resolution of the Annual General Meeting of 15 May 2018 under agenda item 8.
By resolution of the Annual General Meeting on 15 May 2018, the Authorised Capital 2015 was cancelled and replaced by new authorised capital, which authorises the Management Board, subject to the Supervisory Board's consent, to increase the share capital of the Company by a total of up to EUR 15,158,967.00 during a period ending 14 May 2023 by issuing new no-par value bearer shares on one or more occasions against contributions in cash and/or in kind (Authorised Capital 2018). With part amounts drawn down, only EUR 13,038,967 are left of the Authorised Capital 2018. While shareholders principally have a subscription right, it can be excluded in whole or in part with the Supervisory Board's approval. That said, the exclusion of the shareholders' subscription rights is permitted in the following instances only:
The Management Board has also been authorised, with the Supervisory Board's consent, to determine the further content of share rights and the other details of the capital increase and its implementation, and to determine that the new shares in accordance with Sec. 186, Art. 5, AktG, must be assumed by a bank or a company operating pursuant to Sec. 53, Art. 1, Sent. 1 or Sec. 53b, Art. 1, Sent. 1 or Art. 7, German Banking Act (KWG), with the obligation of off ering them for subscription by shareholders.
The Supervisory Board was authorised to amend the Articles of Association to refl ect the respective scope of the share capital increase through the Authorised Capital 2018.
During the 2019 fi nancial year, the Management Board did not take advantage of its authorisation to increase the capital stock by drawing on the Authorised Capital 2018.
As of the balance sheet date, the shares of ACCENTRO AG are not subject to any voting right restrictions neither under applicable law nor under the Articles of Association. All no-par value shares that the Company issued as of 31 December 2019 carry full voting rights and grant one vote each at the Annual General Meeting.
With its notice of 20 November 2018 pursuant to Sec. 5, Art. 1, Letter a), Market Abuse Regulation (MAR), i.c.w. Sec. 2, Art. 1, Commission Delegated Regulation, the Company announced the start of a stock buyback program for the purpose of issuing free employee shares.
As part of this buyback program, the Company acquired 9,700 no-par value shares in the period from 26 November 2018 through 17 January 2019. The buy-backs were carried out via XETRA trading on the Frankfurt Stock Exchange under the management of a bank. The average purchase price was EUR 9.5862 per no-par-value share. Overall, the total consideration spent on shares amounted to EUR 92,986.14 (before transaction costs).
On 31 December 2019, the following direct and indirect interest in the capital of ACCENTRO Real Estate AG exceeded the threshold of 10.00% of voting rights:
Natig Ganiyev, holding an interest of 83.31% via the Brookline Real Estate S.à r.l., Luxembourg.
The Company is subject to the following signifi cant agreements that include provisions governing a change of control as could be brought about, for instance, by a takeover bid:
The ACCENTRO Group signed fi nancing agreements that include change-of-control provisions, which could be triggered in the event of a successful takeover bid. These provisions stipulate that the borrower is obliged to notify the lender whenever a change of control has transpired. The lender may cite the change of control as good cause for terminating the credit relationship. By the reporting date, loans in an aggregate volume of TEUR 161,782 were subject to change-of-control provisions.
In addition to fi nancing agreements, the corporate bond 2018/2021 with an outstanding nominal value of EUR 100 million as of the balance sheet date that was issued by ACCENTRO AG contains a change-ofcontrol provision. Bondholders wishing to intervene have the option to demand premature repayment of the bond at the price of 101% plus interest accrued on the principal amount.
ACCENTRO AG has not concluded any agreement that provides for the compensation of members of the Management Board or employees in the event of a takeover bid.
The Corporate Governance Statement pursuant to Sections 289f, 315, HGB, is published annually on the Company's homepage and retrievable via this hyperlink:
www.accentro.ag/en/investor-relations/corporate-governance/declaration-of-compliance
The service contract with CEO Jacopo Mingazzini eff ective during the 2019 fi nancial year was signed for a three-year term. The contract was adjusted in March 2018.
The contract of Jacopo Mingazzini does not provide for an ordinary termination during the contract term. In the event of a change of control, however, the contract stipulates a break option.
The remuneration paid to the CEO consists of a fi xed annual basic remuneration and a variable bonus to be jointly defi ned by Management Board and Supervisory Board.
In addition, the CEO is granted a health insurance allowance, while an accident and disability insurance has also been taken out for him. The CEO moreover has the use of a company car, and ACCENTRO AG has taken out D&O and accident insurance policies on his behalf.
The following remuneration component as part of a long-term incentive plan was agreed between the main shareholder and the Management Board: On 3 July 2018, EMMALU GmbH announced its off -market acquisition of 272,851 shares in ACCENTRO AG. The company EMMALU GmbH is closely linked to ACCENTRO's CEO, Jacopo Mingazzini. The shares originated in the portfolio of ACCENTRO AG's main shareholder. Accordingly, this implies a transaction between the main shareholder and the CEO of ACCENTRO AG which is to be measured in accordance with IFRS 2 like a stock option at its fair value at the time it is granted and recognised as remuneration expense in the consolidated fi nancial statements of ACCENTRO AG throughout the lifetime of the option. The expense from this stock option compensation amounts to c. TEUR 1,200 over a term of three years, out of which total TEUR 400 had to be deferred during the 2019 fi nancial year.
The CEO has been granted neither pension commitments nor other retirement benefi ts. No arrangements for benefi ts upon early termination have been agreed with the CEO, except for a provision entitling the Company to release the CEO out of his duties during the statutory notice period and in the event of dismissal, subject to the continued payment of salary, and except for the CEO's right to demand immediate disbursement of the remuneration for the residual term in this case. The CEO's employment contract also prescribes a subsequent restraint on competition.
In addition to the reimbursement of their out-of-pocket expenses, the members of the Supervisory Board receive a fi xed annual remuneration for each full fi nancial year served on the Supervisory Board.
The total remuneration and the individual remuneration of the members of the executive bodies are listed in the notes to the consolidated fi nancial statements and in the Corporate Governance Report.
The report on relations with associates pursuant to Sec. 312, AktG, includes the following closing statement by the Management Board:
"ACCENTRO Real Estate AG received appropriate consideration for the legal transactions listed in the report on relations with associates. ACCENTRO Real Estate AG has not been disadvantaged by measures taken or omitted at the instigation or in the interest of the controlling company or an associate.
This assessment is based on the circumstances known to us at the time of the reportable events."
Berlin, 18 March 2020
Jacopo Mingazzini Management Board
61
| Consolidated Balance Sheet | 64 |
|---|---|
| Consolidated Income Statement | 66 |
| Consolidated Cash Flow Statement | 68 |
| Consolidated Statement of Changes in Equity | 70 |
| Notes | 73 |
| Responsibility Statement | 125 |
| Group Auditor's Report | 126 |
Condominiums Schöneiche near Berlin Käthe-Kollwitz-Str.
as of 31 December 2019*
| ACCENTRO Real Estate AG | Notes | 31 Dec. 2019 | 31 Dec. 2018 |
|---|---|---|---|
| Assets | TEUR | TEUR | |
| Non-current assets | |||
| Goodwill | 5.1.1 | 17,776 | 17,776 |
| Owner-occupied properties and buildings | 5.1.2 | 24,083 | 23,366 |
| Plant, equipment, EDP software and rights of use | 917 | 355 | |
| Investment properties | 5.2 | 34,452 | 0 |
| Non-current trade receivables | 5.3 | 0 | 2,357 |
| Non-current other receivables and other assets | 5.1.3 | 14,773 | 28,814 |
| Equity investments | 5.1.6 | 5,615 | 4,231 |
| Equity interests accounted for using the equity method | 5.1.5 | 3,640 | 3,518 |
| Deferred tax assets | 5.12 | 1,251 | 692 |
| Total non-current assets | 102,508 | 81,109 | |
| Current assets | |||
| Inventory properties | 5.3 | 416,573 | 345,241 |
| Contract assets | 5.4 | 1,252 | 0 |
| Trade receivables | 5.5 | 10,566 | 18,607 |
| Other receivables and other current assets | 5.5 | 24,820 | 12,709 |
| Current income tax receivables | 873 | 1,074 | |
| Cash and cash equivalents | 5.6 | 24,167 | 15,464 |
| Total current assets | 478,250 | 393,096 | |
| Total assets | 580,757 | 474,205 |
as of 31 December 2019*
| ACCENTRO Real Estate AG | Notes | 31 Dec. 2019 | 31 Dec. 2018 |
|---|---|---|---|
| Equity | TEUR | TEUR | |
| Subscribed capital | 5.7 | 32,438 | 32,431 |
| Capital reserves | 5.7 | 78,684 | 78,433 |
| Retained earnings | 5.7 | 107,561 | 86,284 |
| Attributable to parent company shareholders | 218,682 | 197,149 | |
| Attributable to non-controlling interest | 5.1.4 | 2,128 | 1,956 |
| Total equity | 220,811 | 199,104 | |
| Liabilities | TEUR | TEUR | |
| Non-current liabilities | |||
| Provisions | 5.9 | 46 | 18 |
| Financial liabilities | 5.8 | 114,474 | 76,773 |
| Bonds | 5.8 | 99,235 | 98,561 |
| Deferred income tax liabilities | 5.12 | 2,164 | 1,080 |
| Total non-current liabilities | 215,919 | 176,431 | |
| Current liabilities | |||
| Provisions | 5.9 | 882 | 843 |
| Financial liabilities | 5.8 | 102,368 | 54,357 |
| Bonds | 5.8 | 1,563 | 1,563 |
| Advanced payments received | 5.10 | 6,979 | 7,033 |
| Current income tax liabilities | 5.11 | 12,910 | 13,261 |
| Trade payables | 5.10 | 6,196 | 4,816 |
| Other liabilities | 5.10 | 13,130 | 16,798 |
| Total current liabilities | 144,028 | 98,669 | |
| Total equity and liabilities | 580,757 | 474,205 |
for the Financial Year Beginning on 1 January and Ending on 31 December 2019*
| 1 Jan. 2019 – 31 Dec. 2019 |
1 Jan. 2018 – 31 Dec. 2018 |
|---|---|
| TEUR | TEUR |
| 143,274 | 205,609 |
| 129,503 | 194,009 |
| –99,661 | –160,924 |
| 29,841 | 33,085 |
| 10,261 | 8,806 |
| –3,743 | –2,676 |
| 6,518 | 6,130 |
| 3,510 | 2,794 |
| –1,147 | –511 |
| 2,363 | 2,282 |
| 1,244 | 2 |
| 1,207 | 1,663 |
| 41,174 | 43,162 |
| 11,399 | 0 |
| –5,835 | –4,613 |
| –731 | –349 |
| –123 | –205 |
| –6,079 | –5,131 |
| 39,804 | 32,864 |
| 36 | 36 |
| 4,854 | 944 |
| –12,207 | –9,869 |
| –7,353 | –8,924 |
| 32,488 | 23,975 |
| –6,189 | –5,675 |
| 26,299 | 18,301 |
| –168 | 103 |
| 26,467 | 18,197 |
Continued on page 67
Continued from page 66
| ACCENTRO Real Estate AG | Notes | 1 Jan. 2019 – 31 Dec. 2019 |
1 Jan. 2018 – 31 Dec. 2018 |
|---|---|---|---|
| Earnings per Share (Comprehensive Income) | EUR | EUR | |
| unweighted | |||
| Basic net income per share (32,431,047 shares; prior year: 32,431,047 shares) |
5.19 | 0.81 | 0.56 |
| weighted | |||
| Basic net income per share (32,431,047 shares; prior year: 30,711,986 shares) |
5.19 | 0.81 | 0.60 |
| Diluted net income per share (32,431,047 shares; prior year: 30,711,986 shares) |
5.19 | 0.81 | 0.60 |
for the Financial Year Beginning on 1 January and Ending on 31 December 2019
| ACCENTRO Real Estate AG | Notes | 1 Jan. 2019 – 31 Dec. 2019 |
1 Jan. 2018 – 31 Dec. 2018 |
|---|---|---|---|
| TEUR | TEUR | ||
| Consolidated income | 26,299 | 18,301 | |
| + Depreciation / amortisation of non-current assets |
731 | 349 | |
| –/+ At-equity earnings / net income from investments | –1,280 | –38 | |
| +/– Increase / decrease in provisions | 67 | –1,428 | |
| +/– Changes in the fair value of investment property | –11,399 | 0 | |
| +/– Other non-cash expenses / income | –7,759 | 18,149 | |
| –/+ Increase / decrease in trade receivables and other assets that are not attributable to investing or fi nancing activities |
10,398 | –18,131 | |
| +/– Increase / decrease in trade payables and other liabilitiesthat are not attributable to investing or fi nancing activities |
–8,600 | –9,638 | |
| + Cash received from distributions / sales of shares consolidated at equity |
1,091 | 86 | |
| +/– Other income tax payments | –5,152 | –8,299 | |
| = Operating cash fl ow before de- /reinvestments in inventory properties |
5.20 | 4,397 | –649 |
| –/+ Cash investments in inventory properties (net after assumption of debt, some without cash eff ect) |
5.20 | –80,062 | –47,697 |
| = Cash fl ow from operating activities |
5.20 | –75,665 | –48,346 |
| + Interest received |
384 | 0 | |
| – Cash outfl ows for investments in intangible assets |
–60 | –121 | |
| – Cash outfl ows for investments in property, plant and equipment |
–1,625 | –23,612 | |
| – Cash outfl ows for investments in non-current assets |
–248 | –9,689 | |
| – Disbursements of loans granted |
–1,863 | –17,867 | |
| + Repayment of loans granted |
5,822 | 0 | |
| = Cash fl ow from investment activities |
5.20 | 2,411 | –51,290 |
Continued on page 69
Continued from page 68
| ACCENTRO Real Estate AG | Notes | 1 Jan. 2019 – 31 Dec. 2019 |
1 Jan. 2018 – 31 Dec. 2018 |
|---|---|---|---|
| TEUR | TEUR | ||
| + Payments made by shareholders |
0 | 19,426 | |
| – Dividend payments to shareholders |
–5,190 | –5,154 | |
| + Payments from issuing bonds and raising (fi nancial) loans |
5.20 | 127,511 | 164,056 |
| – Repayment of bonds and (fi nancial) loans |
5.20 | –34,171 | –62,447 |
| – Interest paid |
–7,132 | –4,470 | |
| = Cash fl ow from fi nancing activities |
5.20 | 81,017 | 111,410 |
| Net change in cash and cash equivalents | 7,763 | 11,774 | |
| +/– Increase/Decrease in cash and cash equivalents from investments in / disposal of fully consolidated companies |
–297 | –3,943 | |
| +/– Change in restricted cash and cash equivalents / adjustment of cash and cash equivalents |
1,237 | 1,091 | |
| + Cash and cash equivalents at the beginning of the period |
15,464 | 6,541 | |
| = Cash and cash equivalents at the end of the period |
5.20 | 24,167 | 15,464 |
for the Financial Year Beginning on 1 January and Ending on 31 December 2019*
| ACCENTRO Real Estate AG | Sub scribed capital |
Capital reserve |
Retained earnings |
Attribut able to parent company share holders |
Non-con trolling interests |
Total |
|---|---|---|---|---|---|---|
| g | TEUR | TEUR | TEUR | TEUR | TEUR | TEUR |
| As of 1 January 2019 | 32,431 | 78,433 | 86,284 | 197,148 | 1,956 | 199,104 |
| Total consolidated income | – | – | 26,467 | 26,467 | –168 | 26,299 |
| Changes in non-controlling interests | – | – | – | – | 341 | 341 |
| Dividend payments | – | – | –5,190 | –5,190 | – | –5,190 |
| Subsequent costs of 2018 cash capital increase |
– | –41 | – | –41 | – | –41 |
| Stock option compensation | – | 231 | – | 231 | – | 231 |
| Purchase of company shares | 7 | 60 | – | 67 | – | 67 |
| As of 31 December 2019 | 32,438 | 78,684 | 107,561 | 218,683 | 2,128 | 220,811 |
for the Financial Year Beginning on 1 January and Ending on 31 December 2018
| ACCENTRO Real Estate AG | Sub scribed capital |
Capital reserve |
Retained earnings |
Attribut able to parent company share holders |
Non-con trolling interests |
Total |
|---|---|---|---|---|---|---|
| TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | |
| As of 1 January 2018 | 24,925 | 53,462 | 73,576 | 151,963 | 1,734 | 153,696 |
| Total consolidated income | – | – | 18,197 | 18,197 | 103 | 18,301 |
| Changes in non-controlling interests | – | – | – | 118 | 118 | |
| Share purchases without change of status |
– | – | –334 | –334 | – | –334 |
| Convertible bonds converted | 5,393 | 7,375 | – | 12,768 | – | 12,768 |
| Dividend payments | – | – | –5,154 | –5,154 | – | –5,154 |
| Cash capital increase | 2,120 | 17,522 | – | 19,642 | – | 19,642 |
| Stock option compensation | – | 135 | – | 135 | – | 135 |
| Repurchase of company shares | –7 | –60 | – | –67 | – | –67 |
| As of 31 December 2018 | 32,431 | 78,433 | 86,284 | 197,148 | 1,956 | 199,104 |
* Adding the values of the individual line items may result in minor diff erences compared to the sum totals posted.
71
| 1 | Basic Information | 73 |
|---|---|---|
| 2 | Signifi cant Accounting Policies | 73 |
| 3 | Capital and Financial Risk Management | 88 |
| 4 | Estimates and Accounting Decisions at the Company's Discretion | 89 |
| 5 | Supplementary Notes to the Individual Items of the Financial Statements | 91 |
| 6 | Events After the Reporting Date | 123 |
| 7 | Other Disclosures | 124 |
ACCENTRO Real Estate AG, together with its subsidiaries, is a listed real estate group whose core business consists in the trading of residential real estate within the framework of housing privatisations. Since December 2019, the Company's registered offi ce has been Kantstr. 44/45 in 10625 Berlin, Germany. Its shares are admitted for trading to the Regulated Market (Prime Standard) of the Frankfurt Stock Exchange.
As of 31 December 2019, ACCENTRO Real Estate AG acts as the operating holding company for a number of property vehicles.
On 30 November 2017, Brookline Real Estate S.à r.l. made a public announcement that it had taken control of ACCENTRO Real Estate AG pursuant to Sec. 35 , Art. 1, i.c.w. Sec. 29, Art. 2, and Sec. 30, Art. 1, German Act on Securities Acquisition and Takeovers (WpÜG).
The Management Board is expected to release these consolidated fi nancial statements for publication after the Supervisory Board meeting on 18 March 2020.
All amounts posted in the balance sheet, income statement, statement of changes in equity, and cash fl ow statement, as well as in the notes and tabular overviews, are quoted in thousands of euros (TEUR), unless otherwise noted. The functional currency is the euro (EUR); there are no signifi cant foreign currency transactions. Both individual and total fi gures represent the value with the smallest rounding diff erence. Adding the values of the individual line items may result in minor diff erences compared to the reported totals.
Outlined below are signifi cant accounting policies underlying these fi nancial statements.
The consolidated fi nancial statements for the 2019 fi nancial year of ACCENTRO Real Estate AG were prepared in accordance with the international accounting standards in the form of the International Financial Reporting Standards (IFRS) adopted and published by the International Accounting Standards Board (IASB) as required in the European Union for capital market-oriented companies.
The requirements of the IFRS whose application is mandatory in the EU were met in full, and provide a true and fair account of the net assets, fi nancial position and results of operations of the ACCENTRO Group. Individual items in the balance sheet have been combined to enhance the clarity of presentation. These items are elaborated in the notes.
The fi nancial years of the parent company, its subsidiaries, and its associates coincide with the respective calendar years. The fi nancial statements of the subsidiaries are uniformly compiled according to the same accounting policies.
The income statement is compiled in accordance with the nature of expense method and includes industrystandard drilldowns.
It was decided not to include a statement of comprehensive income because there are no other eff ects recognised directly in equity that should be posted with the other comprehensive income.
The accounting methods employed in the consolidated fi nancial statements are the same as those on which the consolidated fi nancial statements as of 31 December 2018 were based, except for certain changes as explained below.
The new accounting standard IFRS 16 "Leases" was applied for the fi rst time by the ACCENTRO Group as of 1 January 2019. IFRS 16 specifi es an accounting model that requires lessees to recognise all rights to use the underlying assets ("right-of-use assets") and liabilities arising from lease agreements in their balance sheets. For lessors, the accounting model does not diff er signifi cantly from that specifi ed in IAS 17 "Leases," i.e. lessors continue to classify leases as fi nance leases or operating leases. The ACCENTRO Group has continued to classify the leases it entered into as lessor (in particular the letting of residential accommodation) as operating leases.
Assets and liabilities are reported on the basis of their economic content among the items "property, plant and equipment" and "accounts payable" already recognised in the balance sheet.
Within the ACCENTRO Group, IFRS 16 was applied for the fi rst time according to the modifi ed retrospective method. This means that the ACCENTRO Group measures the lease liabilities arising from operating leases with a remaining term of more than twelve months by recognising the cash value of the remaining lease payments while taking into account the incremental borrowing rate of 3.75% as of 1 January 2019. The capitalised right of use was recognised as of 1 January 2019 in the same amount as the lease liability, so that the initial recognition of all leases had no eff ect on equity. The Group takes advantage of a simplifi cation provision in IFRS 16 and presents neither leases with remaining terms of less than 12 months nor low-value leasing agreements with a transaction price of less than EUR 5,000.
In the context of its transition to IFRS 16, the Group decided to apply the relief provision permitting it to assess at its discretion which transactions represent leases. The Group applies IFRS 16 solely to
agreements that had previously been identifi ed as leases. Agreements not identifi ed as leases under IAS 17 and IFRIC 4 were not reviewed for the purpose of determining whether they qualify as leases under IFRS 16. This means that the defi nition of a lease in accordance with IFRS 16 was only applied to agreements concluded or amended on or after 1 January 2019.
The Group enters into lease agreements particularly for offi ce accommodation, motor vehicles and technical equipment. When recognising leasing liabilities, the ACCENTRO Group took renewal options and break options into account whenever it was reasonably safe to assume that these options would be exercised in future. The ACCENTRO Group principally recognises non-leasing components such as service deliverables separately from lease payments.
As a result of applying IFRS 16, the total assets as of 1 January 2019 increased only insignifi cantly by around EUR 170,000 due to the addition of assets for rights to use leased assets and lease liabilities.
The depreciation expense recognised in income equals TEUR 81 for the 2019 fi nancial year.
Based on the cumulative minimum lease payments as of 31 December 2018, the opening balance sheet value of the lease liabilities as of 1 January 2019 is reconciled as follows:
| TEUR | |
|---|---|
| Cumulative minimum lease payments as of 31 December 2018 | 503 |
| Application simplifi cation for short-term and low-value leases | –332 |
| Gross lease liabilities as of 1 January 2019 | 171 |
| Discounting | 1 |
| Present value of lease liabilities as of 1 January 2019 | 170 |
The expense from short-term leases and leases with low-value assets amounted to TEUR 377 during the 2019 fi nancial year.
The Group rents out its investment properties, and has classifi ed these leases as operating leases.
During the time of transition to IFRS 16, the Group is not yet required to make adjustments for leases in which it is the lessor, excepting subleases.
The Group applied IFRS 15 "Revenue from Contracts with Customers" in order to distribute the contractually agreed remuneration among the various leasing and non-leasing components.
The fi rst-time application of IFRS 16 had no material eff ect on ACCENTRO's accounting in its role as lessor.
The introduction of IAS 28.14A clarifi ed that the application of IFRS 9, including its impairment provisions, to the long-term and equity-replacing fi nancing of associates and joint ventures that are not accounted for using the equity method should be done before any pro-rata loss equal to or exceeding the carrying amount of the investment is recognised, and before the impairment provisions under IAS 28.38 are applied. In its consolidated fi nancial statements, ACCENTRO recognises loans that are aff ected by this clarifi cation. That said, the clarifi cation had no eff ect as of 1 January 2019.
The amendments to IFRS 9 "Financial Assets with a Negative Prepayment Penalty" and to IAS 19 "Plan Amendment, Curtailment or Settlement," the amendments to the "Annual Improvement Projects 2015-2017" and IFRIC 23 "Accounting for Uncertainties in Income Taxes" had no ramifi cations for the Group.
The following new or amended standards or interpretations have already been adopted by the IASB but are not yet mandatory or have not yet been transcribed into European law. The ACCENTRO Group refrained from applying any of these rules and regulations prematurely.
With regard to IFRS 17, as well as to the amendments to IFRS 10 and IAS 28, IAS 1 and IAS 8, IFRS 3 and the framework, an EU endorsement is still pending at this time. But it is safe to say that its application is unlikely to require any major adjustments to the Group's accounting.
The consolidated fi nancial statements present the parent Company, ACCENTRO Real Estate AG, and the subsidiaries that it controls and that are included in the basis of consolidation as one economic entity (IFRS 10).
A controlling interest in a subsidiary is given whenever ACCENTRO Real Estate AG benefi ts from variable returns from its commitment in the company or is entitled to such returns, and has the power to control the returns through its decision-making authority over the company. Whether or not ACCENTRO Real Estate AG has decision-making authority over a given company is determined on the basis of that company's relevant activities and the infl uencing competencies of ACCENTRO Real Estate AG. The assessment considers voting rights as well as other contractual rights to control relevant activities, provided no economic or other obstacles stand in the way of exercising the existing rights. Decision-making authority based on voting rights is vested in ACCENTRO Real Estate AG if the latter holds, due to equity instruments or contractual agreements, more than 50% of the voting rights and if this share of the voting rights comes with robust decision-making authority in regard to the relevant activities. Subsidiaries are fully consolidated as of the date on which the Group acquires a controlling interest in the respective company. They are subject to fi nal consolidation whenever the control ceases.
Subsidiaries also principally include structured entities that are controlled by ACCENTRO Real Estate AG. Structured entities are entities where the assessment of control is dominated by factors other than voting rights or similar rights. There are currently two structured entities that the Group factually controls without having a voting rights majority. These represent property vehicles whose privatisation process and fi nancing arrangements were supervised and controlled by the ACCENTRO Group, so that the ACCENTRO Group participated defi nitively in variable returns.
The Consolidated Financial Statements include all subsidiaries of ACCENTRO Real Estate AG. For a schedule of all companies included, see section 2.2e. All the subsidiaries were fully consolidated and are included in the consolidated fi nancial statements of ACCENTRO Real Estate AG.
Acquired companies are recognised using the purchase method pursuant to IFRS 3 whenever the acquired company represents a business operation. In case the acquired company does not represent a business operation, it is consolidated pursuant to IFRS 10 as an acquisition of assets and liabilities. The decisive criterion for the qualifi cation of an acquired company as a business operation is generally the question of whether human resources will be taken over.
Interests in the subsidiary's equity that are held by other partners are recognised among the Group's equity as shares without controlling infl uence, unless they represent shares in consolidated trading partnerships held by third-party shareholders. Non-controlling ownership interests in subsidiaries and the resulting profi ts or losses as well as the summarised fi nancial information of subsidiaries with signifi cant but non-controlling interests are disclosed in section 5.1.4.
The recognition and measurement methods of subsidiaries are applied uniformly throughout the Group while expenses, income, liabilities and capital are consolidated.
Joint arrangements (IFRS 11) are based on contractual agreements between two or more parties, and serve in turn as basis for a business activity that is subject to joint control by these parties. Joint control is established whenever the parties need to cooperate in order to control the relevant activities of the joint arrangement, and whenever decisions require the unanimous consent of the participating parties. In a joint arrangement taking the form of a joint venture, the parties that exercise joint control have rights to the net assets of the arrangement and obligations for the liabilities thereof.
The consolidated fi nancial statements of ACCENTRO Real Estate AG include seven joint ventures (previous year: six) which are recognised using the equity method pursuant to IAS 28.
Associates are entities over which ACCENTRO Real Estate AG has signifi cant but not controlling infl uence, be it directly or indirectly through subsidiaries. The term "signifi cant infl uence" refers to the power to participate in the fi nancial and operating policy decisions of another entity without controlling it. Signifi cant infl uence principally exists if ACCENTRO Real Estate AG in its role as investor holds at least 20% of the entity's voting rights, be it directly or indirectly through subsidiaries.
Investments in associates and joint ventures that are of signifi cance for the Group's assets, fi nancial and earnings position are taken into account in the consolidated fi nancial statements using the equity method. Disclosures on the risks associated with the interests that ACCENTRO Real Estate AG holds in joint ventures and associates are posted along with summarised fi nancial information on these entities in section 5.1.5. The summarised fi nancial information for joint ventures and associates that are, on an individual basis, immaterial are presented in aggregate form.
ACCENTRO Real Estate AG invests in joint ventures or associates primarily for operational reasons. The idea is often to acquire a stake in a housing privatisation process. Given the analogy to the company's primary operating activities, the result from at-equity investments is allocated to the cash fl ow from operations while the at-equity earnings are included in EBIT.
In conjunction with the at-equity consolidation, the recognition and measurement methods are adapted to uniform group accounting and valuation methods. This includes, inter alia, the capitalisation of borrowing costs for project developments tied up in associates and the classifi cation of real estate as investment properties in accordance with IAS 40.
In the time since 31 December 2018, the consolidated group was subject to the following changes:
| Subsidiaries | Joint Ventures | |
|---|---|---|
| Number | Number | |
| As of 1 January | 30 | 6 |
| Acquisitions | 4 | 2 |
| Start-ups | 5 | 0 |
| Mergers/amalgamations/deletions | 1 | 0 |
| Disposals | 3 | 1 |
| As of 31 December | 35 | 7 |
During the 2019 fi nancial year, the interests in three subsidiaries were sold, these being ACCENTRO 18. Wohneigentum GmbH, ACCENTRO 5. Wohneigentum GmbH, and MBG 2. Sachsen GmbH. Inversely, the company ACCENTRO Binz GmbH was acquired during Q1 2019 while the companies Düsseldorfer Straße 68-69 Projektgesellschaft mbH, Wintersteinstraße 7, 9 Liegenschaften 1 GmbH, and Winterstein straße 9 Liegenschaften 2 GmbH were acquired during Q2 2019. Another fi ve new subsidiaries were formed during Q2 and Q4 2019.
One of the six joint ventures, Havelländer Rosenensemble GmbH, was sold while another Phoenix F1 Neubrandenburgstrasse GmbH, was merged. In addition, another two joint ventures were acquired.
Listed below are the companies integrated in the Group in addition to ACCENTRO Real Estate AG.
| Company | Domicile | 31 Dec. 2019 Interest in net assets (in %)* |
31 Dec. 2018 Interest in net assets (in %)* |
|---|---|---|---|
| ACCENTRO 2. Wohneigentum GmbH** | Berlin | 100 | 100 |
| ACCENTRO 6. Wohneigentum GmbH | Berlin | 100 | 100 |
| ACCENTRO 11. Wohneigentum GmbH** | Berlin | 100 | 100 |
| ACCENTRO 16. Wohneigentum GmbH** | Berlin | 100 | 100 |
| ACCENTRO 17. Wohneigentum GmbH** | Berlin | 100 | 100 |
| ACCENTRO 20. Wohneigentum GmbH (set up in Q4 2019) |
Berlin | 100 | – |
| ACCENTRO 21. Wohneigentum GmbH (set up in Q4 2019) |
Berlin | 100 | – |
| ACCENTRO 22. Wohneigentum GmbH (set up in Q4 2019) |
Berlin | 100 | – |
| ACCENTRO Bayern GmbH** (formerly ACCENTRO 19. Wohneigentum GmbH) |
Berlin | 100 | 100 |
| ACCENTRO Wohneigentum GmbH** | Berlin | 100 | 100 |
| ACCENTRO GmbH** | Berlin | 100 | 100 |
| ACCENTRO Verwaltungs GmbH** | Berlin | 100 | 100 |
| ACCENTRO Sachsen GmbH** (formerly ACCENTRO 8. Wohneigentum GmbH) |
Berlin | 100 | 100 |
| ESTAVIS Wohneigentum GmbH** | Berlin | 100 | 100 |
| Estavis 43. Wohnen GmbH & Co. KG | Berlin | 100 | 100 |
| Quartier Danziger Straße 143 GmbH (set up in Q2 2019) |
Berlin | 100 | – |
| Quartier Hasenheide GmbH** | Berlin | 100 | 100 |
| Quartier Dietzgenstraße GmbH** (set up in Q2 2019) |
Berlin | 100 | – |
| Koppenstraße Wohneigentum GmbH** | Berlin | 100 | 100 |
| Kantstr. 44, 45 Verwaltungsgesellschaft mbH** | Berlin | 100 | 100 |
| Riehmers Dachgeschoss Grundbesitz GmbH** | Berlin | 100 | 100 |
| Riehmers Hofgarten Grundbesitz GmbH** | Berlin | 100 | 100 |
* The disclosures in this table comply with the provisions of the German Commercial Code (HGB).
** The company takes advantage of the exemption pursuant to Sec. 264 Art. 3, German Commercial Code (HGB) (preparation, disclosure and audit).
| List of Equity Interests in Subsidiaries in Which Either ACCENTRO Real Estate AG or One of Its |
|---|
| Subsidiaries Holds a Majority of the Capital Shares |
| Company | Domicile | 31 Dec. 2019 Interest in net assets (in %)* |
31 Dec. 2018 Interest in net assets (in %)* |
|---|---|---|---|
| Subsidiaries with Non-Controlling Interests | |||
| Uhlandstraße 79 Immobilien GmbH | Berlin | 50% + 1 vote |
50% + 1 vote |
| ESTAVIS Beteiligungs GmbH & Co. KG | Berlin | 94 | 94 |
| Kantstraße 130b/Leibnizstraße 36, 36a GbR | Berlin | 38.4 | 38.4 |
| Kantstraße 130b/Leibnizstraße 36, 36a Immobilien Gesellschaft mbH |
Berlin | 40.8 | 40.8 |
| Johanniterstr. 3-6 Liegenschaften GmbH | Berlin | 80 | 80 |
| ACCENTRO Rhein-Ruhr GmbH** | Oberhausen | 75 | 75 |
| ACCENTRO 2. Sachsen GmbH** | Berlin | 50.1 | 49.9 |
| GeSoNa Verwaltungs GmbH & Co. Hermannstraße KG |
Berlin | 73.1 | 69.8 |
| GeSoNa Verwaltungs GmbH | Berlin | 67.3 | 64.2 |
| ACCENTRO Binz GmbH** (acquired in Q1 2019) |
Berlin | 94.9 | – |
| Düsseldorfer Straße 68-69 Projektgesellschaft mbH** (acquired in Q2 2019) |
Berlin | 89.9 | – |
| Wintersteinstraße 7, 9 Liegenschaften 1 GmbH** (acquired in Q2 2019) |
Berlin | 94.9 | – |
| Wintersteinstraße 7, 9 Liegenschaften 2 GmbH** (acquired in Q2 2019) |
Berlin | 89.9 | – |
| Companies Derecognised during the Financial Year | |||
| ACCENTRO 18. Wohneigentum GmbH | Berlin | – | 100 |
| ACCENTRO 5. Wohneigentum GmbH | Berlin | – | 100 |
| MBG 2. Sachsen GmbH | Berlin | – | 100 |
* The disclosures in this table comply with the provisions of the German Commercial Code (HGB).
** The company takes advantage of the exemption pursuant to Sec. 264 Art. 3, German Commercial Code (HGB) (preparation, disclosure and audit).
| List of Equity Interests Accounted for Using the Equity Method | ||
|---|---|---|
| Company | Domicile | 31 Dec. 2019 Interest in net assets (in %)* |
31 Dec. 2018 Interest in net assets (in %)* |
|---|---|---|---|
| Wohneigentum Berlin GbR (Joint Venture) | Berlin | 33.33 | 33.33 |
| Urbanstraße 5 Projekt GmbH (Joint Venture) | Berlin | 44 | 44 |
| Gutshof Dahlewitz 1 GmbH (Joint Venture) | Berlin | 44 | 44 |
| Gutshof Dahlewitz 2 GmbH (Joint Venture) | Berlin | 44 | 44 |
| Belle Époque Quartier Gehrensee GmbH (formerly ACCENTRO Gehrensee GmbH, Joint Venture) |
Berlin | 25 | 25 |
| Düne 38 Projektentwicklungs GmbH (acquired in Q4 2019) |
Berlin | 44 | – |
| SHG Basdorfer Gärten BF6 Liegenschaften GmbH (acquired in Q4 2019) |
Berlin | 49 | – |
* For explanatory notes, see section 5.1.5
The internal reporting to the ACCENTRO Real Estate AG Management Board, which is the highest management body as defi ned by IFRS (management approach) includes no drilldowns by regions or segments. The Group trades solely with real estate located in Germany. Therefore, no geographical segmentation has been undertaken. Although individual sales could generate the equivalent of 10% of the sales proceeds of a fi nancial year with a single customer, this would not constitute a dependence within the meaning of IFRS 8.
Under IFRS 13, fair value is defi ned as the price at which an asset could be exchanged within the framework of an arm's-length transaction between knowledgeable, willing and independent market participants under current market conditions at the measurement date. The fair value may be determined using either the market-based approach, the cost-based approach, or the income-based approach. The fair value measurement maximises the use of defi nitive observable market-based inputs while minimising the use of unobservable inputs.
The measurement hierarchy divides into the following levels of inputs:
If the various inputs are categorised into diff erent levels of the fair value hierarchy, they are broken up into signifi cant and insignifi cant inputs in the fi rst step of the measurement process. Next, the fair value measurement is categorised in its entirety on the level of the lowest level input that is deemed signifi cant to the entire measurement (IFRS 13.73ff .).
The goodwill is reviewed at least once a year, and moreover whenever events or indicators suggest a possible impairment. Owner-occupied properties and buildings, other plant and equipment and intangible assets that are subject to depreciation or amortisation are tested for impairments whenever events or indicators suggest that their carrying value may not be recoverable. Impairment losses are recognised in the amount by which the carrying value of an asset exceeds its recoverable amount. The latter corresponds to the higher amount, derived from the fair value of the asset less the costs of disposal, and the discounted net cash fl ow from its continued use (value in use). In order to determine impairment, assets are combined at the lowest level to form cash-generating units for which cash fl ows can be identifi ed largely independently from the rest of the company. Goodwill impairment is determined at the level of the cash generating unit to which the respective goodwill is allocated.
If the reasons for impairment no longer apply, impairment losses can be reversed up to a maximum of the amortised cost of the respective asset. Goodwill impairment losses may not be reversed.
Plots and buildings are recognised at cost value or production costs less accumulated depreciation and accumulated impairment losses. Subsequent acquisition costs are recognised whenever economic benefi ts associated with property, plant or equipment are likely to accrue for the Group in the future. Scheduled straight-line depreciation is based on the estimated useful lives of the assets. The useful life of the offi ce building is assumed to be 33 years. Depreciation is recognised in the consolidated income statement. The carrying amounts of property, plant and equipment are checked for impairment whenever there is an indication that the carrying amount of an asset may exceed its recoverable amount.
Acquisitions and dispositions of fi nancial assets are aggregated as of the settlement date. These are recognised at their fair value at the time added while taking directly attributable transaction costs into account, unless they are recognised in income at fair value. The ACCENTRO Group currently only recognises loans and receivables that are measured at cost. Changes in the fair value of any fi nancial assets carried at fair value (in particular investments) are recognised directly in equity with no eff ect on net income. Dividends, on the other hand, are recognised at profi t or loss.
ACCENTRO uses the so-called simplifi ed impairment model in accordance with IFRS 9.5.5.15 and always calculates the impairment loss in the amount of the expected credit losses over the entire lifetime, taking into account collateral (e.g. in the case of sold real estate assets the outstanding land register transfer). As soon as it becomes apparent that a rental claim is uncollectable, the full amount will be derecognised in the income statement.
If the reasons for an impairment cease to apply, either in full or in part, the impairment is reversed up to a maximum of the amortised cost of the receivable and the amount of the reversal is recognised in income.
On fi rst-time recognition, fi nancial liabilities other than derivatives are recognised at fair value less transaction costs. In subsequent periods, they are carried at amortised cost. Any diff erences between the amount disbursed (net transaction costs) and the settlement amount are recognised in income over the term of the respective liability in accordance with the eff ective interest method.
Financial liabilities are classifi ed as current if the Group does not have an unconditional right to defer settlement of the liability by at least twelve months beyond the balance sheet date.
For the purpose of calculating the fair value, the expected future cash fl ow is discounted on the basis of a maturity-matched market interest rate. The individual attributes of the fi nancial instruments being measured are taken into account using standard credit and liquidity spreads.
In accordance with IAS 40, investment properties include any real estate that is held for the purpose of generating rental income and/or with a view to capital appreciation. The distinction between investment properties and inventory properties is made on the basis of set criteria using a decision matrix. Decisionmaking elements in this context include essentially the fi nancing structure, possible (new-build) development potential, a short-term intention to sell and CAPEX requirements, while an overall assessment takes account of each factor. Investment property reporting is subject to the option either to use the cost model which recognises acquisition or production costs less scheduled depreciation and less necessary impairment losses, if any, or to use the measurement at fair value through profi t or loss in accordance with the fair value model. Investment properties are recognised in accordance with the fair value model in the fi nancial statements of the ACCENTRO Group. The fair value is determined by an independent surveyor using accepted valuation techniques while checking for, and taking account of, property development opportunities in the process.
The inventories of the ACCENTRO Group consist of real estate acquired for the purpose of reselling it. Initial recognition is measured at the acquisition costs or construction costs, as the case may be. In subsequent measurements, inventory properties are carried at their acquisition value or production costs and net realisable value, whichever is lower. The acquisition costs include the purchase price of the properties plus the directly attributable ancillary costs, such as estate agent fees, real estate transfer tax, notarial charges and the costs of the land registration. Refurbishment costs that result in a material
improvement in the marketability of the properties are capitalised. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated sales costs going forward. In the context of share deal transactions, the acquisition costs are determined individually by adding the other net assets to the purchase price.
From time to time, the condominium retailing business necessitates a breakdown of the acquisition costs incurred by each fl at during the property retailing process. The breakdown of the acquisition costs determines the gross profi t resulting from the disposal of a given fl at. The purchase price is broken down on the basis of the anticipated relative retail prices, the expectation being that the breakdown will show a constant margin for the fl ats. Accordingly, if a residential complex is acquired at a total consideration, the fl ats with the highest expected selling price in absolute terms are allocated the relatively highest share of the acquisition costs.
Cash and cash equivalents are recorded at historical cost. For the purposes of the cash fl ow statement, cash and cash equivalents include cash on hand, demand deposits at banks and other short-term, highly liquid fi nancial investments with a remaining term of three months or less at the time of their acquisition. Earmarked funds, e. g. purchase price portions that may only be used to repay loan obligations, are not included in cash and cash equivalents but are recognised under other receivables and other current assets.
Provisions are recognised if the Company has a current legal or constructive obligation based on events in the past, if settlement of the obligation is likely to require an outfl ow of resources, and if the amount of the obligation can be accurately estimated. If the Company expects reimbursement of a deferred amount (for instance, due to an insurance policy), it recognises the reimbursement right as a separate asset, provided the reimbursement is virtually certain in the event of a claim under the obligation.
The Company recognises a provision for unprofi table business if the expected benefi t from the contractual claim is less than the unavoidable costs of meeting the contractual obligation.
Provisions are measured at the probable outfl ow of resources. The measurement of non-current provisions includes discounting using a risk-adequate interest rate.
Deferred income taxes are recognised using the liability method for temporary diff erences between the tax base of assets and liabilities and their IFRS carrying amounts in the balance sheet and for unused tax loss carryforwards. Deferred income taxes are generally determined using the statutory tax rate applicable on the balance sheet date for the respective date of reversal.
Deferred tax assets are recognised to the extent that future taxable profi ts are likely to be generated in future against which temporary diff erences or a loss carryforward can be off set.
Any changes in deferred taxes are principally recorded in the Income Statement. Exceptions to this include the addition in equity of deferred tax items as part of the purchase price allocation of company acquisitions and deferred tax items in connection with changes in value recognised as other comprehensive income, which are also recognised under "Other comprehensive income."
Given the nature of the business model, privatisations that are not or only to an economically insignifi cant degree subject to a building obligation usually involve a single performance obligation under IFRS 15. Revenue from privatisation includes the amount invoiced for the sale of real estate held as inventory assets and is recognised upon transfer of control. This is generally the case when possession, benefi ts, duties and risks associated with the properties are transferred (e. g. public safety requirements). In the case of the sale of special purpose entities, this date is generally the date on which the transfer of the shares in the respective entity is completed. In some cases, obligations to carry out subsequent renovation or improvement work are negotiated as part of a given sale. Such cases involve a separable performance obligation, which is not realised until it has been fulfi lled.
In 2019, the ACCENTRO Group stepped up its eff orts to develop and sell attic apartments. These sales contracts with signifi cant construction obligations generally involve a single performance obligation. Revenue is recognised in accordance with IFRS 15.35 c) on a period-by-period basis whenever sales agreements for the individual residential units were concluded with customers. To determine the stage of completion, the ACCENTRO Group applies the cost-to-cost method. The Group has also the right to invoice advance payments to customers on the basis of payment schedules, which in turn are based on the regulations of the Estate Agents and Property Developers Ordinance (MaBV) and are governed by so-called milestones. Whenever the progressing construction work has cleared a performance-based milestone, the customer is invoiced for the corresponding milestone payment. For all services provided up to a given milestone, a contract asset is capitalised. If the milestone payment exceeds the revenues previously recognised using the cost-to-cost method, the Group recognises a contractual liability in the amount of the payment balance. The sales contracts include no signifi cant fi nancing component, as the period between revenue recognition under the cost-to-cost method and the respective milestone payment is always less than one year. Residential units for which no sale and purchase agreement (SPA) has been signed are recognised as inventory properties in accordance with IAS 2 until such a SPA has been signed.
Revenues from lease agreements are recognised on an accrual basis in accordance with the terms of the underlying agreements. Rent revenues are recognised among the revenues. Service charges invoiced to tenants are generally off set against the corresponding expenses, as the recoverable expenses are deemed to have been incurred in the tenants' interest.
The Company recognises interest income pro rata temporis, taking account of the remaining debt and the eff ective interest rate over the remaining term.
Commissions for brokering an actual business contract are recognised by the Group as an expense whenever the brokered transaction has been fulfi lled. Any commission paid before this time is reported contract costs among the miscellaneous receivables.
Leases in which the ACCENTRO Group acts as lessee are recognised in accordance with IFRS 16 (recognition of a right of use and a lease liability). Generally speaking, leases play only a secondary role for the ACCENTRO Group.
The Group acts as lessor in conjunction with property lettings. The leasing agreements represent operating leases. Rental income from operating leases is recognised on a straight-line basis over the term of the respective lease.
In its consolidated fi nancial statements, ACCENTRO Real Estate AG includes subsidiaries in the legal form of partnerships even if third parties hold minority interests in them. In accordance with IAS 32, the shareholder positions of these minorities must be recognised as liabilities in the consolidated fi nancial statements due to their statutory, mandatory termination right. At the time such a liability arises, it is measured at the present value of the shareholder's compensation claim. As a rule, the amount is identical to the shareholder's deposit. The liability is subsequently carried forward with the result allocation taken into account. Any change in the liability, insofar as it is not based on deposits and withdrawals, is recognised in the income statement. If the rollover results in an imputed claim against the shareholder, it is suspended until the rollover returns a debt to the shareholder once more.
In the case of corporations within the Group, liabilities for distributions to shareholders are only reported in the period in which the Annual General Meeting passed the corresponding resolution on the appropriation of profi ts.
The cash fl ow statement shows the development of the Group's cash fl ows during the fi nancial year. The consolidated fi nancial statement uses the indirect method for a breakdown of the cash fl ow, with non-cash items deducted and cash items added to the consolidated income. The cash fl ow statement represents the cash fl ows from operating activities, from investing activities, and from fi nancing activities.
Using capital management, ACCENTRO Real Estate AG pursues the objective to sustainably strengthen the Group's liquidity and equity base, to raise funds for the Group's equity-fi nanced growth, and to generate an adequate return on the capital employed. As the refi nancing situation remains relatively favourable, the ACCENTRO Group uses debt as much as possible to fi nance acquisition volumes in the context of its property activities, always taking account of the relevant tax implications. The Group's accounting equity serves as a passive management criterion. The active control variables are revenues and EBIT.
Once a quarter, and ahead of large-scale transactions, the risk management department reviews the Group's capital structure. The review takes the cost of capital and the risk associated with each capital class duly into account. In order to satisfy the banking industry standards of the external capital requirements, the accounting ratios are regularly updated. This also includes property-specifi c debt service ratios, loan-to-value fi gures and, where applicable, contractually agreed balance sheet and income ratios.
The fi nancial risk management (on this subject, see also the elaborations in the Group Management Report) includes the control and limitation of fi nancial risks from business activities. Particularly relevant here is the liquidity risk (the avoidance of disruptions in solvency) and the default risk (the risk of loss if a contracting party fails to meet its contractual obligations).
The responsibility for managing the liquidity risks lies with the Management Board, which has set up an adequate system for managing short-, medium- and long-term fi nancing and liquidity requirements. The Group manages liquidity risks by securing adequate cash and cash equivalents, credit lines with banks and other facilities, as well as by constantly monitoring forecast and actual cash fl ows within the framework of the supervision of the rolling cash plan, and by coordinating the maturity profi les of fi nancial assets and liabilities.
In order to avoid risks of default, the Group only enters into sales relationships with parties of sound creditworthiness. In order to further limit default risk, ownership of sold properties is generally not transferred to the buyer until the purchase price has been paid into an escrow account.
When preparing the consolidated fi nancial statements, the Company uses forward-looking estimates and assumptions based on the conditions prevailing by the balance sheet date. The estimates thus obtained may deviate from the actual events going forward.
The following estimates serve as basis for the recognition, measurement and disclosure of balance sheet items:
Concerning the fi nancial reporting and valuation rules, ACCENTRO Real Estate AG made the following discretionary decisions concerning the basis of its accounts presentation:
Whenever errors in the accounting estimates and in the fair value measurements become apparent during the periods following the balance sheet date, the provisions of IAS 8 apply. Accordingly, material omissions or misstatements are retroactively corrected for all prior reporting periods aff ected up to the current period's fi nancial statement whenever they could impact the economic decisions that the recipients of the statements may have made on the basis of the fi nancial statement.
The Company's goodwill was created by company acquisitions in the trading business during the 2007 and 2008 fi nancial years, laying the ground for today's privatisation business. During the fi nancial years 2017, 2018 and 2019, ACCENTRO AG generated a substantial positive income from its trading business (= consolidated income) and intends to achieve equally high profi t contributions in the years to come to ensure that the intrinsic value of the goodwill is supported by the Group's economic development. In addition, an expert valuation was carried out for the majority of real estate assets, whose fi ndings revealed considerable hidden reserves and translated the existing privatisation potential into more specifi c fi gures.
Two properties are recognised as property, plant and equipment in accordance with IAS 16 and valued at initial cost including incidental costs for notary fees and real estate transfer tax. This concerns specifi cally the offi ce building located at Kantstr. 44/45 in Berlin that the Group has occupied since late 2019 as its principal offi ce. The scheduled depreciation is measured for a period of 33 years using the straightline method.
The acquisition costs, with the incidental acquisition costs taken into account, are allocated to the acquired plots and buildings as follows according to their appraised fair values:
| 31 December 2019 Owner-occupied Owner-occupied plots buildings |
Total | ||
|---|---|---|---|
| ung | TEUR | TEUR | TEUR |
| Acquisition costs | |||
| Beginning of period | 9,686 | 13,854 | 23,540 |
| Additions | 0 | 1,120 | 1,120 |
| Disposals | 0 | 0 | 0 |
| Transfer items | 0 | 50 | 50 |
| End of period | 9,686 | 15,024 | 24,710 |
| Accumulated amortisation | |||
| Beginning of period | 0 | 173 | 173 |
| Additions | 0 | 454 | 454 |
| Disposals | 0 | 0 | 0 |
| End of period | 0 | 627 | 627 |
| Depreciated book value | 9,686 | 14,397 | 24,084 |
Gathered in this item are various loans and fi nancial assets. As of year-end 2019, these represented exclusively loans to companies that are associates and included at equity in the consolidated fi nancial statements of ACCENTRO in the amount of TEUR 14,773.
| 31 Dec. 2019 | 31 Dec. 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Non-current trade receivables | ||
| Purchase price receivables | 0 | 2,357 |
| Non-current other receivables and assets | ||
| Subordinated loan to the associate Belle Époque Quartier Gehrensee GmbH |
11,138 | 10,159 |
| Loan and deferred interest receivables from a sales order in Potsdam |
0 | 10,140 |
| Subordinated loan to HRP Hamburg Residential GmbH | 0 | 3,345 |
| Loan to the associate Havelländer Rosenensemble | 0 | 3,120 |
| Loan to the associates Dahlewitz Projektgesellschaften Gutshof Dahlewitz 1 GmbH and Gutshof Dahlewitz 2 GmbH |
1,736 | 1,581 |
| Equity interest (5.1%) in HRP Hamburg Residental GmbH | 0 | 496 |
| Loan to the associate Düne 38 Projektentwicklungs GmbH | 886 | 0 |
| Loan to the associate SHG Basdorfer Gärten BF6 GmbH | 1,013 | 0 |
| Total of non-current other receivables and other assets | 14,773 | 28,814 |
The purchase price receivable from the sale of an inventory property yet to be developed, which was reported as a non-current receivable in the previous year and which is due by March 2020 at the least, has been reclassifi ed as current receivable (previous year: TEUR 2,357). The receivable is secured by the assignment of future purchase price claims unless these have already been granted as collateral to other lenders with seniority. The loan and the deferred interest receivable from the Potsdam sales mandate in the amount of TEUR 10,140 was reclassifi ed as current receivable, as were the receivables from the 5.1% equity interest in HRP Hamburg Residential GmbH, because the underlying properties were sold or are to be sold in the course of the 2020 fi nancial year. The two subordinated loan receivables from the associate Havelländer Rosenensemble GmbH (previous year: TEUR 3,120) were repaid during the third quarter of 2019.
Recognised among the other receivables is a junior mezzanine loan to the associate Belle Époque Quartier Gehrensee GmbH over TEUR 11,138 at an interest rate of 10%. In the course of the 2019 fi nancial year, loans were disbursed to the associates Düne 38 Projektentwicklungs GmbH in the amount of TEUR 873 and SHG Basdorfer Gärten BF 6 GmbH in the amount of TEUR 990.
In accordance with IAS 28.38, the loans are included in the subsequent at-equity valuation due to their equity-replacing structure, although a separate balance sheet disclosure is retained.
Notes
The table below contains detailed information on subsidiaries of ACCENTRO Real Estate AG in which third parties hold signifi cant but non-controlling interests:
| Name | Capital share of the non controlling interests in % (voting interest, in %) |
Consolidated income representing non-control ling interests |
Book value of the non controlling interests as of 31 Dec. 2019 |
Dividends paid out to the non controlling interests during the reporting period |
|---|---|---|---|---|
| ung | % | TEUR | TEUR | TEUR |
| Corporations | ||||
| Uhlandstraße 79 Immobilien GmbH | 50 +1 vote |
162 | 13 | – |
| Kantstraße 130b/Leibnizstraße 36, 36a Immobilien Gesellschaft mbH |
59.2 | –23 | –101 | – |
| Johanniterstr. 3-6 Liegenschaften GmbH |
20 | 61 | 1,900 | – |
| ACCENTRO Rhein-Ruhr GmbH | 25 | 5 | 11 | – |
| ACCENTRO 2. Sachsen GmbH | 49.9 | –39 | –28 | – |
| GeSoNa Verwaltungs GmbH | 32.9 | 0 | 3 | – |
| Düsseldorfer Str. 68-69 Projekt GmbH | 5.1 | –2 | 82 | – |
| ACCENTRO Binz GmbH | 5.1 | –6 | 26 | – |
| Wintersteinstr.7, 9 Liegenschaften 1 GmbH |
5.1 | –1 | 47 | – |
| Wintersteinstr.7, 9 Liegenschaften 2 GmbH |
10.1 | –1 | 175 | – |
| Total | 168 | 2,128 | – | |
| Partnerships | ||||
| Kantstraße 130b/Leibnizstraße 36, 36a GbR* |
61.6 | 0 | 0 | – |
| GeSoNa Verwaltungs GmbH & Co. Hermannstr. KG |
26.9 | 0 | 0 | – |
* recognised among the fi nancial liabilities
Listed below are the summarised fi nancial details of subsidiaries in which ACCENTRO Real Estate AG held substantial but non-controlling interests as of 31 December 2019 and as of 31 December 2018:
| 31.12.2019 | Johanniterstr. 3-6 Liegen schaften GmbH |
ACCENTRO 2. Sachsen GmbH |
GeSoNa Verwaltungs GmbH & Co. Hermannstr. KG |
ACCENTRO Rhein-Ruhr GmbH |
|---|---|---|---|---|
| u | TEUR | TEUR | TEUR | TEUR |
| Total of current assets | 25,707 | 3,993 | 2,363 | 7,347 |
| Total of non-current assets | 0 | 31 | 34,475 | 0 |
| Total of current liabilities | 474 | 844 | 2,459 | 6,028 |
| Total of non-current liabilities | 10,265 | 3,238 | 17,068 | 1,274 |
| Earnings/revenues | 514 | 121 | 737 | 162 |
| Net income / net loss | 307 | 80 | 7,345 | 21 |
| thereof attributable to the share holders of ACCENTRO Real Estate AG |
245 | 40 | 7,345 | 16 |
| thereof attributable to the non-controlling interests |
61 | 40 | 0 | 5 |
Financial information on companies in which non-controlling interests are held is explained as of 31 December 2019, provided that the proportionate equity attributable to the other pro-rata interests is greater than TEUR 200, the balance sheet total of the respective company is greater than TEUR 1,000 or the pro-rata profi t/loss for the year is greater than TEUR 50. The net profi t shares of non-controlling interests in partnerships are recognised as profi t or loss in the consolidated income statement.
| 31.12.2018 | Johanniterstr. 3-6 Liegenschaften GmbH |
ACCENTRO 2. Sachsen GmbH |
GeSoNa Verwaltungs GmbH & Co. Hermannstr. KG |
|---|---|---|---|
| u | TEUR | TEUR | TEUR |
| Total of current assets | 25,617 | 3,778 | 24,775 |
| Total of non-current assets | 0 | 1 | 23 |
| Total of current liabilities | 672 | 566 | 2,041 |
| Total of non-current liabilities | 10,283 | 3,191 | 12,792 |
| Earnings / revenues | 631 | 0 | 0 |
| Net income / net loss | 328 | –3 | 0 |
| thereof attributable to the share holders of ACCENTRO Real Estate AG |
262 | –1 | 0 |
| thereof attributable to the non-controlling interests |
66 | –2 | 0 |
Equity interests accounted for using the equity method developed as follows:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Start of fi nancial year | 3,518 | 264 |
| Additions | 23 | 3,261 |
| Disposals | –94 | –5 |
| Shares in gains and losses* | 193 | –2 |
| End of fi nancial year | 3,640 | 3,518 |
* The net income from companies included in the consolidated fi nancial statements at equity also includes income from the sale of shares.
During Q2 and Q4 2019, ACCENTRO AG acquired equity interests of 44% and 49%, respectively, each in two companies (Düne 38 Projektentwicklungs GmbH for TEUR 6 and SHG Basdorfer Gärten BF6 Liegenschaften GmbH for TEUR 13) for the purpose of acquiring, developing and marketing joint projects, and to thereby expand the Group's commitment on the real estate market.
The joint ventures are fi nanced by ACCENTRO AG, among other sponsors; see section 5.1.3. The business purpose of the joint ventures is normally the project planning and completion of residential real estate. ACCENTRO is committed in these joint ventures in order to generate value-added through housing privatisations in addition to the successful project completion in a general sense. In this context, ACCENTRO reviews the IFRS-compliant classifi cation of the property development under IAS 2 as inventory asset (possibly associated with partial realisation of profi ts under IFRS 15.35) or the recognition under IAS 40 as "income producing property" in the context of maintaining uniform Group recognition and measurement methods. In this case, the recognition is based on the acquisition and production costs. If a property development is classifi ed as inventory asset, the borrowing costs are capitalised in line with industry standards. Expenses and income are consolidated in the pro-rata amount fi nanced by ACCENTRO and recognised in income.
The section below lists the summarised fi nancial information for the associates and joint ventures of signifi cance for ACCENTRO Real Estate AG along with a reconciliation to the book value of the interest held by ACCENTRO Real Estate AG as of 31 December 2019 and 31 December 2018, appraised using the equity method:
| 31.12.2019 | Urban straße 5 Projekt GmbH |
Wohn eigentum Berlin GbR |
Gutshof Dahlewitz 1 GmbH |
Gutshof Dahlewitz 2 GmbH |
Düne 38 Projek tentwick lungs GmbH |
SHG Basdorfer Gärten BF6 Liegen schaften GmbH |
Belle Époque Quartier Gehren see GmbH |
|---|---|---|---|---|---|---|---|
| (Joint Venture) |
(Joint Venture) |
(Joint Venture) |
(Joint Venture) |
(Joint Venture) |
(Joint Venture) |
(Joint Venture) |
|
| g | TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | TEUR |
| Earnings/revenues | 4,326 | 0 | 0 | 0 | 0 | 0 | 69 |
| Profi t or loss for the year/ comprehensive income |
671 | 0 | –5 | 0 | –1 | –14 | –88 |
| Total of current assets | 649 | 449 | 3,931 | 0 | 6,451 | 4,581 | 3,394 |
| Total of non-current assets | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total of current liabilities | 182 | 0 | 3,935 | 0 | 4,756 | 4,894 | 1,073 |
| Total of non-current liabilities | 0 | 0 | 0 | 0 | 0 | 32,666 | 2,503 |
| Net assets of the associates | 468 | 449 | 20 | 25 | 24 | 14 | –182 |
| ACCENTRO Real Estate AG's interest in net assets of the associate |
49.82% | 33.33% | 44.00% | 44.00% | 44.00% | 49.00% | 25.00% |
| Book value of ACCENTRO Real EstateAG's interest, appraised using the equity method |
295 | 61 | 11 | 11 | 6 | 6 | 3,250 |
| 31.12.2018 | Urban straße 5 Projekt GmbH |
Wohn eigentum Berlin GbR |
Gutshof Dahlewitz 1 GmbH |
Gutshof Dahlewitz 2 GmbH |
Havel länder Rosen - ensemble GmbH |
Belle Époque Quartier Gehren see GmbH |
|---|---|---|---|---|---|---|
| (Joint Venture) |
(Joint Venture) |
(Joint Venture) |
(Joint Venture) |
(Joint Venture) |
(Joint Venture) |
|
| TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | |
| Earnings/revenues | 69 | 0 | 0 | 0 | 288 | 244 |
| Profi t or loss for the year/ comprehensive income |
–88 | 0 | 0 | 0 | 222 | 0 |
| Total of current assets | 3,394 | 449 | 0 | 0 | 12,862 | 49,372 |
| Total of non-current assets | 0 | 0 | 0 | 0 | 0 | 0 |
| Total of current liabilities | 1,073 | 0 | 0 | 0 | 208 | 109 |
| Total of non-current liabilities | 2,503 | 0 | 0 | 0 | 12,420 | 32,666 |
| Net assets of the associates | –182 | 449 | 0 | 0 | 233 | 16,706 |
| ACCENTRO Real Estate AG's interest in the net assets of associate |
44.00% | 33.33% | 44.00% | 44.00% | 44.00% | 25.00% |
| Book value of ACCENTRO Real Estate AG's interest, appraised using the equity method |
0 | 156 | 11 | 11 | 89 | 3,250 |
For the risks and constraints to which ACCENTRO Real Estate AG is exposed by each of the associates and joint ventures, please see the elaborations in section 5.24, as far as relevant.
All things considered, ACCENTRO held interests of 5.1% each in 14 equity investments as of 31 December 2019. The earnings from these equity investments added up to TEUR 36 during the 2019 fi nancial year. No changes in the fair value of the equity investments to be recognised in other comprehensive income were realised during the fi nancial year because the acquisitions made during the year have not yet experienced any signifi cant increase or loss in value. The equity investments were undertaken with the view of developing new housing privatisation opportunities.
| 31 Dec. 2019 | 31 Dec. 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Delta Vivum Berlin I interest | 2,683 | 2,683 |
| Magnus Relda Portfolio interest | 685 | 1,121 |
| ACCENTRO 5. Wohneigentum GmbH interest | 562 | 0 |
| Other | 1,685 | 427 |
| Total | 5,615 | 4,231 |
| Disclosures pursuant to Sec. 313, Art. 2, No. 41, HGB, i. c. w. Sec. 315e, Art. 1, HGB | ||||||
|---|---|---|---|---|---|---|
| Company name and registered offi ce | direct % |
Equity (in EUR) |
Net profi t (in EUR) |
|||
| ACCENTRO 5. Wohneigentum GmbH, Berlin* | 5.1% | –1,845,069.71 | –354,381.67 | |||
| DELTA VIVUM Berlin I GmbH, Berlin* | 5.1% | 10,761,516.47 | 1,458,725.39 | |||
| DELTA VIVUM Berlin II GmbH, Berlin* | 5.1% | –1,894,756.32 | 227,417.27 | |||
| Phoenix Spree Gottlieb GmbH, Berlin** | 5.1% | 123,124.97 | 0.00 | |||
| Phoenix Spree Mueller GmbH, Berlin** | 5.1% | 2,766,430.00 | 0.00 | |||
| HRP Hamburg Residential S.à r.l., Luxembourg*** | 5.1% | 3,461,233.24 | –1,538,766.76 | |||
| Magnus Relda Portfolio | ||||||
| Estavis 6. Wohnen GmbH, Berlin** | 5.1% | 232,122.87 | 0.00 | |||
| Estavis 7. Wohnen GmbH, Berlin ** | 5.1% | –73,154.47 | 0.00 | |||
| Estavis 8. Wohnen GmbH, Berlin** | 5.1% | 224,347.09 | 0.00 | |||
| Estavis 9. Wohnen GmbH, Berlin** | 5.1% | 232,122.87 | 0.00 | |||
| RELDA 36. Wohnen GmbH, Berlin** | 5.1% | 82,259.66 | 0.00 | |||
| RELDA 38. Wohnen GmbH, Berlin** | 5.1% | 104,083.42 | 0.00 | |||
| RELDA 39. Wohnen GmbH, Berlin** | 5.1% | 110,283.40 | 0.00 | |||
| RELDA 45. Wohnen GmbH, Berlin** | 5.1% | 110,714.19 | 0.00 | |||
* provisional HGB fi gures from 2019
** HGB fi gures from 2018
*** HGB fi gures from 2017
| 2019 | |
|---|---|
| TEUR | |
| 1 January | 0 |
| Transfer from inventory properties at fair value | 34 ,410 |
| Additions | 42 |
| 31 December | 34 ,452 |
During the 2019 fi nancial year, ACCENTRO transferred properties in sought-after locations in Berlin with an original carrying amount of TEUR 23,011 from inventories (IAS 2) to investment properties (IAS 40). Investment properties were appraised in accordance with IAS 40.32a at a fair value of TEUR 34,410 while the value balance of TEUR 11,399 determined by a surveyor on this occasion was recognised as income.
As a result of a potential analysis done on the basis of a decision matrix in 2019, the properties will not be resold or privatised within the normal business cycle, contrary to the original reason for acquiring them. Instead, the plan is now to exploit existing development reserves through infi ll densifi cation and new-build developments. The background to this is not least that the real estate assets are held in a
closed-end real estate fund and that a long-term development of this type is easier to integrate into the Group's structure under corporate law.
The rental income from the investment properties added up to TEUR 931 thousand during the fi nancial year. The directly attributable operating expenses of the investment portfolio amounted to TEUR 194.
ACCENTRO had its portfolio of 168 residential units and 3 commercial units with a total area of 11,946 m², most of them centrally located in Berlin, appraised by an independent valuer as of 30 September 2019. The valuers have relevant professional qualifi cations and the experience it takes to carry out such a valuation. The valuations are based on:
The information provided to the valuer, and the assumptions made as well as the results of the property valuation were analysed by ACCENTRO AG's asset and project management and the Management Board.
The fair value (level 3 fair value measurement, based on valuation models) of individual properties or individual property portfolios is determined on the basis of discounted future cash fl ows using the DCF method. As a rule, the underlying detailed planning period is ten years. For the end of this period, a potential discounted sale value (terminal value) is predicted for the appraised property. It refl ects the price most likely to be paid in an arm's length transaction by the end of the detailed planning period. In this context, the discounted net cash fl ows received for the tenth year are capitalised at the so-called capitalisation rate (exit rate) as a perpetual annuity.
The total of the cash operating surplus and the discounted potential sale value produces the gross capital value of the subject property. The resulting fi gure is converted into an investment value by taking into account transaction costs incurred in an orderly business transaction.
The overview below shows material assumptions and results used to determine the fair value of investment properties within the valuation framework in accordance with the DCF method:
| Valuation parameter | Unit | Mean | Bandwidth |
|---|---|---|---|
| Discount interest rate | % | 4.11 | 4 – 4.2 |
| Capitalisation rate | % | 3.14 | 3 – 3.2 |
| Maintenance costs | EUR/m² | 9.67 | 8.50 – 11.25 |
| Administrative overhead | EUR/rental unit/year | 265 | 260 – 270 |
| Stabilised vacancy rate | % | 1.5 | 1.3 – 1.8 |
ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS ACCENTRO Real Estate AG Notes
| Valuation results | Unit | Mean | Bandwidth |
|---|---|---|---|
| Actual rent multiplier | 37.3 | 29.7 – 44.3 | |
| Market value per m² | EUR/m² | 2,880 | 2,280 – 3,180 |
The selected interest rate, the underlying market rents and the stabilised vacancy rates were identifi ed as key value drivers subject to market infl uences. Potential fl uctuations of these parameters have eff ects that are shown below in isolation from each other. Reciprocal eff ects of these parameters are conceivable but not quantifi able due to the complexity of their relationships.
| Discount Interest Rate | Market rent | Vacancy rate | ||||
|---|---|---|---|---|---|---|
| +0.5% | –0.5% | +10% | –10% | +1% | –1% | |
| Changes in value | ||||||
| in TEUR | –5,420 | 7,480 | 3,720 | –3,950 | 520 | –520 |
| in % | –15.8 | 21.7 | 10.8 | –11.5 | 1.5 | –1.5 |
Essential qualitative valuation assumptions included the decision to disregard the rent cap just enacted in Berlin, and the signifi cant rent increases revealed by the potential analysis. The rent cap was not passed by Berlin's House of Representatives until after the balance sheet date, and remains fraught with constitutional caveats for the time being. Moreover, there was no measurable impact on prices in response to the rent cap by 31 December 2019. The potential analysis focuses on the structure of the housing stock more than on anything else.
The Company's inventory properties include available-for-sale properties and down-payments for such properties. The item breaks down as follows:
| 31 Dec. 2019 | 31 Dec. 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Properties | 416,069 | 340,167 |
| Advanced payments | 504 | 5,073 |
| Total | 416,573 | 345,241 |
The Group continued to invest in the expansion of the trading portfolio during the 2019 fi nancial year. Benefi ts and burdens of 812 residential units that we acquired at a price of EUR 164.2 million were transferred, and it should be added that the prices were in parts paid through the non-cash assumption of debt within the framework of share purchase agreements (share deals).
For another 84 residential units acquired for a purchase price of EUR 13 million, the sale and purchase agreements were signed in 2019, while their benefi ts and burdens will be transferred and recognised in the 2020 fi nancial year. At the same time, 830 residential units worth EUR 95.5 million in initial costs were sold, so that the inventory assets, taking into account the refurbishment measures completed in the course of the year and down-payments recently made, increased by EUR 71.3 million. In addition, TEUR 23,011 worth of inventory properties were impaired during the 2019 fi nancial year by their reclassifi cation as investment properties.
Inventory properties with a carrying value of TEUR 302,028 (previous year: TEUR 203,560) are expected to be sold after more than twelve months, according to corporate planning.
The properties are measured at initial costs plus subsequent expenditures to restore their marketability. There was no income from reversals of impairments for properties held as inventory assets during the 2019 fi nancial year. The recognised properties serve as collateral for fi nancial liabilities in the amount of EUR 366.6 million (previous year: EUR 256.1 million).
The contract assets (TEUR 1,252; previous year: TEUR 0) result entirely from the period-by-period revenue recognition of loft apartments under construction and represent exclusively current assets. Given their low amounts, it was decided not to detail these separately.
Trade receivables represent purchase price receivables and rent receivables. The development of trade receivables is shown in the following table:
| 31 Dec. 2019 | 31 Dec. 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Trade receivables (gross) | 10,567 | 21,958 |
| Allowances | –1 | –994 |
| Trade receivables (net) | 10,566 | 20,964 |
| thereof non-current | 0 | 2,357 |
| thereof current | 10,566 | 18,607 |
The table below lists the trade receivables by maturity:
| 31 Dec. 2019 | 31 Dec. 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Trade receivables | 10,566 | 20,964 |
| thereof not value-adjusted and not overdue on the reporting date |
7,132 | 17,805 |
| thereof not value-adjusted and overdue on the reporting date by 30 days or less |
36 | 424 |
| thereof not value-adjusted and overdue on the reporting date by 31 to 60 days |
2,004 | 1,316 |
| thereof not value-adjusted and overdue on the reporting date by 61 to 90 days |
159 | 350 |
| thereof not value-adjusted and overdue on the reporting date by 91 to 180 days |
583 | 248 |
| thereof not value-adjusted and overdue on the reporting date by 181 to 360 days |
170 | 257 |
| thereof not value-adjusted and overdue on the reporting date by more than 360 days |
482 | 565 |
| Net value of value-adjusted trade receivables | 1 | 994 |
The default risk for receivables from tenants and buyers of residential units is rated as low.
One-off allowance on trade receivables developed as follows:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| As of 1 January | 994 | 96 |
| Change in consolidated group | 0 | 4 |
| Additions (impairment losses) | 0 | 926 |
| Reversals | –308 | 0 |
| Utilisation | –685 | –31 |
| As of 31 December | 1 | 994 |
During the previous year, allowances were allocated as a precautionary measure for a rent claim from the letting of a property as migrant shelter. A settlement made it possible to dissolve the allowances in the amount of TEUR 240.
ACCENTRO Real Estate AG CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2019 Notes
The miscellaneous receivables and other assets include:
| 31 Dec. 2019 | 31 Dec. 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Loan and deferred interest receivables in conjunction with the sales mandate in Potsdam |
13,328 | 0 |
| Receivables from operating costs not yet invoiced | 7,008 | 8,064 |
| Receivables from investment companies | 3,568 | 409 |
| Restricted cash in banks | 157 | 175 |
| Down-payments on property, plant and equipment | 138 | 0 |
| Loan receivables from former associates sold together with the companies |
63 | 2,323 |
| Sales tax receivables | 0 | 975 |
| Miscellaneous other receivables | 558 | 763 |
| Total current assets and miscellaneous receivables | 24,820 | 12,709 |
The receivables from the Potsdam sales mandate were due for payment on short notice following the realignment of the project company, with the deadline subsequently extended until October 2019. In addition to the nominal amount, the receivable shown also includes interest receivables accrued by the balance sheet date. The loan is secured by the assignment of shares in the company and is due to be repaid shortly in April 2020. VAT receivables were off set by liabilities over the same amount. Both receivables and liabilities were derecognised as other income and other expenses, respectively, in the course of the year.
Moreover, there are receivables in the amount of TEUR 63 from the sale of two subsidiaries and the related sale of the shareholder loans. The other loan receivables from the previous year were paid back.
Other receivables are subject to allowances in the amount of TEUR 31 (previous year: TEUR 31).
The "Cash and cash equivalents" item represents predominantly bank balances held at call.
The subscribed capital (share capital) of ACCENTRO Real Estate AG amounted to EUR 32,437,934 as of 31 December 2019. It breaks down into 32,437,934 no-par value bearer shares. The Group does not issue diff erent classes of shares.
| Amount | No-par value shares |
Purpose | |
|---|---|---|---|
| TEUR | in thousands | ||
| Contingent Capital 2017 | 1,800 | 1,800 | Servicing the stock option plan (so far inactive) |
| Authorisation to issue convertible bonds* |
200,000 | 25,000 | Issuance of convertible bonds and/or bonds with warrants/ participation rights |
| Authorised Capital 2018 as of 31 December* |
13,039 | 13,039 | Capital increase against cash and non-cash contributions (until 14 May 2023), originally TEUR 15,159 |
| Contingent Capital 2019 | 14,419 | 14,419 | Issuance of convertible bonds and/or bonds with warrants/ participation rights |
ACCENTRO AG has the following authorised and contingent capital at its disposal:
* Subject to approval by the Supervisory Board
Other than that, we refer you to the Group Management Report for mandatory disclosures pursuant to Sec. 315a, Art. 1, HGB.
The table below lists the Group's current and non-current fi nancial liabilities as well as its bonds:
| 31 Dec. 19 | 31 Dec. 18 | |
|---|---|---|
| TEUR | TEUR | |
| Non-current fi nancial liabilities | ||
| Liabilities to banks | 114,474 | 76,773 |
| Bond liabilities | 99,235 | 98,561 |
| Total non-current fi nancial liabilities | 213,709 | 175,334 |
| Current fi nancial liabilities | ||
| Liabilities to banks | 102,368 | 54,357 |
| Bond liabilities | 1,563 | 1,563 |
| Total current fi nancial liabilities | 103,931 | 55,920 |
| Total fi nancial liabilities | 317,640 | 231,253 |
TEUR 114,474 (previous year: TEUR 76,773) of the carrying amount of non-current fi nancial liabilities to banks relate to loan amounts with a remaining term of more than one and less than fi ve years. Current fi nancial liabilities amount to TEUR 102,368 (previous year: TEUR 54,357). The rise in current fi nancial liabilities by TEUR 48,011 is primarily explained by the fact that inventory properties were earmarked for sale in the 2020 fi nancial year by the Company's sales planning, and that this implies prepayment of the associated loan debt, and by the short-term bridge-over fi nancing of a property in the amount of TEUR 23,000.
On 23 January 2018, ACCENTRO Real Estate AG had successfully concluded placement of a three-year corporate bond. The aggregate par value placed equalled EUR 100 million. The corporate bond has an annual interest rate of 3.75%. The interest is paid semi-annually. The net issue proceeds were primarily used to fi nance the acquisition of new real estate assets. The reported carrying amount of the bond of TEUR 99,235 represents the issue proceeds, net of the transaction costs that accrued over the term of the bond and that are calculated using the eff ective interest method. One bond is recognised as non-current, because the decision to call and redeem the bond was not taken until the new bond was successfully placed in 2020 and therefore failed to have any eff ect on the 2019 balance sheet presentation.
The current liabilities include outstanding interest on bonds in the amount of TEUR 1,563.
Liabilities to banks are secured in a carrying amount of TEUR 425.038 (previous year: TEUR 256,184) by the real estate portfolio for whose fi nancing they were taken out, and by the rent and sales receivables associable with these properties. This real estate portfolio consists of properties from the inventory assets, investment properties and owner-occupied properties and buildings. There are also restricted accounts in the amount of TEUR 468 (prior period: TEUR 2,280) of which TEUR 157 are recognised among the other assets and TEUR 311 among the cash and cash equivalents.
In addition, fi nancial liabilities worth TEUR 99,235 (previous year: TEUR 106,286) are subject to contractual covenants regarding the compliance with certain fi nancial ratios (fi nancial covenants) that concerned just one bond as of 31 December 2019. The fi nancial ratios refer essentially to industrystandard covenants relating to the limitation of net debt and to so-called debt service cover ratios, meaning the capacity to sustain the anticipated debt service from rents collected. Moreover, the Group member companies are obliged to repay the relevant loans prematurely whenever apartments are sold.
The bond issued in 2018 obligates the Group, inter alia, to maintain an interest coverage ratio (section 11.3 of the bond terms) of 2.0 maximum and to maintain a set equity ratio, so that the Group's ability to pay dividends may be compromised.
Non-compliance with fi nancial ratios may prompt termination or the mandatory deposit of additional collateral. All fi nancial covenants were upheld during the 2019 fi nancial year.
ANNUAL REPORT 2019 CONSOLIDATED FINANCIAL STATEMENTS ACCENTRO Real Estate AG Notes
Note 11 of the terms and conditions of the new bond issued in 2020 contains fi nancial covenants such as a debt-to-equity ratio, limits on secured liabilities and interest coverage ratios, the calculation being partly based on a principle called "total asset value."
For payables to banks, non-bank lenders and the inland revenue offi ce, interest expenses recognised in income in an amount of TEUR 7,783 (previous year: TEUR 5,028) were incurred, while the bonds generated TEUR 4,424 (previous year: TEUR 4,841) in interest expenses recognised in income and other expenses. The interest expense was matched by TEUR 4,854 (previous year: TEUR 944) in interest earned.
| 31 Dec. 2018 |
Net cash outfl ow from business disposals |
Utilisa tion |
Dissolu tion |
Addition | 31 Dec. 2019 |
|
|---|---|---|---|---|---|---|
| TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | |
| Provisions for payroll costs | 390 | 0 | 390 | 0 | 398 | 398 |
| Provisions for miscellaneous costs |
452 | 192 | 254 | 6 | 484 | 484 |
| Provisions for record keeping obligations |
18 | 0 | 0 | 0 | 28 | 46 |
| Total | 860 | 192 | 644 | 6 | 909 | 928 |
Provisions developed as follows during the 2019 fi nancial year:
The provisions for payroll costs that existed as of 31 December 2019 concern essentially bonus and premium payments as well as holiday accruals.
Provisions for miscellaneous costs include essentially provisions for Supervisory Board remunerations in the amount of TEUR 171 (previous year: TEUR 177).
Other provisions with a carrying amount of TEUR 882 (previous year: TEUR 843) are expected to result in a cash outfl ow during the coming twelve months.
Other provisions are measured at the amount that would reasonably be required to settle the obligation as of the balance sheet date or, in an arm's length transfer, on the date of the transfer. Risks and uncertainties are taken into account by applying adequate appraisal methods while also considering probabilities of occurrence.
| ACCENTRO Real Estate AG | ||
|---|---|---|
| 31 Dec. 2017 | Utilisation | Dissolution | Addition | 31 Dec. 2018 | |
|---|---|---|---|---|---|
| TEUR | TEUR | TEUR | TEUR | TEUR | |
| Provisions for warranty obligations |
1,140 | 0 | 1,140 | 0 | 0 |
| Provisions for payroll costs |
222 | 221 | 0 | 389 | 390 |
| Provisions for miscellaneous costs |
908 | 167 | 698 | 409 | 452 |
| Provisions for record keeping obligations |
0 | 0 | 0 | 18 | |
| Total | 2,288 | 388 | 1,838 | 798 | 860 |
During the 2018 fi nancial year, the provisions developed as follows:
The representation below shows the development of trade payables, down-payments received and other liabilities:
| 31 Dec. 2019 | 31 Dec. 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Trade payables | 6,196 | 4,816 |
| Down-payments received | 6,979 | 7,033 |
| Outstanding invoices | 3,760 | 9,373 |
| Compensation claims of non-controlling shareholders in partnerships |
6,954 | 4,568 |
| Liabilities pursuant to Sec. 13b, UStG | 4 | 975 |
| Loans by non-controlling companies to subsidiaries | 740 | 797 |
| Liabilities from security deposits | 360 | 365 |
| Miscellaneous liabilities | 1,312 | 720 |
| Other liabilities | 13,130 | 16,798 |
The down-payments received break down into operating costs not yet invoiced in the amount of TEUR 5,230 (previous year: TEUR 6,597) and down-payments for plots available for sale in the amount of TEUR 1,749 (previous year: TEUR 436).
The decline in liabilities pursuant to Sec. 13b, Turnover Tax Act (UStG), results from the derecognition of liabilities with an eff ect on income. Based on current developments and fi ndings, ACCENTRO Real Estate AG no longer assumes that any claims will be asserted. Analogously, the corresponding accounts receivable were also derecognised.
Other liabilities amounting to TEUR 1,312 (previous year: TEUR 720) include additional receivables from the inland revenue offi ce, costs for the annual fi nancial statements and rents and deposits for buildings occupied.
The current income tax liabilities in the amount of TEUR 12,910 (previous year: TEUR 13,261) include corporation tax liabilities in the amount of TEUR 6,915 (previous year: TEUR 6,673) and trade tax liabilities in the amount of TEUR 5,995 (previous year: TEUR 6,588).
The balance sheet recognises the following deferred taxes:
| 31 Dec. 2019 | 31 Dec. 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Deferred tax assets | 1,251 | 692 |
| Deferred tax liabilities | 2,164 | 1,080 |
Deferred taxes developed as follows:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Deferred tax liabilities | –1,080 | –969 |
| Deferred tax assets | 692 | 193 |
| Balance of deferred taxes at start of fi nancial year | –388 | –776 |
| Expense (–) / income (+) reported under tax expense | –669 | 186 |
| Disposals from the fi nal consolidation of property vehicles | 144 | 202 |
| Balance of deferred taxes at end of fi nancial year | –913 | –388 |
The deferred taxes break down as follows:
| Diff erences relating to | investment properties |
inventory properties |
fi nancial liabilities |
losses carried forward |
Total |
|---|---|---|---|---|---|
| TEUR | TEUR | TEUR | TEUR | TEUR | |
| 31 December 2018 (prior to closing) – deferred tax liabilities |
–642 | –981 | –169 | –1,792 | |
| 31 December 2018 (prior to closing) – deferred tax assets |
0 | 63 | 1,341 | 1,404 | |
| 31 December 2018 (closing) |
–388 | ||||
| Amounts recognised under tax expense |
–1,710 | 0 | –110 | 1,151 | –669 |
| Disposals through fi nal consolidation of property vehicles |
642 | –130 | –368 | 144 | |
| 31 December 2019 (prior to closing) – deferred tax liabilities |
–1,710 | 0 | –1,555 | –607 | –3,872 |
| 31 December 2019 (prior to closing) – deferred tax assets |
0 | 397 | 2,562 | 2,959 | |
| 31 December 2019 (closing) |
–1,708 |
The deferred tax liabilities result essentially from deviations between tax valuations and IFRS-based valuations of fi nancial liabilities (eff ective interest method) and from the valuation of investment properties.
Deferred tax assets from tax loss carryforwards are recognised at the amount at which the associated tax benefi ts are likely to be consumed by future taxable profi ts.
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Revenues from sales of inventory properties | 129,503 | 194,009 |
| Revenues from services | 3,510 | 2,794 |
| Rental income from inventory properties | 9,709 | 8,684 |
| Rental income from properties held as property, plant and equipment |
314 | 122 |
| Rental income from investment properties | 238 | 0 |
| Total | 143,274 | 205,609 |
The high revenues of the previous year were caused by the one-off deconsolidation of a large real estate portfolio at book value. The rental income increased by TEUR 1,455. This is explained by the ongoing successful expansion of the trading portfolio by adding inventory properties.
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Expenses for sales of inventory properties | 99,661 | 160,924 |
| Expenses from services | 1,147 | 511 |
| Management costs of inventory properties | 3,451 | 2,667 |
| Management costs of properties in property, plant and equipment |
240 | 9 |
| Management costs of investment properties | 52 | 0 |
| Total | 104,551 | 164,111 |
The management costs of the properties developed in line with the development of the portfolio size of the respective property holdings.
The Group employed an average of 53 people (previous year: 45) during the 2019 fi nancial year.
Payroll and benefi t costs break down as follows:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Salaries and other benefi ts | 5,255 | 4,112 |
| Employer contributions to statutory social insurance | 580 | 501 |
| Total | 5,835 | 4,613 |
The rise in payroll and benefi t costs by TEUR 1,222 since the 2018 fi nancial year is due, on the one hand, to the increased workforce and, on the other hand, to participation in the employee profi t-sharing plan.
Contributions to the statutory pension insurance scheme during the 2019 fi nancial year added up to TEUR 280 (previous year: TEUR 217).
In the year under review, impairment losses of TEUR 31 were recognized on miscellaneous receivables in the amount of TEUR 123 (previous year: TEUR 205), with allowances for rent receivables being shown in the item "Letting expenses." No allowances were recognised for inventory properties during the year under review.
The other operating income includes the following amounts:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Income from the dissolution of provisions and the derecognition of liabilities |
925 | 796 |
| Income from the dissolution of allowances | 2 | 31 |
| Miscellaneous other operating income | 280 | 835 |
| Total | 1,207 | 1,663 |
The other operating expenses include the following amounts:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Legal and professional fees | 1,190 | 1,127 |
| Information, advertising and entertaining expenses | 1,243 | 1,313 |
| Expenses for compiling and auditing the fi nancial statements | 337 | 408 |
| EDP expenses | 447 | 472 |
| Rental expenses | 410 | 282 |
| Miscellaneous other operating expenses | 2,452 | 1,529 |
| Total | 6,079 | 5,131 |
The advisory costs for general advisory services in the amount of TEUR 1,190 (previous year: TEUR 1,127) break down mainly into tax advisory services, capital market transactions, property transactions, legal counsel and general consultancy on general strategic issues.
The remaining other operating expenses in the amount of TEUR 2,452 (previous year: TEUR 1,529) include, inter alia, expenditures for things like offi ce supplies, travel expenses, motor vehicle costs, dues and continued professional development costs in a total amount of TEUR 1,177 plus expenses for members of the Supervisory Board in the amount of TEUR 162.
There is also a one-off eff ect due to the derecognition of a receivable in connection with the new VAT treatment (Sec. 13b, UStG) in the amount of TEUR 975.
The tax expense reported in the income statement includes current and deferred income taxes:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Current income tax expense | 5,520 | 5,861 |
| Deferred income tax expense / income | 669 | –186 |
| Total | 6,189 | 5,675 |
The current income tax income includes TEUR 492 for prior years (previous year: TEUR 206).
The reported tax expense diff ers from the theoretical amount calculated by applying the Group's average income tax rate to its earnings before taxes:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Pre-tax profi t | 32,488 | 23,975 |
| Taxes calculated based on the parent company's income tax rate (30.175%) |
9,803 | 7,234 |
| Trade tax eff ects | 508 | 364 |
| Account balance of tax-free income / non-deductible expenses | –3,820 | –2,411 |
| Value adjustment / non-recognition of deferred tax assets | 138 | 616 |
| Write-up / subsequent recognition of deferred tax assets | –117 | –337 |
| Taxes for previous years | –492 | 206 |
| Other causes | 169 | 3 |
| Reported income tax expense | 6,189 | 5,675 |
The imputed tax rate of 19.0% (previous year: 23.7%) for the 2019 fi nancial year is largely dictated by the sale of property holding companies in the legal form of limited liability companies (GmbH), which, as corporations, are largely not subject to income taxation upon disposal.
Basic earnings per share are calculated as the quotient of the profi t attributable to the shareholders of the parent company and the average number of shares issued during the fi nancial year, excluding treasury shares held by the company.
| 2019 | 2018 | |
|---|---|---|
| Consolidated income | TEUR | TEUR |
| Net profi t before minority interests – basic | 26,299 | 18,301 |
| Interest expenses on convertible bonds | 0 | 2 |
| Consolidated income before minority interests – diluted | 26,299 | 18,303 |
| Number of shares | in thousands | in thousands |
| Unweighted number of shares outstanding | 32,438 | 32,431 |
| Weighted number of shares outstanding – basic | 32,438 | 30,712 |
| Weighted number of shares – diluted | 32,438 | 30,711 |
| Earnings per share (EPS) | EUR | EUR |
| unweighted – basic | 0.81 | 0.56 |
| weighted – basic | 0.81 | 0.60 |
| weighted – diluted | 0.81 | 0.60 |
Thus, the diluted net income is identical to the basic net income.
The cash fl ow statement distinguishes between cash fl ows from operating activities, from investing activities, and from fi nancing activities. The cash fl ow from operating activities is measured using the indirect method.
The cash fl ow from operating activities calculated using this method is negative at TEUR –75,665 (previous year: negative at TEUR –48,432). The cash fl ow from operating activities was primarily defi ned by the continued set-up of the trading portfolio according to plan. Due to investments in the trading portfolio and disposals, changes in inventory assets amounted to TEUR 71,332 (previous year: TEUR 41,214), with TEUR 80,062 representing an actual cash outfl ow during the year under review. The main non-cash changes in inventory assets that occurred during the fi nancial year relate to the acquisition of property companies (share deal) where the liabilities taken over together with the acquired company reduce the purchase price to be paid and therefore the cash outfl ow, and to the non-cash reclassifi cation of properties.
| Changes of Inventory Properties | TEUR |
|---|---|
| Portfolio as of 31 December 2018 | 345,241 |
| Net change | 80,062 |
| Non-cash change | –8,730 |
| Portfolio as of 31 December 2019 | 416,573 |
The cash infl ow from companies valued at-equity is recognised under cash fl ow from operations. The existing investments in associates have a very close operational link to the business activities of ACCENTRO AG, which is why dividends from companies valued at-equity and proceeds from the sale of such companies are recognised under cash fl ow from operating operations.
The cash fl ow from investment activities in 2019 adds up to TEUR 2,411 (previous year: TEUR –51,290). Out of this amount, TEUR 1,625 relate to investments in property, plant and equipment. In addition, TEUR 1,863 (previous year: TEUR 17,867) were granted in loans to companies in which the Group holds equity interests.
The cash fl ow from fi nancing activities adds up to TEUR 81,017 (previous year: TEUR 111,410) and essentially includes disbursements toward the repayment of fi nancial liabilities in the amount of TEUR 34,171 (previous year: TEUR 62,447) and interest payments in the amount of TEUR 7,132 (previous year: TEUR 4,470). It is matched by cash infl ows from loan fi nance in the amount of TEUR 127,511 (previous year: TEUR 164,056). During the 2019 fi nancial year, no funds were raised via cash capital increases (previous year: TEUR 19,426); whereas the cash outfl ow for dividend payments amounted to TEUR 5,190 (previous year: TEUR 5,154).
Cash and cash equivalents increased by TEUR 241 due to the addition of three companies to the basis of consolidation of ACCENTRO Real Estate AG.
During the 2019 fi nancial year, three fully consolidated companies were sold. Cash funds dropped by TEUR 538 in this context.
In accordance with IAS 7, a reconciliation of the Group's fi nancial liabilities from 31 December 2018 to 31 December 2019 is presented below:
| 31 Dec. 2018 | cash- eff ective | not cash-eff ective |
31 Dec. 2019 | |
|---|---|---|---|---|
| TEUR | TEUR | TEUR | TEUR | |
| Financial liabilities | 131,129 | 93,340 | –7,627 | 216,842 |
| Bonds | 100,124 | –1,563 | 2,237 | 100,798 |
| Total debt from fi nancing activities |
231,253 | 91,777 | –5,390 | 317,640 |
The "not cash-eff ective" column mainly shows non-cash interest eff ects from the application of the eff ective interest method and from share deal sales in which the property fi nancing was also sold.
Within the framework of its third-party sales activities, the ACCENTRO Group entered into a number of agreements that include purchase guarantees. Under these agreements, ACCENTRO agrees to take over any property assets unsold at the end of the marketing period defi ned in the respective agreement at a purchase price agreed with the property developer. The possibility of having to acquire these properties at the agreed purchase price plus the real estate transfer tax due for the acquisition exposes the Company to the risk that it may not reasonably hope to realise the usual margins when reselling the properties. Purchase guarantee eff ective as of 31 December 2019 added up to EUR 44.8 million.
In addition, there are obligations from purchase agreements involving the acquisition of multi-unit dwellings in Berlin, Potsdam and Cologne-Bonn, among other places, in the amount of TEUR 12,978. The agreements are expected to be executed before mid-year 2020.
Group member companies are liable, in their role as partners, for the debt of the Berlin-based company Wohneigentum Berlin GbR in the amount of TEUR 150 (previous year: TEUR 150).
Claims to minimum lease payments from long-term operating leasing agreements are a standard aspect of letting commercial real estate. The leases signed for residential real estate, by contrast, generally have a statutory notice period of three months. They include no other claims to minimum lease payments. In the property acquired as ACCENTRO's principal offi ce in 2018, all lease agreements with incumbent tenants were either terminated or not renewed.
| up to 1 year | 1 to 5 years | more than 5 years |
||
|---|---|---|---|---|
| TEUR | TEUR | TEUR | TEUR | |
| Total of the future minimum lease payments due to non-cancellable operating lease contracts as lessor as of 31 December 2019 |
3,248 | 3,248 | 0 | 0 |
| Total of the future minimum lease payments due to non-cancellable operating lease contracts as lessor as of 31 December 2018 |
2,936 | 2,936 | 0 | 0 |
The table below shows the carrying amounts and fair values of fi nancial assets and fi nancial liabilities. It includes no fair value details on those fi nancial assets and fi nancial liabilities that were not measured at fair value wherever the carrying amount represents an adequate approximation of the respective fair value.
| Book value | Fair value | ||||
|---|---|---|---|---|---|
| 31 December 2019 | FVOCI* equity instru ments |
Financial assets at amortised costs |
Other fi nancial liabilities |
Total | Total |
| TEUR | TEUR | TEUR | TEUR | TEUR | |
| Assets | |||||
| Equity investments | 5,615 | – | – | 5,615 | 5,615 |
| Non-current trade receivables | – | – | – | – | – |
| Non-current other receivables and other assets |
– | 14,773 | – | 14,773 | 14,773 |
| Trade receivables | – | 10,566 | – | 10,566 | 10,566 |
| Miscellaneous receivables and assets | – | 24,756 | – | 24,756 | 24,756 |
| Total fi nancial assets | 5,615 | 50,095 | – | 55,710 | 55,710 |
| Equity and liabilities | |||||
| Long-term payables to banks | – | – | 114,474 | 114,474 | 114,474 |
| Bond liabilities | – | – | 99,235 | 99,235 | 101,010 |
| Short-term payables to banks and to bond holders |
– | – | 103,930 | 103,930 | 103,930 |
| Trade payables | – | – | 6,196 | 6,196 | 6,196 |
| Other short-term payables | – | – | 5,977 | 5,977 | 5,977 |
| Total fi nancial liabilities | – | – | 329,812 | 329,812 | 329,812 |
* Fair Value through Other Comprehensive Income
| Book value | Fair value | ||||
|---|---|---|---|---|---|
| 31 December 2018 | FVOCI* equity instru ments |
Financial assets at amortised costs |
Other fi nancial liabilities |
Total | Total |
| TEUR | TEUR | TEUR | TEUR | TEUR | |
| Assets | |||||
| Equity investments | 4,231 | – | – | 4,231 | 4,231 |
| Non-current trade receivables | – | 2,357 | – | 2,357 | 2,357 |
| Non-current other receivables and other assets |
– | 28,814 | – | 28,814 | 28,814 |
| Trade receivables | – | 18,607 | – | 18,607 | 18,607 |
| Miscellaneous receivables and assets | – | 10,660 | – | 10,660 | 10,660 |
| Total fi nancial assets | 4,231 | 60,438 | – | 64,669 | 64,669 |
| Equity and liabilities | |||||
| Long-term payables to banks | – | – | 76,773 | 76,773 | 76,773 |
| Bond liabilities | – | – | 98,561 | 98,561 | 100,160 |
| Short-term payables to banks and to bond holders |
– | – | 55,920 | 55,920 | 55,920 |
| Trade payables | – | – | 4,816 | 4,816 | 4,816 |
| Other short-term payables | – | – | 4,984 | 4,984 | 4,984 |
| Total fi nancial liabilities | – | – | 241,054 | 241,054 | 241,054 |
* Fair Value through Other Comprehensive Income
Trade receivables and other receivables have maturities of short-term character. Accordingly, their book values equalled their fair value by the balance sheet date. The same applies, mutatis mutandis, to the trade payables and the other current liabilities. The ACCENTRO Group's non-current and current payables vis-à-vis banks were measured at fair value on initial recognition, minus the transaction costs, the fair values always equalling the acquisition costs. The accounts payable of recently acquired companies vis-à-vis banks were measured at fair value on initial recognition.
Going forward, the book value of all long-term and short-term payables vis-à-vis banks as of the balance sheet date equals the amount that application of the eff ective interest method would return as amortised costs. Taking into account the swift repayment of loans inherent in the business model, the fair value more or less matches the amortised cost in subsequent periods.
The bond without conversion rights was measured at fair value less transaction costs on initial recognition, the value matching the initial costs including transaction costs, and thereafter at amortised costs using the eff ective interest method as of the balance sheet date. The previous year, bonds with conversion rights were measured at fair value on initial recognition, with a market-consistent comparative interest rate taken into account, less transaction costs. This present value represents the debt component of
the bonds, which is posted in the bond liabilities. Their book value represents a revaluation using the eff ective interest method.
With the exception of the bond classifi ed as tier 3 bond under IFRS 13, the fair values of the fi nancial assets and liabilities were measured by discounting fi nancial surpluses or cash outfl ows. The fair value of the bond was obtained from the market price at the Frankfurt Stock Exchange.
| Financial Assets measured at Amortized Cost (aac) |
Financial Liabilities measured at Amortized Cost (fl ac) |
|||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| TEUR | TEUR | TEUR | TEUR | |
| Interest income | 4 ,854 | 944 | – | – |
| Interest expenses | – | – | 12 ,207 | 9 ,869 |
| Gains or losses on impairments |
151 | 205 | – | – |
| Net earnings | 5 ,004 | 1 ,149 | 12 ,207 | 9 ,869 |
The net earnings by measurement categories under IFRS 9 break down as follows:
The Group's business activities expose it to a variety of risks. These include specifi cally liquidity risks. Wherever relevant, variable-rate loans are only concluded on a minor scale while fi xed-rate loans are generally repaid before the end of the fi xed-interest period in line with the business model. There are no material default risks or interest rate risks. Dedicated fi nancial risk management is intended to minimise the negative eff ects of these risks on the Group's net asset, fi nancial and earnings situation and cash fl ows. For a description of the risk management system, please see section 4 in the Group management report.
The following tables show the undiscounted, contractually agreed interest and principal payments of the fi nancial liabilities within the scope of IFRS 7:
| 31 December 2019 | ||||||
|---|---|---|---|---|---|---|
| Book value |
Total cash outfl ow |
Cash out fl ow up to 1 year |
Cash out fl ow 1 to 3 years |
Cash out fl ow 3 to 5 years |
Cash out fl ow after 5 years |
|
| TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | |
| Cash outfl ow for fi nancial liabilities and bond |
317 ,639 | 329 ,426 | 109 ,869 | 192 ,152 | 16 ,471 | 10 ,934 |
| 31 December 2018 | ||||||
|---|---|---|---|---|---|---|
| Book value |
Total cash outfl ow |
Cash out fl ow up to 1 year |
Cash out fl ow 1 to 3 years |
Cash out fl ow 3 to 5 years |
Cash out fl ow after 5 years |
|
| TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | |
| Cash outfl ow for fi nancial liabilities and bond |
231 ,253 | 245 ,378 | 60 ,397 | 172 ,748 | 1 ,595 | 10 ,598 |
The interest rates at the respective balance sheet date were used to determine interest payments for interest-bearing loans with variable interest rates in future reporting periods. At the moment, the ACCENTRO Group is not exposed to signifi cant interest rate risks.
The share of repayments from retail property sales itemised among the current fi nancial liabilities amounts to TEUR 71,114 for the 2020 fi nancial year. Short-term cash outfl ows in a total amount of TEUR 109,869 are anticipated in 2020, with interest payments and scheduled repayments taken into account.
The ACCENTRO Group kept cash and cash equivalents of TEUR 24,167 (previous period: TEUR 15,464) on hand as of the balance sheet data to cover its cash outfl ows. An additional TEUR 10,566 in trade receivables and an estimated TEUR 114,040 worth of inventory properties can be liquidated within one year. In addition, short-term payables from operating costs in the amount of TEUR 5,230 not yet settled are matched by short-term receivables in the amount of TEUR 7,008 for operating costs not yet settled.
The Group has credit agreements and corporate bonds totalling c. EUR 99.2 million (previous year: EUR 106.3 million) that require compliance with certain fi nancial covenants (e. g. debt service coverage ratios, debt ratios, change of control). Breaches of these requirements could trigger early repayment obligations on the basis of a contractually agreed escalation procedure. To defl ect possible breaches of contract, the Group uses appropriate regular monitoring to detect any early signs of a risk that covenants might be breached, and to prevent such a breach through adequate countermeasures as early as possible.
The main existing fi nancial covenants are presented in section 5.8 of the notes to the consolidated fi nancial statements.
The ACCENTRO Group's is currently not exposed to any material bad debt risks as a result of its original business model. However, several long-term loans were granted to associates and investment companies, some of which are subordinated and not fully collateralised (see section 5.1.3). As a rule, ACCENTRO provides privatisation or advisory services to borrowers and is thus involved in the operational management of the companies and knows how to assess default risks at an early stage. ACCENTRO deems the default risks very low as of the balance sheet date.
One subsidiary of ACCENTRO Group (ESTAVIS Wohneigentum GmbH) is a fully liable partner of the Wohneigentum Berlin GbR joint venture.
The Management Board of ACCENTRO Real Estate AG received the following compensation and benefi ts:
| 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| Fixed | Variable | Equity based |
Total | Fixed | Variable | Equity based |
Total | |
| TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | TEUR | |
| Jacopo Mingazzini | 355 | 240 | 231 | 845 | 330 | 280 | 134 | 744 |
Collectively, the total remuneration disbursed to the CEO amounted to TEUR 845 for the 2019 fi nancial year. This remuneration includes, in addition to the paid-out fi xed remuneration plus non-cash remuneration in the amount of TEUR 355, the bonus claimed for the previous year in the amount of TEUR 240. The fi nancial statements recognise a provision for bonus (TEUR 240) as expense. The bonus for the 2019 fi nancial year was not yet due for payment during the year under review.
On 3 July 2018, EMMALU GmbH announced its off -market acquisition of 272,851 shares in ACCENTRO Real Estate AG. The company EMMALU GmbH is closely linked to ACCENTRO's CEO, Jacopo Mingazzini. The shares originated in the portfolio of ACCENTRO's main shareholder. Accordingly, this implies a transaction between the main shareholder and the CEO of ACCENTRO Real Estate AG. For fi nancial reporting purposes, however, these facts and circumstances should be attributed to ACCENTRO pursuant to IFRS 2 even though ACCENTRO is not a contractual partner here. The majority shareholder is bound to a standstill agreement because the majority shareholder will have to redeem the shares at the originally agreed purchase price if the share price were to fall. For accounting purposes, this standstill obligation qualifi es the transaction as a share option model in a total value of TEUR 1,200 (parameters used: strike price: EUR 7.33; maturity: 3-years; volatility: 43.87%; dividend yield: 2%; risk-free interest rate: –0.54%). The resulting expenses amounted to TEUR 231 in the 2019 fi nancial year.
The Member of the Supervisory Board were exclusively paid fi xed remunerations for the fi nancial years shown:
| 2019 | 2018 | |
|---|---|---|
| Fixed | Fixed | |
| TEUR | TEUR | |
| Axel Harloff (Chairman) | 60 | 60 |
| Dr. Dirk Hoff mann (Deputy Chairman) | 45 | 45 |
| Natig Ganiyev | 30 | 30 |
| Total | 135 | 135 |
On 6 January 2020, ACCENTRO Real Estate AG moved into its new offi ces at Kantstr. 44/45 in Berlin with its entire workforce. ACCENTRO Real Estate AG now occupies a modern proprietary offi ce scheme that includes fl oor space reserves for further growth.
On 3 February 2020, the Management Board resolved, with the Supervisory Board's approval, to submit a cash off er to the holders of one debenture bond over TEUR 100,000 at 3.75% that will mature in 2021 to buy back the outstanding 2018/2021 bond. Bond holders representing 89.8% of the total nominal amount accepted the off er. In addition, ACCENTRO AG intends to buy back the units still outstanding at their face value plus accrued interest.
On 7 February 2020, ACCENTRO AG successfully issued a new unsubordinated and unsecured debenture bond over EUR 250,000 with a three-year maturity as part of a private placement to qualifying investors. It was issued at 99.745% of its face value at a coupon rate of 3.625%.
At the time of this writing, the corona virus is spreading rapidly and is gradually paralysing public life in Germany. So far, ACCENTRO has received no cancellations of condominium purchases or noticed a noticeable slackening in the number of requests for purchase information. The acquisition of real estate could actually gain in signifi cance as a safe form of investment. However, the constraints currently imposed on everyday life could cause transactions to be considerably delayed so that our forecasts may not be met.
Indeed, it cannot be ruled out that sales and their settlement could be subject to delays at the moment. In the medium term, though, the asset class "real estate" is likely to experience a further increase in buyer/ investor interest because it is seen as being more crisis-proof than other investment assets. This makes it rather unlikely that the threat of heavy business losses will be signifi cantly increased for ACCENTRO by the rampant pandemic.
The auditor was paid the following remuneration for services provided to the ACCENTRO Group:
| 2019 | 2018 | |
|---|---|---|
| TEUR | TEUR | |
| Audits of fi nancial statements | 280* | 274 |
| Other assurance services | 5 | 0 |
| Tax advisory services | 0 | 0 |
| Other services | 25 | 277** |
| Total | 310 | 551 |
* Out of the total of professional fees and expenses for auditor services, TEUR 11 represent the previous year.
** The item "Other services/previous year" includes an insurance premium of TEUR 229 that was passed on in connection with the issuance of a comfort letter.
The declaration on the Corporate Governance Code in accordance with Sec. 161, AktG, was issued in March 2020 and made permanently available to the shareholders on the homepage of ACCENTRO Real Estate AG (www.accentro.ag).
Berlin, 18 March 2020
Jacopo Mingazzini Management Board
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated fi nancial statements give a true and fair view of the assets, liabilities, fi nancial position, and profi t or loss of the Group, while the Group management report includes a fair review of the development and performance of the Group's business and state of aff airs, together with a description of the principal opportunities and risks associated with the Group's prospective development going forward.
Berlin, 18 March 2020
Jacopo Mingazzini Management Board
[Note: This is a convenience translation of the German original. Solely the original text in German language is authoritative.]
To the ACCENTRO Real Estate Aktiengesellschaft, Berlin
Report on the Audit of the Consolidated Financial Statements and of the Group Management Report
We have audited the consolidated fi nancial statements of ACCENTRO Real Estate Aktiengesellschaft, Berlin, and its subsidiaries (the Group), which comprise the consolidated statement of fi nancial position as of December 31, 2019, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash fl ows for the fi nancial year from January 1 to December 31, 2019, and notes to the consolidated fi nancial statements, including a summary of signifi cant accounting policies.
In addition, we have audited the Group Management Report which is combined with the management report (following: "Group Management Report") of ACCENTRO Real Estate Aktiengesellschaft, Berlin, for the fi nancial year from January 1 to December 31, 2019. In accordance with the German legal requirements we have not audited the content of the corporate governance statement published on the companies website in accordance with section 315d HGB, which is referred to in section 7 in the Group Management Report.
In our opinion, on the basis of the knowledge obtained in the audit,
Pursuant to § 322 Abs. 3 Satz 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated fi nancial statements and of the Group Management Report.
We conducted our audit of the consolidated fi nancial statements and of the Group Management Report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as "EU Audit Regulation") and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW). Our responsibilities under those requirements are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report" section of our auditor's report. We are independent of the group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfi lled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinions on the consolidated fi nancial statements and on the Group Management Report.
Key audit matters are those matters that, in our professional judgment, were of most signifi cance in our audit of the consolidated fi nancial statements for the fi nancial year from January 1 to December 31, 2019. These matters were addressed in the context of our audit of the consolidated fi nancial statements as a whole, and in forming our audit opinion thereon; we do not provide a separate audit opinion on these matters.
In the following, we describe what we consider to be the key audit matters:
For the fi scal year 2019, the ACCENTRO Real Estate AG Group reports revenues from the sale of inventory properties in the amount of EUR 129,5 million., which account for 90.4% of total revenues. Those revenues are generated by way of individual privatization and so-called real estate portfolio sales. The individual privatisation of residential units is also partly carried out for residential units still to be built from the conversion of attic apartments. The audit risk of these distribution channels must be assessed diff erently. While for individual privatization the revenue recognition is mostly based on standardized purchase contracts and less judgmental and less complex accounting decisions, real estate portfolio sales generally require a case-by-case assessment based on the respective sale and purchase agreement due to their higher level of complexity in terms of revenue recognition. On the other hand, if attic apartments that have not yet been built or are only partially built are sold as part of the individual privatisation process, IFRS 15.35 requires profi ts to be realised over time.
The information provided by the company for the recognition of revenue is reported in the Notes to the Consolidated Financial Statements "2.13", "5.4" and "5.13" as well as in sections 2.3 "Business Development" and 2.4 "Earnings, Financial and Net Asset Position" of the Group Management Report. Management makes use of tax, legal and accounting expertise by third party experts for the sale of larger real estate portfolios. Depending on the terms of the contract, a sale may be subject to collateral agreements, be designed by way of an asset or share deal and / or the benefi cial ownership of the real estate portfolio may be transferred before receipt of a purchase price, whereby management is signifi cantly involved in the drafting of the contract.
In the case of individual privatizations, the transfer of benefi ts and burdens of the property and thus the revenue recognition usually takes place upon receipt of the purchase price by the group or on a notary trust account but may also depend on the fulfi lment of further requirements.
In the case of individual privatisations in connection with the construction of new attic apartments, sales revenues are realised in accordance with IFRS 15.35 c) over time using the cost-to-cost method.
The risk for the consolidated fi nancial statements lies in the fact that revenue was not realized in the reporting year or was not recognized in the correct period. Taking into account the substantial impact of each real estate portfolio sale and the large number of privatization sales in temporal proximity to year end, the risk of signifi cant errors in the revenue recognition from these sales transactions is of particular relevance for our audit.
The examination of the revenue recognition of sales of real estate portfolios takes place on a case-bycase basis through critical appraisal of the contract. In 2019 seven sales were completed as so-called portfolio sales. By way of a case-by-case examination, we assessed all portfolio purchase agreements, in particular with regard to proper revenue recognition. The Group's appraisal of the contractual arrangements by obtaining legal advice from knowledgeable third parties is suffi ciently documented and justifi ed to substantiate the revenue recognition of real estate portfolio sales in the fi nancial statements.
For revenue recognition from individual privatizations, we have obtained an understanding of the processes implemented in the Group to ensure the completeness and accuracy of revenue recognition and assessed the internal controls for appropriateness. We conducted appropriate tests to assess the eff ectiveness of the controls identifi ed during the process. For property sales from individual privatizations, we examined the purchase agreements and verifi ed the incoming payments in an extensive random sample to ensure that sales were correctly recognized in the reporting year. When auditing the in comparison relatively minor period-based revenue recognition from the sale of attic apartments that have not yet been handed over, we have convinced ourselves of the appropriateness of the project costing and assessed the assumptions used.
Our audit did not lead to any material reservations relating to the recognition of revenues.
As of 31 December 2019, the Group reported EUR 416.6 million in inventory properties as material assets. The share of the balance sheet total amounts to around 71,7%. Properties acquired for the purpose of short-term privatization and sale are reported as inventory properties. In most cases, the transfer of benefi ts and burdens and thus control of the inventory properties is linked to the payment of the purchase price, in some cases also to the fulfi lment of further conditions. In addition to the purchase price, the ancillary acquisition costs, typically real estate transfer tax, notary fees and brokerage commissions, are to be recognised in full and correctly at the time of acquisition. The costs of the construction and maintenance measures carried out to make the property ready for sale are recognised as subsequent acquisition costs. The acquisition costs are to be allocated to the individual residential units of the acquired inventory properties in accordance with the expected sales prices and in an appropriate procedure in such a way that a largely consistent realisation of margins is ensured upon their sale. When individual residential units are sold, the proportionate acquisition costs allocated to these units are to be fully derecognised from the inventory properties. On the basis of the expected selling prices, an assessment must be made as of the balance sheet date as to whether there are any impairment risks on disposal which must be taken into account by write-downs.
The Company's disclosures on the balance sheet presentation of inventory properties are contained in Notes "2.9" and "5.3" to the consolidated fi nancial statements and in section "2.4 Results of operations, fi nancial position and net assets" of the Group Management Report.
Due to the material absolute and relative amount, the correct recognition and measurement of inventory properties is of particular importance for the consolidated fi nancial statements and thus for our audit.
We have obtained an understanding of the processes implemented in the Group to ensure the completeness and accuracy of the recognition and the measurement of the inventory properties, the appropriate allocation of acquisition costs to the acquired residential units and the correct derecognition of the carrying amounts or residential units upon sale and subsequently assessed their appropriateness. We have performed tests to evaluate the eff ectiveness of the controls identifi ed in the process. For the material purchases of inventory properties in the year under review, we have verifi ed the transfer of ownership and the determination of acquisition costs on the basis of the purchase agreements and the supporting documents for the ancillary acquisition costs. For the material sales in the year under review, we have fully tested the derecognition of the related inventory values and for the remaining sales in samples and on the basis of a margin analysis. In the case of the inventory properties that have already been held by the group for a longer time, we have verifi ed that no material impairment risks exist based on the sales and margins realized and planned.
In our opinion, the processes implemented in the Group to ensure proper recognition and measurement of inventory properties are appropriate. Our audit did not lead to any reservations relating to the recognition and measurement of inventory properties.
Management and the Supervisory Board are responsible for the other information. The other information obtained as of the date of this audit opinion includes:
The Supervisory Board is responsible for the report of the Supervisory Board. The legal representatives and the Supervisory Board are responsible for the declaration pursuant to Section 161 AktG on the German Corporate Governance Code, which is part of the Group's corporate governance declaration referred to in Section 7 of the Group Management Report. The legal representatives are also responsible for other information.
Our audit opinions on the consolidated fi nancial statements and on the Group Management Report do not cover the other information, and consequently we do not express an opinion or any other form of assurance conclusion thereon.
In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management is responsible for the preparation of the consolidated fi nancial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB and that the consolidated fi nancial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, fi nancial position, and fi nancial performance of the Group. In addition, management is responsible for such internal control as management has determined necessary to enable the preparation of consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated fi nancial statements, management is responsible for assessing the Group's ability to continue as a going concern. It also has the responsibility for disclosing, as applicable, matters related to going concern. In addition, management is responsible for fi nancial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.
Furthermore, management is responsible for the preparation of the Group Management Report that, as a whole, provides an appropriate view of the Group's position and is, in all material respects, consistent with the consolidated fi nancial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, management is responsible for such arrangements and actions (systems) as they have considered necessary to enable the preparation of a Group Management Report that is in accordance with the applicable German legal requirements, and to be able to provide suffi cient appropriate evidence for the assertions in the Group Management Report.
The supervisory board is responsible for overseeing the Group's fi nancial reporting process for the preparation of the consolidated fi nancial statements and of the Group Management Report.
Our objectives are to obtain reasonable assurance about whether the consolidated fi nancial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the Group Management Report as a whole provides an appropriate view of the Group's position and, in all material respects, is consistent with the consolidated fi nancial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our audit opinions on the consolidated fi nancial statements and on the Group Management Report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infl uence the economic decisions of users taken on the basis of these consolidated fi nancial statements and this Group Management Report.
We exercise professional judgment and maintain professional scepticism throughout the audit. We also:
– Identify and assess the risks of material misstatement of the consolidated fi nancial statements and of the Group Management Report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suffi cient and appropriate to provide a basis for our audit opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signifi cant audit fi ndings, including any signifi cant defi ciencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most signifi cance in the audit of the consolidated fi nancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.
We were elected as group auditor by the annual general meeting on May 14, 2019. We were engaged by the supervisory board on November 26, 2019. We have been the group auditor of ACCENTRO Real Estate Aktiengesellschaft, Berlin, without interruption since the short fi scal year 2014.
We declare that the audit opinions expressed in this auditor's report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).
The German Public Auditor responsible for the engagement is Florian Riedl.
Hamburg, March 18, 2020
Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft
Dirk Schützenmeister Florian Riedl Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]
| Directors and Officers | 136 |
|---|---|
| Forward-looking Statements | 137 |
| Financial Calendar | 138 |
| Credits | 139 |
Condominiums Usedom Ahlbeck, Heimstr.
This annual report contains specifi c forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events. This applies, in particular, to statements relating to future fi nancial earning capacity, plans and expectations with respect to the business and management of ACCENTRO Real Estate AG, growth, profi tability and the general economic and regulatory conditions and other factors to which ACCENTRO is exposed.
Forward-looking statements are based on current estimates and assumptions made by the company to the best of its knowledge. Such forward-looking statements are based on assumptions and are subject to risks, uncertainties and other factors that may cause the actual results including the net asset, fi nancial and earnings situation of ACCENTRO to diff er materially from or disappoint expectations expressed or implied by these statements. The operating activities of ACCENTRO are subject to a number of risks and uncertainties that may also cause a forward-looking statement, estimate or prediction to become inaccurate.
All dates are provisional. Please check our website www.accentro.ag for confi rmation.
ANNUAL REPORT 2019 ACCENTRO Real Estate AG FURTHER INFORMATION Credits
ACCENTRO Real Estate AG Kantstraße 44/45 10625 Berlin Phone: +49 (0)30 887 181 - 0 Telefax: +49 (0)30 887 181 - 11 E-Mail: [email protected] Home: www.accentro.ag
Jacopo Mingazzini
Axel Harloff , Hamburg
ACCENTRO Real Estate AG Investor & Public Relations Phone: +49 (0)30 887 181 - 799 Telefax: +49 (0)30 887 181 - 779 E-Mail: [email protected]
racken GmbH, Agentur für nachhaltige Kommunikation, Berlin www.racken.de
Goldmund Kommunikation, Berlin www.goldmund-kommunikation.de
Management Board: Die Hoff otografen All others incl. visualisations: ACCENTRO AG
www.accentro.ag
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