Up Closer. - IVG Immobilien AG

Transcription

ANNUAL REPORT 2005
Up Closer.
PASSION FOR REAL ESTATE.
KEY FIGURES BY SEGMENT
Portfolio management
• Buying properties and property portfolios
• Increasing property values by improving tenancies,
active customer relationship management, modernization
and making use of building rights held in reserve
2005
Turnover
2004
Change
€m
€m
%
280.5
301.8
–7.1
–3.9
Of which: Net rental income
218.4
227.2
Total operating income
416.5
410.4
1.5
Of which: Proceeds from disposals
114.3
79.3
44.1
Investments
385.5
146.6
163.0
Property sales
227.5
428.2
–46.9
Employees
327
364
–10.2
208.3
189.3
10.0
2005
2004
Change
€m
€m
%
51.1
147.5
–65.4
119.1
152.8
–22.1
Project value (IVG share)
1,121
1,251
–10.4
394
382
3.1
131.5
95.6
37.6
70
122
–42.6
44.4
26.9
65.1
Operating earnings
The annual report of IVG Immobilien AG (IVG) contains forward-looking statements that reflect current
assumptions and estimates. These forward-looking statements are not a guarantee of future performance.
External sources of information cited in this report are not verified by IVG.
• Optimum choice of exit opportunities
Project development
• Branch offices throughout Europe
• Same quality criteria as applied to IVG portfolio
Turnover
Capital commitment
Investments
Employees
• Go-ahead subject to appropriate level of pre-lettings
Operating earnings
Published by
IVG Immobilien AG
Zanderstraße 5–7
53177 Bonn
Germany
Real estate investment funds
Concept and Design
XEO GmbH, Düsseldorf
Turnover
• Initiation, marketing and management
Closed-end investment funds under management
Shares sold in closed-end investment funds
• Full use made of IVG branch offices around Europe
Number of institutional investment funds
under management
• Attractive products for private and institutional investors
Value of institutional investment funds
2005
2004
€m
€m
Change
93.8
51.3
82.8
106.3
55.6
91.2
79
78
1.3
170.0
88.4
92.3
%
29
28
3.6
9,672
8,760
10.4
Investments
17.4
154.5
–88.7
Employees
296
300
–1.3
Operating earnings
43.9
16.8
161.3
Printing
Druckpartner, Essen
Pictures
IVG Immobilien AG, Christian Schlüter, Pension Fennia
This English translation is provided for information purposes.
The German original is authoritative.
2005
Turnover
2004
Change
€m
€m
%
280.5
301.8
–7.1
–3.9
218.4
227.2
416.5
410.4
1.5
114.3
79.3
44.1
Investments
385.5
146.6
163.0
Property sales
227.5
428.2
–46.9
Employees
327
364
–10.2
208.3
189.3
10.0
2005
2004
Change
€m
€m
%
51.1
147.5
–65.4
119.1
152.8
–22.1
1,121
1,251
–10.4
394
382
3.1
131.5
95.6
37.6
70
122
–42.6
44.4
26.9
65.1
Operating earnings
Project development
Turnover
Capital commitment
Investments
Employees
Operating earnings
Published by
IVG Immobilien AG
Zanderstraße 5–7
53177 Bonn
Germany
Concept and Design
Turnover
under management
2005
2004
€m
€m
Change
93.8
51.3
82.8
106.3
55.6
91.2
79
78
1.3
170.0
88.4
92.3
%
29
28
3.6
9,672
8,760
10.4
Investments
17.4
154.5
–88.7
Employees
296
300
–1.3
Operating earnings
43.9
16.8
161.3
Printing
Druckpartner, Essen
Pictures
Annual Report 2005
KEY FIGURES AND TARGETS
ANNUAL REPORT 2005
Up Closer.
IVG Group key figures (IFRS)
2005
2004
€m
€m
Turnover
426.0
507.3
640.1
613.0
4.4
EBITD (cash flow)
298.7
264.7
12.8
EBIT (operating earnings)
242.6
202.6
19.7
EBD
149.4
118.4
26.2
Consolidated net income
110.1
74.9
47.0
Investments
534.9
398.5
34.2
Total assets
3,686.9
3,613.3
2.0
42.1
39.0
7.9
2,088.6
1,762.8
18.4
18.00
15.20
18.4
821
930
–11.7
0.381)
0.35
8.6
Equity ratio (market values) (%)
Net asset value (equity at market values)
Net asset value per share
Employees
Dividend per share (€)
3,502
3,284
6.6
IVG share of project developments
1,121
1,251
–10.4
13,844
11,980
15.6
1)
Proposed
Medium-term plan to 2008
IVG Immobilien AG
%
–16.0
Portfolio (market values)
Investment funds
1. Real estate transactions 2006–2008: €10 billion
• Purchases: €8 billion
• Sales:
€2 billion
Property assets under management, by region
15% Benelux
14% Berlin
1% Budapest
2% Helsinki
7% Düsseldorf
4% Iberia
2. Property assets under management by end of 2008: > €25 billion
8% Frankfurt
€18.5 billion
8% London
3. Net asset value by end of 2008: > €20 per share
IVG Immobilien AG, Zanderstraße 5–7, D-53177 Bonn
Change
2% Milan
7% Hamburg
4. IVG creates value:
• WACC:
6.9%
• CFROI:
7.9%
14% Paris
10% Munich
6% Other
Investor Relations
Phone: +49 (0)228 / 844-137, Fax: +49 (0)228 / 844-372
Email: [email protected]
Communications
Phone: +49 (0)228 / 844-300, Fax: +49 (0)228 / 844-338
Website: www.ivg.de
Annual Report 2005 IVG Immobilien AG
2% Stockholm
IVG IMMOBILIEN AG
As a European real estate investment house,
IVG combines real estate and capital market
expertise to offer:
• Proximity to markets, tenants and investors
through the IVG branch office network
• Sharp focus on office and logistics real
estate
• Big-picture management taking an ownership approach to property
• Good corporate governance earning a trust
premium on real estate and capital markets
• Opportunities for private and institutional
investors with strong security, great flexibility
and high returns
Passion for Real Estate.
1
Highlights 2005
• IVG share price up 52%
• Renewed focus on Germany with
purchases in Hamburg and Munich
• Helsinki-Munich-Paris property swap
with Rodamco Europe
• Etzel oil and gas caverns near
Wilhelmshaven bought from German
government and let long-term
• Equity sales in closed-end real estate
funds double to €170 million
MOORGATE LONDON
2
The strength of IVG –
bringing real estate and capital
markets together
IVG and capital market –
compelling equity story
Taking responsibility –
even beyond our business
Strategy: page 22
Investor and creditor relations: page 36
Corporate responsibility: page 46
Contents
04
05
08
14
To our shareholders
Letter to our shareholders
Report of the Supervisory Board
Corporate governance
22
24
34
Strategy
Business model
IVG Real Estate Barometer
36
37
41
43
Investor and creditor relations
Successful stock market year for IVG
EPRA
Net asset value
46
47
49
Corporate responsibility
Employees
Our commitment
50
52
69
74
77
78
84
Group Management Report
Business and operating environment
Financial review
Employees and corporate governance
Subsequent events
Risk report
Expected developments
90
92
94
95
Consolidated Financial Statements
Consolidated Balance Sheet
Consolidated Income Statement
Consolidated Statement of Changes
in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial
Statements
Auditor’s Report
96
97
163
164
166
172
174
181
185
186
188
Other disclosures
Real estate portfolio
Development projects
Consolidated subsidiaries, affiliates
and associates
Advisory Committees
Financial calendar
Glossary
IVG Group key figures (5-year overview)
3
DR. DIRK MATTHEY
DR. ECKART JOHN VON FREYEND
DR. BERND KOTTMANN
DR. GEORG REUL
Chief Financial Officer
Chief Executive Officer
Portfolio Management
Investment Funds
(Deputy Member)
Born 1949, holds a business
degree and a doctorate. Chief
Financial Officer to IVG Immobilien AG since July 1996.
Born 1942, holds an economics
degree and a doctorate. Chief
Executive Officer to IVG Immobilien AG since April 1995.
Previous positions:
Chief Financial Officer and
Managing Director to subsidiaries of the VIAG group
Previous positions:
Head of Division in the Federal
Ministry of Finance
degree and a doctorate. With
the IVG Group since 1997. Member of the Board of Management and in charge of portfolio
management since July 2001.
degree and a doctorate. Since
August 2005 Deputy Member of
the Board of Management of
IVG Immobilien AG and in
charge of investment funds. Has
had management responsibility
at IVG for corporate development, IT, communications and
funds.
Director and Head of Business
Administration at VEBA AG
Executive Assistant and Department Manager in Finance and
Accounting at RWE AG
4
Managing Director and shareholder at Verlagsgruppe
Deutscher Wirtschaftsdienst
John von Freyend GmbH
Member of the Executive Board
of the Federation of German
Industries (BDI)
Previous positions:
Member of the Board at
Harpen AG
Managing Director of Deutsche
Babcock Bau GmbH
Member of the Board at
GERMANIA-EPE AG
Previous positions:
Corporate Finance Manager at
Deloitte & Touche, Düsseldorf
TO OUR SHAREHOLDERS
In a bleak economic climate with high unemployment and a paltry 0.9% growth, your
investment in IVG has served you well in 2005. IVG shares increased in value by no
less than 52%. IVG properties in Europe’s growth centres are sought after by tenants
and investors alike. The Group concluded real estate transactions worth some €3 billion. All key indicators are up: Consolidated net income increased by 47% from €74.9
million to €110.1 million, operating earnings (EBIT) by 19.7% from €202.6 million to
€242.6 million, and cash flow (EBITD) by 12.8% from €264.7 million to €298.7 million.
The year-end net asset value rose from €15.20 to €18.00 per share. The Board of
Management and Supervisory Board propose increasing the dividend from 35 to 38
cents a share.
Results well up on
strong prior year
We significantly increased our investment in Germany during 2005. Like many international investors, we consider Germany to be on the verge of recovery. Positive
business expectations and good export performance may have lent the economy the
momentum needed in 2006 to give a long-awaited jump start to domestic demand.
Germany geared for
recovery
We made an outstanding investment in Germany in 2005 with the purchase from the
federal government of the Etzel-based storage caverns facility near Wilhelmshaven.
The market for oil and gas storage is becoming increasingly important against the
backdrop of global energy scarcity. We moved quickly to conclude new tenancies,
securing steady long-term revenue streams from customers of top-rate credit standing – including bodies responsible for managing national strategic oil reserves for
Germany, the Netherlands and Portugal, and companies such as Germany’s E.ON
Ruhrgas and Norway’s Statoil. This highly profitable facility also has the scope for
more than a doubling of its capacity. Energy storage is thus growing to become a
major value driver for IVG.
Storage caverns:
Oil and gas storage
a major value driver
Reflecting the company’s strong fundamentals and outlook, the price of IVG shares
increased by 52% in 2005. The share price reached €17.71 at the end of 2005 and
€24.50 in early 2006 – its highest mark since the 1986 flotation. IVG has now completed a ten-year period and hence a full market cycle as a real estate company. Over the
ten-year analysis period from the beginning of 1996 to the end of 2005, the IVG share
price has outperformed both the MDAX and the DAX index. A comparison with German open-end real estate investment funds produces similar results. On a ten-year
average, such funds produced an annual return of 4.1%, while IVG shares achieved an
average of 13%.
IVG share price up
52% in 2005
One factor in IVG’s success is real estate securitization – a trend that has gathered
huge momentum. People have invested in real estate since time immemorial, but the
large size of individual investments and the work involved in direct property ownership long prevented it from gaining widespread appeal alongside other types of
investment. Securitization, in the form of shares in real estate companies and invest-
Combining capital
market skills with
longstanding property
expertise
To our shareholders
Dear Shareholders
and Friends of IVG,
5
TO OUR SHAREHOLDERS
ment funds, has overcome this obstacle. Real estate now meets the diversification,
liquidity and transparency needs of investors operating to portfolio theory precepts.
IVG has entered the securitization market from the real estate side. This gives us a
unique selling point, because knowledge of securitization techniques is easier to
acquire than the enduring, pan-European real estate expertise we have amassed
through property ownership.
The motto of this Annual Report highlights our market positioning. We are ‘close to’
property markets with our local branch offices, we are ‘close to’ tenants through systematic customer relationship management, and we are ‘close to’ the capital market
with our differentiated range of investment products.
6
€218 million value
growth in portfolio
management
In the portfolio management segment, we maintained the occupancy rate of our real
estate portfolio at an above-average 94.5% – equivalent to a vacancy rate of only
5.5%. The vacancy rate for the European market as a whole was over 9%. In our own
portfolio, we made purchases amounting to €385.5 million and sold property totalling
€227.5 million. In total, the sales generated a profit of €114.3 million. Our own real
estate portfolio increased in value by €218 million to €3.5 billion. Appraisals are an
important information source, but final selling prices are what demonstrate portfolio
management effectiveness. The selling prices obtained by IVG for properties in 2005
exceeded market valuations by an average of 6%.
A major swap deal provided further confirmation of IVG’s strategy and skill in acquiring property on favourable terms in elaborate transactions. A shopping centre in
Helsinki was exchanged for three office properties in Paris and Munich and a right
of first refusal on an office development in Paris.
Profitable project
development
Our profitable real estate business also includes project development, which allows
us to win new tenants and take early occupation of locations with strong potential.
With high-quality property in short supply, now is a particularly good time to be
bringing new and modernized properties to market via project development. IVG has
a €1.1 billion share of development projects around Europe, at a capital commitment
of €394 million.
IVG’s quality real
estate investment
funds
As a real estate investment house, we parallel the option of investing in IVG shares
with real estate funds for private and institutional investors – funds bearing all the
hallmarks of IVG’s quality approach. Our funds business performed well in 2005. The
strongest growth was achieved by our EuroSelect brand funds targeting private
investors. We marketed €170 million in equity for these products, twice as much as
the previous year. In conjunction with our marketing partners, we have new EuroSelect funds in the pipeline for launch through 2006 and beyond. EuroSelect funds have
also achieved above-average scores with rating agencies. Our subsidiary Oppenheim
Immobilien-Kapitalanlagegesellschaft (OIK), the market leader in institutional real
estate investment funds, increased its funds under management by over €900 million
to €9.7 billion. In total, IVG currently manages €13.8 billion in investment funds, placing it among Europe’s leading property management companies.
The introduction of German Real Estate Investment Trusts (G-REITs) has become even
more likely with a specific mention in the governing parties’ new coalition agreement.
IVG has a long track record as a listed real estate company. As such, our natural calling is to acquire real estate portfolios, restructure them and enhance their value, and
bring them to the stock market – including in the form of REITs.
G-REITs poised to
dynamize the market
Through reliability and transparency, IVG has earned the confidence of European
property and capital markets. This is a key success factor – especially on the capitalintensive property markets with their decentralized structure and long-term perspective. In recognition of this fact, we have enshrined the principles of good and fair
practice at all levels of our company as part of our corporate governance. To raise
awareness of these issues, we have compiled all relevant rules in and require all
employees to comply with our published value management and corporate governance guidelines. The Board of Management and managerial employees lead by
example.
Market confidence
and corporate governance
Our medium-term plan provides for transactions totalling €10 billion between 2006
and 2008. We intend to buy properties for €8 billion, mostly for the rapidly growing
investment funds business. We also plan to sell real estate worth €2 billion. The total
value of property assets under management will thus grow to about €25 billion, and
both net asset value and earnings will rise substantially to the end of 2008. The geographical focus of investment will remain in Europe, although we attentively follow
the development of the dynamic growth regions North America and Asia.
Transactions arranged and carried out so far suggest strong earnings in 2006. Over
the last few months, contracts or binding precontractual agreements have been signed
across Europe for over €400 million in property and development sales contributing
over €100 million to earnings. We forecast a further rise in consolidated net income
and net asset value in 2006.
Medium-term plan:
Major gains in net
asset value and
earnings
We would like to express our thanks and recognition to the workforce for their highly
qualified and professional work. “Passion for real estate” is our enduring motto.
“Passion for
Real Estate”
Yours sincerely,
Eckart John von Freyend
Bernd Kottmann
Dirk Matthey
Georg Reul
7
TO OUR SHAREHOLDERS
Dear Shareholders,
in the period under review, the Supervisory Board carried out its advisory and monitoring duties with great diligence in accordance with the law and the company’s
Articles of Association.
Monitoring of business conduct and liaison with the Board of Management
We regularly advised the Board of Management in directing the company and continuously monitored its conduct of the business. We were involved in all decisions of
major importance to IVG Immobilien AG and the Group. The activities of the Board of
Management gave no cause for complaint.
The Board of Management reported to us fully, regularly and on a timely basis both verbally and in writing on all relevant issues relating to corporate planning, strategic development, company profitability, business dealings, the situation of the Group, its subsidiaries and associates, their risk position and risk management. It fully explained any
departures from the planned or targeted course of business and consulted with us on
the company’s strategic orientation. We discussed in detail all transactions important to
the company on the basis of the Board of Management’s written and verbal reports. On
a number of issues, we requested reports from the Board of Management ourselves.
These were duly provided without delay.
I personally maintained permanent contact with the Board of Management and in
particular the Chief Executive Officer to keep abreast of current business developments,
about which I informed the Supervisory Board. We discussed the outlook and future
direction of the Group’s various segments in separate strategy meetings.
Where our approval was required by law or the Articles of Association, we examined
and deliberated on all reports and motions submitted by the Board of Management
before casting our vote.
The Supervisory Board and its committees
The Supervisory Board met eight times during the 2005 financial year. At its constituting meeting on 31.5.2005, the Supervisory Board re-elected Detlef Bierbaum as
Chairman and Peter Rieck as Deputy Chairman. To perform our duties to the optimum, we set up two committees – the Personnel Committee and the Audit Committee. The Personnel Committee comprises Detlef Bierbaum (chairman), Dr. Gert Haller
(deputy chairman) and Claus Schäffauer. The Audit Committee comprises Dr. Gert
Haller (chairman), Peter Rieck (deputy chairman) and Rudolf Lutz.
The committees prepare Supervisory Board resolutions and topics for Supervisory
Board meetings. The Personnel Committee met three times in the 2005 financial
year, on 4. 4., 6. 7. and 16.12.2005. The Audit Committee had four meetings, on 4. 4.,
30. 5., 21.9. and 16. 12. 2005.
All eight Supervisory Board meetings in 2005 were fully attended except two, at
which one member was absent. One member was absent at a meeting of the Audit
Committee. For all dealings requiring their approval, the Supervisory Board members
were provided with full written information so that resolutions could be adopted
8
DETLEF BIERBAUM CHAIRMAN OF THE SUPERVISORY BOARD
taking absentee votes into account. Aside from resolutions passed at meetings, the
Supervisory Board adopted five resolutions by written vote and one resolution in a
teleconference.
Key topics of discussion and committee resolutions
We addressed business developments at IVG Immobilien AG and the Group in detail at
each meeting. In particular, we regularly discussed the Group’s financial position, its
results, and developments in the size of its workforce. The committee chairmen reported the substance of committee meetings that preceded meetings of the Supervisory
Board.
Key topics of discussion and resolutions in the 2005 financial year were as follows:
Buying and selling
We debated a total of 28 proposals regarding asset purchases. Notable purchases of
office properties were planned in Hamburg, London, Munich, Paris, the Netherlands
and Italy. We also approved the acquisition of a business park portfolio in Düsseldorf
and discussed purchases of major real estate portfolios in Germany and Scandinavia.
At our meeting on 14. 2. 2005, we addressed the acquisition of the German government’s ownership interest in the Etzel-based caverns facility near Wilhelmshaven.
To pave the way for expansion in this business activity, at our meetings on 21.9. and
16.12. 2005 we approved the conversion of eleven oil caverns to gas caverns and the
establishment of three new oil caverns.
Sales of properties and stakes in companies came up for decision at Supervisory
Board meetings sixteen times. Among other things, we approved the sale of the portfolio in Budapest, disposal of four properties in Brussels and three in Helsinki, as well
as sales of individual properties in Geneva, Paris, Madrid and Stockholm.
9
TO OUR SHAREHOLDERS
Project developments
In the 2005 financial year, we approved developments in Bydgoszcz (Poland), Budapest,
Düsseldorf, Frankfurt, Munich and Warsaw. We were also kept informed at meetings of
the Supervisory Board regarding the progress of the Airrail Center project at Frankfurt
Airport, Madou Plaza in Brussels and Cornhill in London.
Corporate strategy and planning
At our meeting on 9. 11. 2005, we devoted close attention to the medium-term plan for
the period 2006 to 2008 and the company’s strategic orientation. At the same meeting,
we approved a Board of Management proposal to open a branch office in Madrid.
Changes to share capital and the Articles of Association
At our meetings of 14. 2. and 7. 4. 2005, we approved a Board of Management application to table motions at the Annual General Meeting authorizing the company to effect
two €24 million increases in share capital (Authorized Capital I and III), to change the
Articles of Association accordingly and to purchase its own shares. At several meetings,
we devoted close attention to improvements in the company’s financing structure, such
as plans to issue a convertible or hybrid bond. We also voted to table motions at the
Annual General Meeting proposing amendments to the Articles of Association relating
to an increase in the size of the Supervisory Board, remuneration of its members, exercise of voting rights, and invitations to, the right to attend and chairmanship of the
Annual General Meeting.
Appointments
At their meetings on 6. 7. 2005, both the Personnel Committee and the Supervisory
Board voted to confirm Dr. Bernd Kottmann and Dr. Dirk Matthey as members of the
Board of Management for a further five years commencing 1. 7. 2005 and 3. 7. 2005
respectively. Dr. Georg Reul was appointed (initially) as a deputy member of the Board
of Management for five years commencing 1. 8. 2005. We also adopted a schedule of
responsibilities reflecting the changed Board of Management structure.
On 16. 12. 2005, after lengthy discussions in the Personnel Committee and the Supervisory Board, we terminated the company’s contract with Dr. Eckart John von Freyend
with effect from 30. 6. 2006 and appointed Dr. Wolfhard Leichnitz as a member of the
Board of Management from 1. 6. 2006 and as Chief Executive Officer for the five years
commencing 1. 7. 2006. Dr. Bernd Kottmann was appointed his deputy and Dr. Georg
Reul as an ordinary member of the Board of Management, both with effect from 1. 7. 2006.
On 4. 4. 2005, the Supervisory Board passed resolutions prepared by the Personnel Committee relating to the appointment of a Group company managing director
and the newly adopted Performance Share Plan – a supplementary compensation
scheme provided for Board of Management members and managerial employees and
based on attainment of pre-set targets. Computation of Board of Management com-
10
pensation on the basis of the IFRS annual financial statements was discussed and
found appropriate. At its meeting on 19. 11. 2005, the Supervisory Board approved a
transfer of legal ownership in pension provisions via a contractual trust arrangement
(CTA) to a newly established independent trust. Real estate assets and liquid funds
were transferred in this connection to the pension trust. The Personnel Committee
had already explored this topic at length on 6. 7. 2005.
Conformity declaration shows quality of corporate governance
The Board of Management and Supervisory Board act in the knowledge that good corporate governance is key to the company’s long-term success. As in previous years, we
therefore discussed in detail the further evolution of the company’s own corporate
governance principles over the course of the 2005 financial year. In accordance with
Section 3.10 of the German Corporate Governance Code, the Board of Management
and the Supervisory Board also present a Corporate Governance Report for the Group
on pages 14–15 of this Annual Report.
No member of the Supervisory Board was involved in any conflict of interest within
the meaning of Section 5.5.3 of the German Corporate Governance Code. To avoid such
conflict, Peter Rieck did not take part in discussions or voting on 9.11.2005 on the sale
of the Budapest portfolio to HGA Capital Grundbesitz und Anlage GmbH.
We examined the efficiency of our activities at our meeting on 7. 4. 2005. In particular,
we addressed Supervisory Board procedures, the provision of information by the Board
of Management, the working relationship between the two boards and the work of the
committees. Supervisory Board members’ responses on the various topics did not indicate any need for change.
The auditor has submitted a declaration of neutrality in accordance with Section
7.2.1 of the German Corporate Governance Code and, in our opinion, this declaration
gives no cause for doubt. The requirements of Section 7.2.3 of the German Corporate
Governance Code regarding the company’s mandate to the auditor are fulfilled.
The Supervisory Board and Board of Management submitted an updated declaration
of conformity in accordance with Section 161 of the German Stock Corporations Act
(AktG) on 21 September 2005. The declaration is published on the company’s website,
where shareholders can access it at any time. It is also reprinted in full in the Corporate
Governance Report pursuant to Section 3.10 of the German Corporate Governance
Code. Demonstrating its commitment to exemplary corporate governance, IVG Immobilien AG also conforms with the recommendations of the revised German Corporate
Governance Code issued on 2.6.2005. The sole recommendations of the Code not complied with by IVG in 2005 were Section 7.1.2 (publication of consolidated financial statements within 90 days) and 5.4.2 (adequate number of independent members on the
Supervisory Board). IVG has now complied with the first of these by publishing consolidated financial statements for 2005 within the 90-day period. The Supervisory Board
also deems the number of independent members to be adequate.
11
TO OUR SHAREHOLDERS
Annual financial statements, consolidated financial statements and audit
Audit Committee activities
At its meeting on 4. 4. 2005, the Audit Committee closely analyzed, in the presence of
the auditor, the IVG Immobilien AG 2004 annual financial statements and the consolidated financial statements as at 31. 12. 2004. After examining the financial statements
and fully discussing them, the Audit Committee recommended that the Supervisory
Board approve the IVG Immobilien AG 2004 annual financial statements, the annual
report, the Supervisory Board report and the Board of Management’s proposal for the
appropriation of net income. The Audit Committee also took note of the consolidated
financial statements and the dependent parties report.
At its meetings of 30. 5., 21. 9. and 16. 12., the Audit Committee notably discussed
the Board of Management’s monthly Group reports to the Supervisory Board, including its appraisal of the risks of business activities. On 21. 9. 2005, the Audit Committee
addressed the amended declaration of conformity pursuant to Section 161 of the German Stock Corporations Act (AktG) and the updated standing orders for the Supervisory
Board implementing the recommendations of the revised German Corporate Governance Code dated 2. 6. 2005.
2005 financial statements
All members of the Supervisory Board were provided in good time prior to the
29. 3. 2006 financial statements meeting with the annual financial statements, consolidated financial statements, company management report and Group management
report of IVG Immobilien AG and with the audit reports of PricewaterhouseCoopers
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Düsseldorf. The auditors were
present for discussion of the annual financial statements and the consolidated financial statements at the 27. 3. 2006 Audit Committee meeting and the 29. 3. 2006 Supervisory Board meeting. They reported in detail on the course of the audit and remained
on hand to provide additional information. They also affirmed that the risk early warning system put in place by the Board of Management ensures timely detection of any
potential threats to the company’s ongoing existence.
The IVG Immobilien AG consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). Under the exemption
provided by Section 315a of the German Commercial Code (HGB), the company has
refrained from preparing HGB-basis consolidated financial statements. The auditors
have issued a clean audit certificate for the submitted IFRS-compliant consolidated
financial statements and for the Group management report.
The IVG Immobilien AG annual financial statements as at 31. 12. 2005 are prepared
by the Board of Management on the basis of the German Commercial Code (HGB)
and have been audited together with the IVG Immobilien AG management report by
PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Düsseldorf, acting on instruction of the Audit Committee as resolved at the Annual General
Meeting on 31. 5. 2005. The auditors have issued a clean audit certificate.
12
Following our own examination of the annual financial statements, consolidated
financial statements and Group management report, we concur with the audit findings. In the conclusive findings of our examination we have no objections to raise.
We accord with the Board of Management’s appraisal set out in the company management report and Group management report. On the Audit Committee’s recommendation, we approved the annual financial statements and the consolidated financial
statements at our meeting of 29.3.2006. The annual financial statements are therefore
deemed final as provided for in Section 172 of the German Stock Corporations Act.
We have examined and concur with the Board of Management’s proposal for the
appropriation of net income.
Composition of the Supervisory Board
Dr. Manfred Lennings retired from the Supervisory Board at the end of the Annual
General Meeting on 31.5.2005 having reached the age limit recommended in the
German Corporate Governance Code. Dr. Lennings was a member of the Supervisory
Board from 1985 and its Chairman for 14 years. With his wise personnel decisions
and strategic choices, he played a major role in shaping IVG and supported its growth
into a successful major European real estate company. He was a dependable partner
and key advisor to the Board of Management as well as to shareholder and employee
representatives. Employee representative Rainer Antons retired from office at the end
of the Annual General Meeting.
The Supervisory Board would like to thank both Dr. Lennings and Mr. Antons for
their dedicated work and commitment to IVG, and wishes them the very best for the
future.
Detlef Bierbaum, Dr. Gert Haller, Matthias Graf von Krockow and Peter Rieck were
elected to the Supervisory Board as shareholder representatives with a large majority
at the Annual General Meeting on 31. 5. 2005. Claus Schäffauer was appointed to the
Supervisory Board as an employee representative with effect from the same date.
We would like to thank the Board of Management, the workforce and the employee
representatives for their dedication and successful work in the 2005 financial year.
Bonn, 29 March 2006
On behalf of the Supervisory Board
Detlef Bierbaum, Chairman
13
TO OUR SHAREHOLDERS
Value Management and
Corporate Governance:
Publication bringing
together the key principles and rules applied
in the IVG Group
14
Corporate governance refers to the entire system by which a company is managed
and monitored, its corporate principles and guidelines, and the system of internal and
external controls and supervision to which its operations are subjected. Good, transparent corporate governance ensures that our company is managed and monitored in
a responsible manner geared to value creation. This is a prerequisite for maintaining
the confidence of investors, customers and business associates and for ensuring that
the market puts an appropriate value on the company’s shares. Through reliability,
continuity and transparency, we have built up a reserve of trust that has grown to
become one of our key competitive advantages.
Preconditions for good corporate governance include internal rules and control
mechanisms that secure responsible management in interplay with the market as a
source of outside control.
We have laid down our own code of conduct for employees, according to which no
one may enter unsupervised into any transaction where he or she has an involvement
with both parties, for example, IVG Immobilien AG and an investment fund company.
Employees may not enter into personal dealings with IVG or any other company they
have to do with in their work. All business transactions must be documented so they
can be traced and verified. The full code of conduct can be viewed online at
www.ivg.de.
A compliance officer watches over observance of the code and other regulations,
keeps insider registers and notifies employees when an insider trading violation is
likely. Our compliance officer is also corporate governance ombudsman and acts
on his own responsibility and independently in this capacity.
IVG Group subsidiaries are likewise subject to rules and codes of conduct. Each
subsidiary has a code of ethics setting out its overriding principles and values. These
are transposed into and expanded upon in codes of conduct. For example, we have
drawn up additional voluntary corporate governance principles for the working relationship between IVG and our subsidiary (Oppenheim Immobilien-Kapitalanlagegesellschaft (OIK). These counter potential conflicts of interest in transactions
between IVG and OIK by giving top priority to market integrity, transparent business
practices and the interests of shareholders in the property assets managed in trust.
We support initiatives in the property sector in Germany and the rest of Europe.
Corporate governance is an ongoing process, not something that is implemented in
one fell swoop.
In Germany, we are founding members of ‘Initiative Corporate Governance der
deutschen Immobilienwirtschaft e.V.’, a real estate industry corporate governance
initiative launched in 2002. Its chairman is our Chief Executive Officer Dr. Eckart John
von Freyend. The initiative has drawn up principles of proper and fair management
that supplement the cross-sectoral German Corporate Governance Code with specific
requirements for real estate companies.
Corporate Governance compliance declaration
Declaration of compliance with the recommendations of the
German Corporate Governance Code in the version dated
2. 6. 2005 by the Board of Management and Supervisory Board
of IVG Immobilien AG pursuant to Sec. 161 of the German
Stock Corporation Act (Aktiengesetz – AktG)
IVG welcomes the principles drawn up by the Government
Commission on the German Corporate Governance Code.
Most of these principles have already formed an integral
part of our value-oriented corporate policies for some years.
In September 2002, IVG also became a founding member of
the Initiative Corporate Governance of the Germany Real
Estate Industry. Under the chairmanship of Dr. Eckart John
von Freyend, Chief Executive Officer of IVG Immobilien AG,
this organization drew up corporate governance principles
specifically for real estate companies which go beyond the
recommendations in the Cromme Commission’s Code and
which supplement the Code with requirements specially
aligned to the real estate business. IVG follows the recommendations and suggestions of the Corporate Governance
Code of the German Real Estate Industry. This Code can be
downloaded from http://www.immo-initiative.de.
IVG undertook numerous measures towards compliance
with the German Corporate Governance Code in 2002. As a
result of modifications of the Cromme Code, further recommendations were implemented in 2003, 2004 and 2005. These
include a modification of the terms of reference for the Board
of Management and Supervisory Board as well as the establishment of an Audit Committee. From the 2004 financial year,
the remuneration of the Board of Management and Supervisory Board are reported on an individualized basis. We have
implemented terms of reference for the Supervisory Board.
The consolidated financial statements and the interim reports
are prepared in line with International Accounting Standards
(IAS)/International Financial Reporting Standards (IFRS).
IVG considers that it complies with all recommendations of
the German Corporate Governance Code. Two points require
explanation:
• IVG changed its financial reporting over to IFRS for the
2004 financial year, a year earlier than it was required to
do so. As a result, the consolidated financial statements for
2004 were published a few days after the 90-day deadline
stipulated in Section 7.1.2 of the Code. The consolidated
financial statements for 2005 have been published within
the 90-day period required in Section 7.1.2.
• We also consider that IVG complies with the recommendation in Section 5.4.2 regarding the minimum number of independent Supervisory Board members. IVG’s Supervisory
Board has six members, of whom we regard the employee
representatives and one shareholder representative as
independent.
These requirements include rules on professional qualifications in real estate for management and supervisory bodies, consistency and integrity in valuation, separation of
company and private business, publication of major transactions, and rules for transactions between affiliated companies where conflicts of interest may arise. Two further specific codes address the needs of listed real estate companies and companies
managing assets in trust (investment funds). IVG has adopted these codes for the management of its business and the investment fund companies it sets up.
At European level, we are members of the European Public Real Estate Association
(EPRA), an alliance of some 160 reputable listed real estate companies, investors, financial analysts, auditors and other market participants. Since 2001, EPRA has issued best
practice recommendations for the annual reports of listed real estate companies, containing guidelines to enhance transparency, uniformity and comparability. We are
actively involved in drafting and updating these recommendations and adhere to them
in our own reporting.
Corporate governance and transparency for a listed company also entail reporting
in full on Board of Management and Supervisory Board compensation, directors’
dealings, share option plans and incentive schemes. We do this in the audited Group
Management Report beginning on page 76 and the Notes to the Consolidated Financial Statements starting on page 150.
15
Close to locations
With a local presence and a network of local contacts,
we can let properties quickly and substantially boost
their value through long-term tenancy agreements.
Strategy
TIMO STENIUS DIRECTOR MUTUAL INSURANCE
PENSION FENNIA, HELSINKI
“Like many institutional investors, we too
take advantage of indirect real estate
investments managed by real estate specialists for our investment capital. We
prefer fund managers who like IVG concentrate mainly on real estate business.
It is essential to be sure that the chosen
partners manage their customers’ commercial properties with the same income
and value orientation as they would their
own. IVG has wide experience and therefore can turn real estate into a safe and
profitable investment product.”
We offer investors real estate investments
with added value. We seek out properties
for our private and institutional clients as
carefully as we do for ourselves, harnessing decades of experience and proximity to
local markets to exploit favourable buying
opportunities. We manage properties with
our own local staff, invest in our buildings,
conclude long-term agreements with reliable tenants and sell at the right time.
This sets us apart from exclusively financeand transaction-oriented investors. Being
able to realize market opportunities quickly
calls for a long-term presence on the real
estate markets.
Tenants at Riverside House
have an excellent view of Europe’s
financial hub, London
17
Close to tenants
Satisfied tenants are our most valuable asset. Available
at all times, we set great store by trusting relationships
and offer fast, unbureaucratic solutions.
Interior view of Universal’s German
headquarters at Spreespeicher, Berlin
FRANK BRIEGMANN PRESIDENT & CEO UNIVERSAL
ENTERTAINMENT GMBH, BERLIN
“We are extremely satisfied with IVG as
a landlord. They always understand our
needs, and we appreciate having a personal local contact.”
Our success is founded on reliable, longterm tenancies. Dealing fairly with our
tenants at all times is something that is
important to us. We support them through
systematic client management at our
local branch offices. We know that it
costs less to keep a good tenant than to
attract a new one.
This approach has been rewarded with
occupancy rates well above the industry
average, even in times of crisis. Tenants
can downsize and grow with us – throughout Europe.
19
Close to market trends
The property markets move up and down – we take
this into account in our buying and selling decisions,
backed by the support of our local experts.
JOHN TRAVERS CHAIRMAN & SENIOR PARTNER
CUSHMAN & WAKEFIELD, LONDON
“One of the great strengths of IVG is its
ability to spot trends in the European
property market. It has first-class people
on the ground who are deeply in touch
with the local markets. Its track record in
purchasing and selling at the appropriate
time in the cycle is enviable.”
In association with the international property consultants Cushman & Wakefield,
we keep a constant eye on the European
markets. When buying, we focus on markets in the early phase of an upswing. We
sell on mature markets or following gains
in value.
St. James’s Street:
Historical property in prime
location offers tenants
a prominent address in
London’s West End
We never put ourselves under pressure to
sell. If necessary, we keep properties for
longer, increase their value and sell them
at a higher price when the market is right.
Thanks to our large number of attractive
properties and central portfolio management system, we have regularly met or
even substantially exceeded our self-set
sales targets.
21
Strategy
Close to locations, tenants and market trends.
Letting and upgrading of properties are the backbone of our
business strategy. Key success
factors for our portfolio management are tenants’ financial
standing, the term structure of
tenancies and tenant retention –
as well as the ability to pick the
22
right moment: Buying real estate
at low prices, particularly by
acquiring large portfolios, and
taking advantage of differences
in European real estate cycles
are key to success. The third
element of our strategy is project development. Our nose for a
deal combined with strict controls make this an important
growth lever. We make all our
real estate expertise available to
institutional and private investors
through our stock and a broad
range of funds.
STRATEGY
Concentration on office properties
Office properties are our main business.
The office property market in Europe’s
main cities is highly liquid, offering
diverse opportunities for buying and
selling. Thanks to variability of use, the
letting risk is lower than, for example,
with specialized and operator-run properties. Our vast experience means we
are familiar with the needs of discerning tenants and investors.
Logistics properties, particularly for oil
and gas, represent a profitable complement to our portfolio. Market trends and
the goal of ensuring security of supply
are resulting in increased demand for
storage capacities. The risk in this area
of business is particularly low. Lessees
are large international energy groups
of first-class financial standing. Longterm storage agreements guarantee
reliable cash flows.
IVG headquarters in Bonn
23
STRATEGY
The IVG business model
The unique selling point of our business
model is the link it provides between the
real estate and capital markets.
On the real estate market, we focus on
office and logistics properties in European
growth centres. Here, we achieve results
well above the industry average. The
expertise this requires has been built up
over decades.
We make our real estate know-how
available to the capital market. We offer
institutional and private investors practically the full range of indirect real estate
investment options, including real estate
shares, closed-end real estate funds for
private and institutional investors, institutional funds and other individually
structured investments.
We prepare property portfolios for securitization on the capital market in our three
business segments of portfolio management, project development and investment
funds. In doing so, we harness the entire
value chain: buying, developing, upgrading and selling real estate. We carry out
this value-adding process just as rigorously for properties managed for third
parties as we do for our own portfolio.
The three segments are presented in
detail in the Group Management Report
from page 52 and in the Notes to the
Consolidated Financial Statements from
page 144.
One central investment criterion is the
potential for value growth offered by a
property. This potential can be realized in
three ways:
• Physically: through renovation, extension or complete redevelopment of
buildings
• Commercially: by improving the tenancy portfolio
• In market terms: by selling at a particularly advantageous time
The amount of value growth ultimately
attainable is governed to a large extent
by the initial price paid for a property.
We try to achieve favourable initial
prices by buying complex portfolios or
by means of asset swaps. Such transactions require specialist skills in valuation,
market assessment, financing, international company and tax law, as well as
selling.
Business model: IVG at the interface between capital and property markets
Capital market
Shares
Funds for institutional investors
Funds for private investors
Asset management
Value enhancement through IVG
Buy
• Knowing when to buy
and sell
• Renewal of tenancy
agreements
• Renovation
• Extension
• Conclusion of new tenancy
agreements
• New building
• Customer support
Office properties
Logistics properties
Real estate markets of major European cities
24
Sell
bi
il d
refur
in g s
ry
Aw
a
in t h e c ate
go
rd
sh
ed
o ffi c e
bu
With 33 storeys marking the tallest point
in the city, the building is used in its
entirety by the European Commission
Geschäftsbericht 2005 IVG Immobilien AG
MADOU PLAZA BRUSSELS
25
STRATEGY
Systematic customer management
boosts tenant loyalty
See IVG Real Estate Barometer on page 34
Local knowledge edge
In Europe, we have 14 local branch offices.
In 2005, we expanded our presence on
the Iberian peninsula and in Poland. All
branch offices work to a common strategy which leaves them enough room for
independent action. The staff at the branch
offices have in-depth knowledge of their
locations and are integrated into local
networks. They learn of good buying and
selling opportunities at an early stage
and are the direct contacts for our tenants and prospective tenants.
Independent property market research
This local expertise is augmented by independent property market research. Here,
we work together with the renowned
international property consultants Cushman & Wakefield. Produced jointly with
Cushman & Wakefield, the quarterly IVG
real estate barometer supports our investment decisions. In addition, it is already
seen as a reliable indicator in the industry and by the media.
Added value for the capital market
All IVG properties – whether on our own
balance sheet or managed for others –
are subject to the same standards of
quality and reliability. IVG’s roots lie in
26
the real estate market. They are supported by in-depth capital market expertise.
We tailor our indirect real estate investment products to investors’ needs in
terms of investment volume, term,
spread, risk/return ratio and exit. This
fine-tuning is in line with modern portfolio theory and represents an added
value which direct buying of real estate
can only achieve with very high investment sums.
The tenant is king
Our business is not only to let space but
also to provide our tenants with opportunities to develop successfully at a reasonable price. The regular tenant surveys we carry out indicate growing
customer satisfaction. On a scale of 1
(very good) to 5 (poor), it has risen since
1999 from an average of 3.1 to 2.1, and
95% of respondents would recommend
IVG as a landlord.
Particularly in a difficult market environment, the trust and satisfaction of our
tenants are valuable assets since they
increase the chance of expiring tenancies
being renewed. We aim to support our
tenants on a long-term basis, because
keeping existing tenants is much less
expensive than attracting new ones.
PLACE VENDÔME PARIS
Modern offices in a prominent location
IVG service spectrum
Complexity
Capital
intensity
Property
management
Facility management
Design-and-build
work for
developments
Asset
management
(letting, value
enhancement)
Portfolio
management
for properties and
developments
Raising equity
and structuring
investment vehicles
(closed-end funds,
open-end funds,
listed shares)
(buy, manage, sell)
Project management
for developments
IVG services
Labour
intensity
Bought-in services
Profit per employee
27
ARNULFSTRASSE MUNICH
Part of the property package swapped
for a shopping centre in Helsinki
Jones Lang LaSalle property clock
Warsaw
1997
Stockholm
1999
Stockholm
Helsinki
London
Warsaw
Amsterdam
London
Amsterdam
Rental growth Rents
slowing falling
Rental growth Rents
slowing falling
Madrid
Rental growth Rents
accelerating bottoming out
Madrid
Brussels
Paris
Munich
Berlin
Düsseldorf, Frankfurt
Hamburg
Budapest, Milan
28
Munich
Brussels, Paris
Milan
Lisbon
Frankfurt
Rental growth Rents
Berlin
Budapest
Düsseldorf, Hamburg
STRATEGY
Market environment
Demand for sustainable commercial
properties in Europe is currently greater
than supply. We believe it will stay this
way for some time to come. On the one
hand, real estate has found its way into
the strictly analytical world of modern
portfolio theory through securitization in
real estate shares/REITs and funds. On
the other, it remains an emotional product. These two dimensions are what make
real estate such a compelling investment
story.
The picture on the European investment
markets for office properties remains
positive: stable yields in Germany with
an accordingly high yield-interest rate
spread, and continued value growth in
London, Paris and Eastern Europe.
At the end of 2005, the European rent
markets were moving on average from
rents bottoming out to rental growth accelerating. The five main German office locations remained stable, supporting the
view that the market has bottomed with
future upside potential.
In addition, there are further favourable
external factors:
• Sustained investment flows from the
private pension segment
• Favourable refinancing situation with
an attractive margin between investment yield and cost of funding
• Currency risks for transactions within
the euro zone have been eliminated
• Professionalism and market transparency have increased significantly on
the European mainland in recent years
• Important framework conditions in
Europe are being harmonized, but there
remains a great variety of differently
structured economic regions. This
“unity in variety” makes it possible to
pursue nuanced real estate strategies.
Düsseldorf, Lisbon
Munich
Brussels
Helsinki
Milan
The IVG Businesspark Hamburg Nord
offers companies good transport links
and ample space for further growth
2002
2005
Amsterdam
Hamburg, Milan
Rental growth Rents
slowing falling
Rental growth Rents
Budapest
Rental growth Rents
slowing falling
Frankfurt,
Berlin, London
Rental growth Rents
Brussels
Paris
Stockholm
Warsaw
London West End,
Budapest
Madrid
Hamburg, Paris,
London City, Helsinki
Munich
Frankfurt
Berlin, Milan
Lisbon, Amsterdam
Warsaw
Düsseldorf
Real estate markets move in cycles. The make or break is knowing when to
buy or sell.
29
OIL AND GAS CAVERNS ETZEL
JUMBO SHOPPING CENTRE HELSINKI
Why buy properties
that need work?
What are the advantages
of a real estate swap?
IVG exploits opportunities to add value and leverages its
specialized market knowledge to acquire properties with a
development upside at attractive terms. IVG then selectively
works to make the properties more marketable, measures
that significantly boost their value.
One of the major challenges to investors in today’s markets
is finding good properties that match their investment strategies. In a swap, both partners can acquire suitable properties
in an off-market transaction without incurring high transaction costs.
The acquisition of oil and gas caverns in Etzel near Wilhelmshaven is an investment geared toward high growth. IVG previously owned seven oil caverns of its own and was commissioned decades ago by the Federal Republic of Germany to
operate 33 oil and gas caverns. Following a €132 million
acquisition deal, all 40 caverns are now the property of IVG.
Eleven caverns are currently being converted from oil to gas
storage by 2009 and are already let to E.ON Ruhrgas until
2043. A lease for another nine gas caverns was also extended
early until 2043 with a consortium headed by the Norwegian
Statoil. Salt rights secured by IVG will permit the construction
of at least 40 additional caverns to store valuable energy
resources. Construction work on three additional caverns
has already begun in 2006.
In November 2005, IVG and the Dutch company Rodamco
Europe exchanged properties worth a total of €215 million.
IVG disposed of a stake in a fully let shopping centre in Helsinki
covering 85,000 m2 of space for €135 million in exchange for
three office buildings in Paris and Munich, a right of first
refusal to a project development in Paris, and a cash settlement of €55 million.
IVG purchased four office buildings in Munich in 2005 with
a total value of more than €100 million. Demand for modern
office space is on the increase in Munich. Renowned market
research institutes have forecast an increase of 50,000 in the
number of office employees over the next 10 years. The office
buildings offer value-added potential by way of optimizing tenant structure and investing in structural improvements.
30
IVG and Rodamco Europe were pursuing the same objective
with this transaction. They streamlined their property portfolios while intensifying their focus on their respective core
businesses: office buildings and logistics facilities for IVG and
shopping centres for Rodamco Europe.
For historical reasons, each company’s portfolio included
properties from the other company’s core area. In 2003, IVG
acquired a stake in the Jumbo shopping centre through its
acquisition of the Finnish company Polar. Under IVG management, the centre underwent a significant expansion and, on
completion, became part of the swap transaction.
PIAZZALE LODI MILAN
MOORGATE LONDON
Why is IVG selling properties
at good locations?
How is an office building turned
into an attractive fund product?
Active restructuring (Buy-and-sell) is increasingly gaining
in importance alongside traditional buy and hold real estate
investing. Real estate markets move in staggered cycles, and
the right timing when buying and selling properties can generate additional profits. A sale provides more reliable proof
of the true value of a property than any expert opinion.
Closed-end real estate funds make properties in liquid markets at top-quality locations, rented under long-term leases
to tenants of strong financial standing, also available to private investors.
IVG sold the Lucent-Welle property in Nordostpark, Nuremberg. The 50,000 m2 office complex of the business park was
designed by eminent New York architect Kevin Roche. It was
built in 2000 and rented to the IT company Lucent Technologies. The property was sold to an international investor for €81
million in a deal that yielded a pleasing profit for IVG.
A property sale in Geneva was also profitable. IVG purchased
the office building at a good price in 2001 by assuming bank
liabilities, fully refurbished it and found tenants for vacant
space. Following these measures to upgrade the property’s
value, a private investor purchased the building, which has a
rental area of 13,400 m2. The profit was tax-free because it
was earned through the sale of the property company (in a
share deal).
In Milan, IVG sold an office building on Piazzale Lodi. The
building has 21,000 m2 of lettable space and was purchased
in 2002. It was sold to a property fund belonging to an Italian
insurance group.
The 20 Moorgate office property in London is situated in the
financial centre of the banking metropolis. The lease with
investment bank JP Morgan Cazenove Ltd. runs until 2027. Every
five years, the rent is to be adjusted to reflect any increases in
the prevailing market prices.
These attractive features now benefit also German private
investors in the IVG EuroSelect 11 fund. On its behalf, IVG
takes care of the property management and provides service
for tenants. In turn, investors receive good rental yields and
an attractive dividend which, because of a tax allowance in
the UK, is currently tax-free in Germany for investments of up
to €100,000.
Award-winner as best issuing house in the segment of
closed-end European real
estate funds
31
How can you develop projects with the same quality
throughout Europe?
In project developments we bring together two strengths:
the local expertise of our branch offices and the European know-how of our internationally seasoned specialists. The first support project realization on the
ground, while the second ensure that our modern office
developments meet international quality standards.
14 Cornhill, London
In Brussels, we completed the Madou Plaza project at
the beginning of 2006. In Brussels, we completed the
Madou Plaza project at the beginning of 2006 and sold
it to the European Union. The 33-storey building, marking
the tallest point in the Belgian capital, was completely
modernized and expanded to 39,500 m2 of rental space.
It won the prestigious MIPIM Award in the refurbished
office buildings category at the 2006 MIPIM real estate
fair in Cannes.
Building C at the Infopark in Budapest was completed
and let in 2005. Tenants of the 13,400 m2 building include
T-Systems, Nissan Hungary and a government-owned
Infopark, Budapest
32
AIRRAIL CENTER (SIMULATION) FRANKFURT
Offices in the direct vicinity
of the global transport hub in
the Rhine-Main region
technology promotion agency. At the beginning of
2006 we sold the property together with developments completed in previous years to an issuer of
closed-end real estate funds. The construction of
an additional building with 17,500 m2 of rental space
has begun.
In London, opposite the Bank of England, we are
developing the office building at 14 Cornhill – the
former headquarters of Lloyds TSB. The bank’s
historical facades and prestigious former counter
area are being preserved but the rest of the building is being completely modernized. Including the
land, we are investing around €170 million in the
15,500 m2 property.
The Asticus Tower is being built near Victoria Station in the government and office area of London’s
West End. The distinctive 5,300 m2 circular building
is cleverly utilizing space on the site of Caxton Hall
registry office and will fill a gap in the market: At
present there is a lack of contemporary, distinctive
office buildings of this size in the area.
In the metropolitan region of Paris, we are developing projects worth a total of up to €1.2 billion in
association with AXA Real Estate Investment Managers. The French Development Venture II (FDV II)
project development fund is our second project development fund with AXA REIM. The first, launched
in 2002, developed and successfully marketed office
properties in Paris worth around €800 million.
Bois des Colombes, Paris
The Airrail Center Frankfurt is a 660 metre-long,
nine-storey “horizontal high-rise” we are planning
to build at the ICE airport railway station in Frankfurt
am Main. Scheduled for completion in 2008/2009, the
building will contain 128,000 m2 of rental space. With
direct access to the airport terminal, the ICE railway
station and the Frankfurt autobahn ring, the Airrail
Center will be the most mobile business location in
Europe.
33
STRATEGY
IVG Real Estate Barometer Office markets, fourth quarter 2005
What is the benefit of
independent property
market research?
London
European average
(21 cities)
104.40 €/m2
( 3.1%)
43.90 €/m2
( 3.9%)
We obtain our own picture of the various property markets through the IVG branch offices. This
serves as the basis for our investment decisions.
We also observe the European property markets
in cooperation with independent market experts.
German average
(5 cities)
24.40 €/m2
( 0.4%)
We verify our own market assessment with
international real estate consultants Cushman
& Wakefield (CW) in London. In the real estate
business, where success critically depends on
accumulated experience, a second opinion is
key.
28.98 €/m2
( 6.6%)
65.30 €/m2
( 8.5%)
2,184,090
( 15.2%)
8,888,815
( 8.8%)
9.2%
( 0.8)
5.5%
( 0.7)
Once a quarter, we publish the IVG Real Estate
Barometer jointly with CW. Providing an overview of property market indicators and trends in
the 21 most important European cities, the barometer is a summary of the IVG/CW Research Report,
which analyzes the office market and economic
situation at the various locations in detail.
8.7%
( 1.8)
11.5%
( 0.04)
12.70 €/m2
( 6.6%)
4.5%
( 1.0)
5.7%
( 0.0%)
Madrid
Lisbon
20.00 €/m
( 0.0 %)
2
28.50 €/m2
( 3.6 %)
121,541
( 9.2 %)
17.50 €/m2
( 0.0 %)
10.0 %
( 1.1)
6.25 %
( 1.2)
15.80 €/m2
( 2.6 %)
Legend
Location
7.4 %
( 1.5)
Cumulative space
turnover (m2)
Vacancy rate
Yield in prime
locations
Population
2005
Total space (m2 million)
Space turnover (m2)
Top monthly rent (€/m2)
2005
2005
2004
Change(%)
2005
2004
Change(%)
4.7
Amsterdam
1,013,147
6.3
309,700
299,110
3.5
29.20
27.90
Berlin
3,396,300
17.0
460,000
360,000
27.8
20.50
20.50
0.0
978,384
11.9
671,962
453,171
48.3
20.10
24.20
–16.9
1,775,203
1.5
236,335
230,184
2.7
18.50
17.00
8.8
572,900
8.0
250,000
270,000
–7.4
20.50
20.50
0.0
Brussels
Budapest
Düsseldorf
Frankfurt
646,000
11.4
479,090
340,516
40.7
33.00
33.00
0.0
Hamburg
1,729,000
13.1
405,000
440,000
–8.0
20.00
19.50
2.6
Helsinki
559,716
7.9
–
–
–
25.00
23.50
6.4
Lisbon
560,700
3.3
121,541
133,870
–9.2
20.00
20.00
0.0
London
7,465,100
22.2
773,615
858,585
–9.9
104.40
101.30
3.1
Madrid
3,290,900
10.1
685,409
713,000
–3.9
28.50
27.50
3.6
Milan
1,179,500
9.0
242,310
203,904
18.8
41.70
37.50
11.2
0.0
Munich
1,241,100
17.5
590,000
485,000
21.6
28.00
28.00
10,952,011
48.2
2,049,593
1,937,638
5.8
56.70
52.10
8.8
Stockholm
1,845,650
10.5
200,000
200,000
0.0
35.50
36.90
–3.8
Warsaw
1,609,810
2.4
373,094
346,507
7.7
17.00
18.00
–5.6
Paris
Source: IVG/Cushman & Wakefield (year-end figures)
34
685,409
( 3.9 %)
4.5 %
( 1.0)
Peak monthly
rent
Trend forecast
average monthly rent
773,615
( 9.9%)
Stockholm
Helsinki
Amsterdam
25.00 €/m2
( 6.4%)
35.50 €/m2
( 3.8%)
29.20 €/m2
( 4.7%)
n/a
15.00 €/m2
( 0.0%)
309,700
( 3.5%)
14.20 €/m
( 5.3 %)
2
21.0 %
( 1.0)
6.0 %
( 0.0 %)
Brussels
Düsseldorf
20.10 €/m2
( 16.9%)
20.00 €/m2
( 2.6 %)
Berlin
405,000
( 8.0 %)
15.00 €/m
( 5.1%)
11.0 %
( 0.6)
5.6 %
( 0.4)
5.5 %
( 0.0 %)
250,000
( 7.4 %)
11.9 %
( 1.1)
12.25 €/m
( 0.0 %)
2
19.0%
( 0.1)
20.50 €/m2
( 0.0%)
Warsaw
8.0 %
( 0.1)
12.25 €/m2
( 0.0 %)
671,962
( 48.3 %)
5.75%
( 0.8)
200,000
( 0.0%)
5.25%
( 1.0)
20.50 €/m2
( 0.0 %)
2
19.00 €/m2
( 2.1%)
Hamburg
17.00 €/m2
( 5.6%)
460,000
( 27.8%)
11.50 €/m2
( 4.2%)
6.0 %
( 0.0)
Paris
9.6%
( 0.3)
6.0%
( 0.0%)
373,094
( 7.7%)
12.50 €/m2
( 3.8%)
8.2%
( 3.7)
6.5%
( 1.0)
Munich
Frankfurt
Budapest
Milan
56.70 €/m
( 8.8%)
2
18.50 €/m2
( 8.8%)
28.00 €/m2
( 0.0%)
33.00 €/m2
( 0.0%)
236,335
( 2.7 %)
41.70 €/m2
( 11.2%)
14.00 €/m
( 0.0%)
2
590,000
( 21.6%)
14.50 €/m2
( 3.6%)
41.20 €/m2
( 15.1%)
479,090
( 40.7%)
2,049,593
( 5.8%)
13.00 €/m
( 3.7%)
2
6.8%
( 0.1)
9.0%
( 0.0)
11.6%
( 3.6)
6.75%
( 1.2)
10.5%
( 0.2)
5.25%
( 0.0)
17.2%
( 0.1)
5.5%
( 0.0%)
4.75%
( 1.0)
20.80 €/m2
( 0.0%)
242,310
( 18.8%)
10.4%
( 0.5)
5.5%
( 0.1)
Average monthly rent (€/m2)
Vacancy rate (%)
Prime yield (%)
2005
2004
Change(%)
2005
2004
14.20
15.00
–5.3
21.00
11.50
12.00
–4.2
9.62
15.00
15.80
–5.1
14.00
14.00
12.25
12.25
13.00
12.25
Average yield (%)
Change
2005
2004
Change
2005
2004
Change
20.00
1.0
6.00
6.75
–0.8
7.00
7.25
–0.3
9.90
–0.3
6.00
6.00
0.0
7.00
7.00
0.0
11.04
11.60
–0.6
5.60
6.00
–0.4
6.25
6.40
–0.2
0.0
11.63
15.18
–3.6
6.75
7.90
–1.2
7.75
8.50
–0.8
0.0
11.88
10.78
1.1
6.00
6.00
0.0
6.50
6.50
0.0
13.50
–3.7
17.21
17.10
0.1
5.50
5.50
0.0
6.50
6.50
0.0
12.25
0.0
8.00
8.10
–0.1
5.50
5.50
0.0
6.75
6.75
0.0
15.00
15.00
0.0
9.00
9.00
0.0
5.75
6.50
–0.8
7.40
7.50
–0.1
17.50
17.50
0.0
9.95
8.90
1.1
6.25
7.40
–1.2
8.50
8.50
0.0
65.30
60.20
8.5
8.70
10.51
–1.8
4.50
5.50
–1.0
6.10
6.75
–0.7
15.80
15.40
2.6
7.40
8.85
–1.5
4.50
5.50
–1.0
5.00
6.00
–1.0
20.80
20.80
0.0
10.43
10.97
–0.5
5.50
5.60
–0.1
6.30
6.40
–0.1
14.50
14.00
3.6
10.50
10.70
–0.2
5.25
5.25
0.0
6.75
6.75
0.0
41.20
35.80
15.1
6.78
6.66
0.1
4.75
5.75
–1.0
6.00
6.50
–0.5
19.00
19.40
–2.1
19.00
19.14
–0.1
5.25
6.25
–1.0
7.00
7.50
–0.5
12.50
13.00
–3.8
8.16
11.81
–3.7
6.50
7.50
–1.0
7.25
9.25
–2.0
35
Investor and
creditor relations
Compelling equity story.
We communicate openly, actively
and personally with shareholders,
investors, bankers and analysts
to provide them with a full view of
our business. Purchasers of IVG
shares invest not just in a Euro-
36
pean quality real estate portfolio,
but in the expertise and earning
potential of a European real
estate investment house. Anyone
holding IVG shares and reinvesting the dividends for the last ten
years could earn an average
annual return of 13% – substantially more than the DAX, the
MDAX or open-end real estate
funds.
INVESTOR AND CREDITOR RELATIONS
Successful stock market year for IVG
international investors to increase their
holdings of German shares. European
real estate shares maintained the strong
upward trend established in previous
years. The EPRA index comprising the
70 largest European property companies rose by 25.8%, again beating the
Stoxx 50. Notable among the top performers was IVG, whose compelling
equity story led to a 51.8% boost in its
share price, outperforming the DAX,
MDAX and EPRA indices for the second
year running.
Investor and creditor relations
2005 was a hugely successful year for
the German and European stock markets. The DAX index increased by 27%,
the MDAX by 36% and the Stoxx 50 by
21%. The main factor in the stock market’s buoyancy was the prospect of an
economic recovery in Euroland, supplemented in Germany by the positive
effects of corporate restructuring started
in previous years. The early parliamentary elections and hopes of reform in
Germany also encouraged national and
IVG share price (%)
30. 12. 2004
25. 3. 2005
17. 6. 2005
9. 9. 2005
30. 12. 2005
13. 3. 2006
120
100
80
60
40
20
IVG share price
EPRA index
0
DAX index
Source: Bloomberg
37
Average annual return with dividends reinvested (%)
1 year
3 years
5 years
10 years
IVG
51.8
39.4
11.9
13.0
DAX
27.1
23.2
–3.9
9.1
MDAX
36.1
35.5
10.6
11.1
3.4
3.2
3.8
4.1
Open-end real estate funds
Source: Bloomberg, BVI
IVG shares have tremendous upside potential, mostly from the company’s excellent strategic positioning as a European
real estate investment house, expected
increases in its earnings and net asset
value (NAV), the ongoing recovery of
European property markets, the expansion of IVG’s storage caverns business
and the rapid growth of its investment
funds activities. The extra dynamism given
to the German real estate market by the
introduction of real estate investment
trusts (REITs) provides further opportunities for profitable growth.
The strong appeal of IVG shares is also
evident on a medium and long-term horizon. An investor purchasing IVG shares
ten years ago and reinvesting the dividends since could earn an average annual return of 13.0%. Over the same period,
the DAX gained only 9.1%, the MDAX
11.1% and open-end real estate funds
4.1%. An investor holding IVG shares for
the last five years earned an average
annual return of 11.9%. Over the same
five years, the MDAX rose by only 10.6%,
open-end real estate funds appreciated a
mere 3.8%, and the DAX even fell by 3.9%.
Increased dividends
The strong earnings growth allows the
Board of Management and the Supervisory Board to table a three cent dividend
increase to €0.38 per share for approval
at the Annual General Meeting. This raises the total dividend to €44.1 million.
Based on the year-end share price, the
dividend yield is 2.14%.
38
IVG in key indices
IVG shares are listed in the Official Market
on the Frankfurt, Düsseldorf, Munich and
Berlin/Bremen stock exchanges and in the
XETRA trading system. IVG is Germany’s
biggest listed real estate company in
terms of both market capitalization and
trading volume. The average number of
IVG shares changing hands on each day
of trading increased significantly from
157,000 in 2004 to 252,000 in 2005. By
this measure, IVG improved its ranking
in the 50-share MDAX index from 31 to
30. The company’s market capitalization
increased from €1.4 billion in 2004 to
€2.1 billion in 2005, taking it from 23rd
to 16th place on this count in the MDAX.
Its MDAX weighting increased from 1.54%
to 2.06%. The increasing importance of
IVG shares is also reflected in the fact
that they feature in all relevant national
and international indices, including:
• MDAX
• Stoxx 600
• MSCI Small Cap Index
• EPRA Index
• EPRA/NAREIT Index
• E&G EPIX European Property Stock
Index
• E&G DIMAX Deutscher ImmobilienAktienindex
• Citigroup Smith Barney World Equity
Index Property
• GPR 15 Europe/GPR General
Indices are not only key indicators for
the capital markets. They also serve as a
benchmark for fund managers. Inclusion
in relevant indices is therefore of major
importance.
Free float raised to 75%
The proportion of IVG shares that are
freely traded increased to 75% in 2005.
Sal. Oppenheim Bank and HSH Nordbank each reduced their shareholdings
by five percentage points to 20.1% and
5.1% respectively in September 2005.
Sal. Oppenheim regards its ownership
interest in IVG as a long-term strategic
investment.
The rapid take-up of the 11.6 million
shares sold and the broad geographical
spread of buyers – including abroad – testify to the increased interest in the company shown by institutional investors. DZ
Bank and WGZ-Bank had already reduced
their shareholdings to below 5% in the
spring and summer of 2005. The increase
in the free float to 75% and the increased
weighting in share indices further enhance
IVG’s appeal to German and international
institutional investors.
Investor and creditor relations activities
expanded
The objective of our investor and creditor relations activities is to further consolidate established trusting relationships
with shareholders, banks and the financial community. We aim to provide share-
holders, potential investors, financial analysts and banks with all relevant information on a timely basis, allowing them to
form a sound picture of IVG’s fundamental value and potential.
We further expanded our investor and
creditor relations activities in 2005. We
presented IVG to institutional investors at
a large number of roadshows and conferences in Europe and the USA. These were
supplemented by analysts’ and telephone
conferences, and by numerous one-onone meetings. We also held a bankers’
day. Our investors’ day in October 2005
provided investors and analysts with an
opportunity to acquaint themselves with
operational managers and our individual
business segments as well as with the
Board of Management. Based on the
positive response, we will be holding
another investors’ day in 2006.
We also further stepped up our investor
and creditor relations activities for private investors in 2005. The information
provided on our website, www.ivg.de,
where all current presentations are now
available, has once again been expanded.
We also presented IVG at more events
for private investors.
IVG share data1
2000
2001
2002
2003
2004
Number of shares (at year-end)
million
116
116
116
116
116
116
Market capitalization 2
million
1,507
1,247
962
1,075
1,386
2,054
Year’s highest price
15.35
15.80
12.99
9.50
12.40
17.95
Year’s lowest price
12.55
9.40
8.00
5.75
8.76
12.25
Year’s closing price
12.99
10.75
8.30
9.27
11.95
17.71
Earnings per share 3
0.73
0.55
0.58
0.45 4
0.61
0.83
0.34
0.34
0.35
0.38 6
Dividend per share
0.33
0.34
5
2005
Total dividend
million
38.28
39.44
39.44
39.44
40.60
Dividend yield2
%
2.54
3.16
4.09
3.67
2.93
2.14
17.8
19.5
15.4
10.2
19.6
21.3
Price/earnings ratio 2
44.08
MDAX price/earnings ratio
18.7
17.5
12.9
29.1
16.4
25.4
DAX price/earnings ratio
20.4
30.0
16.4
22.4
15.5
15.4
In euros except as otherwise indicated, 2 At year-end share price, 3 IFRS basis from 2003 onwards, DVFA/SG basis before, 4 Excluding €53.4 million income item for
Polar lucky buy, 5 Excluding special dividend of €0.20 per share, 6 Proposed
1
Annual Report 2005
IVG Immobilien AG
39
NORTH GATE BRUSSELS
Prestige office premises in the
EU capital
Research coverage extended
IVG is covered by numerous national and
international financial analysts. More than
20 analysts regularly publish studies and
commentaries on IVG. Notably in 2005,
international investment banks such as
Morgan Stanley and JP Morgan have
added IVG to their coverage. The majority of assessments were positive.
Good prospects for introduction of
German REITs
The outlook is good for the debut of real
estate investment trusts (REITs) in Germany. Their introduction is expressly provided for in the governing parties’ coalition agreement. They will probably
deliver a major boost to both the market
for real estate shares in Germany and to
the German real property market itself.
They will also significantly enhance the
appeal of Germany as a financial centre
and open up new business opportunities
for IVG.
REITs offer significant benefits to investors. They are not subject to corporate
tax. Instead, they are required to distribute a large proportion of their net profits, and this income is taxed at investor
level. This cuts out double taxation.
40
International comparisons show that real
estate companies structured as REITs
trade at a considerable premium on the
stock markets compared with their peers
not subject to the same exemptions. REIT
vehicles have now become a global standard and are already allowed in more than
20 countries including the USA, Australia,
France, Belgium and the Netherlands. UK
REITs are set to be introduced in the near
future.
By rapidly adopting REITs, Germany
can become a leading investment and
capital market for real estate. They will
jointly benefit the public purse, investors,
the property sector and Germany as a
business location. IVG is actively involved
in the debate and in substantive consultations. The priority now is to reach consensus on a flexible framework for G-REITs in
constructive talks with policymakers. The
property sector has made proposals for
structuring German REITs that resolve
the current outstanding tax problems.
The desired outcome is a structure for
German REITs that is easy to communicate on the capital market.
EPRA
The European Public Real Estate Association (EPRA) is a European industry
association comprising listed real estate
companies, investors, financial analysts,
banks and auditors. To ensure the greatest possible level of transparency for
investors, EPRA issues Best Practices
Recommendations for accounting and
reporting. IVG supports the harmonization of reporting standards. Most of the
required information is already included
in our annual financial statements. Additional information required by EPRA is
set out on the pages that follow.
Basis of computation
Market valuation of the real estate
portfolio
Almost all portfolio properties were valued
as at 30. 11. 2005 by neutral appraisers:
• Germany: Jones Lang LaSalle
• Belgium, Luxembourg and the
Netherlands: de Crombrugghe &
Partners sa and DTZ
• Italy: REAG
• United Kingdom: FPD Savills
• Spain and Portugal: CB Richard Ellis
• Hungary: Cushman & Wakefield
• Sweden: DTZ
• France: Estate Consultant
• Finland: Kiinteistötaito Peltola &
Pulkkannen Oy
Market values were determined for
almost all properties in accordance with
IAS 40 Investment Properties, on a discounted cash flow (DCF) basis or by reference to comparison data. The valuations were performed, as appropriate, in
conformity with International Valuation
Standards (IVS) or the Royal Institution
of Chartered Surveyors (RICS) Guidance
Notes on the Valuation of Assets (the
Red Book).
Net asset value
Net asset value (NAV) is the company’s
total assets at market value less total liabilities and is equal to economic capital.
The net asset value of IVG grew by 18.4%
in 2005, from €15.20 to €18.00 per share.
The rise mainly reflects gains in the value
of our real estate portfolio and growth in
our investment funds business.
see www.epra.com for details
Portfolio management: Property selling prices exceed market value (€ m)
500
428
400
300
403
370 365
266
243
227 214
200
100
Selling prices
Market values
0
2002
2003
2004
2005
Annual Report 2005
IVG Immobilien AG
41
Place de la Madeleine, Paris
Market valuation using the
DCF approach
The DCF method is a net present value
calculation that entails discounting a
property’s future net cash inflows (net
operating income) to a valuation date.
The net operating income figures used
are the balance of receipts and payments
for each year of a ten-year detailed budget
period, where receipts mostly comprise
net rental income and payments mostly
consist of running costs met by the owner
and not passed on to tenants. The net
operating incomes are discounted to the
valuation date at a free market discount
rate estimated for each property, giving
a net present value for net operating
income from each period.
A residual value is then estimated for
the property as at the end of the ten-year
budget period. This reflects the price most
likely to be realized. It is obtained by capitalizing the net operating income for the
tenth or eleventh year as a perpetuity at
an appropriate capitalization rate. The net
present value of this figure at the date of
valuation is then found by applying the
same discount rate as is used on net
operating income. The sum of discounted net operating income and discounted
residual value is the market value, i.e. fair
value, of the property under appraisal.
Properties
Real estate portfolio, including investment
properties, finance lease properties and
real estate assets in other property, plant
and equipment.
Development projects are included at
their carrying amounts under current
and non-current assets plus their discounted future contribution margin. The
discount rate used is 15%.
42
Investment funds
This item gives the market value of our
investment funds business, comprising
the value of OIK (currently €140 million,
purchased for €125 million) plus private
investor funds business valued using the
DCF approach. Corresponding balance
sheet carrying amounts of assets and liabilities are eliminated.
Other property, plant and equipment,
financial assets, receivables and other
assets, inventories and non-current
assets held for sale
These are adjusted for assets already
included in the market value of investment properties.
Derivative financial instruments
As recommended by EPRA, derivative
financial instruments are eliminated from
the NAV computation.
Financial liabilities
Financial liabilities are adjusted to eliminate the liabilities of OIK, which is reported under investment funds.
Deferred tax liabilities
Deferred tax reported in the consolidated
financial statements is restricted to temporary differences between carrying
amounts in the consolidated balance
sheet and the tax base, and is supplemented here by deferred tax on differences between carrying amounts in the
consolidated balance sheet and IFRS
market values. This is measured assuming a 35% tax rate and 50% sale by way
of tax-free share deals and, in line with
the going concern presumption, is discounted to present value over 25 years
at a discount rate of 8%.
Net Asset Value (NAV) (€ m)
2005
Intangible assets
Other property, plant and equipment
Properties
2004
5.7
6.1
166.0
56.8
3,502.3
3,284.3
69.4
49.3
Investment funds
190.5
175.5
Financial assets
208.3
136.7
Shares in associated companies
30.7
32.0
Receivables and other assets
13.6
12.7
Prepaid expenses
Non-current assets
Inventories
2.4
4.9
4,188.9
3,758.4
61.4
73.2
127.4
406.2
Income tax receivables
13.9
11.2
Current asset securities
30.0
26.3
Non-current assets held for sale
Cash at bank and in hand
Prepaid expenses
126.7
–
90.9
69.5
6.0
5.2
456.3
591.6
Total assets
4,645.2
4,349.9
1,701.3
1,914.9
Pension provisions
9.9
23.6
75.6
33.6
Trade accounts payable/other liabilities
4.0
40.9
Deferred income
7.1
8.2
1,797.9
2,021.2
571.7
272.4
Other provisions
30.5
40.3
Tax provisions
24.2
11.2
118.2
229.2
Current assets
Other provisions
Non-current liabilities
Trade accounts payable/other liabilities
Deferred income
14.1
12.9
Current liabilities
758.7
566.0
Total liabilities
2,556.6
2,587.2
NAV
2,088.6
1,762.8
NAV per share (€)
18.00
15.20
Deferred tax
122.7
83.2
1,965.8
1,679.6
16.95
14.48
NAV after deferred tax (NNAV)
NNAV per share (€)
Annual Report 2005
IVG Immobilien AG
43
Like-for-like valuation
Adjusted market value
Change
2005
2005
€m
€m
%
Berlin/Dresden
305
–4
–1.3
Düsseldorf
219
–11
–4.8
91
0
0.0
571
260
83.6
Munich
469
–7
–1.5
Brussels
703
9
1.3
Budapest
90
31
52.5
Frankfurt
Hamburg, including caverns
Helsinki
Iberia
London
266
5
1.9
49
1
2.1
188
8
4.4
Milan
87
0
–0.1
Paris
228
5
2.2
81
–2
–2.4
Domestic
1,655
238
16.8
Foreign
1,692
57
3.5
Total
3,347
295
9.7
Stockholm
On a like-for-like basis – adjusted for additions and disposals – the valuation of the
real estate portfolio including caverns and
tank farms increased by 9.7% in 2005. An
analysis by location is presented in the
table above.
The increase in Hamburg is accounted
for by the caverns and tank farms business. The strongest growth was attained
on the Budapest portfolio, where declining market yields led to a rise in property
values.
Like-for-like rental growth
Adjusted net rentals
2005
Domestic
Foreign
Total
On a like-for-like basis – adjusted for additions and disposals – rental income was
a slight 1.2% down on the previous year.
44
Change
2004
€m
€m
%
79.1
81.8
–3.3
97.4
96.8
0.6
176.5
178.6
–1.2
Increases in rental income abroad were
offset by decreases on the company’s
home market.
RIVERSIDE HOUSE LONDON
EuroSelect 09 investment fund property,
under long-term tenancy to Financial
Times Ltd.
Portfolio valuation parameters
Discount rate
Cap rate
%
%
Berlin
5.75–12.0
5.75–12.0
Düsseldorf
6.0–8.25
6.0–8.25
Frankfurt
7.5–10.5
7.5–10.5
Hamburg
7.75–8.25
7.75–8.25
Munich
7.5–9.5
7.5–10.5
Brussels
5.74–8.39
6.25–9.90
Helsinki
6.25–11.50
6.75–12.0
London
7.50–9.07
5.75–7.0
Milan
7.25–8.25
5.63–6.38
Paris
6.50–9.0
5.0–7.0
Caverns and tank farms
Other
6.0
–
5.0–9.25
5.0–8.50
The table above shows the discount and
capitalization rates used in discounted cash
flow valuation of the real estate portfolio.
Annual Report 2005
IVG Immobilien AG
45
Corporate
responsibility
Responsibility for employees and the community.
Our passion for real estate is
shared by our employees. We
offer them scope for development, good professional opportunities, attractive working
conditions and a friendly, unbureaucratic working atmosphere.
46
Developing young talent is just
as important to us as providing
favourable working conditions
for older employees. We attach
high priority to training and further education.
Taking responsibility means
supporting sustainable development both inside and outside the
company. We sponsor selected
projects in the arts, cultural and
social spheres.
CORPORATE RESPONSIBILITY
Employees
Trainee programme successfully
continued
We welcomed four new trainees in 2005,
the third year of our trainee programme.
Four of the previous year’s five trainees
were retained to take on highly qualified
work. The twelve-month trainee programme was further developed. The
trainees now pass through all core areas
of the company and are additionally
assigned for two months to a branch
office outside Germany. This international assignment supports IVG’s Europe-
wide focus and strengthens the links
between our Bonn headquarters and the
branch offices outside Germany. The
programme is being continued in 2006
with an increased number of trainees.
Initial vocational training
We accept social responsibility for training young people. We currently have
apprentices undergoing training in real
estate management, office communications and mechatronics. The number of
apprentices is to be increased in 2006.
Corporate responsibility
“Passion for real estate” is our motto. It
means that, for all our professionalism,
we go about our business with enthusiasm and identify strongly with our work.
Our success depends crucially on the
skills and motivation of our employees,
their commitment as well as their personal and professional aptitude. Our personnel policy is focused on further education and individual development. Good
opportunities, good working conditions
and social benefits are an important part
of our corporate culture.
Communication at IVG:
simple, open, direct
Student placements/dissertation
support
IVG enables undergraduates to gain initial
hands-on experience in the real estate
industry. In 2005, IVG worked closely with
universities to assist students writing
practically-related dissertations and gave
undergraduates on industrial placements
an insight into day-to-day work. Placements and dissertation assistance allow
us to make contact with young potentials
at an early stage.
47
CORPORATE RESPONSIBILITY
Further education
The IVG Graduate School was conceived
in association with the Real Estate Academy at the European Business School
(ebs). The first academy programme
comprising ten modules was successfully
concluded in 2005. Internal and external
lecturers taught key aspects of the real
estate business from an academic perspective – based on concrete practical
examples. The response from employees
was extremely positive.
Supporting young talent
Our efforts in this area are directed at
supporting highly qualified and motivated
potentials of younger ages. A new series
of seminars is focused on developing
social/soft skills. In addition to their professional capabilities, participants can
develop communication skills and techniques in modular three-day seminars,
allowing young talents involved in challenging work areas to expand and enhance
these key capabilities. The support programme began in 2005 with 20 participants. More seminars are planned for
2006.
Details of organizational personnel changes, collective agreements and employee
participation models are provided in the
Management Report from page 74.
Development in headcount
Apprentices and trainees
27 (+7)
Corporate functions
101 (–23)
Portfolio
management
327 (–37)
2005: 821 employees
2004: 930 employees
Investment funds
business 296 (–4)
Project development
70 (–52)
Employees by qualification
Vocational training and
additional qualifications
12%
Vocational training
59%
48
University 29%
SCHOOL PROJECT SRI LANKA
New prospects for orphans affected by
the tsunami disaster
Our commitment
Above and beyond our business commitments, we also consciously take responsibility within the community and environment in which we operate. We focus
our resources and support projects chiefly
in our home base Bonn and the capital
Berlin.
Attachment to Bonn
We are committed to maintaining the
cultural legacy of Ludwig van Beethoven,
the great son of the city of Bonn. We
provide support for the Beethoven-Haus,
the digital Beethoven-Haus and the International Beethoven Foundation.
We regularly display the works of talented young artists in our headquarters.
We also lend our backing to a series of
classical concerts staged in the summer
months in Brandenburg to promote the
region’s arts and historical monuments,
which can look back on 15 years of cultural and musical sponsorship without
any public funding. In addition, we promote exhibitions for children and young
people at the Art Museum of the City of
Bonn, sponsor the federal league team
as well as support the youth work of the
baseball club Bonn Capitals.
Making a stand for science
In the scientific field, we sponsor the
Endowed Chair of Real Estate at the ebs
in Oestrich-Winkel, and Agenda 4, an
association to promote dialogue between
business, research and the public sector
in the fields of urban and project development. We have also established the
Infopark Foundation to encourage applied
research and business start-ups at the
Budapest University of Technology and
Economics. In addition, IVG backs the
Donors’ Association for the Promotion of
Sciences and Humanity in Germany.
South-East Asian outreach
Shortly after the tsunami disaster in 2004,
we teamed up with notary Peter Frauenfeld in Bentota, Sri Lanka to begin
expanding a private school to include a
boarding school for orphans. Following
acquisition of the land, the construction
of the school is now making very good
progress, providing work for tradesmen
today and school staff in the future, as
well as high-quality education.
In the future, we will focus our community commitment in a dedicated IVG
foundation, resolved in 2005.
www.schulprojekt-sri-lanka.de
49
Group
Management Report
of IVG Immobilien AG as at 31.12. 2005
50
I
1
2
3
Business and operating environment
Group structure and business
The business year
Group management
II
1
2
3
4
Financial review
Earnings
Finances
Assets, liabilities and shareholders’ equity
General appraisal of financial position and performance
III
1
2
Employees and corporate governance
Employees
IV
Subsequent events
V
1
2
3
4
Risk report
Risk management system
Risk management for financial instruments
Individual risk categories
Overall appraisal of the risk situation
VI
1
2
3
4
5
6
Expected developments
Expected development of the Group
Expected changes in the economic and legal environment
Expected earnings situation
Expected financial situation
Opportunities
Overall assessment of expected developments
Group Management Report
GROUP MANAGEMENT REPORT
The charts in the Management Report on the pages that follow are for illustration only
and do not comprise part of the audited Management Report.
51
I Business and operating environment
1 Group structure and business
1.1 Group legal structure
The IVG Group’s parent company is IVG Immobilien AG (IVG), a listed German company. A total
of 252 direct and indirect subsidiaries and associates are included in the consolidated financial
statements. The Group’s property holdings in Germany are largely structured as limited partnerships with IVG as a limited partner and IVG Management GmbH as a general partner. German
development projects are similarly structured. In the investment funds segment, IVG ImmobilienFonds GmbH, a wholly-owned subsidiary, operates as an initiator of closed-end real estate funds.
The funds are managed by WK ImmobilienFonds Verwaltungsgesellschaft mbH, Berlin. Another
subsidiary, Oppenheim Immobilien-Kapitalanlagegesellschaft mbH (OIK), operates in the institutional real estate funds market. Outside Germany, company structures vary according to national
circumstances. IVG’s branch offices are responsible for operational management of properties;
strategic management and control are performed centrally from Bonn.
IVG has control and profit transfer agreements as defined in Section 291 of the German Stock
Corporations Act (AktG) with IVG Beteiligungs GmbH, IVG Logistik GmbH, IVG Management GmbH,
Media Works Munich GmbH, and IVG Museumsmeile GmbH.
1.2 Segments and main locations
IVG’s business activities focus on portfolio management of its own and third-party real estate
assets, project development, as well as setting up and marketing real estate funds for private and
institutional investors. Investment for the IVG portfolio and for investment products initiated for
third parties is concentrated on office and logistics properties in major European cities and growth
centres. All IVG investments are made with long-term property ownership in mind.
The IVG Group’s key investment locations with branch offices are Berlin, Brussels, Budapest,
Düsseldorf, Frankfurt, Hamburg, Helsinki, London, Madrid, Milan, Munich, Paris and Stockholm.
Real estate assets under management, by region
15% Benelux
14% Berlin
1% Budapest
2% Helsinki
7% Düsseldorf
4% Iberia
8% Frankfurt
€18.5 billion
8% London
2% Milan
7% Hamburg
14% Paris
10% Munich
6% Other
52
2% Stockholm
IVG’s active portfolio management operations comprise purchasing properties and property portfolios, increasing their value by development and profitable letting, and selling them when the
market is favourable. Buying, selling, letting, and care of tenants are managed from the company’s Bonn headquarters and performed in close cooperation with the local branch offices.
The aim is lasting growth in the real estate portfolio’s value and rate of return.
The company’s real estate portfolio, including storage caverns under construction and receivables
from finance lease transactions, were worth €3.5 billion at the end of 2005, compared with €3.3
billion a year earlier. Net rental income from investment properties was €223.8 million in the
2005 financial year, versus €235.8 million in 2004.
Real estate holdings, by region and type of use
Berlin 9%
Brussels 16%
Düsseldorf 7%
Retail 2%
Frankfurt 4%
Budapest 3%
Office 70%
Helsinki 8%
€3.5 billion
€3.5 billion
Logistics 24%
London 4%
Hamburg 22%
Milan 3%
Paris 8%
Munich 13%
Other 4%
Other 3%
Rental income, by region and type of use
Berlin 8%
Brussels 17%
Düsseldorf 7%
Retail 3%
Frankfurt 3%
Budapest 2%
Office 67%
€224 million
€224 million
Helsinki 13%
Logistics 26%
Hamburg 23%
Munich 11%
London 4%
Milan 2%
Paris 5%
Other 5%
Other 4%
53
Top ten tenants by net rental income (%)
EBV Erdölbevorratungsverband (Hamburg)
8.6
Régie des Bâtiments (Brussels)
6.9
Statoil Deutschland (Hamburg)
3.9
Netherlands oil stockpiling organization (COVA) (Hamburg)
2.8
Vattenfall AB (Stockholm)
2.6
Lucent Technologies Network Systems GmbH (Nuremberg)
2.3
EPCOS AG (Munich)
1.5
Nokia GmbH (Düsseldorf)
1.2
IABG Holding GmbH (Munich)
1.1
TeliaSonera Finland Oyj (Helsinki)
0.9
Buying
Buying at favourable prices is the basis for future profits. IVG therefore concentrates on complex,
capital-intensive package deals offering development potential from a real estate perspective.
Older office buildings with tenancy structures that can be improved upon are attractive properties
for IVG. Here, IVG can capitalize on the market proximity of its local branch offices and its extensive development experience to improve the marketability of properties and increase their value.
In the 2005 financial year, IVG invested €385.5 million in its own real estate portfolio.
The focus was on Hamburg, Munich and Paris, locations with good economic prospects, as well
as on the cavern location Wilhelmshaven. Notably in Germany, IVG aims to exploit the emerging
upswing from the outset. One special event was the complex property swap carried out with the
shopping centre specialist Rodamco Europe. IVG was able to exchange its shares in a Finnish
shopping centre among other things for office properties in Munich and Paris.
Purchases in the 2005 financial year
• As part of the swap with Rodamco Europe, IVG acquired the two properties Rue Marceau and
Avenue Pierre 1er de Serbie in Paris with 5,300 m2 of lettable space and a 14,000 m2 office
building on Munich’s Arnulfstrasse. The vacancy rate on acquisition was 18%. The building
offers significant development potential.
• In Munich, IVG bought an office building on Sonnenstrasse near Karlsplatz with 15,000 m2 of
lettable space and a 25% vacancy rate. Here, too, there is great potential for value enhancement through space development and re-letting.
• In Hamburg, IVG acquired a fully let office property near the airport housing the headquarters
of a major international corporation. The property has 25,000 m2 of lettable space.
• In Etzel near Wilhelmshaven, IVG bought 33 oil and gas storage caverns for €132 million.
Selling
IVG sells properties after modernizing or upgrading them by concluding long-term tenancy
agreements with tenants of strong financial standing. In 2005, IVG sold portfolio properties worth
over €227 million.
Disposals in the 2005 financial year
• An office property with 12,100 m2 of lettable space in Helsinki and a 75,000 m2 development
site for housing construction in the greater Helsinki area were sold.
54
• In Helsinki, the company swapped its stake in the Jumbo shopping centre for office properties
and €55 million in cash. At the same location, a retail property with 15,600 m2 of lettable space
and another 5,800 m2 shopping centre in the greater Helsinki area were sold.
• In Milan, IVG sold a 21,000 m2 office property on Piazzale Lodi acquired in 2002.
• In Brussels, we sold a 4,900 m2 office building on Place St. Lambert.
• In the Nordostpark in Nuremburg, an office building containing 50,000 m2 of office and laboratory space used by Lucent Technologies was sold to a private investor.
• In Schrobenhausen, a specialized property (465,077 m2 of land with 30 individual buildings)
was sold to the tenant.
Letting
Improvements in the letting of office buildings are reflected very strongly in their market value.
Such improvements include concluding long-term tenancies with customers of strong financial
standing. IVG let out property totalling 250,000 m2 in the 2005 financial year, compared with terminations relating to 206,000 m2.
The year-end effective occupancy rate in the IVG real estate portfolio increased from 93.0% to
94.5%. The overall occupancy rate in Europe was only 90.8%. Capacity utilization in the IVG portfolio is thus significantly better than the industry average.
Top 10 tenancy deals and renewals by rent
Branch office
Property
Tenant
Rent
Mediolanum
Lettable space
in € p.a.
in m2
2,100,000
15,756
15,800
Milan
Fermi & Galeno
Helsinki
Sisustaja KOy
Kesko Oy
1,716,000
Helsinki
Vuorikatu 20
Senate Prop.
1,176,000
5,633
Paris
Rue d’Aguesseau
TTE
1,136,600
3,416
Helsinki
Kumpulantie 3
Senaatti-kiinsteitöt
1,022,842
6,860
Lisbon
Sony
Sony
927,272
4,479
Helsinki
Radiokatu
Suomen Liikunta ja Urheilu
846,156
5,883
Berlin
Montanstraße
Danzas
796,346
7,432
Madrid
Coslada
ITS S.A.
780,000
21,902
Berlin
Bundesallee
Federal Employment Agency
713,203
7,560
IVG tenancies by expiry date in % of net rental income/year
Rental trend Average monthly rents in €/m2
50
44.8
14
40
12
10
20
8
13.2
10
8.0
10.6
13.3
10.1
7.92
9.20
9.22
1999
2000
11.16
11.19
11.09
2001
2002
2003
13.60
13.43
2004
2005
6
4
2
0
0
2006
2007
2008
2009
> 2010
1
1998
1
Indefinite, with exit options in 2006 and 2007
55
Project development
IVG carries out project development – on its own and with partners. Our share of development
projects currently amounts to €1.1 billion. Capital committed stood at €394 million at the end of
2005 and has since been further reduced.
Principles
IVG’s project development activities are based on the following principles:
• IVG develops projects only in locations where it has branch offices. IVG is familiar with the
markets there, and marketing opportunities can be reliably evaluated with internal and external
experts.
• Projects are only begun if they satisfy the same strict quality criteria as properties acquired
for our own portfolio.
• Projects are carried out with general project contractors of strong financial standing.
• We do not start building until an adequate level of pre-letting is assured.
• Our central controlling function monitors all projects and carries out variance analyses at an
early stage.
Project development, by region and type of use
Berlin 8%
Düsseldorf 3%
Brussels 12%
Budapest 3%
Helsinki 2%
Frankfurt 24%
London 18%
€1.1 billion
Other 8%
€1.1 billion
Office 92%
Hamburg 1%
Munich 3%
Poland 2%
Paris 24%
International projects
London
Demand for modern rental space in the City and West End is high. IVG is developing two projects
in Europe’s largest and most transparent property market:
• The former headquarters of Lloyds TSB in the City at “14 Cornhill” with 15,500 m2 of lettable
space is being converted in a project running until 2007. The historical facade is being preserved
while the building is modernized and increased in height.
• A cylindrical office building with an attractive glass facade in Caxton Street near Victoria Station
with 5,300 m2 of lettable space will be completed in 2006.
Paris
The city centre and outskirts of Paris score very highly in the Jones Lang LaSalle “European
Regional Growth Index” (E-REGI). In Paris, IVG in association with AXA Real Estate Investment
Managers (AXA REIM) has for several years been developing numerous projects for the structured
real estate funds French Development Venture I and II. The following development activities took
place in 2005:
56
• Sale of the largely developed logistics park Paris-Oise near Charles de Gaulle Airport with
around 140,000 m2 of lettable space.
• Completion and sale of a pre-let office complex with 28,850 m2 of lettable space in Bois-Colombes
to an open-end real estate fund.
• Start of construction of an office complex containing a total of around 76,000 m2 of lettable
space in Suresnes. 31,150 m2 of the 39,800 m2 first phase is already let to Philips, and sale to an
insurance company has been agreed. The first phase will be completed in 2007, the second is
slated for 2009.
• Start of construction of an office property with 7,800 m2 of lettable space in Les Chartreux.
Completion is scheduled for 2007.
• Start of construction of an office building with 12,900 m2 of lettable space in Neuilly, which will
also be completed in 2007.
• Start of construction of a building at the new central office location “Rive Gauche” in Paris with
12,600 m2 of lettable space, including 3,200 m2 retail, which is already completely let.
Other European locations
• In Brussels, IVG completed the development project Madou Plaza at the beginning of 2006. The
33-storey Madou Plaza marks the tallest point in the Belgian capital. It was completely renovated
and extended to around 40,000 m2 of lettable space. The building was sold to the European
Commission at the start of 2006.
• In Budapest, Building C in the Infopark with 13,400 m2 of lettable space was completed and fully
let in 2005. Tenants include T-Systems, Nissan Hungary and a state-owned technology support
agency. At the start of 2006, this building together with development projects completed in
previous years was sold to a German issuer of closed-end real estate funds. Construction of a
further building containing 17,500 m2 of lettable space has begun.
• In Geneva, IVG renewed and partially re-let a 13,400 m2 property on Rue de Lausanne and sold
it to a private investor.
• In Helsinki, the 28,400 m2 second phase of the Jumbo shopping centre was completed in 2005.
With a total of 85,000 m2, it is one of the largest in Finland. IVG swapped its stake in the centre
with Rodamco Europe for properties in Paris and Munich, a right of first refusal on a project
development in Paris and a cash payment.
• Also in Helsinki, IVG began modernizing the Vuorikatu office building with 7,400 m2 of lettable
space. Scheduled for completion in 2006, the majority of the space is already let to the Finnish
interior ministry.
Projects in Germany
• In Berlin, numerous interesting developments are planned, including Unter den Linden and
Hackescher Markt, which we will begin building when an adequate level of pre-letting is assured.
• In Wustermark near Berlin, IVG, acting for the AXA/IVG logistics fund, will build a logistics
centre with 8,500 m2 of warehouse space and 2,040 m2 of office space for DHL. The project will
be completed at the end of 2006.
• In Düsseldorf, the third phase of the office project Global Gate with 11,000 m2 of lettable space
will be completed shortly. The first two phases were let and sold in previous years.
• In Frankfurt am Main, IVG held a 50% stake in the development of the new German headquarters
of Nike with 8,100 m2 of lettable space. The property has already been sold to an institutional
investor prior to completion.
• Also in Frankfurt, IVG – together with Fraport AG – is planning to build a nine-storey “horizontal
high-rise” above the ICE airport railway station. The 128,000 m2, 660 metre long Airrail Center is
due for completion in 2008/2009. The start of construction is scheduled for 2006.
57
Investment funds
Issuing, marketing and managing real estate investment products and asset management for
third-party real estate portfolios supplement IVG’s activities and offer synergies with the management of its own portfolio. Such synergies arise at all stages from purchasing through property
management (including letting and upgrading) and on to selling.
The timing of cash flows complements IVG’s other activities. Whereas portfolio management and
project development involve heavy initial outlays, setting up and marketing investment funds earn
fee revenues up front. The ongoing fees for asset and fund management are largely unaffected
by the business cycle. In some cases, we collect a performance fee on exit.
IVG has thus positioned itself in a rapidly growing market. According to Cushman & Wakefield,
investment totalled €153 billion in Europe during 2005 and will grow globally by about 29% in
2006, with the weight distribution shifting towards indirect investments.
At the beginning of 2006, IVG managed property worth €9.7 billion for institutional investors and
a further €2.9 billion for private investors.
Investment funds, by region and type of use
Benelux 15%
Berlin 16%
Retail 10%
Iberia 5%
Düsseldorf 8%
London 9%
€13.8 billion
Logistics,
commercial 3%
€13.8 billion
Frankfurt 8%
Office 73%
Milan 2%
Other 14%
Hamburg 3%
Munich 10%
Other 7%
Paris 14%
Stockholm 3%
Closed-end funds for private investors
Private investor interest in the EuroSelect series of closed-end funds grew significantly in 2005.
IVG marketed a total of €170.0 million in equity in these funds, 92.3% up on the previous year. It
moved up to eighth place among German issuers.
IVG is positioned in the upper quality segment. The EuroSelect funds offer investments in office
properties at good micro-locations in European metropolitan regions, with high quality buildings
let on a long-term basis to tenants of good financial standing. The investments are conservatively geared, and advantage is taken of tax breaks. The exacting standards applied to the properties
invested in lead to respectable dividends and enhance their potential for value growth.
Investment in 2005 focused on funds with properties in London. The London office market is characterized by strong growth, a high degree of fungibility and a favourable tax position for German
investors. IVG also has local expertise through its London branch office.
The EuroSelect series was supplemented by a ‘Holland’ fund in 2005.
58
Independent rating agencies confirm IVG’s quality strategy. It received the Scope Award in 2005
for the best issuing company in the European closed-end real estate funds category. Rating agency
Feri gave the EuroSelect 11 fund a score of A (‘Very Good’), Scope designated the quality of the
fund in its portfolio ratings as AA (‘Very High’), and in the opinion of FondsMedia, “EuroSelect 11
presents a compelling case, offering an excellent combination of location, building and tenants.”
IVG anticipates an improvement in its market position as a result of recent and planned changes
in the tax rules on property and shareholdings. While tax savings from apportioned losses continue to wane in importance, return on investment is set to become even more important as a
quality criterion in fund selection. High tax allowances in countries like the United Kingdom are
made even more attractive to German investors by the planned reduction of tax allowances on
savings in Germany.
Initiator
Marketed equity in 2005
€m
MPC
364.0
Jamestown
299.4
DCM
286.8
Sachsenfonds
232.3
Bankhaus Wölbern
203.1
CFB
191.6
ALCAS/KGAL
178.6
IVG
170.0
SHB
109.5
debis
105.0
Source: Stefan Loipfinger, Marktanalyse der Beteilungsmodelle 2006 (market analysis of investment schemes 2006)
For 2006, IVG aims to increase the amount of equity marketed to above €200 million and to
boost earnings beyond €10 million. We anticipate further increases in earnings for future years.
IVG is examining Paris, Switzerland, Milan and Germany as new locations for investment fund
properties.
Institutional funds and structured products for institutional investors
Institutional investors are showing rapidly growing interest in real estate investment vehicles.
Property is viewed as an investment product with good growth perspectives. Its good risk/return
profile fills the gap between bonds and shares. At the same time, institutional investors increasingly prefer to leave the task of acquiring and managing property investments to specialized
firms. They therefore invest in bespoke financial products rather than individual properties, and
seek real estate investment products that are professionally managed and designed around their
individual needs. IVG serves this market with institutional funds – ‘Spezialfonds’ as defined in
Germany’s Investment Act (InvG) – and structured investments.
Since 2004, IVG has been the majority shareholder in OIK. This company increased its real estate
assets under management in 2005 to €9.7 billion – up 10% from the previous year’s €8.8 billion.
Over the past year, OIK invested €940 million in 33 properties spread across nine different countries, and made 18 sales for a total of €330 million. Through its 29 funds, OIK manages 522 properties in twelve countries, totalling 3.5 million m2 of lettable space.
59
Most of OIK’s institutional investors are based in Germany, followed by Luxembourg, the Netherlands, Austria and Switzerland. They include leading European insurance companies, pension
funds and similar. With a 43% market share (on a gross fund volume basis), OIK is market leader
in the growing institutional funds segment. Key developments in 2005 included the healthy performance of OIK’s US funds and its purchase of a portfolio comprising eight retail properties in
Sweden with a total value exceeding €280 million.
In the current year, OIK plans to increase its assets under management to well in excess of
€10 billion.
OIK contributed €17.6 million to IVG’s consolidated net income for the 2005 financial year.
Structured products
Alongside institutional funds, IVG also develops structured products for institutional investors.
The European Logistics Income Venture (ELIV), an investment fund covering high-income properties in the growth market of logistics, was launched in cooperation with AXA REIM in 2004. The
fund had acquired properties and developments for some €37 million by 31.12.2005. It has €300
million in equity capital and a planned investment volume of over €1.2 billion. Upwards of ten
institutional investors can take shares in the fund alongside IVG and AXA. The fund is intended
to generate a 14% internal rate of return.
EuroSelect Developmentfonds is a mezzanine fund invested in German property developments.
Issued jointly by IVG, IKB Deutsche Industriebank and Sal. Oppenheim Bank, it invests in joint
ventures with experienced regional developers. The fund finances and actively follows projects
in major German cities. The focus is on office properties in preferred metropolitan locations.
Capital is provided to project companies in equity and mezzanine tranches, the latter constituting
a source of ongoing income for the fund. The envisaged internal rate of return is 15%.
Closely connected to the investment business is asset management for third parties. Investors in
IVG’s financial investment products generally entrust their properties to it for management, and
purchasers of former IVG properties frequently choose to do likewise. IVG also offers asset management as a service. In 2005, it began managing the portfolio of an occupational pension fund
with ten properties worth a total of €170 million. IVG achieved successes in letting and also
effected sales under this contract in 2005.
1.3 Organization of management and control
The IVG Group is structured around an operationally active parent company, with operating activities directly tied to the Board of Management of IVG Immobilien AG. All cross-sectional functions
are located at the Group’s Bonn headquarters and their directors report directly to the Board of
Management. The company’s European branch offices are profit centres in their own right. They
report on their business results directly to the Board of Management and the Group financial
control function, and liaise on operational matters with cross-sectional function directors.
60
1.4 Products and business processes
IVG offers various products for third parties alongside investments in its own real estate portfolio
and in project developments and funds:
• Office and logistics properties (including oil and gas storage caverns) for rent
• Office and logistics properties for direct sale
• Closed-end real estate funds for private and institutional investors
• Institutional investment funds – ‘Spezialfonds’, as defined in Germany’s Investment Act (InvG)
• Structured real estate investment funds for institutional investors
• Real estate portfolio management for third parties
For all products, IVG assigns property-related operational responsibilities to its European branch
office network.
1.5 Markets served and competitive situation
IVG is a European real estate investment house. On the procurement side, it competes with German
and international investors. As IVG is one of the few real estate companies that invest across
Europe and concentrate on portfolio transactions, its competitors are mostly native to domestic
markets or are opportunity funds focused on financial transactions.
Various competitors can be identified in the markets served:
• In property letting, IVG competes in each instance with other properties of comparable quality
and location.
• The competitive situation regarding direct sales of property to major institutional investors is
currently favourable due to strong demand for office real estate from international investment
capital.
• In marketing closed-end real estate funds to private investors, IVG competes with German
issuers who likewise offer internationally investing closed-end real estate funds to the German
private investor customer segment.
• Rivals for OIK’s institutional fund products comprise bank investment companies that set up
competing institutional funds. The customers are mostly German financial intermediaries such
as pension funds and insurers.
• Structured real estate funds for institutional investors are not widespread on either the issuer
or the investor side in Germany. On the issuer side, IVG competes with real estate investment
companies from the UK, the Netherlands, Sweden and the USA. The customers of these funds
are international financial intermediaries such as pension funds.
1.6 Legal and economic factors
IVG Immobilien AG is a German, MDAX-listed real estate company with investments in Western
and Central Europe. Developments in company, property and building law, the tax framework
and double taxation agreements between Germany and relevant countries are taken into account
in investment and divestment planning. An issue of special importance is the real estate investment trust (REIT) – a tax-transparent form of listed real estate company that has been introduced
so far in Europe by France, the Netherlands and Belgium. The introduction of REITs in Germany
and the United Kingdom is currently being debated. REITs started in the USA. They have come to
be seen as a global industry standard for listed real estate companies, and are set to play a major
role in the structuring of real estate transactions.
The business cycles of the European property letting and investment markets remain key parameters for IVG’s anticyclic investment strategy and are closely watched as part of the company’s
in-house European research activities.
61
2 The business year
2.1 Overall economic parameters
For IVG, key economic factors are the growth and investment of companies. The performance of
the service sector has a direct impact on the number of office jobs and hence on demand for office
space. On the other hand, private consumption, overall saving and spending rates and unemployment are of less direct importance. Our logistics real estate operations are influenced particularly
by the performance of the oil and gas markets. In our investment funds business, the factors
mentioned above impact ongoing rental income, the value of properties and therefore the attractiveness of our investment products. Other important factors are competition from alternative
investment vehicles and their opportunities and risks. Here, interest rate levels and the performance of the stock markets are major influential parameters.
Economic situation
Europe’s economic prospects are brightening. The export markets are growing thanks to increasing global economic activity. Domestic demand is also tangibly picking up. Global economic output increased by 4.3% in 2005. The European Commission’s Directorate General for Economic
and Financial Affairs forecasts more or less equally strong global growth in 2006 and a slight
decrease in 2007. In the EU, this slight reduction will be offset by an increase in internal demand.
This will be driven by investment, which is forecast to rise by 7% in each of 2006 and 2007. The
European Commission forecasts growth in the number of jobs by around 4 million for 2006 and
2007. The greatest potential lies in the service sector, which is also key to IVG’s business.
Overall EU economy Growth rates (%)
2002 1
2003 1
2004 1
2005 2
2006 3
2007 3
2.4
BIP
1.2
1.2
2.4
1.5
2.1
Private consumption
1.6
1.6
2.1
1.6
1.6
2.1
Investment
–1.2
0.8
3.0
2.3
3.5
3.6
Employment
0.4
0.2
0.6
0.9
1.0
1.0
Employment (million persons)
0.8
0.4
1.3
1.9
2.1
2.0
Inflation
2.1
1.9
2.1
2.3
2.2
1.9
Source: European Commission, Directorate General for Economic and Financial Affairs
1
until 2004: 15 EU member countries
2
Estimate November 2005
3
Forecast November 2005
The strongest growth will be enjoyed by Spain, the UK, Ireland, Sweden, Finland and the new EU
members in Central and Eastern Europe. The three large Central and Southern European countries Germany, France and Italy will lag behind, although the growth forecasts for Germany have
recently been revised upwards.
62
Economic growth of selected European countries Growth rates (%)
Gross domestic
product
2005 1
2006 2 2007 2
Equipment
investment
Investment
2005 1
2006 2 2007 2
2005 1
Inflation rate
2006 2 2007 2
Jobs
2005 1
2006 2
2007 2
2005 1
2006 2
2007 2
Belgium
1.4
2.1
2.0
4.9
3.9
2.2
5.4
4.2
4.1
2.9
2.7
2.0
0.7
0.6
0.7
Germany
0.8
1.2
1.6
–0.5
1.6
2.0
4.2
4.7
4.6
1.7
1.6
1.1
0.3
0.5
0.4
Finland
1.9
3.5
3.1
1.3
3.2
3.3
0.3
4.9
4.1
1.5
1.1
1.0
1.3
0.7
0.7
France
1.5
1.8
2.3
2.6
3.0
3.4
4.7
3.8
4.3
1.3
1.7
1.6
0.1
0.5
0.9
UK
1.6
2.3
2.8
2.7
3.9
4.2
2.2
3.7
4.0
2.4
2.4
2.0
0.6
0.4
0.6
Italy
0.2
1.5
1.4
–0.8
2.8
2.2
–3.1
2.7
2.6
2.0
2.1
1.9
0.5
0.6
0.6
Spain
3.4
3.2
3.0
6.5
5.3
4.5
6.5
6.0
5.0
3.7
3.4
2.9
3.0
2.4
2.2
Hungary
3.7
3.8
3.9
7.0
6.8
6.6
4.1
–3.9
7.2
3.6
2.1
3.0
0.4
0.6
0.3
1
Estimate November 2005
2
Forecast November 2005
Major cities in which company headquarters and company-related services are located will be
among the gainers in this scenario. IVG is focused on these major cities.
Economic policy measures
Interest rate policy
The European Central Bank’s key interest rate is expected to increase slightly. In December 2005,
it was increased for the first time in five years by 25 basis points to 2.25. Further small increases
can be expected to follow. Consequently, bond interest rates can also be expected to rise to a
limited extent. Overall, this is not likely to result in a significant decline in real estate investment
business. Alongside the general growth expectations for Europe, demand for investment products
will remain high. Although the yields of real estate investment products have fallen, they remain
attractive because the interest rates on bonds, which are potential alternatives to real estate
investments, have also decreased (see table below).
Interest rates 1
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Belgium
5.5
6.5
5.8
4.8
4.8
5.6
5.1
5.0
4.2
4.2
3.4
Germany
5.2
6.2
5.6
4.6
4.5
5.3
4.8
4.8
4.1
4.0
3.3
Finland
5.6
7.1
6.0
4.8
4.7
5.5
5.0
5.0
4.1
4.1
3.3
France
5.3
6.3
5.6
4.6
4.6
5.4
4.9
4.9
4.1
4.1
3.4
UK
6.2
7.9
7.1
5.6
5.0
5.3
5.0
4.9
4.6
4.9
4.5
Italy
6.3
9.4
6.9
4.9
4.7
5.6
5.2
5.0
4.3
4.3
3.5
Portugal
6.0
8.6
6.4
4.9
4.8
5.6
5.2
5.0
4.2
4.1
3.4
Sweden
6.0
8.7
6.4
4.8
4.7
5.5
5.1
5.0
4.1
4.4
3.4
Spain
6.0
8.0
6.6
5.0
5.0
5.4
5.1
5.3
4.6
4.1
3.4
Hungary
–
–
–
–
9.9
8.6
8.0
7.1
6.8
8.2
6.4
Euro countries
total
7.4
6.1
5.5
4.8
4.7
5.4
5.0
4.9
4.1
4.1
3.3
for comparison:
USA
6.0
6.5
6.5
5.3
5.6
6.0
5.0
4.6
4.0
4.3
4.3
1
Interest rates for ten-year government bonds.
63
Changes in German tax legislation
IVG’s business is affected by recent and planned tax restrictions on private investors:
• Planned cuts in capital gains tax allowances indirectly favour investment funds that invest in
countries with higher tax allowances such as the UK. Under double taxation agreements between
Germany and other countries, German investors are subject to the tax rules of the country where
capital gains are realized.
• A recent change to Section 15 of the German Income Tax Act (EStG) restricting the offsetting
of losses from investment funds against income from other sources does not affect closed-end
funds issued by IVG, which are designed to generate profits rather than apportionable losses.
• A planned 20% capital gains tax on shares may superficially reduce the appeal of shares as an
investment medium, but is still significantly below the tax rate on other gains like interest
income and private rental income.
Social policy developments
With the state pensions system in crisis, property is gaining in popularity as a private investment
and provision for old age. According to a study by UBS Real Estate, real estate investments account
for about 14% of the $44 trillion worth of assets held by the largest pension funds worldwide.
The figure for other institutional investors is far smaller, at 3% to 5%. Many institutional investors
expressly aim to increase this proportion to between 15% and 20% in the medium term. The absolute
volume invested by institutions is also increasing, with particularly strong potential from pension
funds. The resulting relative and absolute increase in property investment is boosting demand on
property markets. The trend within real estate investment strategies is towards indirect investment. According to UBS, institutional investors worldwide currently hold 54% of their real estate
portfolios in property they own themselves and aim to cut this proportion to about 46% by 2007.
Demand will therefore grow particularly strongly for indirect forms of investment like those offered
by IVG: real estate shares, closed-end real estate funds and German institutional investment funds
(‘Spezialfonds’). Investors wanting to keep their own property holdings demonstrate increasing
demand for professional real estate management.
The issues of valuing and closing open-end investment funds do not directly affect IVG. Recent
adjustments to property valuations have brought home to the public the advantages of real estate
shares: strong transparency in listed companies, investment and divestment driven by market
developments rather than positive or negative cash flows, the fungibility of shares, and frequent
verification of portfolio valuations by market transactions.
Exchange rate changes
The impacts of exchange rate changes are described in the Risk Report (Section V).
64
2.2 Industry-specific parameters
Real estate activity in Europe
In 2005, the European real estate sector recovered significantly from the crisis that followed the
collapse of the New Economy. This is shown in studies by the real estate consultants Cushman &
Wakefield (CW), with whom IVG cooperates in real estate research. Rental turnover on the main
European office markets has increased markedly. Almost 9 million square metres of office space
was let in the main European metropolises, an increase of 9% compared with 2004. Vacancy rates
in most major European office markets were lower at the end of 2005, averaging 9.2%. Peak and
average rents are stable and beginning to rise once again.
The office markets in the EU accession countries showed the greatest momentum. Vacancy rates
decreased significantly to only slightly over 10%. Strong demand in these countries is resulting
in high property prices and lower yields, which fell on average to 6.6%.
By comparison with the rest of Europe, German locations are becoming more attractive again
for office investments. With yields between 5.25% and 6%, it is possible to invest in high-turnover,
low-risk office markets which now have upside potential after the economic decline. IVG prepared
for the upturn with real estate purchases in promising German locations such as Munich and
Hamburg in 2005.
Paris and London, by far the largest and highest-turnover office markets in Europe, continue to
perform positively. Demand is high and supply is low. Yields for properties in top locations
decreased to 4.5% in London and 4.75% in Paris. Strong phases in the real estate market such as
are currently being experienced in Paris and London can be exploited through project development. In both locations, IVG is involved in development projects which will be completed in 2006
to 2007.
Real estate investment markets
Investment in real estate has been increasing globally for many years. According to service
providers Jones Lang LaSalle (JLL), some $550 billion was invested in real estate worldwide in
2005 – 20% up on 2004.
For Europe, the Royal Institution of Chartered Surveyors (RICS) expects interest in investment to
continue rising strongly. The property experts at CB Richard Ellis note that demand for property
investments is set to increase further due to private pension provision. European pension funds
already invest about €24 billion a year in property.
The high demand is met by increased supply. Over the next few years, German firms will part with
some €50 billion worth of property and invest the released capital more profitably in their core
business. This is the conclusion of a study by Forschungscenter Betriebliche Immobilienwirtschaft
(FBI), a real estate industry research centre at Darmstadt Technical University. Even more property
is coming onto the market from privatization, with a number of large-volume transactions already
effected in 2005.
65
Competitive environment for logistics real estate
Alongside office properties, IVG also owns logistics facilities storing petroleum and natural gas
in caverns and tank farms. The Etzel caverns facility is Europe’s largest subterranean oil and gas
storage location. Holding oil and gas reserves is increasingly vital. With large swings in prices
and supply, there is a growing need for intermediate storage facilities that act as a buffer to
increase supply security and aid price stability.
Real estate investment trusts (REITs)
General elections and the formation of a new government heralded key policy changes for the
German real estate industry in 2005. In a particularly positive development, the new coalition
agreement provides for the introduction of real estate investment trusts (REITs). Given a suitable
legal framework, REITs will bring further dynamism and professionalism to property markets. By
rapidly adopting REITs, Germany can become one of the leading investment and capital markets
for real estate.
2.3 Key developments in the 2005 financial year
Key developments comprised the purchase of a government storage caverns facility and its letting to tenants of first-class financial standing, a swap deal with Rodamco Europe, and dynamic
growth of the closed-end real estate funds business with the marketing of €170 million worth of
equity in EuroSelect funds.
• With effect from 1.4.2005, IVG acquired the German government’s 33 oil and gas caverns at
Etzel near Wilhelmshaven for €132 million. The caverns are subterranean cavities in salt
deposits and provide safe, environment-friendly storage for large quantities of natural gas and
petroleum. IVG set up the facility in the mid-1970s and has run it on behalf of the government
ever since. Together with seven caverns let on a long-term basis and already belonging to IVG,
the Group now has nine gas and 31 oil caverns at Etzel. The acquisition has had a positive
effect on consolidated net income from the outset.
IVG’s caverns business has long generated steady long-term cash flow returns in excess of 10%.
The oil caverns store parts of the German, Dutch and Portuguese statutory strategic reserves on
behalf of organizations appointed to look after these reserves. There is also a long-term tenancy
with Etzel Gaslager, a gas storage consortium whose main members are Germany’s E.ON Ruhrgas
and Norway’s Statoil. Letting the caverns on a long-term basis to tenants of first-class financial
standing made it possible to refinance the purchase on favourable terms.
IVG secured tenants in 2005 for all twelve oil caverns standing vacant at the time of purchase.
A contract to use eleven of these for gas storage was signed with E.ON Ruhrgas AG. They will be
successively converted from oil to gas use by 2009. The tenancy runs to 2043. At the end of May,
the company also reached agreement with Norway’s Statoil ASA on early renewal of an existing
contract for the use of nine gas storage caverns. The extended contract likewise runs to 2043.
The IFRS accounting standards require it to be accounted for as a finance lease, producing (at a
6% discount rate) a book gain of €58.8 million.
With sufficient demand, IVG can at least double the cavern storage capacity at Etzel. The outlook
for this is good given the steadily expanding market for energy storage and the facility’s strategically advantageous geographical position. IVG has already begun creating three new caverns in
2006.
66
• Another key development was a swap deal with the Dutch Rodamco Group, under which IVG
purchased two office properties in Paris and one in Munich while selling its interests in the
Jumbo shopping centre in Helsinki for approximately €135 million. IVG also received a compensatory €55 million in cash plus a right of first refusal on an office development in Paris.
The swap reaffirms IVG’s ability to orchestrate complex transactions that set it apart from the
increasingly fierce price competition on the office real estate market.
The acquired office properties are at preferred office locations and offer scope for development,
letting and value growth: The two Paris properties with lettable space totalling 5,300 m2 and the
development project with about 3,000 m2 are in the eighth Arrondissement, near the Arc de
Triomphe. The Munich office property has 14,000 m2 of lettable space and is on Anulfstrasse near
the main railway station.
• IVG continued its dynamic growth in closed-end real estate funds by marketing €170 million in
equity for its EuroSelect funds (versus €88 million in 2004 and €21 million in 2003).
The high quality of these funds secured IVG the 2005 Scope Award – Scope is an independent
rating agency – for the best issuing company in the European closed-end real estate funds category. The award justification read: “High product quality combined with strategic foresight have
made the issuer the market leader in this segment in a very short time.”
In spring, IVG rapidly completed marketing the EuroSelect 08 fund based on One Neathouse Place
in London’s West End (fund size €118 million, equity €62 million). A EuroSelect 09 fund followed
in March (fund size €170 million, equity €81 million) and was fully marketed in a matter of a few
weeks. EuroSelect 09 allows private investors to take shares in the architecturally outstanding
Riverside House office property on London’s South Bank. Another fund marketed in its entirety in
2005 was EuroSelect 10, with an office property under long-term tenancy to DHL in the Dutch
growth region of Randstad.
Marketing of the EuroSelect 11 property fund began in November 2005 and was successfully
completed as early as February 2006. The fund, with an overall size of €186 million and equity
capital of €89 million, enables investors to buy into the Moorgate office building in London’s City
banking district. Erected in 2002, the building’s entire 14,000 m2 of lettable space is under tenancy
to banking giants JP Morgan Cazenove. It is managed by IVG’s London office for the lifetime of
the fund.
2.4 Appraisal of business performance
2005 was another successful financial year. All key performance indicators were up: Consolidated
net income increased by a substantial €74.9 million to €110.1 million and operating earnings
(EBIT) from €202.6 million to €242.6 million. In the course of 2005, we forecast that IVG’s consolidated net income would increase. In November, we made our forecast more specific, giving a
rough figure of €100 million. We have exceeded this figure. We also invested €534.9 million in
2005, laying the foundations for further profitable growth.
The IVG share price has brought out the company’s strong fundamentals and outlook. Including
dividends, it gained 51.8% over the course of the year, comfortably outperforming the DAX (27%),
the MDAX (36%) and the EPRA Index (25.8%).
All Group segments generated significantly higher operating earnings.
67
3 Group management
3.1 Internal management system
The Group’s European branch offices carry out operating activities comprising letting, care of
tenants, recruiting new tenants, property management, project development, and executing purchases and sales. Closed-end real estate funds are marketed through marketing partners. Purchases and sales of property are centrally initiated and executed locally by the branch offices.
The various business processes are managed on a Europe-wide basis from Group headquarters
by central Controlling, Funds, Communication and Marketing, Portfolio Management, Project
Development, Legal Affairs and Corporate Development departments.
3.2 Financial goals
IVG determines value creation by comparing cash flow return on investment (CFROI) with the
company’s cost of capital. CFROI is a measure of the ongoing return on total capital invested in
the business. The cost of capital is the minimum return that the capital market requires the company to generate. It is based on the return an investor can obtain on investments with a similar
level of risk, weighted to reflect the relative amounts of debt and equity (weighted average cost
of capital, or WACC):
WACC = Cost of Equity x Equity Ratio + Cost of Debt x Debt Ratio
IVG’s weighted average cost of capital is 6.8% to 7.0%. The value spread – CFROI minus WACC –
states the value growth on an investment.
3.3 Non-financial objectives
Through dependability and transparency, IVG has systematically earned the trust of employees,
shareholders, customers, suppliers and the public. We aim to safeguard and increase this reserve
of trust. This entails focusing on customers and dealing fairly with suppliers. We take our responsibilities towards employees and society seriously. We are committed to training young people,
providing attractive working conditions and systematic employee promotion for all age groups.
Accepting responsibility also means actively promoting sustainable development outside the
company. We support selected performing arts, fine arts and social projects.
3.4 Research and development
IVG’s research and development activities focus on pan-European property and capital market
research undertaken with partners such as Cushman & Wakefield and TNS Emnid.
68
II Financial review
1 Earnings
Turnover (€ m)
2005
2004
2003
426.0
507.3
496.1
Total operating income (€ m)
640.1
613.0
643.2
Net interest and investment income (€ m)
–90.9
–106.1
–70.2
EBITD (€ m)
298.7
264.7
261.1
70.1
52.2
52.6
242.6
202.6
183.9
EBITD (% of turnover)
EBIT (operating earnings) (€ m)
EBIT (% of turnover)
EBT (consolidated net income before tax) (€ m)
EBT (% of turnover)
EBD (€ m)
EBD (% of turnover)
56.9
39.9
37.1
151.7
96.5
113.7
35.6
19.0
22.9
149.4
118.4
161.5
35.1
23.3
32.6
110.1
74.9
107.5
Consolidated net income (% of turnover)
25.8
14.8
21.7
Undiluted earnings per share (€)
0.83
0.61
0.91
Consolidated net income (€ m)
1.1 Earnings performance
Consolidated net income for 2005 was a record €110.1 million, 47.0% up on the previous year.
Other indicators grew similarly in line with the healthy business performance – EBIT by 19.7%,
EBITD by 12.8%, EBT by 57.2% and EBD by 26.2%. Major contributing factors included letting
successes, a finance lease on nine gas caverns (€58.8 million), and book gains on property sales
(€114.3 million).
1.2 Key income statement items
Turnover amounted to €426.0 million in 2005. The €81.3 million year-on-year decrease reflects
the fact that the prior-year figure included €110.5 million in turnover from construction contracts.
These contracts were completed in 2005.
€33.3 million of the 2005 turnover figure comprised contract revenues. Net rental income from
investment properties totalled €223.8 million, compared with €235.8 million in 2004.
The turnover figure also includes €90.1 million in commission and fees for investment fund management (up from €43.7 million in 2004).
Material expenses decreased to €62.4 million (2004: €129.4 million). This is mostly accounted
for by reduced expenses for project developments. The 2004 figure included contract costs under
IAS 11.
Personnel expenses increased from €66.4 million to €79.4 million, mainly due to the inclusion of
OIK for the first time and to expenses for share option plans.
69
Depreciation and amortization decreased by €6 million due to lower impairment losses in 2005.
Investment property expenses stayed more or less constant, at €58.1 million.
Other operating expenses increased from €103.0 million to €120.3 million, primarily due to higher
levies, fees and banking charges (early redemption penalties). All data processing expenses
(€10.4 million) are reported in a separate item for the first time as data processing has been outsourced.
The negative income from associated companies accounted for using the equity method is mainly
due to impairment losses on receivables for activities in Berlin.
Income from participating interests was likewise negative, at minus €7.4 million (2004: minus
€4.0 million). The negative figure is partly accounted for by fair value adjustments.
Net interest and investment income improved to a negative €90.9 million due to increased interest and investment income and reduced interest expenses (2004: minus €106.1 million).
Net income before tax increased from €96.5 million to €151.7 million.
Income tax totalled €41.6 million (2004: €21.6 million). Most of the increase comprises a provision
for tax payable to the Belgian revenue authorities.
Undiluted earnings per share rose from €0.61 to €0.83.
2 Finances
Financial management
Group financing activities are centralized. International subsidiaries are integrated into an electronic
cash pool to further enhance efficiency. The central treasury allows IVG to exploit cost-effective
capital procurement opportunities and improve net interest income, and to manage interest rate,
exchange rate and liquidity risk at Group level. Regular reporting to the appropriate boards and
committees is a key part of the IVG risk management system.
Capital structure
Bank loans totalled €2,064 million at the year-end, compared with €2,179 million a year earlier.
The decrease represents the balance of:
• Loans repaid on sales of property (€797 million)
• Changes in the reporting entity (€118 million)
• New borrowing (€800 million)
A major item in this connection was the purchase and refinancing of German government storage caverns.
Bank loans (€ m)
Bank loans/total assets (%)
2005
2004
2003
2,063.6
2,178.6
2,205.7
56.0
60.3
59.7
2,300.2
2,296.9
2,272.2
Financial liabilities/total assets (%)
62.4
63.6
61.5
Equity ratio (at book values) (%)
23.8
22.7
21.8
Financial liabilities (€ m)
The lion’s share of bank loans (83%) are denominated in euros, followed by Swiss francs (9%)
and pounds sterling (5%).
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IVG made intensive use of its commercial paper programme to diversify finance sourcing in 2005.
The commercial paper programme comprises mostly short-term debt issued by IVG Immobilien
AG up to an aggregate amount of €200 million and bearing an average interest rate of 2.6%.
Several issues were made over the course of the financial year. IVG had €160 million in commercial paper outstanding at the end of 2005, enabling it to exploit market opportunities at short
notice. Industrial companies held 80% of this figure, investment funds 8%, private investors 3%
and banks 9%.
At the end of July, IVG entered into a new syndicated loan facility (for €750 million over five years),
superseding its previous syndicated loan facility ahead of time (originally for €500 to expire
November 2006). Further long-term lending commitments were also obtained from banks during
2005. As a result, the total liquidity resources available to IVG now amount to €991 million.
Sources of finance and terms of available bank facilities € m
Short-term
Up to 5 years
Cash equivalents
Total
422
477
92
991
Under forfaiting arrangements used by IVG since 2003 as another particularly cost-effective source
of credit, receivables from letting out storage caverns are assigned to banks in return for loans
equal in amount to the present value of the rental income. Much of the €181 million obtained by
this route in 2005 was used to refinance a purchase of storage caverns from the German government. The nominal amount of cavern rentals forfaited in 2005 was €223 million. At the balance
sheet date, financial liabilities under all forfaiting arrangements totalled €234 million.
Further information on bank loans, detailing their term structure, currency breakdown and the
types and amounts of security furnished, is provided in section 7.2 of the Notes to the Consolidated Financial Statements.
There are no off-balance-sheet financial instruments of material significance to the company’s
net asset position.
Interest
Interest rate exposures and loan maturities are geared to the investment portfolio and reflect the
typical duration of investments in real estate. Most bank loans across the IVG Group are fixedinterest. IVG hedges specific variable-interest bank loans, chiefly with derivative financial instruments (payer swaps). To optimize net interest income while allowing scope for implementation
of the active buying and selling strategy and the related short-term, intra-year cash flows, the
variable-interest share of borrowing is limited to 30%.
Systematic use is made of derivative financial instruments to reduce risk due to exchange rate
and interest rate changes in IVG’s Europe-wide activities. For this purpose, the company solely
uses marketable instruments with sufficient market liquidity. Contracts involving derivative financial instruments are entered into exclusively with major European banks of immaculate credit
standing to ensure the lowest possible risk of counterparty default. The use of derivative financial
instruments is subject to uniform internal guidelines.
Further information on derivative financial instruments is provided in section 7.3 of the Notes to
the Consolidated Financial Statements.
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Cash flow statement
Cash inflow from operating activities
2005
2004
€m
€m
110.1
74.9
65.3
18.8
Cash outflow from investing activities
–184.7
–64.9
Cash inflow from financing activities
147.0
57.8
27.6
11.7
Net change in cash and cash equivalents from operating activities
Changes in cash and cash equivalents due to exchange rate changes
0.1
0.0
–10.2
0.0
Cash and cash equivalents at beginning of year
74.5
62.8
Cash and cash equivalents at end of year
92.0
74.5
Contributions to plan assets
The cash outflow from investing activities increased sharply compared with 2004 as a result of
the company’s expansionary investment policy.
Investment was financed by new borrowing, issues of commercial paper, and the significantly
higher cash inflow from operating activities. The cash and cash equivalents totalling €92.0 million
as at 31.12.2005 are held available among other things to finance further investment.
Further information on the cash flow statement is provided in section 10.6 of the Notes to the
Consolidated Financial Statements.
3 Assets, liabilities and shareholders’ equity
2005
2004
2003
440.9
494.7
469.0
Non-current assets to total assets (%)
81.3
83.2
82.4
Current assets to total assets (%)
18.7
16.8
17.6
Equity to total assets (equity ratio) (%)
23.8
22.7
21.8
3,686.9
3,613.3
3,695.4
689.3
607.6
649.5
2,997.6
3,005.7
3,045.9
Non-current assets to current assets (%)
Total assets (€ m)
Current assets (€ m)
Non-current assets (€ m)
Equity to total capital (%)
Shareholders’ equity (€ m)
Financial liabilities (€ m)
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96.6
101.3
97.5
921.9
859.0
845.5
2,300.2
2,296.9
2,272.2
Consolidated balance sheet
Total assets increased from €3,613.3 million to €3,686.9 million. Most of the increase is accounted for by a rise in advance payments made and construction in progress, plus various domestic
and foreign development projects. Total non-current assets are virtually unchanged. Within this
total, however, €258.1 million in non-current assets held for sale are reported as a separate item
for the first time in accordance with IFRS 5. These mostly comprise the Hungarian portfolio sold
on 1. 2. 2006 and two Brussels buildings sold in early March 2006. Reclassifying these properties
reduced the figure for investment properties from €2,398.6 million to €2,080.8 million. Numerous
purchases and sales accounted for other changes in the investment properties item. These are
detailed in the Notes to the Consolidated Financial Statements, under section 6.2 ‘Investment
properties’ and section 3 ‘Consolidated group’.
Current assets increased from €607.6 million to €689.3 million, notably due to the reclassification
of assets held for sale. The reduction in receivables and other assets from €406.2 million to
€183.5 million is due to a decrease in amounts receivable under construction contracts accounted
for in accordance with IAS 11. No new construction contracts were accounted for under IAS 11 in
2005. The contracts included in the 2004 financial statements were completed and the properties
handed over in 2005.
Shareholders’ equity increased from €859.0 million to €921.9 million due to additions to revenue
reserves. Non-current financial liabilities decreased, mainly on repayment of long-term loans.
Current financial liabilities increased as a result of commercial paper issues.
The decrease in pension provisions mainly reflects the amount deducted from benefit obligations
for plan assets transferred to IVG Pension Trust e.V. in 2005. This amount included a €5.9 million
fair value step-up in accordance with IAS 19.
There are no materially significant off-balance-sheet assets. All such assets are contained in unconsolidated, inactive or shelf companies. All material activities are included in the consolidated balance sheet.
4 General appraisal of financial position and performance
IVG can look back on another successful financial year. Net income has set a new record. We have
systematically increased the scope for value growth in the Group’s asset base through our active
buy-and-sell policy and methodical use of development reserves. We have further improved the
company’s finance structure by issuing a new syndicated loan facility and refinancing acquisitions
on advantageous terms. We foresee the Group maintaining this positive trend.
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III Employees and corporate governance
1 Employees
“Passion for real estate” is our motto. It means that, for all our professionalism, we go about our
business with enthusiasm and identify strongly with our work. Our success depends crucially on
the skills and motivation of our employees, their commitment, as well as their personal and professional aptitude. Our personnel policy is focused on further education and individual development. Good opportunities, good working conditions and social benefits are an important part of
our corporate culture.
Employees by segment and qualification
Apprentices and trainees
27 (+7)
Vocational training and
additional qualifications
12%
Corporate functions
101 (–23)
Portfolio
management
327 (–37)
University 29%
2005: 821 employees
2004: 930 employees
Investment funds
business 296 (–4)
Project development
70 (–52)
Vocational training
59%
Collective agreement
Negotiations on a new collective agreement with the trade union ver.di were concluded on 14.7.2005.
The pay and conditions agreement was rewritten and revised. Working time has increased from
38.5 to 39 hours. An opt-out clause allows Christmas bonuses in future to be based on performance. Overtime bonuses will no longer be paid for overtime hours within a spread of one year.
Instead, employees will receive time off. Social benefits such as allowances and time off for special circumstances have been adapted to modern levels.
Trainee programme successfully continued
We recruited four new trainees in real estate management in 2005, the third year of our trainee
programme. Four of the previous year’s five trainees were retained to take on highly qualified
work. The twelve-month trainee programme was restructured. The trainees now pass through all
core areas of the company and are additionally assigned to a branch office outside Germany for
two months. This international assignment supports IVG’s Europe-wide focus and strengthens the
links between our Bonn headquarters and the branch offices outside Germany. The programme
is being continued in 2006 with an increased number of trainees.
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Initial vocational training
We accept responsibility for training young people. We currently have apprentices undergoing
training in real estate management, office communications and mechatronics. The number of
apprentices is to be increased in 2006.
Student placements/dissertation support
IVG enables undergraduates to gain initial hands-on experience in the real estate industry. In 2005,
IVG worked closely with universities to assist students writing practically-related dissertations
and gave undergraduates on industrial placements an insight into day-to-day work. Placements
and dissertation support allow us to make contact with young potentials at an early stage.
Further education
The IVG Graduate School was conceived in association with the Real Estate Academy at the
European Business School (ebs). The first academy programme comprising ten modules was
successfully concluded in 2005. Internal and external lecturers taught key aspects of the real
estate business from an academic perspective – based on concrete practical examples. The
response from employees was extremely positive.
Supporting young talent
Our efforts in this area are directed at supporting highly qualified and motivated potentials of
younger ages. A new series of seminars is focused on developing social/soft skills. Here, we are
cooperating with the University of Hamburg. In addition to their professional capabilities, participants can develop communication skills and techniques in modular three-day seminars, allowing
young talents involved in challenging work areas to expand and enhance these key capabilities.
The support programme began in 2005 with 20 participants; more seminars are planned for 2006.
Employee participation
Our employee participation schemes allow our co-workers to become co-owners. We are a member of AGP (Arbeitsgemeinschaft Partnerschaft in der Wirtschaft e.V.), a 400-strong alliance of
companies supporting employee participation. We offer two schemes, the IVG Value programme
and IVG employee loans.
IVG Value programme
The IVG Value programme aims to encourage employees to become shareholders and thus coowners of IVG. The 2005 IVG Value programme allows employees to buy 100 no-par-value shares
in IVG Immobilien AG for a price of €12.30 each. Employees enjoy the full benefit of price gains
and dividends but pay only an initial 10% of the purchase price. The remaining 90% is financed
by a two-year interest-free employer loan.
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IVG employee loans
The employee loan programme is a savings scheme which gives employees the opportunity to
acquire a stake in IVG Immobilien AG, with a yield of 4.5% per year. IVG additionally contributes
a tax-free year-end supplement which together with the employee’s contribution is paid out at
the end of the six-year term. The maximum employee-funded portion is €480 per year. The size
of the tax-free supplement varies according to the employee contribution and is currently €135
maximum. Including the tax-free supplement, the total yield on the employee contribution over
the full term is around 9.8% per year. 37.4% of employees participated in this programme in the
2005 financial year.
Performance share plan
Our value-based compensation system allows us to tie key employees to the company. An important cornerstone of compensation policy is the opportunity given to managerial staff to share in
the long-term growth in IVG’s value. Since the introduction of the share option plan in 1999, we
have continually developed this compensation element and adapted it in line with changing parameters and market trends.
We developed a new model of share price-based compensation in 2005 with a performance share
plan. This pursues two goals: to intensify the involvement of plan participants in the performance
of IVG through a clear focus on shareholder value, and to achieve a balance of opportunities and
risks. With the upside potential of IVG shares and the profit generated per share, the plan links
part of compensation to the successful performance of the company. For more information, see
section 10.12 of the Notes to the Consolidated Financial Statements.
2 Corporate governance
Corporate governance refers to the entire system by which a company is managed and monitored,
its corporate principles and guidelines, as well as the system of internal and external controls
and supervision to which its operations are subjected. Good, transparent corporate governance
ensures that our company is managed and monitored in a responsible manner geared to value
creation. This is a prerequisite for maintaining the confidence of investors, customers and business associates. Through reliability, continuity and transparency, we have built up a reserve of
trust that has grown to become one of our key competitive advantages.
Preconditions for good corporate governance include internal rules and control mechanisms that
secure responsible management in interplay with the market as a source of outside control.
We have laid down our own corresponding code of conduct for employees. The full code of conduct can be viewed online at www.ivg.de.
A compliance officer watches over observance of the code and other regulations, keeps the insider
register and notifies employees about relevant subject-matter. Our compliance officer is also
IVG’s corporate governance ombudsman and acts on his own responsibility and independently
in this capacity.
IVG Group subsidiaries are likewise subject to rules and codes of conduct. Each subsidiary has
a code of ethics setting out its overriding principles and values. These are transposed into and
expanded upon in codes of conduct. For example, we have drawn up additional voluntary corporate governance principles for the working relationship between IVG and our subsidiary OIK.
These counter potential conflicts of interest in transactions between IVG and OIK by giving top
priority to market integrity, transparent business practices and the interests of shareholders in
the property assets managed in trust.
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We support initiatives in the property sector in Germany and the rest of Europe. Value management is an ongoing process, not something that is implemented in one fell swoop.
In Germany, we are founding members of ‘Initiative Corporate Governance der deutschen Immobilienwirtschaft e.V.’, a real estate industry corporate governance initiative launched in 2002. Its
chairman is our Chief Executive Officer Dr. Eckart John von Freyend.
The initiative has drawn up principles of proper and fair management that supplement the crosssectoral German Corporate Governance Code with specific requirements for real estate companies.
These requirements include rules on professional qualifications in real estate for management and
supervisory bodies, consistency and integrity in valuation, separation of company and private
business, publication of major transactions, and rules for transactions between affiliated companies where conflicts of interest may arise. Two further specific codes address the needs of listed
real estate companies and companies managing assets in trust (investment funds). IVG has
adopted these codes for the management of its business and the investment fund companies it
sets up.
At European level, we are members of the European Public Real Estate Association (EPRA), an
alliance of some 160 reputable listed real estate companies, investors, financial analysts, auditors
and other market participants. Since 2001, EPRA has issued best practice recommendations for
the annual reports of listed real estate companies, containing guidelines to enhance transparency, uniformity and comparability. We are actively involved in drafting and updating these recommendations and adhere to them in our own reporting.
Corporate governance and transparency for a listed company also entail reporting in full on Board
of Management and Supervisory Board compensation, directors’ dealings, share option plans and
incentive schemes.
IV Subsequent events
• Five properties with nearly 38,000 m2 in total lettable space were sold to HGA Capital Grundbesitz und Anlage GmbH for €101.2 million with effect from 1. 2. 2006. The properties comprise
three modern office buildings in Infopark Budapest (30,000 m2) and two historical listed buildings (7,700 m2) located in the city centre on Andrássy út, a magnificent boulevard forming part
of Budapest’s UNESCO World Cultural Heritage Site.
• The Madou Plaza development in Brussels was sold to the European Commission on 10.3.2006.
The 40,000 m2, 33-floor office building, which has won an MIPIM Award, will house 1,200 EU
civil servants from 25 countries.
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V Risk report
1 Risk management system
The objectives of the risk management system comprise early and comprehensive risk identification and appraisal, timely risk communication, and appropriate risk control within the IVG Group.
The risk management system ensures that risks identified in the course of business are promptly,
accurately and fully reported to the responsible decision-makers. Consciously managing risk
makes it possible to exploit emerging opportunities with greater confidence.
Each organizational unit is required to identify and record all risks likely to arise from current and
planned activities. Risk appraisal takes into account any control measures already adopted.
Risk management also entails deciding upon and putting into effect suitable control measures to
monitor risks over time and to reduce their potential financial impact.
The information flow is organized on a bottom-up basis, with regular reporting via established
channels and scheduled meetings. The Board of Management must be given immediate notice of
any risks with a potential negative financial impact upwards of €12.5 million.
The auditing function monitors the risk management system on an objective basis independently
of other business processes. The risk audits verify that:
• Steps to secure the proper functioning of the risk management system are appropriate, effectual
and cost-effective
• Risks are identified in full and appropriately assessed
• Control measures decided for specific risks are applied and implemented
2 Risk management for financial instruments
IVG makes selective use of derivative financial instruments as part of active interest rate and currency management. The main instruments used are interest rate swaps, combined interest rate/
currency swaps and interest rate caps. The market values of all derivative financial instruments
are determined once a month using reliable valuation models. As a matter of policy, derivative
financial instruments are used solely in conjunction with operating transactions in hedge accounting relationships. Hedge accounting aims to minimize volatility in net interest and investment
income by matching up changes in the market value of derivative financial instruments with
countervailing risks from hedged transactions. Only changes in the market value of items that
do not meet the strict criteria to qualify for hedge accounting have an impact on income.
At the year-end, IVG held derivative financial instruments with a total nominal value of €960 million.
The (net) market value of all derivatives at the year-end was negative, at minus €19.5 million.
The inclusion of most derivative financial instruments in hedge accounting substantially reduced
market value fluctuations in net interest and investment income in 2005. Over the year to
31.12.2005, derivative financial instruments resulted in expenses totalling €3.6 million reported
in the income statement and gains totalling €3.4 million recognized directly in equity.
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3 Individual risk categories
3.1 Operating environment and sectoral risks
The main operating environment and sectoral risks in the property business arise on the demand
side. The matrix below shows major current risks:
Demand side
Operating environment risks
Sectoral risks
Business activity
Appeal of property as an asset class
Oil price
Adverse external image impact from closures
Terror
of open-end investment funds
Demographics
Supply side
Business activity
Interest rate levels
Building costs
The real estate sector heavily depends on the general state of the economy, in particular as a
determinant of demand for rented property. With the world economy in robust health, influential
economists see Europe on a slow but steady upward trend. A potential source of disturbance is
the cost of energy – especially oil prices, which are set to remain high.
Demographic change is likely to pose only marginal risk over the next few years to IVG’s strategy
of focusing on key growth centres.
One source of sectoral risk on the demand side of the investment market relates to the property’s
general appeal as an asset class. The general appeal of property has grown over recent years.
This is not simply a passing fad. The benefits of investing in property are objectively identifiable
in its ability to combine security (sound intrinsic value) with a steady revenue stream from lettings.
Property assets therefore lend themselves particularly well to long-term investment motives, say
for pension provision or for premium reserve funds in the insurance sector. In view of this, we
consider the risk of property losing its appeal to be low.
Recent developments involving open-end real estate funds in Germany (redemptions suspended
in three instances so far) theoretically risk tarnishing the image of other real estate market segments. Increasingly sophisticated reporting in the media over recent years, however, has made
more and more investors aware of the structural differences between open-end funds, closed-end
funds and shares in listed real estate companies. The stock market performance of IVG shares
and successes in marketing closed-end IVG funds over recent months confirm our assessment
that there is no significant spill-over risk.
On the supply side, developments on the letting market are notably affected by newly completed
property brought onto the market without prior letting – that is, on a speculative basis. Precise
figures are not available, but from the aggregated estimates of key market players, the amount
of new space coming onto the market is currently expected to be moderate. The risk of speculative completions over the next two or three years is to be considered low.
The current low level of interest rates puts interest costs below returns on property, producing
an attractive rate of return on investment. This explains the strong ongoing appeal of real estate
investment markets.
Building costs are another major expense item. In view of the construction industry’s present
capacity surplus, the medium-term price risk attached to construction work should be considered
low.
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3.2. Strategic risks
Market risks
IVG uses two main means of countering price risk on cyclic property markets:
• Good local entry and exit timing
• Broad spread of risk between locations
The aim at each location is to make purchases and sales at relatively favourable junctures. With
their accumulated experience of the market, the IVG branch offices are ideally placed to strike
when the time is right.
To reduce price risk and spread it between locations, the company exploits differences in European property market cycles. Cyclic differences exist but are relatively weak between locations
within Germany, are somewhat more pronounced between the core Western European markets,
and are stronger still, in some cases to the point of negative correlation, relative to other locations such as Eastern Europe.
The required level of return and entry timing determine the optimum holding period for a property investment. Locational diversification allows different optimum holding periods to be combined in a high-liquidity portfolio.
3.3 Business performance risks
IVG diversifies sectoral and tenant risk by targeting a pan-European spread of rental income in
terms of tenants and industry clusters. The company aims to generate at least 20% of rental
income from tenancies with clients in the public sector as well as in traditional and conservative
industries. It can thus limit the dependency of annual rental income on more volatile sectors
while still benefiting when such sectors undergo strong growth.
The public sector accounts for 24% of net rental income, with tenants including Belgian government ministries and Flemish provincial government departments. 10% of net rental income is
accounted for by retailers and wholesalers, and 7% by the financial services sector. The sale of
the Lucent property in Nuremberg will reduce the share of net rental income earned from
telecommunications firms.
Top ten tenants by net rental income (%)
EBV Erdölbevorratungsverband (Hamburg)
8.6
Régie des Bâtiments (Brussels)
6.9
Statoil Deutschland (Hamburg)
3.9
Netherlands oil stockpiling organization (COVA) (Hamburg)
2.8
Vattenfall AB (Stockholm)
2.6
Lucent Technologies Network Systems GmbH (Nuremberg)
2.3
EPCOS AG (Munich)
1.5
Nokia GmbH (Düsseldorf)
1.2
IABG Holding GmbH (Munich)
1.1
TeliaSonera Finland Oyj (Helsinki)
0.9
IVG earned 35% of net rent with its top ten tenants.
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Top ten industries by net rental income (%)
Public sector
23.9
Wholesale and retail trade
10.2
Transport and logistics
7.6
Telecommunications
7.5
Engineering, research and development
7.4
Financial services
7.1
Hotels, restaurants and catering services
4.8
Consultancy services
3.8
Electrical engineering
3.8
Real estate
3.4
Tenancies in the amount of €36.6 million can be theoretically terminated or are due to expire in
2006. Termination is highly probable for tenancies to the value of €10.1 million. The remaining
tenancies are not thought to be at significant risk of termination.
IVG’s effective vacancy rate in December was 5.5%, 3.7 percentage points better than the European average.
Provisions for rent guarantees given at the time of property sales amount to €2.5 million.
The main risks in project development are cost overruns, delays and an adverse market trend at
the time of completion. IVG manages individual projects with tight project monitoring based on
key performance indicators and regular appraisals. 35% of all projects currently under development have already been successfully marketed. IVG’s share of the projected total investment in
ongoing development projects amounts to €1.1 billion, with an equity commitment of approximately €0.4 billion.
In the closed-end investment funds business, IVG mostly issues funds with long-term tenancies,
and no rent guarantees are involved. The main risks are therefore associated with placement
guarantees, guarantees given for bridging loans taken out pending sales of equity shares, and in
some cases redemption pledges. IVG has control over these risks as all fund properties must satisfy the criteria for inclusion in its own portfolio.
3.4 Personnel risks
Appropriate accounting provisions are recognized in the annual financial statements to cover all
material future risks.
3.5 IT risks
As from 1.1.2005, IVG Immobilien AG has outsourced the running of its IT and communications
systems along with application management to T-Com and its subsidiary T-Systems. In doing so,
IVG has secured cost savings and quality improvements across its entire IT landscape. The IT
systems are maintained in a failsafe computer centre.
The service providers have presented documentary evidence of certification to the appropriate
technical and organizational standards. T-Com and IVG have signed functional service level
agreements (SLAs) targeting specific business processes. Each SLA specifies IT support for a
business process without laying down technical implementation details.
Risk management for IT is concerned with identifying and appraising risks, and taking action to
deal with risks based on risk indicators.
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3.6 Financial risks
The IVG Group faces various types of financial risk in its business activities. These include currency risk, credit risk, liquidity risk and interest rate risk. Risk management is performed by the
central Group treasury function based on guidelines issued by company boards.
Contracts relating to derivative financial instruments and financial transactions are only entered
into with financial institutions with high credit ratings. This keeps counterparty default risk to a
minimum.
Currency risk
IVG is exposed to currency risk as a result of its international operations. In particular, currency
risk arises from investing and financing activities in currencies other than the Group currency.
The main exposures relate to Swiss francs, Swedish krona and pounds sterling. IVG counters this
risk by making selective use of currency derivatives and by same-currency borrowing in the case
of foreign currency investments.
Liquidity risk
Group-wide financial planning tools and the deployment of treasury software assure early identification of the liquidity situation. These systems show expected changes in liquidity over a threeyear planning horizon. At 31.12.2005, IVG had over €0.9 billion in unused lines of credit with
terms of up to five years. Alongside its existing commercial paper programme (with a maximum
aggregate amount of €200 million), IVG substantially extended its refinancing options in 2005
by entering into a syndicated loan facility €250 million higher than its predecessor and with additional forfaiting arrangements.
Interest rate risk
Interest rate risk results from market variations in interest rates. These affect the amount of interest expenses in the financial year and the market value of derivative financial instruments used
by the company.
A substantial share of IVG’s bank loans are fixed-interest, making the impact of interest rate fluctuations predictable for the medium-term future.
IVG offsets variable-interest bank loans (these exclude the commercial paper programme) by
using derivative financial instruments in the form of payer swaps. Approximately 85% of the variable interest rate exposure (an amount of €1.0 billion – see the Notes to the Consolidated Financial Statements, section 7.2 ‘Financial Liabilities’) is offset by interest rate swaps with a nominal
value of €960 million.
To optimize net interest income while allowing scope for implementing the active buying and
selling strategy, the variable-interest share of borrowing is limited to 30%. After allowing for
hedging instruments, this represents less than 1% of the total loan portfolio as at the year-end.
A one percentage point increase in the average refinancing interest rate would increase the IVG
Group’s interest rate expenses by €1.2 million.
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3.7 Other risks
Legal risks
IVG Group companies are involved in various legal disputes in their operating activities. IVG does
not expect any of these cases to have a significant negative impact on the Group’s business or
financial situation. Accounting provisions have been recognized in the appropriate amount for
pending disputes.
Legal action was taken to contest and cancel resolutions adopted at the 2004 Annual General
Meeting. Bonn Regional Court dismissed the case on almost all counts in its judgement of
22.12.2005. The claimant has appealed against the judgement to Cologne Higher Regional Court.
As the pending case effectively prevents any use being made of Authorized Capital II, the company has applied to Bonn Regional Court for a release order.
Legal action has also been taken at Bonn Regional Court to contest and cancel resolutions of the
2005 Annual General Meeting. The claim has not yet been served.
The company assumes the claim to be unfounded. If the claim is served, the company will apply
for a release order for the Authorized Capital I and III renewed at the 2005 Annual General Meeting.
Contaminated sites
The company owns a number of sites that feature contaminated ground. IVG is working successfully with the competent authorities to implement the necessary containment measures. The risks
posed by contaminated sites are covered by provisions in the amount of €7.6 million.
Insurance
IVG has an appropriate level of insurance to cover the risks of its business. Its insurance programme
is managed and overseen by a leading brokerage. Alongside property cover, IVG is also insured
against terrorism. It also has the usual classes of liability insurance, with standard amounts of
cover. As in previous years, no major insurance claims arose in 2005.
4 Overall appraisal of the risk situation
As an integral part of all business processes, risk management is monitored by the internal auditing
function. It also forms part of the annual external audit.
No risks to the continued existence of IVG are currently apparent from past or future developments.
All identifiable risks are adequately covered by accounting provisions.
83
VI Expected developments
1 Expected development of the Group
Investment remains concentrated in the portfolio management, project development and investment funds segments. As before, the main focus of investment is on office and logistics properties
in European metropolitan and growth centres. Geographically, IVG will enter the up-and-coming
Warsaw property market and expand its activities in Spain. We will step up our efforts in the
lucrative caverns business and profit from the growing demand for oil and gas storage capacity.
We will expand our range of real estate funds for private and institutional investors and portfolio
management services for third parties.
2 Expected changes in the economic and legal environment
2.1 Future general economic situation
With the world economy in robust health overall, economic growth in the euro zone is on a slight
upward trend. The panel of European economic experts regularly consulted by the European
Central Bank forecasts average growth across Europe of 1.7% in 2006 and 2.0% in 2007. Factoring in a projected rise in investment activity and EU domestic demand, we anticipate an increase
in employment. These expectations are reinforced by positive business sentiment regarding future
economic trends. The Ifo business index for January once again shows a significant improvement
compared with prior reports.
In December 2005, the European Central Bank raised the base rate by 25 basis points to 2.25% –
the first increase in five years. We expect a further moderate interest rate rise in 2006. With sustained high levels of capital available for investment, we anticipate a further rise in demand for
attractive real estate investment products both in Germany and elsewhere.
2.2 Future industry situation
Property letting market
After several years of consolidation, rents on European office markets are on a marked rising
trend. Space turnover in the 21 office locations monitored by IVG around Europe increased by
9% in 2005 to 8.9 million m2. The vacancy rate had decreased to 9.2% by the end of 2005 (2004:
10%). Average monthly rents increased to €28.98/m2 (2004: €27.20/m2) and top monthly rents to
€43.87/m2 (2004: €42.22/m2).
In view of the relatively moderate new building activity, we expect a further increase in space
turnover, rising rents and decreasing vacancy rates in 2006. These projections are based on European property market research we conduct jointly with Cushman & Wakefield.
84
Real estate investment market
The investment market currently faces significant surplus demand. Attracted by the low level of
interest rates and the positive expectations for the economy, an increasing amount of international capital is flooding onto the European property market. Cross-border real estate investment
in Europe reached €136 billion in 2005, compared with €96 billion in 2004. We anticipate a further
rise in 2006. The German market in particular is attracting attention from international investors
due to its relative low rents and high returns. We expect a further slight decrease in returns on
investment across Europe as a whole in 2006.
2.3 Legal changes
We expect the German government to introduce REITs in 2007. To what extent IVG makes use of
REIT structures will depend on the detailed anatomy of the legislation. REITs are likely to attract
more international investor capital to Germany and will further promote the listed real estate
shares segment.
3 Expected earnings situation
3.1 Expected growth in operating earnings and consolidated net income
Our earnings expectations for 2006 are as follows:
Earnings forecast
Actual 2005
Forecast 2006
€m
€m
640
700–750
Operating earnings (EBIT)
243
255–265
110
115–125
We expect further earnings growth in 2007 and 2008.
IVG’s consolidated net income regularly includes net proceeds from sales of properties whose
value has been increased under the company’s ownership. As this income is included in operating earnings rather than turnover, turnover is not a meaningful measure of performance for IVG.
The relevant figure is total operating income. For 2006, total operating income and the company’s
other earnings figures are dominated by sales in Germany and elsewhere. Rental income, income
from the investment funds business, project development revenues and earnings from storage
caverns will come to the fore in 2007 and 2008.
85
3.2 Expected dividend growth
As in the past, our shareholders will continue to share in IVG’s success. Converting IVG into a
REIT would significantly enhance the scope for dividends. We anticipate annual dividend growth.
3.3 Profitability
Cash flow return on investment (CFROI) is set to rise steadily between 2006 and 2008, from 7.4%
to 7.9%. IVG will continue to generate a rate of return in excess of its weighted average cost of
capital, which is likely to increase over the same period from 6.8% to 6.9%.
4 Expected financial situation
4.1 Financial planning
We plan to finance our investment out of cash flow and by borrowing.
4.2 Investment planning
We anticipate net investment of approximately €0.4 billion to be recorded on the Group balance
sheet by 2008. This represents €1.8 billion in planned investment and €1.4 billion in divestments.
IVG will expand its portfolio on a targeted basis with annual investment of between €0.55 billion
and €0.65 billion and annual divestments of between about €0.4 billion and €0.55 billion.
4.3 Expected liquidity situation
Including available bank credit lines, IVG has access to liquidity totalling €1 billion and will continue to have sufficient liquidity reserves for investment in future years.
5 Opportunities
IVG has opportunities for profitable business and value growth in all operating segments. Several
key factors are at play here:
The general economic recovery will fuel demand for space.
• Demand for modern business space is rising as the European economy picks up.
• Highly promising development projects started by IVG at various European locations will be
completed as the recovery gets underway.
• The IVG branch offices have the proximity to local markets enabling them to exploit the
upturn for attractive lettings.
86
Rising rents in Europe open up opportunities for profitable follow-on tenancies.
• European real estate markets are on the verge of a recovery phase with increasing rents.
• This provides an opportunity for IVG to agree higher rents when tenancies expire.
Strong demand for high-quality buildings is pushing up property values.
• Demand from global investment capital for attractive real estate is driving further gains in
the value of quality properties.
• This allows IVG to obtain higher selling prices for properties whose value it has increased
through development, letting and refurbishment.
Germany and Central Europe are about to see an adjustment in property yields.
• Rental yields in Germany and Central Europe remain fairly high relative to the rest of Europe
and are set to embark on a declining trend.
• In 2005, IVG purchased over €100 million worth of property in Germany; in Central Europe,
it started on the next development phase at Infopark Budapest and on a development project
in Warsaw.
• IVG has thus laid the foundations for attractive future earning opportunities, as decreasing
yields result in higher prices.
The continued relatively low level of interest rates enables attractive returns on equity.
• Stable to, at most, moderately rising interest rates keep refinancing costs at favourable levels.
• By borrowing on fixed terms, IVG has secured strong leverage between debt and return on
equity.
Private pension provision is fuelling demand for closed-end real estate funds.
• Private pension provision is on the increase.
• Indirect property investments in the form of closed-end real estate funds and listed real estate
shares are becoming an increasingly important part of private asset allocation.
• IVG will continue to meet this demand by expanding its EuroSelect product line.
Institutional investors are increasing the relative size of their property holdings.
• According to a study by JP Morgan, the real estate share in European pension fund portfolios
is on the rise, from 6% today to at least 10% or 15% in future.
• JP Morgan estimate that this will produce an extra €150 billion to €350 billion in demand for
real estate investments.
• IVG will take advantage of this added investment demand, further increasing the size of OIK’s
German institutional investment funds (‘Spezialfonds’) and offering structured real estate
investment funds with a range of opportunity/risk profiles.
87
Institutional investors are outsourcing real estate management.
• With the increasing globalization of real estate investments held by institutional investors and
as they streamline their internal cost structures, institutionals are increasingly outsourcing
portfolio and asset management to specialized real estate companies.
• IVG is well placed to provide these services through its European branch office network.
There is rising demand for oil and gas storage capacity.
• Increasing energy price volatility and the global scarcity of energy resources are fuelling a rise
in demand for oil and gas storage facilities.
• IVG can tap into this trend by rapidly expanding its Etzel storage caverns facility near Wilhelmshaven, whose current capacity of 40 caverns can be more than doubled.
• The IVG caverns facility’s excellent integration with European oil and natural gas networks as
well as planned additional pipelines further improve its competitive situation.
• E.ON Ruhrgas has announced plans to build facilities for importing liquid natural gas (LNG) at
Wilhelmshaven. This will increase demand for extra caverns.
The introduction of REITs will mobilize real estate assets.
• REITs are the global standard for listed real estate investments.
• According to a number of studies, adopting them in Germany could mobilize up to €127 billion
in real estate assets for REITs.
• This would create broad acceptance for listed real estate shares as an investment vehicle.
• As a reputable asset management company handling major real estate portfolios, IVG stands
to benefit here over the long term.
88
6 Overall assessment of expected developments
We expect that IVG’s earnings figures and the value of property managed by the company will
continue to increase as in recent years. Transactions totalling €10 billion are planned by 2008
for the IVG Group as a whole and the funds it manages, comprising €8 billion in purchases and
€2 billion in sales. The value of real estate assets under our charge is planned to pass the €25
billion mark by the end of 2008. IVG’s net asset value is set to exceed €20 per share by 2008.
This Management Report contains forward-looking statements and information. Such statements
are based on our current expectations and certain presumptions and are therefore subject to certain risks and uncertainties. A variety of factors, many of which are beyond IVG’s control, affect its
operations, performance, business strategy and results and could cause the actual results, performance or achievements of IVG Immobilien AG to be materially different.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially, either positively or negatively, from those
described in the relevant forward-looking statement as expected, anticipated, intended, planned,
believed, projected or estimated. IVG does not intend or assume any obligation to update or revise
these forward-looking statements in light of developments which differ from those anticipated.
Bonn, 22 March 2006
Bernd Kottmann
Dirk Matthey
Georg Reul
89
Consolidated
Financial Statements
of IVG Immobilien AG as at 31.12. 2005
90
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
91
Consolidated Financial Statements
Auditor’s Report
of IVG Immobilien AG as at 31. 12. 2005
Note
2005
2004
€m
€m
ASSETS
Non-current assets
Intangible assets
6.1
131.6
131.6
Investment properties
6.2
2,080.8
2,398.6
6.3
318.5
172.2
Financial assets
6.4
193.3
124.7
Shares in associated companies accounted for using the equity method
6.4
30.7
32.0
7.3
10.3
15.3
Deferred tax assets
7.4
56.7
49.9
6.5
173.3
76.5
Prepaid expenses
6.9
2.4
4.9
2,997.6
3,005.7
Total non-current assets
Current assets
Inventories
6.6
106.9
73.2
6.5
183.5
406.2
13.9
11.2
Current asset securities
6.7
30.0
37.3
6.8
90.9
74.5
Prepaid expenses
6.9
6.0
5.2
431.2
607.6
Income tax receivables
Total current assets
Total assets
92
6.10
258.1
0.0
689.3
607.6
3,686.9
3,613.3
Note
2005
2004
€m
€m
LIABILITIES AND EQUITY
Equity
Subscribed capital
7.1
116.0
116.0
Additional paid-in capital
7.1
458.9
459.7
Own shares
7.1
0.0
–0.2
Other reserves
7.1
6.4
–6.4
Revenue reserves
7.1
342.8
292.2
Equity attributable to Group shareholders
7.1
924.1
861.3
Minority interests
7.1
–2.2
–2.3
921.9
859.0
Total equity
Liabilities
Non-current liabilities
7.2
7.3
11.0
31.4
Deferred tax liabilities
7.4
149.6
143.0
Pension provisions
7.5
9.9
23.6
Other provisions
7.6
75.6
33.6
Accounts payable
7.7
4.0
Deferred income
7.8
Total non-current liabilities
1,728.5
1,941.4 1
5.7 1
7.1
8.2
1,985.7
2,186.9
Current liabilities
7.2
571.7
7.3
18.8
1.4
Other provisions
7.6
30.5
40.3
Accounts payable
7.7
118.2
146.1 1
24.2
11.2
7.8
14.1
12.9
777.5
567.4
Income tax liabilities
Deferred income
Liabilities associated with non-current assets held for sale
Total current liabilities
Total liabilities and equity
1
355.5 1
6.10
1.8
0.0
779.3
567.4
3,686.9
3,613.3
2004 amounts restated to conform with 2005 presentation.
93
of IVG Immobilien AG for the 2005 financial year
Note
2004
€m
€m
426.0
507.3
Turnover
9.1
Net change in inventories and other own work capitalized
9.2
–2.3
–15.6
Other operating income
9.3
216.4
121.3
640.1
613.0
Material expenses
9.4
–62.4
–129.4
Personnel expenses
9.5
–79.4
–66.4
Depreciation and amortization of intangible assets, property,
plant and equipment, and investment properties
9.6
–56.1
–62.1
Investment property expenses
9.7
–58.1
–56.0
Other operating expenses
9.8
–120.3
–103.0
Income from associated companies accounted for using
the equity method
9.9
–13.8
10.5
Income from participating interests
9.10
–7.4
–4.0
Interest and investment income
9.11
48.5
39.1
Interest and investment expenses
9.11
–139.4
–145.2
151.7
96.5
–41.6
–21.6
110.1
74.9
Attributable to shareholders
96.4
70.9
Minority interests
13.7
4.0
Net income before tax
Income tax
9.12
94
2005
€
€
Undiluted earnings per share
9.13
0.83
0.61
Diluted earnings per share
9.13
0.83
0.61
Consolidated Statement of Changes in Equity
Other reserves
Subscribed
capital
Balance at 1.1. 2004
Additional
paid-in
capital
Own
shares
Translation
differences
€m
€m
€m
€m
€m
116.0
459.2
–0.3
–10.9
–1.0
Sundry
reserves
Equity
attributable
to Group
shareholders
Minority
interests
€m
€m
€m
€m
255.9
818.9
26.6
845.5
4.8
–16.9
–12.1
Revenue
reserves
Equity
Gains and losses recognized
directly in equity:
- Changes due to successive
purchases and sales, and other
changes in the reporting entity
4.8
- Translation differences
2.0
- Securities and ownership
shares available for sale
2.0
–0.2
–0.2
- Cash flow hedges
0.5
0.5
- Hedges of net investments
3.2
3.2
Total
2.0
3.5
Valuation of share options
(equity-settled share-based
payments)
459.7
–2.9
3.2
10.3
–20.3
–10.0
70.9
70.9
4.0
74.9
–39.4
–39.4
–12.6
–52.0
292.2
861.3
–2.3
859.0
–5.2
–5.2
–3.4
–8.6
0.5
0.1
116.0
–0.2
–3.4
4.8
0.5
Dividends
Own shares repurchased/sold
2.0
–0.2
0.5
0.1
–8.9
2.5
0.1
Gains and losses recognized
directly in equity:
- Changes due to successive
purchases and sales, and other
changes in the reporting entity
- Translation differences
8.9
8.9
8.9
- Securities and ownership
shares available for sale
0.5
0.5
0.2
0.7
- Cash flow hedges
5.3
5.3
–0.9
4.4
- Hedges of net investments
–1.9
Total
8.9
3.9
Reclassification of share option
plans (from equity-settled to
cash-settled)
Own shares repurchased/sold
–4.1
3.5
96.4
96.4
13.7
110.1
–40.6
–40.6
–9.5
–50.1
342.8
924.1
–2.2
921.9
–0.8
0.2
116.0
458.9
–1.9
7.6
–0.8
Dividends
–1.9
–5.2
0.0
–0.8
0.2
0.0
6.4
0.2
95
of IVG Immobilien AG for the 2005 financial year 1
Depreciation, amortization, impairment losses and reversals of impairment losses
Net proceeds from disposal of non-current assets
Other non-cash income and expenses
€m
110.1
74.9
52.8
59.5
–170.0
–76.7
7.0
5.4
–9.0
–7.1
Undistributed net income of associated companies
–2.6
–10.5
Changes in inventories and receivables
73.4
–2.7
3.6
–24.0
65.3
18.8
–427.8
–148.1
198.5
137.8
–2.4
–178.5
Cash inflow from operating activities
Investments in intangible assets and property, plant and equipment
Proceeds from disposal of intangible assets and property, plant and equipment
Investments in consolidated companies
(excluding acquired cash and cash equivalents)
Proceeds from disposal of consolidated companies
(excluding cash and cash equivalents disposed of)
132.1
122.6
Investments in financial assets
–88.1
–54.6
Proceeds from disposal of financial assets
3.0
55.9
Cash outflow from investing activities
–184.7
–64.9
Dividends paid by IVG Immobilien AG
–40.6
–39.4
–9.5
–12.6
Dividends paid to minority shareholders
New bank loans raised
Repayment of bank loans
Other proceeds from financing activities
799.7
448.0
–796.7
–380.7
219.8
79.1
–2.6
–8.4
Repayment of lease financing
–23.1
–28.2
Cash inflow from financing activities
147.0
57.8
Net change in cash and cash equivalents from operating activities
27.6
11.7
Cash and cash equivalents at beginning of year
74.5
62.8
0.1
0.0
Other payments for financing activities
Changes in cash and cash equivalents due to exchange rate changes
96
2004
€m
Dividends received
Changes in non-financial liabilities and provisions
1
2005
–10.2
0.0
Cash and cash equivalents at end of year
92.0
74.5
Less cash and cash equivalents of disposal group
–1.1
0.0
Cash at bank and in hand reported on balance sheet
90.9
74.5
Explanatory notes on the Cash Flow Statement are provided in section 10.6 of the Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
1 Basis of preparation
The consolidated financial statements of IVG Immobilien AG are prepared in accordance with
mandatory International Financial Reporting Standards (IFRS) as adopted by the EU and supplementary provisions of German commercial law applicable under Section 315a (1) of the German
Commercial Code (HGB).
The requirements of the applied standards are met in full, resulting in a true and fair view of the
financial position and performance of the IVG Group.
The International Accounting Standards Board (IASB) published a number of new and revised
standards in 2004 and 2005 whose application is not mandatory until 1. 1. 2006 or later. In some
cases, the application of these standards is also pending adoption by the EU.
• IFRS 6 (2004): Exploration for and Evaluation of Mineral Resources
• IFRS 7 (2005): Financial Instruments: Disclosures
• IAS 19 (2005): Employee Benefits
• Amendment to IAS 39 (2005): Cash Flow Hedge Accounting of Forecast Intragroup Transactions
• Amendment to IAS 39 (2005): Fair Value Option (EU adoption pending)
• Amendment to IAS 39 (2005): Financial Guarantee Contracts
• Amendment to IFRS 4 (2005): Financial Guarantee Contracts
• Amendment to IAS 1 (2005): Capital Disclosures
The International Financial Reporting Interpretations Committee has also published a number of
interpretations whose application is not mandatory until 1. 1. 2006 or later:
• IFRIC 4: Determining whether an Arrangement Contains a Lease
• IFRIC 5: Rights to Interests arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds
• FRIC 6: Liabilities arising from Participating in a Specific Market: Waste Electrical
and Electronic Equipment
• IFRIC 7: Applying the Restatement Approach under IAS 29 Financial Reporting
in Hyperinflationary Economies (EU adoption pending)
• IFRIC 8: Scope of IFRS 2 (EU adoption pending)
• IFRIC 9: Reassessment of Embedded Derivatives (EU adoption pending)
The option to apply the standards and interpretations early has not been used. IVG assumes that
application of the standards would not materially affect its financial position and performance.
The accounting policies, notes and disclosures for the IFRS consolidated financial statements for
2005 are essentially based on the same accounting policies as the consolidated financial statements for 2004. Domestic and foreign company financial statements included in the consolidated
financial statements are prepared as at the same reporting date as the IVG annual financial statements (31.12. 2005) and are based on uniform accounting policies. IVG Immobilien AG is registered at Bonn Local Court (registration number HRB 4148) and has its registered office at Zanderstrasse 5-7, Bonn, Germany.
Various items in the consolidated balance sheet and consolidated income statement have been
combined for greater clarity and are explained in the Notes. Assets and liabilities are classified as
non-current – with lives exceeding one year – and current. Pension provisions and deferred taxes
are classified as non-current as a general rule.
97
The income statement uses a classification of expenses by nature. The consolidated financial statements are prepared in euros. All monetary amounts, including those for the previous year, are in
millions of euros (€ m) except as otherwise stated.
Preparation of the consolidated financial statements in conformity with IFRS requires, to a limited
extent, estimates and assumptions to be made that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent liabilities. The main areas in which
assumptions and estimates are made comprise establishing useful lives for non-current assets,
determining discounted cash flows for impairment testing, estimating market values and present
values of minimum lease payments, recognizing provisions for legal disputes, pensions and
other benefit commitments, taxes, environmental risks and guarantees, and assessing the future
realizability of tax loss carryforwards. Actual amounts may differ from these estimates.
2 Basis of consolidation
(a) Subsidiaries
Subsidiaries are all companies (including special-purpose entities) whose financial and operational policies are controlled by the Group. The ability to exert control is generally equated with
ownership of more than half of the voting rights. Potential voting rights that are currently exercisable or currently convertible are considered when assessing control. All material subsidiaries
are included in the consolidated financial statements.
Subsidiaries are fully consolidated from the time when control is transferred to the parent and
are deconsolidated when control ceases.
Acquisitions of subsidiaries are accounted for using the purchase method in accordance with
IFRS 3 by allocating the cost of the acquisition to the acquired equity measured at fair value at the
acquisition date. The cost of the acquisition is the fair value, at the date of exchange, of assets
given, liabilities incurred or assumed and equity instruments issued, plus any costs directly attributable to the acquisition. Identifiable assets, liabilities and contingent liabilities acquired in a
business combination are initially measured at fair value at the acquisition date. Fair value adjustments to acquired assets and liabilities are depreciated, amortized or reversed to income in subsequent periods according to the accounting treatment of the assets and liabilities.
If the cost of an acquisition exceeds the fair value of the subsidiary’s acquired net assets, the difference is recognized as goodwill. Goodwill is not subject to amortization but is tested annually
for impairment.
If the cost of an acquisition is less than the fair value of the subsidiary’s acquired net assets (a ‘lucky
buy’), the purchase price allocation is reassessed and any difference then remaining recognized
immediately in income.
Intragroup transactions, intragroup balances and unrealized profits on intragroup transactions are
eliminated. Deferred tax assets and liabilities are recognized as required by IAS 12 for temporary
differences arising on consolidation.
Sales of goods and services within the IVG Group are generally made on market terms.
98
(b) Associated companies
Enterprises in which IVG has a significant influence – generally, those in which it holds between
a 20% and a 50% ownership share – are accounted for using the equity method. All material
investments comprising between a 20% and a 50% ownership share are included in the consolidated financial statements as equity-accounted associates. Under the equity method, an investment is initially recorded at cost and its carrying amount is increased or decreased annually to
recognize IVG’s proportionate share of changes in the investee’s equity. Goodwill and negative
goodwill relating to investments accounted for using the equity method are dealt with as for fully
consolidated subsidiaries. Gains and losses on transactions between Group companies and associated companies are eliminated to the extent of the Group’s interest in the associated companies.
Gains and losses on transactions between associated companies are not eliminated.
By virtue of its ownership shares, the assets and revenues attributable to the Group are as follows:
2005
2004
€m
€m
Assets
459.1
349.3
Provisions and liabilities
422.3
334.8
Turnover
140.0
156.4
Net income for the year
–12.7
11.2
Cumulative losses not recognized as at the balance sheet date totalled €0.0 million
(2004: €0.3 million).
3 Consolidated group
The consolidated group consists of 240 companies, with twelve associated companies accounted
for using the equity method.
Under IAS 27 and SIC-12, special-purpose entities (SPEs) are included in the consolidated financial statements in certain circumstances even if the parent does not hold a majority of voting
rights. The following SPEs are included in the consolidated financial statements because more
than half of the risks and opportunities accrue to IVG: Tardis Verwaltungsgesellschaft mbH & Co.
Vermietungs KG, Munich; and actioplus K. u. K. Grundverwaltungs GmbH & Co. KG, Berlin.
Number of fully consolidated companies
Number of participating interests accounted
for using the equity method
Total number of companies
Domestic
Foreign
Total 2005
Total 2004
109
131
240
252
8
4
12
14
117
135
252
266
A full list of the Group’s shareholdings in accordance with section 313 (2) 1–4 and 313 (3) of the
German Commercial Code (HGB) is filed with the commercial registry at Bonn Local Court. A list
of selected material subsidiaries and equity-accounted associates is contained in this Annual Report.
99
Acquisitions
IVG acquired all shares and voting rights in SERBIE-IVG SCI, Paris during the 2005 financial year.
It also increased its interest in GELFOND Verwaltungsgesellschaft mbH & Co. Frankfurt-Niederrad
Besitz KG, Munich, from 50% to 94%.
The office building belonging to SERBIE-IVG SCI was acquired in a share deal and is situated in a
preferred office location in the eighth Arrondissement. The building has 1,597 m2 of lettable space
and an effective occupancy rate of 100%.
The acquired net assets of SERBIE-IVG SCI are as follows:
Effective date of acquisition
Voting rights acquired
Purchase price (cash portion)
(of which: acquisition costs)
Cash and cash equivalents acquired
Fair value of acquired net assets
30.11. 2005
100%
€0.1 million
(€0.0 million)
€0.0 million
€0.3 million
Liabilities acquired
€13.6 million
Goodwill (+)/lucky buy (–)
–€0.2 million
Net income since acquisition date
€0.0 million
Turnover given hypothetical acquisition date of 1.1. 2005
€0.9 million
Net income given hypothetical acquisition date of 1.1. 2005
€0.1 million
Before remeasurement to fair value on acquisition, the carrying amount of SERBIE-IVG SCI’s
investment properties was €16.8 million. Revaluing the investment properties resulted in a
negative difference of €0.2 million. In accordance with IFRS 3, this was immediately recognized
on the income statement, as other operating income.
The acquired net assets of GELFOND Verwaltungsgesellschaft mbH & Co. Frankfurt-Niederrad
Besitz KG are as follows:
Effective date of acquisition
Voting rights acquired
Purchase price (cash portion)
(of which: acquisition costs)
Cash and cash equivalents acquired
Fair value of acquired net assets
Liabilities acquired
Goodwill (+)/lucky buy (–)
Net income since acquisition date
1.1. 2005
44%
€0.1 million
(€0.0 million)
€0.1 million
€0.0 million
€46.6 million
€0.0 million
–€2.9 million
The acquisition relates to a building in Frankfurt’s Niederrad district beside the A5 autobahn.
The building has 20,260 m2 of lettable space and a 61.3% effective occupancy rate.
100
Disposals
Some sales of real estate by IVG take the form of disposals of property holding companies. The
table below shows data on such disposals during the year under review. Most of these relate to
the sale of a shopping centre in Finland and an office building in Geneva.
€138.1 million
Proceeds from disposal of ownership shares in companies
€4.1 million
Costs of disposal
Net disposal consideration
€134.0 million
Portion of disposal consideration discharged by means of cash and cash equivalents
€137.3 million
€1.9 million
Amount of cash and cash equivalents disposed of
Assets and liabilities surrendered by the Group on disposal of
ownership shares in companies:
- Investment properties
€175.1 million
- Other assets
€184.2 million
- Bank loans
€155.3 million
- Other liabilities
€137.3 million
€10.5 million
- Deferred tax provisions
The costs of disposal mostly consist of sundry consulting fees.
The impacts of changes in the reporting entity are shown in the tables below.
Balance sheet
Group
31.12. 2005
Of which: Additions
to consolidated group
Of which: Disposals
from consolidated group
€m
€m
€m
2,080.8
13.9
175.1
Other assets
1,606.1
47.7
171.0
116.0
0.1
1.2
2,300.2
59.2
209.1
348.8
12.8
37.2
Provisions
Other liabilities
The impacts of additions to the consolidated group in 2005 mostly relate to the acquisition of
SERBIE-IVG SCI and of GELFOND Verwaltungsgesellschaft mbH & Co. Frankfurt-Niederrad Besitz KG.
The disposals mostly relate to sales of the companies that hold the properties in Finland and
Switzerland.
101
Income statement
Group
31.12. 2005
Of which: Additions
to consolidated group
Of which: Disposals
from consolidated group
€m
€m
€m
Turnover
426.0
2.8
4.5
Operating income
214.1
5.2
0.6
Operating expenses
376.3
5.4
12.0
Income from participating interests, including
income from associated companies
–21.2
0.0
0.0
Operating earnings
242.6
2.6
–6.9
Net interest and investment income
–90.9
–2.9
–2.2
Net income before tax
151.7
–0.3
–9.1
Taxes
–41.6
–2.1
0.0
110.1
–2.4
–9.1
4 Foreign currencies
Foreign currency transactions are translated in the separate financial statements of companies
included in the consolidated financial statements using the exchange rate at the date of the transaction. Foreign currency monetary balance sheet items are translated using the middle exchange
rate at the balance sheet date and any resulting translation gains and losses recognized in income.
Foreign subsidiaries are generally treated as independent foreign entities; their financial statements
are translated into euros using the functional currency method. That is, equity items are translated
using historical exchange rates, and assets and liabilities are translated using the ex-change rate
at the balance sheet date. Any resulting translation differences are accounted for in equity and
reported in revenue reserves until a subsidiary is deconsolidated. Income and expenses of subsidiaries are translated into euros using average monthly exchange rates.
The exchange rates used for translation when preparing the consolidated financial statements
are as follows:
102
Exchange rate
at 31.12. 2005
Exchange rate
at 31.12. 2004
€
€
Currency
Country
1 CHF
Switzerland
0.6432
–
1 GBP
United Kingdom
1.4571
1.4182
100 SEK
Sweden
10.6474
11.0857
100 HUF
Hungary
0.3954
0.4066
100 PLN
Poland
25.8732
24.4828
5 Accounting policies
5.1 Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are carried at cost less any accumulated
depreciation, amortization and impairment losses. The cost of acquired assets comprises costs
directly attributable to their acquisition. These include estimated demolition, dismantling and
land reclamation costs.
The cost of self-constructed assets includes all costs directly related to the construction process
and those construction overheads which can be allocated. Borrowing costs are not capitalized
as part of cost.
Grants received for intangible assets and property, plant and equipment are deducted from cost.
Land and salt or surface rights relating to storage caverns are not depreciated as they have an
indefinite useful life. All material depreciable assets including buildings classed as investment
properties are depreciated on a straight-line basis, generally with depreciation periods as follows:
Prime site buildings
Other buildings
Plant and equipment
Motor vehicles
Office equipment
Computer software, licences and usage rights
Caverns
Tank farms
66.7 years
50 years
10 to 15 years
3 to 5 years
3 to 10 years
3 to 5 years
38 to 48 years
20 years
The residual values and economic lives of depreciable assets are reviewed at each balance sheet
date and adjusted as necessary. Gains and losses arising from asset disposals, determined as the
difference between the disposal proceeds and the carrying amount less any directly attributable
costs of disposal, are recognized on the income statement, in other operating income and expenses.
Goodwill is any excess of the cost of a business acquisition over the Group’s interest in the fair
value of the acquiree’s net assets at the acquisition date. Goodwill arising from business acquisitions is classed as an intangible asset. Goodwill arising from acquisitions of associated companies
is included in the carrying amount of shares in associated companies. Goodwill is carried at cost
less any accumulated impairment losses. It is assigned to cash-generating units and tested annually for impairment. The determination of gains and losses from business disposals includes the
carrying amount of any goodwill allocated to the businesses being disposed of.
103
5.2 Investment properties
Properties held to earn rental income or for capital appreciation or both and in which not more
than 10% of lettable space is owner-occupied are classed as investment property. Other properties
are accounted for in other property, plant and equipment.
Investment properties are carried at depreciated cost (see 5.1) in accordance with IAS 40.56 and
not at market value. As industry standards with regard to choice of accounting policy for investment property are still evolving, IVG opted to apply the cost model in its consolidated financial
statements from 2004. This has the advantage that it is possible to change to the fair value model
should this be adopted as best practice by the capital markets. A switch in the other direction
from the fair value model to the cost model is not permitted.
5.3 Impairment testing
Intangible assets with an indefinite useful life are not depreciated or amortized; they are tested
for impairment annually and whenever there is an indication that they may be impaired.
Other intangible assets and items of property, plant and equipment are tested for impairment
whenever events or changes of circumstances indicate that the carrying amount exceeds the
recoverable amount. Land and buildings are grouped for impairment testing. The amount by
which an asset’s carrying amount exceeds its recoverable amount is recognized as an impairment loss. The recoverable amount of an asset is the higher of its fair value less costs to sell
and its value in use. If the reasons for an impairment loss cease to exist, the impairment loss
is reversed by increasing the asset’s carrying amount up to a maximum of the amount it would
have been (net of amortization or depreciation) had no impairment loss been recognized.
5.4 Financial assets
Financial assets are classified as follows:
(a) Financial assets measured at fair value through the income statement
(b) Loans and receivables
(c) Available-for-sale financial assets
The classification of a financial asset depends on the purpose for which it is acquired.
(a) Financial assets measured at fair value through the income statement
(a 1) Derivative financial instruments and hedges
IVG makes targeted use of derivative financial instruments for active interest rate and foreign
exchange management.
Derivative financial instruments are recognized at the contract date and are initially and subsequently measured at fair value. Measurement is performed both with reference to statements
from financial institutions (marking to market) and by mathematical analysis (discounted cash
flow).
The market value of interest-rate swaps and interest-rate/currency swaps is determined by discounting the expected future cash flows over the remaining life of the contract on the basis of
market interest rates or interest rate yield curves.
The method of recognizing gains and losses depends on whether a derivative is classed as a
hedge. The Group accounts for hedging relationships as either cash flow hedges or hedges of
net investments. At the inception of a hedge, it therefore designates the hedging relationship
104
between the hedging instrument and the hedged item, its risk management objective and its
strategy for undertaking the hedge. The Group also checks at the inception of a hedge and on
a continuous basis thereafter that the derivatives used in the hedging relationship effectively
compensate changes in cash flows attributable to the hedged risk.
Cash flow hedges hedge exposure to variability in the amounts and timing of future cash flows.
The hedging instruments are carried at market value.
Where derivatives are designated as cash flow hedges and qualify for hedge accounting under
IAS 39, that portion of the change in their fair value which is deemed to be an effective hedge is
recognized in equity. The ineffective portion of the change in value is recognized directly in income.
When a hedging instrument expires or is sold or if a hedge no longer meets the criteria for hedge
accounting, the cumulative gain or loss remains in equity and is not recognized in income until the
hedged transaction occurs.
Hedges of net investments in foreign operations – net investments being investments in net assets –
are accounted for similarly to cash flow hedges. That portion of the gain or loss on the hedging
instrument which is determined to be an effective hedge is recognized in equity, and the ineffective
portion is recognized directly in income. When a foreign operation is disposed of, the cumulative
gain or loss recognized in equity is reclassified into income.
Certain derivative financial instruments do not qualify for hedge accounting. Changes in the fair
value of such derivatives are recognized directly in income.
(a 2) Other financial instruments measured at fair value through the income statement
Fair values of quoted shares and other securities are determined from current market prices.
Fair values of financial assets that do not have a quoted price in an active market are determined
by using appropriate valuation methods. Financial assets whose fair value cannot be reliably
determined are measured at their carrying amount.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets that have fixed or determinable payments
and are not quoted in an active market. They come into being when the Group provides a debtor
directly with money, goods or services without any intention of trading the debt.
Loans and receivables are initially recognized at fair value and subsequently measured at amortized cost.
Trade receivables for construction contracts in progress at the balance sheet date where the outcome of the construction contract can be reliably estimated are recognized at cost plus profit
attributable to the proportion of the work completed. Other construction contracts in progress
are recognized at cost to the extent that will probably be recovered from contract revenues.
The carrying amount of any doubtful receivables is reduced to the recoverable amount. Besides
necessary specific impairments, a valuation allowance is recognized for at-risk receivables on the
basis of general credit risk. For trade accounts payable and receivables, the nominal amount less
any accumulated impairment losses is assumed to equal fair value.
Receivables denominated in foreign currencies are translated using the middle exchange rate
at the balance sheet date. Foreign exchange gains and losses are recognized in net interest and
investment income.
105
(c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets designated as available for
sale or not coming under any of the other categories mentioned. Gains or losses on such assets
are credited or charged directly to equity in other revenue reserves. The assets are classified as
non-current unless the Group intends to dispose of them within twelve months of the balance
sheet date.
Financial assets and groups of financial assets are assessed for objective evidence of impairment
at each reporting date. In the case of equity instruments classed as available-for-sale financial assets,
a significant or prolonged decline in fair value below cost is considered evidence of impairment.
When there is evidence that an asset has been impaired, an impairment loss is recognized by reducing the asset’s carrying amount to its fair value. The cumulative loss that has been recognized
in equity is removed from equity and recognized on the income statement in depreciation and
amortization. Impairment losses recognized in income for an equity instrument classified as available for sale are not reversed through income.
5.5 Inventories
Inventories are measured at the lower of cost and net realizable value. Cost is assigned by the
weighted average cost formula. The cost of finished goods and work in progress includes costs
of product design, materials and supplies, direct labour, other direct costs, and overheads allocable
to production. Borrowing costs are not included in the cost of inventories. The net realizable value
of inventories is the estimated selling price less the estimated cost to completion and estimated
necessary selling costs.
5.6 Construction contracts
A construction contract is defined in IAS 11 as a contract specifically negotiated for the construction of an asset.
If the outcome of a construction contract cannot be measured reliably, revenue is only recognized
to the extent that it is probable that incurred contract costs can be recovered.
If the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognized over the duration of the contract. If it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized
as an expense immediately. The Group uses the percentage of completion method to determine
the revenue to be reported in a given financial year. The percentage of completion is the percentage of expected total contract cost incurred by the balance sheet date.
The Group reports the gross amount due from customers for construction work – for all contracts
in progress for which costs incurred plus reported profits (or less recognized losses) exceed progress
billings – as an asset. Progress billings not yet paid are reported under trade receivables.
The Group reports the gross amount due to customers for contract work – for all contracts in
progress for which progress billings exceed costs incurred plus reported profits (or less recognized losses) – as a liability.
5.7 Non-current assets held for sale
In accordance with IFRS 5, which is applied for the first time in the 2005 consolidated financial
statements, non-current assets earmarked for sale in asset deals are accounted for as non-current
assets held for sale if their sale is highly probable in the next twelve months. Non-current assets
earmarked for sale in share deals are presented together with the remaining assets and liabilities
106
to be sold in a separate item on the consolidated balance sheet. The cost and cumulative depreciation and amortization of non-current assets held for sale are also shown separately in the consolidated schedules of non-current assets.
At the time they meet the criteria for classification as held for sale and at each subsequent reporting date, non-current assets held for sale are measured at the lower of carrying amount and fair
value less costs to sell. Depreciation of such assets ceases at the time they meet the criteria for
classification as held for sale.
5.8 Accounts payable
Loan payables and other payables are initially recognized at fair value. Any difference between
the amount of a loan (after deduction of transaction costs) and the amount repaid is generally
recognized in income over the contractually agreed loan term using the effective interest method.
Subsequent measurement is at cost.
Accounts payable are classed as non-current liabilities if a loan agreement provides for a repayment period longer than twelve months. Accounts payable denominated in foreign currencies
are translated using the middle exchange rate at the balance sheet date. Foreign exchange gains
and losses are recognized in net interest and investment income. Derivatives recognized as liabilities are carried at fair (market) value. The fair values of financial liabilities disclosed in the Notes
are determined by discounting the contractually agreed future cash flows at the market rate of
return that the Group would currently obtain for similar financial instruments.
5.9 Taxation
Deferred tax assets and liabilities are recognized, using the balance sheet liability method, for temporary differences between the tax base of assets and liabilities and their carrying amounts in the
IFRS balance sheet.
Deferred tax assets are recognized for temporary differences, and also for tax loss carryforwards,
to the extent that it is probable that taxable net income will be available against which a temporary
difference and previously unused tax loss carryforwards can be utilized.
Deferred tax assets and liabilities are measured using the tax rates and tax laws enacted or substantively enacted by the balance sheet date and expected to apply when the asset is realized or
the liability settled. For German Group companies, a tax rate of 39% is applied, made up of the
uniform corporation tax rate, the German ‘solidarity surcharge’, and an average rate for local
trade tax. The tax rates for foreign companies vary between 16% and 37%.
Deferred tax liabilities are recognized for temporary differences associated with investments in subsidiaries and associated companies except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences
will not reverse in the foreseeable future.
Current tax, to the extent unpaid, is recognized as a liability. If the amount already paid for income
taxes exceeds the amount due, the excess is recognized as an asset.
5.10 Pension provisions
Pension provisions are determined for defined benefit retirement plans by independent actuaries
using the projected unit credit method prescribed in IAS 19. This method takes into consideration
future increases in salaries and benefits as well as the benefits and entitlements already known at
the reporting date.
107
The interest element of pension expenses is reported in net interest and investment income. Plan
assets as defined in IAS 19 are shown separately as a deduction from pension obligations. Earnings
from plan assets are deducted from personnel expenses.
Actuarial gains and losses exceeding ten percent above or below the total benefit obligation or the
fair value of plan assets, whichever is the higher, are recognized in income over the remaining
working lives of participating employees.
The majority of employees participate in pension plans that are financed on a pay-as-you-go basis.
Expenses of defined contribution retirement plans are reported in personnel expenses.
Explanatory notes on the pension plans are provided in section 10.9.
5.11 Other provisions
Provisions are recognized for decommissioning, remediation of environmental damage, legal proceedings and other obligations when the Group has a legal or constructive obligation to a third
party, it is probable that settling the obligation will require an outflow of resources embodying
economic benefits, and the amount of the obligation can be reliably estimated.
Other provisions are measured in accordance with IAS 37 and IAS 19 by using the best possible
estimate of the amount of the obligation.
Provisions with a remaining period exceeding one year are discounted using an interest rate that
reflects current market assessments of the time value of money and the risks specific to the liability.
5.12 Share options
Calculations relating to obligations under the share option plan for managerial staff are performed
in accordance with IFRS 2 by financial analysis using an option pricing model. Options are measured at fair value at the grant date and each subsequent reporting date. Their value is allocated in
the income statement as personnel expenses over the lock-up period (until the options are vested)
and is recognized in other provisions. From 2005 onwards, only cash-settled plans have existed
at IVG. The share option plans issued before 7. 11. 2002 (based on the 1999 plan design) are not
subject to reporting requirements.
5.13 Leases
Leases in which substantially all the risks and rewards incidental to ownership of the leased assets
remain with the lessor are classed as operating leases. Payments received or made under an operating lease are recognized in income over the lease term. Tenancies for real estate are operating
leases by this definition.
Leases which transfer substantially all the risks and rewards incidental to ownership of the leased
assets to the lessee are classed as finance leases. Where the Group is the lessee, it recognizes
finance leases at the commencement of the lease term as assets at the fair value of the leased
property or, if lower, the present value of the minimum lease payments. Each lease payment is
apportioned between finance charge and reduction of outstanding liability so as to produce a
constant rate of interest on the liability. The liability is reported in financial liabilities. The finance
charge is recognized in net interest and investment income. Items of property, plant and equipment
held under a finance lease are depreciated over their useful lives or over the lease term, whichever
is shorter.
108
Where the Group is the lessor, it recognizes the present value of minimum lease payments for
finance leases as a receivable and the leased item as an asset disposal. Any difference between
the gross receivable and the present value of the receivable is recognized in net interest and investment income over the lease term. Finance income is recognized over the lease term using the
annuity method, reflecting a constant annual return.
In leases under which the Group is a manufacturer or dealer lessor, selling profits representing
the difference between the present value of minimum lease payments and the residual value of
leased items are recognized in other operating income (IAS 17.42 ff).
5.14 Revenue recognition
Turnover comprises:
• Net rental income
• Service charges receivable
• Turnover from project development, in the form of either turnover under construction contracts
(accounted for using the percentage of completion method if its criteria are met) or turnover
with revenue recognition on completion and transfer of beneficial ownership
• Services (investment fund management, property management fees, commissions, and operation of storage caverns and tank farms)
Revenue recognition on sales (e.g. of investment properties) takes place when:
• All significant risks and rewards of ownership have been transferred to the buyer;
• The Group retains neither managerial involvement nor effective control over what is sold;
• The amount of the revenue and the costs incurred or to be incurred in respect of the
transaction can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow to the Group.
109
6 Notes to the Consolidated Balance Sheet: Assets
6.1 Intangible assets
Concessions, patents,
trademarks, licences
and similar rights
€m
Goodwill arising
on consolidation
€m
Total
€m
Cost
16.6
125.2
141.8
Translation differences
0.0
0.0
0.0
Changes in the reporting entity
0.0
0.0
0.0
Additions
1.5
0.0
1.5
Disposals
0.0
0.0
0.0
Reclassifications
0.0
0.0
0.0
18.1
125.2
143.3
8.4
1.8
10.2
0.0
0.0
0.0
0.0
0.0
0.0
Charge
(of which: impairment losses)
1.5
(0.0)
0.0
(0.0)
1.5
(0.0)
Impairment reversals
0.0
0.0
0.0
Disposals
0.0
0.0
0.0
Reclassifications
0.0
0.0
0.0
9.9
1.8
11.7
Carrying amount at 31.12. 2005
8.2
123.4
131.6
8.2
123.4
131.6
Amortization
110
Concessions, patents,
trademarks, licences
and similar rights
€m
Goodwill arising
on consolidation
€m
Total
€m
Cost
16.0
15.9
0.2
0.1
0.3
5.1
109.2
114.3
Additions
0.9
0.0
0.9
Disposals
–5.7
0.0
–5.7
Reclassifications
31.9
0.1
0.0
0.1
16.6
125.2
141.8
8.7
1.0
9.7
0.1
0.0
0.1
3.9
–0.1
3.8
Charge
1.0
(0.0)
0.9
(0.9)
1.9
(0.9)
Disposals
Amortization
–5.3
0.0
–5.3
8.4
1.8
10.2
8.2
123.4
131.6
7.3
14.9
22.2
Rights include salt rights and surface rights at the Etzel-based caverns facility with a carrying
amount of €5.8 million (2004: €5.0 million) for which no amortization is charged.
The reported goodwill mostly relates to two cash-generating units (CGUs): OIK, which issues German institutional real estate funds (‘Spezialfonds’), accounted for €108.4 million of the goodwill
figure (2004: €108.4 million). Wert-Konzept, which issues closed-end real estate funds for private
investors, accounted for €11.3 million (2004: €11.3 million). In the case of the OIK CGU, the monitoring level relevant to management is growth in the value of the enterprise, whose main determinant is growth in total funds under management. IVG management’s monitoring of the WertKonzept CGU is based on operating earnings, whose main determinant is growth in sales of equity
shares in closed-end real estate funds.
The recoverable amount of a CGU is found by determining its value in use. The calculation is
based on medium-term plans adopted by management with a three-year horizon (2006 to 2008).
A terminal value is calculated for later periods (from 2009 onwards) as a perpetuity of sustained
operating cash flows extrapolated using a growth rate based on long-term expectations for each
CGU. The cost of capital is determined for each CGU using the same parameters. The discount
rates are derived from market data and are set at 8.13% for the OIK CGU and 7.5% for the WertKonzept CGU. There is no impairment in accordance with IAS 36 as the value in use is higher
than the carrying amount of each CGU.
111
6.2 Investment properties
2005
2004
€m
€m
3,017.1
3,144.9
Cost
Balance at 1.1.
–1.2
3.5
–171.3
–185.3
Additions
265.4
125.9
Disposals
–243.2
–106.4
Reclassifications to non-current assets held for sale
–265.6
0.0
Reclassifications from property, plant and equipment
45.2
34.5
2,646.4
3,017.1
618.5
602.2
Balance at 31.12.
Depreciation
Balance at 1.1.
–0.1
0.1
–10.1
–26.5
Charge
(of which: depreciation)
50.3
(42.6)
(7.7)
54.4
(43.3)
(11.1)
Disposals
–78.5
–8.1
–9.7
–12.1
Reversals of impairment losses
Reclassifications to non-current assets held for sale
–16.3
0.0
Reclassifications from property, plant and equipment
11.5
8.5
565.6
618.5
Carrying amount at 31.12.
2,080.8
2,398.6
Carrying amount at 1.1.
2,398.6
2,542.7
Fair values at 31.12.
2,779.5
3,104.9
Balance at 31.12.
Investment properties are initially recognized at cost. Transaction costs are included in initial cost.
After initial recognition, investment properties are measured using the cost model as described
in IAS 40.56 and thus in accordance with the requirements of IAS 16, i.e. at cost less any accumulated depreciation, accumulated impairment losses and reversals of impairment losses. The decrease
in fair values is almost entirely due to sales and reclassifications to assets held for sale, which
are no longer taken into account when determining fair value.
The fair values reported for investment properties are largely based on valuations performed by
reputable neutral appraisers, in accordance with international valuation standards, on the basis
of comparison prices or of net cash inflows discounted to present value using the DCF method.
The company’s own appraisals, relating among other things to 20 oil caverns, account for about
€450 million or 16% of the total.
The impairment losses in 2005 relate to German (€7.3 million) and Dutch (€0.4 million) investment
properties. They were recognized under IAS 36 as the carrying amount of the assets concerned
exceeded their market value at the balance sheet date. This reflected a drop in rental income under
a general business slowdown. The impairment losses in 2005 were offset by revaluations recognized
in other operating income due to individual letting successes in Berlin and Dresden (€8.8 million)
and London (€0.9 million).
112
Investment properties are generally impairment tested by comparing the combined carrying amount
of land and buildings with the properties’ appraised market value. The comparison is made on the
basis of gross market values, i.e. in accordance with IAS 40.37 excluding transaction costs that can
arise in the event of an actual sale.
The main additions in the financial year relate to the acquisition and development of 14 oil and nine
gas caverns plus infrastructure (€90.5 million). The company also purchased an office property
in Paris (€28.6 million), another in Munich (€38.1 million) and another in Hamburg (€38.0 million).
The disposals, reported at carrying amount, are mostly accounted for by office properties in Nuremberg (€54.7 million) and Milan (€34.8 million) and by nine gas caverns let under finance leases
(€55.2 million).
6.3 Other property, plant and equipment
Land and
buildings
(owneroccupied)
Technical
equipment,
plant and
machinery
€m
€m
Other
facilities
and office
equipment
€m
Advance
payments
made and
construction
in progress
Total
€m
€m
Cost
56.3
56.8
21.7
101.7
236.5
0.4
0.8
0.0
1.2
2.4
0.0
0.0
0.0
0.0
0.0
Additions
0.0
0.1
1.8
187.6
189.5
Disposals
–4.5
–5.9
–1.8
–4.1
–16.3
Reclassifications to assets held
for sale
0.0
0.0
–0.1
0.0
–0.1
Other reclassifications
0.1
–18.9
0.0
–26.5
–45.3
52.3
32.9
21.6
259.9
366.7
Depreciation
22.0
27.5
14.8
0.0
64.3
0.0
0.2
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
Charge
0.8
1.8
1.6
0.0
4.2
–1.6
–5.8
–1.6
0.0
–9.0
Disposals
Reclassifications
0.0
–11.5
0.0
0.0
–11.5
21.2
12.2
14.8
0.0
48.2
31.1
20.7
6.8
259.9
318.5
34.3
29.3
6.9
101.7
172.2
113
Advance
Land and
buildings
(owneroccupied)
Technical
equipment,
plant and
machinery
Other
facilities
and office
equipment
Advance
payments
made and
construction
in progress
Total
€m
€m
€m
€m
€m
229.7
Cost
63.0
63.6
22.1
81.0
0.8
1.9
0.0
0.0
2.7
0.0
–7.7
3.9
0.0
–3.8
Additions
0.0
0.1
2.6
48.7
51.4
Disposals
–1.5
0.0
–6.9
–0.6
–9.0
Reclassifications
–6.0
–1.1
0.0
–27.4
–34.5
56.3
56.8
21.7
101.7
236.5
79.3
Depreciation
27.7
34.4
17.2
0.0
0.0
0.3
0.0
0.0
0.3
0.0
–7.7
1.3
0.0
–6.4
Charge
1.1
2.5
2.2
0.0
5.8
Disposals
–0.4
0.0
–5.8
0.0
–6.2
Reclassifications
–6.4
–2.0
0.0
0.0
–8.4
22.0
27.5
14.8
0.0
64.3
34.3
29.3
6.9
101.7
172.2
35.3
29.2
4.9
81.0
150.4
Additions under construction in progress in the financial year include €66.5 million for the acquisition of eleven caverns and the commencement of their conversion from oil to gas. A further
€32.2 million relates to downpayments on an office property in Munich.
114
6.4 Financial assets
Shares in
associated
companies
accounted for
using the equity
method
Shares in
affiliated
companies
Other
participating
interests
Non-current
securities
€m
€m
€m
€m
0.3
Cost
32.0
48.9
32.7
0.0
0.0
0.0
0.0
0.0
–1.5
0.0
0.0
Additions
8.1
2.1
8.0
42.5
–3.5
0.0
0.0
0.0
0.0
–3.3
–2.2
0.0
Reclassifications
–5.9
1.5
4.4
0.0
30.7
47.7
42.9
42.8
0.0
24.8
9.9
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Charge
0.0
3.7
6.3
0.0
0.0
0.0
0.0
–0.1
Measured at fair value through the
income statement
0.0
0.0
0.0
–3.7
Unrealized gains and losses
0.0
–0.5
–0.5
0.0
Disposals
0.0
–0.5
–0.3
0.0
Reclassifications
0.0
0.0
0.0
0.0
0.0
27.5
15.4
–3.7
Change in equity method investments
Disposals
Amortization
30.7
20.2
27.5
46.5
32.0
24.1
22.8
0.2
115
Long-term
loans
to affiliated
companies
€m
Long-term
loans
to associated
companies
€m
Long-term
loans
to other
participating
interests
Other
long-term
loans
Other
financial
assets
€m
€m
€m
163.4
Cost
0.2
27.3
5.2
48.8
0.0
0.0
0.0
0.0
0.0
–10.7
0.0
0.0
–1.0
–13.2
Additions
0.0
3.8
11.4
18.7
86.5
0.0
0.0
0.0
0.0
0.0
Disposals
0.0
0.0
0.0
–0.4
–5.9
10.7
–10.7
0.0
0.0
5.9
0.2
20.4
16.6
66.1
236.7
0.0
0.0
0.5
1.5
36.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Charge
0.0
0.0
0.8
0.0
10.8
0.0
0.0
0.0
–0.5
–0.6
Reclassifications
Amortization
Measured at fair value through the
income statement
0.0
0.0
0.0
0.0
3.7
0.0
0.0
0.0
0.0
–1.0
–0.8
Disposals
0.0
0.0
0.0
0.0
Reclassifications
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.3
1.0
41.5
0.2
20.4
15.3
65.11
195.2 1
4.7
1
126.6 1
1
116
0.2
Of which €1.9 million reported in current receivables.
27.3
47.3
Shares in
associated
companies
accounted for
using the equity
method
Shares in
affiliated
companies
Other
participating
interests
Non-current
securities
€m
€m
€m
€m
0.4
Cost
32.9
49.7
16.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
Additions
5.8
1.0
26.0
3.7
0.0
0.0
0.0
–10.4
–1.8
–9.8
–0.4
Disposals
Reclassifications
0.0
0.0
–0.1
0.1
32.0
48.9
32.7
0.3
0.0
20.8
5.4
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Charge
0.0
3.7
4.5
0.1
0.0
0.0
0.0
0.0
0.0
0.3
0.0
0.0
–0.3
Amortization
Disposals
0.0
0.0
0.0
Reclassifications
0.0
0.0
0.0
0.0
0.0
24.8
9.9
0.1
32.0
24.1
22.8
0.2
32.9
28.9
11.2
0.1
117
Long-term
loans
to affiliated
companies
Long-term
loans
to associated
companies
€m
€m
0.8
21.1
0.0
0.0
0.0
Additions
Long-term
loans
to other
participating
interests
€m
Other
long-term
loans
Other
financial
assets
€m
€m
3.3
66.8
158.7
0.0
0.0
0.0
0.0
0.0
–0.1
–0.1
0.0
6.3
1.4
13.9
48.8
0.0
0.0
0.0
0.0
0.0
–0.6
–0.1
–3.3
–28.0
–44.0
Cost
Disposals
Reclassifications
0.0
0.0
3.8
–3.8
0.0
0.2
27.3
5.2
48.8
163.4
0.0
0.0
0.1
1.5
28.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Charge
0.0
0.0
0.2
1.1
9.6
0.0
0.0
0.0
–0.1
–0.1
0.0
0.0
0.0
0.0
0.3
Disposals
0.0
0.0
–0.1
–0.7
–1.1
Reclassifications
0.0
0.0
0.3
–0.3
0.0
0.0
0.0
0.5
1.5
36.8
Amortization
1
0.2
27.3
4.7
47.3 1
126.6 1
0.8
21.1
3.2
65.3
130.6
Of which €1.9 million reported in current receivables.
An amount of €1.5 million was reclassified from shares in associated companies to shares in affiliated companies as a result of an increased shareholding. Remeasurement of the prior shareholding did not result in recognition of any fair value gains or losses. Long-term loans to the company
concerned were reclassified accordingly. After a further associated company was put into liquidation, its residual carrying amount was reclassified to other participating interests and reduced to
a notional amount by a charge to income. Other impairment charges to other participating interests relate to a tank storage company in Berlin.
Under shares in affiliated companies, €0.8 million (2004: €0.0 million) in impairment losses previously charged to equity were reclassified to the income statement in the 2005 financial year to
reflect other-than-temporary impairments. This was in addition to the €2.9 million in impairment
losses recognized in the financial year.
118
The additions to non-current securities include €34.0 million in Bayerische Landesbank bonds.
As the redemption amount payable in 2015 depends on the performance of global share indices,
the bonds are measured at fair value through the income statement. A gain of €3.7 million was
recognized in the 2005 financial year. Another €8.5 million is accounted for by the purchase of
convertible bonds issued by a Singapore development company.
The additions in long-term loans to other participating interests include €9.0 million for IVG’s share
in financing the purchase of an Italian property company.
The additions in other long-term loans include €8.2 million in loans to a Luxembourg company
that finances the FDV II venture and €4.0 million relating to delayed payment for a property sold
in Nuremberg.
Financial assets
Carrying
amount
2005
Fair value
2005
Carrying
amount
2004
Fair value
2004
€m
€m
€m
€m
Shares in affiliated companies
20.2
20.2
24.1
24.1
Shares in other participating interests
27.5
27.5
22.8
22.8
8.8
8.8
0.2
0.2
56.5
56.5
47.1
47.1
37.7
37.7
0.0
0.0
Available-for-sale financial assets
Non-current securities
Non-current securities measured at fair value
through the income statement
Long-term loans
Long-term loans to affiliated companies
0.2
0.2
0.2
0.2
Long-term loans to associated companies
20.4
20.4
27.3
27.5
Long-term loans to other participating interests
15.3
15.3
4.7
4.7
Other long-term loans
63.2
62.6
45.4
45.7
Total
99.1
98.5
77.6
78.1
193.3
192.7
124.7
125.2
Available-for-sale financial assets are carried at fair value. As the ownership shares concerned are
not traded on sufficiently active markets, they are measured using appropriate valuation techniques
such as the discounted earnings method and other estimation methods with due regard to considerations of materiality and cost-effectiveness. Altogether, impairment losses of €0.8 million were
recognized for long-term loans in the year under review (2004: €3.3 million).
119
6.5 Receivables and other assets
Total
2005
Finance lease receivables
Noncurrent
2005
Current
2005
Total
2004
Noncurrent
2004
Current
2004
€m
€m
€m
€m
€m
€m
139.7
126.7
13.0
62.6
40.7
21.9
104.0
Trade receivables
53.8
10.2
43.6
107.8
3.8
Receivables from associated companies
31.3
26.7
4.6
14.3
11.6
2.7
Other tax receivables
26.5
3.7
22.8
16.1
0.0
16.1
Receivables from affiliated companies
19.1
0.0
19.1
19.3
0.0
19.3
Receivables from other participating interests
14.1
0.0
14.1
4.2
0.0
4.2
Surplus on plan assets
(see section 7.5)
2.3
2.3
0.0
0.0
0.0
0.0
Short-term loans
1.9
0.0
1.9
1.9
0.0
1.9
Construction contract receivables
0.0
0.0
0.0
156.3
1.0
155.3
Other assets
Total
68.1
3.7
64.4
100.2
19.4
80.8
356.8
173.3
183.5
482.7
76.5
406.2
All fair values approximately equal nominal values except finance lease receivables (see section 8).
Finance lease receivables mostly comprise a €111.4 million finance lease on nine caverns in
Germany plus a number of leases in Belgium.
Receivables from associated companies mainly comprise lendings to ‘spirit at stadium’ GmbH &
Co. Liegenschafts KG, Deisenhofen (€15.4 million), Grundbesitz Investitionsgesellschaft LeibnizKolonnaden mbH & Co. KG, Berlin (€7.5 million) and the Am Salzufer property development
company (€6.8 million).
The other tax receivables chiefly comprise €15.0 million in input VAT recoverable from the revenue
authorities in Italy.
The receivables from affiliated companies include lendings to non-consolidated affiliated property
development companies relating to the three developments Hackescher Markt (€5.2 million),
Modaupromenade (€3.1 million) and Galeria Dominikanska (€6.8 million).
Receivables from other participating interests mainly relate to bridging loans to the EuroSelect
11 fund (€3.6 million) and the EuroSelect 12 fund (€7.4 million).
The Group recognized €7.4 million (2004: €8.9 million) in impairment losses on receivables as
other expenses in the 2005 financial year.
120
Future construction contract receivables determined by the percentage of completion method were
as follows in 2004 (there are no such future receivables in 2005):
2005
2004
€m
€m
Accumulated costs incurred
0.0
175.5
Accumulated profits and losses
0.0
26.8
Sum of accumulated costs incurred and
profit and loss on construction contracts
0.0
202.3
Sum of advances received deducted on the assets side
0.0
–46.0
Future receivables from construction contracts
0.0
156.3
Turnover from construction contracts in 2005 was €33.3 million (2004: €110.5 million) and mostly
related to the Munich St.-Martin-Strasse and Berlin Canadian Embassy projects. Receipts recognized
in income during the financial year amounted to €1.6 million (2004: €11.8 million). Income is recognized using the percentage of completion method, with the percentage of completion measured
on a cost-to-cost basis. No more construction contracts requiring this accounting treatment existed
at the reporting date.
6.6 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total
2005
2004
€m
€m
1.2
3.3
100.6
54.2
5.1
15.7
106.9
73.2
€72.2 million (2004: €24.2 million) of inventories will be held longer than one year.
The increase in work in progress includes €45.5 million due to the initial consolidation of GELFOND Verwaltungsgesellschaft mbH & Co. Frankfurt-Niederrad Besitz KG, Munich, which operates the ComConCenter development in Frankfurt am Main.
Inventory write-downs to net realizable value amounted to €2.9 million in 2005 (2004: €0.0 million). The carrying amount of inventories reported at net realizable value is €9.4 million (2004:
€0.0 million).
6.7 Current asset securities
Available for sale
Held for trading
Total
2005
2004
€m
€m
30.0
11.0
0.0
26.3
30.0
37.3
Securities are measured at fair value (quoted market price at the balance sheet date). Changes
in the value of securities held for trading are recognized in income. Changes in the value of available-for-sale securities are taken directly to the appropriate reserve account in equity. Current asset
securities comprise quoted bonds and bonds from public-sector issuers.
121
6.8 Cash at bank and in hand
This mostly comprises cash funds belonging to IVG Immobilien AG and companies not yet included
in the Group cash clearing system.
The interest rates range between 1.5% and 2%.
6.9 Prepaid expenses
2005
2004
€m
€m
Non-current
2.4
4.9
Current
6.0
5.2
Total
8.4
10.1
This item consists of payments made that will not be recognized as expense until later financial
years.
6.10 Non-current assets held for sale
Properties held for sale
Disposal group assets
Total
Disposal group liabilities
€191.0 million
€67.1 million
€258.1 million
€1.8 million
Properties held for sale solely comprise investment properties in the portfolio management and
project development segments. Two office properties in Brussels (with a carrying amount of
€144.2 million) were sold in March 2006. A contract of sale signed for a further office property
in Brussels (carrying amount: €21.1 million) is pending notarization. Planned sales in Germany
(carrying amount: €25.7 million) relate to unbuilt plots in Munich, Berlin and Hanover and three
office properties in Kassel and Munich. In most of these cases, the contracts of sale were signed
and notarized in 2005. As the contracts are either subject to conditions precedent or stipulate a
date in 2006 for the transfer of material opportunities and risks, the book gains on the sales will
probably be realized in the first half of 2006.
The investment properties held as a disposal group comprise five office properties in Budapest
already sold in a share deal in early February 2006.
There were no impairment losses to recognize on the investment properties as their fair value
(€323.7 million) less cost to sell exceeded their carrying amount.
122
The main assets and liabilities in the disposal group comprise:
Assets
€57.3 million
Property, plant and equipment and intangible assets
€0.1 million
Deferred tax assets
€0.5 million
Other tax receivables
€4.7 million
Other receivables
€3.4 million
€1.1 million
Cash and cash equivalents
€67.1 million
Total assets
Liabilities
Other liabilities
€1.1 million
Deferred income
€0.7 million
Total liabilities
€1.8 million
7 Notes to the Consolidated Balance Sheet: Liabilities and equity
7.1 Equity
Detailed figures are provided in the Statement of Changes in Equity.
The share capital of IVG Immobilien AG is €116,000,000.00, divided into 116 million no-par-value
shares.
Categories of authorized capital in existence at the balance sheet date:
Class I authorized capital
for issue as new no-par-value shares payable in cash
€24 million by AGM resolution of 31. 5. 2005
Class II authorized capital
for issue as new no-par-value shares payable in cash
Class III authorized capital
for issue as new registered no-par-value shares payable
in cash or in non-cash assets
By resolution of 23. 5. 2002, IVG Immobilien AG has an additional €30 million in conditional capital
(to expire on 22. 5. 2007) for the event of a convertible bond or warrant-linked bond issue. By resolutions of 27. 5. 1999 and 23. 5. 2002, it has a further total of €5,848,856 in conditional capital for
rights issues under share option plans.
WGZ-Bank, Düsseldorf, notified us under Section 21 (1) of the German Securities Trading Act (WpHG)
that its share of the voting rights in our company fell below the 5% threshold on 24. 6. 2005 and is
now 3.32%.
HSH Nordbank AG, Hamburg and Kiel, notified us under Sections 21 (1), 22 (1) and 24, WpHG on
behalf of its wholly owned subsidiary Pellecea GmbH, Hamburg, that Pellecea GmbH’s share of
the voting rights in our company fell below the 10% threshold on 28. 9. 2005 and is now 5.09%
(rounded to two decimal places). HSH Nordbank’s share of voting rights in our company also fell
below the 10% threshold on 28. 9. 2005 and is now likewise 5.09% (again rounded to two decimal
places); HSH Nordbank is deemed to hold this share of the voting rights since 28. 9. 2005 by virtue
of Section 22 (1) 1, WpHG.
123
Sal. Oppenheim jr. & Cie. KGaA, Cologne, notified us under Section 21, WpHG, that its share of
the voting rights in our company fell below the 25% threshold on 4. 10. 2005 and is now 20.1%.
The 20.1% share of the voting rights is directly held by Sal. Oppenheim jr. & Cie. KGaA.
Sal. Oppenheim jr. & Cie. KGaA, Cologne, notified us under Sections 21, 22 and 24, WpHG that it
sold its previously directly held shares in our company in an internal restructuring of its corporate
group to its subsidiary Sal. Oppenheim jr. & Cie. Beteiligungen S.A., Luxembourg, on 27. 10. 2005.
Sal. Oppenheim jr. & Cie. KGaA, Cologne, therefore further notified us that the share of the voting
rights in our company held directly by Sal. Oppenheim jr. & Cie. Beteiligungen S.A., Luxembourg,
exceeded both the 5% and the 10% threshold on 27. 10. 2005 and is now 20.1%. Sal. Oppenheim
jr. & Cie. KGaA, Cologne, ceased to have a direct shareholding in our company on 27.10. 2005.
By virtue of Section 22 (1), WpHG, the share of voting rights in our company held by Sal. Oppenheim jr. & Cie. Beteiligungen S.A., Luxembourg, is deemed to be held by Sal. Oppenheim jr. &
Cie. KGaA, as a result of which Sal. Oppenheim jr. & Cie. KGaA holds a 20.1% share of the voting
rights in our company.
A shareholder has taken legal action to contest and cancel the resolutions adopted at the 2004
General Meeting. The case is currently on appeal before Cologne Higher Regional Court.
A shareholder has likewise taken legal action to contest and cancel resolutions adopted at the
General Meeting on 31. 5. 2005. The case is pending before Bonn Regional Court. The claim has not
yet been served on the company.
Additional paid-in capital solely comprises premiums on IVG Immobilien AG share issues.
IVG Immobilien AG once again issued IVG shares to employees in 2005 as part of an employee
savings scheme. 30,600 shares (representing 0.0264% or €30,600 of the share capital) were issued
to employees under the IVG Value programme with effect from 22. 12. 2005.
To meet the requirements of the IVG Value programme, 10,000 shares (corresponding to 0.0086%
or €10,000 of the share capital) were purchased on 21. 12. 2005 at a price of €17.16 per share.
The number of no-par-value shares held in treasury at 31. 12. 2005 was thus 751 (2004: 21,351),
representing 0.0006% or €751 of the share capital.
The other reserves comprise cumulative translation differences and changes in the fair value of
financial instruments recognized in equity (hedges plus available-for-sale securities and ownership shares).
Revenue reserves contain the undistributed net income of companies included in the consolidated
financial statements.
The minority interests essentially comprise minority interests in the share capital of OIK GmbH,
Wiesbaden, Tardis GmbH & Co. KG, Munich, and the actioplus investment fund, Berlin.
124
7.2 Financial liabilities
Total
2005
Bank loans
Commercial paper
Current
2005
Total
2004
Non-current
2004
Current
2004
€m
€m
€m
€m
€m
€m
2,063.6
1,717.9
345.7
2,178.6
1,906.2
272.4
160.0
0.0
160.0
0.0
0.0
0.0
Finance lease obligations
10.1
7.8
2.3
33.2 1
12.8 1
20.4 1
Loans from affiliated companies
11.9
0.0
11.9
13.2 1
0.0
13.2 1
1.0
2.3
1
69.6
1
2,296.9
1
Loans from associated companies
1.0
Other financial obligations
53.6
Total
1
Non-current
2005
2,300.2
0.0
2.8
1,728.5
50.8
571.7
1.5
1
0.8 1
20.9
1
48.7 1
1,941.4
1
355.5 1
The marked items have been reclassified from accounts payable since the previous year.
The carrying amounts of fixed and variable-interest bank loans are denominated in various currencies as follows (euro equivalents):
2005
2004
€m
€m
EUR
1,710.3
1,778.7
CHF
174.7
249.8
SEK
63.3
65.9
GBP
102.6
84.2
USD
12.7
0.0
Total
2,063.6
2,178.6
The term structure of variable and fixed-interest bank loans is as follows:
Total
variableinterest
liabilities
2005
Total
fixedinterest
liabilities
2005
Weighted
interest
rate (fixedinterest
loans)
2005
Total
variableinterest
liabilities
2004
Total
fixedinterest
liabilities
2004
€m
€m
%
€m
Up to 1 year
234.8
110.9
4.34
220.7
51.7
4.42
1 to 2 years
25.7
109.8
4.76
296.4
60.2
4.60
2 to 3 years
65.7
134.5
4.92
84.2
71.1
5.29
3 to 4 years
116.8
318.1
5.19
57.4
148.5
4.97
4 to 5 years
526.1
76.2
5.29
88.7
249.7
5.17
4.8
340.2
4.82
381.9
468.1
5.04
Total carrying amount
973.9
1,089.7
1,129.3
1,049.3
Fair value
973.9
1,119.8
1,129.3
1,076.4
Over 5 years
€m
Weighted
interest
rate (fixedinterest
loans)
2004
%
Variable-interest liabilities are subject to regular rate adjustments. The adjustments are mostly
based on 1, 3, 6 or 12-month Euribor/Libor plus an average margin of 0.72% (2004: 1.1%).
Fixed-interest loans are subject to an average interest rate of approximately 4.94% (2004: approx.
5.0%).
125
The fair values of bank loans are based on cash flows discounted to fair value using discount factors based on the current interest rate yield curve. The underlying interest rates ranged between
2.4% and 3.75% in the euro zone, between 4.2% and 4.9% in business denominated in pounds
sterling, and between 0.78% and 2.7% in business denominated in Swiss francs.
The commercial paper programme issued by IVG targets institutional investors seeking short-term
investment opportunities between one and three months. The average interest rate in 2005 was
2.60% (including margins).
The other financial obligations are mostly accounted for by loans from two second-tier participating interests; these loans are almost fully matched by receivables from the same companies.
The fair value of finance lease obligations amounts to €13.5 million (2004: €40.1 million). The fair
value of other financial liabilities is approximately equal to their carrying amount.
Certain bank loans are secured by charges on property:
2005
2004
€m
€m
Financial liabilities secured by charges on property
557.7
844.5
of which: charges on investment properties other than storage caverns
555.5
706.4
2.2
138.1
of which: on other properties (inventories and construction contracts)
Additionally, ownership interests in various fully consolidated subsidiaries that hold investment
properties are pledged as security for financial liabilities totalling €7.0 million (2004, adjusted:
€268.8 million). Due to consolidation, these interests no longer appear as financial assets in the
consolidated financial statements. Fixed-term deposits with a carrying amount of €19.2 million
(2004: €16.8 million) are additionally pledged as security for financial liabilities. Pledged property, plant and equipment is zero as in the previous year.
The €234.3 million in bank loans (2004: €74.9 million) relate to the forfaiting of future rent revenues
from the caverns business. The rent receivables are pledged to the lending banks as security. In
addition to the security shown in the table above, the loans are also secured with charges on the
land, salt extraction and surface rights needed to operate the caverns.
126
7.3 Derivative financial instruments
Derivative financial instruments current at the balance sheet date are as follows:
Nominal value
2005
Market value
2005
Nominal value
2004
Market value
2004
€m
€m
€m
€m
Currency derivatives
67.7
10.0
80.9
15.3
Interest rate derivatives
40.0
0.3
0.0
0.0
107.7
10.3
80.9
15.3
Assets
Total
Liabilities
Currency derivatives
91.9
1.4
95.2
2.2
Interest rate derivatives
760.2
28.4
756.7
30.6
Total
852.1
29.8
851.9
32.8
The absolute nominal value came to €959.8 million in 2005 and €932.8 million in 2004.
Contrary changes in the value of hedged items are not taken into account when determining the
market values of derivative financial instruments. These therefore do not represent the combined
amount that IVG would receive for hedges and hedged items on immediate sale at current market
conditions.
The carrying amounts of the derivatives match their market values and there is no (material) risk
of default as all derivative financial instruments are entered into with major banks of first-class
credit standing.
Net positive market values of €2.8 million (2004: €0.3 million) after deferred tax were deferred in
equity at 31. 12. 2005. This is the balance of a positive €9.1 million (2004: €11.0 million) for the
market values of net investment hedges and a negative €6.3 million (2004: €10.7 million) for the
market values of cash flow hedges.
The changes recorded over the course of the 2005 financial year were as follows (figures after
deferred tax): An amount of €2.5 million (2004: €0.3 million) was recognized in equity, representing €4.4 million (2004: minus €2.9 million) for changes in the market value of cash flow hedges
minus €1.9 million (2004: plus €3.2 million) for changes in the market value of net investment
hedges.
The market value of swaps classified as net investment hedges amounted to €9.5 million (2004:
€14.9 million). The market value of derivatives in cash flow hedges amounted to minus €11.4 million
(2004: minus €18.3 million). The market value of derivatives not qualifying for hedge accounting
came to minus €17.6 million (2004: minus €14.1 million).
127
The table below shows the derivative financial instruments classified by maturity.
Nominal value
up to 1 year
Nominal value
1 to 5 years
Nominal value
over 5 years
€m
€m
€m
0.0
67.7
0.0
Assets
Currency derivatives (total)
of which
- in connection with cash flow hedges
9.4
- in connection with net investment hedges
58.3
Interest rate derivatives (total)
0.0
40.0
0.0
of which
20.0
- other interest rate hedges
20.0
Total
0.0
107.7
0.0
0.0
91.9
0.0
127.8
426.7
205.7
127.8
426.7
205.7
Total
127.8
518.6
205.7
Liabilities
Currency derivatives (total)
of which
91.9
Interest rate derivatives (total)
of which
7.4 Deferred tax assets and liabilities
Deferred tax assets and liabilities are offset at separate company level and within fiscal units when
the Group has a legally enforceable right to set off current tax assets against current tax liabilities
and the deferred tax assets and liabilities relate to taxes levied by the same taxation authority.
Deferred tax assets and liabilities changed as follows over the financial year:
Assets
2005
Assets
2004
Liabilities
2004
€m
€m
€m
€m
5.5
142.8
37.7
171.9
Receivables (primarily lease receivables)
2.1
36.7
4.6
22.6
Special item under Section 6b
of the German Income Tax Act
0.0
11.2
0.0
32.8
29.7
3.6
15.2
13.4
Financial assets and securities
2.4
20.6
1.4
0.5
Other temporary differences
5.2
2.0
3.3
7.4
79.1
0.0
93.3
0.0
Subtotal
124.0
216.9
155.5
248.6
Offsetting of deferred tax assets and liabilities
–67.3
–67.3
–105.6
–105.6
56.7
149.6
49.9
143.0
Payables and provisions
Tax loss carryforwards
Amount on balance sheet
128
Liabilities
2005
of which current
45.3
18.9
29.9
5.2
of which non-current
11.4
130.7
20.0
137.8
€1.2 million was charged to equity in 2005 (2004: €0.3 million) for deferred tax assets and liabilities
recognized for hedges and available-for-sale investments.
No deferred tax assets have been recognized for tax loss carryforwards totalling €409.1 million
(2004: €339.1 million) that probably will not be able to be utilized.
Term structure of tax loss carryforwards for which no deferred tax assets have been recognized:
2005
2004
€m
€m
Up to 1 year
0.7
15.6
1 to 5 years
1.8
38.0
Over 5 years
(of which: local authority trade tax carryforwards)
406.6
(350.2)
285.5
(284.2)
Total
409.1
339.1
Deferred tax assets have been recognized as follows for utilizable tax losses:
Deferred tax assets for domestic tax loss
Corporation tax
Local authority trade tax
2005
2004
€m
€m
16.3
17.5
1.4
2.6
Deferred tax assets for foreign tax loss carryforwards
61.4
73.2
Total
79.1
93.3
€5.0 million (2004: €4.0 million) in deferred tax liabilities arising from temporary differences relating to investments in subsidiaries have not been recognized because the time of reversal of the
temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future.
7.5 Pension provisions
IVG maintains both defined benefit and defined contribution plans for its employees. These plans
are described in Note 10.9, Employee Benefits.
IVG Immobilien AG, IVG Management GmbH and IVG Logistik GmbH transferred assets in the form
of real estate and securities to a legally independent pension trust incorporated as a German
registered association (e.V.) under a contractual trust arrangement at the end of 2005. Assets (plan
assets) with a market value of €16.5 million (comprising €6.3 million in real estate and €10.2 million
in cash and cash equivalents) were transferred to the pension trust.
The pension trust used the cash and cash equivalents to purchase German mortgage bonds (‘Pfandbriefe’) repayable at short notice. These are reported at their market value as at the reporting date.
The market value of plan assets as at the balance sheet date was unchanged, at €16.5 million.
The transfer of assets to the pension trust produced a €5.9 million income item at Group level;
this is reported in other operating income. The assets serve to meet the transferring companies’
benefit obligations. Other companies with pension obligations are covered by pension liability
insurance.
129
Actuarial assumptions
The assumptions used in actuarial valuations of benefit obligations and benefit costs are as follows:
2005
2004
%
%
4.25/4.00
5.00
Rate of increase in salaries:
Board and other managerial staff
Benefit plan
2.00
2.00
1.00
2.00
Rate of increase in benefits:
Benefit plan
1.75/1.25
1.00/1.25
1.25
1.00
Fluctuation:
Benefit plan
3.50
10.00
3.50
10.00
2005G actuarial tables
published by
Dr. Klaus Heubeck
1998 actuarial tables
published by
Dr. Klaus Heubeck
5.00
6.00
Discount rate
Basis of calculation:
Expected return on externally held plan assets
A discount rate of 4% is applied for one Group company whose entire obligations comprise pension
benefits. A discount rate of 4.25% is applied for all other obligations, most of which are towards
active employees with benefit entitlements. Future pension increases of 1.25% a year are assumed
for Oppenheim Immobilien-Kapitalanlagegesellschaft mbH (OIK).
Reconciliation of total benefit obligations to pension provisions
2005
2004
€m
€m
Funded benefit obligations at 31.12.
20.6
2.9
Unfunded benefit obligations at 31.12.
10.7
23.4
Total benefit obligations at 31.12.
31.3
26.3
Unrealized actuarial losses (funded)
–3.2
0.0
Unrealized actuarial losses (unfunded)
–1.6
–0.7
Past service cost not yet recognized (funded)
Less fair value of plan assets
–0.1
0.0
–18.8
–2.0
Plan surplus reported in other assets
2.3
0.0
Pension provisions at 31.12.
9.9
23.6
The adjustment to obligations in 2004 is a result of funded benefit obligations not being shown
net of the fair value of plan assets. The entire amount of unfunded benefit obligations in 2005 is
accounted for by Oppenheim Immobilien-Kapitalanlagegesellschaft mbH (OIK).
130
Changes in total benefit obligations
2005
2004
€m
€m
26.3
16.8
0.0
8.4
Service cost
0.8
0.7
Unrealized actuarial losses
4.1
0.7
Past service cost not yet recognized
0.1
0.0
Interest cost
1.3
1.0
–1.3
–1.2
Benefit payments
Other
0.0
–0.1
31.3
26.3
2005
2004
€m
€m
23.6
14.9
0.0
8.4
Increases in provisions
0.8
0.7
Reversal of provisions
–0.3
–0.2
Changes in pension provisions
Net pension provisions changed as follows in the years 2005 and 2004:
Reversal of discounting (non-current provisions)
Benefit payments
Asset transfer at market value to plan assets
1.3
1.0
–1.3
–1.2
–16.5
0.0
Plan surplus reported in other assets
2.3
0.0
9.9
23.6
The portion of pension provisions classed as current provisions is €1.3 million (2004: €1.3 million).
The portion of the provision relating to funded obligations is reduced by the amount of the assets
transferred to the pension trust. At IVG Immobilien AG and IVG Logistik GmbH, the transferred
assets exceed the pension obligations. The surplus is reported in other assets.
Changes in the fair value of plan assets:
2005
2004
€m
€m
Opening fair value of plan assets 1.1.
2.0
1.7
0.2
0.2
Benefits paid
0.0
0.0
Expected returns
0.1
0.1
Asset transfer
16.5
0.0
Closing fair value of plan assets 31.12.
18.8
2.0
The plan assets comprise real estate (€6.3 million), securities (€10.2 million) and pension liability
insurance (€2.3 million).
131
Pension expenses
The expenses included in the Income Statement are as follows:
2005
2004
€m
€m
Defined contribution plan expenses
5.5
5.2
Service cost
0.8
0.7
Interest cost
1.3
1.0
Pension expenses at 31.12.
7.6
6.9
The interest cost is recorded in net interest and investment income and all other items in personnel
expenses. The expected return on plan assets was approximately equal to the actual return on plan
assets in both 2004 and 2005.
Actuarial gains and losses were not recognized through the income statement in 2004 and 2005 as
they remained within plus or minus 10% of the total benefit obligation. Defined contribution plan
expenses also include employer contributions to the state pension scheme.
7.6 Other provisions
Changes in other provisions in the 2005 financial year:
Opening
balance
Consolidation
changes
Additions/
increases Reversed
Unwinding of
discount
Utilized
Closing
balance
Longterm
Shortterm
€m
€m
€m
€m
€m
€m
€m
€m
€m
Decommissioning
0.9
0.0
20.8
0.0
0.9
0.0
22.6
22.6
0.0
Onerous contracts
16.6
0.0
7.0
0.6
0.0
0.2
22.8
22.5
0.3
Other personnel
provisions
10.3
0.0
12.2
1.3
0.0
8.2
13.0
0.2
12.8
Semiretirement
provision
2.3
0.0
0.7
0.0
0.0
0.1
2.9
2.9
0.0
Share option plan
provision
1.1
0.0
6.7
0.1
0.0
0.0
7.7
7.7
0.0
Environmental risks
provision
7.1
0.0
0.8
0.0
0.0
0.3
7.6
7.5
0.1
Rent guarantees
provision
2.7
0.0
0.8
0.0
0.0
1.0
2.5
0.3
2.2
Sundry provisions
32.9
–1.1
5.8
1.7
0.0
8.9
27.0
11.9
15.1
Total
73.9
–1.1
54.8
3.7
0.9
18.7
106.1
75.6
30.5
The provision for decommissioning was reported under other provisions in 2004. The increase in
this provision in 2005 relates in its entirety to gas and oil storage caverns on long-term lease and
was recognized as a deduction from cost without going through the income statement.
132
The provisions for onerous contracts primarily account for share repurchase obligations relating
to the actioplus real estate investment fund. The other personnel provisions include provisions
for performance-linked bonuses and special remuneration. The increase in the provision for share
options includes €0.8 million due to reclassification, on the balance sheet, of share option plans
from equity-settled to cash-settled.
The environmental risks provision almost entirely consists of risks from legacy munitions sites.
The sundry provisions mostly relate to warranties.
Probable cash outflows from provisions are €30.5 million (2004: €40.3 million) within one year,
€15.1 million (2004: €15.7 million) after one to five years and €60.5 million (2004: €17.9 million)
after five years.
7.7 Accounts payable
Trade accounts payable
(of which: amounts owed to affiliated
companies)
Long-term
2005
Short-term
2005
Total
2004
Long-term
2004
€m
€m
63.6
0.7
Short-term
2004
€m
€m
€m
€m
62.9
62.6
1.7
60.9
(0.1)
(0.0)
(0.0)
(0.0)
(0.1)
(0.0)
Customer advances received
3.1
0.0
3.1
10.2
0.3
9.9
Other taxes payable
6.7
0.0
6.7
12.2
0.0
12.2
Accrued interest payable
12.8
0.0
12.8
11.8
0.0
11.8
Invoices payable
16.3
0.0
16.3
17.7
0.0
17.7
Other liabilities
(of which: for social security)
19.7
(1.0)
3.3
(0.0)
16.4
(1.0)
37.3
(0.8)
3.7
(0.0)
33.6
(0.8)
122.2
4.0
118.2
151.8 1
5.7 1
146.1 1
Total
1
Total
2005
2004 figures restated (see section 7.2)
The reported carrying amounts are approximately equal to fair value.
Trade accounts payable include €38.0 million (2004: €30.2 million) in amounts outstanding out of
the purchase price of investment properties.
7.8 Deferred income
Non-current
2005
2004
€m
€m
7.1
8.2
Current
14.1
12.9
Total
21.2
21.1
The deferred income is mostly prepaid rent.
133
8 Leases
8.1 Operating leases
Many contracts entered into between IVG and its tenants are classed as operating leases under IFRS.
The Group is therefore the lessor in many and varied operating leases (tenancies) for investment
properties, from which it derives the greater part of its receipts and revenues. There are also various
operating leases for other properties and facilities (tank farms). Some fixed-term leases provide
lessees with renewal options. Tenants do not have any significant purchase options.
The operating leases related to investment properties with a carrying amount of €2,080.8 million
(2004: €2,377.0 million) and to tank farms with a carrying amount of €20.7 million (2004: €20.3
million). The carrying amount of partly owner-occupied properties under lease was not materially
significant.
IVG will receive minimum lease payments as follows under operating leases in force with third
parties:
2005
2004
€m
€m
Up to one year
208.4
203.8
Over one year and up to five years
466.4
478.8
Over five years
173.4
228.8
Total
848.2
911.4
The minimum lease payments are the net rent accruing over the agreed term or up to the earliest
possible date of termination by the lessee (tenant), regardless of the probability of the tenant terminating or not exercising an option to renew.
Contingent rent totalling €0.6 million (2004: €0.6 million) was recorded in turnover over the financial year.
Total operating lease expenses incurred as lessee were €9.8 million (2004: €8.3 million). The operating leases concerned primarily relate to rented property at various locations. The individual leases
do not have any material impact on the financial position or performance of the Group. The Group
generates only marginal revenue from subletting.
Minimum lease payments due in future periods are as follows:
Not later than one year
2005
2004
€m
€m
9.1
9.0
Later than one year and not later than five years
22.1
26.1
Later than five years
14.0
19.6
Total
45.2
54.7
The Group is not subject as lessee or lessor to any material restrictions under finance or operating leases concerning financing, dividends or further leasing.
134
8.2 Finance leases
The Group is the lessor under finance and operating leases for investment properties. Leases for
rolling stock where the Group was both lessor and lessee were terminated in 2005 – some as
planned, some early – by exercising reciprocal purchase options.
A long-term (38-year) tenancy agreement for nine gas caverns signed in 2005 qualifies under IAS 17
as a finance lease by a manufacturer or dealer lessor (see section 5.13) and increases finance lease
receivables by €111.4 million. The selling profit of €58.8 million is reported in other operating
income. The present value of the minimum lease payments is calculated by applying a discount
rate of 6%, which is appropriate to the lease term and the risk involved. The remaining lease
receivables relate to long-term tenancies in Belgium.
Minimum finance lease payments due in future periods are as follows:
Minimum
lease
payments
2005
Later than one year and
not later than five years
Discounting
2005
Present
2005
Lease
payments
2004
Discounting
2004
Present
2004
€m
€m
€m
€m
€m
€m
13.5
0.5
13.0
23.2
1.3
21.9
45.5
7.5
38.0
25.3
4.5
20.8
237.8
149.1
88.7
52.6
32.7
19.9
Total
296.8
157.1
139.7
101.1
38.5
62.6
The present values of the lease receivables total €162.8 million (2004: €70.1 million). The lease
receivables include €12.5 million in unguaranteed residual values (2004: €30.8 million). No conditional lease payments were received in 2004 or 2005. There is no accumulated allowance for
uncollectable minimum lease payments receivable.
Investment properties with a carrying amount of €6.1 million (2004: €7.1 million) are also used
under finance leases.
The term structure of the finance lease obligations is as follows:
Minimum
lease
payments
2005
Discounting
2005
Present
2005
Lease
payments
2004
Discounting
2004
Present
2004
€m
€m
€m
€m
€m
€m
2.6
0.3
2.3
21.9
1.5
20.4
Later than one year and
not later than five years
12.2
4.6
7.6
14.0
5.7
8.3
1.1
0.9
0.2
7.6
3.1
4.5
15.9
5.8
10.1
43.5
10.3
33.2
Total
The fair values of finance lease obligations total €13.5 million (2004: €40.1 million).
Future minimum lease payments from operating subleases on finance leased investment property
total €2.6 million (2004: €11.4 million). As in the previous year, there were no contingent rents.
The fair values of finance lease receivables and obligations are determined on the basis of the
interest rate yield curves current at each balance sheet date.
135
9 Notes to the Consolidated Income Statement
9.1 Turnover
2005
Net rental income from investment properties
2004
€m
€m
223.8
235.8
Service charges receivable
24.8
25.1
Turnover from project development (billed developments)
12.8
32.3
Turnover from construction contracts (percentage of completion)
33.3
110.5
Rental income from tank farms and operating income from storage caverns and tank farms
28.4
34.8
Fund management and fund equity marketing commission and fees
90.1
43.7
Other turnover
Total
12.8
25.1
426.0
507.3
9.2 Net change in inventories and other own work capitalized
2005
Decrease/increase in inventories of finished goods and work in progress
Other own work capitalized
2004
€m
€m
–2.3
–16.2
0.0
0.6
–2.3
–15.6
2005
2004
€m
€m
173.4
(173.1)
79.3
(75.1)
Income from reversals of impairment losses
9.7
12.1
Income recognized on remeasurement to market value
of properties qualifying as plan assets
5.9
0.0
Reversal of provisions
3.7
6.2
Lucky buy
0.2
5.8
Other
23.5
17.9
Total
216.4
121.3
Total
9.3 Other operating income
Disposals of non-current assets
(of which: from disposals of investment properties)
136
9.4 Material expenses
2005
Project development
Raw materials and consumables
Purchased services
Inventory write-downs
Total
2004
€m
€m
40.3
105.6
0.9
4.8
18.3
19.0
2.9
0.0
62.4
129.4
The project development expenses primarily consist of contracted construction work, architects’
fees, planning costs, etc.
9.5 Personnel expenses
2005
2004
€m
€m
Wages and salaries
57.5
53.7
Social security
(of which: for retirement pensions)
11.7
(6.3)
11.1
(5.9)
Share option plans
10.2
1.6
Total
79.4
66.4
The average number of employees in 2005 was 851 (comprising 111 trade and 740 salaried employees). The average number of employees in 2004 was 817 (comprising 135 trade and 682 salaried
employees). The increase is due to the inclusion of OIK in the consolidated group for the first time
over an entire financial year.
The retirement pension expenses are mostly costs of defined contribution plans, including employer
contributions to the state pension scheme. Personnel expenses for share option plans comprise
€4.5 million in payments and €5.7 million in additions to the provision for share option plans (see
section 10.11 for further information).
9.6 Depreciation
Depreciation
Impairment losses
Total
2005
2004
€m
€m
48.4
50.0
7.7
12.1
56.1
62.1
2005
2004
€m
€m
53.6
50.1
The impairment losses mainly relate to investment properties.
9.7 Investment property expenses
Let investment properties
Partially vacant investment properties
Total
4.5
5.9
58.1
56.0
137
This item essentially comprises maintenance, land tax, running costs, charges and fees directly
allocable to investment properties.
The amounts for let and vacant investment properties are stated as at the balance sheet date.
9.8 Other operating expenses
2005
2004
€m
€m
Auditing, legal and consultancy fees
20.0
19.6
Levies, fees, banking charges/early redemption penalties
10.8
3.8
Data processing
10.4
3.6
Ground rents, lease payments and lease expenses
9.8
8.3
Communication and marketing
9.1
6.6
Service and maintenance
7.9
12.6
Purchased external services
7.9
8.6
Impairment of receivables
7.4
8.9
Losses on disposals of non-current assets
4.0
2.6
Other taxes
Other expenses
Total
2.0
0.8
31.0
27.6
120.3
103.0
The auditing, legal and consultancy fees include €2.6 million for PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, comprising €1.6 million for the audit of the annual
financial statements, €0.5 million for tax consultancy, €0.3 million for other audit services and
€0.2 million for other services.
9.9 Income from associated companies accounted for using the equity method
Income from associated companies accounted for using the equity method includes a negative
amount of €18.1 million (2004: €0.0 million) as a result of adjusting receivables from four associated companies to fair value, and a positive amount of €4.3 million (2004: €10.5 million) for the
Group’s share in the 2005 net income of other associated companies.
9.10 Income from participating interests
Income from participating interests
(of which: affiliated companies)
Reductions in the carrying amount of investments
in participating interests and affiliated companies
Total
2005
2004
€m
€m
2.6
(1.4)
4.4
(3.8)
–10.0
(–3.7)
–8.4
(–3.7)
–7.4
–4.0
The reductions in the carrying amount of investments include remeasurements to fair value. An
amount of €0.1 million from net negative changes in the value of available-for-sale financial assets
was recognized directly in equity, in other reserves (2004: minus €1.2 million). Changes in other
reserves taken to income due to impairment of such assets resulted in an expense of €0.8 million
(2004: €0.0 million).
138
9.11 Interest and investment income
2005
2004
€m
€m
24.0
(0.9)
26.2
(0.6)
Income from hedging activities
3.6
0.4
Income from securities activities (see 6.4)
5.0
2.8
Income from foreign currency activities
15.9
9.7
Total other interest and investment income
24.5
12.9
Interest and investment income
48.5
39.1
Interest expenses
–111.4
(–0.4)
–125.2
(–0.3)
Expenses from hedging activities
–7.2
–8.3
Expenses from securities activities
–0.8
–3.4
–20.0
–8.3
Income from long-term loans and other interest income
Expenses from foreign currency activities
Total other interest and investment expenses
Interest and investment expenses
Net interest and investment income
–28.0
–20.0
–139.4
–145.2
–90.9
–106.1
Realization of a hedged item under a cash flow hedge resulted in €1.7 million being transferred from
other reserves in 2005 and charged to the income statement in expenses from hedging activities.
The remaining income and expenses from hedging activities relate to fair value gains and losses
on hedges not qualifying for hedge accounting.
The income and expenses from securities activities include value gains on a share index bond.
Income and expenses from foreign currency activities essentially comprise exchange rate gains
and losses on foreign currency transactions effected by Swedish subsidiaries.
9.12 Income tax
2005
2004
€m
€m
Current income tax expense
–17.3
–10.8
Out-of-period income tax expense
–19.2
–3.3
Deferred tax
–15.6
–7.5
Out-of-period deferred tax
Total
10.5
0.0
–41.6
–21.6
The current income tax expense has increased in line with the higher net income before tax.
The out-of-period income tax expense mostly relates to tax disputes in Belgium (€15.5 million)
and back tax in Germany (€3.7 million).
The change in deferred tax mostly reflects the fact that additional deferred tax assets were not
recognized for corporation tax losses generated in Germany in the 2005 financial year as it is not
probable that sufficient taxable profits will be available against which such assets could be utilized
in future years. The unrecognized loss carryforwards have a positive tax impact amounting to
€10.2 million.
139
The out-of-period deferred tax relates to foreign activities, as follows:
• A positive amount of €18.2 million in deferred tax assets on previously unrecognized loss carryforwards due to Group organizational structure enhancements and the positive outcome of a
tax dispute
• A negative amount of €7.7 million as a result of loss carryforwards not recognized by the revenue
authorities.
Tax reconciliation
The tax on consolidated net income before tax differs as follows from the hypothetical amount
arrived at by applying the Group tax rate of 39% to net income before tax:
2005
IAS/IFRS net income before tax
Expected tax expense/income (Group tax rate)
Impact of local authority trade tax
Differing foreign tax rates
Tax rate changes
Non-deductible expenses
Tax-exempt income
Other tax impacts relating to subsidiaries and companies
accounted for using the equity method
2004
€m
€m
151.7
96.5
59.2
37.7
–8.4
–10.8
–19.2
–6.7
–1.1
2.8
0.4
2.6
–13.9
–15.5
1.0
1.7
Tax impacts arising from acquisitions
–0.1
–1.7
Unutilizable current losses less utilized uncapitalized loss carryforwards
19.4
10.6
Out-of-period impacts
8.7
3.3
Other
–4.4
–2.4
Effective income tax (current and deferred)
41.6
21.6
Group effective tax rate
27.4%
22.4%
9.13 Earnings per share
2005
2004
Consolidated net income attributable to shareholders (€ m)
96.4
70.9
Number of no-par-value shares in circulation (million)
116
116
Number of potential no-par-value shares under LTI plans (million)
0.0
0.7
Undiluted earnings per share (€)
0.83
0.61
Diluted earnings per share (€)
0.83
0.61
Dividend per share
Dividends totalling €40.6 million (€0.35 per share) were paid out in 2005 for the preceding year.
It is expected that the Annual General Meeting on 30.5.2006 will approve a dividend for 2005 of
€0.38 per dividend-bearing no-par-value share constituting a total distribution of €44.1 million.
This dividend is not recognized as a liability in these consolidated financial statements.
140
10 Other disclosures
10.1 Accounting estimates and assumptions
Preparation of the consolidated financial statements in conformity with IFRS requires management
to make estimates and assumptions that affect the reported amounts of assets, liabilities, income
and expenses and the disclosure of contingent assets and liabilities. Actual amounts may differ
from these estimates. In particular, management must make estimates and assumptions in the
following areas:
• Assessing the possibility and amount of any impairment loss or write-down, especially as relates
to investment properties, goodwill and receivables.
• Recognition and measurement of provisions.
• Assessing the need for inventory write-downs.
• Assessing the probability that deferred tax assets will be utilized.
• Determining the present value of minimum lease payments for finance leases.
Investment properties are mostly valued by external appraisers. Where market values cannot be
determined from sales of comparable properties, valuations are performed using the discounted
cash flow (DCF) method under which future cash flows are discounted to present value as at the
balance sheet date. These estimates include assumptions about future conditions. The fair values
thus calculated are used in impairment testing. Due to the large number and geographical spread
of properties involved, individual measurement uncertainties tend to cancel out statistically.
Similar techniques are applied where IVG performs valuations itself; this mainly applies to storage
caverns and residential properties in Germany.
At the time of preparing the financial statements, no material change is expected in the estimates
and assumptions used, and therefore there is currently no reason to expect any material adjustment to the carrying amounts of reported assets and liabilities in the 2006 financial year.
10.2 Financial risk management
Financial risk factors
The IVG Group faces various types of financial risk in its business activities. These include currency
risk, credit risk, liquidity risk and interest rate risk. The Group’s integrated risk management system focuses on the unpredictability of developments on the financial markets and aims to minimize potential negative impacts on the Group’s financial situation. The Group’s policy is to limit
these risks with systematic financial management. Within this, targeted use is made of derivative
financial instruments to counter exposure to specific risks.
Risk management is performed by the Group treasury function in accordance with guidelines
(directives) issued by the Board of Management. IVG identifies, assesses and controls financial
risks in close cooperation with Group operating units. The Board of Management issues guidelines for risk management as well as principles for specific areas such as dealing with currency
risk, interest rate risk and credit risk, use of derivative and non-derivative financial instruments,
and the use of surplus liquidity.
141
(a) Currency risk
The Group operates internationally and is exposed to currency risk arising from various currency
exposures, primarily the pound sterling, the Swedish krona and the Swiss franc.
Currency risk arises when future commercial transactions or recognized assets or liabilities are
denominated in a currency that is not the entity’s functional currency. Currency risk is partly countered by making targeted use of currency derivatives, in particular combined interest rate/currency
swaps with outside third parties. Also, foreign currency investment is partly financed by borrowing in the same currency, producing a natural hedge.
Qualifying contracts are designated as cash flow hedges or net investment hedges, as appropriate.
(b) Credit risk
There is no material credit risk. Derivative financial instrument contracts and financial transactions
are only entered into with financial institutions with high credit ratings, keeping counterparty default
risk at a minimum.
(c) Liquidity risk
Group-wide financial planning tools assure early identification of the liquidity situation following
from implementation of the Group strategy and Group planning process. The Group’s financial
planning with a multi-year planning horizon is supplemented by liquidity planning carried out on
a rolling basis each month for the forthcoming twelve months. A 12-month liquidity analysis is
kept up to date based on actual data. The planning systems cover the entire consolidated group.
Prudent liquidity management includes retaining an adequate reserve of cash and cash equivalents. The IVG Group also has sufficient unused lines of credit (approximately €900 million as at
31. 12. 2005) and has additionally enhanced its refinancing options by issuing a commercial paper
programme in 2004 (up to a maximum of €200 million) and with the early extension and augmentation of a syndicated loan facility in summer 2005 (up to €750 million).
In view of the dynamic nature of the underlying businesses, the aim of the Group treasury function
is to maintain flexibility in funding.
(d) Interest rate risk
Interest rate risk results from market variations in interest rates. These affect the amount of interest expenses in the IVG Group and the market value of derivative financial instruments.
A substantial share of the IVG Group’s bank loans are fixed-interest, making the impact of interest
rate fluctuations predictable for the medium-term future.
Variable-interest bank loans expose the Group to cash flow interest rate risk. The Group primarily
manages its cash flow interest-rate risk by using variable-to-fixed interest-rate swaps (payer swaps)
that have the economic effect of converting borrowings from variable rates to fixed rates. The Group
therefore generally raises long-term borrowings at variable rates and swaps them into fixed rates.
To optimize net interest income while allowing scope for implementing the active buying and selling strategy, the variable-interest share of borrowing is limited to 30%.
The Board of Management and the Supervisory Board are provided with regular reports on the
Group’s financial risks. Observance of Group directives is monitored by the internal audit function.
142
10.3 Contingent liabilities
2005
Financial guarantees
(of which: bank guarantees)
Contractual guarantees
2004
€m
€m
207.5
(103.3)
170.4
(88.6)
42.2
91.1
Post-employment benefit obligations
0.0
2.0
Other contingent liabilities
0.5
1.5
250.2
265.0
Total
The financial guarantees are guarantees to third parties in favour of parties unrelated to the Group
and Group companies not included in the consolidated financial statements. The bank guarantees
are guarantees given by banks to third parties to cover Group company payment, performance
and warranty obligations. The contractual guarantee obligations are binding letters of comfort,
repurchase commitments, rent guarantees and similar obligations to third parties. Long-term repurchase obligations are discounted to present value at an annual discount rate of 5.5%. Letters of
comfort issued to third parties in respect of consolidated subsidiaries are only included to the
extent that they give rise to separate obligations from the point of view of the Group as a whole.
It is not to be considered probable that the contingent liabilities will require a significant outflow
of resources on settlement. There are no guarantees for cheques or bills of exchange.
10.4 Other financial obligations
Financial obligations totalling €80.9 million (2004: €68.4 million) exist under contracts already
awarded for commenced or planned investment projects and under contractual agreements with
tenants and other parties. They comprise €41.6 million in investment spending on investment
properties and €39.4 million on investment spending on other property, plant and equipment.
The obligations from investment spending on investment properties are accounted for by €36.4
million in purchases plus building and extension works, together with €5.2 million in repairs,
maintenance and improvements.
Investment contracts worth €56.3 million were also awarded for development projects earmarked
for sale in the course of ordinary operating activities.
Future lease obligations are disclosed in the section on finance and operating leases (see Note 8).
10.5 Contingent assets
There were no materially significant contingent assets as at the balance sheet date (2004: €3.7 million).
10.6 Consolidated Cash Flow Statement
The cash flow statement shows how the Group’s cash position has changed due to inflows and
outflows of cash and cash equivalents over the course of the financial year. In conformity with
IAS 7 Cash Flow Statements, cash flows are classified into cash flows from operating, investing
and financing activities.
The cash and cash equivalents reported in the cash flow statements include all cash and cash
equivalents comprising cash in hand and at banks. €19.2 million in fixed-term deposits are pledged
as security (2004: €16.8 million).
Cash flows from investing and financing activities are determined directly from receipts and payments. Cash flows from operating activities, on the other hand, are determined using the indirect
method. Under this method, changes in balance sheet items relating to operating activities are
143
adjusted for the effects of changes in the reporting entity. As a result, the changes in balance
sheet items reported in the cash flow statement are not the same as they would be if they were
determined using figures from the published balance sheet.
The cash inflow from operating activities includes:
• €23.5 million in interest received (2004: €25.6 million)
• €106.9 million in interest paid (2004: €118.8 million)
• €26.2 million in income tax paid (net of income tax refunds) (2004: €12.3 million)
Materially significant transactions not affecting cash flow relate to finance leases on nine gas caverns.
The change in cash and cash equivalents resulting from changes to the reporting entity amounted
to minus €1.8 million (2004: plus €17.9 million).
Other proceeds from financing activities mostly comprise cash inflows from the commercial paper
programme and payments received from rolling stock leases.
10.7 Segment reporting
Segment reporting is presented in accordance with IAS 14 (Segment Reporting).
Specific information from the consolidated financial statements is presented by division and region
in line with the Group’s internal organizational and reporting structure. Segment reporting aims to
provide a clearer view of the financial position and performance of the Group’s individual activities and regions.
Reflecting the predominant segmentation in the Group’s organizational structure, primary segment
reporting is by division.
The Group is organized in three main segments as at 31. 12. 2005:
(1) Portfolio management: This segment contains the real estate portfolio management business.
In addition to office properties and business parks, it also includes logistics properties activities
(storage caverns and tank farms).
(2) Project development: This segment undertakes real estate project development for IVG and
third parties.
(3) Investment funds: This segment contains closed-end investment fund activities, German institutional investment funds (‘Spezialfonds’) and asset management.
In addition to these three main segments, segment figures are reported for non-core business
(rail) and corporate functions/consolidation.
A property in Geneva sold in 2005 came under the portfolio management segment in 2004 but
under the project development segment in 2005; the previous year’s figures have been restated
accordingly. In August 2005, a Helsinki shopping centre (Jumbo I) was reclassified from portfolio
management to project development as it was managed as a combined project together with an
extension, Jumbo II.
Operating earnings are defined as net income before tax, minus interest and investment income,
plus interest and investment expenses.
144
Segment results 2005
Non-core
business
Corporate
functions/
consolidation
€m
€m
€m
1.0
3.9
0.0
–8.5
0.0
280.5
51.1
93.8
0.4
0.2
426.0
416.5
119.1
106.3
0.4
–2.2
640.1
Operating earnings
208.3
44.4
43.9
–0.1
–53.9
242.6
50.7
(7.4)
1.2
(0.0)
3.3
(0.3)
0.3
(0.0)
0.6
(0.0)
56.1
(7.7)
5.9
0.0
3.8
0.0
0.0
9.7
–2.6
–15.3
4.1
0.0
0.0
–13.8
Portfoliomanagement
Project
development
€m
€m
3.6
External turnover
Inter-segment turnover
Depreciation and amortization
(of which: Impairment)
Income from associated companies
Other income from participating interests
Segment assets (carrying amount)
(of which: Shares in associated companies)
Investment
funds
Group
€m
–3.6
–4.5
0.7
0.0
0.0
–7.4
2,473.6
(0.0)
405.8
(15.9)
246.8
(14.8)
2.7
(0.0)
92.8
(0.0)
3,221.7
(30.7)
Segment liabilities
140.9
30.4
26.1
1.6
49.3
248.3
Investments
385.5
131.5
17.4
0.0
0.5
534.9
Non-core
business
Corporate
functions/
consolidation
Segment results 2004
Portfoliomanagement
Project
development
€m
€m
€m
€m
€m
5.8
0.9
2.9
0.0
–9.6
0.0
External turnover
301.8
147.5
51.3
6.5
0.2
507.3
410.4
152.8
55.6
8.1
–13.9
613.0
Operating earnings
189.3
26.9
16.8
0.5
–30.9
202.6
Depreciation and amortization
(of which: Impairment)
54.8
(9.8)
1.3
(0.0
4.2
(2.3)
0.3
(0.0)
1.5
(0.0)
62.1
(12.1)
12.1
0.0
0.0
0.0
0.0
12.1
0.0
8.5
2.0
0.0
0.0
10.5
–3.8
–0.2
0.0
0.0
0.0
–4.0
2,450.0
(0.0)
562.2
(20.8)
242.9
(11.2)
3.0
(0.0)
59.5
(0.0)
3,317.6
(32.0)
Segment liabilities
148.2
40.7
29.1
1.7
39.5
259.2
Investments
146.6
95.6
154.5
0.0
1.8
398.5
Inter-segment turnover
Income from associated companies
Other income from participating interests
Segment assets (carrying amount)
(of which: Shares in associated companies)
Investment
funds
Group
€m
145
Segment assets and liabilities are composed, and reconciled to the Group assets and liabilities,
as follows:
31.12. 2005
€m
131.6
131.6
2,080.8
2,398.6
318.5
172.2
Other ownership shares
47.7
46.9
Shares in associated companies accounted for using the equity method
30.7
32.0
Inventories
106.9
73.2
148.1
378.5
258.1
0.0
90.9
74.5
Intangible assets
Prepaid expenses
Segment assets
Other Group assets
Group assets
Pension provisions
8.4
10.1
3,221.7
3,317.6
465.2
295.7
3,686.9
3,613.3
31.12. 2005
31.12. 2004
€m
€m
9.9
23.6
Other provisions
106.1
73.9
Accounts payable
109.3
140.6
Liabilities associated with non-current assets held for sale
1.8
0.0
21.2
21.1
248.3
259.2
Other Group liabilities
2,516.7
2,495.1
Group liabilities
2,765.0
2,754.3
Deferred income
Segment liabilities
The segment assets figures for 2004 no longer include non-current securities.
Inter-segment business is conducted on an arm’s length basis.
Investments include accounts payable assumed in acquisitions.
146
31.12. 2004
€m
Geographical segments 2005
UK
France
Benelux
Germany
Finland
Other
countries
Group
€m
€m
€m
€m
€m
€m
€m
10.2
24.5
46.7
278.4
37.7
28.5
426.0
4.1
10.0
20.8
95.5
89.7
22.5
242.6
181.0
244.0
592.0
1,631.9
264.9
307.9
3,221.7
34.8
70.9
24.4
366.0
26.9
11.9
534.9
UK
France
Benelux
Germany
Finland
Other
countries
Group
€m
€m
€m
€m
€m
€m
€m
8.8
18.1
51.3
351.2
45.7
32.2
507.3
Operating earnings
18.1
6.2
66.0
62.7
30.5
19.1
202.6
Segment assets
(carrying amount)
146.2
170.0
470.5
1,769.8
375.6
385.7
3,317.8
24.9
0.0
32.5
250.3
69.8
21.0
398.5
External turnover
Operating earnings
Segment assets
(carrying amount)
Investments
Geographical segments 2004
External turnover
Investments
The geographical segments reflect the geographical distribution of IVG’s real estate properties.
10.8 Related party dealings
Related individuals are Supervisory Board, Board of Management and managerial staff members
and their close relatives. Related companies are Sal. Oppenheim jr. & Cie. KGaA of Cologne, and
the unconsolidated subsidiaries and equity-accounted companies in the IVG Group.
In view of its ownership structure, the Group has not prepared a dependent parties report in
accordance with Section 312 of the German Stock Corporations Act.
Relationships with members of the Supervisory Board and Board of Management are as stated
in section 10.13. There were no business dealings with close relatives of members of the Supervisory Board or Board of Management.
There were no material business dealings with managerial staff or their close relatives.
Gross salaries of managerial employees totalled €13.5 million in the 2005 financial year (2004:
€11.5 million).
All business dealings with unconsolidated subsidiaries and equity-accounted companies (inclusion
in global cash management, general project contracts, etc.) were conducted at arm’s length. They
comprised €4.3 million in services rendered (income, 2004: €1.8 million) and €12.0 million in
services received (expense, 2004: €0.4 million).
IVG purchased €1.1 million in services from Sal. Oppenheim on arm’s length terms in 2005
(2004: €1.1 million). IVG did not acquire any assets from Sal. Oppenheim in the 2005 financial
year (2004: €125.5 million).
147
10.9 Employee benefits
a) Retirement pensions
Both employer-funded and employee-funded pension plans are in operation in the IVG Group.
b) Employer-funded retirement pensions
The various different employers in the Group maintain different types of employer-funded pension
plans for employees. Employees of IVG Immobilien AG generally have compulsory membership
of Versorgungsanstalt des Bundes und der Länder (VBL), a pension scheme operated by the German federal government and the German states. Members of the Board of Management of IVG
Immobilien AG are covered by defined-benefit plans funded through pension provisions. Under
individual and collective agreements, current and former employees of IVG Management GmbH
and certain managerial employees of IVG Immobilien AG and IVG Logistik GmbH are in definedcontribution book reserve schemes under which future benefits are fully provided for in the year
they accrue. There are also current and future benefit recipients under book reserve schemes
originating with legal predecessors of IVG Immobilien AG and IVG Logistik GmbH.
c) VBL retirement pensions
VBL is a pay-as-you-go pension scheme. Pension benefits accrue in a points system. The yearly
number of points accrued by a given employee depends on the level of the employee’s assessable annual pay relative to a benchmark pay level determined actuarially taking an age factor into
account. When the benefits fall due, the accumulated number of points is multiplied by a factor
equalling 0.4% of the monthly benchmark pay level. The benefit accrual method is thus similar to
that used in the German statutory pension system.
Employees pay contributions of 1.41% of assessable income. IVG’s contributions to VBL, to the
amount of 6.45% of assessable income, are included in personnel expenses. The employer contributions count as income for tax and social insurance purposes and partial use is made of optional
flat-rate deductions in this regard. The employer additionally pays a refinancing contribution,
currently 2.61%, for liabilities of the VBL pay-as-you-go system primarily from years preceding a
major reform to the VBL charter in 2001/2002.
d) Defined-contribution book reserve schemes
The defined-contribution book reserve schemes in the IVG Group are based on a pension credit
system and funded through pension provisions.
Under collective agreements, the company concerned contributes 3% (for managerial employees
5%) of fixed annual salary for each calendar year of pensionable service. The annual contribution
is converted into accrued benefit (pension credits) by applying an actuarially assessed commutation
rate. The final benefit is the sum of the pension credits. When they fall due, annual benefits are
paid out in twelve equal monthly amounts. The accrued benefits are independent of employees’
pensions under the statutory pension system. They are subject to mandatory insolvency insurance
with the Pensions-Sicherungs-Verein (PSV).
Each scheme is funded in its entirety by the company concerned. Employees pay income tax on
the benefits when they fall due and are paid out.
The pension provisions recognized for benefits accrued under individual or collective agreements
are assessed annually by an independent actuary and recognized accordingly.
148
e) Employee-funded retirement pensions
The German Retirement Savings Act (AVmG) – adopted on 26. 6. 2001 to reform the statutory
pension system and promote funded pension plans – provided from 1. 1. 2002 for the introduction
of employee-funded top-up pensions and, by way of a new Sec. 1a (1) inserted into the German
Occupational Pensions Act (BetrAVG), accorded employees a personal entitlement to occupational pensions of this kind by allowing them to convert a portion of their salary to accrued benefits
which immediately vest by law, up to the amount of 4% of the annual upper earnings limit in the
statutory pension system. Under Sec. 1a (3), BetrAVG, employees can additionally demand that
the occupational pension plan is implemented in such a way as to establish entitlement to pension
supplements from the state (known as Riester supplements after the former German labour minister) under Sections 10a and 82 (2) of the German Income Tax Act (EStG).
IVG responded early to the new legislation with a two-module arrangement implemented in 2002.
In the first module, IVG has secured attractive terms with an insurance company under a master
agreement. This allows each employee to sign with the insurance company for a personal plan
meeting the criteria for Riester supplements under Sections 10a and 82 (2), EStG. The master
agreement thus provides a framework for what are known as Riester pension plans taken out by
employees themselves. The employee contributions must be met out of net pay (after tax and
social insurance contributions). The future benefits are fully taxable at the time of payment, as
other income under Sec. 22, EStG.
The second module is enshrined in a second master agreement and provides for the conversion
of salary to pension contributions, implemented in the form of a pension pool under Sec. 3, item 63,
EStG. This is a straight pension plan. A salary-to-pension agreement must be signed with each
employee. IVG deducts the contributions and pays them to the insurance company through payroll.
The employee contributions are tax-free up to 4% of the annual upper earnings limit in the statutory pension system and until 2008 are also met out of gross pay before social insurance contributions. When the benefits fall due, they are paid by the pension pool directly to the recipient and
are subject to personal tax and social insurance contributions.
Employees can choose between the two modules to suit their personal circumstances and income
and tax position.
10.10 Severance benefits
Severance benefits are individually agreed in some voluntary redundancy agreements and can be
part of a court settlement in a labour dispute. A provision is recognized for the full amount of the
resulting liability in the year it arises. Where liabilities under labour disputes cannot be exactly
quantified, they are valued in accordance with the litigation risk by IVG’s independent legal counsel at the end of the financial year and a provision is recognized for the amount determined plus
associated legal costs.
149
10.11 Long-term incentive plans
1999 plan rules (1999 to 2001 plans)
Implementation of a long-term incentive plan was first decided at the Annual General Meeting
on 27. 5.1999. The plan was open to members of the Board of Management of IVG Immobilien AG,
the executive management of divisional operating companies and other IVG Group managerial
employees. To this end, €2,790,000 in contingent capital was approved for the sole purpose of
issuing up to 2,790,000 ordinary (no-par-value) shares to cover share options granted under the
IVG share option plan.
The 1999 plan rules stipulate an overall term of seven years. A three-year minimum vesting period
is supplemented by performance conditions. These are that the IVG share price must increase
annually in absolute terms and must outperform the EPIX share index, whose constituents include
IVG’s main competitors.
The 1999 plan rules provide exclusively for settlement in shares. The option plans are valued using
the Cox-Ross-Rubinstein binomial pricing model.
2002 plan rules (2002 to 2004 plans)
On 23. 5. 2002, the Annual General Meeting approved a new share option plan which was the first
to include the management of foreign branch offices in the IVG Group. To this end, €4,800,000 in
contingent share capital was approved for the sole purpose of issuing up to 4,800,000 ordinary
(no-par-value) shares to cover options granted under the IVG share option plan.
The rules of the share option plan stipulate an overall term of five years. A two-year minimum vesting period is supplemented by a performance condition. This is an absolute rise in the IVG share
price from the base price of at least 5% a year from the grant date.
IVG Immobilien AG can choose:
• Instead of new shares from its contingent share capital, to settle the options with IVG Immobilien AG shares that have already been issued and are held in treasury.
• Instead of shares in return for payment of the exercise price, to settle each exercised option in
cash. The cash amount is the difference between the exercise price and the closing auction price
of IVG shares in Deutsche Börse AG’s XETRA trading system on the effective date of the exercise
notice, less any taxes, fees and other costs.
The plan is open to members of the Board of Management of IVG Immobilien AG, managing directors of affiliated companies and other employees. The Board of Management (and for the Board
of Management the Supervisory Board) has been authorized to grant non-transferable options
under the adopted share option plan to individuals in these groups.
150
The table below shows the number of options granted in the years 1999 to 2004, options expired
and the number of options outstanding at the end of each year:
Number of options
2004 plan
2003 plan
2002 plan
2001plan
2000 plan
1999 plan
Outstanding at 1.1.1999
Granted in 1999
403,256
Exercised in 1999
Expired in 1999
Outstanding at 31.12.1999
403,256
Granted in 2000
377,298
Exercised in 2000
Expired in 2000
18,083
Outstanding at 31.12. 2000
377,298
Granted in 2001
385,173
410,497
Exercised in 2001
Expired in 2001
Granted in 2002
48,327
49,729
410,497
328,971
335,444
410,497
327,245
766,350
Exercised in 2002
Expired in 2002
1,726
766,350
Granted in 2003
335,444
749,250
Exercised in 2003
Expired in 2003
Granted in 2004
749,250
7,575
6,904
9,042
402,922
320,341
326,402
756,600
Exercised in 2004
403,500
Expired in 2004
20,100
746,250
756,600
7,500
39,000
23,608
1,381
741,750
303,750
379,314
318,960
326,402
413,300
289,400
318,960
326,402
Granted in 2005
Exercised in 2005
Expired in 2005
34,500
38,400
722,100
290,050
5,353
14,350
373,961
Of the 2,045,823 options outstanding (2004: 2,826,776), 304,400 are exercisable (2004: 303,750).
Options exercised in 2005 resulted in cash payments of €4,506,413.50.
The weighted average share price at the exercise date was €13.46 for the 2002 plan and €16.31
for the 2003 plan.
At the balance sheet date, members of the Board of Management held a total of 497,450 options
(2004: 1,159,180) under the 1999 to 2004 option plans.
151
Key data on long-term incentive plans adopted to date:
2002 plan rules
Grant date
Term (years)
Minimum vesting
period (years)
1999 plan rules
2004 plan
2003 plan
2002 plan
2001 plan
2000 plan
1999 plan
30. 6. 2004
30. 6. 2003
26. 7. 2002
14. 6. 2001
16. 6. 2000
10. 6.1999
5
5
5
7
7
7
2
2
2
3
3
3
Base price (€)
9.80
7.63
10.28
14.13
14.70
15.02
Participants in
grant year
52
49
52
35
30
27
Number of
options granted
(of which: Board
of Management)
756,600
749,250
766,350
410,497
377,298
403,256
(274,050)
(274,050)
(274,050)
(147,707)
(138,075)
(162,748)
Absolute
performance
target
(share price gain)
5% per year
5% per year
5% per year
7.4% per year
6.5% per year
5% per year
None
None
None
Out-perform
EPIX
Out-perform
EPIX
Out-perform
EPIX
Option value at
exercise date (€)
1.85
1.42
1.47
3.33
3.59
2.63
Remaining term
at 31.12. 2005
42 months
30 months
19 months
30 months
18 months
6 months
Relative
performance
target
10.12 2005 performance share plan
Objective
IVG follows a corporate strategy geared to long-term value growth. To align the actions of the
IVG Board of Management, affiliated company management teams and other selected managerial
staff to this corporate objective and to strengthen their longer-term allegiance to IVG, the Group’s
first performance share plan was granted in 2005 as a replacement for the previous share option
plans.
Participants
The plan is open to all members of the IVG Board of Management, divisional executives and other
managerial employees. The Supervisory Board of IVG has the final say on participating by members of the IVG Board of Management.
The decision on whether to grant a new performance share plan is made each year.
Performance shares
Plan participants are granted a set number of performance shares. These are virtual shares entitling
their holders, subject to fulfilment of certain conditions, to a sum of money at the end of the performance period.
Performance shares are non-voting and carry no dividend entitlement.
The number of performance shares that can be converted into a sum of money and paid out at the
end of the performance period depends on attainment of two performance targets.
152
Targets
The targets determining the number of performance shares paid out at the end of the performance
period comprise:
• A target for the absolute increase in the IVG share price.
• A target for average diluted earnings per share (EPS).
Attainment of targets 1 and 2 is measured independently with a weighting of 50% each to determine the number of performance shares paid out at the end of the performance period. That is,
attainment of each target results in an allotment factor that is multiplied by half the number of
granted performance shares; the outcome of this calculation is the number of performance shares
converted into cash and paid out.
Target 1
The absolute increase in the IVG share price (Target 1) is measured using closing prices for IVG
shares in the XETRA trading system on Frankfurt Stock Exchange (IVG shares trade at Frankfurt under
the stock symbol WKN 620570). The closing rates on Frankfurt Stock Exchange for the 30 trading
days before and the 30 trading days after the IVG Immobilien AG Annual General Meeting in 2005
are averaged to give a start price. Similarly, the closing rates on Frankfurt Stock Exchange for the
30 trading days before and the 30 trading days after the IVG Immobilien AG Annual General Meeting in 2008 are averaged to give an end price. The end price is then divided by the start price to
obtain the percentage increase.
The allotment factor for Target 1 (share price increase) is set as follows:
Share price increase less than 15%: 0%
Share price increase equal to 30%: 130%
Share price increases in excess of 30% are ignored.
Target 2
Attained performance in terms of average diluted EPS (Target 2) is measured on the basis of the
figures for the 2005, 2006 and 2007 financial years. The figure used is diluted EPS as stated in IVG’s
annual report for each financial year.
The allotment ratio for Target 2 is set as follows:
Average diluted EPS less than €0.48: 0%
Average diluted EPS greater than or equal to €0.72: 130%
Increases in excess of €0.72 are ignored.
If the end price of IVG shares (stock symbol WKN 620570) is more than 30% down on the start
price, no performance shares are paid out regardless of target attainment in terms of diluted EPS.
153
Grant date and performance period
Performance shares under the 2005 plan were granted as at 15. 7. 2005.
The performance period – the measurement period for the performance targets – is three years.
The performance period begins on the grant date and ends at the close of the thirtieth trading
day on Frankfurt Stock Exchange after the close of the IVG Immobilien AG Annual General Meeting in 2008.
Entitlement to a cash payout does not accrue until the end of the performance period and is conditional on:
• Attainment of the targets
• A contract of employment – on which notice has not been served – with IVG or a divisional
company.
Number of performance shares to be paid out
Target attainment is measured as at the end of the performance period. The ultimate number of
performance shares to be paid out is determined by the allotment ratios based on the degree of
target attainment.
Payout of performance shares
The final number of performance shares is multiplied with the average closing price of IVG shares
(stock symbol WKN 620570) as quoted in Frankfurt Stock Exchange’s XETRA trading system on the
30 trading days before and the 30 trading days after the IVG Immobilien AG Annual General Meeting in 2008. Any increase in the end price relative to the start price in excess of 100% is ignored.
Performance shares granted in 2005
128,475 performance shares were granted in 2005 with a start price of €14.53. Their fair value,
as measured by Towers Perrin using Monte Carlo simulation, was €15.82 as at 31. 12. 2005.
Key parameters used in the pricing model comprise:
• Term
• Grant date
• Lock-up period
• End of lock-up period
• Residual term
• IVG Immobilien AG share price at reporting date
• Base share price (60-day average)
• Risk-free interest rate matching residual term
• Dividend yield
154
10.13 Supervisory Board and Board of Management
The members of the Supervisory Board and Board of Management are listed in Note 12.
Supervisory Board remuneration was composed as follows:
Supervisory Board remuneration 2005 1
Name
Fixed remuneration
Dividend-linked remuneration
€
€
Dr. Michael Albertz
€
3,701.83
3,701.83
Rainer Antons
1,489.32
14,848.00
16,337.32
Detlef Bierbaum (Chairman)
7,200.00
22,048.26
29,248.26
Wilhelm Friedrich Corneli
6,020.56
6,020.56
Roland Flach
7,403.66
7,403.66
14,624.13
Dr. Gert Haller
2,120.55
Matthias Graf von Krockow
3,600.00
11,024.13
Dr. Manfred Lennings
1,489.32
14,848.00
16,337.32
Rudolf Lutz
3,600.00
8,908.80
12,508.80
Peter Rieck (Deputy Chairman)
5,400.00
16,536.20
21,936.20
Claus Schäffauer
3,180.82
Karl-Ernst Schweikert
Total
1
Total
28,080.01
2,120.55
3,180.82
5,552.75
5,552.75
110,892.19
138,972.20
Amounts ex VAT and excluding taxation
Members of the Supervisory Board, in accordance with Article 16 of the Articles of Association,
receive fixed annual remuneration of €3,600 plus remuneration of €512 for each percentage point
by which dividends distributed on the share capital exceed 6%. The Chairman receives twice and
the Deputy Chairman one-and-a-half times these amounts. The dividend-linked remuneration paid
in 2005 relates to the 2004 financial year and the Supervisory Board members in office during
that year.
In addition to out-of-pocket expenses for each Supervisory Board meeting, Supervisory Board
members receive an attendance fee and per diem allowance of €112.48 for each meeting of the
Supervisory Board or its committees.
The remuneration of the Board of Management for 2005 is composed as follows:
The remuneration of members of the Board of Management consists of a fixed and a variable
component. In addition to performance bonuses, members of the Board of Management receive
remuneration in the form of performance shares under the performance share plan launched in
2005, details of which are given under ‘Performance share plan’.
Remuneration of active members of the Board of Management for the 2005 financial year was
€3.996 million (2004: €2.168 million). €1.070 million (2004: €0.944 million) of this total was accounted
for by fixed remuneration and €1.484 million (2004: €1.048 million) by performance bonuses.
Members of the Board of Management also received payments on exercising options under the
2002 and 2003 long-term incentive plans, whose two-year minimum vesting period ended in
mid-2004 and 2005. The 2002 plan’s performance target (a 10% increase in share price relative to
the €10.28 base price at the grant date in 2002) was exceeded for the first time in November 2004.
The 2003 plan’s performance target (a 10% increase in the share price relative to the €7.63 base
price at the grant date in 2003) had already been significantly exceeded at the end of the vesting
period in mid-2005. Further details and information on the remuneration of individual members
of the Board of Management are shown in the table overleaf. Criteria for the appropriateness of
remuneration are personal areas of responsibility, performance of the Board of Management as
a whole, the economic situation and the success and future prospects of the company.
155
Board of Management annual income, 2005
Annual income (€)
Fixed
Bonus
Incentive plan
Total
Loans and
advances
Dr. John von Freyend
420,000.00
459,200.00
400,050.00
1,279,250.00
0.00
Dr. Kottmann
280,000.08
459,200.00
772,789.50
1,511,989.58
0.00
Dr. Matthey
280,000.08
459,200.00
118,864.50
858,064.58
0.00
89,585.00
106,500.00
101,800.00
297,885.00
0.00
1,069,585.16
1,484,100.00
1,393,504.00
3,947,189.16
0.00
Dr. Reul (from 1. 8. 2005)
Total
Members of the Board of Management receive normal benefits in kind totalling, to the nearest
thousand, €49,000 (2004: €45,000). This represents the amount to be recognized for private use
of company cars in accordance with tax regulations. The members of the Board of Management
are required to declare the benefits in kind for income tax purposes.
Future obligations under long-term incentive plans/performance share plan (PSP) 2005
Options under long-term incentive plans 1999–2004
1
2003
2004
PSP 1
2005
1999
2000
2001
2002
Dr. John
von Freyend
Total
0.00
0.00
0.00
10,030.50
719,208.00
722,578.50
262,707.25
1,714,524.25
Dr. Kottmann
0.00
0.00
0.00
0.00
195,048.00
722,578.50
262,707.25
1,180,333.75
Dr. Matthey
0.00
0.00
0.00
74,300.00
920,808.00
722,578.50
262,707.25
1,980,393.75
Dr. Reul
0.00
0.00
0.00
0.00
0.00
237,300.00
123,038.00
360,338.00
Total
0.00
0.00
0.00
84,330.50
1,835,064.00
2,405,035.50
911,159.75
5,235,589.75
Basis of calculation: Target 1 = share price €17.71 (30.12.2005) Target 2 = diluted earnings per share €0.60
The amounts shown in the above table for individual Board of Management members under
long-term incentive plans still outstanding are arrived at by taking the balance sheet date as the
hypothetical due date (2005 closing price) and assuming cash settlement. On this basis, the
options under the 2002, 2003 and 2004 long-term incentive plans and the grants under the 2005
performance share plan retain value.
Pension liabilities
The members of the Board of Management have accrued pension benefits. The Chairman, Dr. Eckart
John von Freyend, is entitled after his third term of appointment to a pension equal to 52.5% of
his fixed remuneration. Dr. Dirk Matthey is entitled to 60% of part of his fixed remuneration; this
will be converted in 2006 into an equal amount determined as 50% of his fixed annual remuneration. Dr. Bernd Kottmann has a defined-contribution pension entitlement linked to his fixed remuneration; this will be replaced on his reappointment in 2006 with a percentage-based entitlement
set at 50% of his fixed annual remuneration. Dr. Georg Reul likewise has a defined-contribution
pension entitlement linked to his fixed remuneration; this will be converted on his reappointment
into a percentage-based entitlement set at 50% of his annual remuneration. The pension provision
for Board of Management pensions amounts to €5.915 million (2004: €3.517 million).
Total benefits for former members of the Board of Management and their surviving dependants
totalled €0.574 million. The corresponding pension provisions come to €6.6 million (2004: €5.9
million). A €0.932 million provision has also been recognized for severance payments; this sum
is payable in a number of amounts over the years 2006 to 2010.
There were no loans or advances to members of the Board of Management or of the Supervisory
Board as at 31. 12. 2005.
156
11 Corporate governance
Corporate governance refers to the entire system by which a company is managed and monitored,
its corporate principles and guidelines, and the system of internal and external controls and
supervision to which the company’s operations are subjected. Good, transparent corporate governance ensures that our company will be managed and monitored in a responsible manner
geared to value creation. This fosters the confidence of investors, employees, business associates
and the general public in IVG’s management and supervision.
The Board of Management and the Supervisory Board of IVG Immobilien AG jointly issued on
21. 9. 2005, in accordance with Section 161 of the German Stock Corporations Act, a new declaration of conformity with the recommendations of the German Corporate Governance Code. The
declaration is published on the IVG website, www.ivg.de, where shareholders can access it at
any time.
Stodiek Europa Immobilien AG, a listed subsidiary that is included in the consolidated financial
statements, has submitted a declaration of conformity in accordance with Section 161 of the
German Stock Corporations Act and has made the new declaration available by publication on
its website (www.stodiek.com).
According to a notice under Section 15a of the German Securities Trading Act (WpHG) (directors’
dealings), Dr. Eckart John von Freyend sold 1,600 no-par-value shares in IVG for €12.60 each on
11. 1. 2005 and Mr. Martin John von Freyend sold 611 no-par-value shares in IVG for €12.60 each
on 11. 1. 2005.
157
12 Supervisory Board and Board of Management
Supervisory Board
Detlef Bierbaum
Chairman
Personally liable partner,
Sal. Oppenheim jr. & Cie. KGaA
Cologne
Peter Rieck
Deputy Chairman
Board of Managing Directors,
HSH Nordbank AG
Reinbek
Notification of seats on other supervisory
boards as per Sec. 285 (10) of the German
Commercial Code:
AXA Investment Managers Deutschland GmbH
Douglas Holding AG
DWS Investment GmbH
Kölnische Rückversicherungs-Gesellschaft AG
LVM Landwirtschaftlicher Versicherungsverein
Münster a.G.
LVM Lebensversicherungs-AG
Monega Kapitalanlagegesellschaft mbH
Oppenheim Immobilien-Kapitalanlagegesellschaft mbH (Chairman)
Oppenheim Kapitalanlagegesellschaft mbH1
(Chairman)
SMS GmbH
Commercial Code:
DEKA Immobilien Investment GmbH
DGAG Deutsche Grundvermögen AG
HSH N Real Estate AG 1 (Chairman)
HSH Nordbank Hypo AG 1 (Chairman)
LB Immo Invest GmbH (Chairman)
Similar mandates:
Atradius N.V., Amsterdam
Bank Sal. Oppenheim jr. & Cie. (Luxembourg)
S.A., Luxembourg1
Dundee REIT, Toronto
Foreign Colonial Europe Trust, London
Oppenheim Investment Managers, Dublin1
(Chairman)
Oppenheim Pramerica Asset Management
S.à r.l., Luxembourg (Chairman)
Tertia Handelsbeteiligungsgesellschaft mbH
The European Equity Fund, Inc., New York
The Central European and Russia Fund, Inc.,
New York
1
158
Oppenheim Group companies
Similar mandates:
AGV Anlagen-, Grundstücksvermietungsund Geschäftsführungsgesellschaft mbH
Amentum Capital Ltd., Dublin 1
BIG-Bau Investitionsgesellschaft GmbH
GEHAG GmbH
H/H-Stadtwerkefonds KGaA, Luxembourg
(Chairman)
HSH Nordbank Private Banking S.A.,
Luxembourg 1 (Chairman)
1
HSH Nordbank Group companies
Rainer Antons (until 31. 5. 2005)
Mechanical engineering master craftsman
IVG Logistik GmbH, Etzel Office
Wilhelmshaven
Commercial Code:
None
Dr. Gert Haller (from 31.5.2005)
Chairman of the Management Board, Wüstenrot & Württembergische AG (until 28. 2. 2006)
Head of the Office of the Federal President and
State Secretary (from 1. 3. 2006)
Stuttgart
Commercial Code:
LEG Landesentwicklungsgesellschaft BadenWürttemberg mbH
TLG Immobilien GmbH
WMF Württembergische Metallwarenfabrik AG
Württembergische Lebensversicherung AG1
(Chairman) (until 28. 2. 2006)
Württembergische und Badische Versicherungs-AG
Württembergische Versicherung AG1
Wüstenrot Bank AG Pfandbriefbank1
(until 28. 2. 2006)
Wüstenrot Bausparkasse AG1 (Chairman)
(until 28. 2. 2006)
Similar mandates:
Erasmus Groep B.V., Rotterdam (Chairman)
(until 28. 2. 2006)
Stavebna sporitel’na VUB Wüstenrot a.s.,
Bratislava (until 28. 2. 2006)
Wüstenrot –stavebni sporitelna a.s., Prague
Wüstenrot Verwaltungs- und Dienstleistungen
GmbH, Salzburg
1
Matthias Graf von Krockow
Spokesman for the personally liable partners
of Sal. Oppenheim jr. & Cie. KGaA
Cologne
Commercial Code:
Fiat Automobil AG (Chairman)
IV. Oppenheim AG1 (Chairman)
RWE-Power AG
ThyssenKrupp Steel AG
V. Oppenheim AG1 (Chairman)
Similar mandates:
Bank Sal. Oppenheim jr. & Cie. (Luxembourg)
S.A., Luxembourg1 (Chairman)
Bank Sal. Oppenheim jr. & Cie. (Schweiz) AG,
Zurich1 (Chairman)
Sal. Oppenheim International S.A.,
Luxembourg1
Sal. Oppenheim jr. & Cie. Corporate Finance
(Schweiz) AG, Zurich1
German Red Cross Nurses Insurance Fund
(Chairman)
1
Oppenheim Group companies
Wüstenrot & Württembergische AG Group companies
159
IVG Immobilien AG Supervisory
Board committees
Dr. Manfred Lennings (until 31. 5. 2005)
Industrial consultant
Essen
Commercial Code:
Bauunternehmung E. Heitkamp GmbH
Deilmann-Haniel GmbH
Deutsche Post AG
ENRO AG
Heitkamp-Deilmann-Haniel GmbH
Rudolf Lutz
Operative employee
IVG Immobilien AG
Bonn
Commercial Code:
None
Claus Schäffauer (from 31. 5. 2005)
Operative employee
Oppenheim Immobilien-Kapitalanlagegesellschaft mbH
Heppenheim
Commercial Code:
None
160
Audit Committee
• Dr. Gert Haller, Chairman (from 31. 5. 2005)
• Peter Rieck, Deputy Chairman
• Rudolf Lutz
• Dr. Manfred Lennings (until 31. 5. 2005)
Personnel Committee
• Detlef Bierbaum, Chairman
• Dr. Gert Haller, Deputy Chairman
• Claus Schäffauer
Board of Management
Dr. Eckart John von Freyend
Chief Executive Officer
Bad Honnef
Dr. Dirk Matthey
Chief Financial Officer
Bonn-Bad Godesberg
Commercial Code:
Gerling Konzern Lebensversicherungs AG
Infopark Fejlesztési Rt.1
Oppenheim Immobilien-Kapitalanlagegesellschaft mbH1
SIBRA Beteiligungs AG1 (Chairman)
(until 20. 2. 2006)
Stodiek Europa Immobilien AG1 (Chairman)
UTH United Technologies Holding GmbH
VNR Verlag für die Deutsche Wirtschaft AG
Commercial Code:
SIBRA Beteiligungs AG1 (until 20. 2. 2006)
Stodiek Europa Immobilien AG1
Similar mandates:
HANNOVER HL Leasing GmbH & Co. KG
IVG Polar Ltd., Helsinki1
TERCON Immobilien Projektentwicklungs
GmbH1 (until 7. 11. 2005)
1
Similar mandates:
Bonn Kft.1 (until 1. 2. 2006)
HANNOVER HL Leasing GmbH & Co. KG
Parisz Kft.1 (until 1. 2. 2006)
IVG Polar Ltd., Helsinki1 (Chairman)
GmbH1 (Chairman) (until 7. 11. 2005)
1
IVG Group companies
Dr. Bernd Kottmann
Portfolio Management
Wachtberg-Pech
Commercial Code:
Infopark Fejlesztési Rt.1
IVG Group companies
Dr. Georg Reul (from 1. 8. 2005)
Member of the Board of Management
(Deputy)
Bonn-Bad Godesberg
Commercial Code:
SIBRA Beteiligungs AG1 (until 20. 2. 2006)
Similar mandates:
None
1
IVG Group companies
Similar mandates:
Bonn Kft.1 (until 1. 2. 2006)
IT Immobilien Beteiligungsgesellschaft mbH1
Parisz Kft.1 (until 1. 2. 2006)
IVG Polar Ltd., Helsinki1
GmbH1 (until 7. 11. 2005)
1
IVG Group companies
161
13 Board of Management declaration
The Board of Management of IVG Immobilien AG is responsible for the preparation, completeness
and integrity of the consolidated financial statements, the Group Management Report and other
information provided in the annual report.
The consolidated financial statements of the IVG Group are prepared in accordance with International Financial Reporting Standards (IFRS).
The Group Management Report contains an analysis of the Group’s financial position and performance, and further disclosures required by the German Commercial Code (Section 315).
An effective internal management and control system ensures the completeness and reliability
of data for consolidated financial statements and internal reporting. This includes Group-wide
financial reporting directives, a risk management system as required by the German Control and
Transparency Act (KonTraG), an integrated approach to financial control as part of value-driven
management, plus internal audits. The Board of Management is thus able to identify material risks
at an early stage and to take timely action as needed.
Düsseldorf, 22 March 2006
162
Bernd Kottmann
Dirk Matthey
Georg Reul
Auditor’s Report
We have audited the consolidated financial statements prepared by IVG Immobilien AG, comprising the balance sheet, the income statement, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements, together with the group management
report for the business year from January 1 to December 31, 2005. The preparation of the consolidated financial statements and the group management report in accordance with the IFRSs, as
adopted by the EU, and the additional requirements of German commercial law pursuant to Section 315a (1) HGB (‘Handelsgesetzbuch’: German Commercial Code) are the responsibility of the
Board of Management. Our responsibility is to express an opinion on the consolidated financial
statements and on the group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with Section 317
HGB and German generally accepted standards for the audit of financial statements promulgated
by Institut der Wirtschaftsprüfer (the Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting
the presentation of the net assets, financial position and results of operations in the consolidated
financial statements in accordance with the applicable financial reporting framework and in the
group management report are detected with reasonable assurance. Knowledge of the business
activities and the economic and legal environment of the Group and expectations as to possible
misstatements are taken into account in the determination of audit procedures. The effectiveness
of the accounting-related internal control system and the evidence supporting the disclosures in
the consolidated financial statements and the group management report are examined primarily
on a test basis within the framework of the audit. The audit includes assessing the annual financial
statements of those entities included in consolidation, the determination of the entities to be
included in consolidation, the accounting and consolidation principles used and significant estimates
made by the Company’s Board of Management, as well as evaluating the overall presentation of
the consolidated financial statements and the group management report. We believe that our
audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion based on the findings of our audit the consolidated financial statements comply
with the IFRSs as adopted by the EU, the additional requirements of German commercial law
pursuant to Section 315a (1) HGB and give a true and fair view of the net assets, financial position
and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides
a suitable view of the Group's position and suitably presents the opportunities and risks of future
development.
Düsseldorf, 22 March 2006
PricewaterhouseCoopers Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
(Brebeck)
Wirtschaftsprüfer
(German Public Auditor)
(Leifels)
Wirtschaftsprüfer
(German Public Auditor)
163
Other disclosures
relating to IVG Immobilien AG as at 31.12. 2005
164
OTHER DISCLOSURES
Consolidated subsidiaries, affiliates and associates
Advisory Committees
Financial calendar
Glossary
165
OTHER DISCLOSURES
Real estate portfolio1
IVG share
2005
Form of
ownership
Added/last
refurbished
Type of use
(%)
Site area
Lettable
w/o
parking
1,000 m2
1,000 m2
35.9
Berlin
Spreespeicher, Stralauer Allee 1–2, Berlin
97
Leasehold
1995/2002
Office
12.7
Joachimstaler Straße 1–3, Berlin
98
Freehold
2000/2003
Office
1.8
6.6
100
Freehold
1948/2004
Business park
239.7
31.6
Bundesallee 204–206, Berlin
95
Freehold
1998/2005
Office
7.5
7.6
Hafenplatz 6/7, Köthener Straße 29, Berlin
95
Freehold
1998
Other
12.1
16.5
Airport Center Schönefeld, Mittelstraße 5/5a, Berlin
100
Freehold
2001
Office
13.9
11.8
Montanstraße 18–26, Berlin
100
Freehold
1948/1987
Comm./Logistics
44.2
7.4
Berlin, other
238.4
56.4
Berlin total
570.3
173.8
Dresden total
192.0
34.0
Berlin Office total
762.3
207.8
Carossa Quartier, Streitstraße 5–19, Berlin 5
Brussels
North Gate, Bd. Roi Albert II, 6, 8 and 16, Brussels
100
Freehold
1998
Office
9.4
56.0
94
Freehold
1998/2001
Office
19.8
19.6
Pléiade A–C, Avenue des Pléiades 11, 15 and19, Brussels
100
Freehold
1999
Office
8.0
14.7
Louise Village, Avenue Louise 29–31/Rue Dejonker 34–36, Brussels 6
100
Freehold
1999
Other
7.6
12.5
Tervuren Plaza, Rue Gribaumont 1, Brussels
100
Freehold
1999/2003
Office
6.5
10.5
Diegem, Rue Bessenveld 9, Brussels
Twin House, Rue Neerveld 105, Brussels 6
100
Freehold
1999
Office
4.1
9.3
Le Croissant, Avenue Beaulieu 24–26, Brussels
100
Freehold
1999
Office
4.4
6.2
Chaussée de la Hulpe 154, Brussels
100
Freehold
1989/1999
Office
3.5
4.6
Oaktree, Dreve de Bonne Odeur 20, Brussels
100
Freehold
1999
Office
4.7
3.6
Brussels, other 5, 7
Brussels/Amsterdam total
45.2
83.1
113.2
220.1
15.1
Ariane I–III, Route d’Esch 400, Luxembourg
94
Freehold
1999
Office
9.5
Thomas, Rue Thomas Edison 2, Luxembourg
100
Freehold
1999
Office
6.4
5.8
15.9
20.9
129.1
241.0
3.7
30.1
Luxembourg total
Brussels Office total
Budapest
Infopark Budapest, sètàny 1 und 3, Budapest 6
100
Leasehold
2003/2005
Business park
Budapest, other 6
1.9
7.7
Budapest Office total
5.6
37.8
Düsseldorf
IVG Businesspark am Flughafen, Heltorfer Straße 1–22, Düsseldorf
100
Freehold
1999
Business park
69.4
37.6
Gotic-Haus, Westfalendamm 94–100, Dortmund
100
Freehold
1995/2002
Office
13.3
23.6
Stockholmer Allee 32, Dortmund
100
Freehold
2001
Office
7.3
6.7
Fashion Plaza, Karl-Arnold-Platz 2, Düsseldorf
100
Freehold
2005
Office
1.7
6.4
Businesspark Zapp Platz 1, Ratingen
100
Freehold
2004
Comm./Logistics
62.7
26.1
Businesspark Bonner Straße, Neuss
100
Freehold
2004
Comm./Logistics
71.0
34.1
Düsseldorf, other 5, 8
Düsseldorf Office total
20.4
9.7
245.8
144.2
Frankfurt
Cargo City South, Building 554, Frankfurt Airport
ComConCenter, Colmarer Straße, Frankfurt
Center am Ring, Otto-von-Guericke-Ring 13–15, Wiesbaden
Kassel total
166
100
Comm./Logistics
17.7
11.7
94
Leasehold
Freehold
1997/1999
2005
Office
67.0
20.3
100
Freehold
1993/2002
Office
9.8
9.1
167.6
48.5
Other
2,320.3
19.7
Frankfurt Office total 9
2,582.4
109.3
In-Building
parking
Occupancy
31.12. 2005 2
Effective
Occupancy
Dec. 2005 2
Effective
Occupancy
Jan.–Dec.
Spaces
(%)
(%)
(%)
150
Development
reserve
1,000 m2 GFA
Market
value
(€ ‘000)
Investment
(€ ‘000)
87.7
88.8
83.2
100.0
100.0
100.0
75.7
72.8
70.9
182.0
651
291
100.0
100.0
100.0
13.0
1,500
250
97.3
97.6
93.8
147
673
80.5
80.9
83.6
8.0
100.0
100.0
100.0
28.2
352
89.0
91.2
89.2
34.0
1,190
87.9
90.3
87.7
6
80.1
82.1
80.3
1,196
86.6
89.4
86.9
293.7
1,003
100.0
100.0
480
100.0
100.0
251
53.2
204
(€ ‘000)
Gross rental
income
forecast 2006
(€ ‘000)
Net rental
income 3
Operating
Profit
(EBIT)3, 4
(€ ‘000)
(€ ‘000)
1,054
3,625
3,912
3,055
1,971
1,902
1,967
732
1,315
1,503
824
–437
420
814
41
–392
1,045
1,073
101
–112
–176
602
811
391
847
814
806
574
45
5,456
5,160
4,961
688
265.2
3,441
15,281
15,989
12,146
1,931
28.5
1,898
1,829
2,121
1,594
329
5,339
17,110
18,110
13,740
2,260
100.0
17,015
17,106
16,623
13,903
99.9
3,112
3,193
2,972
2,397
54.8
67.5
1,556
1,382
54
–928
92.1
94.5
96.2
1,926
191
1,548
999
173
6.0
4.9
4.8
109
115
–547
–961
114
100.0
100.0
95.4
1,004
227
–134
–800
133
100.0
100.0
100.0
1,225
1,256
1,069
799
72
100.0
100.0
100.0
651
664
238
48
88
57.2
56.5
32.5
193
298
–56
–288
2,571
97.8
96.3
94.2
5,089
90.4
89.4
90.0
273
100.0
100.0
250
51.2
51.8
523
86.4
5,612
90.1
207
7,991
8,302
6,598
3,488
34,782
32,734
28,365
18,657
100.0
3,847
3,928
3,639
2,855
51.8
833
1,202
270
–156
85.5
85.8
4,680
5,130
3,909
2,699
88.9
89.4
125
39,462
37,864
32,274
21,356
678
2,776
339
2,688
1,830
80
1,354
111
1,331
946
758
4,130
450
4,019
2,776
5,115
4,561
5,052
3,143
2,653
2,382
2,396
1,060
853
536
849
386
1,731
1,233
1,276
1,127
279
1,372
1,479
1,285
1,023
1,709
2,586
2,836
2,557
1,545
125
581,598
92.4
92.9
96.6
95.5
97.4
207
92.9
93.5
96.9
14.5
313
100.0
100.0
100.0
36.0
413
88.3
87.8
83.5
80.3
90.2
94.8
93.7
93.0
91.3
83
14.5
100.0
100.0
100.0
5.0
100.0
100.0
6.0
109
96.2
98.2
98.2
10.6
984
96.6
96.4
95.6
57.6
100.0
100.0
100.0
161
59.7
61.3
51.6
213
70.5
75.9
74.3
2
95.6
95.6
94.3
100.0
100.0
100.0
88.1
84.4
80.9
96,800
515
100.0
376
304,514
125
94.8
66
166
Gross
rental
income 3
254,869
9,920
1,621
1,989
1,175
1,120
13,875
15,433
15,059
14,441
8,556
9
1,365
1,365
1,368
585
1,307
1,625
704
510
997
1,059
936
504
2,699
1,444
2,501
1,316
101.0
152
39.0
140.0
144,022
802
894
894
330
189
963
7,262
6,387
5,839
3,104
167
OTHER DISCLOSURES
IVG share
2005
Form of
ownership
Added/last
refurbished
Type of use
(%)
Site area
1,000 m2
Lettable
w/o
parking
1,000 m2
Hamburg
IVG Businesspark Hamburg Nord, Essener Straße 89–99, Hamburg
100
Freehold
1947/2001
Business park
Penta Hof, Suhrenkampp 71–77, Hamburg
100
Freehold
Late 2005
Office
Habichtstraße 41, Hamburg
100
Freehold
1991/1995
Office
Hamburg, other
Hamburg total
133.9
46.7
13.0
24.7
3.0
6.7
120.0
39.8
269.9
117.9
Tank storage
100
Freehold/rental
1962/2005
Logistics
238.0 10
Oil und gas storage caverns, Beim Postweg 2, Friedeburg
100
Freehold
1993/2005
Logistics
20,000.0 11
Vallilan yhtiöt, Helsinki
100
Freehold
2003
Office
10.0
35.2
Pakkalan Kartanonkoski 3 KOy, Helsinki
100
Freehold
2003
Office
9.5
7.8
Tapiontuuli KOy, Helsinki
100
Freehold
2003
Office
3.1
6.8
Plaza Forte KOy, Helsinki
100
Freehold
2003
Office
4.0
6.1
Vilhonkatu 5 KOy, Helsinki
100
Freehold
2003
Office
1.6
6.4
Munkkiniemen liiketalo, Helsinki
100
Freehold
2003
Office
6.0
6.6
Sörnäisten Rantatie 25 KOy, Helsinki
100
Freehold
2003
Office
3.4
6.7
Caverns/tank storage total 7, 8, 11, 12, 13
Hamburg Office total
Helsinki
Pasilanraitio 5 KOy, Helsinki 14
92
Leasehold
2003
Office
2.1
6.7
Sinimäentie 10 KOy, Helsinki 14
77
Freehold
2003
Office
23.4
9.4
Scifin Alfa KOy, Helsinki
100
Freehold
2003
Office
7.8
5.5
Vuorikatu 20 KOy, Helsinki 5
100
Freehold
2003
Office
1.7
Kutomotie 6 KOy, Helsinki
100
Freehold
2003
Office
3.6
7.6
Malmin Kauppatie 8 KOy, Helsinki
100
Leasehold
2003
Office
4.1
4.7
Kilon Helmi KOy, Helsinki
100
Freehold
2003
Office
3.7
3.8
Pakkalan Kartanonkoski 12 KOy, Helsinki
100
Freehold
2003
Office
4.0
3.4
Kornetintie 6 KOy, Helsinki
100
Leasehold
2003
Office
2.0
3.3
Vanha Talvitie 11 KOy, Helsinki
100
Leasehold
2003
Office
2.8
6.6
Satomalmi KOy, Helsinki 14
90
Freehold
2003
Office
2.3
3.4
Kilon Timantti KOy, Helsinki
100
Freehold
2003
Office
3.9
3.9
Niittylänpolku 16 KOy, Helsinki
100
Freehold
2003
Office
2.7
2.9
Helsingin Kirkonkyläntie 3 KOy, Helsinki
100
Freehold
2004
Office
1.0
1.3
Helsingin Radiokatu 20 KOy, Helsinki
100
Leasehold
2004
Office
7.4
10.2
Helsingin Kumpulantie 3 KOy, Helsinki 5
100
Freehold
2004
Office
2.3
10.9
Espoon Asemakuja 2 KOy, Espoo
100
Freehold
2004
Office
4.7
6.0
Niittmäenpolku KOy, Espoo
100
Freehold
2004
Office
9.8
5.1
Ykkösseppä KOy, Helsinki
100
Leasehold
2004
Other
3.4
4.6
Kiiskinkatu 5 KOy, Helsinki
100
Leasehold
2004
Other
3.3
4.2
Helsingin Latokartanontie 7 KOy, Helsinki
100
Leasehold
2004
Office
2.8
3.6
Helsinki, other
Helsinki Office total
59.7
39.0
196.1
221.7
5.6
London
168
20 Soho Square, London
100
Freehold
20 St James’s Street, London
100
Leasehold
1999/2003
Office
1.1
1999
Office
0.8
5.1
London, other
1.0
3.3
London Office total
2.9
14.0
In-Building
parking
Occupancy
31.12. 2005 2
Effective
Occupancy
Dec. 2005 2
Effective
Occupancy
Jan.–Dec.
Development
reserve
Spaces
(%)
(%)
(%)
1,000 m2 GFA
326
100.0
100.0
99.9
69.0
347
100.0
100.0
100.0
38,018
124
79.8
84.2
81.8
22
9
81.5
89.0
87.1
806
92.6
96.9
96.2
100.0
100.0
30.0 10
100.0
100.0
20,000.0 11
100.0
99.5
Market
value
(€ ‘000)
Investment
Gross
rental
income 3
Gross rental
income
forecast 2006
Net rental
income 3
Operating
Profit
(EBIT)3, 4
(€ ‘000)
(€ ‘000)
(€ ‘000)
(€ ‘000)
(€ ‘000)
1
5,069
5,068
4,967
2,606
623
333
3,035
724
742
–4
305
1,554
1,594
1,405
596
141,935
38,346
7,347
10,439
6,995
3,531
100.0
634,556
159
43,981
49,800
37,085
33,888
99.3
776,491
198
51,328
60,239
44,080
37,419
2,926
69.0
91
98.3
98.3
95.1
4.5
13
100.0
100.0
94.6
5.1
85
100.0
100.0
100.0
151
97.9
97.8
96.9
40
91.5
89.5
87.7
2
100.0
100.0
99.3
12
3,999
4,219
3,500
1,180
1,253
803
624
1,273
1,257
1,126
949
1,412
1,435
1,197
428
1,121
1,134
825
774
1,233
1,005
716
716
60
70.0
70.6
73.2
10
692
750
539
424
62
100.0
100.0
99.3
4
964
758
1,084
1,243
8
84.2
100.0
82.9
71
1,014
1,013
1,275
1,475
61
100.0
100.0
100.0
391
854
486
680
577
100.0
1,230
394
356
329
330
42
13
95.3
95.3
95.5
100.0
100.0
100.0
100.0
100.0
98.1
86
99.9
100.0
98.3
11
76.7
73.3
74.8
88.6
89.2
79.0
31
100.0
100.0
91.9
100.0
100.0
95.1
26
85.0
85.0
88.9
13
93.8
91.2
90.7
65
89.2
88.2
91.1
45
100.0
100.0
100.0
6.3
62
11.3
68
15
687
662
528
358
688
688
536
419
589
528
427
355
667
656
515
415
356
139
203
150
490
479
318
245
495
548
554
700
548
453
401
335
282
303
219
175
215
222
147
133
1,433
1,301
798
566
1,481
72
1,552
1,316
17
94.4
94.4
95.0
939
679
716
555
46
100.0
100.0
100.0
810
814
643
570
11
90.9
90.3
75.7
332
371
203
148
44
95.9
96.0
96.7
449
449
232
189
4
100.0
100.0
97.8
498
524
315
262
1,000
90.9
90.6
86.6
6.7
1,898
94.3
95.1
92.7
33.9
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.4
3,633
3,628
1,071
318
28,728
26,182
21,452
17,675
98.3
2,673
2,783
2,069
2,069
100.0
3,649
3,324
3,312
2,205
1,944
1,938
1,945
543
8,266
8,045
7,326
4,817
268,364
134,055
1,992
169
OTHER DISCLOSURES
IVG share
2005
Form of
ownership
Added/last
refurbished
Type of use
(%)
Site area
1,000 m2
Lettable
w/o
parking
1,000 m2
Milan
Palazzi Fermi & Galeno, Milan
93
Freehold
2000
Office
5.9
15.8
Via Carducci 125, Sesto San Giovanni, Milan
93
Freehold
1999
Office
1.5
9.4
Via Dione Cassio 13, Milan
93
Freehold
1999
Office
7.0
8.4
Via Cascia 5, Milan
93
Freehold
2000
Office
2.4
5.4
100
Freehold
2001
Office
4.7
7.3
93
Freehold
2000
Retail
Via Gobetti 2, Cernusco sul Naviglio
Palazzo dei Cigni, Milano 3, Basiglio – Milan
Milan Office total
4.8
2.7
26.3
49.0
Munich
Nordostpark Nuremberg, Nordostpark 1–98, Nuremberg
100
Freehold
1948/2004
Business park
218.5
71.9
MEDIA WORKS MUNICH, Rosenheimer-/Anzinger Straße, Munich
100
Freehold
1966/2005
Business park
60.3
100.5
Pontis Haus, Arnulfstraße 25–27, Munich
100
Freehold
Nov. 2005
Office
5.1
14.0
Sonnenstraße 31, Munich 5
100
Freehold
Dec. 2005
Office
2.0
9.7
IVG Businesspark vor München, Einsteinstraße, Ottobrunn
100
Freehold
1960/2005
Business park
742.1
71.5
Gewerbepark Dornach, Margaretha-Ley-Ring 1–14, Dornach
100
Freehold
1974/2001
Comm./Logistics
30.7
29.8
Munich, other
Munich Office total
44.4
22.1
1,103.1
319.5
11.1
Paris
7 Place Vendôme, Paris
100
Freehold
1999/2002
Office
2.5
94
Freehold
2000
Office
3.0
9.9
21 Place de la Madeleine, Paris
100
Freehold
1997
Office
0.8
2.7
36 Avenue Pierre 1er de Serbie, Paris 15
100
Freehold
Nov. 2005
Office
0.6
1.6
58 Avenue Marceau, Paris 15
100
Freehold
Nov. 2005
Office
1.0
3.7
7.9
29.0
117.2
117.7
121–123 Rue d’Aguesseau, Paris 15
Paris Office total
Other
Europe (except Germany)
485.1
710.2
Germany
4,963.5
898.7
IVG portfolio
5,448.6
1,608.9
1
Compiled in accordance with EPRA Best Practice Recommendations
Includes tenancies signed up to 31.12.2005
3
Non-consolidated
4
Excluding book gains/losses and net income from participating interests
5
Space (partly) in development
6
Sold, transfer 2006
7
Including finance lease properties
8
Including properties in other property, plant and equipment
9
Excluding woodland (40 ha)
10
1,000 m3
11
Geometrical volume in 1,000 m3
12
IVG share only
13
Including other revenues
14
IVG share
15
Sale planned
2
170
In-Building
parking
Occupancy
31.12. 2005 2
Effective
Occupancy
Dec. 2005 2
Effective
Occupancy
Jan.–Dec.
Spaces
(%)
(%)
(%)
178
100.0
100.0
100.0
151
81.0
82.8
66.3
53
86.4
82.8
40
100.0
140
562
963
Development
reserve
1,000 m2 GFA
Market
value
(€ ‘000)
Investment
(€ ‘000)
Gross
rental
income 3
Gross rental
income
forecast 2006
Net rental
income 3
Operating
Profit
(EBIT)3, 4
(€ ‘000)
(€ ‘000)
(€ ‘000)
(€ ‘000)
1,729
1,800
1,402
1,001
780
1,108
445
151
97.5
908
882
752
588
100.0
100.0
590
590
573
428
100.0
100.0
100.0
727
731
682
529
100.0
100.0
100.0
622
506
590
483
94.0
93.9
92.6
5,365
5,617
4,444
3,180
89.9
89.2
91.8
137.4
1,469
5,035
5,071
3,769
36
98.4
98.6
99.7
43.0
2,449
10,041
10,077
10,374
–560
217
2,577
254
252
87,652
252
156
82.4
83.1
83.1
38,094
20
100.0
100.0
100.0
13,515
193
42
–186
8
94.2
94.8
92.9
197.3
588
6,359
4,007
5,358
1,535
430
75.8
86.8
87.7
19.0
14
2,345
2,356
2,266
1,405
3
90.2
94.2
94.2
12.0
1,573
1,508
1,292
774
1,580
92.2
94.1
94.2
408.7
25,570
25,789
23,313
3,373
97.9
98.5
98.6
6,864
7,078
6,818
6,448
197
100.0
100.0
70.9
2,197
1,400
1,980
1,361
31
99.7
100.0
99.6
2,141
2,206
2,085
1,706
38
100.0
100.0
100.0
183
66
127
66
47
72
99.8
100.0
100.0
28,628
155
310
155
84
338
99.1
1.0
91.5
270,914
28,859
11,423
11,121
11,104
9,646
1,045
96.8
92.0
93.2
129,980
108
10,524
10,787
8,732
6,992
9,662
93.5
93.3
92.0
48.4
1,569,362
32,094
107,889
100,066
89,351
66,442
4,942
91.2
95.5
94.5
969.0
1,932,890
274,601
116,703
125,584
101,413
54,712
14,604
92.2
94.5
93.3
1,017.4
3,502,253
306,695
224,592
225,650
190,764
121,154
452,994
56,119
48
171
OTHER DISCLOSURES
Project development
Location
Project
Type of use
Lettable space
m2
Projects completed in 2005
Budapest
Building C
Office
13,376
Genf
Rue de Lausanne
Office
13,389
Helsinki
Polar Jumbo 2
Retail
28,425
Paris
FDV I PS Soufflot
Residential
Düsseldorf
Museumsmeile multi-storey car park
Multi-storey car park
Düsseldorf
Global Gate phase 3
Office
11,086
Frankfurt/Kassel
ComConCenter – Entire development
Office and site development
16,223
Lettable space, 100% (m2)
5,341
74,464
Total investment, 100% (€ m)
286
Total investment, IVG share (€ m)
229
Total IVG share (%)
80
Projects in development
Benelux
Madou Plaza
Office
39,475
Berlin/Dresden
Salzufer
Office and site development
48,113
Budapest
Infopark Building D
Office
17,520
Düsseldorf
Museumsmeile office building
Office
Frankfurt/Kassel
Airrail Center
Office, retail und hotel
Frankfurt/Kassel
Nike headquarters
Office
Helsinki
Vuorikatu
Office
7,384
London
Fourteen Cornhill
Office
15,472
London
Caxton Hall
Office
5,277
Munich
City Limit
Retail
16,343
Paris
FDV I M1 H Avenue de France
Office
12,612
Paris
FDV I Neuilly sur Seine
Office
12,853
Paris
FDV I Oise Logistics Parc
Office und logistics
Paris
FDV II Colombes Champs Phillipe
Office
26,215
Paris
FDV I BC Ilot 9, 10 und 11
Residential
28,215
Paris
FDV II Suresnes
Office
76,329
Paris
FDV II BC south phase
Office
70,200
Poland
Galeria Astoria
Retail
10,969
Lettable space, 100% (m2)
2,365
Total investment (total cost) IVG share (€ m)
1,121
Total IVG share (%)
Committed capital (cost to date) (€ m)
172
682,150
Total investment (total cost) 100% (€ m)
47
394
Average proportion let, by value, for projects
under construction (%)
35
Average proportion sold (residential/sites), by value (%)
70
9,700
128,127
8,090
141,428
Percentage let/
marketed
Completion
%
Share IVG
Status
Exit
%
100
2005
100
Completed
Sold
100
2005
100
Completed
Sold
100
2005
60
Completed
Sold
100
2005
14
Completed
Sold
100
2005
100
Completed
Sold
10
2005
100
Completed
Marketing
63
2005
94
Completed
Part-sold
100
2006
100
Completed
Sold
55
2006
50
Completed
Part-sold
2007
100
Construction
Marketing
2007
100
Planning
Marketing
Marketing
4
2009
45
Planning
100
2006
50
Construction
Sold
84
2006
100
Construction
Marketing
2007
100
Construction
Marketing
2006
100
Construction
Marketing
100
2006
95
Completed
Marketing
11
2006
30
Construction
Marketing
49
2007
30
Construction
Marketing
100
2006
30
Part-completed
Sold
2007
21
Planning
Marketing
99
2006
30
Construction
Sold
53
2007
21
Construction
Marketing
2009
21
Construction
Marketing
2007
100
Construction
Marketing
56
173
OTHER DISCLOSURES
Consolidated subsidiaries, affiliates and associates1
Group share
Country
(%)
as at 31. 12. 2005
Shareholders’ equity
Net income
(€ ‘000)
(€ ‘000)
–731
I. Affiliated, consolidated companies
16.40
Germany
34,357
Ada SA, Brussels
100.00
Belgium
8,251
285
Aranäs International NV, Amsterdam
100.00
Netherlands
24,148
718
actioplus KG K. u. K. Grundverwaltungs GmbH & Co., Berlin
Ässätalo KOy, Helsinki
100.00
Finland
Asticus AB, Göteborg
100.00
Sweden
–19
79,279
Asticus Belgium II SA, Brussels
100.00
Belgium
453,811
–42,539
Asticus Belgium SA, Brussels
100.00
Belgium
376,684
–18,838
Asticus Europe GIE, Brussels
100.00
Belgium
0
0
Asticus International AB, Stockholm
100.00
Sweden
148,260
76,158
Avenue Marceau IVG SAS, Paris
100.00
France
–1,607
–1,648
Batipromo SA, Brussels
100.00
Belgium
65,260
16,348
Beaulieu SPV SA, Brussels
100.00
Belgium
–1,286
–293
Berlin Konzept Immobilien Verwaltungs GmbH, Berlin
100.00
Germany
Bolet SA, Brussels
100.00
Belgium
Bonn Kft., Budapest
100.00
Bonne Odeur SA, Brussels
100.00
Bosquet Immobilière SA, Brussels
100.00
47
0
–4,345
–743
Hungary
1,176
169
Belgium
33,615
744
Belgium
48,308
1,209
992
890
0
0
–2,520
BOTAGRUND Verwaltungs GmbH, Bonn
100.00
Germany
Brooksave Ltd., London
100.00
UK
BURG Grundstücksverwaltung GmbH & Co. Ristamos KG, Berlin
Germany
–7,696
C:ie Foncière De Bassano, Paris
100.00
France
–3,010
73
C:ie Foncière Vendôme, Paris
100.00
France
5,049
4,894
94.60
Demot SPV SA, Brussels
100.00
Belgium
Edison SA, Luxembourg
100.00
Luxembourg
Espoon Asemakuja 2 KOy, Espoo
100.00
Finland
Euroselect Pfäffikon AG, Switzerland
100.00
Switzerland
Euroselect Pfäffikon GmbH & Co. KG, Berlin
100.00
Germany
–11
–3
Foripro Oy, Helsinki
100.00
Finland
22,008
2,105
FORSET Verwaltungsgesellschaft mbH & Co.
Vermietungs KG, Munich
100.00
Germany
–768
–37
98.12
Germany
4,455
921
FvH Grundstücksverwaltungs GmbH & Co.
Hardenbergstraße 26 KG, Berlin
GELFOND Verwaltungsgesellschaft mbH & Co.
Frankfurt-Niderrad Besitz KG, Munich
–29
–67
–1,587
–70
3,186
–270
–91
–156
94.00
Germany
–6,080
–1,805
Gertrud SA, Brussels
100.00
Belgium
122,234
3,493
Groenhoek SA, Brussels
100.00
Belgium
26,218
174
Helsingin Latokartanontie 7 KOy, Helsinki
100.00
Finland
1,172
–223
Helsingin Radiokatu KOy, Helsinki
100.00
Finland
3,279
–726
Helsingin Vuorikatu 20 KOy, Helsinki
100.00
Finland
–149
–72
Hibou SA, Brussels
100.00
Belgium
56,992
–2
Immobilière Groenveld SA, Brussels
100.00
Belgium
10,916
568
Infopark B Épitési Terület Kft., Budapest
100.00
Hungary
12,160
6,519
Infopark C Epitesi Terület Kft., Budapest
100.00
Hungary
17,405
12,016
Infopark Fejlesztesi RT, Budapest
174
1,724
204,212
99.99
Hungary
23,077
8,303
Infopark I Épitési Terület Kft., Budapest
100.00
Hungary
16,977
12,579
IVG Schönefeld Mittelstraße GmbH & Co. KG, Berlin
100.00
Germany
6,877
105
IVG Asset Management GmbH, Bonn
100.00
Germany
4,082
516
IVG Asticus (Caxton Hall) Ltd., London
100.00
UK
27,794
389
2
2
Consolidated subsidiaries, affiliates and associates as at 31. 12. 2005
Group share
Country
(%)
Net income
(€ ‘000)
(€ ‘000)
IVG Asticus (GMS) Ltd., London
100.00
UK
24,932
348
2
IVG Asticus (Lombard) Ltd., London
100.00
UK
2,983
–27
2
IVG Asticus Real Estate Ltd., London
100.00
UK
75,584
659
2
IVG Beteiligungs GmbH, Bonn
100.00
Germany
30,100
0
IVG Brussels SA, Brussels
100.00
Belgium
320,644
5,454
IVG Businesspark Media Works Munich I
GmbH & Co. KG, Munich
100.00
Germany
4,632
–101
IVG Businesspark Media Works Munich II
GmbH & Co. KG, Munich
100.00
Germany
13,298
–827
IVG Businesspark Micropolis Ost
Grundstücks GmbH & Co. KG, Dresden
100.00
Germany
391
–9
IVG Businesspark Micropolis Ost
Verwaltungs GmbH & Co. KG, Dresden
100.00
Germany
3,503
–350
IVG Businesspark vor München I GmbH & Co. KG, Munich
100.00
Germany
11,359
–180
IVG Businesspark vor München II GmbH & Co. KG, Munich
100.00
Germany
24,020
165
IVG Businesspark vor München III GmbH & Co. KG, Munich
100.00
Germany
6,311
–280
IVG Businesspark vor München IV GmbH & Co. KG, Munich
100.00
Germany
1,126
301
IVG Businesspark vor München V GmbH & Co. KG, Munich
100.00
Germany
10,283
–2,877
IVG European Properties AB, Göteborg
100.00
Sweden
81,721
73,396
IVG European Real Estate SA, Brussels
100.00
Belgium
70,810
378
IVG Hungária Ingatlanfejlesztesi Kft., Budapest
100.00
Hungary
2,515
–707
IVG Immobilien GmbH & Co. Berlin VIII
Objekt Neue Spreespeicher Cuvryhof KG, Berlin
100.00
Germany
333
–187
IVG Immobilien GmbH & Co. Bonn XI
Objekt Frankfurt Flughafen KG, Bonn
100.00
Germany
51
552
IVG Immobilien GmbH & Co. Bonn XII
Objekt Dortmund Westfalendamm KG, Bonn
100.00
Germany
34,345
189
IVG Immobilien GmbH & Co. Bonn XIII
Objekt Karl-Arnold-Platz KG, Bonn
100.00
Germany
51
376
IVG Immobilienentwicklungsgesellschaft mbH & Co.
Objekt Hamburg Ferdinandstraße 18 KG, Hamburg
100.00
Germany
–418
–196
IVG Immobilienentwicklungsgesellschaft mbH & Co.
Objekt Hamburg Glockengießerwall 19 KG, Hamburg
100.00
Germany
1
–49
IVG ImmobilienFonds GmbH, Bonn
100.00
Germany
1,000
0
IVG Immobilienverwaltung Bonn GmbH & Co.
Objekt Langen KG, Bonn
100.00
Germany
–275
–698
IVG Immobilienverwaltung GmbH & Co.
Objekt Bremerhaven KG, Bonn
100.00
Germany
IVG Immobiliere SAS, Paris
100.00
France
1,631
16
197,753
82,442
6,396
IVG Italia S.r.l., Milan
100.00
Italy
16,398
IVG Logistik GmbH, Bonn
100.00
Germany
89,028
0
IVG Logistics Holding SA, Luxembourg
100.00
Luxembourg
13
–17
IVG Management GmbH & Co. Berlin VII
Wohnungsportfolio KG, Berlin
100.00
Germany
10,466
–71
IVG Management GmbH & Co. Berlin IX
Objekt Wohnpark Lückstraße KG, Berlin
100.00
Germany
6,193
217
IVG Management GmbH & Co. Berlin X
Objekt Wohnpark Roonstraße KG, Berlin
100.00
Germany
11,110
–290
IVG Management GmbH & Co. Berlin XI
Objekt Gravensteinstraße KG, Berlin
100.00
Germany
891
–9
IVG Management GmbH & Co. Bonn III
Objekt Neuss KG, Bonn
100.00
Germany
–1,787
1,686
IVG Management GmbH & Co. Bonn X
Objekt Wiesbaden KG, Bonn
100.00
Germany
35
585
175
OTHER DISCLOSURES
Group share
Country
(%)
Net income
(€ ‘000)
(€ ‘000)
IVG Management GmbH & Co. Bonn XV
Objekt Zanderstraße 1 und 3 KG, Bonn
100.00
Germany
101
–7
IVG Management GmbH & Co. Hamburg VI
Objekt Penta Hof KG, Hamburg
100.00
Germany
37,996
–4
IVG Management GmbH & Co. Kassel XIII
Objekt Falderbaumstraße KG, Kassel
100.00
Germany
699
–73
IVG Management GmbH & Co. Liebenau VIII
Objekt Bomlitz KG, Liebenau
100.00
Germany
774
199
IVG Management GmbH & Co. Liebenau IX
Objekt Clausthal KG, Liebenau
100.00
Germany
–43
–84
IVG Management GmbH & Co. KG Liebenau X
Objekt Hessisch Lichtenau KG, Liebenau
100.00
Germany
–530
20
IVG Management GmbH & Co. Liebenau XI
Objekt Lippoldsberg KG, Liebenau
100.00
Germany
43
147
IVG Management GmbH & Co. Liebenau XII
Objekt Fienerode KG, Liebenau
100.00
Germany
1,648
51
IVG Management GmbH & Co. München XIII
Objekt Leopoldstraße 157 KG, Munich
100.00
Germany
19,591
–109
IVG Management GmbH & Co. München XIV
Objekt Implerstraße KG, Munich
100.00
Germany
30,890
–110
IVG Management GmbH & Co. München XV
Objekt Sonnenstraße 28 KG, Munich
100.00
Germany
13,011
–189
IVG Management GmbH & Co. München XVI
Objekt Arnulfstraße KG, Munich
100.00
Germany
100
144
80.00
Germany
3,849
–61
IVG Management GmbH & Co. Nordbahnhof Berlin KG, Berlin
176
IVG Management GmbH, Bonn
100.00
Germany
140,463
0
IVG Media Works Munich Vermietungsgesellschaft mbH, Bonn
100.00
Germany
219
0
IVG Nordostpark I GmbH & Co. KG, Munich
100.00
Germany
911
–20
IVG Nordostpark II GmbH & Co. KG, Munich
100.00
Germany
3,418
–1,582
–67
IVG Nordostpark III GmbH & Co. KG, Munich
100.00
Germany
933
IVG Nordostpark IV GmbH & Co. KG, Munich
100.00
Germany
1,000
37
IVG Nordostpark V GmbH & Co. KG, Munich
5.98
Germany
12,291
562
IVG Nordostpark VI GmbH & Co. KG, Munich
100.00
Germany
10,093
–9
IVG Nordostpark VII GmbH & Co. KG, Munich
100.00
Germany
7,579
–131
IVG Objekt Museumsmeile Bonn GmbH, Bonn
100.00
Germany
IVG Polar Oy, Helsinki
100.00
Finland
132
0
369,493
72,326
–365
–15
IVG Promotion SARL, Paris
100.00
France
IVG Real Estate Belgium SA, Brussels
100.00
Belgium
53,460
66
IVG Real Estate Stockholm AB, Stockholm
100.00
Sweden
936
887
IVG Schönefeld Entwicklungs GmbH & Co. KG, Berlin
100.00
Germany
387
–14
IVG Service GmbH & Co. Berlin Objekt Großziethen KG, Bonn
100.00
Germany
3,828
–39
IVG Service GmbH & Co. Berlin Objekt Potsdam KG, Bonn
100.00
Germany
3,652
–204
IVG Service GmbH & Co. Berlin Objekt Teltow KG, Bonn
100.00
Germany
4,254
–187
IVG Spree-Speicher GmbH & Co. KG, Bonn
96.88
Germany
4,544
–2,241
IVG Terminal Silesia Sp. z o.o., Radzionków
100.00
Poland
7,254
1,821
IVG-Immobilienentwicklungsgesellschaft mbH & Co.
Objekt Hamburg Glinde KG, Hamburg
100.00
Germany
1,551
351
IVG-Immobilien-GmbH & Co. Berlin II
Objekt Streitstraße KG, Berlin
100.00
Germany
1,081
–2,592
IVG-Immobilien-GmbH & Co. Berlin IV
Objekt Montanstraße KG, Berlin
100.00
Germany
450
565
IVG-Immobilien-GmbH & Co. Berlin V
Objekt Freiheit KG, Berlin
100.00
Germany
294
376
Group share
Country
(%)
Net income
(€ ‘000)
(€ ‘000)
IVG-Immobilien-GmbH & Co. Bonn I
Objekt Zanderstraße KG, Bonn
5.98
Germany
15,543
1,081
IVG-Immobilien-GmbH & Co. Bonn II
Objekt Bad Godesberg KG, Bonn
100.00
Germany
390
33
IVG-Immobilien-GmbH & Co. Bonn IV
Objekt Düsseldorf Hohenzollernwerk KG, Bonn
100.00
Germany
–136
–23
IVG-Immobilien-GmbH & Co. Bonn V
Objekt Homburg/Saar KG, Bonn
100.00
Germany
–38
–33
IVG-Immobilien-GmbH & Co. Bonn VI
Objekt Düsseldorf Grafenberg KG, Bonn
100.00
Germany
7,632
–1,114
IVG-Immobilien-GmbH & Co. Bonn VII
Objekt Dortmund Stockholmer Allee KG, Bonn
100.00
Germany
337
531
IVG-Immobilien-GmbH & Co. Bonn XIV
Objekt Heltorfer Straße KG, Bonn
100.00
Germany
3,105
–424
IVG-Immobilien-GmbH & Co. Dresden I
Objekt Klotzsche West KG, Dresden
100.00
Germany
3,655
745
IVG-Immobilien-GmbH & Co. Hamburg I
Objekt Essener Straße KG, Hamburg
100.00
Germany
4,728
1,647
IVG-Immobilien-GmbH & Co. Hamburg V
Objekt Habichtstraße KG, Hamburg
100.00
Germany
6,997
43
IVG-Immobilien-GmbH & Co. Kassel VII
Objekt Hannover KG, Hamburg
100.00
Germany
2,854
31
IVG-Immobilien-GmbH & Co. Kassel VIII
Objekt Fuldabrück-Ostring KG, Kassel
100.00
Germany
1,433
381
IVG-Immobilien-GmbH & Co. Kassel IX
Objekt Waldau KG, Kassel
100.00
Germany
3,032
3
IVG-Immobilien-GmbH & Co. Kassel X
Objekt Lohfelden, Otto-Hahn-Straße KG, Kassel
100.00
Germany
1,000
609
IVG-Immobilien-GmbH & Co. Kassel XI
Objekt Lohfelden, Forstbachweg KG, Kassel
100.00
Germany
2,022
219
IVG-Immobilien-GmbH & Co. Kassel XII
Objekt Fuldabrück, Industrie-/Crumbacher Straße KG, Kassel
100.00
Germany
3,107
425
IVG-Immobilien-GmbH & Co. Liebenau II
Objekt Dörverden KG, Liebenau
100.00
Germany
–16
10
IVG-Immobilien-GmbH & Co. Liebenau III
Objekt Liebenau KG, Liebenau
100.00
Germany
1,141
–58
IVG-Immobilien-GmbH & Co. Liebenau IV
Objekt Dragahn KG, Liebenau
100.00
Germany
168
253
IVG-Immobilien-GmbH & Co. Liebenau V
Objekt Bremen, Blumenthal KG, Liebenau
100.00
Germany
–42
85
IVG-Immobilien-GmbH & Co. München II
Objekt Unterpfaffenhofen KG, Munich
100.00
Germany
157
79
IVG-Immobilien-GmbH & Co. München III
Objekt Ottobrunn KG, Munich
100.00
Germany
1,000
565
IVG-Immobilien-GmbH & Co. München IV
Objekt Dornach KG, Munich
100.00
Germany
3,000
1,372
IVG-Immobilien-GmbH & Co. München VI
Objekt Puchheim KG, Munich
94.99
Germany
4,406
1,211
100.00
572
IVG-Immobilien-GmbH & Co. München VIII
Objekt Rosenheimer/Anzinger Straße KG, Munich
Jämsän Forum KOy, Jämsä
Järvenpään Helsinginportti KOy, Järvenpää
Johs. Uckermann GmbH & Co. Grundstücksentwicklung KG, Bonn
Germany
1,000
54.30
Finland
2,721
2
100.00
Finland
–5
–44
Germany
1,445
–560
Kiiskinkatu 5 KOy, Helsinki
100.00
92.50
Finland
1,125
–233
Kilometri KOy, Espoo
100.00
Finland
–2
–8
177
OTHER DISCLOSURES
Group share
Country
(%)
Net income
(€ ‘000)
(€ ‘000)
Kilon Helmi KOy, Espoo
100.00
Finland
6,224
–236
Kilon Timantti KOy, Espoo
100.00
Finland
5,917
–239
Kirkonkyläntie 3 KOy, Helsinki
100.00
Finland
–95
–82
99.95
Belgium
291,141
4,420
26,268
972
–119
–213
226,063
4,495
Kobben SA, Brussels
Kolla SA, Brussels
100.00
Belgium
Kornetintie 6 KOy, Helsinki
100.00
Finland
Korpen SA, Brussels
100.00
Belgium
Kouvolan valtakatu, 28 KOy, Ku
100.00
Finland
382
–79
Kumpulantie 3 KOy, Helsinki
100.00
Finland
15,678
–229
Kuopion Satama 4 KOy, Kuopio
100.00
Finland
1,000
–114
Kutomotie 6 KOy, Helsinki
100.00
Finland
–630
–234
Lappeenrannan Lentäjäntie 17–19 KOy, Lappeentranta
100.00
Finland
566
–188
Madou Plaza SA, Brussels
100.00
Belgium
12,093
–4,394
Malmin Kauppatie 8 KOy, Helsinki
100.00
Finland
1,829
–198
MMD Bauträgergesellschaft mbH, Bonn
100.00
Germany
Niittylänpolku 16 KOy, Helsinki
100.00
Niittymäenpolku 9 KOy, Espoo
Nova KOy, Turku
256
0
Finland
1,894
–88
100.00
Finland
5,932
–318
100.00
Finland
–8
–74
29,284
16,981
Oppenheim Immobilien-Kapitalanlagegesellschaft mbH,
Wiesbaden
50.10
Germany
Oppenheim Immobilier France SAS, Paris
50.10
France
435
911
Oppenheim Property Fund Management Ltd., London
50.10
UK
197
135
1,049
Oppenheim Property Services B.V. Utrecht Niederlande,
Amsterdam
Netherlands
642
OPUS 2 Investment Sp. z o.o., Warsaw
100.00
Poland
–73
–82
Pakkalan Kartannnkoski 3 KOy, Vantaa
100.00
Finland
8,593
–566
Pakkalan Kartanonkoski 12 KOy (Leija), Vantaa
100.00
Finland
231
–243
Parc Avenue IVG SAS, Paris
100.00
France
–2,703
–2,740
Párizs 2000 Kft., Budapest
100.00
Hungary
3,519
–203
91.60
Finland
8,898
0
20
–5
Pasilanraitio 5 KOy, Helsinki
Pfäffikon Beteiligungs- und Verwaltungs GmbH, Berlin
50.10
100.00
Luxembourg
Pitkänsillankatu 1–3 KOy, Kokkola
100.00
Finland
99
–232
Plaza Forte KOy, Vantaa
100.00
Finland
11,410
–554
Polar-Rakennus Oy, Helsinki
100.00
Finland
19
9
Praten SA, Brussels
100.00
Belgium
–1,867
–4,266
Property Management Gesellschaft mbH, Wiesbaden
50.10
Germany
Property Security Belgium SA, Brussels
94.43
Belgium
Rantasarfvik Oy, Helsinki
100.00
Finland
REM Gesellschaft für Stadtbildpflege und
Denkmalschutz mbH, Berlin
100.00
Germany
103
0
15,680
1,220
8
0
–89
–108
Satomalmi KOy, Helsinki
90.40
Finland
3,450
–13
SCI 121/123 Rue D’ Aguesseau, Paris
94.43
France
–1,692
–709
Scifin Alfa KOy, Espoo
100.00
Finland
4,027
–245
SERBIE-IVG SCI, Paris
100.00
France
197
–3,176
–51
Sinimäentie 10 KOy, Espoo
76.90
Finland
3,463
100.00
Belgium
15,743
570
99.18
France
5,936
632
Solartalo 2001 KOy, Helsinki
100.00
Finland
4,562
–249
100.00
Finland
4,563
–248
Slot SA, Brussels
Société Immobilière de la place de la Madeleine SAS, Paris
178
Group share
Country
(%)
Net income
(€ ‘000)
(€ ‘000)
100.00
Finland
4,562
–249
100.00
Finland
4,562
–249
100.00
Finland
4,562
–249
Sörnäisten Rantatie 25 KOy, Helsinki
100.00
Finland
2,327
–267
Spannen SA i.L., Brussels
100.00
Belgium
62,362
–2,441
Spoor SA, Brussels
100.00
Belgium
8,275
–19
Stockned Holding BV, Amsterdam
100.00
Netherlands
61,223
7,365
Stodiek Ariane I SA, Luxembourg
94.43
Luxembourg
2,072
220
Stodiek Ariane II SA, Luxembourg
94.43
Luxembourg
1,656
123
Stodiek Ariane III SA, Luxembourg
94.43
Luxembourg
1,414
62
Stodiek Beteiligungs I Sarl, Luxembourg
94.43
Luxembourg
66,190
–16
Stodiek Beteiligungs II Sarl, Luxembourg
94.43
Luxembourg
66,196
0
Stodiek ESPANA S.A., Madrid
94.43
Spain
9,351
–820
Stodiek Europa Immobilien AG, Bonn
94.43
Germany
125,599
34,314
Stodiek France SAS, Paris
94.43
France
–3,118
–417
Stodiek Immobiliare S.r.l., Milan
94.49
Italy
5,305
–331
Stodiek Immobilien GmbH & Co. Objekt München I KG, Bonn
94.43
Germany
–1,115
266
Stodiek Immobilien- und Verwaltungsgesellschaft mbH, Bonn
94.43
Germany
27
0
Stodiek Inmobiliaria, S.A., Madrid
94.43
Spain
3,478
–805
Stodiek Italia S.r.l., Milan
94.49
Italy
3,607
–466
Stodiek Lisboa Promocao e Construcao de Imóveis, S.A.,
Lisbon
94.43
Portugal
736
79
Stodiek Portugal Sociedade Imobiliaria, S.A., Lisbon
94.43
Portugal
2,225
–277
94.43
Germany
–309
–106
Finland
2,491
2,482
–3,736
–2,524
–818
–268
Stodiek Wohnpark Kaarst GmbH & Co. KG, Bonn
Suomen Osakaskiinteistöt Oy, Helsinki
100.00
Svanen SA, Brussels
100.00
Belgium
Tapiontuuli KOy, Espoo
100.00
Finland
Tardis Verwaltungsgesellschaft mbH & Co. Vermietungs KG,
Munich
0.03
Germany
0
0
TERCON Immobilien Projektentwicklungsgesellschaft mbH, Bonn
100.00
Germany
1,604
–7,050
Thomas SA, Luxembourg
100.00
Luxembourg
Valen SA, Brussels
100.00
Belgium
Vallilan Solar 1 KOy, Helsinki
100.00
100.00
–2,313
–484
140,913
4,746
Finland
1,724
–19
Finland
1,724
–19
100.00
Finland
1,724
–19
100.00
Finland
1,724
–19
Vanha Talvitie 11 KOy, Helsinki
100.00
Finland
1,250
–198
Vantaan Seisake KOy, Vantaa
100.00
Finland
153
0
Vantaanportin Autopaikat KOy, Vantaan
100.00
Finland
459
0
Varla SA, Brussels
100.00
Belgium
Vilhonkatu 5 KOy, Helsinki
100.00
Finland
Wert-Konzept Immobilienfonds Verwaltungsgesellschaft
Holland IV mbH, Berlin
100.00
Wert-Konzept Immobilienfonds Verwaltungsgesellschaft
Holland V mbH, Berlin
100.00
Wert-Konzept Immobilienfonds Verwaltungsgesellschaft mbH,
Berlin
100.00
94.70
XXTRA Liegenschaften GmbH & Co. KG, Nuremberg
1,650
–47
828
–358
Germany
–142
–161
Germany
–195
–157
Germany
1,094
540
Germany
10,483
752
Ykkösseppä KOy, Helsinki
100.00
Finland
1,246
–156
Zesmeer SA, Brussels
100.00
Belgium
42,497
1,652
179
OTHER DISCLOSURES
Group share
Country
(%)
Net income
(€ ‘000)
(€ ‘000)
II. Associated companies
(accounted for using the equity method)
Airrail Center Frankfurt Verwaltungsgesellschaft mbH & Co.
Vermietungs KG, Oberhaching
47.12
Germany
4,281
–2,968
European Logistics Income Venture SCA, Luxembourg
49.49
Luxembourg
4,002
–1,987
2
FDV II Venture SA, Luxembourg
21.17
Luxembourg
1,600
84
3
FDV Venture SA, Luxembourg
30.00
Luxembourg
12,184
6,953
3
Fernleitungs-Betriebsgesellschaft mbH, Bonn
49.00
Germany
522
62
3
Grundbesitz Investitionsgesellschaft
Leibniz-Kolonnaden mbH & Co. KG, Berlin
50.00
Germany
–8,710
–5,228
HANNOVER LEASING GmbH & Co. KG, Pullach
25.00
Germany
43,126
11,530
3
HANNOVER LEASING Verwaltungsgesellschaft mbH, Pullach
25.00
Germany
33
1
3
HIPPON Verwaltungsgesellschaft mbH & Co. Salzufer I
50.00
Germany
–1,532
–2,289
3
HIPPON Verwaltungsgesellschaft mbH & Co. Salzufer II
50.00
Germany
2,585
429
3
spirit at stadium GmbH & Co. Liegenschafts KG, Deisenhofen
50.00
Germany
–1,289
–1,303
Swisscap Investment Management AG, Pfäffikon
50.00
Switzerland
128
–517
1 Complete
list of shareholdings deposited with Commercial Registry
at and for the year to 31.12. 2005
and for the year to 31.12. 2004
2 Unaudited,
3 At
180
Advisory Committees
Central Advisory Committee of IVG
Immobilien AG
Dr. Claus Nolting, Munich
Senior Advisor, Cerberus Deutschland GmbH
Hermann Aukamp, Düsseldorf
Nordrheinische Ärzteversorgung
Lars G. Öberg, Stockholm
Chairman of the Board, AB Rännilen
(until 14.4.2005)
Dr. Dierk Ernst, Munich
Managing Partner, Hannover Leasing
GmbH & Co. KG
Dr. Karl Ohl, Kronberg
Lawyer
Wolfgang Fink, Stuttgart
Chairman of the Management Board,
Allianz Immobilien GmbH
Nick J. M. van Ommen, Amsterdam
Chief Executive Officer, EPRA European Public
Real Estate Association
Dr. Joachim Grünewald, Olpe
Retired Parliamentary State Secretary
Paul Orchard-Lisle, London
Chairman, Slough Estates Plc.
Dr. Gert Haller, Stuttgart
Chairman of the Management Board, Wüstenrot & Württembergische AG (until 31.5.2005)
Prof. Dr. Karl-Werner Schulte, Oestrich-Winkel
Head of Department, European Business
School (ebs)
Jochen Herwig, Münster
Member of the Board of Management,
LVM Landwirtschaftlicher Versicherungsverein
Münster a. G.
Erich K. Schulthess, Schaffhausen
Chairman of the Board of Management,
Schulthess Holding AG
Heinrich Hildesheim, Bonn
Chairman of the Managing Board,
Deutsche Post Immobilienentwicklung GmbH
Michael A. Kremer, Frankfurt am Main
DB Real Estate Management GmbH
Jan-Henrik Kulp, Helsinki
Member of the Board of Directors, IVG Polar Ltd.
Jorma Laakkonen, Helsinki
Member of the Board of Directors, IVG Polar Ltd.
Paul Marcuse, London
Chief Executive Officer, AXA Real Estate
Investment Managers Limited
Dr. Gerhard Niesslein, Frankfurt am Main
DeTe Immobilien Deutsche Telekom
Immobilien und Service GmbH
Berlin Advisory Committee
Dr. Karl Kauermann, Chairman
Berliner Volksbank eG
Dr. Gerold Bezzenberger
Lawyer and notary
Dr. Christoph Franz
President and CEO, Swiss International
Air Lines AG
Dr. Michael Fuchs
Member of the Bundestag
Werner Gegenbauer
Chairman of the Supervisory Board,
Gegenbauer Holding SA & Co. KG
181
OTHER DISCLOSURES
Dr. Volker Hassemer
Member of the Berlin Landtag, former
Managing Director, Partner für Berlin –
Gesellschaft für Hauptstadtmarketing mbH
Dr. Thomas Kurze
Chairman of the Advisory Board,
VBV Vermögens-Beratungs- und Verwaltungsgesellschaft mbH
Dr. Wolf Klinz
Member of the European Parliament
Prof. Dr. Kurt J. Lauk
Member of the European Parliament;
President, Wirtschaftsrat der CDU e.V.
Dr. Jean-Pierre Staelens
Chairman of the Board of Directors, CETIM S.A.
Dr. Lothar de Maizière
Former Prime Minister, lawyer
Budapest Advisory Committee
Dr. Werner Martin
Lawyer
Dr. Jens Odewald
Chairman of the Administrative Board,
Odewald & Compagnie GmbH
Dr. Klaus Rauscher
Chairman of the Management Board,
Vattenfall Europe AG
Dr. Klaus Riebschläger
Former Finance Senator, lawyer
Brussels Advisory Committee
Tibor Adler
Counsellor for Science and Environmental Policy
Dr. Miklós Boda
President, National Office for Research and
Development
Prof. Dr. Ákos Detreköi
President, National Council of Communications and Information Technology NHIT
Emmerich Endresz
Chairman of the Board, RWE Hungaria Kft.
Dr. Johannes Ludewig, Chairman
Executive Director, Community of European
Railway and Infrastructure Companies (CER),
retired State Secretary
Wolfram Klein
Executive Board, German-Hungarian Chamber
of Industry and Commerce
Dr. Georg Brodach
Senior Vice President, ABB Europe Ltd.
Gyula Molnár
Mayor of the 11th district, Budapest
Dirk van den Broeck
Managing Director, Petercam SA –
Société de Bourse
Attila Varkonyi
Member of the Supervisory Board,
Enigma Software Rt;
Vice President, Hungarian Association for
Innovation
Denis Buisseret
Secretary General and Member Executive
Committee, Ahlers Group
Michael F. Gaul
Chairman NATO Budget Committees,
NATO Headquarters
182
Elek Straub, Chairman
Chairman and Chief Executive Officer,
Magyar Telekom Rt.
József Veress
Political State Secretary, European Affairs
Investment Funds Advisory Committee
Günter Schlatter, Chairman, Düsseldorf
Provinzial Rheinland
Jochen Aymanns, Cologne
Former Chairman of the Executive Board,
Gerling Lebensversicherungs-AG
Kurt Gliwitzky, Hanover
Executive Vice President, NordLB
Frank-Rainer Vaessen, Düsseldorf
Member of the Executive Committee,
AEDES Group, Milan
Prof. Dr. Martin Wentz
Managing Director, Wentz Concept Projektstrategie GmbH
Claus Wisser
Managing Director, Claus Wisser Verwaltungsund Beteiligungs GmbH; Member of the
Supervisory Board, AVECO Holding AG
Hamburg Advisory Committee
Dr. Klaus Asche, Chairman
Member of the Board of Directors, ZEIT-Stiftung
Dr. Stefan Wiegand, Frankfurt am Main
Head of Special Products, Dresdner Bank AG
Michael Behrendt
Chairman of the Executive Board,
Hapag Lloyd AG
Frankfurt Advisory Committee
Dr. Karl-Joachim Dreyer
Chairman of the Board of Managing Directors,
Hamburger Sparkasse
Dr. Joachim von Harbou, Chairman
President, Frankfurt Chamber of Industry
and Commerce
Dr. Ralf Bethke
Chairman of the Board of Executive Directors,
K+S Aktiengesellschaft, Kassel
Karl-Hans Caprano
Managing Director, Technoform
Caprano + Brunnhofer GmbH & Co. KG, Kassel
Peter Kobiela
Member of the Board of Managing Directors,
Landesbank Hessen-Thüringen
Alfred Schmidt
Retired Minister of State, Kassel
Prof. Dr. Manfred Schölch
Vice Chairman of the Executive Board,
Fraport AG
Thilo von Trott zu Solz
Chief Executive, Wirtschaftsförderung
Region Kassel GmbH, Kassel
Thies J. Korsmeier
Former Member of the Board of Management,
Deutsche Shell AG;
Chairman of the Board, Verband SchmierstoffIndustrie e.V.
Dr. Heinrich Kraft
Chairman of the Advisory Board, ECE Projektmanagement GmbH
Dr. Joachim Lemppenau
Chief Executive Officer, Volksfürsorge
Versicherungsgruppe
Dr. Andreas M. Odefey
Managing Partner, BPE Private Equity G.m.b.H.
Dr. Manfred Schmidt
Member of the Supervisory Board,
Philips GmbH
Dr. Henning Voscherau
Notary, retired Mayor and President of the
Senate of the Free Hansa City of Hamburg
183
OTHER DISCLOSURES
Eckhard Ziegert
Former Member of the Board of Management,
Esso AG
Munich Advisory Committee
Dr. Theo Waigel, Chairman
Former Federal Minister
Wolfgang Egger
Patrizia Immobilien AG
Dr. Roland Fleck
Nonelected councillor and Deputy Mayor
for Economic Affairs, City of Nuremberg
Daniel F. Just
Member of the Board of Management,
Bayerische Versorgungskammer
Günter Koller
Managing Director, Wilhelm von Finck
Hauptverwaltung GmbH
184
Klaus Laminet
Managing Partner, INVESTA Projektentwicklungs- und Verwaltungs-GmbH
Dr. Lutz Mellinger
Former Member of the Corporates and
Real Estate Group Divisional Executive,
Deutsche Bank AG
Friedrich Wilhelm Patt
Managing Partner, Hannover Leasing
GmbH & Co. KG
Dr. Jochen Scharpe
Chairman of the Supervisory Board, GSW
Gemeinnützige Siedlungs- und Wohnungsbaugesellschaft mbH
Klaus-Werner Sebbel
Managing Partner, Inventis GmbH & Co. KG
Dr. Klaus Trescher
TMW Pramerica Property Investment GmbH
Professor Josef Zimmermann (Dr.-Ing.)
Technical University of Munich
Financial calendar
30. 03. 2006
Analysts’ conference on the 2005 annual report and financial statements
30. 03. 2006
Press conference on the 2005 annual report and financial statements
11. 05. 2006
Publication of interim report, 1 January–31 March 2006
30. 05. 2006
Annual general meeting for the 2005 financial year
11. 08. 2006
Publication of interim report, 1 January–30 June 2006
14. 11. 2006
Analysts’ conference on the interim report for the year to 30 September 2006
14. 11. 2006
Press conference on the interim report for the year to 30 September 2006
24. 05. 2007
Annual general meeting for the 2006 fiscal year
185
OTHER DISCLOSURES
Glossary
Asset Management
Management of major asset portfolios for
institutional investors.
Cash flow
A measure of a company’s financial health and
earning power. Cash flow states the financial
surplus from ongoing operating activities recognized in income. IVG focuses in particular
on operating cash flow, i.e. earnings before
interest, taxes, depreciation and amortization,
including goodwill amortization (EBITDA).
Caverns
Subterranean cavities created to store liquid
and gaseous substances, such as petroleum
and natural gas.
Dividend
A portion of profit paid out to shareholders for
each share held. The decision to pay out a dividend and the dividend amount are decided at
the Annual General Meeting.
EBD
Earnings before depreciation.
CFROI
Cash flow return on investment. Return on total
capital invested in the business, measured on
the basis of cash flows taking into account differing levels of asset depreciation, useful lives
and residual values.
EBIT
Earnings before interest and taxes. At IVG, EBIT
and operating earnings are identical.
Closed-end fund
Type of investment fund with a limited issue
size. Shares cease to be sold when the predetermined capitalization is attained. The fund initiator does not normally redeem shares during
the lifetime of the fund.
EBITDA
Earnings before interest, taxes, depreciation
and amortization (including goodwill amortization). IVG uses EBITDA as its measure of operating cash flow.
Rules of good, value-driven corporate management geared to responsible sustained value
creation in the interest of shareholders.
DAX
German share index composed of the share
prices of the 30 largest German companies
in terms of market capitalization and stock
exchange turnover.
186
Deferred taxes
Items recognized in balance sheets and
income statements prepared in accordance
with national financial reporting rules such
German HGB or an international financial
reporting framework such as IFRS, reflecting
temporary differences between the HGB or
IFRS-based accounts and the tax base.
EBITD
Earnings before interest, taxes and depreciation.
EBT
Earnings before taxes.
Equity ratio
The ratio of equity to total capital. The equity
ratio stated at market values as opposed to
book values includes any unrealized value gains.
EPRA index
Share index reflecting the price performance
of the 70 largest European real estate companies. The European Public Real Estate Association (EPRA) is also open to financial analysts,
investors, auditors and consultants.
IFRS
International Financial Reporting Standards.
These replace national standards for listed
groups of companies in the EU from 2005 and
thus improve the comparability of corporate
financial reporting.
LTI plan
Long-term incentive plan under which the
Board of Management, divisional executives
and other managerial employees receive share
options as an incentive-based remuneration
component.
Lucky buy
Acquisition of a company or interests in a company where the purchase price is less than the
net asset value of the acquired company or
interest.
Market capitalization
The stock market value of a company, calculated by multiplying the current share price
with the number of shares.
MDAX
Share index comprising the 50 next largest
companies in terms of market capitalization
and stock exchange turnover after those in
the DAX.
NAV
Net asset value. Group assets at market value
less liabilities, equal to economic equity.
Deducting deferred taxes on unrealized gains
from NAV gives net net asset value (NNAV).
Open-end fund
Type of fund whose issue size is not limited.
Shares are issued and redeemed on an ongoing basis. Inflows of capital increase the fund’s
total assets and are held in the liquidity reserve
until invested in assets. Outflows of capital are
initially met out of the liquidity reserve, and
from sales of assets when the liquidity reserve
drops below a specified minimum limit.
Operating earnings
Earnings from operating activities. At IVG,
operating earnings are identical with EBIT.
Purchase, management and sale of properties.
Project development
Management of major real estate projects, in
some cases from planning and construction
through to operation.
Property assets under management
Value of the real estate managed by IVG in
its three segments of portfolio management,
project development and investment funds.
REIT
Real estate investment trust. A company, usually listed, that exclusively invests in real estate.
REITs provide a means of investing indirectly
in real estate by buying shares. Almost all
profits are distributed and then taxed in their
entirety at investor level. REITs are the global
standard for indirect real estate investments.
Share options
Options to purchase shares, as a form of
employee incentive and compensation.
187
OTHER DISCLOSURES
2001 1
2002 1
2003 1
2003 2
2004 2
€m
€m
€m
€m
€m
€m
319.3
471.2
411.5
496.1
507.3
426.0
486.6
637.8
545.7
589.8 3
613.0
640.1
EBITD (cash flow)
259.8
350.3
224.8
207.7 3
264.7
298.7
165.8
188.7
174.2
130.5 3
202.6
242.6
68.1
70.4
66.5
54.13
74.9
110.1
Investments
432.2
358.3
565.2
530.7
398.5
534.9
Total assets
3,021.9
3,185.3
3,427.8
3,695.4
3,613.3
3,686.9
45.2
41.2
39.0
39.0
39.0
42.1
1,894.0
1,642.3
1,671.4
1,671.4
1,762.8
2,088.6
16.33
14.16
14.41
14.41
15.20
18.00
Employees
763
750
717
717
930
821
0.34
0.34
0.34
0.34
0.35
0.38 4
Turnover
Net asset value
(equity at market values)
1
188
German Commercial Code (HGB) basis, 2 IFRS basis, 3 Excluding €53.4 million income item for Polar lucky buy, 4 Proposed
2005 2
2005
Turnover
2004
Change
€m
€m
%
280.5
301.8
–7.1
–3.9
218.4
227.2
416.5
410.4
1.5
114.3
79.3
44.1
Investments
385.5
146.6
163.0
Property sales
227.5
428.2
–46.9
Employees
327
364
–10.2
208.3
189.3
10.0
2005
2004
Change
€m
€m
%
51.1
147.5
–65.4
119.1
152.8
–22.1
1,121
1,251
–10.4
394
382
3.1
131.5
95.6
37.6
70
122
–42.6
44.4
26.9
65.1
Operating earnings
Project development
Turnover
Capital commitment
Investments
Employees
Operating earnings
Published by
IVG Immobilien AG
Zanderstraße 5–7
53177 Bonn
Germany
Concept and Design
Turnover
under management
2005
2004
€m
€m
Change
93.8
51.3
82.8
106.3
55.6
91.2
79
78
1.3
170.0
88.4
92.3
%
29
28
3.6
9,672
8,760
10.4
Investments
17.4
154.5
–88.7
Employees
296
300
–1.3
Operating earnings
43.9
16.8
161.3
Printing
Druckpartner, Essen
Pictures
Annual Report 2005
KEY FIGURES AND TARGETS
ANNUAL REPORT 2005
Up Closer.
IVG Group key figures (IFRS)
2005
2004
€m
€m
Turnover
426.0
507.3
640.1
613.0
4.4
EBITD (cash flow)
298.7
264.7
12.8
242.6
202.6
19.7
EBD
149.4
118.4
26.2
110.1
74.9
47.0
Investments
534.9
398.5
34.2
Total assets
3,686.9
3,613.3
2.0
42.1
39.0
7.9
2,088.6
1,762.8
18.4
18.00
15.20
18.4
821
930
–11.7
0.381)
0.35
8.6
Net asset value (equity at market values)
Employees
3,502
3,284
6.6
IVG share of project developments
1,121
1,251
–10.4
13,844
11,980
15.6
1)
Proposed
Medium-term plan to 2008
IVG Immobilien AG
%
–16.0
Portfolio (market values)
Investment funds
1. Real estate transactions 2006–2008: €10 billion
• Purchases: €8 billion
• Sales:
€2 billion
Property assets under management, by region
15% Benelux
14% Berlin
1% Budapest
2% Helsinki
7% Düsseldorf
4% Iberia
2. Property assets under management by end of 2008: > €25 billion
8% Frankfurt
€18.5 billion
8% London
3. Net asset value by end of 2008: > €20 per share
IVG Immobilien AG, Zanderstraße 5–7, D-53177 Bonn
Change
2% Milan
7% Hamburg
4. IVG creates value:
• WACC:
6.9%
• CFROI:
7.9%
14% Paris
10% Munich
6% Other
Investor Relations
Phone: +49 (0)228 / 844-137, Fax: +49 (0)228 / 844-372
Communications
Phone: +49 (0)228 / 844-300, Fax: +49 (0)228 / 844-338
Website: www.ivg.de
2% Stockholm

Up Closer. - IVG Immobilien AG

Transcription

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