annual report

Transcription

annual report

A
R NN
20 EPO U
13 R AL
T
TABLE OF CONTENTS
PROPERTIZE IN BRIEF
1INTRODUCTION
10
2
THE NATIONALISATION OF PROPERTIZE
2.1Nationalisation
2.2
Pro-forma balance sheet
2.3
Status ‘403-declaration’, bank license and fiscal unity
2.4
The Propertize shares
2.5NLFI
14
14
15
15
16
16
3
17
MANAGEMENT BOARD PROPERTIZE
REPORT OF THE MANAGEMENT BOARD
4
4.1
4.2
4.3
STRATEGY AND OUTLOOK
Overall strategy and ambition
Strategy update
Outlook 2014
20
20
21
22
5
5.1
5.1.1
5.1.2
5.1.3
5.1.4
5.1.5
5.2
RISK, CAPITAL MANAGEMENT & ALM AND FUNDING
Risk and capital management
Financial risks
Capital management
Non-financial risks
New regulations and their implementation
Developments in the risk management organisation
Funding and credit ratings
22
22
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24
25
26
26
6
FINANCIAL OUTLINES AND DEVELOPMENT PROPERTIZE
27
7
HUMAN RESOURCE MANAGEMENT (HRM)
29
REPORT OF THE SUPERVISORY BOARD
8
8.1Themes
8.1.1
Important subjects and discussions
8.1.2
Composition and functioning of the Supervisory Board
8.1.3Cooperation
8.1.4
Employees
8.2
Composition of the Management Board
8.3
Meetings of the Supervisory Board
8.3.1
Most important subjects
8.3.2
Presence of the Management Board
8.3.3
Presence of the external auditor
8.4
Meetings of committees
8.4.1
Audit & Risk Committee (ARC)
8.4.2
Nomination Committee (NC)
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PROPERTIZE ANNUAL REPORT 2013
3
8.5
8.6
8.6.1
8.6.2
8.6.3
8.7
Annual financial statements
Remuneration report
Remuneration policy Management Board
Remuneration of the Management Board 2013
Remuneration of the Supervisory Board
Closing words
38
38
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41
CORPORATE GOVERNANCE
9
9.1
9.1.1
9.1.2
9.2
9.2.1
9.2.2
9.3
The Management Board
Composition and functioning
Responsibilities, curriculum vitae and other positions
The Supervisory Board
Composition, appointment and functioning
Responsibilities, curriculum vitae and other positions
Dutch Corporate Governance Code and Banking Code
44
44
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44
45
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46
FINANCIAL STATEMENTS
10
10.1
10.2
10.3
10.4
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated cash flow statement
11
ACCOUNTING PRINCIPLES FOR THE CONSOLIDATED FINANCIAL STATEMENTS
11.1
Adoption of the financial statements
11.2
General information
11.3
Going concern
11.4
Basis of preparation
11.4.1
Statement of IFRS compliance
11.4.2
Changes in published Standards and Interpretations effective in 2013
11.4.3Interpretations of existing standards or amendments to standards,
not yet effective in 2013
11.4.4
Accounting principles used in the preparation of the financial statements
11.4.4.1 Accounting principles applied to balance sheet items
11.4.4.2 Functional currency and reporting currency
11.4.5
Main accounting principles, estimates and assumptions
11.4.5.1The use of estimates and assumptions in the preparation of the
financial statements
11.4.5.2 Provision for impairment of loans and advances to customers
11.4.5.3 Net realisable value of property projects
11.5
Accounting principles used for consolidation
11.5.1Subsidiaries
11.5.2
Associated companies and joint ventures
11.5.3
Elimination of group transactions
11.5.4
Foreign currencies
11.5.5
Accounting based on transaction date and settlement date
11.5.6
Offsetting of financial instruments
11.5.7
Discontinued operations or assets held for sale
11.5.8
Information by segment
11.6
Specific balance sheet accounting principles
11.6.1
Tangible assets
4
52
52
53
54
55
55
55
55
56
56
57
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58
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11.6.2
Loans and advances to customers
11.6.3
Property projects
11.6.4
Cash and cash equivalents
11.6.5Taxes
11.6.5.1 Deferred tax assets and liabilities
11.6.5.2 Current tax assets and liabilities
11.6.6
Other receivables
11.6.7
Other assets
11.6.8
Equity
11.6.9
Amounts due to banks
11.6.10Provisions
11.6.10.1 Employee benefits
11.6.10.2 Other provisions
11.6.11
Other liabilities
11.7
Specific statement of comprehensive income accounting principles
11.8
Property finance loan portfolio
11.8.1
Interest income
11.8.2
Interest expenses
11.9
Property projects
11.10
The share in result of associates and joint ventures
11.11
Result on financial instruments
11.12
Other operating income
11.13Expenses
11.13.1
Staff costs
11.13.2
Depreciation and amortisation of fixed assets
11.13.3
Service charge expenses & fee and commission / management expenses
11.13.4
Other operating expenses
11.13.5 Impairment charges
11.14
Contingent liabilities and commitments
11.15
Cash flow statement
64
65
65
65
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65
65
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67
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67
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68
69
69
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12.1
12.2
12.3
12.4
69
69
69
70
71
RISK MANAGEMENT AND ORGANISATION
Risk management in transition
Risk management organisation
Framework for risk management
Risk classification
13
FINANCIAL RISKS
13.1Introduction
13.2
Credit risk
13.2.1
Credit risk overview
13.2.2
Credit risk profile and credit risk management
13.2.3
Credit risk Propertize
13.2.4
Managing credit risk Propertize
13.2.5
Credit risk loans and advances to customers
13.2.6
Exposures to higher-risk Eurozone countries
13.3
Market risk
13.3.1
Managing market risk
13.3.2 Price risk property projects
13.3.3
Interest rate risk
13.3.4
Sensitivity test for interest rate risk
13.3.5
Effective interest rates
13.3.6
Currency risk
13.4
Liquidity risk
72
72
72
72
72
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83
5
14
14.1
14.2
14.3
FINANCIAL INSTRUMENTS
Fair value of financial instruments
Notes to the valuation of assets and liabilities
Hierarchy in determining the fair value of assets and liabilities
84
84
85
86
15
15.1
NON-FINANCIAL RISK MANAGEMENT
Management of non-financial risks
90
90
16
CAPITAL MANAGEMENT
16.1
Going concern capital management
16.2Objectives
16.3
Capital and solvency position
91
91
91
91
17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17.1
Tangible fixed assets
17.2
Investments in associates and joint ventures
17.3
Property projects
17.4
17.5
Deferred tax assets and liabilities
17.6
Other receivables
17.7
Other assets
17.8
17.9
Equity
17.10Provisions
17.10.1
Specification provision for employee benefits
17.10.2
Other provisions
17.11
17.12
Other liabilities
17.13
Off balance sheet commitments
17.13.1
Contingent liabilities
17.13.2
Operational lease commitments
17.14
Legal proceedings
17.14.1Nationalisation
17.14.2
Claims and legal cases
17.15
Related Parties
17.15.1Positions and transactions between Propertize, associated companies
and joint ventures
17.15.2
Positions and transactions between Propertize and SNS Bank
17.15.3
Positions and transactions between Propertize and the Dutch State / NLFI
17.15.4
Positions and transactions with managers in key positions of Propertize
17.16
Subsequent events
17.17
Net interest income
17.18
Property projects income
17.19
Other income
17.20
Staff costs
17.21
17.22
Impairment charges
17.23Taxation
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101
101
102
104
18
18.1
18.2
18.3
COMPANY FINANCIAL STATEMENTS
Company balance sheet
Company income statement
Principles for the preparation of the company financial statements
109
109
110
110
19
NOTES TO THE COMPANY FINANCIAL STATEMENTS
110
6
104
105
105
105
106
106
106
107
107
108
108
108
19.1 19.2 19.3 19.4 19.5 19.6 19.7 19.8 19.9 19.10 19.11 19.12 Cash and cash equivalents
Subsidiaries
Receivables from subsidiaries
Receivables from affiliated companies
Other receivables and Other assets
Amounts due to group companies
Other liabilities
Provision investments in subsidiaries
Equity
Issued share capital
110
110
112
112
113
113
113
113
113
113
114
114
20
OFF BALANCE SHEET COMMITMENTS
20.1Guarantees
20.2
Other off balance sheet commitments
115
115
115
21
RELATED PARTIES
115
22
SUBSEQUENT EVENTS
115
23
AUDIT FEES
116
24
OVERVIEW OF PRINCIPAL SUBSIDIARIES
117
OTHER INFORMATION
25
25.1
25.2
OTHER INFORMATION
Provision regarding profit or loss appropriation
Independent auditor’s report
120
120
120
PILLAR III REPORT
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PILLAR III REPORT
124
7
PR
IN O
B PE
R R
IE T
F IZ
E
“Propertize aims
to add value to
its real estate
and property
finance
portfolio”
Fr
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PROPERTIZE IN BRIEF
INTRODUCTION
THE PAST YEAR WAS AN INTENSIVE ONE FOR PROPERTIZE, BEING LARGELY DEVOTED
TO PREPARE FOR THE ORGANISATION’S SPIN-OFF AND TO DEVELOP A STRATEGY
DESIGNED TO RESULT IN THE COMPLETE WIND-DOWN OF ITS PROPERTY AND
PROPERTY FINANCE PORTFOLIO IN THE COMING TEN YEARS.
Until the nationalisation on 1 February 2013, SNS Property Finance (as of 1 January 2014 known
as Propertize) was part of SNS Bank and therefore also of SNS REAAL. When SNS REAAL was
nationalised, the Dutch Minister of Finance announced that an independent organisation would
have to wind-down the property and property finance portfolio as cost-effectively and profitably
as possible in the medium-term. After obtaining the approval of the European Commission on
19 December 2013, the spin-off became official as of 31 December 2013. Since that date, the
shares in Propertize are held by Stichting Administratiekantoor Beheer Financiële Instellingen
(NLFI), a Dutch State-controlled agency managing the shareholdings in a number of nationalised
Dutch financial institutions.
PROPERTIZE’S SPECIAL ASSIGNMENT
Propertize was set up with a time horizon of ten years, to give the organisation sufficient time
to wind-down its portfolio as well as possible in order to obtain the highest possible proceeds for
the Dutch State – and ultimately the tax-payer – at the lowest possible cost, while minimising
the portfolio risk and the risk of claims and consequential losses. This period will create time and
space to explore what is best for the property that Propertize owns or finances, and this in its turn
will result in value creation as the portfolio is winding down. The wind-down must be conducted
in a controlled, transparent and professional manner, with high ethical standards. Furthermore,
Propertize is fully aware of the turbulent past and of the context in which commercial property
and society’s interests intersect. All this has led to the following mission:
PROPERTIZE WILL WIND-DOWN ITS PORTFOLIO IN THE COMING TEN
YEARS WITH INTEGRITY AND IN A CONTROLLED, TRANSPARENT AND
PROFESSIONAL MANNER. A QUICK AND CONTROLLED WIND-DOWN FOR
THE HIGHEST POSSIBLE PROCEEDS AT THE LOWEST POSSIBLE COSTS IS
IN THE PUBLIC INTEREST. IN EXECUTING THIS TASK, PROPERTIZE WILL
MINIMISE THE PORTFOLIO RISK AND THE RISK OF NEW CLAIMS AND
CONSEQUENTIAL LOSSES. WE AIM TO ACHIEVE THIS AMBITION WITH A
HIGH-QUALITY AND PROFESSIONAL TEAM.
10
OTHER INFORMATION
PILLAR III REPORT
PROPERTIZE’S AMBITION
The wind-down strategy which Propertize has developed and which commenced in 2014
immediately reflects our ambition. Our goal is not just to wind-down our portfolio within ten
years with the right people and an efficient organisation, but Propertize also aims to add
value to its property and property finance loans so that losses ultimately will be lower than the
€ 2.8 billion of the Cushman & Wakefield valuation presently taken into account in the transfer
value. Our ambition is therefore to repay the additional capital of € 500 million which the Dutch
State provided, and to manage without calling on the guarantees by the Dutch State.
THE TURNAROUND IN 2013, BEFORE THE COMMENCEMENT OF 2014
This wind-down strategy as defined in 2013 and of which the execution started in 2014 is a major
break with the past, when the principal object was – in essence – to wind-down the portfolio
as quickly as possible in order to reduce the risk weighted assets (RWA reduction). Propertize
is now tasked with winding-down the portfolio as favourably as possible, i.e. with the highest
possible proceeds, the lowest possible costs and the lowest possible risks. In order to execute
this special task going forward, Propertize has made a turnaround in 2013. For that reason, three
considerations were high on the agenda in 2013: developing the new wind-down strategy, further
reinforcing the organisation and its structure and filling in the posts which are necessary as an
independent organisation for successfully phasing-out in the coming years. Together with the
expected recovery of the property markets, these are important pre-conditions for achieving our
wind-down strategy.
(I) THE WIND-DOWN STRATEGY IN MORE DETAIL
The formulated wind-down strategy is based on a bottom-up and risk-based analysis of
approximately 80% of the exposure which the organisation conducted internally in the second
half of 2013. When executing this strategy, Propertize will combine the optimisation of cash flows
with picking well-timed exits and reducing risks.
The cash flow will not only cover the operating costs, but also provide the opportunity for
(restricted) investments in Propertize’s own property and limited additional finance on existing
loans, provided that these contribute to a further improvement of the cash flow and the expected
exit values. Propertize is however ruling out project development and finance for new clients.
In order to achieve maximum value, the portfolio has been broken down into three buckets:
‘Healthy’, ‘Value Retention and Creation’ and ‘Disposition’. The property in each of these buckets
has more or less the same profit-making potential. By proceeding in this way, Propertize can
focus on optimising the cash flow from the portfolio in the coming ten years and utilise this
period for reducing exposures, which will make well-timed exits possible. At the same time, good
customer relation management and attention for the customer will be important for Propertize to
achieve its special task. The shift in focus away from RWA-reduction leads to room to look at what
is good for real estate. It is our conviction that this results in a better outcome for both Propertize
and our customers.
Healthy
(23% of the net portfolio)
In this category, Propertize will concentrate on client retention until the end of their term,
also to cover our operating costs. These concern loans on which clients pay interest and make
repayments and on which no losses on the outstanding balance are expected in the mediumterm. Loans can be extended if this will reduce risk and if it is for a period within the ten-year
period granted to Propertize. Active portfolio management through account management and
regular monitoring will improve the cash flow.
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PROPERTIZE IN BRIEF
Value Retention and Creation
It may be possible to retain or create value on the assets in this category, which are mainly
Dutch loans and property assets. Obviously, the cash flow and potential value must be higher
than the costs of keeping the asset. Active asset management geared to the individual asset
is essential for this. Existing loans can be increased or additional investments are possible if
individual business cases are favourable.
Disposition
In some cases there can be no conclusion other than that there is no scope for value creation
and in that case it is best for Propertize to seek the quickest possible exit so that it can minimise
its losses. After all, prolonged retention of such assets will only lead to an increase in losses.
Minimising management costs, a systematic dismantling of legal structures and restricting the
risk of new claims have greater priority in that case.
(II) THE ORGANISATION
Aside from the strategy, a lot of attention has been devoted to the continued development of the
organisation and its structure. It is important that Propertize can keep the reins on the portfolio
and can safeguard the quality of its work. This is now possible as a result of the reinforcement
of the administrative organisation and the internal control system. Propertize has also made a
conscious decision to outsource certain activities, such as some of our IT. There will be constant
attention for maintaining the quality of the organisation in the coming years. Special attention
has gone out and will go out to the integrity of the organisation and its employees. After the
developments at the end of 2012 and the begin of 2013, Propertize is more than aware of
the importance of integrity to its special task. The focus on the quality and integrity of the
organisation is reflected more and more within Propertize and our employees.
(III) STAFF
After my appointment as Chief Executive Officer in June, and Reinout van Riel as Chief
Restructuring Officer in July (now: Chief Portfolio Officer), together with Jack Mondt as Chief
Finance & Risk Officer, Propertize’s Management Board is now complete. Other key positions
within Propertize have now been filled and new staff have started work in a range of positions.
During 2013, both existing and new employees have done their utmost for the organisation,
despite all the attention and turmoil up to and after the nationalisation and from other
developments. The effort by our employees has contributed considerably to the foundation for
Propertize to fulfill its special task over the coming years. A word of thanks on behalf of the
Management Board is therefore well deserved.
The interest in a job within Propertize was and is considerable. The labour market campaign
under the slogan ‘Steep learning curve’ aimed at young professionals with 3-5 years’ experience
played an important part in this. This campaign clearly defined the type of organisation Propertize
wants to be in the coming ten years and what type of people it is looking for. In total, the number
of internal staff increased to 109 FTE.
An important factor in the growth of the number of staff was the fact that, as a result of the
spin-off, Propertize itself would again become responsible for staff departments such as Audit,
Communications, IT, Legal and Risk Management (including ORM). In addition to this, the nature
of the work has changed as a result of the extension of the wind-down period and the departure
from the focus on RWA reduction. Finally, we aim to reduce the temporary filling of positions
by external members of staff in favour of permanent staff; this way we can invest in the knowhow of our organisation and our staff. As from 2015, we expect the number of staff to decline
gradually as a result of the wind-down of the portfolio.
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OTHER INFORMATION
PILLAR III REPORT
FINANCE REQUIREMENTS
In order to properly complete the wind-down strategy, it is important that Propertize has
sufficient funding. That - very important - pre-condition was achieved in early 2014: within six
weeks of the start of its funding programme Propertize had already raised the finance it needed
in 2014, a total of € 3.89 billion, by placing medium-term notes with a value of € 2.6 billion and
€ 1.29 billion in Euro Commercial Paper. Propertize used these funds to redeem all its loans from
SNS Bank N.V. (€ 4,054,900,000) as of 4 April 2014. Due to repayments and the reduction of its
exposure, Propertize subsequently did not need to raise external funding for the full amount.
By means of this
the Dutch State:
€ 4,054,900,000
need any further
funding we can execute our task within the financial boundaries laid down by
a capital injection of € 500 million and a guarantee for a maximum of
for our funding programme. As a result Propertize expects that it will not
capital injection or additional guarantees.
OUTLOOK
The recovery of the real estate markets will eventually benefit the execution of Propertize’s winddown strategy. On the whole, the number of transactions is increasing, although sometimes there
is still question of considerable discounts. We see this as a vindication of the decisions we have
made for Propertize’s wind-down strategy. In our view this strategy will enable us to successfully
complete our special assignment in the coming ten years: retaining and creating value within our
portfolio in the interest of the Dutch tax-payer.
Hans Copier
Chief Executive Officer
13
PROPERTIZE IN BRIEF
2
THE NATIONALISATION OF PROPERTIZE
2.1 NATIONALISATION
As an independent organisation Propertize focuses on winding-down its portfolio of property
and property finance loans, for which it has been given a period of ten years, starting from the
spin-off on 31 December 2013. This special assignment is a result of the nationalisation of SNS
REAAL N.V. (SNS REAAL) on 1 February 2013, when the Dutch Minister of Finance announced
that the SNS REAAL property and property finance portfolio would be separated and placed in an
independent organisation.
Propertize prepared itself for the spin-off in the course of 2013 in collaboration with SNS REAAL.
An important priority was providing a structure for the staff and supporting departments (such as
IT) within Propertize, because after the spin-off Propertize could no longer rely on the clustering
of these activities within SNS REAAL. SNS REAAL will continue to provide support for a limited
period in a number of areas on the basis of service level agreements and a conscious decision to
outsource certain other activities has been made.
The spin-off of Propertize’s activities related to the portfolio of property and property finance
loans is part of the restructuring plan which the Ministry of Finance submitted to the European
Commission (EC) on 19 August 2013 and which was approved by the EC on 19 December 2013.
On 24 December 2013, the Dutch central bank (De Nederlandsche Bank / DNB) issued a
‘Certificate of No Objection’ for the spin-off of the property activities and on 31 December 2013,
SNS Bank N.V. (SNS Bank) transferred the shares in the organisation to the State. That same
day, the State subsequently transferred the shares to the foundation Administratiekantoor
Beheer Financiële Instellingen (NLFI), the holding entity for the shareholdings of the Dutch
State in a number of nationalised financial institutions, and NLFI subsequently became 100%
shareholder. The company started operating under the name of Propertize B.V. (Propertize) as
of 1 January 2014.
The European Commission agreed with the SNS REAAL restructuring plan on 19 December 2013.
According to the plan, SNS Bank should dispose of SNS Property Finance in order to allow for a
stand-alone and proper wind-down of the property and property finance portfolio. The transfer
value of the portfolio was determined by the Ministry of Finance, based on calculations of
Cushman & Wakefield, at € 2.8 billion below the book value as at 30 June 2012.
Since then, the book value of the portfolio reduced to € 5,726 million, representing a € 1,833
million decline in value (incurred loss basis). For the net amount of the difference between the
transfer value and the losses incurred (which amounted gross € 967 million), the capital of
Propertize was strengthened by € 725 million (net) prior to the transfer on 31 December 2013.
Table 1: Follow-up impairments on the portfolio (pre-tax)
(In € millions)
Cushman & Wakefield 30-6-2012
Impairments and discounts HY2-2012
Impairments and discounts FY-2013
Remaining value 31-12-2013
Result
(776)
(1,057)
(1,833)
Balance
2,800
967
After the transfer the Dutch State paid € 500 million in share premium into Propertize’s
shareholders’ equity. € 400 million of these liquidities were then used to redeem SNS Bank’s
funding, of which € 4,054,900,000 was still outstanding at the end of 2013. In order to also
repay the remaining outstanding amount to SNS Bank as quickly as possible, Propertize executed
a funding programme for a maximum of € 4,054,900,000 starting in February 2014. Within six
weeks of the commencement of the programme the new external finance had been raised. The
Dutch State had issued a guarantee for this full amount.
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OTHER INFORMATION
PILLAR III REPORT
2.2 PRO-FORMA BALANCE SHEET
The following balance sheet shows the pro-forma – consolidated balance sheet at the end of
2013. The adjustment is the difference between the actual carrying amount of the portfolio and
the transfer value as at 30 June 2012.
Table 2: Consolidated balance sheet
Actual Adjustment
Pro forma
20132013
(In € millions)
Assets
Tangible assets
2
2
Investments in associates
2
2
Property projects
810
810
4,916
(967)
3,949
Deferred tax assets
9
9
Other receivables
45
45
Other assets
67
67
207
207
Total assets
6,057
(967)
5,090
Equity and liabilities
Share capital and share premium reserve
3,117
3,117
Other reserves
(1,068)
(1,068)
Retained earnings
(823)
(725)
(1,548)
Total equity
1,226
(725)
501
Other provisions
Deferred tax liabilities
Corporate income tax
Other liabilities
Total equity and liabilities
14
249
(242)
4,409
8
151
6,057
(967)
14
7
4,409
8
151
5,090
The adjustment at year-end 2013 of € 967 million reflects the expected losses as per that date
on both property projects and loans and advances that were taken into account to determine the
transfer value as at 30 June 2012. If these will actually materialize in future reporting periods the
losses will be accounted for in future reporting periods. However this hypothetical split cannot be
made on the actual figures, because there’s no split of the expected losses to property projects
and loans and advances to customers.
2.3 STATUS ‘403-DECLARATION’, BANK LICENSE AND FISCAL UNITY
On 31 December 2013, SNS REAAL NV and SNS Bank NV withdrew their guarantees as referred
to in Book 2, Section 403 of the Dutch Civil Code for SNS Property Finance BV (per 1 January 2014
renamed to Propertize BV) and its subsidiaries BPF Onroerend Goed Lease en Financieringen BV,
De Haarlemsche Maatschappij voor Hypothecaire Financiering BV, SNSPF Financiering
Participaties BV (per 1 January 2014 renamed as PRPZ Financiering Participaties BV) and SNSPF
Interim Finance BV (per 1 January 2014 renamed as PRPZ Interim Finance BV). As of that date
SNS REAAL NV and SNS Bank NV are no longer jointly and severally liable for the obligations
of these companies resulting from legal acts (rechtshandelingen) executed by them. These
withdrawals have been registered with the Dutch Chamber of Commerce and have been published
in the Staatscourant.
SNS Bank NV issued separate guarantees to a number of counterparties of Propertize in the past.
Following the withdrawal of the 403 declarations and termination of the remaining commitments
arising from the 403 declarations, these guarantees will remain in place.
15
PROPERTIZE IN BRIEF
As was the case in previous years, during 2013 Propertize was supervised by the Nederlandsche
Bank (Dutch National Bank or DNB). In anticipation of its separation of SNS Bank N.V. Propertize
engaged in constructive dialogue with his stakeholders, including DNB, to develop a sustainable
regulatory framework. In view of his unique situation Propertize is in need of a tailor-made
framework. Accordingly, Propertize will file an application with DNB to withdraw its banklicense,
after the adoption of these financial statements. Following Propertize’s application, DNB is
expected to agree to withdraw Propertize’s bank license, whilst simultaneously instructing
Propertize to wind-down its remaining activities and operations in accordance with the provisions
of section 1:104 paragraph 3 of the Dutch Financial Supervision Act. DNB will impose several
conditions and instructions on Propertize, all aimed at ensuring that such winding-down takes
place in an integer and controlled way for as long as the wind-down operations shall last, in
accordance with (i) applicable laws and regulations, (ii) instructions previously provided by DNB,
and (iii) the working arrangements provided by NLFI.
The DNB instruction to wind-down Propertize’s activities pursuant to aforementioned section
1:104 paragraph 3 of the Dutch Financial Supervision Act, ensures a tailor made DNB supervisory
regime regarding Propertize’s wind-down activities, enabling Propertize to wind-down its activities
as currently contemplated.
With the transfer of the shares of SNS Property Finance, the fiscal unity with SNS REAAL was
ended. As from 31 December 2013, Propertize BV, together with a major part of its Dutch
subsidiaries, constitutes a fiscal unity for corporate income tax. For VAT purposes the fiscal unity
started on 1 January 2014. All companies within the Dutch fiscal unity are jointly and severally
liable for corporate income tax debts and VAT debts stemming from the fiscal unity.
Up until the time of separation on 31 December 2013, Property Finance was part of the fiscal
unity of SNS REAAL. Based on the advanced tax ruling with the Dutch Tax Authority, it was
determined that the reduction in value of the portfolio (€ 2.8 billion) that was used for its transfer,
is directly and fully recognised for tax purposes. All financial relationships associated with tax
between Property Finance and SNS REAAL were settled at year-end 2013.
2.4 THE PROPERTIZE SHARES
On 31 December 2013 SNS Bank NV transferred the shares in SNS Property Finance BV to
the Dutch State. The Dutch State transferred these shares to NLFI. NLFI issued exchangeable
depositary receipts for shares to the Dutch State in return for acquiring and holding, in its own
name, the share capital in SNS Property Finance BV.
The number of authorised share capital (250,000) was reduced to 50,003 end of 2013, the same
as the number of issued and paid up shares. The nominal value of the shares, originally € 50,
was reduced to € 1. As the reduction did not involve a return to the shareholders, the value was
transferred to the share premium reserve.
The number of shares outstanding (50,003) remained unchanged in 2013.
For more information on the number of shares and nominal value, please refer to section 19.12
Issued share capital.
Dividend
In view of the net loss, the Management Board has resolved, with the approval of the Supervisory
Board, to pass over the dividend for 2013.
Key dates in 2014
The General Meeting of Shareholders was held on 26 June 2014.
2.5 NLFI
As from 31 December 2013, NLFI is the sole shareholder of Propertize. NLFI is by law responsible
for the management of interest of the State in Propertize. NLFI is publicly accountable for this
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PILLAR III REPORT
statutory duty. To fulfil this task, NLFI has made arrangements with Propertize regarding its
governance. These arrangements have been laid down in a draft Memorandum of Understanding
(MoU) which is expected to be signed after the adoption of these financial statements. Amongst
other things, the MoU describes that Propertize has to comply with the Dutch Corporate
Governance Code, the way members of the Management Board and Supervisory Board are
appointed, and the way NLFI shall be informed about decisions of the Management Board.
3
MANAGEMENT BOARD PROPERTIZE
Hans Copier, chairman of the Management Board (CEO)
Hans Copier (1957) has been chairman of the Management
Board since June 2013. In addition he is responsible for the
staff departments Strategy & Special Projects, Internal Audit,
Communications, Legal & Compliance, HR and Facility Services.
Jack Mondt, Chief Financial & Risk Officer (CFRO)
Jack Mondt (1959) has been Chief Financial & Risk Officer of
the Management Board since March 2012. Additionally he is
responsible for the departments Risk Management, Provisions
& Appraisals, Finance & Control, Business Control, Treasury,
Tax and Operations & IT.
Reinout van Riel, Chief Portfolio Officer (CPO)
Reinout van Riel (1970) has been member of the Management
Board since July 2013. As Chief Portfolio Officer he is
responsible for all the business assets of Propertize which are
handled in the departments Loan Management, Restructuring &
Recovery, Asset Management and Contract & Business Support.
Abridged CVs and additional positions of the Management Board members can be found in section
9.1.2 of this annual report.
17
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PROPERTIZE IN BRIEF
REPORT OF THE
MANAGEMENT BOARD
4 STRATEGY AND OUTLOOK
4.1 OVERALL STRATEGY AND AMBITION
Propertize will wind-down its portfolio over a period of ten years, with integrity and in a controlled,
transparent and professional manner. Within this assignment, its strategic objective is to ensure
maximum proceeds from the portfolio with the lowest possible risks and the lowest possible costs.
Propertize’s risk profile is expected to entail that the Dutch State will not need to provide extra
capital or guarantees and, upon the completion of the wind-down, Propertize furthermore expects
to be able to repay the € 500 million which the State made available as shareholders’ equity.
Important pre-conditions for realising this strategy are the recovery of the property and property
finance markets and the build-up and retention of a high-quality organisation.
Our ambition
During the wind-down, Propertize will focus on adding value to the underlying property. This
includes reducing the risks of new claims and consequential losses. Propertize’s ambition is to
achieve lower losses than the Cushman & Wakefield valuation that led to a € 2.8 billion portfolio
value reduction. During the wind-down, operating costs will be compensated by (interest) income
and other proceeds, so that Propertize will be self-supporting.
Achieving maximum proceeds
Optimising cash flow, picking well-timed exits and reducing risks are designed to ensure
maximum proceeds for Propertize.
Propertize aims to maintain and / or improve its clients’ cash flow and, as long as cash continues
to flow, Propertize can use the regular repayments to reduce its exposure. Propertize has the
mandate to use this cash flow to invest in its own property and also to provide additional finance
to existing clients, provided that this is necessary to optimise the cash flow and improve the
expected exit value. Propertize is ruling out project development and finance for new clients.
With the ten-year wind-down period, Propertize anticipates that the markets will recover, allowing
the company to pick the best time for an exit, i.e. at the point at which the real estate market
picks up and the financing or re-financing possibilities improve. Propertize aims to sell off assets
to which it can add no value immediately, or after foreclosure.
The segmentation of the portfolio
In undertaking its wind-down strategy, Propertize has broken its portfolio down into three
buckets: ‘Healthy’, ‘Value Retention and Creation’ and ‘Disposition’.
Healthy (23% of the net portfolio)
Our strategy for assets on which clients are paying interest and making repayments, and for which
no losses are expected on the outstanding balance in the medium-term, is geared to retaining
clients until the end of the term and covering our operating costs. When risk reduction is possible,
it may even be possible to grant an extension, provided that this is within the period stipulated
in the shareholder’s mandate. Cash flow will be further optimised as a result of active portfolio
management by focusing on account management and by monitoring the underlying cash flow.
Value creation can also result from standardising and streamlining data and documentation.
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PILLAR III REPORT
Value Retention and Creation (64% of the net portfolio)
This segment mainly consists of Dutch loans and properties that are in scope for creating or
optimising value in the short or medium term. Precondition is that the cash flow and the potential
value must outweigh the costs of retaining the property (or the loan). Active asset management
is essential in this bucket. It may be possible to increase the loan or make additional investments,
provided that this is necessary for optimising the cash flow and improving the expected exit
value, and this is possible only with a positive individual business case. The risk of new claims
must be restricted as much as possible.
Disposition (13% of the net portfolio)
In some cases, it is necessary to acknowledge that certain assets have no scope for value
creation, and prolonged retention would have negative financial implications. At that point, it
is in Propertize’s best interest to seek the quickest possible exit to minimise losses. Until the
exit, management costs must be minimised, legal structures must be dismantled in a controlled
manner and the risk of new claims must be reduced as much as possible.
4.2 STRATEGY UPDATE
The past year was largely devoted to laying the foundations for Propertize: preparing the
organisation for the spin-off as of 31 December 2013 and developing the wind-down strategy
for the coming ten years.
The separation from SNS REAAL
Staff and supporting departments, such as Communications, IT, Legal and Risk Management,
have been created within Propertize, because the clustering of these activities within SNS REAAL
is obviously no longer available to Propertize as an independent organisation after the spin-off.
SNS REAAL will continue to provide Propertize with limited support for a limited period, for
example on legal matters, on the basis of service level agreements.
Developing the wind-down strategy
The wind-down strategy for the Propertize property and property finance portfolio is based on a
bottom-up and risk-based analysis conducted internally by the organisation of approximately 80%
of the portfolio in the second half of 2013.
The desired organisation and internal controls
In 2012, Propertize initiated an investigation into possible conflicts of interests within Propertize.
This investigation was continued in 2013. In early 2013, Propertize launched a project to further
reinforce the Administrative Organisation and the Internal Control system. After the appointment
of the new Management Board and an investigation of the Dutch Central Bank into Propertize’s
controlled business resulting in a formal directive, the work was stepped up in the second half
of 2013 and in early 2014 a revised Administrative Organisation and Internal Control system
was designed and implemented. The objective was to ensure integrity and achieve professional,
transparent and controlled business management with clearly-defined tasks and responsibilities,
so that Propertize can function properly as an independent organisation, with satisfactory internal
controls in line with the Three Lines of Defense principle. Other important aspects that were
addressed were the filling in of job functions and profiles, the risk management parameters, the
recovery of case files and internal management.
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PROPERTIZE IN BRIEF
4.3 OUTLOOK 2014
As part of the wind-down strategy, Propertize has identified the following five strategic themes
specifically for 2014. These themes will flesh out the wind-down strategy further, on the basis
created in 2013.
1 Propertize in control: the implemented Administrative Organisation / Internal Control system
will enable the organisation to manage processes, to control these (in control) and to have
transparent accountability.
2 Value creation by selling off assets: Propertize will create value by undertaking a professional
and hands-on translation of its exit strategy per individual client.
3 Clear monitoring: Propertize knows at any time the situation in relation to the wind-down
strategy, and management reports on that subject will be clear and unambiguous.
4 Transparent external accountability: Propertize is accountable to society in a transparent
manner and thereby earns its license to operate.
5 Reinforce and retain human capital: the Propertize staff is crucial for realising this special
assignment.
Given the uncertain economic climate and the developments on the real estate markets,
Propertize refrains from comments or predictions about future results.
5
RISK, CAPITAL MANAGEMENT & ALM AND FUNDING
5.1 RISK AND CAPITAL MANAGEMENT
The spin-off of Propertize’s activities related to the portfolio of property and property finance
loans was part of the restructuring plan which the Ministry of Finance submitted to the European
Commission (EC) on 19 August 2013 and which was approved by the EC on 19 December 2013.
On 24 December 2013, the Dutch central bank (De Nederlandsche Bank / DNB) issued a
‘Certificate of No Objection’ for the spin-off of the property activities and on 31 December 2013,
SNS Bank N.V. (SNS Bank) transferred the shares in the organisation to the State. That same day,
the State subsequently transferred the shares to the foundation Stichting Administratiekantoor
Beheer Financiële Instellingen (NLFI), the holding entity for the shareholdings of the Dutch
State in a number of nationalised financial institutions, and this subsequently became 100%
shareholder. The company started operating under the name of Propertize B.V. (Propertize) as
of 1 January 2014.
Prior to the spin-off of Propertize on 31 December 2013, Propertize’s risk management was
part of SNS REAAL’s risk management. With the exception of credit risk, SNS REAAL performed
many of the risk management activities for Propertize, such as Operational Risk, Asset and
Liability Management (ALM), capital management and funding activities. As of 31 December 2013
Propertize itself has responsibility for the entire risk management. Propertize has adjusted the
structure of its risk management activities to its new status as an independent company. The risk
management function will continue to be adapted as the circumstances change.
This chapter will deal with the financial and non-financial risks occurring within Propertize and
is based on the situation during 2013. The financial risks mainly concern the credit, market and
liquidity risks. Capital management is discussed in section 5.1.2. Credit risk will be dealt with in
the following section. Market risk was managed at the level of SNS Bank and SNS REAAL in 2013.
As of 2014 Propertize will manage the interest rate and exchange rate risks itself. The current
business operations do not give rise to share price or credit spread risks. Please refer to chapter
13.3 Market risk in the annual accounts. Liquidity risk will be dealt with in paragraph 13.4.
Wherever the name Propertize is used in the context of the situation prior to 1 January 2014,
SNS Property Finance is meant.
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PILLAR III REPORT
5.1.1 Financial risks
Developments credit risk Propertize
Due to continuing weak economic growth and deteriorating circumstances on the European real
estate markets in 2013, the number of defaults and the default volume further increased in 2013.
The further deterioration of the market, particularly relevant for our portfolios in The Netherlands
and Spain, resulted in more vacant properties, lower rents and lower valuations, for our B and C
locations in particular. The financing of B and C locations situated in The Netherlands constitutes
the majority of Propertize’s portfolio. In addition, the definition of ‘default’ was tightened.
Quality property and property finance portfolio
The credit quality of Propertize’s property finance portfolio further deteriorated in 2013 compared
to 2012 which resulted in an increase of the property portfolio (due to repossessions). The
continuation of poor market conditions increasingly result in clients having insufficient liquidity
to pay interest and redemptions which are not covered by the operational cash flow from the
property concerned out of their own reserves.
Propertize carried out an in-depth bottom-up and risk-based analysis of approximately 80% of its
property and property finance portfolio. The aim of this analysis was to map the current situation
with regard to the portfolio so that new exit strategies and exit dates could be determined for all
client relationships and a scenario analysis for future developments could be carried out.
As a result of the unfavourable developments in the Dutch and international real estate markets,
Spain in particular, it has proven necessary to foreclose on the collateral by exercising the rights
provided for the benefit of Propertize in a number of cases. Propertize has also obtained the
effective control (according to IFRS regulation) over a number of property projects, which are
therefore now presented as assets on Propertize’s balance sheet.
Future developments financial risks
For 2014, a cautious economic recovery is expected internationally. This recovery is, however, not
yet expected to result in the stabilisation or improvement of the property markets in 2014. For
this reason, continued impairment losses are expected for 2014.
5.1.2 Capital management
Capital
The capitalisation of Propertize strongly improved in 2013 due to the measures taken within
the scope of the nationalisation of SNS REAAL and SNS Bank. As of 31 December 2013
€ 1,833 million of the original € 2.8 billion in the Cushman & Wakefield report (portfolio transfer
value) had already been recognised as impairments, leaving an amount of € 967 million. This
gross amount translates into a net amount of € 725 million. Prior to the transfer to the State,
SNS Bank had increased Propertize’s capital with this amount in the form of a share premium
payment, allowing Propertize to cope with future impairments up to an amount of € 967 million
(gross), if they would materialise in future reporting periods.
After the transfer, the State made a share premium payment of € 500 million into Propertize’s
shareholders’ equity. As a result of these two share premium payments, the negative
shareholders’ equity as at the end of 2012 in the amount of - € 412 million was converted into
positive shareholders’ equity in the amount of € 1,226 million.
External funding
Because Propertize had not yet raised external financing of its own at the end of 2013, SNS Bank
provided for this. The State issued a guarantee for this funding. In the meantime this funding
has been replaced by external funding (also under a State guarantee) after the implementation
of a funding programme. For more information on this please refer to paragraph 5.2 Funding and
credit ratings.
23
PROPERTIZE IN BRIEF
Liquidity
In 2013, Propertize maintained an adequate liquidity position. ALM was managed on SNS Bank
and SNS REAAL level during 2013.
The liquidity position ended up at € 207 million, in line with year-end 2012 (€ 203 million). The
liquidity is used both for the day-to-day operations, and with the inflow of cash from regular
redemptions and interest on loans, the need for external funding is managed and controlled.
5.1.3 Non-financial risks
The non-financial risks include strategic, integrity and operational risks. The Compliance, Security
& Operational Risk Management Department (CS&O) of SNS REAAL is one of the departments
that monitors and advises on the management of these non-financial risks. The other
departments include Business Continuity Management and Information Security.
Management of non-financial risks
SNS REAAL had several measures in place in 2013 for its various business segments (and as such
including Propertize) aimed at managing the non-financial risks. The most important components
were:
•A clear governance structure, including a clear assignment of duties and responsibilities and
escalation routes, supported by a clear risk management structure. For this purpose SNS REAAL
implemented a so-called ‘Three lines of defence’ model. This means that line management is
primarily responsible for recognising and managing the risks and decision-taking in this area.
CS&O, together with a number of other staff departments at group level, plays an important
monitoring role as the second line of defence and has the possibility to escalate, where
necessary. The third line of defence is Group Audit, which assesses the structure and functioning
of the entire system of management independently of the line organisation.
• The Group policies formulated by CS&O, including the operational risk framework, in the area
of ethical business management for the non-financial risks. CS&O advises on their translation
within the business segments if so requested and monitors their compliance.
• The Training & Awareness Programme to make management and employees conscious
of integrity and the management of non-financial risks. It includes information meetings,
e-learning, presentations and train-the-trainer workshops.
• A central point where employees can report various types of incidents, such as fraud,
unwanted behaviour and information security issues. It has been set up to ensure that risks
are timely reported so that consequential damage can be prevented or limited, and adequate
measures can be taken to prevent similar incidents from happening in the future. Staff can
also report incidents anonymously as whistle-blowers.
• Signals of fraud will always be investigated. Fraud investigations are carried out on a risk
basis, possibly with specialist external support. Also see the next paragraph.
• There is a monitoring program that is implemented by CS&O in consultation with Group
Audit every year. Using a risk-based analysis it is decided every year which resources will be
deployed for relevant topics.
• The periodic in-control statements by the management of the business segments and the
members of the Executive Board of SNS REAAL. In these statements they report on the most
important risks and the accompanying management measures, the improvements made
compared to the previous period and which improvement actions are being undertaken. The
in-control statements identify the most important risks.
Integrity risk
Propertize wants to take responsibility for its integrity status. This concerns its employees, its
clients and any other business relationship. It has been established that in the past (external)
staff saw an opportunity for (personal) advantage to the detriment of Propertize. Based on signals
of apparent fraud, a limited number of comprehensive investigations have been performed both
internally and externally (by forensic parties). The investigations, initiated in 2012 and continued
in 2013, have brought to light no other types of fraud yet. As a next step Propertize
will identify, analyse and address integrity risks through a comprehensive risk analysis.
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OTHER INFORMATION
PILLAR III REPORT
In addition policies and procedures have been tightened and additional controls are implemented
to mitigate the risk of fraud from re-occuring.
The investigation comprises two components:
1 The signals relating to an alleged conflict of interest and irregularities regarding invoices and
statements of expenses of external members of Propertize’s staff;
2 A detailed investigation to establish whether any irregularities had occurred in respect of
projects and divestments of Propertize. It concerns a risk-based selection of these projects
and divestments based on the available signals.
As a result of the investigation regarding the first component, a number of irregularities were
found to have occurred, resulting in the termination or non-renewal of the working relationship
with 18 external members of staff, including one former director and several members of
Propertize’s management team. In consultation with Propertize, SNS REAAL reported to the law
enforcement authorities in 2013 four instances of suspected criminal offences regarding several
persons in 2013, including those apparently committed by one of Propertize’s former directors.
Propertize is co-operating to the best of its ability with the law enforcement authorities and their
investigation officers, all this with due observance of the applicable legal framework and codes of
conduct / professional codes. The investigation into a presumed conflict of interest, irregularities
and malversation was led within SNS REAAL by Group Audit in close cooperation with Compliance
and Security. For this purpose SNS REAAL engaged a number of professional external (forensic)
parties so that the investigation could be performed as effectively as possible.
The irregularities regarding invoices and statements of expenses have caused damages to
Propertize. Various recourse actions are currently being contemplated. If these recourse actions
end-up being successful, the proceeds will accrue to Propertize. Certain issues may still come
to light during the investigation that may affect the valuation of the assets and liabilities of
Propertize.
As of 31 December 2013, when SNS Property Finance was spun off, the responsibility for the
integrity investigation passed to Propertize. Propertize will complete the investigations concerned
with utmost care.
Administrative Organisation and Internal Controls
In 2013 Propertize’s management devoted attention to the management of the various risks
within the company. The administrative organisation for instance was given a great deal of
attention in order to prepare it for the spin-off as of 31 December 2013.
The qualitative attention paid to the internal control measures came under pressure in 2013 due
to the preparations for the spin-off and the substantial increase in the number of questions asked
by regulatory bodies and their requirements. The internal control system now consists of separate
measures with which the most important risks are managed.
Subsidiaries have their own (delegated) responsibility regarding risk management. By appointing
directors and supervisors that have a (working) relationship with Propertize, it is assured that the
subsidiaries are managed in line with the risk management principles, administrative and internal
control principles and norms of Propertize. The main focus regarding risk management at subsidiaries
is to be in control, comply with local rules and regulations, act with integrity and prevent fraud.
5.1.4 New regulations and their implementation
CRD IV
The Capital Requirements Directive, or CRD IV, was published by the EU on 27 June 2013 and
is being introduced in phases with effect from 1 January 2014. It is a European directive for the
implementation of the Basel III regulations published in 2011 aimed at reinforcing the capital and
liquidity of banks and investment firms.
CRD IV contains a Directive and a Regulation. The Directive will be incorporated in Dutch legislation
around 1 July 2014. As the Regulation came immediately into effect, no separate implementation
25
PROPERTIZE IN BRIEF
process into Dutch law is required. In addition to CRD IV, the European Banking Authority (EBA) is
preparing technical standards, most of which will also come immediately into effect. The ultimate
impact of CRD IV will thus not become apparent until during the course of 2014.
As was the case in previous years, during 2013 Propertize was supervised by DNB. In anticipation
of its separation of SNS Bank N.V. Propertize engaged in constructive dialogue with its
stakeholders, including DNB to develop a sustainable regulatory framework. In view of his unique
situation Propertize is in need of a tailor-made framework. Accordingly, Propertize will file an
application with DNB to withdraw its banklicense, after adoption of these financial statements.
Following Propertize’s application DNB is expected to agree to withdraw Propertize’s banklicense,
whilst simultaneously instructing Propertize to wind-down its remaining activities and operations
in accordance with the provisions of section 1:104 paragraph 3 of the Dutch Financial Supervision
Act. DNB will impose several conditions and instructions on Propertize, all aimed at ensuring that
such winding-down takes place in an integer and controlled way for as long as the wind-down
operations shall last, in accordance with (i) applicable laws and regulations, (ii) instructions
previously provided by DNB, and (iii) the working arrangements provided by NLFI.
The DNB instruction to wind-down Propertize’s activities pursuant to aforementioned section
1:104, paragraph 3 of the Dutch Financial Supervision Act, ensures a tailor made DNB
supervisory regime regarding Propertize’s wind-down activities, enabling Propertize to wind-down
its activities as currently contemplated.
5.1.5 Developments in the risk management organisation
The Property Finance activities were separated from SNS REAAL and SNS Bank on 31 December
2013. As a result of this, the SNS REAAL Group’s role in forming policy and the parameters for
risk control is transferred to Propertize with effect from 2014.
The emphasis will be placed on continuous improvement of the quality and efficiency of the
risk management organisation at Propertize, but with no less focus on Propertize’s strategy and
corporate responsibility.
In 2013 Propertize worked on the anticipated separation of the risk management organisation.
Changes being made in 2013 will be permanently applied and, where necessary, further defined
in the years to come.
5.2 FUNDING AND CREDIT RATINGS
The funding strategy is aimed at replacing the SNS Bank funding with public funding, in line with
our business strategy (wind-down in ten years), cost effectively and profitably while limiting risks.
On 31 December 2013 Propertize was for the largest part funded by SNS Bank, with Dutch State
guarantee.
The strategy is built on two pillars:
• The first pillar comprises cash management measures to ensure sufficient and prompt
liquidity, but also to avoid surplus liquidity.
• The second pillar is the diversification in terms of funding instrument and maturity.
Propertize has a programme for the issuance of guaranteed (STEP compliant) Euro-Commercial
Paper and guaranteed (non-STEP compliant) Medium Term Notes. The total amount of the funding
programme is € 4,054,900,000. The State of the Netherlands fully guarantees the funding
programme, for which the rules are described in ‘Rules of the Propertize Debt Guarantee Scheme’
(www.propertize.nl/english/investors.html)
Medium Term Notes
On 10 February 2014 Propertize started its funding programme, and placed € 600 million
Medium Term Notes (MTN). This was followed with a second placement of MTNs in the amount of
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OTHER INFORMATION
PILLAR III REPORT
€ 750 million on 20 February 2014. On 4 March the third placement took place in the amount of
€ 1,000 million. The most recent MTN was placed on 24 March 2014 in the amount of € 250 million.
The notes cover 67% of funding needs.
Table 3: Outstanding MTNs
Amount (in millions)
Maturity (years)
€ 250
2
€ 1,000
3
€ 750
3
€ 600
5
Maturity date
4 April 2016
10 March 2017
27 February 2017
18 February 2019
Total amount of the MTN’s is € 2,600 million.
The notes are listed on the Amsterdam and Luxemburg stock exchange.
Euro Commercial Paper
On 6 March 2014 a € 500 million Euro Commercial Paper (ECP) was issued. This was followed by
a second issue of € 500 million ECP on 14 March 2014, and a final third ECP issue of € 290 million
on 31 March 2014. All ECPs have a maturity of less than one year.
Within six weeks after the official start of the programme, all placements were successfully
concluded.
With the proceeds from the funding programme, and regular redemptions, SNS Bank’s funding
has been fully redeemed in 2014.
Table 4: Credit ratings
Fitch
Long-term
AAA
Short-term
F1 +
Issuer identifier number
93492690
Programme identifier number
93542696
6
Moody’s
(P) Aaa
(P) Prime-1
823728871
823763964 (MTN)
823763984 (ECP)
FINANCIAL OUTLINES AND DEVELOPMENT PROPERTIZE
Table 5: Results
(In € millions)
2013
2012
Change
Result
Property finance loans
92
111
(17)
Property projects
(24)
(14)
(71%)
Other income
0
(12)
100%
Total income6885
(20%)
Operating expenses
77
117
(34%)
Impairment expenses
1,053
941
12%
Total expenses1,1311,058 7%
Result before tax
(1,063)
(973)
(9%)
Tax
(239)
(208)
(15%)
Net result for the period
(823)
(765)
(8%)
Outstanding loan portfolio
4,916
6,615
(26%)
Property projects
810
416
95%
Total exposure5,7267,031
(19%)
27
PROPERTIZE IN BRIEF
The table above is consistent with internal management reporting and as such different from the
IFRS financial statements.
Results 2013 compared to 2012
The net loss amounted to € 823 million compared to a net loss of € 765 million in 2012. The
higher loss was mainly due to higher impairment charges, driven by further decline of real estate
markets especially in The Netherlands for B and C locations.
Income
Income from the loan portfolio declined by € 19 million (- 17%) to € 92 million due to the decline
of the net outstanding loan portfolio (- 26%), partly compensated by higher interest margins.
Income from the real estate portfolio declined by € 10 million (- 71 %). Rental income declined
from € 14 million to € 12 million due to increasing vacancy and rent reductions, while operating
expenses increased by € 8 million to € 33 million mainly due to the consolidation of two projects
over which Propertize obtained effective control (under IFRS standards) as per 30 September
2013, Babylon (NL) and Űberseequartier (GE). In total, the book value of the real estate portfolio
increased from € 416 million to € 810 million. At initial recognition, the net exposure increased
with € 300 million as a result of external funding of this project. Űberseequartier is funded by
Propertize as well as a third party German bank.
Expenses
Total operating expenses decreased by € 40 million (- 34%) to € 77 million due to lower staff
expenses resulting from lower external staff and lower other operation expenses, mainly due
to lower legal and advisory costs related to the wind-down of the loan portfolio and lower costs
related to forensic audits.
Impairment charges
Impairment charges increased by € 112 million (+ 12%) to € 1,053 million. The continuing high
level of impairments can be attributed to the following causes:
• Further deterioration of the European property markets, particularly in the Netherlands and
Spain, results in further increasing vacancy rates, lower rental income and increasingly lower
valuations for B and C locations. Loans for B and C locations in the Netherlands constitute the
major part of the portfolio.
• Pursuant to the regular review process and an in-depth portfolio analysis on the largest part
of the portfolio of property projects and property finance loans, more updated appraisals
were received in 2013, resulting in lower valuations due to the aforementioned ongoing
unfavourable economic developments and declining real estate markets. These lower
valuations impacted the level of provisions for impairment.
• Appraisement continues to be difficult for a large part of the portfolio to test against recent
observed comparable market transactions. As a result, the assumptions and estimations
made by Propertize in the valuation of loans remain exposed to significant large uncertainties,
greater than under normal conditions, which results in broader bandwidths for the valuations.
• Ongoing difficult market conditions more and more often deprive customers of the means
to use their own reserves to meet debt service obligations, which cannot be covered by the
property’s operating cash flows.
•The aforementioned developments led to a further increase of the default rate in 2013. At
year-end 2012, this rate was still 40%; but at year-end 2013 the default rate increased to
62% of the portfolio. The default rate of the Dutch portfolio alone rose from 36% (2012)
to 56% at year-end 2013, which was also a result of a tighter application of the default
definition.
• At the time the scenario analyses were prepared, it was concluded for a part of the portfolio
that the opportunities that were initially being assessed as a loss- limiting / preventing
measure or a potential value-creating strategy were no longer applicable, leading to an
adjustment of the exit strategy. This resulted in additional impairments for these items.
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The impairment charges consisted mainly of impairments on loans in the amount of € 858 million
(2012: € 718 million). Impairments on property projects amounted to € 158 million (2012: € 210
million). Impairments on associates and joint ventures amounted to € 37 million (2012: € 13 million).
Portfolio development
Total net exposure declined by € 1.3 billion to € 5.7 billion (- 19%) compared to year-end 2012.
This decline was due to impairment charges of € 1.1 billion and transactions (sales, redemptions) of
€ 0.5 billion. The decline was partly offset by the impact of new consolidated entities (€ 0.3 billion).
Again, during the year the financial situation of a number of our clients, who already had been
in financial difficulty, as a result of which the outstanding loans went into default and provisions
were recognised, deteriorated even further. Propertize had to step in and take control of either
the related real estate object or the whole entity, in order to optimise the cash flows of the
projects in question and secure the collateral related to the loans.
Table 6: Breakdown portfolio Propertize by region
(In € millions)
2013
2012
The Netherlands4,4605,521
Other Europe1,1811,310
North-America 85200
Total5,7267,031
End of 2013, in relation to the wind-down strategy, management decided to create three buckets
in which the loans and property are classified: Healthy, Value retention & creation, and Disposition.
Table 7: Buckets loan and property portfolio 2013
(In € millions)
Outstanding loan portfolio (gross)
Loan loss provision
Outstanding loan portfolio (net)
Property projects
Total exposure
7
Healthy
Retention Disposition
Total
1,325
3,932
1,445
6,702
0
931
855
1,786
1,325
3,001
590
4,916
0
644
166
810
1,3253,645 7565,726
HUMAN RESOURCE MANAGEMENT (HRM)
Impact and consequences of the nationalisation for our employees
Simultaneously with the nationalisation of SNS REAAL, the Dutch Minister of Finance announced
that the organisation would wind-down the property and property finance portfolio in the medium
term in the most cost-effective and profitable way, and as an independent company.
Starting-point was that all employees within SNS REAAL, working at and / or for Propertize for
more than 50%, would move to the new organisation. There were also members of staff at SNS
REAAL and SNS Bank who worked for Propertize, but for less than 50%; for these positions a job
application procedure was conducted at Propertize. These employees did not automatically move
to Propertize. Finally, there were also employees who, despite their contract of employment with
Propertize, did not work or no longer worked for Propertize, but worked for SNS REAAL for 100%
of the time. These employees have entered the service of SNS REAAL.
As a result of the spin-off dissynergy effects could not be excluded, as certain activities had to
be performed at both SNS REAAL and Propertize. The spin-off meant that Propertize had to set
up its own staff departments, so that many vacancies arose. Accordingly, and in order to
guarantee (continued) expertise and / or from a social point of view, a job was offered to as
many employees of SNS REAAL as was reasonably possible and needed. Eventually 24 FTE of
SNS REAAL came over to Propertize at the end of 2013.
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PROPERTIZE IN BRIEF
Integrity
Integrity is the life blood of a financial service provider. This is why Propertize has a wide range
of procedures in place to ensure that everything is done honestly, properly and in an integer
way. Nevertheless, procedures and rules sometimes do not work properly or are not adequately
followed. In that case harsh measures shall be taken. In 2012 signals were received that cast
doubt on the integrity of a number of external members of staff. After an internal investigation
into possible conflicts of interest SNS REAAL reported suspected criminal offences apparently
involving one of Propertize’s former directors to the law enforcement authorities. Moreover,
Propertize forced 18 external members of staff that worked on a temporary basis to either leave
the company or they were put on non-active duty.
The period that preceded the nationalisation of SNS REAAL and the spin-off was a turbulent one
for the employees. Especially the intensive media attention - for Propertize in particular due to
the reported criminal offences - did not leave the employees untouched. Still, they managed to
stay focussed and Propertize was able to shape its course for the future.
New employee benefit program
In the wind-up to the spin-off, in 2013 deal of attention was paid to consultations with the trade
unions about the company’s own collective labour agreement, a Social Plan, employee benefits
and the harmonisation of employee benefits for the members of staff of SNS REAAL moving to
Propertize. After intensive consultations with the trade unions in the summer, an agreement was
reached in autumn which was to all the parties’ satisfaction. Since 1 January 2014 Propertize has
its own employee benefit program (including transitional schemes), which does justice to both the
employment (benefits) past of the employees and the future of our organisation.
Propertize’s Collective Labour Agreement runs from 1 January 2014 up to and including
31 December 2018. This long period emphasises the importance attached by all parties to
stability in the employment benefits, in line with Propertize’s objective. Motivated employees in
combination with work satisfaction and good health are important points of attention, along with
enabling employee development in the areas of competencies and key values. After a growth
phase until 2015, the organisation will be reduced in size in a responsible manner. This means
that attention must be paid to the long-term employability of our staff, which is a responsibility
that must be fleshed out by employer and employees jointly.
Change of location
On 1 July 2013 Propertize moved from Leusden to Utrecht. The choice for the present location
was partly determined by its excellent accessibility and the acceptability of the travelling distance
for our employees.
In order to reduce the burden for employees, it was decided that a ‘light’ version of the New
World of Work would be introduced: staff will be provided with the means and the opportunity
to work at home and to set up a workplace that complies with the requirements of the Dutch
Occupational Health and Safety Act.
Propertize’s office in Utrecht has been divided into so-called spots for every team and / or
department of the organisation. An employee can work within his or her spot, but has no fixed
workplace anymore.
Employee satisfaction
In 2013 Propertize participated in the employee satisfaction survey held by SNS REAAL for
the last time. As of 2014 it will conduct a survey independently. In 2013 69.4% of Propertize’s
employees participated in the survey. Despite the turbulent times that were facing us, employees
rated their work satisfaction with a score of 6.7, compared to 6.3 in 2012. We are pleased that
the employee survey shows that people experience Propertize as a safe working environment.
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En route to 2014
As from the last quarter of 2013 Propertize worked hard on the ‘Administrative Organisation /
Internal Control System and Desired Organisation’. This resulted in a new organisational structure
in December 2013, with tightened responsibilities, clear processes and concrete management
measures. The Works Council has in the meantime given a positive opinion on it.
When adjusting the organisational structure, the deliberate choice was made to create several
levels within the existing job matrix. Apart from the fact that this makes duties, responsibilities
and powers clearer, it also results in concrete career paths for the employees. Propertize
believes that every professional’s wish to achieve personal development is of importance for the
organisation and Propertize also wants to facilitate this in this way. There is also an Employability
Budget available for every employee in order to give it substance.
Preparation of our key values after the spin-off
Based on our mission we have identified four key values: commitment, integrity, professionalism
and respect.
Our staff is committed to Propertize and the work they are doing. Their heart lies with Propertize
and they make every effort to meet the organisation’s target. The work is done adequately
and carefully, with due observance to the responsibilities and all the applicable requirements,
including rules of conduct. We realise our ambition with a high-quality team of professionals, who
have the right know-how, skills and competencies for this purpose in an environment, which is
characterised by openness and respect for other people and / or other views.
Promoting diversity
On 1 January 2013, the Management and Supervision Act (Wet Bestuur en Toezicht) entered into
force. The act requires, inter alia, that at least 30% of the Management Board and Supervisory
Board members must be female and at least 30% must be male. Propertize does not as yet
comply with this requirement regarding balanced representation.
Employee participation
In 2013 Propertize’s Works Council was still part of the employee participation structure of SNS
REAAL, including the representation in the Central Works Council of SNS REAAL. Important
priorities for employee participation are: internal and external employment in the long term for
the largest possible number of employees, continuity in the employment benefits and the Social
Plan.
As of 1 January 2014 our Works Council (in the same composition) will independently flesh out its
role within Propertize together with the Management Board.
Table 8: Key staff figures (excluding FTEs of property projects)
Key figures
2013
2012
Number of FTEs at year-end (fixed labour contract) 109 103
Temporary contract, in FTEs
42 51
Male / female ratio
67% - 33% 65% - 35%
Full-time / part-time ratio
71% - 29% 69% - 31%
Training costs (Euros per FTE)
€ 1,939
€ 1,246
Absenteeism due to illness
3.6%
5.2%
Employee survey response 69.4%
36.7%
Utrecht, 26 June 2014
Hans Copier, CEO
Jack Mondt, CFRO
Reinout van Riel, CPO
31
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PROPERTIZE IN BRIEF
REPORT OF THE
SUPERVISORY BOARD
Propertize (formerly known as SNS Property Finance) was an important factor in the decision
to nationalise SNS REAAL on 1 February 2013. The continuing losses in its property projects
and property finance portfolio resulted in SNS Bank NV’s capital position becoming inadequate.
Therefore, the Minister of Finance decided to transfer SNS Property Finance’s activities to a
separate asset management organisation, isolated from SNS REAAL. On 31 December 2013, the
shares of SNS Property Finance were transferred to the State, followed by the transfer of the
SNS Property Finance shares by the State to Stichting Administratiekantoor beheer Financiële
Instellingen (NLFI). On 1 January 2014, SNS Property Finance changed its name to Propertize.
The past year was an intensive one for Propertize. Two new supervisors were appointed, as well as
two new members of the Management Board. The new Management Board was largely devoted to
preparations (in collaboration with SNS REAAL) for the organisation’s spin-off as per 31 December
2013 and developing the strategy that must result in the complete wind-down of Propertize’s
property projects and property finance portfolio in the coming ten years. As part of this, a great
deal of attention was also devoted to the further development of the organisation and its structure.
In addition, investigations took place in 2013, both by SNS REAAL internally and by external
criminal investigation bodies, after signals of possible conflicts of interest and fraud by external
members of staff of Propertize. As a result, Propertize forced 18 external members of staff, that
worked on a temporary basis, to either leave the company or they were put on non-active duty.
These integrity investigations had already started at the end of 2012 and produced a great deal
of - negative - (media) attention for Propertize.
Propertize’s mission is to wind-down its portfolio in a controlled, transparent and professional
manner with high ethical standards, within a period of ten years. The Supervisory Board fully
endorses this mission, and is of the opinion, together with the Management Board, that a quick
and controlled wind-down of the portfolio, with the highest possible proceeds at the lowest
possible costs, is in the public interest. The main driver is no longer capital relief, but value
retention and creation. The Supervisory Board is of the opinion that the mission, strategic target
and ambitions of Propertize (see chapter 4.1 of this annual report) and the wind-down strategy
and new organisational structure of Propertize based thereon are a good implementation of the
special assignment that Propertize has, with due consideration for the public interest.
8.1 THEMES
8.1.1 Important subjects and discussions
During 2013 the Supervisory Board exercised supervision over the Management Board and
provided it with advice. The Supervisory Board always took a critical attitude and gave advice
where necessary, as well as providing support where possible.
The most important themes of the Supervisory Board were the preparation and approval of
the spin-off of Propertize as per 31 December 2013, the preparation and approval of the winddown strategy and the business plan, the integrity investigations, finding and naming the new
Management Board, the action plan for controlled and ethical business management (focusing
on, for instance, the reinforcement of the administrative organisation and internal controls), the
intended supervision regime for Propertize as a wind-down organisation and the supervision over
Propertize’s regular business management.
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The subjects discussed at the meetings will be described in more detail in paragraph 8.3.
8.1.2 Composition and functioning of the Supervisory Board
Composition
As Propertize still was part of SNS REAAL in 2013, Propertize’s Supervisory Board was
composed by members of the Executive Board of SNS REAAL in that year. Due to changes in
the Executive Board of SNS REAAL in 2013, the composition of Propertize’s Supervisory Board
also changed in 2013. Thus, Ronald Latenstein stepped down as member and chairman of the
Supervisory Board, while Ference Lamp resigned as member of the Supervisory Board as per
February 2013.
As a result of the nationalisation, Gerard van Olphen and Maurice Oostendorp were respectively
appointed chairman and member of the Executive Board of SNS REAAL by the State. In that
capacity, Gerard van Olphen and Maurice Oostendorp were also appointed chairman and member
of Propertize’s Supervisory Board respectively as per that date.
As per 31 December 2013, in the wind-up to the spin-off of Propertize, Dick Okhuijsen resigned
as member of the Supervisory Board on 15 November 2013 and Wim Henk Steenpoorte resigned
per 17 December 2013.
The Supervisory Board is composed of Rob Meuter (chairman), Gerard van Olphen and Maurice
Oostendorp.
Rob Meuter has been appointed as member of the Supervisory Board on 12 June 2014 and was
appointed as chairman on the same date. Gerard van Olphen is still member of the Supervisory
Board at the time of publication of this annual report.
More information on the composition of the Supervisory Board is given in chapter 9.2 of this
annual report.
Functioning
In 2013 there was no internal or external assessment of the way in which the Supervisory
Board functions. The Supervisory Board is expected to become operational in its new composition in
2014. At the end of 2014 the Supervisory Board will carry out an assessment of the way it functions.
8.1.3 Cooperation
Cooperation with committees
The Supervisory Board has two subcommittees: the Audit & Risk Committee (ARC) and the
Nomination Committee (NC). At the committee meetings, subjects can be discussed in-depth,
so that the decision-making in the Supervisory Board can be carefully prepared. The cooperation
between the Supervisory Board and its committees was adequate in 2013.
Cooperation with management
With the installation of the new Management Board, the cooperation between the Supervisory
Board and the Management Board improved. The Supervisory Board supervises and advises the
Management Board by taking a critical attitude and providing advice where necessary and by
offering support where possible. The Supervisory Board takes responsibility if and when necessary
and desirable, for instance by giving its opinion on the wind-down strategy, the business plan and
the action plan for controlled and ethical business management.
The Supervisory Board is of the opinion that the Management Board as a whole, but also its
individual members, showed an extraordinary dedication and commitment in 2013. Hans Copier
and Reinout van Riel quickly made themselves familiar with Propertize, supported by Jack
Mondt with his long-year knowledge and experience. Jack Mondt remained a member of the
Management Board after he had voluntarily been subject to integrity investigations. There was
good cooperation between the members of the newly composed Management Board. In 2013 the
Management Board prepared and drafted the wind-down plan in an energetic and thorough way.
35
PROPERTIZE IN BRIEF
The same goes for the action plan for controlled and ethical business management, including the
preparations for a new Administrative Organisation / Internal Control System.
Cooperation with external experts
Advice from external experts is sought where necessary, for the proper performance of the
supervisory duties of the Supervisory Board. One of the results of this is the regular contact
between the Audit & Risk Committee and the external auditor.
As Propertize still formed part of SNS REAAL in 2013, Propertize has the same external auditor
as SNS REAAL, i.e. KPMG Accountants NV. As a result of the Dutch Act on the Accountant’s
Profession, Propertize will have to comply with the audit firm rotation requirement. Propertize will
prepare itself for this as soon as possible.
8.1.4 Employees
Due to the nationalisation and the various internal and external integrity investigations which
took place within Propertize in 2013 (and which, in part, are still under way), Propertize received
a great deal of - negative - (media) attention and its employees were under a magnifying glass.
The implementation of the measures resulting from the nationalisation and the preparations for
the external separation of Propertize as of 31 December 2013 mostly came on top of the regular
work of our employees.
The Supervisory Board greatly appreciates the commitment of Propertize’s employees. In spite of
the drastic developments Propertize and its employees went through, the employees continued to
give it their all and showed their trust in the management. The Supervisory Board trusts that the
employees will continue this commitment in 2014, in realising Propertize’s responsibility in light of
its mission, strategic target and ambitions, as set out in paragraph 4.1 of this annual report.
8.2 COMPOSITION OF THE MANAGEMENT BOARD
On 26 June 2013 Jaap van Dijk stepped down as member of the Management Board. Hans Copier
(24 June 2013) and Reinout van Riel (15 July 2013) were appointed chairman (26 June 2013) of
the Management Board (CEO) and Chief Restructuring Officer (currently: Chief Portfolio Officer)
of Propertize, respectively at the instigation of the State. Jack Mondt remained a member of the
Management Board (CFRO).
More information on the composition and the assignment of tasks within the Management Board
can be found in chapter 3 of this annual report. Brief CVs and positions with other companies and
organisations are included in paragraph 9.1.
8.3 MEETINGS OF THE SUPERVISORY BOARD
8.3.1 Most important subjects
In 2013 the Supervisory Board met nine times in total. Informal consultations and information
exchanges also took place on a regular basis between the chairman of the Supervisory Board and
the CEO of Propertize, as well as between Supervisory Board member Maurice Oostendorp and
the CEO and CFRO of Propertize. For the activities of the Audit & Risk Committee and Nomination
Committee please refer to paragraph 8.4.
In most cases the entire Supervisory Board attended the meetings.
In the course of 2013, the Supervisory Board considered the management of the various risks
within Propertize. In addition, the monthly business reports were given extensive attention.
The most important themes discussed at the Supervisory Board meetings are mentioned in
chapter 8.1.1 of this annual report.
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Apart from this, the subjects dealt with by the Supervisory Board in 2013 included:
• s
electing and appointing new management;
• Maurice Oostendorp chaired the Credit Committee meetings during 2013;
• an investigation by the Dutch Central Bank into Propertize’s controlled and ethical business
management;
•proposals of the Management Board (i) to provide for possible operational gaps, and (ii) for
measures to guarantee staff continuity within Propertize;
• the 2012 annual results of Propertize and the approval of the 2012 company financial
statements;
• the project ‘Catch-Up Financial statements’;
• moving Propertize from Leusden to Utrecht;
• the project ‘Updating the Administrative Organisation / Internal Control System’;
• the quarterly in-control statements of the Management Board;
• periodic updates from the external auditor;
• the decision by the Dutch Central Bank (DNB) to issue a directive;
• assessing and approving the Risk Appetite Statement (RAS);
•the intended governance of Propertize as of 2014, including the amendment of Propertize’s
Articles of Association as per 31 December 2013;
• the approval of the spin-off of Propertize as of 31 December 2013;
• the Business Plan (Operational Plan) for 2014 – 2016;
• assessing and approving the intended funding of the wind-down activities from 2014 onwards;
•assessing and approving the service level agreements, on the basis of which SNS REAAL will
provide temporary support for a number of staff department functions for a limited period of
time after 31 December 2013;
• the Declaration of No Objection of DNB with regard to the spin-off of Propertize;
• assessing and approving the project aimed at a thorough portfolio analysis and removing
revision backlogs;
•the legal procedures in which Propertize is involved.
In addition, the Supervisory Board and the Management Board discussed the contacts with
the DNB relating to subjects, including the nature, organisation and scope of the integrity
investigations, the implementation of the action plan for controlled and ethical business
management and the action plan for the intended withdrawal of the banking license and other
aspects relating to the supervision regime that applies to Propertize.
8.3.2 Presence of the Management Board
In 2013 all the Supervisory Board meetings were attended by the members of the Management
Board.
8.3.3 Presence of the external auditor
In 2013 the Audit & Risk Committee meeting was attended by the external auditor, who was
allowed inspection of the minutes of all the Management Board and Supervisory Board meetings.
8.4 MEETINGS OF COMMITTEES
The Supervisory Board consisted of two committees in 2013:
• Audit & Risk Committee
• Nomination Committee
Each committee prepares the decision-making by the Supervisory Board in respect of the duties
assigned to it, and reports to the Supervisory Board.
37
PROPERTIZE IN BRIEF
8.4.1 Audit & Risk Committee (ARC)
In the second half of 2013 an Audit & Risk Committee (ARC) was installed. As per 31 December
2013 the ARC is comprised of: Maurice Oostendorp (chairman). In addition to the ARC member,
the meetings of the ARC were attended by the chairman of the Management Board, the CFRO,
the CPO, the head of Internal Audit and the external auditor. The ARC met once in 2013.
The main subjects discussed and assessed by the ARC in 2013 were the structure and operation
of Propertize’s financial reporting and the control over it, the financial and audit reports, fiscal
issues, the progress of an internal investigation, the internal reports from Internal Audit and the
management, the reports and work of the external auditor, the mandate of the external auditor
and Internal Audit and the management letter.
8.4.2 Nomination committee (NC)
In July 2013 the NC was set up to prepare the nomination of new members of the Supervisory
Board. The composition of the NC is stated in chapter 9.2.1 of this annual report. In 2013 the NC
considered (i) the selection of candidates for a new independent chairman for the Supervisory
Board, (ii) the preparation, in consultation with the State, of a profile of the Supervisory Board
(and the individual members) after the spin-off of Propertize as per 1 January 2014, and (iii)
the selection of candidates with a banking and legal background for a position as member of
Propertize’s Supervisory Board.
8.5 ANNUAL FINANCIAL STATEMENTS
Both the 2013 annual report and the 2013 annual financial statements were discussed at
various meetings of the Audit & Risk Committee and the Supervisory Board, prior to their
publication. KPMG, the external auditor, has issued an unqualified auditor’s report on the 2013
financial statements. The annual financial statements were submitted to the General Meeting
of Shareholders and adopted on 26 June 2014. On 27 June 2014 Propertize published its 2013
annual financial statements.
8.6 REMUNERATION REPORT
This section deals briefly with the remuneration policy of all employees. The remuneration policy
and practices for the Management Board and Supervisory Board are discussed in greater detail in
subsequent sections.
Remuneration policy Propertize
The current remuneration policy is a continuation of the remuneration policy of SNS REAAL. The
remuneration policy frameworks have been laid down in the ‘SNS REAAL Group Remuneration
Policy’. The SNS REAAL Group Remuneration Policy was most recently updated in October 2013.
In 2014 Propertize will set up its own remuneration policy.
The current remuneration policy is based on the following principles:
• The remuneration policy is compliant with current legislation and regulations.
• The remuneration policy is characterised by its consideration of all of Propertize’s
stakeholders: customers, employees, the shareholder and society.
•The remuneration is transparent and in line with indications that reach Propertize from the
outside world.
• The remuneration matches the risk profile of Propertize and the risk profile of the relevant
person holding the position.
• The policy is in accordance with and contributes to sound and effective risk management and
does not encourage taking more risks than acceptable to Propertize.
• The total remuneration package reflects the requested output of the relevant person holding
the position.
• The purpose of the policy is to attract and retain good employees, taking Propertize’s specific
position into account.
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PILLAR III REPORT
• T
he policy contributes to the realisation of the strategy and long-term interests of Propertize.
• There is an appropriate ratio between the fixed and variable remuneration.
• The policy is as consistent as possible for the Propertize Group, to encourage the exchange
and movement of staff to other positions.
•The revised earnings model forced Propertize to moderate remuneration.
Governance
The remuneration policy complies with the relevant legal requirements, the Dutch Corporate
Governance Code, the Banking Code, Regulation on Sound Remuneration Policies pursuant to the
Financial Supervision Act 2011 (Regeling Beheerst Beloningsbeleid Wft 2011) and the Dutch Act
on the Limitation of Liability DNB and AFM and the Prohibition on Bonuses for State Supported
Companies.
The complete remuneration report of SNS REAAL and SNS REAAL Group Remuneration Policy can
be found on www.snsreaal.nl/corporate governance.
Propertize intends to review the remuneration policy in 2014. Please refer also to section 9.3
Dutch Corporate Governance Codes – Remuneration policy.
8.6.1 Remuneration policy Management Board
A new remuneration policy for the Management Board will be drafted in 2014. This will be done
in close cooperation with and the approval of NLFI. The current remuneration of the Management
Board members consists of the following components: the fixed annual income, a pension scheme
and a few other fringe benefits. Based on these remuneration components, the remuneration
policy will be explained in more detail.
Remuneration components
• The total fixed gross salary of the chairman of the Management Board is € 320 thousand per
annum.
• For the other members of the Management Board the total fixed gross salary is € 280 thousand
(CPO) and € 220 thousand (CFRO) per annum.
• In the event of termination of employment at the initiative of Propertize, the members of the
Management Board will receive payments of no more than the total fixed salary of one year.
• In accordance with the Dutch ‘Act on the Limitation of Liability DNB and AFM and the
Prohibition of Bonuses for State Supported Companies’ the members of the Management
Board are not entitled to variable remuneration, as long as Propertize falls within the scope of
the Act.
•The members of the Management Board participate in the same pension scheme as all
Propertize employees. Thus the members of the Management Board also pay the same
percentage member’s contribution to be paid on the pensionable remuneration in accordance
with the Propertize Collective Labour Agreement (CLA).
• Propertize took out three insurance policies for the members of the Management Board: WIA
insurance, disability insurance and term life insurance. The corresponding premiums are paid
for by Propertize.
• The other fringe benefits are in line with the conditions that apply to the majority of the
employees.
In accordance with the 2014 Tax Plan, and based on the Budget Agreement 2013 Tax Measures
(Implementation) Act (‘Wet uitwerking fiscale maatregelen Begrotingsakkoord 2013’), Propertize
pays a one-off ‘crisis tax levy’ of 16% in 2014 on the salaries it paid its employees in 2013, in so
far as that the salary per employee was more than € 150,000.
In the table presenting the remuneration of the members of the Management Board, the crisis tax
levy is stated as a separate line item.
39
PROPERTIZE IN BRIEF
8.6.2 Remuneration of the Management Board 2013
Table 9 provides an overview of the total remuneration paid to each member of the Management
Board.
Table 9: Gross remuneration board members
Fixed salary Pension Retention Total
and other
in € thousands
20132012201320122013201220132012
H. Copier
174
47
-
-
220
R.D.J. van Riel
136
40
-
-
176
J.C.J. Mondt
206
137
43
32
-
-
249
168
- J.J. van Dijk
147
295
39
80
-
94
186
469
Total
663
431
169
112
-
94
832
637
Crisis tax levy
25
28
Total Management Board
857
666
The fixed annual income includes holiday pay, 13th month, health insurance and social security contributions.
The fixed salary of Mr. Copier and Mr. van Riel include gross expense allowance.
The column Pension and other includes: 1. WIA premium, disability insurance premium and term life insurance
premiums (starting from 2013 the amount of disability insurance and term life insurance is based on the
grossed up benefit for the employee. Comparative information is restated). 2. The benefit of the private use of
a company lease car.
The Management Board has three members. In 2013, four individuals were part of the
Management Board. Jack Mondt was appointed CFRO as per 22 March 2012, replacing Ernst-Jan
Boers. The latter did not receive any remuneration of Propertize. Mr Copier joined
the Management Board on 24 June 2013. He succeeded Mr. van Dijk as CEO on 26 June 2013,
who retired as member of the Management Board at the same date. Mr. van Riel joined the
Management Board on 15 July 2013 as CPO.
Variable remuneration
The members of the Management Board are not entitled to a variable remuneration as long as
Propertize is under the scope of the Dutch Act on the Limitation of Liability of the Dutch Central
Bank and the Financial Markets Regulator and a Ban on Bonuses for Companies Receiving State
Support. No shares or other forms of variable remuneration have been granted to the members
of the Management Board.
Loans
No loans have been provided by Propertize to the members of the Management Board.
The mortgage which SNS Bank granted on staff terms to a member of the Management Board will
be converted in 2014, in conformity with the harmonisation of employee benefits protocol. There
will no longer be an interest rate discount. This will be compensated by a salary increase.
8.6.3 Remuneration of the Supervisory Board
During 2013 the members of the Supervisory Board did not receive any fee or remuneration
for their work as members of the Supervisory Board of Propertize. The same applies to the
membership of the Audit & Risk Committee and the Nomination Committee of Propertize.
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Before the nationalisation, the members of SNS REAAL’s Executive Board were also the members
of Propertize’s Supervisory Board. At that time, the remuneration policy did not foresee in a fee
for the membership of Propertize’s Supervisory Board. After the nationalisation, members of the
Supervisory Board will receive a remuneration with the exception of Supervisory Board members
who are also members of SNS REAAL’s Executive Board.
8.7 CLOSING WORDS
The Supervisory Board explicitly wishes to express its gratitude and appreciation to all employees
of Propertize and also to the staff of SNS REAAL involved in realising a stand-alone future for
Propertize, in particular for their engagement and commitment. Great demands have been placed
on them over the preceding period, both inside and outside the office. This has not always been
easy for any of the parties concerned. Despite these developments and the present negative
sentiment towards the financial services industry in general, and the situation of Propertize
in particular, Propertize’s employees continue to dedicate themselves with a great deal of
enthusiasm. The Supervisory Board is fully aware that this is not simply to be expected and
wishes to express its gratitude for this.
In 2013 an exceptional effort was also demanded of Propertize’s management. Nevertheless,
the cooperation with the Supervisory Board was good. This, too, is something for which the
Supervisory Board wishes to express its appreciation.
On behalf of the Supervisory Board
Rob Meuter, Chairman
41
CO
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O P
V O
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A E
N
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“Propertize
supports
wishes to make
a positive
contribution
to people’s
confidence in
the financial
sector”
Fr
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14
-3
,
Ed
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PROPERTIZE IN BRIEF
9.1 THE MANAGEMENT BOARD
9.1.1 Composition and functioning
On
of:
•
•
•
the date of the publication of the annual report Propertize’s Management Board is comprised
Hans Copier (Chief Executive Officer)
Jack Mondt (Chief Financial & Risk Officer)
Reinout van Riel (Chief Portfolio Officer)
Hans Copier succeeded Jaap van Dijk as per 26 June 2013 as chairman of the Management
Board. Reinout van Riel was appointed Chief Restructuring Officer (now: Chief Portfolio Officer)
of the Management Board as per 15 July 2013.
The Management Board is responsible for drawing up and realisation of the corporate strategy
of Propertize as stated in paragraph 4.1 of this annual report, the resulting effective wind-down
of the property and property finance portfolio, and for the compliance policies, risk management
policies, communications, IT policies and staff policies of Propertize.
Management Board resolutions are passed by a majority of the votes cast. The formal rules for
the functioning of the Management Board are laid down in the Articles of Association of Propertize
and the Management Board Regulation. This Regulation has been approved by the Supervisory
Board. The members of the Management Board have declared that they agree with the contents
of the Regulation and will comply with the rules included therein. The Articles of Association and
the Regulation contain an enumeration of resolutions that are subject to the approval of the
Supervisory Board and / or the General Meeting of Shareholders.
9.1.2 Responsibilities, curriculum vitae and other positions
The responsibilities of each member of the Management Board are described in Chapter 3.
Hans Copier
Hans Copier (1957) has been Chief Executive Officer since 26 June 2013.
Before Hans Copier joined Propertize, he was a member of the European Executive Committee
and held the position of Country manager Netherlands at CBRE Global Investors, and additionally
that of fund manager of a number of Dutch Real Estate funds. Before that, Hans was a member
of the Executive Board of Giesbers Groep and held various positions at FGH Bank, inter alia as
Statutory Director.
Additional positions: Chairman of the advisory council In-Use of Breeam and member of the
experts group of the Dutch Green Building Council (DGBC).
Jack Mondt
Jack Mondt (1959) has been Chief Financial & Risk Officer since 22 March 2012.
Before that, Jack Mondt held various Financial Director positions at SNS REAAL and SNS Bank.
He was also employed by Fortis and Fortis Bank, Nutsspaarbank ‘s-Gravenhage and KPMG
Accountants.
Additional positions: during 2013 Jack Mondt was a member of the Reporting & Accounting
(WGRA) group of the Dutch Bankers’ Association (Nederlandse Vereniging van Banken) and
44
OTHER INFORMATION
PILLAR III REPORT
member of the Board of Fonds Onderlinge Hulp, an entity affiliated to SNS REAAL. As a result of
the spin-off from SNS REAAL Jack Mondt has resigned these positions.
Reinout van Riel
Reinout van Riel (1970) has been Chief Portfolio Officer (initially: Chief Restructuring Officer)
since 15 July 2013.
Before joining Propertize, Reinout van Riel held several positions at Royal Bank of Scotland (RBS),
including Head of Recoveries & Litigation EMEA. Before that he was employed at RBS and
ABN AMRO in various (international) positions. Next to that he has been a board member of
RBS Netherlands Pension Fund in 2012 and 2013.
9.2 THE SUPERVISORY BOARD
9.2.1 Composition, appointment and functioning
On the date of publication of this annual report, the Supervisory Board of Propertize is
comprised of:
• Rob Meuter (chairman)
• Gerard van Olphen
• Maurice Oostendorp
A member of the Supervisory Board is appointed for a maximum period of four years.
Reappointment only takes place after careful consideration and at most twice, each time for a
term of maximum four years. Therefore a member of the Supervisory Board can only sit on the
Supervisory Board for a maximum of three four-year periods.
Members of the Supervisory Board are appointed by the General Meeting of Shareholders, on the
recommendation of the Supervisory Board.
The Supervisory Board meets at least six times a year, according to a schedule to be prepared
annually. The Supervisory Board passes its resolutions by a majority of votes.
The Supervisory Board has set up two committees from their midst, which are comprised of the
following members as per 31 December 2013:
•The Audit & Risk Committee, consisting of Maurice Oostendorp (chairman) and Hans Copier,
Jack Mondt, Reinout van Riel, the head of Internal Audit and the external auditor.
•The Nomination Committee, consisting of Gerard van Olphen (chairman) and Maurice
Oostendorp. In addition, Hans Copier and a representative of an external executive search
agency attend the meetings.
9.2.2 Responsibilities, curriculum vitae and other positions
Rob Meuter
Rob Meuter (1947) has occupied several management positions with financial institutions, such as
Director-General Wholesale with ABN AMRO NV, Chairman of the Supervisory Board of Friesland
Bank and statutory director of Kempen & Co. He has also been the chairman of ABN AMRO’s
Pension Fund for many years.
Rob Meuter holds various posts with other organisations, including that of member of the
Supervisory Board of the Royal Dutch Life-Boat Society and member of the Executive Committee
of Ubbo Emmius Fonds of Groningen University.
Gerard van Olphen
Gerard van Olphen (1962) has been chairman of the Executive Board of SNS REAAL since
4 February 2013. Before Gerard van Olphen joined SNS REAAL, he held various positions at
Achmea, including that of CFRO and member of the Executive Board. Gerard van Olphen was
previously employed at SNS REAAL, for instance from 2000-2001 as the CFO of SNS REAAL
Group and as chairman of the Managing Board of REAAL Verzekeringen.
45
PROPERTIZE IN BRIEF
Gerard Van Olphen was appointed member and chairman of the Supervisory Board in February
2013. The position of chairman was transferred to Rob Meuter on 12 June 2014. Since then
Gerard Olphen has been a member of the Supervisory Board.
Maurice Oostendorp
Maurice Oostendorp (1956) has been Chief Financial and Risk Officer on the Executive Board
of SNS REAAL since 4 February 2013. Before Maurice Oostendorp joined SNS REAAL, he held
various positions at health insurer Coöperatie VGZ and ABN AMRO, including the position of Chief
Financial Officer and member of the Executive Board at Coöperatie VGZ and Director-General of
Group Finance at ABN AMRO.
Positions with other companies and organisations: member of the Supervisory Board of NWB
Bank, member of the Advisory Board of Women in Financial Services (WIFS) and member of the
Board of Inspiration of NIVBE-SVV.
Maurice Oostendorp was appointed member of the Supervisory Board in February 2013.
9.3 DUTCH CORPORATE GOVERNANCE CODE AND BANKING CODE
Dutch Corporate Governance Code
The Corporate Governance Code (CGC-code) is applicable to all Dutch listed companies. The
content of the CGC-code is available on www.commissiecorporategovernance.nl.
Although Propertize – as a non-listed company – is not required to adhere to the Dutch Corporate
Governance Code, we continue to attach importance to a transparent governance structure and
therefore aim to comply in 2014 with the Dutch Corporate Governance Code.
Dutch Banking Code
The Dutch Banking Code sets out principles that banks with a banking license issued by DNB should
observe in terms of corporate governance, risk management, audit and remuneration. In 2013
Propertize still held a banking license and hence, the Dutch Banking Code applies to Propertize.
Propertize believes that the principles of the Banking Code are important. Propertize supports
the goals of the Banking Code and wishes to make a positive contribution to people’s confidence
in the financial sector and the proper functioning of the markets. Our mission, strategy and
ambitions, as set out in chapter 4.1 of the annual report, reflect this and it is also shown in the
words and actions of Propertize’s Management Board. Furthermore, this annual report sets out
in different places how Propertize tries to adhere to the principles of the Banking Code. Where
necessary, this will be discussed in more detail below.
In 2013 Propertize formed part of SNS REAAL. A number of measures aimed at complying with
the Banking Code have therefore been implemented at the level of the group. In 2014 Propertize
will implement these measures independently within the organisation, so that it will continue to
comply with the Banking Code.
Propertize complies with the larger part with the Banking Code, however in certain areas
additional measures must be taken. This will be part of the establishment and fine tuning of the
new organization during 2014.
Supervisory Board:
As a result of the nationalisation on 1 February 2013, Gerard van Olphen and Maurice
Oostendorp were appointed by the State as chairman and member of the Executive Board of
SNS REAAL and on that account Gerard van Olphen and Maurice Oostendorp were also appointed
chairman and member of Propertize’s Supervisory Board, respectively, as per the abovementioned date. Because of the nationalisation, no function profiles were prepared for these two
appointments as Supervisory Board members. For the future both individual function profiles and
a profile for the Board as a whole will be prepared for vacancies within the Management Board
and / or Supervisory Board.
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PILLAR III REPORT
The number of members of the Supervisory Board is now in agreement with the relevant provisions
in the Articles of Association. In the function profile for the Supervisory Board as a whole, attention
is being paid to the need to add expertise in the area of real estate and legal affairs to the
Supervisory Board. For this reason, and also within the scope of the Board’s independence and
diversity, the composition of the Supervisory Board is expected to change in 2014.
Audit and risk subjects were discussed within the Group Risk Committee and the Audit Committee
of SNS REAAL in 2013. These Committees are sub-committees of the Supervisory Board of SNS
REAAL. These subjects also came up for discussion in the Audit & Risk Committee of Propertize,
starting 2 December 2013.
Within Propertize, the Credit Committee was operational in 2013, providing support to the
Management Board and the Supervisory Board in 2013. The Credit Committee was chaired by
Maurice Oostendorp, in his role as member of the Supervisory Board. In 2014 this committee was
succeeded by the Credit and Transaction Committee, which is chaired by Hans Copier (CEO).
As 2013 is regarded as a transition year, and the positioning of the Supervisory Board of
Propertize was within the governance structure of SNS REAAL, an internal assessment of the
functioning of the Supervisory Board, including Permanent Education (PE), did not take place. At
the end of 2014 the (new) Supervisory Board will carry out this self-assessment.
Management Board:
As a result of the nationalisation, Hans Copier was appointed CEO and chairman of the
Management Board and Reinout van Riel was appointed Chief Restructuring Officer (now: Chief
Portfolio Officer) of Propertize, at the instigation of the State. Jack Mondt continued to serve as
CFRO after the nationalisation. The Management Board is composed in such a way that it is well
equipped to perform its duties.
In light of the complementary roles and the desired functional diversity, the knowledge and
experience of the nominated board members were thoroughly scrutinised (both individually and
considering the profile of the other member of the Management Board). However, given the
special situation of the (aftermath of the) nationalisation, no specific written function profile was
prepared during this process.
All the Management Board members have a thorough knowledge of the financial services industry
in general and the real estate industry in particular. Each Board member is consciously aware
of the social environment in which Propertize operates and of the special assignment Propertize
has been charged with. During 2013, improvements were initiated regarding documentation of
decision making (audit trail). This effort will continue during 2014.
In 2013, the (former) Management and Supervisory Board members attended the permanent
education (PE) as facilitated by SNS REAAL. Given the nationalisation and the assignment to get
Propertize ‘in control’ the focus of the Management Board however was on the organisation and its
governance and less on permanent education. In 2014 Propertize will set up its own programme
for Permanent Education.
Propertize has translated the moral ethical statement into the Propertize code of conduct
principles that guide the actions of all employees of the head office of the bank in Utrecht. Every
new employee of the head office of the bank is informed of the content of these principles by
reference to these principles in the employment contract and is deemed to comply with these
principles. In 2013 Propertize launched a process to strengthen and improve management control
over its (foreign) joint ventures. Part of this is ethical behavior and actions and code of conduct.
The extent to which Propertize can incorporate this in the daily operations depends on the set up
of and agreements within each joint venture. Also the strategic plan plays a role: is Propertize
expected to take the assets on own book (Real Estate Owned and Propertize fully in control) or
will it be fully transferred to the partner (Propertize only lender).
47
PROPERTIZE IN BRIEF
During 2013, improvements were initiated regarding the documenting of decision making. This
will result in better documenting of the balancing of interest of Propertize’s stakeholders in
decisions taken.
Customer Focus
To the extent that the theme ‘Putting customers’ interests first’ relates to providing advisory
services to consumers, this theme cannot be directly applied to Propertize as the company
does not provide any advisory services to consumers. However, more in general it can be said
that Propertize always does thoroughly weigh the interests of all its stakeholders (including
customers), and does opt for solutions which are (also) in the interest of such stakeholders.
Further, improvements in this area are deemed necessary. This improvement path has been
started as part of Propertize’s action plan aimed at optimizing its controlled and integer business
management. This action plan will continue until the middle of 2014, but is also aimed at a
sustainable improvement of the corporate culture, in order to lift the administrative organisation,
the internal control system and overall Compliance to a higher level.
The members of the Management Board support the values as set out in the Moral-Ethical
Statement signed by them. In 2013 the Management Board initiated a process aimed at
translating the standards and values in this Statement into policies and procedures, so that these
apply to all employees. This process will be continued and optimised in 2014. All new employees
will immediately be informed by the Compliance Officer of the Code of Conduct and its underlying
principles. The importance of adhering to the Code of Conduct and its standards and values is
also emphasized in the labour contracts.
As a result of the outcomes in the internal integrity investigations in 2013, Propertize took leave
of a number of external members of staff. The integrity investigations are being continued, in
order to take responsibility for the integrity status of Propertize, its portfolio and its employees.
Risk management
In 2013 it was ascertained that Risk Management needed further improvement. The Management
Board and the Supervisory Board need better support to monitor material risks at such a time
that they can adjust when necessary, or in order to comply with the risk profile. Therefore, further
improvement of the systematic risk analysis has to be implemented, as well as an improved
monitoring role. Furthermore, the overall awareness of (non-)financial risks has to be increased.
This has led to an all-surpassing improvement process, in order to arrive at the desired controlled
and ethical business management, in which the ‘Three Lines of Defence’ model is guiding and is
respected within all workflows.
Propertize does not have its own Product Approval Process. The reason for this is that Propertize
is an organisation that is phasing out its activities and therefore does not offer new products.
Audit
In 2013 the internal audit function for Propertize was performed by Group Audit of SNS REAAL,
in order to ensure a systematic review of the proper functioning of governance structures, risk
management and internal control measures. Group Audit has also played an important role in
fraud investigations, carried out as a result of internal and external signals. In 2014 an internal
audit function will be structured within Propertize, in accordance with the principles of the
Banking Code as well as the guidelines of the Institute of Internal Auditors (IIA).
Remuneration policy
The present remuneration policy was established by SNS REAAL. The SNS REAAL policy complies
with the applicable standards. Going forward, starting in 2014, Propertize wishes to conduct a
remuneration which reflects Propertize’s special position in society.
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PILLAR III REPORT
The present remuneration policy is well thought-out, controlled, sustainable and in accordance
with the strategy of Propertize. In 2013 the Supervisory Board did not pay specific attention to
the execution of the remuneration policy, since it had been prepared under the supervision of
SNS REAAL. The basic principle of the policy is that it must not encourage staff to take risks and
that the remuneration must be in proportion to the work performed, with the total remuneration
being slightly below the median of that for comparable positions. Propertize does not have any
stock option plans. Labour contracts of members of the Management Board comply with the
principles of the Banking Code.
In accordance with the provisions of the applicable Collective Labour Agreement, all employees
whose outcome of their annual Performance and Competence Evaluation was adequate will
receive an evaluation bonus of 3% of their annual salary. The Management Board members
are excluded– they have not received an evaluation bonus. Apart from the above-mentioned
evaluation bonus with a maximum of 3 percent, based on the Collective Labour Agreement, there
are no variable remuneration systems in place within Propertize. The upper treshold of 100%
maximum variable remuneration is therefore complied with.
49
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ANNUAL
10 CONSOLIDATED FINANCIAL STATEMENTS
10.1 CONSOLIDATED BALANCE SHEET
Consolidated balance sheet
31-12-1331-12-1201-01-12
Before result appropriation Notes
(In € millions)
Assets
Tangible assets
1
2
2
2
2
2
3
17
Property projects
3
810
416
512
4
4,916
6,615
8,900
Current tax assets
5
-
211
81
Deferred tax assets
5
9
8
8
Other receivables
6
45
111
74
Other assets
7
67
106
130
8
207
203
476
Total assets
6,057
7,675
10,199
Share capital and share premium reserve
3,117
656
656
Other reserves
(1,068)
(303)
(60)
Retained earnings
(823)
(765)
(243)
Equity attributable to the owner of the
parent company
9
1,226
(412)
353
Other provisions
10
14
9
5
5
249
8
8
11
4,409
7,945
9,709
Current tax liabilities
5
8
-
Other liabilities
12
151
125
124
6,057
7,675
10,199
•The references next to the balance sheet items refer to the notes to the consolidated balance sheet starting
from paragraph 17.1.
•As required by IFRS 1.21, Propertize presents in its first IFRS financial statements three statements of
financial position.
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10.2 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Consolidated statement of comprehensive income
20132012
(In € millions)
Notes
Income
Interest income
195
272
Interest expense
(118)
(174)
Net interest income
17
77
98
Rental income
21
20
Service charge income
5
5
18
26
25
Share in result of associates and joint ventures
19
(0)
(0)
19
(4)
(12)
19
31
32
Total income
131
144
Expenses
Staff costs
20
36
48
Depreciation and amortisation of fixed assets
0
0
Service charge expenses
8
7
Fee and commission / management expenses
11
7
21
85
114
Total operating expenses
140
176
Impairment charges
22
1,053
941
Total expenses
1,193
1,117
Result before tax
(1,063)
(973)
Taxation
23
(239)
(208)
Net result continued operations
(823)
(765)
Net result discontinued operations
-
(823)
(765)
Net result / Total comprehensive income:
attributable to shareholders
(823)
(765)
attributable to minority interests
-
Net result / Total comprehensive income for the period
(823)
(765)
•The references next to the statement of comprehensive income items refer to the notes to the consolidated
statement of comprehensive income starting from paragraph 17.17.
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10.3 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Consolidated statement of changes in equity
Issued
Share
Other
Retained
Equity
share premium
reserves
earningsattributable
capital
reserveto the owner
of the parent
company
(In € millions)
Balance as at 1 January 2012
3
653
(60)
(243)
353
Transfer of net result 2011
-
-
(243)
243
Transfers 2011
-
-
(243)
243
Amounts charged directly to equity - -
-
-
Net result 2012
-
-
-
(765)
(765)
Total result 2012
-
-
-
(765)
(765)
Transactions with shareholder
-
-
-
-
Balance as at 31 December 2012
3
653
(303)
(765)
(412)
-
-
(765)
765
Transfers 2012
-
-
(765)
765
-
-
Net result 2013
-
-
-
(823)
(823)
Total result 2013
-
-
-
(823)
(823)
(2)
2,464
-
-
2,461
Balance as at 31 December 2013 (1) 0
3,117
(1,068)
(823)
1,226
(1)
At the end of 2013, the number of authorised share capital (250,000) was reduced to 50,003,
the same as the number of issued and paid up shares. The nominal value of the shares,
originally € 50, was reduced to € 1. As the reduction did not involve a return to the
shareholders, the value was transferred to the share premium reserve (€ 2.5 million).
The increase in share premium further comprises the conversion of part of SNS Bank funding as
a contribution of share premium by SNS Bank of € 1,961.1 million and the capital injection by the
Dutch State of € 500 million.
Minority interests in several property projects have no value as at year-end 2013 and 2012, as
their share in the losses and equity of the projects in question results in nil values.
For more information, please refer to paragraph 11.6.8 Equity and 19.12 Issued share capital.
Propertize BV declared not to distribute dividend for the year 2013.
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10.4 CONSOLIDATED CASH FLOW STATEMENT
Consolidated cash flow statement
20132012
(In € millions)
Cash flow from operating activities
Operating profit before taxation
(1,063)
(973)
Adjustments for:
Changes in other provisions and deferred taxes
245
3
Impairment charges / (reversals)
1,053
941
Change in operating assets and liabilities:
Change in property projects
(553)
(101)
Change in loans and advances to customers
1,343
1,290
Change in other operating activities
52
328
Net cash flow from operating activities
1,078
1,488
Cash flow from investment activities
Sale of investments in associates 2
2
Net cash flow from investment activities
2
2
Cash flow from finance activities
Issue of shares or additions to share premium
500
Proceeds (repayments) amounts due to banks
(1,575)
(1,764)
Net cash flow from financing activities
(1,075)
(1,764)
Net increase (decrease) in cash and cash equivalents
4
(273)
Cash and cash equivalents as at 1 January
203
476
Effect of exchange rate differences on cash and cash equivalents
-
Cash and cash equivalents as at 31 December
207
203
Additional disclosure with regard to cash flows from operating activities
Interest income received
206
279
Interest paid
118
174
Dividends received
-
-
11 A
CCOUNTING PRINCIPLES FOR THE CONSOLIDATED FINANCIAL
STATEMENTS
11.1 ADOPTION OF THE FINANCIAL STATEMENTS
The consolidated financial statements of Propertize BV (former name SNS Property Finance BV) for
the year ended on 31 December 2013 were authorised for publication by the Management Board
following their approval by the Supervisory Board on 26 June 2014. The financial statements were
submitted to and adopted by the General Meeting of Shareholders on 26 June 2014.
11.2 GENERAL INFORMATION
Propertize BV, incorporated and established in the Netherlands, is a private company incorporated
under the laws of the Netherlands. Propertize BV’s registered office is located at Graadt van
Roggenweg 500, 3531 AH Utrecht. The consolidated financial statements of Propertize (referred
to as ‘the Company’ or ‘Propertize’) comprise the accounts of all the companies controlled by
Propertize and the interests of Propertize in associated companies and entities.
Until 30 December 2013, Propertize BV was a 100% subsidiary of SNS Bank NV.
On 31 December 2013 SNS Bank transferred the shares to the Dutch State. The State
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subsequently transferred these shares on the same date to Stichting administratiekantoor beheer
financiële instellingen (NL Financial Investments, NLFI). The annual accounts of SNS Bank are
available on the company website www.snsreaal.nl.
The objective of the Company is to manage and phase out the Company’s portfolio that
consists on the one hand of loans in the field of commercial property, and on the other hand of
participations in property companies and direct property.
The main accounting principles used in the preparation of the consolidated financial statements
and the company financial statements are set out in this section.
11.3 GOING CONCERN
After the nationalisation of SNS REAAL on 1 February 2013, the Minister of Finance announced
that the property and property finance loan portfolio would be separated. The spin-off of the
Propertize activities is part of the restructuring plan for SNS REAAL, which the Dutch State
submitted to the European Commission (EC) on 19 August 2013. The EC approved the transfer
on 19 December 2013. The Dutch Central Bank (DNB) issued a declaration of no objection for the
separation of Propertize on 24 December 2013.
On 30 December 2013 SNS REAAL announced that the shares in Propertize had been transferred
to the Dutch State (effective 31 December 2013). The State subsequently transferred these
shares to Stichting administratiekantoor beheer financiële instellingen (NL Financial Investments,
‘NLFI’).
Prior to the transfer of the shares, SNS Bank enforced the capital position of Propertize by means
of a contribution of share premium. Immediately after the transfer of the shares, the Dutch State
strengthened the capital position even further with € 500 million.
As a result the Company has equity of € 1,226 million at year-end 2013 (2012: € 412 million
negative).
Initially, the funding of Propertize largely continued to be provided by SNS Bank. As per
30 December 2013, the Dutch State guarantees the funding by SNS Bank to Propertize. On
10 February 2014 Propertize started its funding programme, to replace the SNS Bank funding
with external funding. With four issues of Medium Term Notes (MTN), an amount of € 2.6 billion
was placed. The issue of Commercial Paper during the months of March and April 2014 in the
amount of € 1.3 billion has completed the funding programme.
With the proceeds from the funding programme, the SNS Bank funding has been redeemed.
Please refer to chapter 5.2 Funding and credit ratings in the annual report.
The company’s main objective is the optimisation of value and cash flows of the total portfolio in
the wind-down of this portfolio of both property finance loans and real estate in a period of ten
years, as from 2014.
Based on the before mentioned situation and future developments, the annual accounts are
prepared on a going concern basis.
11.4 BASIS OF PREPARATION
Propertize prepares its balance sheet items and results in the 2013 financial statements for the
first time on the basis of International Financial Reporting Standards (IFRS) as adopted by the
European Union. IFRS 1 First-time adoption of International Financial Reporting Standards is
applied to the preparation of these financial statements.
Propertize adopts IFRS later than its former parent SNS Bank. Therefore, in accordance with IFRS
1.D16, Propertize measures its assets and liabilities at the carrying amounts that were included in
SNS Bank’s consolidated financial statements until the moment of deconsolidation (31 December
2013).
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As Propertize was only required to issue separate financial statements under NL-GAAP, no
reconciliation disclosures between the first IFRS consolidated financial statements and the
previous NL-GAAP separate financial statements are required.
11.4.1 Statement of IFRS compliance
Propertize prepares the annual accounts in accordance with International Financial Reporting
Standards (IFRS), as adopted within the European Union. Pursuant to the option offered under
Book 2, Title 9 of the Dutch Civil Code, Propertize prepares its company financial statements
(see also paragraph 18.3 Principles for the preparation of the company financial statements for
the application of section 2:402 of the Dutch Civil Code) in accordance with the same accounting
principles as those used for the consolidated financial statements.
11.4.2 Changes in published Standards and Interpretations effective in 2013
New or amended standards become effective on the date specified in the relevant IFRS, but
may allow early adoption. In 2013, the following standards and interpretations issued by the
International Accounting Standards Board (IASB) and the IFRS Interpretations Committee
respectively, became mandatory, and are adopted by the EU. Unless stated otherwise, the
changes have no material effect on the consolidated financial statements of Propertize.
• Amendment to IFRS 1 First-time Adoption - Government Loans.
• Amendment to IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and
Financial Liabilities.
• IFRS 13 Fair Value Measurement.
•Amendment to IAS 1 Presentation of Financial Statements - Presentation of Items of Other
comprehensive Income.
• Amendment to IAS 19 Employee Benefits - Post Employment Benefits.
• Amendments to IAS 12 Income Taxes - Deferred Tax: Recovery of Underlying Assets.
• Improvements to IFRSs’ 2011.
Notes to the main changes:
Amendment to IFRS 1 First-time Adoption – Government Loans
This amendment seeks to amend the requirements for first-time adoption, to mirror the
requirements for existing IFRS preparers in relation to the application of amendments made to
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, in relation to
accounting for government loans.
Propertize has no government loans on or before the date of transition to IFRS.
Amendment to IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and
Financial Liabilities
Taking effect in the current financial year, this standard requires a disclosure on the possibility
of offsetting financial instruments. This disclosure requires a breakdown of instruments that are
offset in the balance sheet and a disclosure of instruments that are not being offset, but in which
the company has the right to offset under specified conditions.
Propertize has no netting arrangements or rights to offset under specified conditions (please refer
to section 11.5.6).
In addition, the IASB has published Offsetting Financial Assets and Financial Liabilities
(Amendments to IAS 32). This amendment clarifies the offsetting criteria in IAS 32 and address
inconsistencies in their application. Contrary to the IFRS 7 amendment, the IAS 32 amendment is
effective for annual periods beginning on or after 1 January 2014.
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IFRS 13 Fair Value Measurement
The goal of IFRS 13 is to provide a more consistent and simple application of fair value. Taking
effect in the current financial year, IFRS 13 is applicable to measurement and disclosure
requirements with respect to fair value, irrespective of which asset or liability it concerns. The
standard includes a changed definition of fair values as well as additional disclosure requirements.
The standard has no impact on which assets and liabilities have to or may be valued at fair value.
The modified definition led to the inclusion in fair value of the credit risk of counterparties.
Various assets of Propertize are excluded from the scope of IFRS 13. Property projects are
excluded, since they are classified as inventory (IAS 2) and measured at the lower of cost and
net realisable value, which is excluded from IFRS 13 measurement and disclosure requirements
(IFRS 13.6c). This also applies to the financial leases (IAS 17), included in Loans and advances to
customers (IFRS 13.6b).
The property finance loans (financial instruments) are within the scope of IFRS 13. They are
measured at amortised cost. The additional disclosures mainly concern non-financial assets which
are measured at amortised cost in the balance sheet and financial assets and liabilities of which a
fair value is disclosed. The impact of IFRS 13 for Propertize relates to the (qualitative) disclosure
requirements of this standard, in conjunction with the disclosure requirements of IFRS 7. Further
disclosures can be found in chapter 14 Financial instruments.
IAS 19 Employee Benefits – Post Employment Benefits
Propertize’s pension scheme by the ABP is a multi-employer defined benefit scheme. However, at
the moment, the ABP arrangement does not provide a consistent and reliable basis for charging
the liability, mutual fund investments and costs of the scheme to individual employers taking
part. That is why this pension scheme is treated as a defined contribution scheme for reporting
purposes. The financial reporting principles of this defined contribution scheme do not change.
The amendment to IAS 19 relates to defined benefit plans. As a result there is no impact on the
financial statements of Propertize.
11.4.3 Interpretations of existing standards or amendments to standards,
not yet effective in 2013
The following new standards, amendments to existing standards and interpretations, published
prior to 1 January 2014 and effective for accounting periods beginning on or after 1 January 2014,
were not early adopted by Propertize.
• IFRS 9 Financial Instruments.
• IFRS 10 Consolidated Financial Statements.
• IFRS 11 Joint Arrangements.
• IFRS 12 Disclosures of Interests in Other Entities.
• IAS 27 Separate Financial Statements (revised 2011).
• IAS 28 Investments in Associates and Joint Ventures (revised 2011).
• Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27).
• Amendment to IAS 32 Financial Instruments: Presentation – ‘Offsetting Financial Assets and
Financial Liabilities’.
• Amendment to IAS 36 Impairment of Assets: Recoverable Amount Disclosures for NonFinancial Assets.
• Amendment to IAS 39 Financial Instruments: Novation of Derivatives and Continuation of
Hedge Accounting.
• IFRIC 21 Levies.
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Notes to the main changes:
IFRS 9 Financial Instruments, classification and measurement
The first adoption date has been postponed again by IASB and set at 1 January 2018. This new
standard is subdivided into three phases. The phases Classification and Measurement and Hedge
Accounting have already been published. The phase Classification and Measurement is still subject
to changes based on additionally proposed changes. The completed version of IFRS 9 is expected
to include the classification and measurement, impairment and hedge accounting requirements
(excluding macro hedge accounting), and is expected to be issued in 2014. The standard will
lead to a complete revision of IAS 39 Financial Instruments. The new standard has not yet
been adopted by the EU. Expectations are that the standard will affect the classification and
measurement of financial assets and liabilities. Its full impact will not become clear until this IASB
project has been completed in full, and published.
IFRS 10 Consolidated Financial Statements, IFRS 11 joint arrangements, IFRS 12 ‘Disclosure
of Interest in Other Entities’, IAS 27 ‘Consolidated and Separate Financial Statements’, IAS 28
’Investment in Associates and Joint Ventures’
These IFRS standards have been approved by the EU and will replace the IFRS standards ‘IAS
27 Consolidated and Separate Financial Statements’ and ‘SIC-12 Consolidation – Special Purpose
Entities’ with regards to consolidation rules, and ‘IAS 31 Joint Ventures’ and ‘SIC 13 Jointly
Controlled entities – Non-Monetary Contributions by Venturers’ as of the reporting year 2014.
Meanwhile, IAS 28 is changed from ‘Investments in Associates’ into Investment in ‘Associates and
Joint Ventures’ and in combination with these changes IFRS 12 ‘Disclosure of Interest in Other
Entities’ will be in force.
IFRS 10 redefines the notion of “dominant control” because of the diverging interpretation and
application of this notion under IAS 27 and the interpretation under SIC12 ‘Consolidation –
Special Purpose Entities’.
IFRS 11 determines when and in what way joint arrangements with third parties have to be
included in the consolidation of the group. IFRS 11 is, contrary to IAS 31, applicable to all joint
arrangements. Under IFRS 11 only the structure of the joint arrangement determines how this is
accounted for in the reporting. IFRS 11 differentiates ‘joint operations’ and ‘joint ventures’. Joint
operations arise where the investors have rights to the assets and obligations for the liabilities
of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue
and expenses. Joint Ventures arise where the investors have rights to the net assets of the
arrangement. Joint operations are consolidated proportionately and joint ventures according to
the equity method, which is equal to minority interests under IAS 28.
IFRS 12 requires clear disclosure of the nature of an interest, the considerations of how to classify
the interest and any possible restrictions in the exercise of the dominant control or access to the
assets.
IAS 27 ’Separate Financial Statements’ is limited to the separate financial statements because the
regulations for consolidation are included in IFRS 10.
IAS 28 is changed so that the equity method is applicable on minority interests as well as joint
ventures.
Expectations are that the consolidation of Propertize as a result of getting into force of the
amendments in these IFRS standards will change. We expect no significant impact on the balance
sheet and statement of comprehensive income. If required, the disclosures will be adjusted.
11.4.4 Accounting principles used in the preparation of the financial
statements
The accounting principles set out below have been applied consistently to all the periods
presented in these consolidated financial statements, as well as to the preparation of the IFRS
opening balance on 1 January 2012 in the context of the implementation of IFRS.
All group entities have applied the accounting principles consistently.
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11.4.4.1 Accounting principles applied to balance sheet items
In preparing the financial statements, the accounting principles ‘amortised cost’, ‘net realisable
value’, ‘historic cost’ and ‘nominal value’ are used.
Amortised cost is used for Loans and advances to customers and Amounts due to banks. Property
projects are valued at the lower of cost or Net Realisable Value (NRV).
Non-financial assets and liabilities are generally measured at historical cost.
Except for the cash flow information, the financial statements have been prepared on an accrual
basis.
11.4.4.2 Functional currency and reporting currency
The consolidated financial statements have been prepared in millions of euros (€). The euro is the
functional currency of Propertize. All financial data presented is rounded off to the nearest million,
unless stated otherwise. Counting is based on unrounded figures. Their sum may differ from the
sum of the rounded figures.
On the treatment of foreign currencies, please refer to 11.5.4 Foreign currencies.
11.4.5 Main accounting principles, estimates and assumptions
11.4.5.1 The use of estimates and assumptions in the preparation of the financial
statements
The preparation of the consolidated financial statements requires Propertize to make estimates
and assumptions based on complex and subjective opinions and estimates. These estimates have
a significant impact on the reported amounts of assets and liabilities and the contingent assets
and liabilities at the balance sheet date, and the reported income and expenses for the financial
year.
Hereby, management judges situations on the basis of available information and financial data
which could potentially alter in the future. Although these estimates are made to the best of the
management’s knowledge, actual results may differ from the estimates and the use of other
propositions or data can lead to materially different results.
Estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised or in the period of revision
and future periods if the revision impacts both the reporting period and future periods. The main
accounting principles involving the use of estimates concern the methods for determining the
provision for impairment of loans and advances to customers and the determination of the net
realisable value of property projects.
For detailed information and disclosure of the accounting estimates and assumptions we refer to
the next sections and the notes to the financial statements items. Assumptions used in the fair
value disclosure of loans and advances to customers are disclosed in section 14.3 Hierarchy in
determining the fair value of assets and liabilities.
11.4.5.2 Provision for impairment of loans and advances to customers
Propertize assesses periodically whether there is objective evidence that a financial asset
(property finance loan or financial lease) is impaired. Impairment losses are incurred if, and only
if, there is objective evidence of impairment as a result of one or more events that occurred after
the initial recognition of the financial asset, but before the balance sheet date, and that loss event
(or events) has an impact on the estimated future cash flows of the financial asset. The following
circumstances (default indicators), among others, are considered objective evidence that a
financial asset is impaired:
• The borrower / lessee sought or has been placed in bankruptcy or similar protection and this
leads to avoidance of or delays in repayment of the financial asset;
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• T
he borrower / lessee has failed in the repayment of principal, interest or fees and the
payment failure has remained unsolved for a certain period;
•The borrower / lessee has entered into a forbearance agreement or similar agreement
(restructuring of the credit obligation), in which the conditions of the loan and / or financial
lease are changed with respect to principal, interest, fees and terms;
• The borrower / lessee has demonstrated significant financial difficulty, to the extent that it will
have a negative impact on the expected future cash flows of the financial asset;
• Historic evidence, updated for current events where necessary, provides evidence that assets
are impaired although the related events that represent impairment triggers are not yet
captured by Propertize’s credit risk system.
The default indicators are monitored and discussed in the Early Warning Process and the Credit &
Transactions Committee (CTC). In addition a risk assessment and exit scenario is drafted of the
major part of the finance loan portfolio (both performing and non-performing loans) and brought
to the attention of the CTC as input for the quarterly provisioning process. For further information
please refer to section 12 Risk management and organisation and 13.2 Credit risk.
The provision recognised equals the difference between the book value and the recoverable value.
The recoverable value equals the expected future cash flows, including the amounts realised by
virtue of guarantees and collateral, discounted at the original effective interest rate of the loan or
lease (i.e. the effective interest rate computed at initial recognition).
If the amount of the impairment subsequently decreases due to an event occurring after
the impairment, the previously recognised impairment loss is reversed in the statement of
comprehensive income. When a loan is uncollectible, it is written off against the relevant provision
for impairment. Amounts that are subsequently collected are deducted from the addition to the
provision for impairment in the statement of comprehensive income.
11.4.5.3 Net realisable value of property projects
Property projects are valued at the lower of cost or net realisable value (NRV). NRV is the
estimated sales price less sales costs, in which the projected revenues and costs (including the
estimated sales price at the end of the exit period) are discounted at the weighted average cost
of capital (WACC).
The estimated sales price at the exit date in the future is determined based on projections of the
rental income, price per square meter, construction costs, interest costs and expected market
returns on exit date and is based on valuations provided by professional external appraisers.
11.5 ACCOUNTING PRINCIPLES USED FOR CONSOLIDATION
11.5.1 Subsidiaries
Subsidiaries, i.e. all companies and other entities (including special purpose entities) in respect of
which Propertize has the power to determine the financial and operating policies, whether directly
or indirectly, are consolidated. This is the case if more than half of the voting rights may be
exercised, or if Propertize has control in any other manner.
Subsidiaries are fully consolidated from the date on which control is transferred to Propertize.
They are de-consolidated from the date control ceases. The financial statements of these group
companies are fully consolidated, with Propertize accounting principles being applied. The
interests of third parties (if applicable) are separately included in the consolidated balance sheet
and statement of comprehensive income.
Some foreign entities of Propertize (subsidiaries, joint ventures or affiliated companies) are
confronted with a negative equity balance as at year-end. This could potentially pose some
regulatory restrictions on the transfer of funds from respective countries to Propertize either in
the form of cash dividends or repayment of loans and advances.
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11.5.2 Associated companies and joint ventures
Investments in associated companies (associates) are entities in which Propertize generally has
between 20% and 50% of the voting power, or over which Propertize can exercise significant
influence on the operational and financial policies, but has no control.
Joint ventures are entities over which Propertize has joint control, which control is laid down
in an agreement, and strategic decisions on the financial and operational policies are taken
unanimously.
The consolidated financial statements include Propertize’s share in the total results of associates
and joint ventures, from the date that Propertize acquires significant influence to the date that
significant influence ceases. The result is accounted for using the equity method, after adjusting
the result to comply with Propertize’s accounting principles, if needed.
Upon recognition, associates and joint ventures are initially accounted for at the cost price
(including the transaction costs) and subsequently according to the equity method. The item also
includes goodwill paid upon acquisition less accumulated impairment losses, where applicable.
Under the equity method, the share of Propertize in the result of associates and joint ventures is
recognised in the statement of comprehensive income under ‘share in the result of associates’.
The share of Propertize in changes in the reserves of associates or joint ventures is recognised
directly in shareholders’ equity (change in share of associates in other comprehensive income).
If the book value of the associate falls to zero, no further losses are accounted for, unless
Propertize has entered into commitments or made payments on its behalf. If Propertize has also
provided loans to the associate or joint venture, and its share in the losses of the associate or
joint venture exceeds the book value, a provision is made against these loans. The share in the
future profits of the associate or joint venture is a reversal of the provisions for commitments,
loans and subsequently may result in a positive book value of the associate or joint venture.
Some foreign entities of Propertize (subsidiaries, joint ventures or affiliated companies) are
confronted with a negative equity balance as at year-end. This could potentially pose some
regulatory restrictions on the transfer of funds from respective countries to Propertize either in
the form of cash dividends or repayment of loans and advances.
11.5.3 Elimination of group transactions
Intra-group transactions, intra-group balances and unrealised gains arising from intra-group
transactions were eliminated in the preparation of the consolidated financial statements.
Unrealised gains on transactions between Propertize and its associates and joint ventures are
eliminated to the extent of Propertize’s interest in these investments.
Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
11.5.4 Foreign currencies
Upon initial recognition, transactions in foreign currencies are converted into euros at the
exchange rate at the transaction date. Monetary balance sheet items denominated in foreign
currencies are translated into euros at the official exchange rate applicable on the reporting date.
Exchange rate differences from these transactions and from converting monetary balance sheet
items expressed in foreign currency are recorded in the statement of comprehensive income
under ‘result on financial instruments’.
Non-monetary items measured at historical cost are measured at the exchange rate applicable on
the initial transaction date.
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11.5.5 Accounting based on transaction date and settlement date
All purchases and sales of financial instruments, which have been settled in accordance with
standard market practices, are recognised on the transaction date, in other words, the date on
which Propertize commits itself to buy or sell the asset or liability. All other purchases or sales are
recorded as forward transactions until they are settled.
11.5.6 Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount is reported on the balance sheet if
there is a legally enforceable right to set off the recognised amounts, and there is an intention
to settle the items on a net basis, or to settle the asset and the liability simultaneously. If these
conditions are not fulfilled, amounts will not be offset.
11.5.7 Discontinued operations or assets held for sale
Assets and liabilities that are part of operations to be discontinued and assets held for sale, of
which it is highly probable that, on balance sheet date, the discontinuation or sale is within
12 months, are recognised at the lower of the book value and fair value less expected sales costs.
Property projects of Propertize held for sale are measured at the lower of cost or net realisable
value. Financial instruments held for sale follow the measurement of the instrument.
11.5.8 Information by segment
Propertize has no distinctive operating segments. The Management Board, as chief operating
decision maker for the purpose of allocating resources and assessing Propertize’s performance
considers the company as a whole.
This is also in line with the company’s main objective, which is the optimisation of value and cash
flows of the total portfolio in the wind-down of the total portfolio of both property projects and
property finance loans in a period of eight to ten years, as from 2014.
11.6 SPECIFIC BALANCE SHEET ACCOUNTING PRINCIPLES
The accounting principles of the main balance sheet items are described below.
11.6.1 Tangible assets
Propertize has no property in own use.
IT equipment and other property and equipment are measured at cost net of accumulated
depreciation and, if applicable, accumulated impairment losses.
The cost price comprises the expenses directly attributable to the acquisition of the asset and is
depreciated on a straight-line basis over the useful life, taking into account any residual value.
The estimated useful life can vary from three to ten years.
Regular impairment tests are performed on the other property and equipment. If the book value
of the tangible asset exceeds the realisable value, it is written down to the realisable value.
Repairs and maintenance expenses are recognised under ‘other operating expenses’ the moment
the expense is incurred. Expenses incurred after the acquisition of an asset that increase or
extend the future economic benefits of the other tangible fixed assets in relation to their original
use are capitalised and then depreciated.
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Results on the sale of property and equipment are defined as the balance of the realisable value
less transaction costs and the book value. These results are recognised as part of ‘other operating
income’ or ‘other operating expenses’ depending whether the result is a profit or a loss.
11.6.2 Loans and advances to customers
Loans and advances to customers consist of property finance loans, financial leases and
capitalised fees.
Property finance loans
These are defined as loans and advances to customers with or without mortgage collateral. These
loans and advances are measured at amortised cost using the effective interest method. The
conditions of loans and advances can change as a result of renegotiations or other reasons (see
next section). If the net present value of the cash flows under the new conditions deviates from
the net present value of the cash flows under the current terms and conditions, this is considered
an objective indication for an impairment test.
In certain circumstances Propertize grants borrowers postponement and / or reduction
of loan principal and / or interest payments for a temporary period of time to maximise
collection opportunities and, if possible, avoid default, foreclosure or repossession. When such
postponement and / or reduction of loan principal and / or interest payments is executed it is also
referred to as “forbearance”. In general, forbearance represents an objective impairment trigger
(see also section 11.4.5.2 Provision for impairment of loans and advances to customers.
If the forbearance results in a substantial modification (a complex restructuring, resulting in
one or more new financial instruments with different conditions and cash flows) of the terms of
the loan, the original loan is derecognised and a new loan is recognised at its fair value at the
modification date.
Loans and advances not derecognised but adjusted after renegotiations or otherwise adjusted are
measured on the basis of the original effective interest rate before the terms and conditions were
revised.
Financial lease
Propertize has entered (as lessor) into a number of financial lease agreements. These are
agreements for which Propertize has transferred almost all of the risks and benefits of the
property to the lessee. The book value of the lease receivable is equal to the present value of
the lease instalments, calculated on the basis of the implicit interest rate and, if applicable, any
guaranteed residual value. This relates to property finance in the Netherlands.
The book value of the lease agreement is derecognised if the contractual cash flows from the
asset have expired. This will apply at the end of the term when the lessor has no more right to
the cash flows of the lessee.
A number of financial lease agreements have a purchase option of the property by the lessee.
If at the expiration of the lease agreement (the end of the term) the lessee does not use this
option, the asset is derecognised, and subsequently recognised as a property project. The value
at initial recognition will be the book value of the derecognised lease receivable.
Should a new financial lease agreement be issued for the property, either by the same lessee or
another lessee, the asset will continue to be recognised as a lease receivable.
Impairment
As far as the loans and advances are concerned, a provision for impairment is recognised if
there are objective indications that Propertize will not be able to collect all the amounts due in
accordance with the original contract. See also paragraph 11.4.5.2 Provision for impairment of
loans and advances to customers.
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11.6.3 Property projects
Property projects comprise property for which no specific sales agreement with a third party exists.
Property projects comprises completed and not yet completed projects. These properties are stated
at the lower of cost price and net realisable value (NRV). Propertize’s strategy is to wind-down its
organisation in 10 years. As such the policy is to dispose of the property projects within that period
in a controlled manner for the highest possible proceeds at the lowest possible costs.
NRV is the estimated sales price less sales costs. If the NRV is lower than the book value, an
impairment is recognised in the statement of comprehensive income. Reversals of impairments
are also recognised in the statement of comprehensive income. See also paragraph 11.4.5.3 Net
realisable value of property projects.
11.6.4 Cash and cash equivalents
Cash and cash equivalents include the non-restricted demand deposits with credit institutions with
a remaining maturity of less than one month. Restricted demand deposits that Propertize has with
other credit institutions are included under Other assets (section 11.6.7). These receivables are
measured at amortised cost using the effective interest method, less any impairment losses.
11.6.5 Taxes
11.6.5.1 Deferred tax assets and liabilities
Deferred tax assets and liabilities are recognised for tax loss carry forwards and for temporary
differences between the tax base of assets and liabilities and the book value. This is based on the
tax rates applicable as at the balance sheet date and the tax rates that will apply in the period
in which the deferred tax assets or tax liabilities are settled. Deferred taxes are measured at
nominal value.
Deferred tax assets are only recognised if sufficient tax profits are expected to be realised in
the near future to compensate these temporary differences. Deferred taxes are recognised for
temporary differences between the book value and the value for tax purposes of investments
in group companies and associates, unless Propertize can determine the time at which these
temporary differences are realised or settled and if it is likely that these differences will not be
realised or settled in the near future. The latter are permanent differences.
Deferred tax assets are assessed at the balance sheet date and if it is no longer likely that the
related tax asset can be realised, the asset is reduced to the recoverable value.
Deferred tax liabilities concern tax payable in future periods in connection with taxable temporary
differences.
The most significant temporary differences relate to the difference between the tax and
accounting valuation of the property finance portfolio.
11.6.5.2 Current tax assets and liabilities
Current tax assets and liabilities relate to payable or recoverable tax on the taxable profit for the
period under review, and taxes due from previous periods, if any. Current tax receivables and
payables are measured at nominal value according to the tax rate applicable at the reporting
date.
11.6.6 Other receivables
Other receivables consist of the invoiced interest due on loans and advances to customers.
Upon initial recognition, other receivables are measured at fair value, including transaction costs
incurred. Thereafter, they are measured at amortised cost.
11.6.7 Other assets
Other assets consist of accumulated interest on financial instruments measured at amortised cost,
other taxes (including VAT, payroll tax), as well as other accruals.
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11.6.8 Equity
Issued share capital and share premium reserve
The share capital comprises the issued and paid-up ordinary shares. The share premium reserve
concerns the paid-in surplus capital in addition to the nominal value of the issued ordinary shares.
Costs directly attributable to the issue of equity instruments are deducted net of tax from the
share issue income.
Share dividend
Dividend for a financial year, which is payable after the balance sheet date, is disclosed in
paragraph 25.1 Provision regarding profit or loss appropriation under Other information.
Other reserves
Other reserves comprise Propertize’s retained profits.
11.6.9 Amounts due to banks
Amounts due to banks comprise the current account and short term (cash) loans with SNS Bank
related to the funding of Propertize, and loans extended by foreign banks to entities consolidated
by Propertize.
Upon initial recognition, amounts due to banks are measured at fair value, including transaction
costs incurred. Thereafter, they are measured at amortised cost.
11.6.10 Provisions
11.6.10.1 Employee benefits
Short-term remunerations for employees
Short-term remunerations for employees include, inter alia, salaries, short paid leave, profit
sharing and bonus schemes. These short-term remunerations are accounted for in the statement
of comprehensive income over the period in which the services are rendered. In the event that
employees have not made use of their entitlements at the end of the period, a liability is formed
for the nominal amount.
Other employee commitments
The other employee commitments refer mostly to discounts granted for SNS REAAL bank and
insurance products to (former) employees after the date of their retirement. The size of the
obligation is based on the present value of the discounts offered after the retirement date, taking
into account actuarial assumptions about mortality and interest. Furthermore, an obligation has
been recognised for reimbursement of medical expenses.
To qualify for these benefits, the employment contract of the employee should normally have
continued until the retirement age, and it should have lasted for a specified minimum period. A
liability is taken for the estimated costs of these benefits during the term of employment using a
method that corresponds with that used for defined benefit pension plans.
Post-employment commitments
Propertize’s pension scheme by the ABP is a multi-employer defined benefit scheme. However, at
the moment, the ABP arrangement does not provide a consistent and reliable basis for charging
the liability, mutual fund investments and costs of the scheme to individual employers taking
part. That is why this pension scheme is treated as a defined contribution scheme for reporting
purposes.
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11.6.10.2 Other provisions
General
Provisions are made if there is a legally enforceable or present obligation arising from events in
the past, the settlement of which is likely to require an outflow of assets, and a reliable estimate
of the size of the obligation can be made. Provisions are measured at the present value of the
expected future cash flows. Additions and any subsequent releases are recorded in the statement
of comprehensive income.
Restructuring provision
The restructuring provision is a specific provision that consists of anticipated severance payments
and other costs that are directly related to restructuring programmes. These costs are accounted
for in the period in which a legally enforceable or actual obligation to make the payment arises.
No provision is formed for costs or future operating losses stemming from continuing operations.
Propertize recognises severance payments if Propertize has demonstrably committed itself, either
through a constructive or legally enforceable obligation, to:
• The termination of the employment contracts of current employees in accordance with a
detailed formal plan without the option of the plan being withdrawn; or
• The payment of termination benefits as a result of an offer to encourage voluntary redundancy.
Benefits that are due after more than twelve months after the balance sheet date are discounted.
Legal provisions
Propertize recognises a provision for legal proceedings at the balance sheet date for the estimated
liability with respect to ongoing legal proceedings. The provision comprises an estimate of the
legal costs and payments due during the course of the legal proceedings, to the extent that it is
more likely than not that an obligation exists at the balance sheet date, and a reliable estimate
can be made of the obligation.
11.6.11 Other liabilities
Other liabilities primarily consist of interest accrued on financial instruments that are stated at
amortised cost. This item also includes creditors, other taxes and other accrued liabilities.
11.7 SPECIFIC STATEMENT OF COMPREHENSIVE INCOME ACCOUNTING
PRINCIPLES
The accounting principles of the main statement of comprehensive income items are described
below.
General
Income and expenditure are allocated to the period to which they relate. Costs are recognised in
the cost category to which they relate.
A number of services are outsourced to SNS REAAL. The costs are charged by SNS REAAL on the
basis of a service level agreement (Transactions Service Agreement / TSA).
11.8 PROPERTY FINANCE LOAN PORTFOLIO
11.8.1 Interest income
The interest income comprises interest on the property finance loan portfolio activities
attributable to the period. Interest on financial assets is accounted for using the effective interest
method based on the actual purchase price.
The effective interest method is based on the estimated future cash flows, taking into account the
risk of early redemption of the underlying financial instruments and the direct costs and income,
such as the transaction costs charged, brokerage fees and discounts or premiums. If the risk of
early redemption cannot be reliably determined, Propertize calculates the cash flows over the full
contractual term of the financial instruments.
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11.8.2 Interest expenses
Interest expenses comprise the interest expenses arising from financial liabilities of the funding.
Interest on financial liabilities is recognised using the effective interest method.
11.9 PROPERTY PROJECTS
The total result related to the Property projects comprises of rental income and service charge
income.
11.10 THE SHARE IN RESULT OF ASSOCIATES AND JOINT VENTURES
The share of Propertize in the result of associates and joint ventures is here accounted for. If
the book value of the associated company or joint venture falls to zero, no further losses are
accounted for, unless Propertize has entered into commitments or made payments on its behalf.
Where necessary, the accounting principles applied by the associated companies have been
adjusted to ensure consistency with the accounting principles applied by Propertize.
11.11 RESULT ON FINANCIAL INSTRUMENTS
The result on other financial instruments is recognised under this item. This includes the result on
derivatives and the result on the sale of performing loans.
11.12 OTHER OPERATING INCOME
This comprises all the income that cannot be accounted for under other headings.
11.13 EXPENSES
Expenses are recognised in the statement of comprehensive income on the basis of a direct
relationship between the costs incurred and the corresponding economic benefits. If future
economic benefits are expected to be derived across different reporting periods, expenses are
recognised in the statement of comprehensive income using a systematic method of allocation.
Expenses are directly included in the statement of comprehensive income if they are not expected
to generate any future economic benefits.
11.13.1 Staff costs
These costs concern all costs that pertain to the personnel. This includes, inter alia, salaries,
social security costs and pension costs.
11.13.2 Depreciation and amortisation of fixed assets
This item comprises the depreciation and amortisation of equipment. The specific principles for
depreciation and amortisation are explained in more detail in section 11.6 Specific balance sheet
accounting principles under the applicable items.
11.13.3 Service charge expenses & fee and commission / management
expenses
The service charge expenses consist of service costs (i.e. cleaning, shared (office) space, energy)
that are charged to the tenants of the property projects in question. The income received is
presented under Service charge income.
Fee and commission / management expenses relate to the management fees of the property projects.
11.13.4 Other operating expenses
This includes office, accommodation and other operating costs. It also comprises expenses that
happen occasionally, and occur in a single financial year, or arise in a single financial year, and are
amortised over multiple financial years.
11.13.5 Impairment charges
This item includes downward revaluations of assets for which the book value exceeds the
recoverable value. Intangible assets, property and equipment, associated companies,
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investments, property projects, receivables (loans and advances to customers) and other assets
may be subject to impairment. As soon as impairment is identified, it is included in the statement
of comprehensive income.
The specific principles for impairment are explained in more detail in paragraph 11.4.5.2 under
the applicable items.
11.14 CONTINGENT LIABILITIES AND COMMITMENTS
Contingent liabilities are liabilities not recognised in the balance sheet because the existence is
contingent on one or more uncertain events that may or may not occur in the future not wholly
within the control of Propertize. It is not possible to make a reliable estimate of such liabilities.
In addition Propertize’s customers may have the availability on undrawn credit lines. For more
information please refer to section 17.4 Loans and advances to customers.
The maximum potential credit risk arising from pledges and guarantees is stated in the notes. In
determining the maximum potential credit risk, it is assumed that all the counterparties will no
longer live up to their contractual obligations and that all the existing collateral is without value.
11.15 CASH FLOW STATEMENT
The cash flow statement is prepared according to the indirect method, and distinguishes cash
flows from operational, investment and financing activities. Cash flows in foreign currency are
converted at the exchange rate applicable on the transaction date. With regard to cash flow from
operations, operating results before taxation are adjusted for gains and losses that did not result
in income and payments in the same financial year and for movements in provisions and accrued
and deferred items.
Investments in (consolidated) subsidiaries and associates are stated under ‘cash flow from
investing activities’. The cash and cash equivalents available at the acquisition date are deducted
from the purchase price.
In the context of the cash flow statement, cash and cash equivalents are equal to the balance
sheet item ‘cash and cash equivalents’.
12 RISK MANAGEMENT AND ORGANISATION
12.1 RISK MANAGEMENT IN TRANSITION
Since the 1st of January 2013, Propertize did already have its own Risk Management department,
which reported to the organisation’s CFRO. Prior to the separation, the risk management activities
formed part of the Risk Management of SNS REAAL. During 2013 Risk Management had a
functional line with Group Risk Management of SNS REAAL.
Propertize’s Risk Management activities are focused on managing the credit risks. The daily
activities are carried out by the Restructuring & Recovery, Loan Management and Asset
Management departments. With the spin-off of Property Finance on 31 December 2013 this
functional line has ended. The activities of Propertize’s Risk Management also focus on other
financial risks, such as the interest rate risk, and managing the non-financial risks.
12.2 RISK MANAGEMENT ORGANISATION
Within the Propertize structure, the departments Restructuring & Recovery, Loan Management
and Asset Management constitute the first-line risk management organisation. They report to the
Chief Portfolio Officer (CPO).
The Risk Management department reports to the Chief Financial and Risk Officer (CFRO). The
Compliance department reports to the Director Legal & Compliance. These departments form the
second-line risk management.
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12.3 FRAMEWORK FOR RISK MANAGEMENT
Within the framework of risk management, risks are identified and quantified. In order to make or
keep the identified risks controllable, measures are taken.
Risk Appetite
The risk appetite determines the level and nature of the risks an organisation is prepared to take,
taking into account all the stakeholders’ interests, as part of its strategy. The risk appetite of
Propertize is prepared by the Management Board and adopted by the Supervisory Board. After
the spin-off, Propertize’s Risk Management monitors the daily activities based on the risk appetite
and reports to the Management Board and the Supervisory Board.
Risk Culture
Propertize aims to achieve good risk awareness within its business. By means of communication
and training the risk culture is anchored and propagated in the organisation.
Risk governance
The risk governance framework is based on the governance of Propertize. Corporate governance
is guiding. All decisions made involve a risk: this is called risk-taking. The risk must remain within
the risk appetite. In order to mitigate the risks, risk control is performed. This is anchored in
the (risk) organisation. The framework is aimed at maintaining and managing the risk profile,
supporting efficient and effective risk management in all layers of the company and taking risks
that are in agreement with the determined risk appetite.
Three lines of defence
For risk management purposes, three responsibilities are distinguished, based on the ‘Three lines of
defence’ model, which is considered best practice within the financial services industry. Propertize
has continued on this principle after the spin-off. The format provides for clear responsibilities and
guarantees that risk management is an important subject for the entire organisation:
1 the first line has an executive role and focuses on the primary and execution process of the
business activities. Within the scope of the policies and with due observance of the internal
procedures and risk limits, the first line aims to realise optimal risk / return ratios. Business
plans are drafted in the first line;
2the second line (‘Risk Control’) on the one hand has a managing and accepting role with
regard to the transactions proposed by the first line; Risk Control monitors the correct
execution of transactions and actions approved in the first line and is responsible for the risk
profile in the relation to the risk appetite. On the other hand, the role of Risk Control is to set
the framework and to monitor. It prepares the policy frameworks, but leaves their execution
and acceptance to the first line. The second line regularly assesses whether the policies are
also properly complied with, based on risk reports and its own observations. Risk Control also
sets the mandates within which the organisation’s risk appetite can become operational. It
also defines basic principles and pre-conditions for risk models as well as supporting central
decision-taking bodies. The data, models, assumptions, techniques, etc. that are used are
periodically validated;
3the third line has a supervising and assuring role (internal audit). This line supervises the
proper functioning of the risk management function, conducts audits and establishes any
failures in the risk governance, risk systems and internal controls. It also assesses whether
actions have been followed up adequately and have been made compliant. The third line
assures the effectiveness of the risk governance (risk-taking up to and including risk control)
towards the Management Board, the Supervisory Board and the Audit & Risk Committee. This
was continued after the spin-off.
The responsibilities within the risk management organisation of SNS REAAL have been clearly
determined, with the Group Risk Committee (GRC) of SNS REAAL being the highest body that
reports to the Executive Board of SNS REAAL as well as being the primary body setting the
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framework for risk management. With the spin-off of Propertize the Management Board has become
responsible, which is now the primary body that establishes the framework for risk management.
The Chief Financial Officer of Propertize is also the Chief Risk Officer. He is responsible for
formulating and implementing risk policies. The risk principles used for organising risk
management, which aim for a consistent risk management approach, have been formulated as
follows:
• One common, group-wide classification of risk types.
• A pre-determined risk tolerance (‘Risk Appetite’) for every recognised risk type.
• Scenario analyses for stress situations and measures in emergency situations for the most
important risks.
• Testing and validation of the models used for risk management.
• Designating the risk owners for all recognised risks.
• Monitoring and assessing the risks, independently of the commercial activities.
Risk decision framework
The Management Board is responsible for the balance between the commercial interests and the
risks taken. The risks must stay within the boundaries of the risk appetite of Propertize.
The Management Board makes clear engagements within the scope of the responsibilities and
powers to achieve good risk governance.
Within the scope of the credit risk decisions the Management Board is supported by the Credit &
Transactions Committee (CTC). Since the spin-off the CEO or the CFRO of the Management Board
has chaired the CTC. In 2013 the chairman was member of the Executive Board of SNS REAAL.
The Supervisory Board is responsible for the approval of the risk appetite and evaluates whether
Propertize is operating within the framework of the determined risk appetite. The Supervisory Board
assesses the risk governance and the implementation of the strategy by the Management Board.
12.4 RISK CLASSIFICATION
During 2013 the risk classification of SNS REAAL was used. The relevant classifications for
Propertize are:
Financial risks (chapter 13)
Credit risk
The risk that a borrower and / or counterparty fails to comply with a financial or other contractual
obligation.
Market risk
The risk that equity, results or continuity is threatened by movements in the level and / or
volatility of market prices to which the company is exposed. Market risk is split into price risk,
interest rate risk, credit spread risk and currency risk.
Liquidity risk
The risk that there are insufficient liquid assets available in the short term to meet financial
obligations, whether under normal circumstances or in time of stress, without this leading to
unaccepted costs or losses.
Non-financial risks (chapter 15)
Integrity risk (compliance risk)
The risk that the company’s integrity is harmed by actions (or omissions) contrary to its internal
(core) values, social standards and values or behavioural laws and regulations or requirements
to be observed by the company when providing its financial services or translating these into
internal regulations. This may lead to regulatory measures, financial losses or damage to the
company’s reputation.
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Crime risk
The risk that the company’s integrity is harmed by employees, customers or third parties due to
fraud (deceit, misappropriation of property, violation of the law, rules or company policy) or criminal
activities directed against the company and / or its customers in their relationship with the company.
Operational risk
The risk of direct or indirect losses due to inadequate or deficient internal processes and systems,
from inadequate or human error, or from external events. In this sense, the operational risk is allencompassing. It can be further broken down into IT risks, outsourcing risks, legal risks, integrity
risks and other operational risks.
Risks of a mixed nature
Strategic risk
The risk that strategic objectives are not achieved due to lack of response or inadequate or late
response to changes in the environment and the business climate.
Strategic risks of a non-financial nature are related to reputation and governance. Strategic risks
of a financial nature are related to positioning / acquisitions, capitalisation, concentration of risks
and internal models.
13 FINANCIAL RISKS
13.1 INTRODUCTION
This chapter discusses the main financial risks arising from financial instruments that occur within
Propertize. The financial risks mainly consist of credit risk, market risk (breakdown to interest and
exchange rate risk) and liquidity risk.
13.2 CREDIT RISK
13.2.1 Credit risk overview
The main category of credit risk is related to the loans and advances to customers. To improve
the relationship and understanding between the information presented in the credit risk section
and the Propertize business, the property projects are also included.
Propertize hedges the open foreign currency positions by means of forward exchange rate
transaction contracts (FX-contracts) with SNS Bank. The notional amount is € 148 million and the
fair value is insignificant at year-end 2013. Please refer to section 13.3.6 for more details. The
counterparty credit risk associated with these FX-contracts is considered limited as SNS Bank is a
Dutch State owned bank that is well funded.
13.2.2 Credit risk profile and credit risk management
The default loans of Propertize (and loans for which a potential default situation is plausible) are
managed by the Restructuring and Recovery (R&R) department.
In 2013 the net exposure of Propertize was reduced with € 1,305 million, from € 7,031 million to
€ 5,726 million. This reduction is the result of regular redemptions in combination with the sale
of loans, restructurings and impairments of the portfolio. Property projects increased through
foreclosure and the following transfer of loans to property projects.
Breakdown portfolio Propertize
In € millions
2013
2012
Commitments6,6677,880
Undrawn commitments
(35)
48
6,702
7,832
Provision for impairment
1,786
1,217
4,916
6,615
Property projects
810
416
Total exposure5,7267,031
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Breakdown portfolio Propertize by region
(In € millions)
2013
2012
Other Europe1,1811,310
North-America 85200
Total5,7267,031
In absolute terms, the major part of the reduction by € 1,061 million in 2013 relates to the
Netherlands (from € 5,521 million to € 4,460 million). Net exposure in North America is reduced
by € 115 million in 2013. As a result, the remaining value of this portfolio is only € 85 million.
As from 1 January 2014, the portfolio is broken down into three buckets:
• Healthy
• Value retention & creation (‘Retention’)
•Disposition
Buckets loan and property portfolio 2013
(In € millions)
Property projects
Total exposure
Healthy
Retention Disposition
Total
1,325
3,932
1,445
6,702
-
931
855
1,786
1,325
3,001
590
4,916
-
644
166
810
1,3253,645 7565,726
Healthy
In this category, Propertize will concentrate on client retention until the end of their term, also to
cover its operating costs. These concern loans on which clients pay interest and make repayments
and on which no losses on the outstanding balance are expected in the medium-term. Loans can
be extended if this will reduce risk and if it is for a period within the ten-year period granted to
Propertize. Active portfolio management through account management and regular monitoring
will improve the cash flow.
Value Retention and Creation
It may be possible to retain or create value on the assets in this category, which are mainly Dutch
loans and property assets. Obviously, the cash flow and potential value must be higher than the
costs of keeping the asset. Active asset management geared to the individual asset is essential
for this. Existing loans can be increased or additional investments are possible if individual
business cases are favourable.
Disposition
In some cases, there can be no conclusion other than that there is no scope for value creation
and in that case, it is best for Propertize to seek the quickest possible exit so that it can minimise
its losses. After all, prolonged retention of such assets will only lead to an increase in losses.
Minimising management costs, a systematic dismantling of legal structures and restricting the
risk of new claims have greater priority in that case.
13.2.3 Credit risk Propertize
The Propertize activities were spun off as of 31 December 2013. The following description is
based on the situation in 2013 when the Propertize activities were still part of SNS REAAL and
SNS Bank.
13.2.4 Managing credit risk Propertize
The default items of Propertize (and items on which default may arise) are managed by the
R&R and Loan Management departments.
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The development of Propertize’s credit risk profile is constantly monitored and reported to the
Management Board. For this purpose use is made of reports on arrears and overdrafts, periodic
revisions, portfolio analyses and external reporting.
Revisions
Revision is an important part of the portfolio monitoring process, as sound risk management
necessitates that client accounts are revised periodically to properly monitor the risk profile.
In addition to this regular revision there was a bottom-up and risk-based analysis of a major
part of the portfolio (property projects and property finance loans) in the second half of 2013.
This resulted in three scenarios (bear, base and bull), which made use of forecasts, discounting
future cash flows and the most recent internal and external valuations. That analysis was used
for the Q4-2013 credit provision procedure and formed the basis of Propertize’s business plan.
In addition, the analysis of the individual client accounts was also used as input for revisions.
Valuations of collateral
Adequate revisions require recent valuations. This is why, within the framework of the periodic
revision, the collateral value is assessed in order to determine the value of the loans. Propertize
works with a valuation guideline as part of its revision policies. The value of the collateral for the
default loans is determined at least once a year, with an external valuation of a major part of the
portfolio in the third and fourth quarter. The goal is to test the valuations of default items as at
balance sheet date against up-to-date external valuations. Annual valuations are also made of
the collateral for loans not in default in excess of € 10 million and of project finance loans. The
valuation guideline requires collateral with a lower value to be valued at least once every three
years. This concerns collateral for loans not in default with a Loan to Value below 90%.
The valuation of a property may be performed by an internal expert or by an external appraiser.
For loans in default the valuation is nearly always carried out by an external appraiser. Valuations
are as much as possible carried out in accordance with the Guidelines of the PTA (Dutch Platform
of Appraisers and Accountants) and the RICS (Royal Institution of Chartered Surveyors) valuation
standard. For the other loans use is also made of internal appraisers (who have been certified and
operate independently). The concept valuations received by Propertize are first audited internally
before being finalised.
As part of their valuation the appraisers make use of comparable transactions that can be
observed in the market as much as possible. Due to the increasing lack of liquidity in the current
market, it has become increasingly difficult to test valuations. As a result, the assumptions and
estimates made by appraisers when surveying real estate are subject to considerable larger
uncertainties than in normal market conditions.
Defaults
Loans with an increased risk profile are declared in default by the competent approving body
as soon as there are indications to this effect. Default indicators used in this respect include the
customers’ payment record (arrears and overdrafts), the Loan to Value (LtV) of the loan, the
customer’s financial position, the progress in the construction work, the rental or sales rate, the
compliance with agreements made, risk status and (other) internal and external signals, and
finally the extent to which a loss is expected to manifest itself on the intended exit date. Loans
declared in default are, in general, transferred to the Restructuring & Recovery (R&R) department.
Provisions
Loans are valued on the basis of the base-case scenario, using forecasts, the discounting of future
cash flows and the most recent (external) valuation report. If the expected revenues for a loan
upon exit are lower than the currently outstanding balance increased by the costs to be incurred
in the future, a provision for impairment is recognised or any provision already made is adjusted
to the required level.
Property projects
As a result of the further deteriorating market conditions, Propertize is increasingly forced to
foreclose on collateral provided as security to Propertize. As a result Propertize has obtained
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effective control (in accordance with the IFRS regulation) over a number of property projects,
which have thus been included in its consolidation scope.
Loans with renegotiated terms (forbearance)
Propertize considers a forborne asset to be a contract in which the terms and conditions were
modified or which was refinanced by Propertize because the counterparty is in, or is considered to
face, financial difficulty.
The rationale behind forbearance is that Propertize shows leniency towards the counterparty by
agreeing on modified terms that would not have been agreed when the client would not have
been in financial difficulty. The objective is on the one hand to allow the counterparty to regain
its financial health within its means, and by doing so to maintain a sustainable relationship
between Propertize and its counterparty, and on the other hand to avoid default, foreclosure or
repossession.
Please refer to section 11.6.2 Loans and advances to customers and 11.4.5.2 Provision for
impairment of loans and advances to customers.
In December 2012 the European Securities and Markets Authority (ESMA) issued a public
statement on the disclosure of forbearance practices in the financial statements of financial
institutions prepared under EU-IFRS. A final draft definition on forbearance was provided by
ESMA in October 2013.
Propertize considers itself as acting in the spirit of the recommendations of ESMA. Since
Propertize’s target is the phase-out of the real estate portfolio and the major part of Propertize’s
finance portfolio is in default, to present forbearance separately from the other portfolio would
not enhance the information in these annual statements; Propertize is using the buckets (see the
section before) to manage the portfolio.
Impairments
The impairments on Propertize’s default loans and property projects reflect the changes in the
expectations regarding the cash flow profile of the underlying assets. Expected cash flows are
driven by items such as rental income, price per square meter, construction costs, interest costs
and recent valuation reports provided by professional appraisers.
In the estimation of future cash flows, transactions are used which can be observed in the
market and which are comparable to the extent possible. Due to the increasing lack of liquidity
in the market, it is very difficult for a large part of the portfolio to test against recently observed
comparable market transactions. This means that the assumptions and estimates made by
Propertize in the valuation of loans are exposed to significantly larger uncertainties greater than
under normal market conditions, which results in broader bandwidth for the valuations.
Impairments Propertize
(In € millions)
2013
2012
Loans and advances
858
718
Property projects
158
210
Associates and joint ventures
37
13
Total1,053 941
The loans and advances and property projects are discussed in more detail in the following
sections. For the impairments on associates and joint ventures please refer to section 17.2.
13.2.5Credit risk loans and advances to customers
The total commitments decreased by € 1,213 million from € 7,880 million to € 6,667 million
(-18%). In 2013, the net exposure was reduced by € 1,700 million (-26%) to € 4,916 million.
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Breakdown loan portfolio Propertize
(In € millions)
Commitments
Undrawn commitments
2013
6,667
(35)
6,702
1,786
4,916
2012
7,880
48
7,832
1,217
6,615
Impairments loan portfolio Propertize
(In € millions)
2013
2012
The Netherlands622537
Other Europe197172
North-America39 9
Total858718
The impairments on loans comprise the Netherlands with 72%, Other Europe 23% and 5% NorthAmerica.
The economy continued to struggle in 2013, putting both tenants and investors under further
pressure. The unabated large number of bankruptcies is leading to vacant properties, lower
property values and eventually to financial problems for clients, who can no longer service their
loans. It would seem that the situation worsened rather than bottomed out in 2013. This means
that it is necessary to allow for additional vacancy, lower property values and more clients facing
liquidity problems in 2014.
The real estate markets
As stated, the Dutch real estate market deteriorated further in 2013 and there are still no clear
signs of any recovery, although the residential housing market seems to have bottomed out. The
further deterioration, for example of the Spanish and Dutch property markets, is resulting in more
vacant properties, especially on the B and C locations which constitute most of the Dutch portfolio
(e.g. as a result of the bankruptcy of tenants or the removal of tenants to better locations that
have become more affordable as a result of the changed conditions), lower rents and ever-lower
valuations.
As a whole, the Dutch market for office premises is still suffering from a huge over-supply and
an increasing number of vacant properties (currently approx. 16% of the total stock countrywide). These vacancies are concentrated in less up-to-date properties and on less desirable
locations. A1 locations on the other hand have been developing slightly more favourably recently,
with supply and demand more balanced, and with values that appear to be stable.
The impact of the further decline in consumer confidence, which is still at a very low level,
combined with the fast-rising use of internet is becoming increasingly evident on the Dutch
market for retail premises. In practice, only the A1 locations are still finding favour with tenants
and investors, because retailers are still anxious - and still able - to let buyers experience the
‘feel’ of their brand there. Locations outside the A1 zone are however showing increasingly visible
signs of deterioration, such as vacant properties, lower rents, a higher turnover level and a
resulting drop in property values.
The Dutch market for commercial property has always been less susceptible to trends, as
this property is frequently in use by owner-occupiers. Because of its very close links with the
recovering global economy, the logistics industry is one of the few sections in our country to still
make a reasonably positive contribution to the economy and the value of logistics properties
(which are part of the commercial property market) is showing a fairly steady value development.
High-quality logistics properties have re-attracted the keen interest of investors recently.
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Breakdown loans and advances by underlying assets
(In € millions)
2013
2012
Offices
2,062
2,384
Retail1,2011,392
- residential mortgages
1,081
1,272
- residential lease and development
473
773
Residential1,5532,045
Industrial768910
Other960972
Gross outstanding loans secured
6,544
7,702
Unsecured loans158130
Gross outstanding loans
6,702
7,832
Provisions for impairment
Total outstanding (net)
(1,786)
4,916
(1,217)
6,615
In 2013, the reduction of € 1,130 million in gross outstanding loans can be broken down into 42%
residential property, 9% Retail property, 29% offices, 12% industrial property and 8% other.
Loan to value
The Loan-to-Value (LtV) of the loan portfolio was 113.5% as at year-end 2013 (2012: 100.9%).
As at year-end 2013, the average LtV of the provisioned loans is 161.4% (2012: 169.0%). The
LtV of the Dutch portfolio increased from 101.3% at year-end 2012 to 111.4% at the end of
2013. The LtV of the other Europe and North-America portfolio increased to 123.6% at year-end
2013, from 99.4% at year-end 2012. In case the loans and advances of Propertize are, apart
from mortgage collateral, backed by other collateral, this will (partly) mitigate credit risks.
The table below shows the gross loans, divided into different LtV buckets. This creates insight
into the volumes in which credit risk is completely mitigated by the existing mortgage collateral
(LtV ≤ 100%) and additionally the volumes where there is a collateral shortfall (LtV> 100%). The
classification is based on mortgage collateral; no account has been taken of other guarantees.
Breakdown loans and advances by LtV buckets
(In € millions)
2013
2012
6,702
136%
7,832
118%
Provisions loans and advances
(1,786)
(36%)
(1,217)
(18%)
Total outstanding (net)
4,916
100%
6,615
100%
LtV buckets
No collateral information available
74
1%
107
1%
<= 70%
630
9%
880
11%
> 70 <= 80%
275
4%
663
8%
> 80 <= 90%
623
9%
904
12%
> 90 <= 100%
791
12%
873
11%
> 100 <= 110%
623
9%
729
9%
> 110 <= 120%
590
9%
857
11%
LtV > 120% (including unsecured loans)
3,096
46%
2,820
36%
Total
6,702100% 7,832100%
Credit quality of loans
The table below breaks down the gross outstanding loans of Propertize into non-default, notimpaired default and impaired default. The procedure for declaring loans in default is described in
chapter 11 Accounting principles and chapter 12 Risk management.
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PROPERTIZE IN BRIEF
Defaults Propertize
(In € millions)
Not in default
Default, not impaired
Default, impaired
Total in default
Total
Outstanding
Loan to value
2013201220132012
2,563
4,711
81.0%
82.3%
483
472
98.4%
96.6%
3,656
2,649
161.4%
169.0%
4,139
3,121
150.2%
151.5%
6,702 7,832113.5%100.9%
The outstanding balance of the impaired default loans was € 3,656 million as at year-end 2013
(2012: € 2,649 million). Expressed as a percentage of the total portfolio, the defaults rose from
39.8% to 61.8%.
The following table provides information on payments in arrears. The payment record of
customers is one of the default indicators used by Propertize. However, payment in arrears does
not necessarily automatically result in default. Vice versa it is possible that loans without any
arrears are nevertheless declared in default. This can occur mainly in project financing.
Arrears in loans and advances
(In € millions)
Neither past due, nor impaired
Past due but not impaired
Impaired
Total
Outstanding
Loan to value
2013201220132012
2,675
4,258
81.9%
83.0%
371
925
96.6%
85.8%
3,656
2,649
161.4%
169.0%
6,702 7,832113.5%100.9%
The decline in the neither past due, nor impaired loans of € 1,583 million is the result of a shift to
impaired loans (€ 1,035 million), property projects (€ 160 million), redemptions (€ 235 million),
arrears caught up and an inflow of new loans in arrear (€ 32 million) and the realised phase out
of these loans (€ 121 million).
Ageing analysis past due but not impaired loans and advances
(In € millions)
< 30 days
30 - 60 days
60 - 90 days
> 90 days
Total
Outstanding
Loan to value
2013201220132012
84
334
90.2%
82.6%
23
97
87.6%
65.8%
38
49
106.0%
69.9%
226
445
98.2%
97.8%
371
92596.6%85.8%
If there are payments in arrears, or is a collateral shortfall (the LtV exceeds 100%) or a
combination of both, a thorough analysis may still lead to the decision that a specific provision is
not necessary. Reasons for such a decision include:
• additional security is available, such as cross-collateral connections with loans with a collateral
excess, or additional guarantees are available (limited recourse);
• sufficient cash flow is available, which can be used for interest and redemption to reduce the
collateral shortfall;
• the collateral shortfall or arrears is / are mitigated by means of restructuring.
Of the € 226 million outstanding which is past due > 90 days, 60% has an LtV < 100%, and one
third of this an LtV < 80%.
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Provisioned loans and advances Netherlands
(In € millions)
2013
2012
Book value provisioned loans (gross value)
2,668
1,899
Provision(1,324) (867)
Book value provisioned loans (net value)
1,344
1,032
Coverage ratio
49.6%
45.7%
Fair value collateral provisioned loans
1,639
1,146
Loan to Value provisioned loans
162.8%
165.7%
Provisioned loans and advances Other Europe
(In € millions)
2013
2012
897
619
Provision(407)(253)
490
366
Coverage ratio
45.4%
40.9%
567
377
158.2%
164.2%
Provisioned loans and advances North-America
(In € millions)
2013
2012
91
131
Provision(56)(97)
35
34
Coverage ratio
61.5%
74.0%
35
44
260.0%
297.7%
Provisioned loans and advances all regions
(In € millions)
2013
2012
3,656
2,649
Provision(1,787)(1,217)
1,869
1,432
Coverage ratio
48.9%
45.9%
2,241
1,567
163.1%
169.0%
The coverage ratio (= provisions as a percentage of the balance of the provisioned loans) is
48.9%. Compared to 2012, the coverage ratio as at year-end 2013 has increased in all regions,
with the exception of North-America.
13.2.6 Exposures to higher-risk Eurozone countries
Propertize regards a eurozone country as ‘higher-risk’ when the country exhibits higher volatility
and economic and political uncertainties than other eurozone members. In line with market
practice, Propertize considers the so-called GIIPS countries as high-risk countries.
Of the position of € 1,181 million in the region ‘Other Europe’ (see section 13.2.2) an amount of
€ 163 million relates to exposures in the GIIPS countries Spain and Italy.
13.3 MARKET RISK
The risk that equity, results or continuity is threatened by movements in the level and / or
volatility of market prices to which the company is exposed. Market risk is split into (property
projects) price risk, interest rate risk, credit spread risk and currency risk. For Propertize the price
79
PROPERTIZE IN BRIEF
risk, interest rate and currency risks are relevant. It does not run any credit spread risks arising
of financial instruments.
13.3.1 Managing market risk
During 2013 the market risk has been managed by Risk management of SNS REAAL and SNS
Bank. In 2014 Propertize introduced its own market risk reports to monitor and mitigate the
market risks. The ALM reports are prepared by the Treasury department. The Propertize reports
are discussed in regular Management Board meetings. In this respect market risk is split into
two components: interest rate risk and currency risk. Interest rate risks arise due to the fact that
there are differences in the interest rate sensitivity of the assets and liabilities in the balance
sheet. Currency risk arises as Propertize has exposures in foreign currency as a result of financing
and other activities.
13.3.2 Price risk property projects
Due to the unfavourable developments on the Dutch and International real estate markets, it
was necessary to recover collateral provided to Propertize under a number of loans. As a result,
Propertize gained effective control over a few property projects, which have thus been included in
Propertize’s consolidation scope.
The property on Propertize’s balance sheet is valued at the lower of cost or net realisable value.
The net realisable value is determined on the basis of the expected present value of the cash
flows as estimated under the realistic exit scenario, the same way as the method used in the loan
provisioning process. In this respect, estimates are made with regard to costs (completion costs,
costs to sell), income (rents, sales proceeds) and the time needed to execute the scenario. The
weighted average cost of capital (WACC) is used to discount the cash flows.
Impairments property projects Propertize
(In € millions)
2013
2012
The Netherlands4126
Other Europe114180
North-America34
Total158210
The total sum of property projects on the balance sheet of Propertize amounted to € 810 million
as at 31 December 2013 (year-end 2012: € 416 million). Of this sum, € 316 million is related to
the Netherlands (2012: € 107 million), € 470 million to Other Europe (2012: € 284 million) and
€ 24 million to North America (2012: € 25 million).
The book value at year-end 2013 is fully based on the lower net realisable value.
Accumulated impairments on property projects
(In € millions)
2013
2012
Cost1,318 810
Accumulated impairments
(508)
(394)
Book value (net realisable value)
810
416
The increase of the gross value is mainly caused by the inflow (in-control and / or recovery of
collateral) of property projects in the Netherlands (€ 395 million), Germany (€ 314 million) and
North America (€ 38 million). In addition, the gross value has increased due to capitalised project
costs. Accumulated impairments have increased mainly due to impairments on projects in the
Netherlands (€ 41 million), Luxembourg (€ 50 million) and Spain (€ 43 million). The run-off
in Spain of a project led to a decrease with € 49 million (€ 86 million gross, impairments
€ 37 million). Please refer to section 13.2.2 for the policies regarding the (exit) strategies of
property projects and loans.
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13.3.3 Interest rate risk
Term to maturity gap profile 2013
(In € million)
< 1m
1-3 m
3-12 m
1-5 yr
>5 yr
Prov
Total
Loans and advances
to customers
5,481594142421 64
(1,786)
4,916
Cash and cash
equivalents
20700000
207
Subtotal
5,688594142421 64
(1,786)
5,123
Total assets 5,688594142421 64
(1,786)
5,123
Amounts due to banks 4,260
116
6
27
0
0
4,409
Subtotal
4,260
1166
2700
4,409
Total liabilities
4,260
1166
2700
4,409
Interest rate
sensitivity gap1,428478136394 64
(1,786)714
Term to maturity gap profile 2012
(In € million)
< 1m
1-3 m
3-12 m
1-5 yr
>5 yr
Prov
Total
Loans and advances
to customers
6,329671332425 75
(1,217)
6,615
Cash and cash
equivalents
0000000
Subtotal
6,329671332425 75
(1,217)
6,615
Total assets 6,329671332425 75
(1,217)
6,615
896
35
876
155
0
7,945
Subtotal
5,983896 35876155 0
7,945
Total liabilities5,983896 35876155 0
7,945
Interest rate
sensitivity gap
549 (225)
297 (451)
(80)(1,217)(1,127)
13.3.4 Sensitivity test for interest rate risk
The interest rate risks can be illustrated by a sensitivity analysis. This analysis calculates the
impact of an immediate parallel shift of the yield curve of +100 basis points (bps) on Propertize’s
financial assets and financial liabilities. Interest rate movements affect reported equity through
retained earnings, i.e. increases or decreases in net interest income. The results of the
calculations are net of taxation. Compared to 2012, there are no changes in assumptions and
methodology in the sensitivity tests.
Sensitivity projected net interest income
(In € millions)
Interest rate +1% (100 bps)
Interest rate -0.25% (25 bps)
At 31 December
2013
2012
-
(12)
-
3
At current low market interest rates, a decrease of the interest rate with 100 basispoints would
result in a negative interest. Therefore the decrease is capped at an interest rate of 0%.
In 2013, interest rates are 90% floating with respect to property finance loans (2012: 90%),
against 100% floating on the funding (2012: 90%).
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PROPERTIZE IN BRIEF
An interest increase of 100 basis points will have a limited impact on the gross result. Some
clients will not be able to pay this increase as they are currently already in default, and therefore
the increase will trigger further impairments. The impact of the interest increase of the loans in
default on the gross result is estimated to € 17 million (2012: € 13 million).
13.3.5 Effective interest rates
The table below gives an indication of the average effective interest rates throughout the year
with respect to financial instruments.
Effective interest rates
in percentages20132012
Assets
3.25%
3.50%
Liabilities
1.55%
1.97%
13.3.6 Currency risk
Propertize has assets and liabilities denominated in foreign currency. This exposures Propertize
to risk. All currency exposures are measured on a monthly basis, and forward exchange rate
transaction contracts (FX-contracts), which are also regarded as derivative transactions, are bought
to minimise the open foreign currency exposure. Provisions recognised in relation to assets during
the month can result in exposure. Normally, these provisions are known before month-end, as a
result of which the exposure can be mitigated. However, part of the information on other balance
sheet items in foreign currency become available only after the month-end, causing limited
unhedged currency positions. These positions are hedged – if needed – during the first half of the
following month. To reduce the currency exposure, derivatives are bought. This results in a fair
value hedge, in which currency results on assets, liabilities and derivatives are recognised in the
consolidated statement of comprehensive income. Propertize does not engage in hedge accounting.
The currency risk is monitored and reported to the Management Board through a monthly ALM
report.
Until 30 December 2013 the currency risk was mitigated by means of attracting funding in foreign
currency. After the separation of Propertize, the funding could only be closed in euro. To solve
this, Propertize changed its methodology, and bought FX-contracts to minimise the currency risk
on its foreign currency asset exposures.
Exchange rate position 2013
(In € millions)
US dollar
Canadian dollar
Danish krone
Pound Sterling
Total
Assets
41
63
55
48
207
Liabilities
31
1
-
64
96
Balance FX-contracts
10
62
(97)
55
(51)
(16)
111
(148)
Exchange rate postion 2012
(In € millions)
US Dollar
Canadian Dollar
Danish Krone
Pound Sterling
Total
The tables present nominal amounts.
82
Assets
Liabilities
Balance FX-contracts
93
96
(3)
0
123
12300
66
6600
65
66
(1)
0
348351 (4) 0
OTHER INFORMATION
PILLAR III REPORT
Sensitivity exchange rate risk 2013
(In € millions)
US Dollar
Canadian Dollar
Danish Krone
Pound Sterling
Total
Exposure Local currency +10% Local currency -10%
9
1
(1)
(35)
(4)
4
5
0
0
(15)
(2)
2
(37)(4) 4
Sensitivity exchange rate risk 2012
(In € millions)
US Dollar
Canadian Dollar
Danish Krone
Pound Sterling
Total
Exposure Local currency +10% Local currency -10%
(3)
0
0
0
0
0
0
0
0
0
0
0
(3) 00
13.4 LIQUIDITY RISK
The risk that there are insufficient liquid assets available in the short term to meet financial
obligations, whether under normal circumstances or in time of stress, without this leading to
unaccepted costs or losses.
Managing liquidity risk
Liquidity risks are managed on the basis of the net (assets minus liabilities) nominal amounts due
per maturity in a gap profile. The following table represents the gap profile at year-end 2013 on
the basis of the remaining contractual maturity. Until 2013, Propertize was part of SNS Bank NV,
as a result of which liquidity risk management was executed on the level of SNS Bank NV.
Liquidity risk 2013
(In € millions)
< 1
1-3
3-12
1-5
> 5
Total
month
months
months
years
years
Assets
33
55
235
2,260
2,333
4,916
Other receivables
66
-
-
-
-
66
Other assets
-
-
-
-
-
207
-
-
-
-
207
Total assets
306
55
235
2,260
2,333
5,189
Shareholders’ equity
-
-
-
-
1,226
1,226
Liabilities
4,071
-
-
217
121 4,409
Other liabilities
26
-
-
-
-
26
4,081
-
-
354
1,226
5,661
Net liquidity gap (3,774)
55
235
1,906
1,107
(471)
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PROPERTIZE IN BRIEF
Liquidity risk 2012
(In € millions)
< 1
1-3
3-12
1-5
> 5 Provision
Total
month
months
months
years
years
Assets
Loans and advances
to customers
1,487
471
250
1,165
3,242
6,615
Other receivables
-
-
-
-
- Cash and cash
equivalents
203
-
-
-
- 203
Total assets
1,690
471
250
1,165
3,242
-
6,819
Shareholders’ equity
-
-
-
-
(412)
(412)
Liabilities
-
5
-
130 7,945
Other liabilities
53
-
-
-
- 53
Total equity and
liabilities
7,827
-
-
170
(412)
-
7,586
Net liquidity gap (6,137)
471
250
994
3,654
-
(767)
In 2014 the funding of SNS Bank was replaced by MTNs and ECPs. For more information on the
funding programme, please refer to section 5.2 Funding and credit ratings. The funding aims to
mirror the phase-out of the property finance portfolio timelines.
A limited number of Propertize’s customers still have undrawn credits lines. The amount of
undrawn credits from customers is € 71 million (2012: € 153 million), against an amount of
€ 106 million (2012: € 105 million) of endorsed overdrawn. Of the 2013 undrawn credits from
customers, an amount of € 54 million cannot be drawn without prior approval of Propertize, as
the underlying loans are in default.
Liquidity risk policy
Propertize’s liquidity management is based on two pillars. Pillar I is the liquidity buffer, and in
pillar II a shortfall of liquidity with a maturity less than one month may not exceed a maximum
amount. This maximum amount is reviewed internally and discussed on a monthly basis with the
regulatory authorities. The objective of the risk management and policy is to ensure sufficient
liquid assets in the short term as well as anticipating liquidity needs in the longer term.
14 FINANCIAL INSTRUMENTS
14.1 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table shows the fair value of the financial assets and liabilities of Propertize. In a
number of fair value measurements, estimates are used. Balance sheet items that do not meet
the definition of a financial asset or liability are not included. Therefore the total of the fair value
presented below does not reflect the underlying value of Propertize and should not be interpreted
as such.
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OTHER INFORMATION
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Fair value and book value financial assets and liabilities
2013
2012
(In € millions)
Fair value Book value
Fair value Book value
Assets
Loans and advances to customers*
3,116
4,634
3,663
6,294
Other receivables
45
45
111
111
Other assets
67
67
106
106
207
207
203
203
Total assets
3,435
4,953
4,083
6,714
Liabilities
4,409
4,409
7,945
7,945
Other liabilities
151
151
125
125
Total liabilities
4,560
4,560
8,070
8,070
* The financial lease portfolio (IAS 17) is out of scope of IFRS 13 Fair Value Measurement (IFRS 13.6b)
The total value of the Propertize portfolio, consisting of the property projects (€ 810 million, valued
at the lower of cost or net realisable value), financial lease portfolio (€ 282 million,valued ad the
net investment in the lease) and the property finance portfolio (€ 3,116 million,fair value) amounts
to € 4,208 million (2012: € 4,400 million).
Fair value represents the price (exit price) that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants on the balance sheet
date. Fair value is market based, not entity specific. Where observable, the fair values of assets
and liabilities are based on quoted prices (for example, if information is available on the reporting
date of a sale in a subsequent period). If actively quoted market prices are not available, valuation
techniques are used to measure the fair value of these instruments. Parameters used in such
valuation techniques may be subjective and various assumptions are used, for instance for the
discount rate and the timing and size of expected future cash flows. To the extent possible and
available, the valuation techniques make use of observable inputs in relevant markets. Changes in
the assumptions can significantly influence the estimated fair values. Moreover, the calculation of
the fair value is based on market conditions and assumptions as at 31 December 2013 (or more
generally, at a specific point in time) and may not be indicative of future fair values.
The main assumptions for each balance sheet category are explained in the section below.
14.2 NOTES TO THE VALUATION OF ASSETS AND LIABILITIES
The loans and advances to customers consist of property finance loans and financial leases. The
latter is not a financial instrument and not in scope of IFRS 13 Fair value measurement and is
therefore excluded from this fair value disclosure.
The fair value is based on a valuation model with observable as well as unobservable inputs. The
fair value of loans and advances to customers has been established by determining the present
value of the expected future cash flows. For more information, please refer to section 14.3 Fair
value measurement property finance loan portfolio.
Other receivables and other assets
Because of the predominantly short-term nature of other receivables (i.e. issued invoices payable
within 30 days) and other assets, the book value is considered to be a reasonable approximation
of the fair value.
The book value of the liquid assets is considered to be a reasonable approximation of the fair value.
85
PROPERTIZE IN BRIEF
Amounts due to banks consist of short term loans and current account balances.
The book value of liabilities with a remaining term to maturity of three months or less, liabilities
with a State-guarantee and liabilities of which the counterparty is a subsidiary of the Dutch State,
are considered to be a reasonable approximation of the fair value.
Other liabilities
The book value of the other commitments is considered to be a reasonable approximation of the
fair value.
14.3 HIERARCHY IN DETERMINING THE FAIR VALUE OF ASSETS AND
LIABILITIES
No financial instruments other than derivatives measured at fair value are included in the balance
sheet.
Hierarchy financial instruments 2013
(In € millions)
Level 1
Level 2
Level 3 Total Fair
Book
valuevalue
Assets
3,116
3,116
4,634
Other receivables
45
45
45
Other assets
67
67
67
207
207
207
Liabilities
4,409
4,409
4,409
Other liabilities
151
151
151
Hierarchy financial instruments 2012
(In € millions)
Level 1
Level 2
Level 3 Total Fair
Book
valuevalue
Assets
3,663
3,663
6,294
Other receivables
111
111
111
Other assets
106
106
106
203
203
203
Liabilities
7,945
7,945
7,945
Other liabilities
125
125
125
This section starts with a general overview of the distribution of financial instruments among level 1
(the fair value is based on published stock prices in an active market), level 2 (the fair value is
based on observable market data) and level 3 (the fair value is not based on observable market
data). The distribution is followed by a description of the fair value valuation of the loans and
advances to customers (i.e. the property finance loan portfolio).
Disclosure level distribution
Financial instruments that require disclosure of their fair value, are distributed in three levels.
The level is dependent on the parameters used in the fair value measurement, and provides
information on the valuation. The different levels are explained in more detail below:
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Level 1 – Fair value based on published stock prices in an active market
For all financial instruments in this valuation category, published stock prices are observable
from stock exchanges, brokers or pricing institutions. In addition, these financial instruments are
traded on an active market, which allows for the stock prices to accurately reflect current and
regularly recurring market transactions between independent parties.
Level 2 – Fair value based on observable market data
This category includes financial instruments for which no stock prices or market quotes are
available, and instruments in markets that have been identified as being inactive. The fair value
is based on (appraisal) models by external valuation agencies as well as internal independent
appraisers, whereby the input variables in the model consist of available and observable market
information. If certain inputs in the model are unobservable, but all significant inputs are
observable, the instrument is still classified in this category, provided that the impact of those
unobservable inputs on the overall valuation is insignificant.
Level 3 – Fair value not based on observable market data
This category includes financial instruments whose fair value is determined using a valuation
technique (e.g. a model) for which more than an insignificant part of the inputs in terms of the
overall valuation are not observable in the market (i.e. a significant portion of the instrument’s
fair value is driven by unobservable inputs). Unobservable in this context means that there is little
or no current market data available from which the price at which an arm’s length transaction
would be likely to occur can be derived.
Fair value measurement property finance loan portfolio
The basis of the fair value measurement of the property finance loan portfolio is the business
plan 2014-2023 of Propertize. The business plan is based on the total portfolio of loans, financial
leases and property projects. As the financial leases and property projects are not in scope of the
fair value measurement, this section discusses the property finance loan portfolio.
The business plan was set up in 2013. Basis of the business plan was an analysis of the largest
part of the property portfolio. Inputs in the assessment were:
• Regular appraisals by independent qualified valuers of the underlying property (collateral) of
the property finance loan.
• The overall performance of the finance loan, i.e. (non)-default and the counterparty in general.
• The market for (re)financing property finance loans.
The main input variables in relation to the underlying property assessment concern market
transactions, market interest rates, recent interest risk surcharges by type of asset, vacancy
percentages, rent per square meter, the condition and location of the asset, restrictions on the
sale or use of the asset and possible alternative use of the asset.
The projected development of the property finance loan portfolio for the period 2014-2023 is for
a major part based on a bottom-up analysis derived from the outcomes of the aforementioned
project, and the remainder is based on a top-down approach. This implies that the business plan
is for a large part derived from the characteristics and dynamics of the underlying individual
client relation compositions and the related assets, which is in line with the unit of account
requirements of IFRS 13 and IAS 39.
The property finance portfolio was subsequently segmented into three buckets: Healthy, Value
retention & creation, and Disposition. The property finance loans have been classified into either
one of these buckets. The three buckets were then used as input in Propertize’s business plan.
Management considers the business plan fair and reasonable. An average market participant
would use the same approach and consider a comparable set of projections for the valuation of
the property finance loan portfolio. The Ministry of Finance approved the business plan.
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PROPERTIZE IN BRIEF
This business plan has the following main characteristics:
• A ten-year horizon, 2014-2023.
• Three buckets:
- Healthy: normal portfolio with positive outlook.
- Value retention & creation: viable portfolio with moderate to positive outlook.
- Disposition: non-viable portfolio with a negative outlook.
• Per bucket, three cases were defined, leading to a bear, base and bull case. The mid-case
between bear and base case was used for the valuation of the portfolio.
The valuation technique can be classified as ‘income approach’. The model used in the business
plan is a dividend discount model, or flow to equity approach.
Key value drivers and assumptions:
•Loan development, future impairments and interest income derived from the mid-case
business plan.
• Cost of debt of 4%.
• Cost of equity of 13.5%.
• Target funding ratio (capital structure) to finance the portfolio of 70% debt and 30% equity.
• Cost ratio of 75% of Propertize’s operational expenses derived from the business plan.
• An effective tax rate of 25%
Cost of debt
The pre-tax cost of debt consists of three components:
• A risk-free rate
• A spread, which relates to the risk profile (derived from a credit rating)
• A country risk premium
The cost of debt was derived from the IRS-yield (5-years) plus a spread of 300 basispoints
(average of financial institutions with a BBB rating and private equity funds with subordinated
debt). The five years relate to the estimated duration of the portfolio. The Country Risk Premium
is assumed to be nil given the large presence of the property finance loan portfolio’s underlying
properties in the Netherlands.
The cost of debt assumption was tested against the normalised 5-year German Sovereign strips
(0.9%) plus a spread based on a sample of 55 listed European Real Estate Companies (3.1%).
The result is the same: 4%.
Cost of equity
The rate of return on equity capital is estimated using the Capital Asset Pricing Model. The rate of
return is the risk-free rate plus a market risk premium, multiplied by the Beta (ß-multiplier) for
the stock. As peer group financial services institutions were used, and consideration was given to
the funding characteristics of European Real Estate companies.
In addition, several research studies demonstrate that, on average, smaller companies (like
Propertize) have higher rates of return than larger companies. This resulted in an additional stock
premium.
Funding (leverage) ratio
Target Tier 1 ratio’s (regulatory requirement) as well as actual capital ratios of the comparable
companies – the peer group – have increased considerably. A further increase is expected. Recent
transactions – based on public information – show a bandwidth of 60-70% funding by third
parties. Another study into LBO’s 2014 show a split of 30% equity, 50% senior debt and 20%
subordinated debt, which supports the leverage ratio chosen in the valuation.
Cost ratio
Propertize has operational expenses which primarily relate to personnel, general, and
administrative expenses. The 75% allocation of costs is based on the proportional allocation of
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OTHER INFORMATION
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the number of employees towards the property finance loan portfolio, the financial lease portfolio
and the property projects portfolio. The projected wind-down of the property finance portfolio
requires special attention, which is considered in Propertize’s forecast of operational expenses. An
average market participant would most likely make the same considerations, and would therefore
be hesitant to include cost synergies.
Results and sensitivity of the fair value measurement
The fair value of the property finance loan portfolio at 31 December 2013 is € 3,116 million
(2012: € 3,663 million). The fair value is positively impacted over time by (i) the assumed return
on the fair value of the property finance loan portfolio, and negatively impacted by (ii) the actual
return on debt, (iii) the repayment of debt, and (iv) the combination of the realised return on
equity plus the repayment of equity.
The 2012 fair value of € 3,663 million reflects all information available until June 2014 in relation
to the situation that existed on 31 December 2012. The key drivers in the valuation model used
to measure the fair value in 2012 were recalibrated, and the cash flows were calculated with the
same bottom-up analyses used in the 2013 fair value measurement.
Sensitivity analysis key drivers
Variations in the assumptions of Management in relation to the key drivers influence the resulting
fair value. A sensitivity analysis has been conducted on the cost of debt, cost of equity, leverage
ratio and return assumptions on both cost of debt and equity. In the tables, the amount of
€ 3,116 million represents the fair value measurement 2013.
Sensitivity analysis 2013 key drivers
Cost of Debt
3.0%
4.0%
5.0%
Equity Value
960
935
910
Debt Value
2,241
2,181
2,124
Fair Value property finance portfolio
3,201
3,116
3,034
Cost of Equity
12.0%
13.0%
13.5%
14.0%
15.0%
Equity Value
963
944
935
926
908
Debt Value
2,246
2,202
2,181
2,160
2,119
Fair Value property
finance portfolio
3,209
3,146
3,116
3,086
3,027
Leverage
25.0%
30.0%
35.0%
Equity Value
799
935
1,064
Debt Value
2,396
2,181
1,976
Fair Value property finance portfolio
3,195
3,116
3,040
Return Assumptions
Cost of Debt (Pre-Tax)
3.6%
3.8%
4.0%
4.2%
4.4%
Cost of Debt (Post-Tax)
2.7%
2.9%
3.0%
3.2%
3.3%
Cost of Equity (Post-Tax)
12.2%
12.8%
13.5%
14.2%
14.9%
WACC
5.5%
5.8%
6.2%
6.5%
6.8%
Equity Value
970
952
935
918
901
Debt Value
2,264
2,222
2,181
2,141
2,103
Fair Value property
finance portfolio
3,235
3,174
3,116
3,059
3,004
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PROPERTIZE IN BRIEF
Overall conclusion on the sensitivity analysis shows that the variation in key drivers results in a
range of € 3.0 - 3.3 billion.
The fair value calculations, results and assumptions have been reviewed by an independent
external consulting firm.
15 NON-FINANCIAL RISK MANAGEMENT
As described in the risk classification, Propertize recognises both financial and non-financial risks.
Non-financial risks include strategic, integrity and operational risks. The Compliance department
is one of the departments monitoring and advising on the management of these non-financial
risks.
During 2013, the management of non-financial risks was executed according to the three lines of
defense. Please refer to section 12.2.
15.1 MANAGEMENT OF NON-FINANCIAL RISKS
Propertize has taken several measures to manage non-financial risks. The main components are
the following:
•A clear governance structure, including a clear assignment of duties and responsibilities
and escalation routes, supported by a clear risk management structure. For this purpose
SNS REAAL implemented a so-called ‘Three lines of defence’ model. In 2014, we continue
to use our own three lines of defence model.. This means that line management is primarily
responsible for recognising and managing the risks and decision-taking in this area. CS&O,
together with a number of other staff departments at group level, plays an important
monitoring role as the second line of defence and has the possibility to escalate, where
necessary. The third line of defence is Group Audit, which assesses the structure and
functioning of the entire system of management independently of the line organisation.
• The Group policies formulated by CS&O, including the operational risk framework, in the area
of ethical business management for the non-financial risks. CS&O advises on their translation
within the business segments if so requested and monitors their compliance.
• The Training & Awareness Programme to make management and employees conscious
of integrity and the management of non-financial risks. It includes information meetings,
e-learning, presentations and train-the-trainer workshops.
• A central point where employees can report various types of incidents, such as fraud,
unwanted behaviour and information security issues. It has been set up to ensure that risks
are timely reported so that consequential damage can be prevented or limited and adequate
measures can be taken to prevent similar incidents from happening in the future. Staff can
also report incidents anonymously as whistle-blowers.
• Signals of fraud will always be investigated. Fraud investigations are carried out on a risk
basis, possibly with specialist external support. Please refer to section 17.14.2 Claims and
legal cases, subsection Irregularities.
• There is a monitoring program that is implemented by CS&O in consultation with Group
Audit every year. Using a risk-based analysis it is decided every year which resources will be
deployed for relevant topics.
• The periodic in-control statements by the management of the business segments and the
members of the Executive Board of SNS REAAL. In these statements they report on the most
important risks and the accompanying management measures, the improvements made
compared to the previous period and which improvement actions are being undertaken. The
in-control statements identify the most important risks.
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16 CAPITAL MANAGEMENT
16.1 GOING CONCERN CAPITAL MANAGEMENT
Propertize has prepared a strategic plan for the period 2014 – 2023, i.e. the period during which
Propertize plans to phase-out the property finance loan portfolio and its real estate.
This strategic plan is translated into an operational plan with a 3-year horizon. This plan is
reviewed annually. Based on the operational plan, Propertize prepares a capitalisation and funding
plan with the same horizon, in which the expected development of the capital and funding
available is compared to the capital and funding requirements ensuing from the operational plans.
In addition to the capitalisation and funding plan, a 12-month rolling forecast of capitalisation
developments is made, which is discussed by the Management Board. This forecast is used to
control the funding needed, the roll-over of the 3, 6 and 9-month’s ECPs, and in the longer term
the MTNs. This quantitative assessment of the capital and funding position is confronted with
the applicable internal standards, supervisory restrictions and rating agencies requirements with
regard to the composition of capital and funding.
The strategic, capitalisation and funding plan translate in a number of objectives, summarised in
the next section.
16.2 OBJECTIVES
Propertize’s capitalisation focuses on the optimisation of the capital structure in such a manner
that it contributes to the realisation of Propertize’s strategy. Propertize’s capital management
objectives are:
• T
he Dutch State has strengthened the capital of Propertize by means of € 500 million at the
end of 2013. The strategic objective of Propertize is to maintain this capital, i.e. the capital
position of Propertize will not end up below € 500 million.
•Propertize has prepared a base and bear case of its portfolio. The objective is that in a bear
case situation Propertize will have ample capital.
• A liquidity buffer of € 100 million as a minimum.
• A liquidity shortfall of maximum € 200 million according to the 12-months rolling forecast of
amounts due within one month.
The objectives have been discussed with the regulatory bodies.
ILAAP
In 2013, the liquidity adequacy of Propertize was assessed on SNS Bank level, as Propertize was
part of SNS Bank. With the ILAAP (Internal Liquidity Adequacy Assessment Process) the available
amount of liquidity is determined, and assessed whether it is sufficient compared to the amount
of liquidity deemed necessary. As from 2014, Propertize is exempt from ILAAP assessment and
reporting.
16.3 CAPITAL AND SOLVENCY POSITION
Solvency position
In the table below, which is also disclosed in chapter 26 Pillar III report, an overview of the
capital requirements and the Risk Weighted Assets (RWA) as of 31 December 2013 divided by
the different risk types is presented. The RWA for credit risk comprises 97.6% of the capital
requirements in Propertize.
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PROPERTIZE IN BRIEF
Risk weight
Exposure
RWA
Capital
value Requirement
in € millions
2013201320132013
Credit risk
Standardised exposures classes:
- Institutions
20%
207
41
3
- Secured by real estate
0%
13
0
0
20%
10
2
0
35%
0
0
0
100%
4,563
4,563
365
150%
429
643
51
- Past due items
50%
25
12
1
100%
133
133
11
- Other items
0%
35
0
0
100%
722
722
58
6,1376,117 489
Market risk*
- StandardisedN/AN/AN/A
Operational risk
- Standardised
142
11
Total6,1376,258 501
Capital requirements and risk weighted assets
* Propertize has no trading book
The net loss of 2013 was more than compensated by the capital injections of both SNS Bank and
the Dutch State. The Tier-1 ratio ended up at 8.01% at year-end 2013, with a Tier-1 capital of
€ 501 million, and risk weighted assets of € 6,258 million.
Propertize had no Tier-2 or Tier-3 capital. Of the eligible capital of € 1,226 million at yearend
2013, expected losses in the amount of € 725 million are deducted to arrive at the
abovementioned Tier-1 capital. The € 725 million deduction reflects the difference between the
transfer value of the portfolio and the aggregate incurred loss recognised at 31 December 2013,
net of tax. At the instruction of DNB, this amount is deducted from Tier-1 capital (so-called
prudential filter).
(In € millions)
31 December 2013
Total Tier 1 capital
1,226
Dutch Central Bank prudential filter
(725)
Total own funds for Solvency purposes
501
Total Risk Weighted Assets (RWA)
6,258
Solvency ratio (%)
8.01%
Capital requirement operational risk
To calculate the capital that must be maintained as a buffer for the manifestation of operational
risks, the standardised approach is used during 2013, as SNS REAAL used this approach. As of
2014 the basic indicator approach will be used by Propertize to calculate the capital required. The
adequacy of the capital for operational risk is assessed every year.
Capital adequacy
In 2013, the capital adequacy of Propertize was assessed on SNS Bank level, as Propertize was
part of SNS Bank. SNS Bank assesses its capital adequacy, amongst others, by conducting the
Internal Capital Adequacy Assessment Process (ICAAP). In the ICAAP, the available own funds are
compared to the capital requirements imposed by the regulatory authority (Regulatory capital)
and on the basis of stress testing. As from 2014, Propertize is exempt from ICAAP assessment
and reporting.
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Tailer-made reporting
In anticipation of its separation of SNS Bank NV Propertize engaged in constructive dialogue
with his stakeholders, including DNB, to develop a sustainable regulatory framework. In view
of his unique situation Propertize is in need of a tailor-made framework. Accordingly, Propertize
will file an application with DNB to withdraw its banklicense, after the adoption of these financial
statements. Following Propertize’s application DNB is expected to agree to withdraw Propertize’s
bank license, whilst simultaneously instructing Propertize to wind-down its remaining activities
and operations in accordance with the provisions of section 1:104 paragraph 3 of the Dutch
Financial Supervision Act.
DNB will impose several conditions and instructions on Propertize, all aimed at ensuring that
such winding-down takes place in an integer and controlled way for as long as the wind-down
operations shall last, in accordance with (i) applicable laws and regulations, (ii) instructions
previously provided by DNB, and (iii) the working arrangements provided by NLFI. The DNB
instruction to wind-down Propertize’s activities pursuant to aforementioned section 1:104
paragraph 3 of the Dutch Financial Supervision Act, ensures a tailor made DNB supervisory
regime regarding Propertize’s wind-down activities, enabling Propertize to wind-down its activities
as currently contemplated.
The main waivers and allowed deviations given by DNB in relation to the sustainable regulatory
framework are:
2013:
• Country concentration risk report
•Sector concentration risk report
• Interest risk report
• Immobilia treshold
• Large exposures treshold
As of 2014:
•The aforementioned waivers 2013
•ICAAP assessment and reporting
•ILAAP assessment and reporting
•Basel III monitoring
17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17.1 TANGIBLE FIXED ASSETS
Propertize has no land and buildings in own use. The three floors in the Graadt van Roggenweg
500 are rented from SRLEV NV. Please refer to chapter 17.13 Off balance sheet commitments.
Specification tangible fixed assets
(In € millions)
Land and buildings in own use
IT equipment
Other assets
Total
2013
-
-
1.7
1.7
2012
1.5
1.5
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PROPERTIZE IN BRIEF
Statement of changes in tangible fixed assets
(In € millions)
Accumulated acquisitions costs
Accumulated amortisation and impairments
Balance as at 31 December
2013
2.4
(0.6)
1.7
2012
1.9
(0.4)
1.5
Balance as at 1 January
Investments
Divestments
Depreciation
Exchange rate differences
1.5
0.6
(0.0)
(0.3)
(0.1)
1.7
1.9
(0.0)
(0.3)
(0.0)
1.5
The other assets comprise the machinery and equipment of the Bonita Grande project in the USA,
Florida State (€ 1.5 million) and office equipment of Propertize (€ 0.2 million).
17.2 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
The financial year of all material associates and joint ventures is consistent with the reporting
date of Propertize.
Specification of investments in associates and joint ventures
(In € millions)
Associated companies
Joint ventures
Total
2013
0.7
0.9
1.6
2012
2.2
0.9
3.1
Statement of changes in investments in associates and joint ventures
(In € millions)
2013
2012
3.1
16.7
Reclassifications
Purchases and expansions
8.1
1.1
Disposals and divestments
(2.1)
(1.9)
Share in result of associates
-
Revaluations
Paid dividend
Impairments (including reversals)
3.0
(12.8)
Other movements
(10.6)
(0.0)
Transfer assets held for sale
1.6
3.1
Overview most significant investments in associates 2013
(In € millions)
Country Interest
Share
Share
in equity in result
Kapelaansdijk I BV NL
25%
0
-
Koppelenweg I BV NL
33.3%
1
-
Zwarte Land CV NL
1.0%
0
-
De Locht C.V.
NL
1.0%
0
-
ZOM City Place LP
US
14.3%
-
-
Oranje C.V.
NL
1.0%
0
-
Total
1
-
94
Assets Liabilities
37
34
8
1
1
0
81
38
32
7
1
-
2
79
Income
5
2
1
0
0
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The Dutch entities in the table above relate to property for which Propertize has engaged in
financial lease loan contracts. Subsequently, although Propertize holds less than 20% of the
voting power, Propertize still holds legal title to the property, has a financial interest in the
associates, certain veto rights on important decisions and the lessee has an unguaranteed option
to purchase the property at the end of the lease term. Therefore management has concluded that
Propertize has significant influence, however no control since the majority of the rewards and
risks are transferred by Propertize to the lessee.
Overview most significant investments in associates 2012
(In € millions)
Country Interest
Share
Share
in equity in result
Überseequartier Project BV
DE
44.8%
-
-
Prospect Village LP
US
29.7%
-
-
The Park at Brushy Creek Ltd US
11.7%
1
-
Koppelenweg I BV
NL
33.3%
1
-
Other
Divers 1%-30%
0
-
Total
2
-
Assets Liabilities
66
41
22
35
112
276
Income
74
31
16
33
91
245
6
(1)
15
20
End of 2013, some shareholder loans of Propertize in Űberseequartier BV (USQ) were transferred
into equity (€ 8 million). As a result of this Propertize’s share increased to 50%. A reassessment
of the facts and circumstances in relation to power and the variability of returns led to conclude
that Propertize had control of USQ (under IFRS standards). USQ was consequently derecognised
as an associate and accounted for as a subsidiary as from September 2013.
A total of € 33 million (2012: € 66 million) of loans was granted to associates. These are included
under ‘loans and advances to customers’. At year-end 2013, the associates have no investment
commitments (2012: nil).
Overview most significant joint ventures 2013
Assets
Liabilities
Country Interest Share Share Current Non- Current Non- In- Exinin
current
current
come
pen
equity result
ses
Retail Fund North
Holding B.V.
NL
33%
-
-
3
65
86
1
5
7
Alaska Building B.V.
NL
28%
-
-
0
64
75
2
5 18
LPM / BFP Holding VOF DE
50%
0
-
3
42
2
43
- 0
Heyen Vastgoed
Beleggingen BV
NL
50%
-
-
1
34
0
30
2
2
Homburg
SNS Property
Finance LP
CA
50%
0
-
2
27
3
23
11 12
Post-X-Change B.V.
NL
50%
-
-
24
-
1
64
- 4
Other
Divers15%-50%
1
-
37
14
46
60
6 27
Total
1
-
69 245
213 223 29 70
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PROPERTIZE IN BRIEF
Overview most significant joint ventures 2012
Assets
Liabilities
Country Interest Share Share Current Non- Current Non- In- Exinin
current
current
come
pen
equity result
ses
Alaska Building B.V.
NL
28%
-
-
0
82
79
2
4
4
Retail Fund
North Holding B.V.
NL
33%
-
-
2
68
87
1
5 20
Post-X-Change B.V.
NL
50%
-
-
62
-
1
58
1
1
Homburg
SNS Property
Finance LP
CA
50%
0
-
60
-
61
- 14 16
V.O.F. To Say Hello
NL
25%
-
-
0
52
5
40
5
2
LPM / BFP Holding VOF DE
50%
0
-
3
42
6
53
- 0
Heyen Vastgoed
Beleggingen BV
NL
50%
-
-
0
40
1
30
2
2
Other Divers 1
5%-50% 1
-
73 4
61 29 3 12
Total
1
-
200 288
302 213 35 57
The joint ventures have been granted a gross total amount of € 440 million (2012: € 759 million)
of loans and advances. These are presented under the loans and advances to customers. At
year-end the joint ventures have € 46 million (2012: € 46 million) investment commitments.
Propertize exercises joint control of the joint ventures together with real estate development
partners, without any unilateral control by one of the participants.
17.3 PROPERTY PROJECTS
Specification property projects
(In € millions)
Property projects (at cost)
Cumulative impairments / (reversals) as at 31 December
Total
2013
1,318
(508)
810
2012
810
(394)
416
2013
416
2012
512
576
(23)
(158)
(4)
2
810
140
(39)
(210)
(1)
14
416
Statement of changes in property projects
(In € millions)
Balance property projects as at 1 January
Reclassifications
Additions and Foreclosures
Disposals
Impairments
Other changes
Balance property projects as at 31 December
The additions mainly concern gaining control (under IFRS standards) and subsequent
consolidation of three projects, Űberseequartier Project BV (USQ) in Hamburg (Germany), New
Babylon The Hague (the Netherlands) and a portfolio of residential property in the Netherlands.
The property projects are mainly located in Western Europe.
The WACC used to discount the estimated sales price at year-end 2013 is the WACC of Propertize
(4.2%). In 2012 the WACC of SNS Bank was used (5%).
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17.4 LOANS AND ADVANCES TO CUSTOMERS
Specification loans and advances to customers
(In € millions)
Property finance
Undrawn credits
Outstanding loans (gross amount)
Provisions on loans
Total property finance (net)
Financial lease (gross)
Provisions on loans
Financial lease (net)
Total loans and advances to customers (net)
2013
6,379
(35)
6,413
1,780
4,633
288
6
282
4,916
2012
7,555
48
7,507
1,213
6,294
326
5
321
6,615
The undrawn credits line item is a net position. The amount of undrawn credits from customers
is € 71 million (2012: € 153 million), against an amount of € 106 million (2012: € 105 million)
of endorsed overdrawn. Of the 2013 undrawn credits from customers, an amount of € 54 million
cannot be drawn without prior approval of Propertize, as the underlying loans are in default.
The property finance loans and financial leases are backed by collateral.
Financial leases
Overview maturities 2013
(In € millions)
< 1 year
1 - 5 year
> 5 year
Total
Gross
82
163
74
319
Unearned interest
(10)
(19)
(8)
(37)
Net
72
144
66
282
Overview maturities 2012
Gross
89
183
96
368
Unearned interest
(11)
(24)
(12)
(47)
Net
78
159
84
321
The financial lease assets are included in the balance sheet as advances to customers of which
the amount is equal to the net investment in the lease. The financial lease activities relate to the
financing of property in the Netherlands. The amount of unguaranteed residual values (the value
for which the lessee has a call option to purchase the asset at the end of the term of the lease) is
€ 184 million (2012: € 196.5 million). In addition, some contracts include the option of the lessee
to purchase the asset at the market value at the end of the term. The residual values are remeasured on a regular basis, together with the other property finance loans, and a provision for
any shortfall is taken, if necessary.
Statement of changes in loans and advances to customers
(In € millions)
Consolidations and foreclosures
Additions
Redemptions
Movement in current accounts
Other movements
2013
7,833
(461)
39
(681)
(16)
(12)
-
6,702
2012
9,538
(174)
59
(1,582)
(1)
(7)
7,833
97
PROPERTIZE IN BRIEF
Statement of changes in provision loans and advances to customers
(In € millions)
Consolidations and Foreclosures
Withdrawal
Addition
Release
Other movements
2013
1,217
(185)
(131)
987
(128)
26
1,786
2012
637
(34)
(128)
799
(82)
24
1,217
Consolidation and foreclosures resulted in a decrease of the provision; the loans and related
provisions are subsequently recognised in the balance sheet under ‘property projects’.
Withdrawals relate to the end of the term, transfer or sale of a loan, and subsequent
derecognition of the related loan and provision on the loan.
The net amount of ‘Addition’ and ‘Release’ ties-in with the related figure in the statement of
comprehensive income, line item impairments. Please refer to section 11.4.5.2 Impairments.
17.5 DEFERRED TAX ASSETS AND LIABILITIES
Specification deferred tax assets and liabilities
(In € millions)
Deferred tax assets
Total 2013
9
(249)
(240)
2012
8
(8)
(0)
The deferred tax liability relates to the difference between the tax and accounting valuation of
the loan portfolio and property projects portfolio. The future expected losses, of gross € 967
million are non-tax deductible, as SNS Bank has taken these into the tax valuation prior to the
deconsolidation of Propertize. Please also refer to section 17.23 Taxation.
Origin of deferred tax assets and tax liabilities 2013
(In € millions)
1 January
Change
Other
31
throughmovements December
profit or loss
(6)
0
(5)
Provision for employee benefits
2
1
4
Other
3
(241)
(238)
Total
(0)
(240)
-
(240)
Origin of deferred tax assets and tax liabilities 2012
(In € millions)
1 January
Change
Other
31
throughmovements December
profit or loss
(5)
(0)
(6)
Provision for employee benefits
-
2
2
Other
5
(2)
3
Total
(0)
(0)
-
(0)
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Current tax assets and liabilities
(In € millions)
Current tax assets and liabilities within fiscal unity
Current tax assets and liabilities outside fiscal unity Total
2013
8
(0)
8
2012
(210)
(0)
(211)
2013
41
4
45
2012
97
14
111
17.6 OTHER RECEIVABLES
Specification other receivables
(In € millions)
Mortgage debtors
Other receivables
Total
Mortgage debtors comprise the (short-term) invoices issued to the clients in relation to the
investment finance and financial lease portfolio. Other receivables consist of receivables from
participants and tenants including any related provisions (€ 6 million). There are no other
receivables from related parties.
17.7 OTHER ASSETS
Specification other assets
(In € millions)
Accrued interest
Other accrued assets
Accrued assets
Other taxation
Other advances
Total
2013
11
25
36
5
25
67
2012
13
18
30
10
65
106
In 2012, the shareholder loans of USQ in the gross amount of € 48 million were included under
other advances. The other taxes relate to VAT and social securities.
17.8 CASH AND CASH EQUIVALENTS
Specification cash and cash equivalents
(In € millions)
Cash and balances with other banks
Total
2013
207
207
2012
203
203
This item relates mainly to the free available bank balances of Propertize and her subsidiaries at
SNS Bank in the amount of € 175 million (2012: € 183 million). The cash position at SNS Bank
consists of € 212 million receivables and € 37 million liability. The restricted demand deposits
amount to € 8.6 million, relate to projects in North-America and Germany, and are not available
for use in Propertize’s day-to-day operations.
17.9 EQUITY
Specification equity
(In € millions)
Equity attributable to shareholders
Minority interest
Total
2013
1,226
-
1,226
2012
(412)
(412)
The number of issued and paid-up shares is 50,003 with a nominal value of € 1 per share.
For further information on total equity, see paragraph 10.3 Consolidated statement of changes in
total equity.
99
PROPERTIZE IN BRIEF
17.10 PROVISIONS
17.10.1 Specification provision for employee benefits
As the ABP pension scheme is treated as a defined contribution scheme, Propertize has no
provision for post-employment benefits on the balance sheet.
The obligation for holiday commitments (holiday allowance of the personnel at the end of the year
not taken up) is presented under ‘Other liabilities’.
The restructuring provision is disclosed in note 17.10.2.
17.10.2 Other provisions
Specification other provisions
(In € millions)
Total
2013
14
14
2012
9
9
Statement of change in other provisions
(In € millions)
Additions
Withdrawal
2013
2012
9
5
6
6
(1)
(2)
14
9
The restructuring provision relates to the changed business model of Propertize, which is the
optimisation of value and cash flows of the total portfolio in the wind-down of the total portfolio of
both property finance loans and projects in a period of ten years, as from 2014. The timing of the
usage of the provision in this ten-year period is uncertain, and depends on the developments in
the wind-down of the property projects and property finance portfolio.
As the wind-down is a certainty, Propertize has recognised a restructuring provision for all
Propertize staff. The best estimate of the expenditure required is, inter alia, based on the number
of staff, the expected time of the wind-down, the terms and conditions of the social plan and other
constructive obligations arising from employee benefit contracts. The expected cash outflows are
discounted at 3% (2012: 3%). The interest recognised of the unwinding of the discount on those
expected cash flows is € 0.2 million (2012: € 0.1 million).
17.11 AMOUNTS DUE TO BANKS
Specification amounts due to banks
(In € millions)
Loans
Total
2013
4,409
4,409
2012
7,945
7,945
The amounts relate to the short-term funding of Propertize by SNS Bank NV of € 4,055 million
(2012: € 7,774 million), and other foreign banks € 354 million (2012: € 171 million). Of the
€ 354 million, an amount of € 27 million is due within one to five years; the remainder is shortterm. The State of The Netherlands has provided a maximum guarantee of € 4,055 million with
respect to loans that SNS Bank has provided to Propertize. Meanwhile this financing by SNS
Bank to Propertize has been replaced with that from third parties in the form of Notes issued by
Propertize under a Programme for the issuance of guaranteed (step compliant) Eurocommercial
paper and guaranteed (non-step compliant) Medium Term Notes.
For more information on this programme please refer to section 5.2 Funding and credit ratings in
the annual report.
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17.12 OTHER LIABILITIES
Specification other liabilities
(In € millions)
Trade creditors
Un-earned interest income non consolidated participations
Other liabilities (accruals and deferred income)
Accrued interest
Total
2013
23
23
100
5
151
2012
51
21
46
7
125
Un-earned interest income non-consolidated participations comprise the correction of interest income
on loans to associates and joint ventures. Other liabilities comprise accruals and deferred income.
17.13 OFF BALANCE SHEET COMMITMENTS
17.13.1 Contingent liabilities
Guarantees
Propertize has given guarantees to third parties in the amount of € 35.8 million (2012: € 115.9
million). The decrease is related to the settlement of guarantees.
Included in the guarantees is the guarantee that Propertize has issued to SNS Financial Markets
as beneficiary for the guaranteed margin on the derivates that SNS Financial Markets has
concluded on behalf of customers of Propertize.
Duty of care
A number of Propertize’s customers has a property finance loan contract including variable
interest. In addition, these customers closed a financial derivative contract with SNS Bank.
Propertize has issued a guarantee to SNS Bank in relation to the payment requirements of this
customer group after settlement of the derivative.
In the context of the disentanglement of Propertize and SNS REAAL, agreements have been made
concerning the settlement of the derivatives. The aforementioned guarantee of Propertize does
not cover any payments to customers of possible duty of care issues in relation to the closed
derivative contracts. To date, no agreements have been made between Propertize and SNS Bank
on this subject.
17.13.2 Operational lease commitments
In its daily operations Propertize has entered into operational lease commitments with:
• SRLEV NV / GVR Building 500 (rent of three floors and parking lots, Graadt van Roggenweg
500 in Utrecht). It concerns a 5-year contract. Propertize may decide to renew the lease for
consecutive periods of 2.5 years at the end of the first term. The annual rent is € 0.7 million.
• Services (cleaning, security etcetera) in relation to the rent of Graadt van Roggenweg 500.
3-year contract, with annual rent of € 0.1 million.
• Car lease contract. The number of cars leased is approximately 40-45, annual total rent
€ 0.5 million, with a 5-year contract (cancellable upon a penalty).
The total amount of future minimum payments based on irrevocable operational leases amounts
to € 5 million, of which € 1 million within one year, and the remainder between 1-5 years.
17.14 LEGAL PROCEEDINGS
17.14.1 Nationalisation
Various former holders of expropriated securities and capital components of SNS REAAL have
initiated legal proceedings to seek compensation for damages in connection with the nationalisation
of SNS REAAL. At the time of drawing up the financial statements, no court proceedings had
(yet) been initiated against Propertize BV. Currently, it is not possible to make an estimate of
the probability that possible legal proceedings of original holders or other parties affected by the
nationalisation may result in liability, or the level of the financial impact on Propertize BV. For this
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PROPERTIZE IN BRIEF
reason, at year-end 2013 no provisions have been made in respect of possible legal actions by
holders concerning the expropriated securities and capital components of SNS REAAL and other
affected parties. As the outcomes of possible legal proceedings cannot be predicted with certainty,
it is not possible to rule out that a negative outcome could potentially have a material negative
financial impact on the capital position, results and / or cash flows of Propertize BV.
17.14.2 Claims and legal cases
Propertize is involved in legal proceedings. Although it is impossible to predict the result of
pending or threatening legal proceedings, on the basis of information currently available and after
consulting legal advisors, the Management Board believes that the outcome of these proceedings
is unlikely to have any material adverse effects on the financial position or operating results
of Propertize. A litigation provision is recognised for those claims and legal cases which are
more likely than not (> 50%) to result in a possible outflow of economic benefits. Based on the
assessment of the various litigation and arbitration proceedings, no litigation provision has been
recognised at year end 2013.
Legal costs in relation to the day-to-day operation of Propertize of the loans and advances and
property projects are included in the estimated cash flow calculations underpinning the provisions
of the aforementioned items.
Irregularities
The integrity investigation initiated in 2012 following signals of possible conflicts of interest and
fraud by external members of staff of Propertize was continued in 2013. In this investigation the
signals from forensic audits that had already commenced were also examined.
The investigation comprises two components:
1 The signals relating to an alleged conflict of interest and irregularities regarding invoices and
statements of expenses of external members of staff of Propertize;
2 A detailed investigation to establish whether any irregularities had occurred in respect of
projects and divestments of Propertize. It concerns a risk-based selection of these projects
and divestments based on the available signals.
As a result of the investigation regarding the first component, within Propertize a number of
irregularities were found to have occurred, resulting in the termination or non-renewal of the
working relationship with 18 external members of staff, including one former director and several
members of Propertize’s management team. In consultation with Propertize, SNS REAAL reported
in 2013 to the law enforcement authorities four instances of suspected criminal offences against
several persons, including those apparently committed by one of the former directors of Propertize.
Propertize is co-operating to the best of its ability with the law enforcement authorities and their
investigation efforts, all this with due observance of the applicable legal framework and codes of
conduct / professional codes. The investigation into a presumed conflict of interest, irregularities
and malversation was led within SNS REAAL by Group Audit in close cooperation with Compliance
and Security. For this purpose SNS REAAL engaged a number of professional external (forensic)
parties so that the investigation could be performed as effectively as possible.
The irregularities regarding invoices and statements of expenses have caused damages to
Propertize. Various recourse actions are currently being contemplated. If these recourse actions
end-up being successful, the proceeds will accrue to Propertize. Certain issues may still come to
light during the investigation which will affect the valuation of the assets and liabilities of Propertize.
As of 31 December 2013, when SNS Property Finance was spun off, the responsibility for the
integrity investigation passed to Propertize. Propertize will complete the investigations concerned
with utmost care.
Claims
Propertize is confronted with a number of claims. The most important ones are mentioned below.
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Nawon
Nawon International Estates II BV, Nawon International Estates III BV and Nawon Holding BV.
(hereafter: Nawon) announced Propertize in a letter dated 11 December 2012 that Nawon holds
Propertize responsible for damage already and still to be suffered for an amount of around € 50
million. On 31 January 2013, Nawon requested DNB to investigate this at Propertize. According to
Nawon, Propertize, as a financer of Nawons German real estate portfolio, has violated its duty to
care. On 26 February 2013, Propertize rejected all liability claims. Propertize has not yet received
a subpoena from Nawon.
Meanwhile, Nawon Holding BV has filed bankruptcy and the appointed trustee has asked the other
Nawon parties to provide evidence supporting their alleged claims against Propertize. The counsel
of Nawon provided the trustee with the requested support on 10 February 2014. On 18 February
2014 Propertize discussed matters with the trustee. The chances that the trustee will take on the
claim of Nawon against Propertize seem unlikely as - in Propertize’s view - there are no grounds
for a liability claim.
Union de Sociedad The Key en Colmar Group Spain
Mr. R. Ras, a property developer who was involved with the construction and development of a
number of Spanish real estate projects that are financed by Propertize, states to have a claim
against Propertize for an amount of more than € 408 million because of supposed damage
suffered on these projects by the acts of Propertize. This claim is not supported with any
arguments. On 10 January 2013, Mr. Ras showed NOS Television a Spanish payment request
(“acto de conciliación”) addressed to Propertize, in which Propertize is summoned to appear
before a Spanish judge in order to acknowledge the aforementioned amount is due. Till this day,
Propertize has not yet received this payment request. Propertize strongly denies to be obligated
to pay the amount of € 408 million.
As the status of this alleged claim has not changed since January 2013, Propertize considers the
risk to be low.
Belval
One of Propertize’s property projects is the project Belval Plaza in Luxembourg. Since the loans
were not repaid as agreed, in 2009 Property Finance started to enforce its collateral, and as a
result Belval Plaza is now fully controlled by Property Finance (and its subsidiary).
Various (sub)contractors and suppliers started a legal procedure against the Belval Plaza companies
for the payment of outstanding invoices and alleged compensation. To date, some disputes have
been settled, withdrawn, or are still ongoing. Propertize is still strongly rejecting all remaining claims.
Moreover, in the second half of March 2013, 14 tenants of the commercial centres Belval Plaza I Mall
and Belval Plaza II issued a claim against the Belval companies and four subsidiaries of the SNS
REAAL group (including Propertize) for alleged compensation of more than € 16 million. To date,
several tenants have already waived their claim, and with a few others waiver negotiations are in
progress. The compensation amount was subsequently lowered to € 13 million. Both parties have
pledged their views on the matter to the court. No hearing date has been set by the court, as of yet.
Finally, mid-April 2013, the Multiplan Group NV, SA Circle EU Holding, and Mr. C. van Erp,
resident of Switzerland, requested the court in Utrecht for a preliminary hearing of witnesses. The
request is aimed to hear more than thirty employees, former employees, external employees,
managers and former managers of Propertize (and its legal predecessor) as well as third parties
(subcontractors) regarding their involvement in the Belval project. On 11 September 2013 the
court ruled against the parties making the request for a witness hearing. On 10 December 2013
van Erp c.s. appealed against the ruling of the court. Early March 2014 Propertize and its affiliated
company PRPZ Financiering Participaties B.V. filed their statement of reply in the appeals case.
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PROPERTIZE IN BRIEF
Trustees of 2SQR Holding
The trustees of 2SQR companies have indicated its intention to sue Propertize on the grounds of
illicit actions and breach of contract. They claim that as a result of the actions of Propertize the
2SQR companies went bankrupt in 2011. The trustees have indicated that their claim relates to
the entire asset shortfall of approximately € 150 million. The amount claimed has not yet been
substantiated in great detail. Propertize has indicated it will accept no responsibility.
To date Propertize has not yet received the formal statement of claims.
In February 2014, the trustees have challenged in court the termination with effect from January
1, 2014 by SNS REAAL NV and SNS Bank NV of their liability statement (“403 verklaring”) as
referred to in Book 2, Section 403 of the Dutch Civil Code for Propertize, and the withdrawal of
SNS REAAL NV’s and SNS Bank NV’s remaining liability. In May 2014, the Utrecht court of first
instance has issued an interim ruling, granting Propertize the possibility to bring into evidence
its financial statements 2013 and allowing SNS REAAL and SNS Bank the possibility to present
further arguments to reject the trustees challenge, based on such financial accounts 2013.
Terminated external former members of staff
A number of external members of Propertize’s staff, whose contracts were terminated in
connection with or as a result from the integrity investigation initiated in 2012 and continued in
2013 following signals of possible conflicts of interest and fraud by external members of staff at
Propertize, have initiated legal proceedings against Propertize. Propertize is rejecting the claims
made by these former members of staff.
17.15 RELATED PARTIES
A related party is a person or entity that has significant influence over another entity, or has
the ability to affect the financial and operating policies of the other party. Parties related to
Propertize include SNS REAAL, SNS Bank, NLFI with control, the Dutch State (Ministry of Finance)
with significant influence, associates, joint ventures, managers in key positions and close family
members of any person referred to above, entities controlled or significantly influenced by
any person referred to above and any other related entities. Propertize has applied the partial
exemption for government-related entities as described in IAS 24 paragraphs 25-27.
Propertize maintains various sorts of ordinary business relations with related companies and
parties, particularly in the area of financing and the group staff departments of SNS REAAL.
Transactions with related parties are conducted at arm’s length, with the exception of transactions
with the Dutch State.
17.15.1 Positions and transactions between Propertize, associated companies
and joint ventures
Associated companies
Joint ventures
Total
(In € millions)
201320122013201220132012
Positions
Loans and advances
(gross)
33
66
440
759
473
825
(10)
(8)
(244)
(156)
(254)
(165)
Loans and advances (net)
24
58
196
602
219
660
Transactions
Interest income
2
4
19
22
21
26
Change in loans and
advances (provision)
(2) 14 (88) (67) (89) (53)
In 2013, shareholder loans in Uberseequartier were converted into equity in the amount of
€ 48 million. As a result of this, Propertize’s share increased to 50%. Please refer to section 17.2
associates and section 24 Overview of principal subsidiaries.
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17.15.2 Positions and transactions between Propertize and SNS Bank
(In € millions)
2013
2012
Positions
175
183
4,055
7,774
Other liabilities
5
15
Transactions
Interest expenses
89
167
The State of The Netherlands has provided a maximum guarantee of € 4,055 million with respect
to loans that SNS Bank has provided to Propertize. Immediately before the transfer of shares
of Propertize from SNS Bank to the Dutch State, SNS Bank strengthened the capital position of
Propertize with € 725 million share premium.
Please also refer to section 20.1 Guarantees of the Company financial statements.
17.15.3 Positions and transactions between Propertize and the Dutch State /
NLFI
As at 31 December 2013 NLFI is the sole shareholder of Propertize. The Dutch State transferred its
share capital in Propertize BV to NLFI. NLFI issued exchangeable depositary receipts for shares to the
Dutch State in return for acquiring and holding, in its own name, the share capital in Propertize BV.
NLFI holds a total voting interest of 100% in Propertize. As sole holder of all issued exchangeable
depositary receipts, the Dutch State holds an equal indirect interest in Propertize. NLFI is
responsible for managing the shares and exercising all rights associated with these shares
under Dutch law, including voting rights. However, material or principal decisions require the
prior approval of the Dutch Minister of Finance, who will also be able to provide binding voting
instructions with respect to such decisions.
NLFI’s objectives exclude disposing of or encumbering the shares, except pursuant to an
authorisation from and on behalf of the Dutch Minister of Finance.
Propertize has funding from SNS Bank in the amount of € 4.055 million that is guaranteed by the
Dutch State. Immediately after the transfer of shares of Propertize from SNS Bank to the Dutch
State, the State strengthened the capital position of Propertize with € 500 million share premium.
17.15.4 Positions and transactions with managers in key positions of
Propertize
Managers in key positions comprise the members of the Management Board, the members of
Propertize’s Supervisory Board, and the members of the Executive Board of SNS REAAL NV and
SNS Bank NV. This includes both current and former members.
Specification remuneration managers in key positions
Expenses Propertize
Expenses SNS REAAL
Total
/ SNS Bank
in € thousands
201320122013201220132012
Short-term
employee benefits
752
498
2,464
2,733
3,216
3,231
Post-employment benefits
105
73
381
408
486
481
Other long-term benefits
-
95
-
-
95
Termination benefits
-
-
250
-
250
Total
857
666
3,095
3,141
3,952
3,807
The amount of compensation paid for the services provided by Propertize’s Supervisory Board,
SNS Bank’s Executive Board and the Executive Board of SNS Bank was not charged to Propertize,
and is subsequently not accounted in the statement of comprehensive income of Propertize.
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PROPERTIZE IN BRIEF
As it is impossible to relate the total compensation paid to the Executive Board members of SNS
REAAL and SNS Bank to services rendered for Propertize, their total compensation has been
included in the table above.
Short-term employee benefits comprise the fixed salary including holiday allowances, contribution
to health insurance and social security. Based on the Budget Agreement 2013 Tax Measures
(Implementation) Act (“Wet uitwerking fiscale maatregelen Begrotingsakkoord 2013”), Propertize
pays a one-off “crisis tax levy” of 16% in 2014 of the salaries paid to its employees in 2013, to
the extent that the salary per employee was more than € 150,000. The crisis tax levy is also part
of the short-term employee benefits. The total “crisis” tax levy for managers in key positions is
€ 240 thousand (2012: € 275 thousand).
Post-employment benefits comprise the pension premiums paid by the employer less the
member’s contribution paid by the employee.
Other long-term benefits relate to the remuneration based on a retention agreement with a
member of the Management Board of Propertize. Termination benefits comprise the payment
made in the context of a termination of the employment agreement of a member of the Executive
Board of SNS Bank NV.
No variable remuneration was paid to senior management in 2013 and 2012.
Transactions with individual members of the Management Board and the Supervisory Board of
Propertize are explained in section 8.6.2 Remuneration report of the Report of the Supervisory
Board. This information is part of the consolidated financial statements.
17.16 SUBSEQUENT EVENTS
On 10 February 2014 Propertize started its funding programme. With four issues of Medium Term
Notes (MTN) an amount of € 2.6 billion was placed. The issue of Commercial Paper during the
months of March and April 2014 has completed the funding programme. The bonds are listed on
the Amsterdam and Luxemburg stock exchange.
With the proceeds from the funding programme, the SNS Bank funding has been fully redeemed.
For more information please refer to section 5.2 Funding and credit ratings in the annual report.
17.17 NET INTEREST INCOME
(In € millions)
Interest income
Interest expenses
Net interest income
2013
195
(118)
77
2012
272
(174)
98
The interest expenses include costs from banking activities incurred from borrowing and related
transactions, as well as other interest-related charges.
The recognised interest income on provisioned loans amounts to € 103.9 million (2012: € 81.7
million).
17.18 PROPERTY PROJECTS INCOME
(In € millions)
Rental income
Service charge income
2013
21
5
26
2012
20
5
25
This item comprises the components Rental income and Service charge income on property projects.
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17.19 OTHER INCOME
This comprises the share in result of associates and joint ventures, result on financial instruments
and other operating income.
(In € millions)
Share in result of associates and joint ventures
Total other operating income
2013
(0)
(4)
31
27
2012
(0)
(12)
32
20
Discounts on non-default loans account for € 3.6 million in 2013. Exchange rate differences result
in a profit in 2013 of € 0.8 million (2012: € 0.3 million loss).
Other operating income comprises mainly the sales of property projects.
17.20 STAFF COSTS
Specification staff costs
(In € millions)
Salaries
Pension costs
Social security
Temporary staff
Other staff costs
Total
2013
16
1
1
15
3
36
2012
17
2
1
23
4
48
Other staff costs consist largely of travel costs and training and education costs. The restructuring
costs (additions minus releases) of the total staff of Propertize, is included in ‘Salaries’, for a total
amount of € 5.0 million (2012: € 4.2 million).
Transactions with individual members of the Management Board and the Supervisory Board of
Propertize are explained in section 8.6.2 Remuneration report of the Report of the Supervisory
Board. This information is part of the consolidated financial statements.
Number of FTEs at year-end
20132012
Propertize
Property
Total
Propertize Property
Total
projectsprojects
Internal
109 32141103 33136
External
4235775166
117
Total at year-end
151
67
218
154
99
253
External staff of Propertize as a percentage of total FTE decreased to 27.5% (2012: 32.9%),
based on contractual hours.
Pension costs
Propertize’s pension scheme by the Stichting Pensioenfonds ABP (ABP) is a defined benefit scheme.
However, the ABP arrangement does not provide a consistent and reliable basis for charging the
liability, mutual fund investments and costs of the scheme to individual employers taking part. That
is why this pension scheme is treated as a defined contribution scheme for reporting purposes.
ABP is a pension fund to which approximately 3,900 employers are affiliated, with over 2.8
million of participants. The annual premium amounts to € 8.9 billion (employer and employee).
ABP has all the risks for the obligations of the pensions. The premium is a so-called moderated
cost coverage premium, including – if necessary – either surcharges to cover deficits or premium
discounts to bring down excessive surpluses in the pension fund.
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PROPERTIZE IN BRIEF
Set against this, Propertize’s share in the ABP is marginal. Propertize’s contribution to the ABP
(employer part) is estimated at € 2.0 million rounded for the year 2014 (2013: € 1.4 million). The
increase is related to the increase in personnel in 2014.
17.21 OTHER OPERATING EXPENSES
Specification other operating expenses
(In € millions)
Cost of sales
External advisors
IT systems
Housing
Other costs
Total
2013
23
22
3
2
34
85
2012
28
54
6
3
25
114
The decrease in external advisor costs mainly relate to the forensic audits in relation to the irregu
larities at Propertize, for the most part conducted in 2012, and research into the property portfolio.
In accordance with legislation, the other costs contain a charge for the banking tax (€ 0.8 million).
17.22 IMPAIRMENT CHARGES
Specification impairment charges / (reversals) by class of asset
(In € millions)
2013
2012
Impairments Reversals Total
ImpairmentsReversals Total
Investments in associates
and joint ventures
37
-
37
13
-
13
Property projects
158
-
158
210
-
210
Loans and advances
to customers
986
(128)
858
799
(82)
718
Total through profit
or loss
1,181
(128)
1,053
1,023
(82)
941
The tax deductibility of impairments depends on their nature, either being an impairment on a
loan or an impairment on an investment.
17.23 TAXATION
(In € millions)
2013
2012
(479)
(479)
240
240
(239)
(208)
(208)
0
0
(208)
2013
25%
(1,063)
(266)
26
(239)
23%
2012
25%
(973)
(243)
35
(208)
21%
Specification taxation
In financial year
Current tax assets and liabilities due
Due to temporary differences
Deferred tax
Total
Reconciliation between the statutory and effective tax rate
(In € millions)
Statutory income tax rate
Result before tax
Statutory current income tax amount
Other, mainly non-deductible expenses
Total
Effective tax rate
108
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PILLAR III REPORT
The effective tax rate is lower than the applicable rate of 25% in the Netherlands due to the fact that
a part of the results on associates are non-tax deductible. The negative result during the year causes
the non-tax deductibility of part of this result to a lower effective tax rate instead of a higher one.
In addition, taxes on losses in foreign subsidiaries that are outside the fiscal unity are not taken into
account, as there is insufficient certainty that these losses will be compensated by future profits.
With the transfer of the shares of SNS Property Finance, the fiscal unity with SNS REAAL was
ended. As from 31 December 2013, Propertize BV, together with a major part of its Dutch
subsidiaries, constitutes a fiscal unity for corporate income tax. For VAT purposes the fiscal unity
started on 1 January 2014. All companies within the Dutch fiscal unity are jointly and severally
liable for corporate income tax debts and VAT debts stemming from the fiscal unity. Up until the
time of separation on 31 December 2013, Property Finance was part of the fiscal unity of SNS
REAAL. Based on the advanced tax ruling with the Dutch Tax Authority, it was determined that
the reduction in value of the portfolio (€ 2.8 billion) that was used for its transfer, is directly
and fully recognised for tax purposes. All financial relationships associated with tax between
Property Finance and SNS REAAL were settled at year-end 2013. The final settlement with the
tax authorities in previous years did not result in any tax payments of restitutions in 2012 and
2013. Propertize is no longer severally liable for the income tax losses of SNS REAAL after the
disentanglement from the fiscal unity with SNS REAAL.
Please also refer to section 17.5 Deferred tax assets and liabilities.
18 COMPANY FINANCIAL STATEMENTS
18.1 COMPANY BALANCE SHEET
Company balance sheet
Before result appropriation (In € millions)
2013
2012
Assets
1
152
165
2
4,482
5,989
1
1
Subsidiaries
3
204
196
4
633
270
5
205
174
Other receivables
6
47
10
Property projects
4
4
Deferred tax assets
8
7
-
199
Other assets
6
20
77
5,755
7,090
Amounts due to group companies
7
17
114
8
4,055
7,200
247
5
20
Other liabilities9
76
88
10
101
85
Other provisions
14
9
Total liabilities
4,529
7,502
Issued share capital and share premium reserve
3,117
656
Other reserves
(1,068)
(303)
Retained earnings
(823)
(765)
Shareholder equity
11
1,226
(412)
5,755
7,090
109
PROPERTIZE IN BRIEF
18.2 COMPANY INCOME STATEMENT
Company income statement
(In € millions)
Result on subsidiaries after taxation
Other results after taxation
2013
(128)
(695)
(823)
2012
(108)
(657)
(765)
18.3 PRINCIPLES FOR THE PREPARATION OF THE COMPANY FINANCIAL
STATEMENTS
Propertize prepares the company financial statements in accordance with the statutory provisions
of Book 2, Section 402 of the Dutch Civil Code. Based on this, the result on associated companies
after taxation is the only item shown separately in the income statement. Use has been made of
the option offered in Book 2, Section 362 (8) of the Dutch Civil Code to use the same principles
for valuation and the determination of the result that are used in the consolidated financial
statements for the company financial statements. Reference is made to the Accounting principles
for the consolidated financial statements.
For additional information on items not explained further in the notes to the company balance
sheet, reference is made to the ‘Notes to the consolidated financial statements’.
The overview as referred to in Book 2, Sections 379 and 414 of the Dutch Civil Code has been
filed with the Trade Register of the Chamber of Commerce of Utrecht.
Subsidiaries are all companies and other entities in respect of which Propertize has the power to
govern the financial and operating policies, whether directly or indirectly, and which are controlled
by Propertize. The subsidiaries are accounted for using the equity method.
Changes in balance sheet values due to the results of these subsidiaries, accounted for in
accordance with Propertize accounting policies, are included in the profit and loss account. The
distributable reserves of subsidiaries are included in other reserves.
19 NOTES TO THE COMPANY FINANCIAL STATEMENTS
19.1 CASH AND CASH EQUIVALENTS
(In € millions)
Cash and balances with other banks
Total
2013
152
152
2012
165
165
2013
6,188
(18)
6,206
1,724
4,482
2012
7,176
75
7,101
1,112
5,989
2013
7,101
(461)
39
(461)
(1)
(12)
6,206
2012
8,342
(174)
59
(1,120)
1
(7)
7,101
19.2 LOANS AND ADVANCES TO CUSTOMERS
Specification loans and advances to customers
(In € millions)
Property finance
Undrawn credits
Outstanding loans (gross amount)
Total loans and advances to customers (net)
Statement of changes loans and advances to customers
(In € millions)
Additions
Redemptions
Movement in current accounts
110
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Statement of change in provision loans and advances to customers
(In € millions)
Withdrawal
Addition
Release
Other movements
2013
1,112
(149)
(90)
942
(124)
32
1,724
2012
489
(20)
(86)
778
(72)
23
1,112
The decrease is related to the regular redemptions (€ 372 million), reclassifications to property
projects (€ 276 million, of which Babylon € 148 million and USQ € 14 million) and impairments
(€ 818 million). Of the total amount of € 4,482 million, an amount of € 310 million is due within
one year.
Breakdown by remaining maturity
(In € millions)
< 1 month
> 1 month < 3 months
> 3 months < 1 year
> 1 year < 5 years
> 5 years
Total
2013
32 53 226 2,060 2,112 4,482 2012
40
67
286
2,753
2,842
5,989
Breakdown portfolio Propertize by region
in € millions
2013
2012
Other Europe
711
1,026
Total net exposure
4,486
5,993
Property projects
4
4
4,482
5,989
Breakdown loans and advances by assets
in € millions
2013
2012
Offices
1,986
2,287
Retail1,1351,251
- residential mortgages
1,057
1,238
- residential lease and development
399
615
Residential1,4561,853
Industrial602702
Other880889
Gross outstanding loans secured
6,057
6,982
Unsecured loans149119
6,206
7,101
Provision for impairment of loans and advances
(1,724)
(1,112)
Total4,4825,989
111
PROPERTIZE IN BRIEF
19.3 SUBSIDIARIES
Specification subsidiaries
(In € millions)
BPF Onroerend Goed Lease en Financieringen B.V.
B.V. De Haarlemsche Maatschappij voor Hypothecaire Financiering BPF Onroerend Goed Advies en Transacties B.V.
BPF Onroerend Goed Beheer B.V.
BPF Onroerend Goed Projecten B.V.
PRPZ Management B.V.
PRPZ Management II B.V.
Total
2013
107
79
1
4
13
0
0
204
2012
101
78
1
4
13
0
0
196
2013
196
(128)
136
204
2012
190
(108)
114
196
Statement of change in subsidiaries
(In € millions)
Result
Adjustment subsidiaries with negative equity book value
The adjustment subsidiaries with negative equity book value is the adjustment to the carrying
amount in relation to Propertize’s the share of losses in the subsidiary that exceeds the interest in
the subsidiary. The recognition of these losses is explained in further detail in the next paragraph.
If the losses in subsidiaries exceed the equity book value, the book value is set at zero, and a
provision is taken on the loans and advances to these entities for the remaining amount of the
loss, if any. If Propertize did not issue any loans to the subsidiary in question, or there is no
current account with the subsidiary, a provision is recognised to the extent that Propertize is liable
for the losses in the subsidiary.
19.4 RECEIVABLES FROM SUBSIDIARIES
(In € millions)
PRPZ Interim Finance B.V.
Woningportefeuille NL Divers B.V.
Überseequartier Project B.V.
B.V. De Haarlemsche Maatschappij voor
Hypothecaire Financiering
Other
Total receivables from subsidiaries
2013
209
182
86
59
2012
125
51
17
81
633
40
54
270
During 2012 PRPZ Interim Finance BV (PRPZ IF) and BPF Onroerend Goed Lease & Financieringen
B.V. (OG L&F) had their own (partial) funding. As from 2013 Propertize is responsible for all
funding, as a result of which the funding of the aforementioned two entities was replaced by
funding from Propertize by means of current accounts. This resulted in an increase in PRPZ IF of
€ 84 million and OG L&F of € 182 million (receivable € 279 million and debt € 97 million). The
receivables from subsidiaries concern current account balances, on which no interest is charged
or recognised by Propertize.
112
OTHER INFORMATION
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19.5 RECEIVABLES FROM AFFILIATED COMPANIES
(In € millions)
Babylon Den Haag B.V.
Balthazar I B.V.
Belval Plaza Holding S.A.
Other
Total receivables from affiliated companies
2013
139
57
1
9
205
2012
73
57
44
174
The receivables from affiliated companies include corrections in relation to negative participations
for an amount of € 16 million (2012: € 11 million).
19.6 OTHER RECEIVABLES AND OTHER ASSETS
The other receivables and other assets are all due within one year.
19.7 AMOUNTS DUE TO GROUP COMPANIES
(In € millions)
BPF Onroerend Goed Beheer B.V.
Other
Total amounts due to group companies
2013
4
-
13
0
17
2012
4
97
13
0
114
During 2012 BPF Onroerend Goed & Financieringen B.V. (OG L&F) had its own (partial) funding.
As from 2013 Propertize is responsible for all funding, as a result of which the funding of the
aforementioned entity was replaced by funding from Propertize by means of current accounts.
This resulted in a decrease of € 97 million.
19.8 AMOUNTS DUE TO BANKS
(In € millions)
Short-term loans
Total
2013
4,055
4,055
2012
7,200
7,200
The amounts due to banks are payable within one month. The decrease is related to the winding
down of the portfolio, as well as the split-off from SNS Bank as at 31 December 2013.
19.9 OTHER LIABILITIES
Of the other liabilities an amount of € 41 million has a maturity date of more than one year. FXswaps are included in the other liabilities (€ 0.5 million). For more information on the notional
amounts please refer to 13.3.5.
19.10 PROVISION INVESTMENTS IN SUBSIDIARIES
(In € millions)
PRPZ Financiering Participaties B.V.
Total provisions investments in subsidiaries
2013
101
101
2012
85
85
This balance sheet item has a direct link to the balance sheet item ‘subsidiaries’. Please refer to
note 19.3.
For other provisions please refer to the section 17.10.2 Provisions in the Notes to the
Consolidated Financial Statements.
113
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19.11 EQUITY
Company statement of changes in equity
(In € millions)
Issued
Share
Statutory
Other Retained
Equity
sharepremium
reserves reserves earningsattributable
capitalreserve associates
to
shareholders
Balance as at 1 January 2012
3
653
6
(65)
(243)
353
-
-
-
(243)
243
Transfers 2011
-
-
-
(243)
243
-
-
-
Net result 2012
-
-
-
-
(765)
(765)
Total result 2012
-
-
-
-
(765)
(765)
(3)
3
Balance as at 31 December 2012 3
653
3 (306)
(765)
(412)
-
-
-
(765)
765
Transfers 2012
-
-
-
(765)
765
-
-
-
Net result 2013
-
-
-
-
(823)
(823)
Total result 2013
-
-
-
-
(823)
(823)
(2)
2,464
-
-
-
2,461
Other movements
-
-
0
(0)
-
Balance as at 31 December 2013 0 3,117
3 (1,071)
(823)
1,226
Please refer to section 10.3 in the consolidated statements for more information.
19.12 ISSUED SHARE CAPITAL
The number of capital issued is fully paid and comprises ordinary shares.
The nominal value of the ordinary shares is € 1. The number of issued shares as at 31 December
2013 is 50,003. Initial paid-in capital was € 2.5 million (50,003 shares at € 50).
Specification issued share capital
Number of shares
Amount of shares
201320122013 2012
Authorised share capital
50,003
250,000
50,003
12,500,000
Share capital in portfolio (199,997) (9,999,850)
Issued share capital 31 December
50,003
50,003
50,003
2,500,150
On 31 December 2013 the number of authorised share capital (250,000, of which 199,997 not
issued) was reduced to 50,003, the same as the number of issued and paid up shares. The
nominal value of the shares, originally € 50, was reduced to € 1. As the reduction did not involve
a return to the shareholders, the value was transferred to the share premium reserve.
All shares are held by Stichting NLFI, a government-controlled agency managing the
shareholdings in a number of nationalised Dutch financial institutions. There is only one class of
ordinary shares. Propertize pursues a provision and dividend policy that is adopted and may be
changed by the General Meeting of Shareholders.
114
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20 OFF BALANCE SHEET COMMITMENTS
20.1 GUARANTEES
Following the share transfer on 31 December 2013, SNS Bank NV withdrew the 403 declaration
for Propertize on 31 December 2013 and initiated the proceedings provided for in Article 2:404
of the Dutch Civil Code to terminate the remaining liabilities. SNS Bank NV and SNS REAAL,
respectively, also withdrew the 403 declarations for four subsidiaries of Propertize on 31
December 2013, and initiated the proceedings to terminate the remaining liabilities.
In two specific instances a creditor has challenged such withdrawal of the 403 declaration and
termination of the remaining liabilities. The final court ruling for these two cases is awaited.
Propertize has provided guarantees as referred to in Book 2, Section 403 of the Dutch Civil Code
for:
• B.V. De Haarlemsche Maatschappij voor Hypothecaire Financiering
• BPF Onroerend Goed Lease en Financieringen B.V.
• PRPZ Financiering Participaties B.V.
• PRPZ Interim Finance B.V.
20.2 OTHER OFF BALANCE SHEET COMMITMENTS
For more information about the other off balance sheet commitments, please refer to section
17.13 of the consolidated financial statements.
21 RELATED PARTIES
Positions and transactions between Propertize and subsidiaries and affiliated companies
(In € millions)
2013
633
(101)
1,035
Provision receivables from affiliated companies
(830)
Income
24
2012
270
(85)
722
(548)
30
22 SUBSEQUENT EVENTS
For more information about the subsequent events, please refer to section 17.16 of the
consolidated financial statements.
115
PROPERTIZE IN BRIEF
23 AUDIT FEES
In the financial year, the following fees of the audit firm KPMG Accountants NV and the other
KPMG companies were charged to the organisation, its subsidiaries and other companies it
consolidates, all this as referred to in Book 2, Section 382A of the Dutch Civil Code.
Notes to the audit fees
KPMGOther Total
Accountants NV
KPMG network
in € thousands201320132013
Statutory audit of annual accounts,
including the audit of the financial
statements and other statutory
audits of subsidiaries and other
consolidated entities
881
132
1,013
Other assurance services
Tax advisory services
579
579
Other non-audit servicesTotal
881
711
1,592
The costs in 2013 include the extra costs KPMG made because of the integrity investigations.
Based on Book 2, Section 383A(3) of the Dutch Civil Code, reference is made to the 2012
financial statements of SNS REAAL for an overview of audit fees charged by KPMG Accountants
NV and the Other KPMG member firms regarding the 2012 financial statements audit.
Supervisory Board
R.J. Meuter (Chairman)
G. van Olphen
M.B.G.M. Oostendorp
Management Board
H. Copier (Chairman)
J.C.J. Mondt
R.D.J. van Riel
116
OTHER INFORMATION
PILLAR III REPORT
24 OVERVIEW OF PRINCIPAL SUBSIDIARIES
An overview is provided below of Propertize BV’s main subsidiaries. Participation in the
subsidiaries is 100% unless stated otherwise.
BPF Onroerend Goed Advies en Transacties B.V.
BPF Onroerend Goed Beheer B.V. BPF Onroerend Goed Lease en Financieringen B.V.
B.V. De Haarlemsche Maatschappij voor Hypothecaire Financiering
Hoevelaken Real Estate B.V.
PRPZ Financiering Participaties B.V.
PRPZ Interim Finance B.V.
PRPZ Management B.V.
PRPZ Management II B.V.
PRPZ Participations Restructuring B.V.
Belval Plaza Holding S.A. (50%)
Hoevelaken
Hoevelaken
Hoevelaken
Hoevelaken
Haarlem
Hoevelaken
Utrecht
Utrecht
Utrecht
Utrecht
Utrecht
Esch-sur-Alzette
(Luxembourg)
Heyen Vastgoed Beleggingen B.V. (50%)
Koppelenweg I B.V. (33.3%)
Naarden
Hoevelaken
Other participations
117
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OTHER INFORMATION
25 OTHER INFORMATION
25.1 PROVISION REGARDING PROFIT OR LOSS APPROPRIATION
Result 2013: € 823 million loss
The loss appropriation will be determined in accordance with Propertize BV’s Articles of
Association applicable per 31 December 2013.
Article 23
23.1 The General Meeting has the right to appropriate the profit that was determined by adoption
of the financial statements and to adopt distributions, with due observance of the adopted
provision and dividend policy as referred to in Article 23.2 and the statutory limitations.
23.2 Propertize BV pursues a provision and dividend policy that is adopted and may be changed
by the General Meeting. The Management Board can make a proposal to that effect with the
approval of the Supervisory Board. The adoption of, and subsequent change to, the provision and
dividend policy will be dealt with and recognised as a separate item on the agenda of the General
Meeting.
23.3 The power of the General Meeting to adopt distributions applies to both distributions at
the expense of profit not reserved and to distributions at the expense of any reserves, and
to distributions on the occasion of the adoption of the financial statements and to interim
distributions.
23.4 A resolution to make distributions will not have an effect as long as the Management Board
has not granted its approval. The Management Board will only refuse to grant its approval if it
knows or should reasonably foresee that Propertize BV will not be able to continue to pay its
payable debts after making the distribution.
Profit or loss appropriation
The loss for the financial year 2013 is debited to the other reserves of Propertize BV.
25.2 INDEPENDENT AUDITOR’S REPORT
To: The Shareholder of Propertize BV
Report on the financial statements
We have audited the accompanying financial statements 2013 of Propertize BV, Utrecht, as
included in chapters 10 to 24 of this report. The financial statements include the consolidated
financial statements and the company financial statements. The consolidated financial statements
comprise the consolidated balance sheet as at 31 December 2013,
the consolidated statements of income, comprehensive income, changes in equity and
consolidated cash flows for the year then ended and notes, comprising a summary of the
significant accounting policies and other explanatory information. The company financial
statements comprise the company balance sheet as at 31 December 2013, the company
statement of comprehensive income for the year than ended and the notes, comprising a
summary of the significant accounting policies and other explanatory information.
120
OTHER INFORMATION
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The Management Board’s responsibility
The Management Board is responsible for the preparation and fair presentation of these financial
statements in accordance with International Financial Reporting Standards as adopted by the
European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation
of the Report of the Management Board in accordance with Part 9 of Book 2 of the Netherlands
Civil Code. Furthermore, the Management Board is responsible for such internal control as it
determines is necessary to enable the preparation of the financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing.
This requires that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company’s preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the Management Board,
as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion with respect to the consolidated financial statements
In our opinion, the consolidated financial statements give a true and fair view of the financial
position of Propertize BV as per 31 December 2013 and of its result and its cash flows for the
year then ended in accordance with International Financial Reporting Standards as adopted by
the European Union and with Part 9 of Book 2 of the Netherlands Civil Code.
Opinion with respect to the company financial statements
In our opinion, the company financial statements give a true and fair view of the financial position
of Propertize BV as per 31 December 2013 and of its result for the year then ended in accordance
with Part 9 of Book 2 of the Netherlands Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirements under Section 2:393 sub 5 at e and f of the Netherlands Civil
Code, we have no deficiencies to report as a result of our examination whether the Report of the
Management Board, to the extent we can assess, has been prepared in accordance with Part 9 of
Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b - h
has been annexed. Further, we report that the Report of the Management Board, to the extent we
can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the
Netherlands Civil Code.
Amstelveen, 26 June 2014
KPMG Accountants N.V.
P.A.M. de Wit RA
121
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PILLAR III REPORT
26 PILLAR III REPORT
This is Propertize BV’s report on capital adequacy and risk management in accordance with the
legal disclosure requirements in EU’s Capital Requirements Directive (CRD) as based upon the
Basel II framework. The information contained in this section has not been audited by Propertize
BV’s external auditors.
The report, together with the risk section in the Financial Statements of Propertize BV, presents
the capital position and how the size and composition of the capital base is related to the risks
as measured in Risk Weighted Assets (RWA). As a result of the choices made by Propertize,
and its business model, the Pillar III disclosure information for the major part is presented in
the Financial Statements (according to the IFRS principles), which are published once a year.
Please refer to the risk section chapters 12 to 16 of the Financial Statements. Other, additional
information is presented in this Pillar III section.
The Basel II Directives apply to all banks in The Netherlands. This integral framework for bank
supervision consists of three pillars, which are considered to reinforce each other:
Pillar I: External capital requirements for the credit, market and operational risks;
Pillar II: Internal processes for risk management and for the calculation of the internal capital
requirements, the economic capital and the manner in which the regulator looks at these internal
processes;
Pillar III: Disclosure requirements to provide external stakeholders with risk information.
Pillar III contains disclosure requirements to provide risk information to external stakeholders
and supports the provision about the minimum solvency requirements (Pillar I) and the solvency
requirements set by the management (Pillar II). The object of Pillar III is to improve the quality
of an institution’s risk management through the disciplining effect of the market.
The Basel II legislation requires banks to keep a capital buffer so that they can cope with the
risks occurring as a result of running a bank. Pillar I gives instructions for the calculation of the
minimum capital that regulators require banks to maintain in order to cover the credit, market
and operational risks.
Methods of capital calculation
The requirements provide for a number of methods of the capital calculation for these risks,
ranging from simple (Standardised Approach/SA) to advanced methods. In certain conditions a
bank has the option of choosing one of these methods.
In view of its business model and strategy Propertize uses the SA method for its credit,
operational and market risks.
Of the Pillar I risks the credit risk is the most important risk category. The standardised approach
measures credit risk pursuant to fixed risk weight. The application of risk weight in standardised
approach is given by a set of fixed rules and is mainly based on the exposure class to which the
exposure is assigned. The capital requirement for credit risk is based on the total finance loan
exposure that Propertize has provided or is committed to provide. The solvency requirement for
operational risk is based on the average proceeds over the last three years.
124
OTHER INFORMATION
PILLAR III REPORT
Consolidation scope
There is no difference between the consolidation scope of Propertize on IFRS basis and the
consolation scope for regulatory purposes.
Capital base
The capital base (referred to as own funds in the CRD) is the sum of Tier 1 capital and Tier 2
capital after deductions.
The main component in the capital base are core equity in the balance sheet. The calculation of
capital base is done in accordance with the CRD and the Dutch legislation. The outcome must, as
a minimum, correspond to the sum of the capital requirement for credit risks, market risks and
operational risks and capital requirement related to transition rules.
The capital ratio is calculated by dividing the capital base with risk weighted assets (RWA).
The total equity of Propertize is classified as Tier 1 capital, which comprise the paid-up capital,
share premium and eligible reserves. The eligible reserves consist of the retained earnings and
income from the current year. Please refer to section 16.3 Capital and solvency position.
Capital requirement
The capital requirement at year-end 2013 was € 501 million, divided into credit risk (€ 489
million) and operational risk (€ 11 million). Propertize has no trade book and so from a regulatory
perspective there is no market risk for which a capital requirement applies.
In the SA method, regulatory capital requirements for credit risks are calculated using the
following formula:
Capital requirement = RWA x 8%, where RWA = risk weight x EAD
In the table below, the EAD (Exposure at Default / Exposure value), the risk weight and the
capital requirement are presented according to the regulatory reporting. The EAD for the onbalance sheet items is 100% of the outstanding amount.
The weighting percentages on credit risk are based on Basel II guidelines. The weighting
percentages of items under the standardised approach depend on the counterparty’s external
credit risk. Generally, these percentages are 0% for loans and advances to, or guaranteed by
OECD governments, 20% for loans and advances to, or guaranteed by OECD banks, 35% for
loans not in default and a loan-to-foreclosure-value (LtfV) < 75%, 100% for the loans in default
and a provision > 20%, and 150% for loans in default and a provision < 20%.
125
OTHER INFORMATION
PILLAR III REPORT
Risk weight
Exposure
RWA
Capital
value Requirement
in € millions
2013201320132013
Credit risk
Standardised exposures classes:
- Institutions
20%
207
41
3
- Secured by real estate
0%
13
0
0
20%
10
2
0
35%
0
0
0
100%
4,563
4,563
365
150%
429
643
51
- Past due items
50%
25
12
1
100%
133
133
11
- Other items
0%
35
0
0
100%
722
722
58
6,1376,117 489
Market risk*
- StandardisedN/AN/AN/A
Operational risk
- Standardised
142
11
Total6,1376,258 501
Capital requirements and risk weighted assets
* Propertize has no trading book
Further Disclosure to Regulation on Sound Remuneration Policies pursuant
to the Financial Supervision Act 2011
In compliance with the requirements set out in the Policy Act and Regulation on Sound
Remuneration policies pursuant to the Financial Supervision Act (Besluit & Regeling Beheerst
Beloningsbeleid Wft 2011), i.e. the implementation of Pillar III disclosure requirements on
remuneration, this section provides further information on Propertize’s Senior Management and
members of staff whose actions have a material impact on the risk profile of Propertize (Identified
Staff).
Identified Staff is determined on the basis of an internal specification of the Dutch Central Bank
(DNB) criteria as outlined in its Open Book Supervision.
The remuneration of Identified Staff meets the requirements of the Regulation on Sound
Remuneration policies pursuant to the Financial Supervision Act 2011 (FSA 2011). Identified staff
is not rewarded any variable remuneration.
Until its separation on 31 December 2013, Propertize was a subsidiary of SNS Bank NV, which in
turn is a subsidiary of SNS REAAL NV. As such the Identified Staff of Propertize were an integral
part of the SNS REAAL Group and SNS Bank. Propertize has concluded therefore, and ascertained
that the information on Propertize’s Identified Staff has been included in the reports 2013 of SNS
REAAL as well as SNS Bank.
SNS Bank NV will issue a report on remuneration simultaneously with SNS REAAL NV’s Group
report on remuneration. This separate report will be made public on SNS Bank’s website when
available.
SNS Bank NV’s remuneration policy forms an integral part of SNS REAAL NV’s Group remuneration
policy. As such, it is fully derived from and aligned with all the procedures from this Group policy
and accompanying actions. The report will display the 2013 remuneration for SNS Bank NV’s
senior management and members of staff whose actions have a material impact on the risk
profile of SNS Bank NV (the other Identified Staff).
126
COLOFON
Concept and design
Ambitions, ’s-Hertogenbosch
Images
Cover image: Fragment of Keesomstraat 36-44, Ede, part of the real estate owned portfolio
of Propertize
Real estate photography: Fotopersburo Dijkstra, Uithoorn
Photography Management Board: Sjaak Ramakers, Utrecht
Text
Propertize, Utrecht
Translation
Courtesie, Almere
PROPERTIZE GRAADT VAN ROGGENWEG 500 - 3531 AH UTRECHT - POSTBUS 71 - 3500 AB UTRECHT T +31 (0)30 - 702 28 00 I PROPERTIZE.NL

annual report

Transcription

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