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Corporate Governance 

Report of the Supervisory Board

Corporate Governance Report

Group Management Report 

Economic Overview and Property Markets 

Portfolio Report 

Property Valuation 

Financing 

Business Development 

EPRA Financial Indicators 

Risk Report 

Information on Equity 

Voluntary Consolidated Non-financial Statement for the 2020 Financial Year 

Research & Development 

Outlook 

Consolidated Financial Statements 

Consolidated Balance Sheet 

Consolidated Income Statement 

Consolidated Statement of Comprehensive Income 

Consolidated Cash Flow Statement 

Consolidated Statement of Changes in Equity 

Notes to the Consolidated Financial Statements 

Auditor's Report 

Statement by the Executive Board 

Individual Financial Statements 

Balance Sheet as of 31 December 2020 

Income Statement for the 2020 Financial Year 

Notes 

Development of Non-current Assets (§ 226 (1) of the Austrian Commercial Code) 

Management Report for the 2020 Financial Year 

Auditor's Report 

Financial Calendar 

Imprint 

Report of the Supervisory Board 

Dear Shareholders, 

Global events were dominated by the COVID-19 pandemic throughout 2020. IMMOFINANZ started the past financial year with sound operating results, but business development was slowed by the crisis beginning in mid-March. The wide-ranging economic restrictions and shutdown of public life triggered a worldwide recession of historical proportions and also confronted IMMOFINANZ with numerous challenges. However, the many steps taken at the beginning of the crisis were successful in minimising the negative effects on the company and strengthened both liquidity and equity. 

In our function as the Supervisory Board, we accompanied IMMOFINANZ and its Executive Board on all activities and, as in previous years, conscientiously performed the duties required by law and the articles of association. The Executive Board provided the Supervisory Board with extensive, ongoing and timely information on the development of business, the effects of the pandemic and the company's asset, financial and earnings position and, in this way, met its information requirements at all times and in appropriate depth. 

The Supervisory Board and Executive Board discussed the company's economic position as well as major events and measures in ten meetings during the 2020 financial year. The Supervisory Board acknowledges and accepts its responsibility in full; the attendance of the shareholder representatives equalled 96% in 2020. Detailed statistics on the attendance of the individual members can be found in the Corporate Governance Report on page 10. 

Outside the framework of these meetings, the Supervisory Board remained in regular contact with the Executive Board and took a number of decisions through circular resolutions. The cooperation between the Supervisory Board and the Executive Board was consistently characterised by open discussions and constructive teamwork.

The Supervisory Board dealt extensively with the company's strategic orientation, above all in connection with the COVID-19 situation. Other focal points included the further optimisation of the portfolio through the acquisition and sale of properties, the company's management by the Executive Board and the financing situation as well as developments on the real estate and capital markets and the situation in IMMOFINANZ's core markets.

Special emphasis was given to the following issues: 

• March: Changes in the shareholder structure and the resignation of Rudolf Fries from the Supervisory Board, following the sale of the shares under his ownership and the ownership of FRIES Family Private Foundation to RPPK Immo GmbH

• March: The resignation of Oliver Schumy from the Executive Board and as CEO by mutual agreement 

• March: The conclusion of an unsecured, revolving corporate credit line of EUR 100.0 million to give the company greater financial flexibility 

• April: The appointment of Ronny Pecik to the Executive Board and as CEO for a three-year period beginning on 4 May 2020

• July: The placement of 11.2 million new shares and 4.2 million treasury shares as well as the issue of a mandatory convertible bond with a total nominal value of EUR 120.0 million with institutional investors to strengthen equity and the indicators relevant for our investment grade rating 

• July: In line with the corporate strategy, the sale of the Panta Rhei office building in Düsseldorf and the continued concentration in the office business on further growth with our innovative myhive office brand

• August: A recommendation to the 27th annual general meeting to waive the dividend for the 2019 financial year and, in view of the exceptional situation caused by the COVID-19 pandemic, to carry forward the total profit 

• October: The issue of a corporate bond with a benchmark volume of EUR 500 million for institutional investors 

• December: The further expansion of the STOP SHOP retail park brand through the acquisition of locations in the Czech Republic and Serbia

• Evaluation, discussion and approval of the budget for the 2021 financial year 

Changes on the Supervisory Board 

The resignation of two Supervisory Board members during the 2020 financial year also led to changes in the presidium. Rudolf Fries, who accompanied IMMOFINANZ as a member of the Supervisory Board for ten years and also served as its vice-chairman, resigned with immediate effect as of 4 March 2020 and with notification that the IMMOFINANZ share package held by him and by the FRIES Family Private Foundation had been sold. Michael Knap resigned as of the end of the 27th annual general meeting on 1 October for personal reasons and in agreement with his colleagues on the board. He had been a member of the Supervisory Board since 2008 and served as chairman since 2013. On behalf of the entire Supervisory Board, I would like to thank both gentlemen for their long-standing commitment and their contribution to the successful reorientation of IMMOFINANZ. I initially took over the function of vice-chairwoman after the resignation of Rudolf Fries and, after the resignation of Michael Knap, subsequently became chairwoman of the Supervisory Board. Christian Böhm and Sven Bienert now serve as vice-chairmen. 

Changes on the Executive Board 

In March 2020, Oliver Schumy resigned from the Executive Board for personal reasons and by mutual agreement. Mr. Schumy made a lasting and valuable contribution to the successful reorientation of IMMOFINANZ over the past years and, on behalf of the Supervisory Board, I would like to thank him for his commitment. 

Mr. Schumy's functions were initially transferred to the remaining Executive Board members, Dietmar Reindl and Stefan Schönauer. In April 2020, Ronny Pecik was appointed CEO for a three-year period beginning in May. He is a leading entrepreneur and is making his many years of experience in corporate and capital market activities available to IMMOFINANZ. 

Focal points of the committees

In order to support the efficient performance of its duties, the Supervisory Board has established three committees: the Audit and Valuation Committee, the Strategy Committee and the Personnel and Nominating Committee. 

13 committee meetings were held during 2020, which had a high overall attendance rate of 97%. Information on the responsibilities of the committees, their composition and the attendance of the individual members is provided in the Corporate Governance Report beginning on page 10. 

The Audit and Valuation Committee met four times during the past year. The agendas for these meetings included the discussion and examination of the annual and consolidated financial statements for 2019 and the risk report for 2019 as well as the annual report on internal audits in 2020 and the internal audit planning for 2021. 

In four of its nine meetings, the Personnel and Nominating Committee dealt with IMMOFINANZ's remuneration policy. Other issues involved the termination of the contract with Oliver Schumy and the extension of the Executive Board contracts with Dietmar Reindl and Stefan Schönauer for a five-year period as of 1 May 2021. The appointment of Ronny Pecik was finalised at an extraordinary meeting of the Supervisory Board in March.

The Strategy Committee is responsible, above all, for ongoing discussions of the company's strategy and positioning as well as advising the Executive Board on these issues. These responsibilities were met by the full Supervisory Board in 2020.

The Supervisory Board also completed a routine annual self-evaluation of its working efficiency in 2020, above all with regard to its organisation and operating procedures. The focal points, among others, included the organisation of the Supervisory Board and the procedures at meetings, the activities of the committees, the provision of information to the Supervisory Board, the self-image of the Supervisory Board members as well as any recommendations for improvement. 

Approval of the 2020 financial statements 

The following documents were prepared by the Executive Board and audited by Deloitte Audit Wirtschaftsprüfungs GmbH, which was appointed as the auditor by the annual general meeting on 1 October 2020: the annual financial statements of IMMOFINANZ AG as of 31 December 2020 including the management report and the consolidated financial statements together with the group management report. All of these documents were awarded an unqualified opinion (see pages 203-208). 

The annual financial statements and consolidated financial statements as well as the related auditor's reports were made available to all Supervisory Board members immediately after completion. These documents were discussed by the Audit and Valuation Committee in detail in the presence of the auditor and the Executive Board and reviewed in accordance with § 96 of the Austrian Stock Corporation Act. Following this examination and discussion, the members of the Audit and Valuation Committee unanimously agreed to recommend the unqualified acceptance of these documents to the Supervisory Board. The Supervisory Board accepted the annual financial statements as of 31 December 2020, which are considered approved in accordance with § 96 (4) of the Austrian Stock Corporation Act. The consolidated financial statements as of 31 December 2020 were also accepted by the Supervisory Board. In accordance with L-Rule 60 of the Austrian Corporate Governance Code, the Supervisory Board reviewed and approved the expanded Corporate Governance Report which now also includes the Consolidated Corporate Governance Report and the non-financial statement.

The Supervisory Board agrees with the Executive Board's recommendation for the use of profit. The agenda for the annual general meeting on the 2020 financial year will therefore include a proposal for the distribution of a EUR 0.55 dividend per share. 

On behalf of the Supervisory Board, I would like to thank the members of the Executive Board and the many men and women who work for IMMOFINANZ for their outstanding performance during the past financial year. The COVID-19 pandemic was still not under containment by the time this report was prepared, but the approval of several vaccines represents an important step. Although business at the beginning of 2021 was still influenced by COVID-19, IMMOFINANZ has a very solid position with a conservative capital and financing structure. This makes is possible for our company to react quickly, flexibly and directly in a challenging environment and also creates ideal conditions to return to our growth course as quickly as possible. 

I would also like to thank you, our shareholders, for accompanying us on this journey. 

Vienna, 21 April 2021 

Bettina Breiteneder

Chairwoman

Corporate Governance Report

Corporate Governance Report expanded to include the Consolidated Corporate Governance Report 

Commitment to the Austrian Corporate Governance Code

IMMOFINANZ pursues responsible business activities that are designed to create and maintain sustainable, long-term value. In line with this orientation, the company strives to achieve a high degree of transparency for all stakeholders. The Austrian Corporate Governance Code provides Austrian stock companies with a framework for corporate management and monitoring. The Executive Board and Supervisory Board of IMMOFINANZ AG are committed to compliance with the code, in the currently applicable version, and to the related transparency and principles of good management. IMMOFINANZ complied with all provisions of the code - with the exception of the following temporary deviation - during the 2020 financial year.

Temporary deviation from C-Rule 16 

C-Rule 16 requires the Executive Board to have a chairman. This requirement was not met for a brief period - namely between the resignation by mutual agreement of Oliver Schumy as CEO on 18 March 2020 and the appointment of Ronny Pecik as CEO on 4 May 2020. The Supervisory Board did not consider it necessary to appoint an interim CEO for the brief period immediately after Mr. Schumy's resignation. 

Corporate Bodies 

Dual management structure 

The dual management structure of IMMOFINANZ AG, as a listed stock corporation, consists of an Executive Board and a Supervisory Board. These corporate bodies are strictly separated, in both their composition and functions, and can therefore independently carry out their assigned duties. The Executive Board is responsible for the management of the company, the Supervisory Board for monitoring. 

The Executive Board 

The Supervisory Board 

¹ End of term: at the end of the annual general meeting which votes on the release from liability for the 2023 financial year (31st AGM in 2024) 

² End of term: at the end of the annual general meeting which votes on the release from liability for the 2020 financial year (28th AGM in 2021) 

Supervisory Board committees and attendance 

Members of the Supervisory Board committees 

The Supervisory Board monitors the Executive Board and provides support for the management of the company, particularly on decisions of fundamental importance. In addition to its primary function as a monitoring and support body, the Supervisory Board constantly strives to further improve the efficiency of its work through self-evaluation. At the beginning of the 2020 financial year, the Supervisory Board had six members who were elected by the annual general meeting (shareholder representatives) and two members delegated by the Works' Council. The shareholder representatives Rudolf Fries and Michael Knap resigned from the Supervisory Board as of 4 March 2020, respectively at the end of the annual general meeting on 1 October 2020. Maria Onitcanscaia, who was delegated by the Works' Council, resigned from the Supervisory Board as of 31 May 2020. At the end of the 2020 financial year, the Supervisory Board had four shareholder representatives and one member delegated by the Works' Council. Ten Supervisory Board meetings were held in 2020. These meetings were attended by roughly 96% of the elected members, respectively nearly 97% including the 13 individual committee meetings.

Audit and Valuation Committee 

The Audit and Valuation Committee is responsible for monitoring accounting processes and supervising the audit of the separate and consolidated financial statements. This committee also monitors the effectiveness of the company's internal control system, risk management and internal audit as well as property valuation. Christian Böhm took over the chair of this committee from Bettina Breiteneder, who remains a member of the Audit and Valuation Committee, following the resignation of Michael Knap on 1 October 2020. Maria Onitcanscaia, who was delegated by the Works' Council, resigned as of 31 May 2020. Sven Bienert, a previous member, became vice-chairman of this committee. Christian Böhm serves as the Audit and Valuation Committee's financial expert based on his professional experience and knowledge of finance and accounting. The committee members, as a whole, are well informed of the real estate sector. The Audit and Valuation Committee held four meetings in 2020, whereby all shareholder representatives were in attendance.

Strategy Committee 

The Strategy Committee is responsible, above all, for the regular evaluation of the company's strategy and orientation as well as consultations with the Executive Board on the definition of this strategy. These responsibilities were fulfilled by the full Supervisory Board in 2020. 

Personnel and Nominating Committee

The Personnel and Nominating Committee makes recommendations to the Supervisory Board for nominations to the Executive and Supervisory Boards and is responsible for determining the remuneration and preparing the employment contracts for the Executive Board members. In addition, the committee reviews the remuneration policy for the Executive Board members at regular intervals. In its capacity as a remuneration committee, the Personnel and Nominating Committee has as its members the chairwoman and at least one member with knowledge and experience in remuneration policy. This committee met nine times during 2020, whereby 96% of the shareholder representatives attended these meetings.

Gov-Selec, GRI 102-24

Supervisory Board qualification matrix  

x   = General experience in this area

xx = Responsibility and/or working experience in this area

All Supervisory Board members have extensive expertise in environmental, social and governance (ESG) issues. Bettina Breiteneder, a real estate development and management specialist, places high priority on sustainability, energy efficiency and the use of high-quality materials in the construction projects developed by her family-owned corporate group. Christian Böhm, as chairman of the management board of APK Pensionskasse, heads a major institutional investor whose investment decisions are taken with a clear focus on the environment, society and corporate governance. In this connection, APK has committed to follow a "responsible engagement approach". Mr. Böhm is also a member of the management board of the European branch association PensionsEurope and, in this function, has dealt with the recommendations of the EU Commission on sustainable investments. Sven Bienert is, among others, the head of the Center of Excellence for Sustainability in the Real Estate Industry at the University of Regensburg and a member of the DAW SE advisory board. He is a member of the management board of various branch associations associated with sustainability/ESG, for example the Institute for Corporate Governance of the German Real Estate Industry (ICG), and committees like the advisory board of the German Sustainable Building Council (DGNB e. V.) as well as a representative of the ZIA sustainability advisory board. He often directs research projects that are focused on ESG/sustainability/climate risks, e.g. www.crrem.eu. Nick van Ommen has dealt regularly with sustainability issues during his many years on the supervisory boards of real estate companies and insurance firms. In the past, he also served as CEO of the branch association EPRA, which is committed to sustainability and acts as a standard setter. Philipp Obermair, who was delegated by the Works' Council, represents the real estate management branch as the chief negotiator for collective bargaining negotiations in Austria. 

Gov-Board, GRI 102-22

Shareholdings of the Executive Board and Supervisory Board members as of 31 December 2020 

Members of the IMMOFINANZ corporate bodies and closely related persons are required to report their transactions in financial instruments issued by the company. These reports ("Directors' Dealings") are published on the IMMOFINANZ website. Following is an overview of the direct and indirect shareholdings of these members as reported to the company: 

¹ RPPK Immo GmbH (formerly CARPINUS Holding GmbH), which is considered indirectly controlled by Ronny Pecik and Peter Korbačka pursuant to the Austrian Stock Exchange Act, held 13,000,000 shares and five certificates from the mandatory convertible bond 2020-2023 as of 31 December 2020. RPR Private Foundation, RPR Treasury GmbH, RPR Management GmbH and the Olympic Special Fund, each indirectly controlled by Ronny Pecik pursuant to the Austrian Stock Exchange Act, held a further 1,200,001 shares in total.

Working Procedures of the Executive Board and Supervisory Board

The cooperation between the Executive Board and Supervisory Board of IMMOFINANZ is based on open and constructive discussions. The Executive Board provides the Supervisory Board with regular, timely and comprehensive information on the development of business and related issues and also prepares the documentation for the Supervisory Board's meetings and resolutions. The rules of procedure for the Executive Board define the transactions and measures that require Supervisory Board approval. In addition, the Executive Board provides the Supervisory Board with information on issues of major importance outside the framework of scheduled meetings. 

Independence and avoidance of conflicts of interest 

The members of the Executive Board are required to take their decisions independent of any personal interests and the interests of controlling shareholders. Moreover, these decisions must be based on well-founded knowledge and comply with all relevant legal regulations. Persons serving on the Executive Board must disclose any personal interests in the company's transactions or other conflicts of interest to the Supervisory Board without delay and inform their board colleagues. The Executive Board members may only accept appointments to a supervisory board with the consent of the IMMOFINANZ Supervisory Board. Key company employees must also have the approval of the Executive Board and Supervisory Board before they may accept a position on the corporate body of a non-Group company. A legal restraint on competition is also in place. 

The members of the Supervisory Board are required to represent the interests of the company and must disclose any conflicts of interest without delay. They may not accept positions on the corporate bodies of any companies that compete with IMMOFINANZ.

Christian Böhm a member of the Supervisory Board, is the chairman of the management board of APK Pensionskasse AG. IMMOFINANZ makes pension fund contributions at ordinary market conditions to this firm for the company pensions of the Executive Board members. The contributions made in 2020 totalled EUR 167,501.0. 

Apart from the above business relationship, there are no contracts between the members of the Supervisory Board or companies in which a member of the Supervisory Board holds a significant financial interest, on the one hand, and IMMOFINANZ or one of its subsidiaries, on the other hand. 

Criteria for the independence of the Supervisory Board 

The Austrian Corporate Governance Code (C-Rule 53) requires the majority of the supervisory board members elected by the annual general meeting to be independent of the company and its management board. A supervisory board member is considered to be independent when he or she has no business or personal relations with the company or its management board that constitute a material conflict of interest and are therefore capable of influencing the member's behaviour.

The following independence criteria were defined by the IMMOFINANZ Supervisory Board and reflect the standards listed in Annex 1 to the Corporate Governance Code. All elected Supervisory Board members are independent based on these criteria. No member represents a shareholder with an investment of more than 10% or the interests of such a shareholder. 

• The Supervisory Board member did not serve as a member of the Executive Board or a key employee of IMMOFINANZ or one of its subsidiaries during the past five years.

• The Supervisory Board member does not currently, or did not in the past year, maintain any business relations with IMMOFINANZ or one of its subsidiaries of a scope considered significant for the Supervisory Board member. The same applies to business relationships with companies in which the Supervisory Board member holds a considerable economic interest, but not for exercising functions on IMMOFINANZ's corporate bodies. The approval of individual transactions by the Supervisory Board pursuant to L-Rule 48 does not automatically qualify the member as not independent.

• The Supervisory Board member did not act as an auditor of IMMOFINANZ or own an investment in the auditing company or work for the auditing company during the past three years.

• The Supervisory Board member is not a member of the management board of another company in which a member of the Executive Board of IMMOFINANZ serves on the supervisory board.

• The Supervisory Board member has not served on the Supervisory Board of IMMOFINANZ for more than 15 years. This does not apply to members who are shareholders with a direct investment in IMMOFINANZ or who represent the interests of such a shareholder.

• The Supervisory Board member is not closely related (direct offspring, spouse, life partner, parent, uncle, aunt, sibling, niece, nephew) to a member of the Executive Board or to persons specified in one of the above points.

Gov-Col, GRI 102-25

Support for women on the Executive Board and Supervisory Board and in key functions

In the interest of the company, appointments to the Executive Board, Supervisory Board and key positions are based solely on professional and personal qualifications. 

Women filled 27.66% of the management positions in 2020 (2019: 34.0%) and represented 59.69% of the total workforce (2019: 59.0%). The Executive Board currently has no female members. The Supervisory Board is chaired by Bettina Breiteneder, and the percentage of women among the shareholder representatives equals 25% (2019: 16.67%), respectively 20% for the entire Supervisory Board (2019: 25%). In the IMMOFINANZ Group, women hold key management positions in central corporate functions and on the local country boards.

Specific measures to increase the share of women in management positions have not been defined to date. IMMOFINANZ supports the work-life balance through flexible and partially flexible working times as well as part-time work models for employees, parental leave for fathers or the one-month "new baby break".

Men and women have equal opportunities for advancement at IMMOFINANZ, and all employees receive performance-based remuneration for their work. 

Diversity concept 

IMMOFINANZ does not follow an abstractly defined diversity concept for appointments to the Executive Board or Supervisory Board. The Supervisory Board, which is responsible for appointments to the Executive Board and for issuing recommendations to the annual general meeting for elections to the Supervisory Board, considers the diversity aspects listed in § 243c (2) no. 2a of the Austrian Commercial Code (age, gender, education and professional experience) and the international aspects for supervisory board members which are discussed in L-Rule 52 of the Austrian Corporate Governance Code to be very important. Accordingly, these aspects are acknowledged and reflected in connection with specific appointment decisions or recommendations. However, the company does not consider it suitable or expedient to tie its decisions on recommendations or appointments to a diversity concept with abstractly defined goals. The Supervisory Board believes the decisive factors for recommended elections to the Supervisory Board and appointments to the Executive Board must involve aspects like expertise, specific requirements, experience, availability, etc.

Gov-Selec, GRI 102-24

External evaluation

IMMOFINANZ's compliance with the provisions of the Austrian Corporate Governance Code was evaluated by the auditor, Deloitte Audit Wirtschaftsprüfung GmbH, within the framework of a separate audit of the corporate governance report (pursuant to KFS/PG 13). The related auditor's report is available for review on our website (www.immofinanz.com). The evaluation of the corporate governance report for 2020 did not result in any objections.

Vienna, 21 April 2021 

The Executive Board 

Group Management Report

Economic Overview and Property Markets 

The following section presents a selection of key economic indicators on the IMMOFINANZ core markets. Included here are statistics on GDP growth, the inflation rate and the unemployment rate based on the autumn forecast published by the European Commission in November 2020 and on current Eurostat and/or OECD data. This information is followed by a summary of developments in the individual real estate market segments where IMMOFINANZ is active. The information was drawn from market reports prepared by BNP Paribas, CBRE, JLL, Savills and EHL (data as of the end of Q3 or Q4 2020). 

The COVID-19 pandemic was the determining factor for the commercial property market in Europe during 2020. All the same, the transaction volume reached a significant EUR 276.6 billion despite negative forecasts and health crises - and, in the end, was only 17% below the record set in 2019. The differences between the market and asset classes were, in some cases, significant. The strongest declines among the European countries were registered by Ireland with -41% and France with -39%, while Germany with -5% and Sweden with -6% nearly matched the previous year. The influence of the pandemic was particularly visible in the transaction volumes of the various asset classes. The traditional heavyweights were faced with, in part, substantial revenue declines: Volumes fell by 66% to EUR 9.4 billion in the asset class hotel and by 32% to EUR 94.3 billion in the asset class office. In spite of the sharp drop, office properties remained the most popular asset class on the commercial real estate market in 2020. The reduction in the transaction volumes for retail properties was more moderate with a minus of 6% to EUR 39.0 billion. The pandemic caused wide-ranging negative effects but was also responsible for positive impulses in the following sectors during 2020: healthcare with a volume of EUR 11.4 billion (+16%), followed by industrial and logistics properties at EUR 40.4 billion (+11%) and multi-family houses in the residential construction segment at EUR 65.9 billion (+7%).

Austria 

Economic growth in Austria was weakened, above all, by the corona-related lockdown that covered the first six months. The year-on-year GDP decline amounted to 7.8% at the end of 2020 (2019: +1.5%). Tourism and the service sector were hardest hit by the measures implemented to contain the pandemic. Forecasts point to recovery for the Austrian economy in 2021, but any improvement will be clearly dependent on the further development of the COVID-19 crisis. The effects of European fiscal policy represent an added uncertainty factor. The inflation rate in Austria equalled 1.0% at the end of the year (2019: 1.5%) but, in contrast to many other countries in the European Union, there were no signs of deflation in 2020. 

Despite measures implemented by the Austrian government to shore up the labour market, for example through short-time work regulations, the unemployment rate rose to 5.8% in 2020 (2019: 4.5%). Consumer spending by private households was an important growth driver for Austria in previous years, and the development of unemployment and purchasing power will therefore play a key role in the post-pandemic recovery. 

The transaction volume on the commercial property market in Austria reached a record EUR 5.9 billion in 2019 but dropped by nearly half to EUR 3.3 billion in 2020 (-48%). Residential properties were the most popular asset class with a volume of EUR 1.2 billion and a share of 37%, followed by office properties at approximately EUR 1.1 billion (33%) and logistics properties at roughly EUR 460 million (14%). The prime yield in the office sector continued along the trend set in previous years with a moderate decline to 3.35% (2019: 3.45%). 

Germany 

The German economy fell into recession during 2020 with a 3.9% decline in the GDP (2019: +1.0%), even though the negative forecasts from the beginning of the year (-6.25%) failed to materialise. Economic recovery is forecasted for 2021, whereby this export-oriented nation is expected to benefit substantially from stronger momentum in the global economy. However, two risk factors remain: the pandemic and the effectiveness of government measures to lessen the economic impact. The inflation rate in Germany declined to -0.7% following a temporary VAT reduction. The unemployment rate equalled 4.6% at the end of the year (2019: 3.2%).

The commercial property market in Germany generated impressive results in 2020 despite the corona-related restrictions: The transaction volume was only slightly lower than 2018 and reached EUR 59.7 billion (2019: EUR 73.4 billion). Office properties remained the leader on the transaction market with 41%, or EUR 24.7 billion, of this volume, whereby the share of local buyers increased significantly. Roughly 60.5% of the capital was attributable to buyers from Germany. Europeans were the dominant category among foreign investors with a share of 20.4%, followed by buyers from North America, Asia and the Near East. Steady high demand combined with low-yield alternatives led to a further slight decline in the prime yields for first-class properties. Prime yields equalled 2.55% in Berlin and Munich and fell from 3.0% in the previous year to 2.9% in Düsseldorf. Düsseldorf reported the third-highest transaction volume in its history with EUR 3.6 billion (2019: EUR 4.1 billion). 

Romania 

Forecasts for Romania show a 5.25% decline in economic output for 2020 (2019: +3.0%). Although this value signals an improvement over the initial estimates at the beginning of the COVID-19 pandemic, the strong dependency of the Romanian economy on private consumption as well as weak export and production indicators represent risks for the recovery expected in 2021. Inflation fell significantly to 1.8% in 2020 (2019: 3.9%), and the unemployment rate amounted to 4.9% at year-end (2019: 4.0%).

The commercial property market in Romania contracted by 44% year-on-year to EUR 589 million in 2020 (2019: EUR 1.06 billion). Office properties formed again most of the transactions, with an increase in the already high share of 74% in 2019 to 80%, or EUR 471 million, in 2020. Logistics and industrial properties ranked second with a share of 12% and a volume of EUR 71 million. The retail sector saw only a single notable transaction due to the pandemic-related decline in demand. Prime yields remained stable at 7.0% (2019: 6.5%) for shopping centers and 7% for office properties. 

Poland 

In spite of the strong economic momentum, forecasts for Poland indicate a GDP decline of 3.5% in 2020 (2019: +4.1%). This economy was severely weakened by the pandemic, and the extent of the recovery expected in 2021 is uncertain due to the high number of infections. The inflation rate rose to 3.4% at the end of 2020 (2019: 2.1%), which is the highest level in the EU, but the unemployment rate declined slightly to 3.3% despite the pandemic (2019: 3.4%). 

The volume of investments on the real estate market in Poland represented the third-highest value in the country's history at EUR 5.3 billion in 2020. However, COVID-19 was responsible for a significant shift in transaction volumes. Industrial and logistics properties were the most popular asset class with a volume of EUR 2.6 billion (50%), while office properties dropped to second place with a volume of EUR 2.0 billion and a market share of 38%. The demand for retail properties was significantly weakened by the pandemic, and transactions in this asset class reached a market share of only 12% and a volume of roughly EUR 658 million. The high transaction volume limited the increase in the yields for office properties to 4.6% (2019: 4.5%). In the meantime, prime yields for retail properties rose to 5.75% (2019: 5.0%) as a result of the negative market expectations.

Slovakia 

The Slovakian economy slid into recession during 2020 as a consequence of the pandemic, with a sharp drop in investments as well as private consumption and exports. The GDP rose by 2.5% in 2019, but a decline of 2.7% followed in 2020. The inflation rate achieved 1.6% at year-end (2019: 2.9%), while the unemployment rate increased to 7.0% (2019: 5.8%). 

The transaction volume on the commercial investment market fell by 33% from EUR 770 million in 2019 to EUR 516 million in 2020. The Slovakian market followed the international trend, whereby logistics and industrial properties were the most popular asset classes with a volume of EUR 253 million or 49%. Office properties were responsible for EUR 191 million, or 37%, of the transaction volume, and retail properties for EUR 57 million or 11%. Prime yields equalled 5.5% (2019: 5.25%) on the office market and increased to 6.0% for retail properties (2019: 5.75%). 

Czech Republic 

Economic growth in the Czech Republic was severely impaired by the measures implemented to combat the COVID-19 pandemic. The GDP decline equalled 5.0% at year-end 2020 (2019: +3.3%), and a return to the 2019 level is not expected before the end of 2022. At 2.4%, the inflation rate remained nearly unchanged year-on-year (2.6%). Unemployment rose from 2.0% in 2019 to 3.1% at the end of 2020. 

The transaction volume on the real estate investment market totalled EUR 2.7 billion in 2020, after the previous record year with EUR 3.1 billion. Demand was strongest for residential properties, which represented a transaction volume of EUR 1.3 billion, followed by office properties with a volume of EUR 580.0 million. 

Hungary 

The Hungarian economy was negatively affected by its procyclical orientation in 2020. Experts estimate that the growth of 4.6% in 2019 will be followed by a decline of 6.5% in economic output in 2020. Inflation remained high at 2.8% in 2020 (2019: 3.4%), and the unemployment rate equalled 4.3% in November (2019: 3.4%).

Investments on the commercial property market in Hungary fell by 26% to EUR 1.25 billion in 2020 (2019: EUR 1.7 billion). The share of international buyers rose to 47% and nearly equalled the share of Hungarian investors. Office properties were the most popular asset class at EUR 813 million or 65%, whereby the transaction volume in absolute numbers nearly matched the previous year. Second and third place in the transaction volume ranking were held by logistics properties with EUR 160 million and hotels with EUR 150 million. Only two transactions were registered in the retail sector during the past year. Prime yields remained stable at 5.25% for office properties and rose to 6.0% (2019: 5.5%) for retail properties. 

Portfolio Report

COVID-19 update 

The COVID-19 pandemic and its effects played a decisive role in the development of the global economy - and the real estate branch - throughout 2020. The governments in most of IMMOFINANZ's core countries imposed temporary lockdowns beginning in March which had an impact, above all, on retail businesses. These restrictions were gradually eased beginning in mid-April and, with few exceptions which primarily involved restaurants and movie theatres in Romania and Serbia, all IMMOFINANZ retail areas were open as of mid-June.

At the beginning of October, the countries in which IMMOFINANZ holds commercial properties witnessed a renewed increase in new infections. Governments reintroduced containment measures that again included temporary shutdowns in the retail business and, as a further consequence, lockdowns. Roughly 35% of the rented retail space was closed on a temporary basis at the end of December 2020. This level dropped to almost 20% by the end of February 2021and increased again to around 58% at the beginning of April 2021. 

In the retail parks, visitor frequency recovered very quickly after the end of the respective lockdowns. The STOP SHOP retail parks benefit from direct access to the individual stores from the parking areas and a focus on everyday products. Statistics also show that people shopped less frequently but spent more per visit as a result of the pandemic. This is reflected in the development of visitor frequency and the turnover reported by retailers to IMMOFINANZ. For example: footfall was only 3.9% lower year-on-year in August, but the retailers in the STOP SHOPs recorded an increase of 6.0% in revenue during that month. Footfall in the STOP SHOPs was 17.0% lower than the previous year during the months from January to December 2020 - including the COVID-19-related shutdown days - but revenues declined by only 7% and, after an adjustment for the shutdown days, even increased by around 1%. 

The VIVO! shopping centers in Romania, which represent roughly 46% of the total VIVO! retail space, were only able to re-open in mid-June after the first lockdown. Consequently, these shopping centers recorded the strongest post-lockdown increase in visitor frequency during the third quarter. Footfall was only 14% lower year-on-year in September, but 29% lower in December due to the new shutdowns. In total, footfall in the VIVO! shopping centers was 29% lower than the previous year during the months from January to December 2020 - including the COVID-19-related shutdown days - while retail revenues declined by 26.0%.

An analysis of the individual branches shows the largest revenue declines, above all, in the areas of entertainment, fitness, restaurants & cafes, shoes and fashion as well as travel agencies. In contrast, higher revenues were recorded by supermarkets and food retailers, health & beauty outlets and pet supply stores.

In order to optimally offset the temporary decline in rental income from the retail properties on cash flow, IMMOFINANZ's management introduced a cost savings programme in March. It includes, among others, the postponement of non-essential investments and expenditures, the reduction of overheads and the renegotiation of supplier contracts. On the revenue side, individual solutions were developed together with retail tenants for the crisis months and the reopening phase to assist them in handling the situation, and marketing activities were launched to ensure the rapid recovery of visitor frequency in the retail properties. Necessary support was provided in the form of rent deferrals and temporary rental reductions, accompanied by the negotiation of contract extensions, an increase in turnover-based rents and the strengthening of safety measures. In the office business, temporary support was provided to individual tenants in branches particularly affected by the pandemic. Back-to-office plans were prepared with a focus on room concepts, distance guidelines, disinfection, protective measures and access rules. A separate task force was installed to manage hygiene procedures for the common areas to ensure the safe use of office and retail space. 

Roughly 98.8% of the contract rents invoiced during the 2020 financial year for space in the office and retail properties had been paid by the end of March 2021 (retail: 98.6%, office: 98.8%). This high percentage demonstrates the quality of IMMOFINANZ's tenants and the appropriateness of the temporary support agreements. The rental reductions granted during this period amounted to 10.6% of the contractual rents (retail: 17.1%, office: 5.2%).

A close dialogue with tenants is essential for fast reactions and the implementation of necessary measures. The IMMOFINANZ teams have a successful track record in the repositioning and upgrading of properties and in adjustments to reflect changes in the market environment. The company follows an active portfolio management approach and has the necessary internal expertise - which represents a decisive advantage under difficult market conditions. 

Property portfolio

The IMMOFINANZ portfolio covered 209 properties as of 31 December 2020 (31 December 2019: 213) with a combined value of EUR 4,978.9 million (31 December 2019: EUR 5,122.1 million). These properties are located, above all, in the core markets of Austria, Germany, Poland, Czech Republic, Slovakia, Hungary and Romania. Standing investments represent the largest component at EUR 4,428.5 million, or 88.9% of the carrying amount, and 2.0 million sqm, which generate steady rental income. The development projects total EUR 358.6 million, or 7.2% of the carrying amount. Pipeline projects are responsible for EUR 191.8 million, or 3.9%, and include future planned development projects, undeveloped land, real estate inventories and properties that are intended for sale. 

The portfolio is focused on three clearly defined brands with a high degree of standardisation: myhive stands for flexible, international office solutions, STOP SHOP for retail parks and VIVO! for shopping centers. Properties in these three brands were responsible for 69.1% of the carrying amount of the standing investment portfolio at year-end 2020 and 76.2% of rental income (Q4 2020). A further 14.9% of the carrying amount is attributable to office buildings which are rented to single tenants. The largest of these properties is the City Tower in Vienna, which is leased to the Austrian government, followed by the trivago Campus and FLOAT in Düsseldorf. 

Structure of the property portfolio 

Total carrying amount: MEUR 4,978.9 

A geographical analysis shows 50.1% of the property portfolio in Austria, Germany and Poland, i.e. in so-called "developed markets" as defined by FTSE EPRA/NAREIT. 

The application of IFRS 16 since the first quarter of 2019 leads to differences between the amounts presented in the portfolio report and on the balance sheet. Expert appraisals or internal valuation form the basis for the property values in the portfolio report. The reported property values also include capitalised rights of use for building rights.

Property portfolio by core market and classification 

Rounding differences may result from the use of automatic data processing equipment for the addition of rounded amounts and percentage rates. 

¹ Including real estate inventories (Cologne and Adama) totalling EUR 0.6 million 

² In declining order based on the carrying amount: Slovenia, Serbia, Croatia, Turkey, Bulgaria

Property acquisitions

IMMOFINANZ continued the strategic expansion of its cost-efficient and, accordingly, crisis-resistant STOP SHOP retail park brand, as announced, and expanded the portfolio by eight locations in 2020. These acquisitions involved six fully rented retail parks in Serbia and the Czech Republic with roughly 43,000 sqm of rentable space as well as two retail parks in Austria and Croatia with roughly 5,500 sqm and 3,100 sqm, respectively. Four properties were transferred to our portfolio during 2020, and the closing for the Serbian real estate package took place in the first quarter of 2021. The expected annual rental income from the newly acquired properties totals approximately EUR 5.7 million. The gross return per property equalled up to 8.9%, for example in Serbia. Land in Croatia was also purchased during the past year. 

Investments

Investments in the real estate portfolio totalled EUR 162.1 million in 2020, compared with the substantially higher EUR 905.3 million in 2019 which was influenced by several acquisitions and completions. The pandemic was responsible for isolated delays on development projects. In addition, non-essential investments were postponed to protect liquidity. Most of the expenditures in 2020 were directed to the office properties myhive Medienhafen (Düsseldorf), myhive Iride (Bucharest), myhive am Wienerberg and myhive Ungargasse (Vienna) as well as several STOP SHOP retail parks and a plot of land in Croatia. 

Property sales

The portfolio optimisation also includes the sale of properties that are no longer part of the core business. These sales focus, above all, on real estate that is no longer compatible with IMMOFINANZ's portfolio because of its size, location, quality or other features. The proceeds from these sales are invested to expand the portfolio, in other words in development projects and acquisitions.

In spite of the challenging market environment, properties totalling EUR 109.7 million were sold during 2020 (excl. proceeds from the sale of real estate inventories; 2019: EUR 119.4 million). These transactions included, among others, an office building in Poland as well as land in Romania and Hungary. The largest transaction took place at the beginning of August with the successful sale of the Panta Rhei office building in Düsseldorf. The marketing of this office property started before the beginning of the corona-related lockdown and was concluded without any negative effects. The sale price substantially exceeded the carrying amount, and the closing was finalised at year-end. 

Structure of the property portfolio by asset class and classification

Total carrying amount: MEUR 4,887.9 (excl. Others); in MEUR

Selected details on the carrying amount of IMMOFINANZ's property portfolio as of 31 December 2020 are provided in the following table: 

Property portfolio by brand and classification 

¹ Including real estate inventories (Cologne and Adama) totalling EUR 0.6 million 

Standing investments

With an 88.9% share of the total property portfolio, the standing investments are the major source of earnings for IMMOFINANZ. These properties are held to generate rental income. The most important objectives for their management include a continuous increase in quality and efficiency, the strengthening of ties with existing tenants and the acquisition of new tenants and the continuing improvement of the portfolio.

The 153 standing investments had a combined carrying amount of EUR 4,428.5 million as of 31 December 2020 (31 December 2019: 158 standing investments with a carrying amount of EUR 4,749.5 million). Of this total, 62.1% are attributable to office properties and 37.7% to retail properties. The year-on-year decline is explained primarily by the pandemic-related write-downs (revaluation results from standing investments: EUR -156.6 million; details are provided under "Property Valuation" beginning on page 34). The focal point of the standing investments based on the carrying amount are the markets in Poland (EUR 977.8 million), Austria (EUR 712.5 million) and Romania (EUR 611.7 million). The rentable space in this portfolio totals 1,953,460 sqm (31 December 2019: 2,001,063 sqm). The standing investment portfolio has a gross return of 6.2% based on IFRS rental income and a return of 6.6% based on invoiced rents. The difference is explained by the accrual of rental incentives - e.g. the standard market practice of granting rent-free periods or allowances for fit-out costs. These incentives must be accrued on a straight-line basis over the contract term in accordance with IFRS (basis for gross return under IFRS) but are not included in the invoiced rent.

The occupancy level remained unchanged at a high 96.0% (31 December 2019: 96.8%). According to the EPRA's calculation formula, the vacancy rate equals 4.0% (31 December 2019: 3.2%). The EPRA vacancy rate is based on the ratio of the estimated market rent for the vacant space in the standing investments to the total estimated market rent for the standing investment portfolio (additional information on the EPRA financial indicators can be found beginning on page 46). Take-up was substantially higher at 616,000 sqm in 2020 despite the challenging market conditions, for a more than twofold increase over the previous year (excluding standing investments in the Other asset class; Q1-4 2019: 300,800 sqm). This increase was based, above all, on the extension of existing rental contracts in the retail business in return for support provided by IMMOFINANZ. The total take-up includes 65,000 sqm of new rentals and 551,000 sqm of contract extensions. The average unexpired lease term (WAULT) weighted by rental income equalled 4.2 years as of 31 December 2020 (31 December 2019: 4.3 years). 

Contract expiration profile: standing investments (total)

Expiring rental contracts as of the earliest possible contract end in relation to the total rented space (only GLA space¹): 

¹ Gross lettable area: the total area available to tenants for their exclusive use; excludes common areas, e.g. traffic, parking and service areas, etc. 

Standing investments by core market 

The following graph shows the distribution of IMMOFINANZ's standing investment portfolio as of 31 December 2020 by country, based on the carrying amount: 

¹ In declining order based on the carrying amount: Slovenia, Serbia, Croatia

² Financing costs based on nominal outstanding liability

³ 19.5 million S IMMO shares at the EPRA NAV of EUR 24.32 per share as of 31 December 2020

⁴ Cash and cash equivalents, incl. cash and cash equivalents from assets held for sale

Like-for-like rental income

A like-for-like analysis (i.e. acquisitions, completions and sales are deducted to facilitate comparison with Q4 2019) shows a decline of EUR 2.0 million, or 2.8%, in rental income to EUR 67.9 million in the fourth quarter of 2020. Although the retail business was hard hit by the COVID-19-related measures, like-for-like rental income remained nearly unchanged at EUR 33.9 million in the fourth quarter of 2020. Here it should be noted that most of the temporary rent deferrals are not directly reflected in rental income but in the write-off of rents receivable. Like-for-like rental income in the office business was EUR 1.9 million, or 5.3%, lower year-on-year. This decline is attributable, among others, to the relocation of a large office tenant in 2020 (the space has already been re-let) and to two office properties with retail space which was closed due to the pandemic. As seen over the full 12 months, the pandemic was responsible for a decline of EUR 6.2 million, or 2.6%, to EUR 236.9 million. 

Standing investments like-for-like by core market

Standing investments like-for-like by asset class and brand

Rounding differences may result from the use of automatic data processing equipment for the addition of rounded amounts and percentage rates. 

¹ This calculation only includes the properties which were fully owned by IMMOFINANZ during both periods. In other words, the calculation excludes new acquisitions, completions and sales.

Office standing investments 

The carrying amount of the 47 office standing investments totalled EUR 2,749.99 million as of 31 December 2020 (31 December 2019: 53 standing investments with a carrying amount of EUR 3,024.4 million). These assets represented 62.1% of the standing investment portfolio and 49.6% of the rental income from standing investments in the fourth quarter of 2020. A regional analysis shows the focal points of the IMMOFINANZ office properties in the core markets of Poland (EUR 694.1 million), Austria (EUR 570.2 million) and Germany (EUR 523.0 million). 

The sale of three office buildings, including the Panta Rhei office building in Düsseldorf (closing at year-end 2020), and the reclassification to development projects of two office buildings which are undergoing refurbishment reduced the rentable space in the office standing investments to 940,303 sqm as of 31 December 2020 (31 December 2019: 1,035,844 sqm). Based on annualised rents (Q4 2020: EUR 34.2 million), the office portfolio generated a gross return of 5.0% and a return of 5.4% based on invoiced rents. The office properties in the myhive brand represent a carrying amount of EUR 1,400.8 million and generated a gross return of 5.2%, respectively 5.7% based on invoiced rents. The occupancy rate in the office portfolio equalled 93.7% (31 December 2019: 95.3%), and the myhive offices have an occupancy rate of 93.0%. Based on the EPRA's calculation formula, the vacancy rate equals 5.5% (31 December 2019: 4.2%). Despite the challenging market environment, take-up in the office business rose by 3.5% year-on-year to 155,000 sqm: nearly 42,500 sqm represented new rentals and 112,500 sqm contract extensions.

The office portfolio has a balanced tenant structure. The ten largest tenants are responsible for 23.9% of the space in the office standing investments, and no single tenant has rented more than 3.8% of the total space in these properties. The WAULT equalled 4.4 years as of 31 December 2020 (31 December 2019: 4.6 years). 

Contract expiration profile: office standing investments

Expiring rental contracts as of the earliest possible contract end in relation to the total rented space (only GLA space¹): 

¹ Gross lettable area: the total area available to tenants for their exclusive use; excludes common areas, e.g. traffic, parking and service areas, etc. 

The ten largest standing investments in the office portfolio based on the carrying amount (in declining order) are the myhive Warsaw Spire (Warsaw), FLOAT (Düsseldorf), myhive am Wienerberg, including the Twin Towers (Vienna), trivago Campus (Düsseldorf), City Tower Vienna (Vienna), Na Příkopě 14 (Prague), Cluster Produktionstechnik (Aachen), BBC Gamma (Prague), myhive Átrium Park (Budapest) and myhive S-Park (Bucharest). An overview of the IMMOFINANZ office properties can be found under www.immofinanz.com/en/office/office-search. 

Key data on the office standing investments by category

¹ Financing costs based on nominal outstanding liability

The COVID-19 pandemic - with the accompanying shift to home office work in many companies - has accelerated the current digitalisation trend in the office sector. Even under the assumption that home office will play a slightly less important role in the future, the tenants' wish for greater flexibility is increasing. IMMOFINANZ is well positioned with its flexible myhive-office concept and offers tenants properties at good locations in a high-quality office and community environment with excellent service, infrastructure and a friendly atmosphere. Tenants only pay for the space they need and can make short-term adjustments where necessary.

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Retail standing investments 

The carrying amount of the 105 standing investments in the retail sector totalled EUR 1,671.1 million as of 31 December 2020 (31 December 2019: 100 standing investments with a carrying amount of EUR 1,672.9 million). These properties represented 37.7% of the standing investment portfolio and generated 50.2% of the rental income from standing investments in the fourth quarter of 2020. The largest regional markets are Romania with EUR 321.3 million, Poland with EUR 283.6 million and Slovakia with EUR 265.5 million. The STOP SHOP retail parks have a carrying amount of EUR 1,001.7 million and a gross return of 8.4%, respectively 8.5% based on invoiced rents. The VIVO! shopping centers have a carrying amount of EUR 658.6 million; they generate a gross return of 8.2% and an invoiced rental return of 8.4%. 

The retail standing investments have 1,013,157 sqm of rentable space (31 December 2019: 955,039 sqm). Based on annualised rents (Q4 2020: EUR 34.6 million), the retail portfolio has a gross return of 8.3%, respectively 8.5% based on invoiced rents. The occupancy rate in the retail properties remained high at 98.1% as of 31 December 2020 (31 December 2019: 98.3%); the STOP SHOP retail parks and VIVO! shopping centers were essentially fully rented with an occupancy rate of 98.6% and 97.3%, respectively. Take-up in the retail properties amounted to roughly 460,900 sqm in 2020 and included approximately 22,500 sqm of new rentals and 438,400 sqm of contract extensions. The extensions were concluded, above all, in return for temporary support provided by IMMOFINANZ during the lockdown phases. 

IMMOFINANZ relies on a balanced tenant mix to create an optimal environment for retailers and their customers. All larger IMMOFINANZ retail properties have solid international and local anchor tenants, but no single retailer has rented more than 4.2% of the total space in these properties. The WAULT equalled 3.9 years as of 31 December 2020 (31 December 2019: 3.8 years). 

Branch mix - Retail

Only rented space in standing investments as of 31 December 2020 

Contract expiration profile: retail standing investments

Expiring rental contracts as of the earliest possible contract end in relation to the total rented space (only GLA space¹): 

¹ Gross lettable area: the total area available to tenants for their exclusive use; excludes common areas, e.g. traffic, parking and service areas, etc. 

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The ten largest standing investments in the retail portfolio based on the carrying amount (in declining order) are the VIVO! Cluj-Napoca (Romania), VIVO! Bratislava (Slovakia), VIVO! Lublin (Poland), VIVO! Constanţa (Romania), VIVO! Baia Mare (Romania), VIVO! Stalowa Wola (Poland), VIVO! Hostivař (Czech Republic), VIVO! Piła (Poland), VIVO! Krosno (Poland) and STOP SHOP Třebíč (Czech Republic). An overview of the IMMOFINANZ retail properties can be found under www.immofinanz.com/en/retail/retail-search. 

Key data on the retail standing investments by category

¹ Financing costs based on nominal outstanding liability

The government-ordered temporary shutdowns to contain the COVID-19 pandemic have affected nearly all branches. However, discounters have fared substantially better due to consumers' growing price consciousness. IMMOFINANZ is well positioned with its cost-efficient STOP SHOP and VIVO! retail brands and benefits from its focus on everyday goods and tenants from the discount segment. 

Development projects

The development projects had a carrying amount of EUR 358.6 million as of 31 December 2020, which represents 7.2% of the total property portfolio (31 December 2019: EUR 199.4 million and 3.9%). This amount includes EUR 300.8 million of active development projects and EUR 57.9 million of projects in the preparation or concept phase, for which outstanding construction costs are not yet available. Included here are four STOP SHOP projects. The expected fair value of the active projects on completion amounts to EUR 391.1 million. The core markets of Germany and Austria represent the focus of these activities based on an expected fair value after completion of EUR 162.8 million, respectively EUR 96.7 million. 

The COVID-19 pandemic led to delays in the progress of construction on several development projects. The fully rented STOP SHOP Siedlce, which opened at the end of March 2020, was reclassified from development projects to standing investments in the year under report. 

Current focus of development activities

Germany

The country's first office building in the myhive brand, myhive Medienhafen, which also includes the flexible myhive products, is currently under construction in the Düsseldorf Medienhafen. This high-rise is designed as a multi-tenant building and will have approximately 21,000 sqm of rentable space on 16 floors. Completion is scheduled for the third quarter of 2021.

Austria

The two development projects in progress as of 31 December 2020 involve the modernisation of existing office buildings: the location for the myhive am Wienerberg with approximately 12,500 sqm and the myhive Ungargasse in Vienna's third district with roughly 17,200 sqm of planned usable space which was largely completed in the fourth quarter of 2020. The myhive Ungargasse will be reclassified to standing investments in 2021. 

Hungary

An existing office building in Budapest is also undergoing modernisation. Completion is scheduled for the second half of 2021. 

Romania

At the IRIDE Business Park in Bucharest, the IRIDE 18 and 19 office buildings are currently undergoing modernisation and integration in the myhive concept. They are then expected to have roughly 10,000 sqm and 18,000 sqm of rentable space. These projects were largely completed during the fourth quarter of 2020, and the properties will be reclassified to standing investments in 2021. 

Croatia

The development of a new retail park under the STOP SHOP brand is planned for the Croatian city of Kaštela. It will have 6,800 sqm of rentable space and 220 parking spaces. Construction will start in autumn 2021, and completion is planned for spring 2022. 

Development projects by core market 

¹ Expected rental income after completion in relation to the current carrying amount, including outstanding construction costs 

² Croatia 

Pipeline projects

Pipeline projects include planned development projects, undeveloped land and/or temporarily suspended projects. These projects had a carrying amount of EUR 191.8 million as of 31 December 2020 (31 December 2019: EUR 173.2 million). Romania represents the focal point of the pipeline projects at EUR 98.9 million. IMMOFINANZ intends to further reduce the scope of pipeline projects, in particular the land reserves in Romania, through selected sales as part of its corporate strategy. 

Assets held for sale

The assets held for sale totalled EUR 168.4 million as of 31 December 2020 (including capitalised rights of use for building rights) and are not included in this portfolio report (31 December 2019: EUR 154.6 million). Concrete sale plans have been approved for these properties, and their sale is intended in the near future. Details are provided in section 4.9 of the consolidated financial statements. 

Property Valuation

IMMOFINANZ prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and arranges for the regular valuation of its properties by independent experts. These external appraisals are carried out each year as of 30 June and 31 December. The valuation of the property portfolio also follows the EPRA's Best Practices Policy Recommendations for the application of the fair value method as defined in IFRS. 

The valuation includes property-related factors like the occupancy rate, rental income and the length of the rental contracts as well as the age and quality of the buildings. External factors are also taken into account, e.g. the development of the regional and general market environments, the economy and the financing climate. As of 31 December 2020, CBRE was responsible for appraising nearly the entire IMMOFINANZ portfolio (EUR 5 billion). Internal appraisals covered 0.9%. 

Development of property valuation in 2020 

The COVID-19 pandemic has had a negative influence on the valuation of investment property. Revaluations totalled EUR -166.5 million in 2020, compared with strong positive results in the previous year (2019: EUR 193.3 million). The external appraiser CBRE identified a slight increase in market yields (increase of up to 50 basis points in the retail segment) which was subsequently reflected in changed assumptions for re-letting in the portfolio. 

Revaluation results from the standing investments totalled EUR -156.6 million in 2020 (2019: EUR 195.9 million). This reduction represented roughly 3.5% of the carrying amount of the standing investments as of 31 December 2020. The write-downs included EUR 71.0 million for retail properties (4.3% of the carrying amount) and EUR 89.1 million for office properties (3.2% of the carrying amount). The pandemic-related write-downs in the retail segment were recorded, above all, by the VIVO! shopping centers in Romania and Poland, while the negative valuation effects in the office business also resulted from slightly higher yields in these two countries. These negative effects were contrasted by positive valuation results, above all, from the office buildings in Germany. 

Development of property valuation like-for-like

A like-for-like analysis - i.e. after an adjustment for new acquisitions, completions and sales to improve comparability - shows a valuation effect of EUR -145.6 million for 2020 (2019: EUR 122.7 million). 

Standing investments like-for-like by core market

¹ This calculation only includes the properties which were fully owned by IMMOFINANZ during both financial years. In other words, the calculation excludes new acquisitions, completions and sales. 

Standing investments like-for-like by asset class 

¹ This calculation only includes the properties which were fully owned by IMMOFINANZ during both financial years. In other words, the calculation excludes new acquisitions, completions and sales. 

Financing 

Financing strategy and further optimisation of the capital structure

The objectives of IMMOFINANZ's financing strategy are to ensure sufficient liquidity at all times, to achieve and maintain a balanced capital structure and maturity profile and to optimise financing costs. The best possible structuring of debt financing is an important priority and, in addition to successful property management, represents a decisive factor for the results generated by the company's business activities.

Financing with a total volume of EUR 925.2 million was concluded in 2020. That represents approximately 29.2% of the total financial liabilities as of 31 December 2020 and involves extensions as well as new financing. 

Financial liabilities amounted to EUR 3.2 billion as of 31 December 2020 (31 December 2019: EUR 2.8 billion). Cash and cash equivalents, including cash held for sale, rose to EUR 1,051.4 million (31 December 2019: EUR 345.1 million), due to the capital measures carried out in July and the issuance of a benchmark bond. Net debt, i.e. debt after the deduction of cash and cash equivalents held by the Group, equalled EUR 2.1 billion (31 December 2019: EUR 2.5 billion). 

IMMOFINANZ AG concluded an unsecured, revolving corporate credit line of EUR 100.0 million at the end of March 2020. It can be used at the company's discretion until 31 March 2022 and gives IMMOFINANZ additional financial flexibility. This credit line was unused as of 31 December 2020 and is therefore available in full.

Capital increase and placement of a subordinated mandatory convertible bond

In order to strengthen the company's equity and the indicators relevant for the current investment grade rating, IMMOFINANZ successfully carried out a share placement and issued a mandatory convertible bond in July 2020. The gross issue proceeds totalled EUR 356.1 million. 

A total of 15,418,824 shares were placed with institutional investors through an accelerated bookbuilding process under the exclusion of subscription rights. Share capital was increased by 11,208,526 to 123,293,795 shares, and 4,210,298 treasury shares were sold. The placement was completed at EUR 15.31 per share and resulted in gross issue proceeds of EUR 236.1 million.

IMMOFINANZ also issued a subordinated mandatory convertible bond with a total nominal value of EUR 120.0 million through an accelerated bookbuilding process with institutional investors. The initial conversion price was set at EUR 17.1472, which represents a 12.0% premium above the subscription price for the shares in the current share placement. The bond carries a coupon of 4.0% per year, payable semi-annually in arrears on 23 January and 23 July of each year. The subordinated mandatory convertible bond is currently convertible into a total of 6,998,228 IMMOFINANZ shares and is classified as equity under IFRS and by the rating agency Standard & Poor's.

Issue of a benchmark bond

In October 2020, IMMOFINANZ issued a fixed-interest, senior unsecured bond with institutional investors. The bond has a benchmark volume of EUR 500 million, a seven-year term and a fixed coupon of 2.5% per year. The net proceeds from the issue will be used to refinance existing liabilities, to utilise value-creating opportunities for growth and for general corporate purposes.

Robust balance sheet structure

As of 31 December 2020, IMMOFINANZ had a robust balance sheet structure with an equity ratio of 45.1% (31 December 2019: 46.0%) and a net loan-to-value ratio (net LTV) of 37.8% (31 December 2019: 43.0%). 

The indicator net LTV compares the carrying amount of financing, less cash and cash equivalents, with the total carrying amount of the properties and the EPRA NAV for the roughly 19.5 million shares held in S IMMO AG (S IMMO). 

Development of average financing costs 

Development of net LTV

Calculation of net LTV as of 31 December 2020

¹ Including IFRS 5 values, excluding IFRS 16 values

² Cash and cash equivalents, including cash and cash equivalents in assets held for sale

³ Excluding rights of use, values as per IFRS 16

⁴ 19.5 million S IMMO shares at the EPRA NAV of EUR 24.32 per share as of 31 December 2020 

Constant financing costs 

The average financing costs for IMMOFINANZ, including derivatives, equalled 1.99% per year as of 31 December 2020 (31 December 2019: 1.91% per year). The hedging quota remained stable at 88.6% (31 December 2019: 90.7%). 

Term structure

The weighted average remaining term of financial liabilities equalled 4.25 years at the end of December 2020 (2019: 4.0 years). The following graph shows the term structure by year as of 31 December 2020. The maturing financing volume for the financial year 2021 amounted only to EUR 14.2 million. IMMOFINANZ is in regular contact with its financing banks to discuss the premature extension of expiring financings, in particular for the financial 2022 year, in order to further optimise the term structure. 

Term structure of financial liabilities by financial year as of 31 December 2020

In MEUR 

¹ The convertible bond 2017-2024 was not "in the money" as of 31 December 2020. It is presented in the year of final maturity, i.e. 2024; the bondholders have a put option on 22 January 2022. 

Unencumbered assets

In addition to properties which carry external financing and are encumbered through standard market collateral (e.g. mortgages, pledge of company shares), EUR 1,482.8 million, or 28.9% of the total property portfolio, were not externally financed and therefore unencumbered as of 31 December 2020 (31 December 2019: EUR 1,434.0 million or 27.3%). Including the S IMMO shares (valued at the EPRA NAV), which are also unencumbered, this value increases to EUR 1,957.1 million or 34.9%. 

Unencumbered assets by asset class 

Unencumbered property portfolio in total: MEUR 1,482.8 

Composition of financial liabilities

The financial liabilities held by IMMOFINANZ are denominated entirely in euros and consist of amounts due to financial institutions as well as liabilities from bonds. The composition of these liabilities as of 31 December 2020 is as follows:

¹ Based on nominal remaining debt, excluding mandatory convertible bond 

² Convertible bond 2017-2024 (coupon reduced to 1.50% following the receipt of an investment grade rating) at EUR 294.5 million as well as future coupon payments for the mandatory convertible bond 2020-2023 which are classified as liabilities.

³ Including IFRS 5 

The remaining balance of the financial liabilities held by IMMOFINANZ totalled EUR 3,170.9 million as of 31 December 2020. 

Bank liabilities

The bank liabilities represent secured loans which, in each case, were concluded by the respective property company as the borrower. Consequently, all rights and obligations from these loans are attributable to the borrower. These property loans include standard market obligations for compliance with specific financial covenants by the property company, which generally involve: 

• Debt service coverage ratios

• The ratio of the remaining debt to the market value of the property (loan-to-value) 

The COVID-19 pandemic and the related curfews and legal restrictions led, in part, to the shutdown of properties, above all in the retail sector beginning in March 2020. Government assistance packages were also introduced to support the economy. Among others, the government measures gave tenants the right to defer rental payments. 

Rent reductions can result in the failure to meet individual financial covenants. This, in turn, can entitle the financing banks to call the outstanding loan prematurely if the borrower also fails to comply with contractually defined, accepted measures to remedy the situation. As a precautionary measure, IMMOFINANZ has therefore partly concluded agreements with the financing banks to suspend compliance with the debt service coverage ratio during the COVID-19 pandemic. These suspensions covered a total loan volume of EUR 274.9 million as of 31 December 2020 for office properties in Hungary and retail properties in Slovakia and the Czech Republic. IMMOFINANZ is in regular contact and communication with its financing banks and is continuously evaluating the current situation.

The total volume of refinancing, long-term extensions and new financing from bank liabilities amounted to EUR 425.2 million (2019: EUR 798.1 million). Of this total, EUR 325.2 million is attributable to the office asset class and EUR 100.0 million to the retail asset class. 

Financing sources as of 31 December 2020

Derivatives

IMMOFINANZ uses derivatives to hedge against interest rate increases. The volume of financial liabilities hedged through interest rate derivatives amounted EUR 1,459.6 million as of 31 December 2020 (31 December 2019: EUR 1,694.1 million). In total, 88.6% of financial liabilities are hedged against interest rate risk (31 December 2019: 90.7%), 45.8% via interest rate derivatives and a further 42.8% represent financial liabilities with fixed interest rates.

¹ Including IFRS 5 (For information on assets held for sale, see section 4.9 in the consolidated financial statements.) 

A swap exchanges floating for fixed interest payments. Therefore, floating rate liabilities that are hedged with a swap can be regarded as fixed interest rate liabilities from an economic standpoint. 

The interest rates used for discounting and the calculation of variable payment flows are based on interest rate curves for each currency and matching maturities that are observable on the market. In accordance with IFRS 13 (Fair Value Measurement), the resulting market values are adjusted to include a credit value adjustment (CVA) and a debt value adjustment (DVA).

Financial liabilities - type of interest rate as of 31 December 2020

Bonds 

The outstanding nominal value of the bonds totalled EUR 1,397.3 million as of 31 December 2020 (31 December 2019: EUR 797.2 million). It is attributable to the convertible bond issued in January 2017 with a term ending in 2024 and a put option for the investors at the nominal amount in 2022 (current conversion price: EUR 21.3772), the subordinated mandatory convertible bond issued in July 2020 with a term ending in 2023 (current conversion price: EUR 17.1472) and the two benchmark corporate bonds which were issued in January 2019 and October 2020.

¹ The term of the bond ends in 2024; the bondholders have a put option on 24 January 2022. 

² Coupon reduced by 50 basis points to 1.50% as of 24 January 2019 following the receipt of an investment grade rating. 

³ The mandatory convertible bond represents a hybrid financial instrument which must be separated into equity and debt components on initial recognition. The regular interest payments are classified as a financial liability, while the mandatory conversion is considered an equity component. 

S&P Global Ratings assigned a long term issuer rating BBB- with stable outlook to IMMOFINANZ AG during the first quarter of 2019. They confirmed this rating and outlook during the annual review process in February 2021. IMMOFINANZ's announcement in March 2021, i.e. after the end of the reporting year, of its intention to launch a voluntary takeover offer to the shareholders of S IMMO AG led to a revision in the S&P outlook from stable to negative. 

In connection with the issue of the corporate bond 2019-2023 and the corporate bond 2020-2027, IMMOFINANZ has committed to comply with the following standard financial covenants. These covenants will be calculated on the basis of the consolidated IFRS financial statements: 

¹ The values are based on the latest calculation as per the bond terms on or before 31 December 2020. 

Business Development

IMMOFINANZ started the 2020 financial year with strong operational performance, but the development of business was negatively influenced by the COVID-19 pandemic beginning at the end of that year's first quarter. Rental income rose by 3.1% to EUR 288.6 million due to the strong growth in the portfolio during the second half of 2019, but a crisis-related increase in receivables write-offs from asset management led to substantially higher property expenses. The results of asset management totalled EUR 206.4 million in 2020 and reflect the previous year despite these write-offs. The pandemic also had a negative influence on the valuation of investment property: revaluations totalled EUR -166.5 million, compared with clearly positive results in the previous year (2019: EUR 193.3 million). This reduction represents roughly 3.2% of the total property portfolio. In addition, the continuing decline in the price of the S IMMO share during 2020 led to a write-down of EUR 88.6 million in this investment to EUR 363.6 million. Net profit for the 2020 financial year amounted to EUR -165.9 million. 

Funds from operations (FFO) 

FFO 1 from the standing investment business (before tax and including the S IMMO dividend) rose by 0.6% from EUR 125.3 million in 2019 to EUR 126.1 million. That represents FFO 1 per share of EUR 1.13 compared with EUR 1.18 in the previous year (see the table on the following page for the number of shares used in the calculation). These FFO 1 calculations include the accrued interest for once-a-year coupon payments on bonds: the calculation for 2020 includes accrued interest of EUR -2.6 million for the bond 2020-2027 that was issued in October. The first annual coupon payment for this bond will be made on 15 October 2021. The calculation of FFO 1 for 2019 includes the future interest payments for the bond issued in January 2019, whereby the first coupon payment was made in January 2020. 

Funds from operations (FFO)

Income statement

Rental income increased by 3.1%, or EUR 8.7 million, to EUR 288.6 million, above all due to acquisitions and property completions in the second half of the previous year. 

The COVID-19 pandemic led to a substantial rise in the write-off of receivables from asset management to EUR 29.2 million (2019: EUR 2.2 million). In contrast, maintenance and real estate marketing costs declined to EUR 14.4 million (2019: EUR 21.6 million), respectively EUR 5.4 million (2019: EUR 8.3 million) and reflect the liquidity protection measures that were implemented immediately at the start of the crisis to cut costs and protect liquidity. Property expenses were 25.1% higher than the previous year at EUR 71.9 million (2019: EUR 57.4 million). However, an adjustment for the effects on receivables write-offs shows a year-on-year reduction of 22.8% in property expenses to EUR 42.7 million. 

The results of asset management reflected the previous year at EUR 206.4 million in 2020 (2019: EUR 207.3 million). The results of property sales rose to EUR 7.9 million (2019: EUR -5.1 million), supported, above all, by the profitable sale of an office property in Düsseldorf and the related revaluation. Properties with a volume of EUR 109.8 million were sold during 2020 (asset and share deals), whereby the largest transactions involved one office property each in Düsseldorf and Warsaw as well as land in Romania. 

The results of property development totalled EUR -24.2 million (2019: EUR -12.4 million). This decline resulted from the revaluation of properties under construction, which amounted to EUR -21.2 million (2019: EUR 1.5 million) and also reflected a COVID-19-related increase in market yields as well as costs increases on individual projects. 

Results of operations 

Other operating expenses rose by 6.0% to EUR 48.9 million (2019: EUR 46.1 million). The increase in personnel expenses included under this position is primarily attributable to a non-recurring payment related to the resignation of Oliver Schumy from the Executive Board. The results of operations equalled EUR 143.9 million and were only slightly lower than the previous year (2019: EUR 149.9 million).

Revaluation and operating profit

Results from the revaluation of standing investments turned negative -due to the adverse effects of the COVID-19 pandemic - at EUR -156.6 million (2019: EUR 195.9 million). This value decline represents roughly 3.5% of the carrying amount of the standing investments as of 31 December 2020. Retail properties were written down by EUR 71.0 million (4.3% of the carrying amount) and office buildings by EUR 89.1 million (3.2% of the carrying amount). Additional details are provided under "Property Valuation" on page 34.  

These crisis-related, negative valuation results were responsible for a decline in operating profit (EBIT) - despite the strong operating performance - from EUR 345.6 million in 2019 to EUR -12.7 million. 

Financial results and taxes 

Financing costs declined slightly to EUR 64.0 million (2019: EUR 64.6 million) despite a year-on-year increase of roughly 12% in the financing volume. Average financing costs, including hedging, equalled 1.99% per year (31 December 2019: 1.91%). Other financial results amounted to EUR -14.6 million (2019: EUR -9.0 million) and resulted chiefly from the valuation of interest rate derivatives in the current low-interest environment. 

The steady decline in the price of the S IMMO share during 2020 represented an objective indication of impairment to this investment as of 31 December 2020. Consequently, the S IMMO investment was tested for impairment and the carrying amount was written down to EUR 363.6 million (i.e. to a carrying amount of EUR 18.65 per S IMMO share). Net profit for the 2020 financial year therefore includes an impairment loss of EUR 88.6 million. The share of profit/loss from equity-accounted investments amounted to EUR -69.5 million in 2020 (2019: EUR 78.4 million), whereby EUR 15.0 million (2019: EUR 62.0 million) are attributable to the share of earnings from S IMMO. Of this total, EUR -73.1 million are attributable to S IMMO (including the carryforward of EUR 0.6 million in undisclosed reserves from the initial consolidation). Financial results totalled EUR -147.8 million (2019: EUR 4.5 million). 

Net profit 

Profit before tax equalled EUR -160.4 million (2019: EUR 350.1 million). After the deduction of EUR -5.5 million (2019: EUR -2.5 million) in income taxes, net profit amounted to EUR -165.9 million (2019: EUR 352.1 million). That represents earnings per share (basic) of EUR -1.50 (2019: EUR 3.37). 

Balance sheet 

The condensed balance sheet is shown below:

IMMOFINANZ has a robust balance sheet structure which was further strengthened by capital measures in 2020. Equity was increased to EUR 3.1 billion by the placement of shares and a mandatory convertible bond in July 2020. Cash and cash equivalents rose to EUR 1.1 billion as a result of these capital measures and the benchmark bond issued in October 2020. This bond issue is also reflected in an increase in financial liabilities to EUR 2.9 billion (31 December 2019: EUR 2.6 billion). In total, the net loan to value ratio improved to 37.8% (2019: 43.0%). The equity ratio equalled 45.1% (2019: 46.0%). 

The value of the property portfolio amounted to EUR 5.2 billion and represents 76.2% of total assets. These properties are reported on the balance sheet under the following positions: investment property, property under construction, real estate inventories and assets held for sale. Assets held for sale include properties as well as other assets which will be transferred to the buyer in the event of a sale.

The additions are related primarily to the acquisition of retail parks under the STOP SHOP brand in Austria, Czech Republic and Croatia as well as investments in office properties in Vienna and the purchase of land reserves in Croatia. The disposals in 2020 consisted chiefly of properties in the core countries: in Germany through the sale of the Panta Rhei office building, and in Poland and Romania.

The equity-accounted investments of EUR 367.9 million include EUR 363.6 million which are attributable to S IMMO AG. Based on the roughly 19.5 million shares held by IMMOFINANZ, the book value of the S IMMO share equals EUR 18.65 (31 December 2019: EUR 24.34). As indicated above, the S IMMO investment was written down by EUR 88.6 million. 

EPRA Financial Indicators 

IMMOFINANZ is a member of the European Public Real Estate Association (EPRA), the interest group for listed real estate companies which is headquartered in Brussels. EPRA's mission is to promote, develop and represent the European public real estate sector. Its objectives are achieved through the provision of better information to investors and stakeholders, active involvement in the public and political debate, improvement of the general operating environment, promotion of best practices and the cohesion and strengthening of the real estate industry. 

With its Best Practices Recommendations (EPRA BPR), the EPRA has created a standardised framework for improving the comparability between real estate companies - above and beyond IFRS. IMMOFINANZ publishes detailed information on the EPRA indicators based on these recommendations (www.epra.com) as part of its commitment to full transparency. The non-financial statement (starting on page 65) also provides further non-financial indicators on IMMOFINANZ's performance, including environment and employee-related issues, in line with the principles and criteria defined in the "EPRA Sustainability Best Practices Recommendations Guidelines - Third Version September 2017".

EPRA net asset value 

The EPRA recommends publishing a revised version of the net asset value indicators (NAV indicators) beginning with the financial statements for 2020 to better reflect current market trends and company developments. The two previously published indicators - net asset value (NAV) and triple net asset value (NNNAV) will be replaced by three new indicators: net reinstatement value (NRV), net tangible assets (NTA) and net disposal value (NDV). 

These indicators are calculated in accordance with the EPRA BPR, whereby adjustments are made beginning with IFRS equity to provide stakeholders with the most transparent information on the market value of the real estate company's assets and liabilities under various scenarios. 

In order to present the transition as clearly as possible, IMMOFINANZ calculated a transition for the 2020 financial year and the comparative period from the previous EPRA NAV and EPRA NNNAV to the three new NAV indicators based on the EPRA BPR Guidelines issued in October 2019. The EPRA NTA is the most relevant indicator for IMMOFINANZ's business activities and therefore serves as the new primary indicator for net asset value. 

Net asset value (NAV) and triple net asset value (NNNAV)

The EPRA NAV concept is used to present the fair value of equity on a long-term basis in order to give investors an overview of a company's sustainable asset position. The calculation of EPRA NAV also includes the undisclosed reserves in real estate inventories as well as the (negative) fair value of derivative financial instruments. Undisclosed reserves are not included in carrying amounts according to IFRS accounting rules, while the (negative) fair values of derivative financial instruments regularly serve as a means of hedging long-term financing so these gains or losses will remain hypothetical as of the balance sheet date. The deferred taxes on these items are included. The EPRA NAV concept also calls for the inclusion of the deferred taxes on investment property which would be incurred when these assets are sold. Goodwill, which arises as a technical figure due to the recognition of deferred taxes on business combinations, is deducted.

The calculation of EPRA NNNAV involves an adjustment to reverse the (negative) fair value of derivative financial instruments from the NAV calculation. In addition, financial liabilities are restated at their fair value and the deferred taxes which would be incurred on a planned sale are deducted. Asset deals generally result in the full realisation of deferred taxes, while the assumption for sales through share deals is that IMMOFINANZ will (economically) bear 50% of the deferred tax liabilities.

The EPRA NNNAV calculation also includes the deferred taxes from the adjustments to derivative financial instruments and from the fair value measurement of financial liabilities. The objective is to give investors an overview of the current value of all assets and liabilities. 

Net reinstatement value (NRV), net tangible assets (NTA) and net disposal value (NDV) 

The calculation of the three new NAV indicators begins with the IFRS equity attributable to shareholders. Since the convertible bond 2017-2024 was not "in the money" as of 31 December 2020, the calculation of diluted equity includes a deduction for the equity component of this bond. This bond was "in the money" as of 31 December 2019, and the debt component of the convertible bond 2017-2024 was therefore included in equity as a diluting factor. 

The objective of the EPRA net reinstatement value is to present the value of net assets on a long-term basis. It is calculated under the assumption that property will never be sold. The NRV is also intended to show what would be required to re-establish the company on the investment markets based on its current capital and financing structure. Accordingly, the NRV includes a correction to equity for the deferred taxes on investment property. Property taxes and other costs incurred by the buyer are also taken into account in accordance with the external appraisals.  

The assumption underlying EPRA net tangible assets is that assets are bought and sold, and these transactions lead to the partial realisation of deferred taxes. The calculation of NTA includes the deferred taxes on the properties that will not be sold over the long term. Intangible assets are excluded from the NTA calculation. The NTA can include an adjustment for property taxes and other costs incurred by the buyer when previous transactions show that these costs are lower than indicated by the external consultants' appraisals. This is regularly the case with share deals. After an adjustment for special effects, roughly 22% of the property sales in recent years were settled through share deals. Property taxes and other costs incurred by the buyer are included at an appropriate amount in the NTA calculation.

The EPRA net disposal value shows the value of equity under a sale scenario. The NDV does not represent a liquidation value because the calculation is based on fair values, which generally do not represent liquidation amounts. Deferred taxes, financing instruments and other adjustments are therefore included at market value in keeping with the resulting tax effects. The deferred taxes on investment property as well as property taxes and other costs incurred by the buyer are not included in the NDV. 

Transition from EPRA NAV to the three new EPRA indicators 

The calculation of the EPRA NAV indicators as of 31 December 2020 - in contrast to 31 December 2019 - does not include any potential shares which would result from the conversion of the convertible bond 2017-2024 because the bond was not "in the money" at year-end 2020. The number of shares used for the calculation was increased, however, by the placement in July 2020 of 15,418,824 shares (11,208,526 shares from authorised capital and 4,210,298 from the sale of treasury shares). The calculation of the EPRA NAV indicators also includes 6,998,228 shares for the mandatory convertible bond 2020-2023 issued in July 2020 because the bond must be converted into IMMOFINANZ shares and is classified as equity under IFRS.

The EPRA NTA per share equalled EUR 27.82 as of 31 December 2020, compared with EUR 31.25 in 2019. This decline is primarily attributable to the negative revaluation of investment property as well as diluting effects (see the following reconciliation). 

The book value per share equalled EUR 25.20 as of 31 December 2020 (31 December 2019: EUR 29.34).  

EPRA NTA bridge 

¹ Number of shares as of 31 December 2019 in thousand: 114,780 (diluted) 

² Number of shares as of 31 December 2020 in thousand: 123,294 (basic)

EPRA earnings per share

EPRA earnings per share is a result of operating activities and an important indicator of the extent to which current dividend payments are covered by operating results. 

¹ The comparative data were adjusted. 

EPRA earnings per share equalled EUR -0.20 in 2020, respectively EUR 0.44 per share after company-specific adjustments. This reduction resulted, above all, from the decline in net profit before revaluation results. 

EPRA net initial yield 

The EPRA net initial yield (EPRA NIY) shows the ratio of annualised rental income, less non-recoverable operating property expenses (net rental income - projected over a full financial year) to the total portfolio value of the standing investments. For this calculation, the fair values of the properties are increased by the estimated purchasers' costs. The EPRA net initial yield is a comparative benchmark for portfolio valuation. Its goal is to assist investors in comparing the value of different real estate portfolios.  

The EPRA "topped-up" NIY includes an adjustment for the granting of rent-free periods (or other unexpired rental incentives like temporary rental reductions or scaled rents). 

¹ The comparative data were adjusted. 

The EPRA NIY rose from 5.4% at year-end 2019 to 5.6% and the "topped-up" NIY from 5.7% to 6.0%. These increases were based, above all, on the reduction of the total portfolio value. 

EPRA vacancy rate

The EPRA vacancy rate represents the ratio of the estimated market rents for vacant space to the estimated market rents for the entire standing investment portfolio. Its goal is to provide investors with an indicator for evaluating vacancies in the standing investments based on the estimated market rents. 

EPRA vacancy rate by core market 

EPRA vacancy rate by asset class and brand

The EPRA vacancy rate equalled 4.0% at year-end 2020 (31 December 2019: 3.2%). The vacancy rate in the office portfolio increased slightly to 5.5% and reflects normal tenant turnover. The retail portfolio was nearly fully rented with a vacancy rate of only 2.1%, whereby the STOP SHOP retail parks had the lowest vacancy rate as of 31 December 2020 at 1.4%. 

EPRA cost ratio 

The EPRA cost ratio shows the company's cost efficiency by comparing the proportional share of the operating and administrative expenses for investment property - both including and excluding direct vacancy costs - to gross rental income for the reporting period. The underlying calculations for the EPRA cost ratio are based on the results of asset management. Other operating costs, e.g. development costs and miscellaneous operating expenses, are excluded.