INTERIM REPORT as of September 30, 2015 – 9M
CONTENTS
DIRECTORS’ REPORT
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOTES
OTHER
02
10
17
33
General Information
Unaudited Condensed Consolidated Interim Statement of Financial Position
A. General Information
Financial Statement Certification
04 EBIT – Recurring FFO Bridge
17 B. Consolidated Group
05
12
18
Analysis of Results of Operations, Net Worth and Financial Position
Unaudited Condensed Consolidated Interim Statement of Comprehensive Income
C. Changes in Accounting Policies
08 Significant Events after the Interim Reporting Date
13 Unaudited Condensed Consolidated Interim Statement of Cash Flows
14 Unaudited Condensed Consolidated Interim Statement of Changes in Equity
15 Group Segment Report
21 D. Group Segment Reporting
22 E. Notes to the Unaudited Condensed Consolidated Interim Statement of Financial Position
26 F. Notes to the Unaudited Condensed Consolidated Interim Statement of Comprehensive Income
27 G. Notes to the Unaudited Condensed Consolidated Interim Statement of Cash Flows
28 H. Other Notes
34 Glossary
36 Disclaimer
37 Imprint
DIRECTORS’ REPORT
02
General Information
04
EBIT – Recurring FFO Bridge
05
Analysis of Results of Operations, Net Worth and Financial Position
08
Significant Events after the Reporting Date
GAGFAH S.A. INTERIM REPORT 9M
GENERAL INFORMATION THE COMPANY GAGFAH S.A. is a joint stock corporation incorporated in Luxembourg, having its registered office at 2–4, Rue Beck, L-1222 Luxembourg, Grand Duchy of Luxembourg, registered with the Registre de Commerce et des Sociétés under number B109.526. GAGFAH S.A. and its subsidiaries form the GAGFAH GROUP. GAGFAH S.A. is an intermediate parent company preparing consolidated financial statements. GAGFAH S.A.’s business is the securitization of risks relating to a geographically diversified residential property portfolio. The business of GAGFAH GROUP’s operating subsidiaries is the ownership and management of a geographically diversified and well-maintained residential property portfolio. As of the balance sheet date, the Group owned a total of more than 142,000 units. GAGFAH GROUP’s operating subsidiaries also operate in the area of real estate sales. The ultimate parent company is Vonovia SE (former Deutsche Annington Immobilien SE), Düsseldorf, Germany, which prepares the consolidated financial statements for the widest group of affiliated companies.
G AGFAH AND VONOVIA BUSINESS COMBINATION On December 1, 2014, Vonovia SE (Vonovia) announced its intention to launch a voluntary public takeover offer for all shareholders of GAGFAH S.A. The offer was structured as a combined cash and exchange offer, which granted € 122.52 in cash plus five shares of Vonovia SE for every 14 shares of GAGFAH S.A. Vonovia published the offer document in connection with the transaction on December 18, 2014. It describes, inter alia, the structure and envisaged timeline of the offer and the intentions of Vonovia upon a successful completion of the offer. The Board of Directors of GAGFAH S.A. published a reasoned response statement in accordance with the requirements of the German Securities Acquisition and Takeover Act on December 23, 2014. During the acceptance period between December 19, 2014, and January 21, 2015, 84.8 % of GAGFAH S.A. shares (assuming full conversion of GAGFAH S.A.’s convertible bonds) had been tendered into the offer. As indicated in the offer document, the acceptance period was followed by an additional acceptance period between January 27, 2015, and February 9, 2015, during which an additional 21,996,582 GAGFAH S.A. shares were offered to Vonovia SE. All in all, after the two acceptance periods and assuming full conversion of GAGFAH S.A.’s convertible bonds into GAGFAH S. A. shares as a result of the change of control as described in the terms and conditions of the convertible bonds, a total of 93.8 % of all GAGFAH S. A. shares had
02
DIRECTORS’ REPORT
GAGFAH S.A. INTERIM REPORT 9M
been tendered to Vonovia SE (88.8 %) and the Co-Investor J.P. Morgan Securities plc (5.0 %). This was well above the target acceptance rate of 57 % and cleared the way for beginning the integration process of Vonovia and GAGFAH. The Luxembourg law on public takeover bids grants minority shareholders the right to tender, when the bidder holds, as a result of a public takeover bid, securities carrying more than 90 % of the voting rights of the target company. The remaining minority shareholders of GAGFAH S.A were entitled to tender their shares until May 10, 2015 and additional 12,355,521 shares were traded. After these transactions Vonovia SE holds 93.8 % of all GAGFAH S.A. shares. On April 15, 2015 GAGFAH S.A. has resolved to file for a delisting of the shares of GAGFAH S.A. from the regulated market at the Frankfurt Stock Exchange. The Board of Directors has further filed for a revocation of the inclusion in the over-the-counter markets at the other stock exchanges where shares of GAGFAH S.A. are currently traded. Following the delisting from the regulated market and the revocation of the inclusion in the over-the-counter markets GAGFAH S.A. shares will no longer be traded at a stock exchange. The delisting from the regulated market becomes effective pursuant to sec. 46 para. 2 sentence 3 Stock Exchange Regulation of the Frankfurt Stock Exchange on November 20, 2015.
DIRECTORS’ REPORT
03
GAGFAH S.A. INTERIM REPORT 9M
EBIT – RECURRING FFO BRIDGE Recurring FFO, or FFO I, is the industry benchmark figure for recurring earnings from operations. Customary practice for listed German real estate companies is to also define a payout ratio from the recurring FFO for dividend purposes. While FFO definitions of the different companies may differ slightly, the recurring FFO usually does not account for certain cash elements; truly free cash flow, however, should take all cash items into account. For reason of comparability to the FFO calculation scheme of Vonovia, the FFO calculation of GAGFAH was modified in Q3 2015. Compared to the prior year's calculation the following changes have been made: Earnings before interest and taxes (EBIT) no longer include income from the reversal of deferred income.The result from other services, expenses / income from share-based remuneration, result from HB-Funds and the result from the property development business are now included; excluded are interest expenses on pension obligations. Furthermore current tax expenses are now disclosed without tax payments for prior years. The prior-year figures have been adjusted accordingly. Overall, the reported recurring FFO for the prior year period has been adjusted by € -0.9 million or € -0.01 per share.
EBIT – Recurring FFO Bridge
€ million, unless stated otherwise
EBIT (w/o income from the reversal of deferred income) Depreciation and amortization EBITDA Result from the fair value measurement of investment property Profit from the sale of investment property and assets held for sale Other operating income / expenses incl. reorganization and restructuring expenses Sales expenses 1 Adjusted EBITDA Rental Net interest expenses Current tax expenses Recurring FFO before sales Recurring FFO before sales (€ / share) 1 w / o depreciation and amortization
04
DIRECTORS’ REPORT
9M 2014 313.3 2.3 315.6 -54.0
9M 2015 476.4 1.7 478.1 -245.2
-12.7
-10.2
5.4 6.9 261.2 -112.2 -8.5 140.5 0.65
51.0 4.7 278.5 97.7 -10.0 170.8 0.70
GAGFAH S.A. INTERIM REPORT 9M
ANALYSIS OF RESULTS OF OPERATIONS, NET WORTH AND FINANCIAL POSITION INCOME FROM THE LEASING OF INVESTMENT PROPERTY Income from the leasing of investment property is mainly attributable to the leasing of apartments and remains relatively stable compared to the first nine months of 2014. The lost rents from the sale of 5,046 units since Q3 2014 have been nearly compensated for the acquisition of the VITEX Group with 4,947 units. Income from Property Management
€ million
Income from the leasing of investment property Other income from property management Income from property management
9M 2014 617.5
9M 2015 621.6
9.5 627.0
6.6 628.2
ADJUSTED EBITDA RENTAL Adjusted EBITDA rental increased by € 17.3 million to € 278.5 in the first nine months of 2015 compared to € 261.2 million in the first nine months of 2014. The increase is mainly due to lower repair and maintenance costs, lower expenses for share-based remuneration and lower personal costs as a result of the integration process of GAGFAH and Vonovia. SALE OF INVESTMENT PROPERTY AND ASSETS HELD FOR SALE We closed the sale of 2,865 units for a total consideration of € 167.6 million in the first nine months of 2015. Of that amount, 645 units for € 79.9 million came from our condo sales program and the remaining 2,220 units for € 87.7 million were sales from the non-core portfolio. Our condo sales break down as follows:
Condo Sales
Sold units Gross proceeds (€ million) Carrying value (€ million) Gross margin in % NCR multiple
DIRECTORS’ REPORT
9M 2014 571 59.9 -47.4 26.3 20.3X
9M 2015 645 79.9 -62.5 27.8 20.3X
05
GAGFAH S.A. INTERIM REPORT 9M
ONE OFFS: OTHER OPERATING INCOME / EXPENSES INCL. REORGANIZATION AND RESTRUCTURING EXPENSES In 2015 total expenses amounted to € 51.0 million, compared to € 5.4 million in 2014. The increase is mainly due to additions to provisions for Multi-Employer-Plans which are organized by the pension institution of the Federal Republic of Germany and the Federal State (“Versorgungsanstalt des Bundes und der Länder”), expenses in connection with the reorganization program “GAGFAH 2015” and expenses in connection with the ongoing integration process of GAGFAH and Vonovia. Furthermore GAGFAH has initated a new partial retirement program which led to an addition to provision of € 3.8 million.
NET FINANCING EXPENSES Our net financing expenses are the sum of the following items: Net Financing Expenses
9M 2014 -123.7
9M 2015 -114.1
Other interest expenses
-28.9
-22.7
Result from the fair value measurement of derivatives
-32,8
-2.0
-185.4 1.1 -184.3
-138.8 0.2 -138.6
€ million
Interest expenses related to loans
Financial expenses Financial income Net financing expenses
Net financing expenses are the sum of interest expenses on borrowings and the cost of refinancing of our Group’s indebtedness, adjusted by interest income and the result from the fair value measurement of derivatives. Interest expenses related to loans decreased substantially to € 114.1 million in the first nine months of 2015 from € 123.7 million in the prior-year period. The decrease reflects lower interest rates as a result of the successful refinancing as well as lower interest payments as a consequence of the scheduled amortization of financial liabilities in the course of the financial year 2014. In the first nine months of 2015 loans in an amount of € 194.6 million were repaid as compared to € 677.0 million in the first nine months of 2014. The convertible bonds were fully converted in GAGFAH S.A. shares. This positive effect was supported by a lower loss from the fair value measurement of derivatives of € 2.0 million (prior-year period: € 32.8 million). In total, this led to a much better result of net financing expenses of € 138.6 million (prior-year period: € 184.3 million).
06
DIRECTORS’ REPORT
GAGFAH S.A. INTERIM REPORT 9M
FINANCIAL POSITION As of September 30, 2015, and December 31, 2014, the Group’s equity and liabilities were as follows: Financial Position
€ million
Total equity Financial liabilities Other liabilities Total equity and liabilities
12-31-2014 € million 2,154.6 4,928.0
12-31-2014 % 25.9 59.2
09-30-2015 € million 2,930.2 4,551.4
09-30-2015 % 34.5 53.5
1,243.7 8,326.3
14.9 100.0
1,018,3 8,499.9
12.0 100.0
ASSETS AND LIABILITIES The Consolidated Statement of Financial Position of GAGFAH GROUP breaks down into the following main categories: Assets and Liabilities
€ million
Non-current assets Current assets Assets held for sale
12-31-2014 7,963.0
09-30-2015 8,269.4
268.8
192.6
94.5
37.9
Total assets
8,326.3
8,499.9
Equity
2,154.6
2,930.2
Non-current liabilities Current liabilities Total equity and liabilities
5,217.5 954.2 8,326.3
5,250.1 319.6 8,499.9
Non-current assets of € 8,269.4 million mainly include investment property of € 8,186.9 million (99.0 % of all non-current assets), € 26.2 million (0.3 %) property, plant and equipment and € 25.4 million (0.3 %) deferred tax assets. Non-current assets make up 97.3 % of total assets. Current assets of € 192.6 million mainly include other financial assets of € 37.3 million (19.4 %) and bank balances and cash on hand of € 81.1 million (42.1 % of all current assets). Non-current liabilities of € 5,250.1 million mainly comprise € 4,457.1 million financial liabilities (84.9 % of all non-current liabilities), € 556.1 million deferred tax liabilities (10.6 %) and € 140.9 million pension provisions (2.7 %).
DIRECTORS’ REPORT
07
GAGFAH S.A. INTERIM REPORT 9M
Current liabilities of € 319.6 million mainly include financial liabilities of € 94.3 million (29.5 % of all current liabilities) and other provisions of € 89.5 million which is 28.0 % of all current liabilities.
SIGNIFICANT EVENTS AFTER THE INTERIM REPORTING DATE On October 21, 2015, the Osnabrücker Wohnungsgesellschaft mbH paid the amount of € 91.0 million to HSH Nordbank AG for the purpose of the full repayment of the loan granted by institutional lenders. Furthermore, another € 128.7 million were paid by GBH Acquisition GmbH to HSH Nordbank AG for the purpose of the full repayment of the loan granted by institutional lenders on October 22, 2015.
OPPORTUNITY AND RISK REPORT There are no significant changes to the risks and opportunities reported in the presentation of Financial Risk Management in our 2014 Annual Report.
OUTLOOK 2015 will, overall, be an extraordinary year, as it will be impacted by the risks and opportunities of the business combination between Vonovia and GAGFAH. The GAGFAH management believes that the opportunities outweigh the risks and that the integration of the two companies and portfolios should have a positive impact on the stand-alone GAGFAH portfolio. Luxembourg, November 18, 2015 The Board of Directors of GAGFAH S. A.
08
DIRECTORS’ REPORT
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES
10
Unaudited Condensed Consolidated Interim Statement of Financial Position
12
Unaudited Condensed Consolidated Interim Statement of Comprehensive Income
13
Unaudited Condensed Consolidated Interim Statement of Cash Flows
14
Unaudited Condensed Consolidated Interim Statement of Changes in Equity
15
Group Segment Report
17 Notes
GAGFAH S.A. INTERIM REPORT 9M
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION as of September 30, 2015
ASSETS
Notes
€ million
12-31-2014
09-30-2015
Non-current assets Intangible assets
E.1.
10.2
13.2
Investment property
E.2.
7,884.2
8,186.9
Property, plant and equipment
E.3.
33.8
26.2
9.7
17.7
Other financial assets Deferred tax assets
E.9.
25.1
25.4
7,963.0
8,269.4
Current assets Inventories
10.7
11.2
Receivables
E.4.
46.5
19.8
Other financial assets
E.5.
0.0
37.3
50.2
40.4
Other assets Current tax claims
10
Bank balances and cash on hand
E.6.
Assets held for sale Total assets
E.7.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES
6.5
2.8
154.9
81.1
268.8
192.6
94.5 8,326.3
37.9 8,499.9
GAGFAH S.A. INTERIM REPORT 9M
EQUITY AND LIABILITIES
€ million
Equity Subscribed capital
Notes E.8.
Share premium Legal reserve Revenue reserves Equity attributable to the shareholders of the parent company Non-controlling interests Total equity
12-31-2014
09-30-2015
269.9
307.7
1,085.9
1,598.7
28.2 801.3
28.2 1,020.0
2,185.3
2,954.6
-30.7
-24.4
2,154.6
2,930.2
Liabilities Non-current liabilities Liabilities due to non-controlling shareholders Pension provisions Other provisions Deferred tax liabilities
2.4 140.9
6.9
19.7
E.9.
448.0
556.1
28.0
0.0
E.10.
4,395.7
4,457.1
137.5
18.0
Liabilities from income tax Financial liabilities
3.2 141.1
Other liabilities Deferred liabilities of government-granted loans
57.1
55.9
5,217.5
5,250.1
Current liabilities Pension provisions Other provisions Liabilities from income tax
6.7
6.7
49.0
89.5
42.6
37.4
Financial liabilities
E.10.
532.3
94.3
Other liabilities
E.11.
320.1
88.3
Deferred liabilities of government-granted loans Total liabilities Total equity and liabilities
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES
3.5
3.4
954.2
319.6
6,171.7 8,326.3
5,569.7 8,499.9
11
GAGFAH S.A. INTERIM REPORT 9M
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME for the period from January 1 to September 30, 2015
€ million, unless stated otherwise
Income from the leasing of investment property Other income from property management Income from property management Income from the sale of investment property and assets held for sale Carrying amount of the sold investment property and assets held for sale Revaluation of assets held for sale Profit from the sale of investment property and assets held for sale Result from the fair value measurement of investment property Capitalized internal expenses Cost of materials Personnel expenses Depreciation and amortization Other operating income Other operating expenses Financial income Financial expenses Earnings before taxes (EBT) Income taxes Net result
12
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES
Notes F.1.
F.2.
F.3 F.3 F.4
Q3 2014 236.8 2.8 239.6 53.4 -48.1 -7.5 -2.2 52.1 0.0 -122.0 -24.3 -0.9 9.0 -20.6 0.6 -61.7 69.6 -32.9 36.7
9M 2014 617.5 9.5 627.0 136.8 -123.0 -4.1 9.7 58.1 0.0 -272.8 -74.3 -2.3 26.4 -51.8 1.1 -185.4 135.7 -54.4 81.3
Q3 2015 198.4 1.8 200.2 34.7 -33.1 3.7 5.3 0.0 -0.2 -73.8 -37.6 -0.4 2.1 -13.9 0.0 -48.2 33.5 -18.9 14.6
9M 2015 621.6 6.6 628.2 170.5 -160.4 13.8 23.9 231.4 0.2 -259.4 -119.8 -1.7 17.0 -42.4 0.2 -138.8 338.8 -114.2 224.6
GAGFAH S.A. INTERIM REPORT 9M
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS for the period from January 1 to September 30, 2015
Notes
€ million
Net result Change in deferred taxes Result from the fair value measurement of investment property Amortization, depreciation and impairment losses on intangible assets and property, plant and equipment Profit from the sale of investment property and assets held for sale
E.9.
9M 2015 224.6
46.4
104.7
-58.1
-231.4
2.3
1.7
F.2.
-9.7
-23.9
-0.4
0.0
G.
54.8
36.4
-12.4
57.4
Profit from the deconsolidation of subsidiaries Other non-cash expenses (+) / income (-) Change in provisions, pension provisions and deferred liabilities of government-granted loans
9M 2014 81.3
Change in inventories
0.8
-3.1
Change in receivables and other assets
2.0
12.6
-23.3
-86.7
Change in other liabilities Reclassification of interest and other cost paid for refinancing into “Cash flows from financing activities” Cash flows from operating activities1 Cash received from the sale of investment property and assets held for sale
E.11.
G.
7.7
0.6
91.4
92.9
152.6
193.8
Cash paid for investment property Cash paid for investments in intangible assets, property, plant and equipment and financial assets
-30.7
-154.0
-1.5
-0.5
Cash flows from investing activities
120.4
39.3
0.0
-9.8
-3.9
-2.3
Dividends paid to stockholders of GAGFAH S.A. Cash paid to non-controlling shareholders / interests Cash paid for liabilities to non-controlling shareholders / interests
E.8.
-0.1
-0.1
-4.0
-12.2
Cash received from convertible bond
375.0
0.0
Cash received from raising financial liabilities
176.5
0.0
-677.0
-194.6
Cash flows from equity capital measures
Cash repayments of financial liabilities
E.10.
Transaction costs paid for convertible bond
-4.9
0.0
Transaction costs paid for refinancing
-1.6
0.0
Interest and other cost paid for refinancing
-7.7
-0.6
Securities paid / received for swaps
-1.6
1.4
Cash flows from debt capital measures
-141.3
-193.8
Cash flows from financing activities
-145.3
-206.0
Change in cash and cash equivalents Bank balances and cash on hand at the beginning of the financial year Bank balances and cash on hand as of the end of the financial year
66.5
-73.8
E.6.
101.9
154.9
E.6.
168.4
81.1
1 Operating cash flow includes taxes paid of € 45.5 million (prior year: € 7.6 million), interest paid of € 97.9 million (prior year: € 117.9 million) and interest received of € 0.2 million (prior year: € 1.7 million).
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES
13
GAGFAH S.A. INTERIM REPORT 9M
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY for the period from January 1 to September 30, 2015 Revenue reserves
€ million
01-01-2015 Net result Other comprehensive income, net of tax Total comprehensive income, net of tax Capital increase Share-based remuneration Changes in shareholdings and the consolidated group Dividends 09-30-2015
Subscribed Share capital premium 269.9 1,085.9 0.0 0.0 0.0
Legal reserve 28.2 0.0
Unrealized Equity gains / attributEquity losses from Unrealized able to the attributderivative gains / shareable to financial losses from holders of noninstrupension Treasury Retained the parent controlling ments provision shares earnings company interests -15.9 -25.5 -3.1 845.8 2,185.3 -30.7 0.0 0.0 0.0 219.4 219.4 5.2
Total equity 2,154.6 224.6
0.0
0.0
2.9
3.1
0.0
0.0
6.0
-0.1
5.9
0.0
0.0
0.0
2.9
3.1
0.0
219.4
225.4
5.1
230.5
37.8
528.7
0.0
0.0
0.0
2.3
0.0
568.8
0.0
568.8
0.0
-15.9
0.0
0.0
0.0
0.8
0.0
-15.1
0.0
-15.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.3
3.3
0.0 307.7
0.0 1,598.7
0.0 28.2
0.0 -13.0
0.0 -22.4
0.0 0.0
-9.8 1,055.4
-9.8 2,954.6
-2.1 -24.4
-11.9 2,930.2
Equity attributEquity able to the attributshareable to holders of nonthe parent controlling company interests 2,235.2 37.1 77.9 3.4
Total equity 2,272.3 81.3
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY for the period from January 1 to September 30, 2014 Revenue reserves
€ million
01-01-2014 Net result Other comprehensive income, net of tax Total comprehensive income, net of tax Capital increase Share-based remuneration Changes in shareholdings and the consolidated group Dividends 09-30-2014
14
Subscribed Share capital premium 269.9 1,083.2 0.0 0.0
Legal reserve 28.2 0.0
Unrealized gains / losses from Unrealized derivative gains / financial losses from instrupension Treasury provision shares ments -0.8 -11.8 -4.4 0.0 0.0 0.0
Retained earnings 870.9 77.9
0.0
0.0
0.0
-9.2
-12.8
0.0
0.0
-22.0
-72.0
-94.0
0.0
0.0
0.0
-9.2
-12.8
0.0
77.9
55.9
-68.6
-12.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.9
0.0
0.0
0.0
1.3
0.0
2.2
0.0
2.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-0.3
-0.3
0.0 269.9
0.0 1,084.1
0.0 28.2
0.0 -10.0
0.0 -24.6
0.0 -3.1
0.0 948.8
0.0 2,293.3
-3.9 -35.7
-3.9 2,257.6
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES
GAGFAH S.A. INTERIM REPORT 9M
GROUP SEGMENT REPORT for the period from January 1 to September 30, 2015
€ million
Segment revenues
Real estate Real estate management sales 621.6 170.5
Carrying amount of property sold
All other Total segments segments 6.63 798.7
Other 0.0
Total Group 798.7
0.0
-160.4
0.0
-160.4
0.0
-160.4
-344.4
-4.7
-6.0
-355.1
194.2
-160.9
0.0
0.0
0.0
0.0
-138.6
-138.6
277.2
5.4
0.6
283.2
55.6
338.8
Interest expenses
0.0
0.0
0.0
0.0
136.0
136.0
Interest income
0.0
0.0
0.0
0.0
-0.2
-0.2
Other financial expenses Result from the fair value measurement of derivatives
0.0
0.0
0.0
0.0
0.8
0.8
(Net) Operating expenses Net financing expenses Segment EBT
Segment EBIT Depreciation and amortization
0.0
0.0
0.0
0.0
2.0
2.0
277.2
5.4
0.6
283.2
194.2
477.4
1.4
0.0
0.2
1.6
0.1
1.7
Segment EBITDA1
278.6
5.4
0.8
284.8
194.3
479.1
Segment investments2
154.5
0.0
0.0
154.5
0.0
154.5
1 Segment EBITDA includes income from the reversal of deferred income in difference to the presentation of the EBIT - Recurring FFO bridge in the directors’ report. 2 Segment investments comprise capex and acquisitions of investment properties as well as investments in intangible assets, property, plant and equipment and financial assets. 3 The revenues of other segments consist of other income, e. g. revenues from third-party management of condominiums, third-party facility management, third-party house services and third-party insurance management.
GROUP SEGMENT REPORT for the period from January 1 to September 30, 2014
€ million
Segment revenues
Real estate Real estate management sales 633.1 135.1
Carrying amount of property sold
All other segments 11.13
Total segments 779.3
Other 0.0
Total Group 779.3
0.0
-122.4
-0.8
-123.2
0.0
-123.2
-370.6
-6.9
-9.1
-386.6
48.5
-338.1
0.0
0.0
0.0
0.0
-182.3
-182.3
262.5
5.8
1.2
269.5
-133.8
135.7
Interest expenses
0.0
0.0
0.0
0.0
150.5
150.5
Interest income
0.0
0.0
0.0
0.0
-1.1
-1.1
Other financial expenses Result from the fair value measurement of derivatives
0.0
0.0
0.0
0.0
0.1
0.1
(Net) Operating expenses Net financing expenses Segment EBT
Segment EBIT Depreciation and amortization Segment EBITDA1 Segment investments2
0.0
0.0
0.0
0.0
32.8
32.8
262.5
5.8
1.2
269.5
48.5
318.0
1.8
0.0
0.3
2.1
0.2
2.3
264.3
5.8
1.5
271.6
48.7
320.3
32.2
0.0
0.0
32.2
0.0
32.2
1 Segment EBITDA includes income from the reversal of deferred income in difference to the presentation of the EBIT - Recurring FFO bridge in the directors’ report. 2 Segment investments comprise capex as well as investments in intangible assets, property, plant and equipment and financial assets. 3 The revenues of other segments consist of other income, e. g. revenues from third-party management of condominiums, third-party facility management, third-party house services and third-party insurance management.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES
15
NOTES
17
A. General Information
17
B. Consolidated Group
18
C. Changes in Accounting Policies
21
D. Group Segment Reporting
22
E. Notes to the Unaudited Condensed Consolidated Interim Statement of Financial Position
26
F. Notes to the Unaudited Condensed Consolidated Interim Statement of Comprehensive Income
27
G. Notes to the Unaudited Condensed Consolidated Interim Statement of Cash Flows
28
H. Other Notes
GAGFAH S.A. INTERIM REPORT 9M
A. GENERAL INFORMATION These Unaudited Condensed Consolidated Interim Financial Statements of GAGFAH S. A., Luxembourg, have been prepared in accordance with the provisions of International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted in the European Union. The Unaudited Condensed Notes to the Consolidated Interim Financial Statements do not contain all the disclosures and explanations required in Annual Consolidated Financial Statements and should be read in conjunction with the Notes to the Consolidated Financial Statements as of December 31, 2014. Information that is labeled “prior year” in the Notes to the Consolidated Interim Statement of Comprehensive Income, the Notes to the Consolidated Interim Statement of Cash Flows, the Consolidated Interim Statement of Changes in Consolidated Equity and the Group Segment Report refers to the respective reporting period of the preceding financial year. In the Notes to the Consolidated Interim Statement of Financial Position, the comparative value is the value as of December 31 of the preceding financial year.
B. CONSOLIDATED GROUP In the first nine months of 2015, the following changes in the Consolidated Group took place: With contract of February 5, 2015 and effect as of January 1, 2015, the legal form of NILEG Real Estate GmbH & Co. Management KG has been changed and the company has been renamed correspondingly to NILEG Real Estate Management GmbH. The entry into the commercial register took place on February 12, 2015. With contract of February 5, 2015 and effect as of January 1, 2015, the legal form of KALIRA Grundstücksgesellschaft mbH & Co. KG has been changed and the company has been renamed correspondingly to K ALIRA Grundstücksgesellschaft mbH. The entry into the commercial register took place on February 23, 2015. With contract of August 17, 2015 GAGFAH S Service GmbH has been merged with GAGFAH Property Management GmbH. The entry into the commerical register took place on September 2, 2015.
NOTES
17
GAGFAH S.A. INTERIM REPORT 9M
With contract of August 17, 2015 VHB FM GmbH has been merged with GAGFAH Hausservice GmbH. The entry into the commercial register took place on August 27, 2015. With effect as of September 8, 2015 Griffin Flats NRW GmbH was renamed into GAGFAH Griffin GmbH. After the sale of all their assets in the course of the year, the following 3 HB Fund were liquidated and therefore deconsolidated in the financial year 2015. The liquidation surpluses amounting to € 0.3 million were transferred as dividend to the remaining shareholders in 2015: • Haus- und Boden Fonds 19 • Haus- und Boden Fonds 33 • Haus- und Boden Fonds 37
C. CHANGES IN ACCOUNTING POLICIES The Interim Financial Statements of the entities included in the Unaudited Condensed Consolidated Interim Financial Statements have been drawn up on the basis of uniform accounting policies. There are no new accounting standards that have an impact on the Consolidated Financial Statements of GAGFAH GROUP. The accounting policies applied were the same as those used in the Consolidated Financial Statements as of December 31, 2014 with the following exceptions:
CHANGE TO NATURE OF EXPENSES METHOD In 2015, GAGFAH GROUP decided to make use of the option according to IAS 1 to aggregate the expenses within profit or loss according to their nature (nature of expense method). In the prior years, expenses were classified according to their function (cost of sales method).
18
NOTES
GAGFAH S.A. INTERIM REPORT 9M
The main effects on the consolidated statement of comprehensive income for the first nine months of 2014 are as follows:
COST OF SALES METHOD Income from the leasing of investment property
€ million
633.1
NATURE OF EXPENSE METHOD Income from the leasing of investment property Other positions
Transferable leasehold land interest Operating expenses for the generation of rental income
Profit from the sale of investment property and assets held for sale
-1.7 -336.8
12.7
Revaluation of assets held for sale Profit from the sale of property development projects Result from other services
-4.1
Selling expenses
-7.0
General and administrative expenses
26.3
Income from / Expenses for share-based remuneration Reorganization and restructuring expenses
-5.7 -6.8
Interest expenses Interest income Result from the fair value measurement of derivatives Refinancing expenses Income taxes
0.9 1.6
-138.2 1.1 -32.8 -12.3 -54.4
NOTES
Cost of materials
€ million
-617.5 -15.6 -1.7
Cost of materials Personnel expenses Other positions Profit from the sale of investment property and assets held for sale Profit from the sale of investment property and assets held for sale Profit from the sale of investment property and assets held for sale Other income from property management Personnel expenses Cost of materials Other positions Cost of materials Personnel expenses Other positions Personnel expenses Cost of materials Other positions
-281.8 -46.9 -8.1
Personnel expenses Personnel expenses Other positions Financial expenses Other positions Financial income
-5.7 -2.1 -4.7 -140.3 2.1 1.1
Financial expenses Financial expenses Income taxes
-32.8 -12.3 -54.4
12.7 -4.1 0.9 9.3 -4.4 -1.7 -1.6 -2.4 -2.3 -2.3 -12.6 -4.4 -9.3
19
GAGFAH S.A. INTERIM REPORT 9M
The income from the leasing of investment property according to the nature of expenses method is relatively constant compared to the cost of sales method. Operating expenses for the generation of rental income of € -336.8 million according to the cost of sales method now mainly split up in “Cost of materials” of € -281.8 million and “Personnel expenses” of € -46.9 million. Further parts of the “Personnel expenses” according to the nature of expenses method in a total amount of € -74.3 million have previously been shown in different positions according to the cost of sales method: € -12.6 million in “General and administrative expenses”, € -5.7 million in “Income from / Expenses for share-based remuneration”, € -4.4 million in “Result from other services”, € -2.3 million in “Selling expenses”, € -2.1 million in “Reorganization and restructuring expenses” and € -0.3 million in “Other operating expenses”. “Interest expenses”, “Refinancing expenses” and “Result from the fair value measurement of derivatives” according to the cost of sales method are now summarized under “Financial expenses”.
RE-ESTIMATION OF FUTURE CASH FLOWS Furthermore there had been done an analysis of the development of recent years in connection with senior debts, which are granted by NRW.BANK and include an option for the bank to increase the interest rate over a specific period up to a maximum level. This analysis made it necessary to re-estimate the future cash flows in this context, leading to a positive effect of € 6.1 million. In accordance with IAS 8.36 (f) in conjunction with IAS 39.AG 8 this positive effect was recorded immediately in current earnings for the financial year 2015.
20
NOTES
GAGFAH S.A. INTERIM REPORT 9M
D. GROUP SEGMENT REPORTING According to IFRS 8 Operating Segments, the Group Segment Reporting is prepared in a manner consistent with internal reports regularly used by the Group’s key decision-makers for the internal assessment of the segments’ performance or the allocation of resources to the Group’s segments. GAGFAH’s reporting format is based on its core business segments “Real estate management” and “Real estate sales” as these segments represent strategic business functions within the Group. The real estate management segment represents the ownership and management of our residential property portfolio. The revenues of the real estate management segment comprise the total income from the leasing of investment property as shown in the Unaudited Condensed Consolidated Interim Statement of Comprehensive Income. Income from the leasing of assets held for sale continues to be shown within the segment revenues of the real estate management segment. The real estate sales segment concentrates all our residential property sales activities, condo sales as well as our portfolio strategy sales. Information about other business activities and operating segments that are not reportable are disclosed in the column “All other segments”. This comprises the income from third-party real estate management and other trade. All other income and expenses that are not allocated to our operating segments are shown in the separate column “Other” in the Group Segment Report. Basically, this comprises the result from the fair value measurement of investment property as well as reorganization and restructuring expenses. Due to changes in the reporting system the Group's management changed one of the key performance indicators from “Segment FFO” to “Segment EBITDA”. Segment revenues as reported in our Group Segment Report are revenues from our external customers.
NOTES
21
GAGFAH S.A. INTERIM REPORT 9M
E. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM S TATEMENT OF FINANCIAL POSITION 1. INTANGIBLE ASSETS The increase in intangible assets in the first nine months of 2015 is mainly due to an adjustment of the goodwill in connection with the acquisition of the VITEX GROUP. 2. INVESTMENT PROPERTY With the takeover by Vonovia SE, GAGFAH GROUP revaluated their investment property aligning its portfolio segmentation and valuation methods. The main valuation parameters and valuation results of the GAGFAH portfolio as of September 30, 2015 are as follows:
VALUATION PARAMETERS Management costs residential Repair and maintenance costs residential Apartment improvement costs for reletting Maintenance cost total Cost increase & inflation Market rent Market rent increase Stabilized vacancy rate Discount rate Capitalized interest rate
Average
Min *
Max *
€ 246 per residential unit p.a. € 9.41 per m² p.a. € 4.13 per m² p.a. € 13.54 per m² p.a. 1.7 % p.a. € 6.07 per m² p.a. 1.1 % 3.2 % 6.0 % 4.9 %
195 € 5.92 € 0.00 € 5.92 €
350 € 12.29 € 15.57 € 25.68 €
2.00 € 0.2 % 0.5 % 4.4 % 3.5 %
13.00 € 2.1 % 25.8 % 8.5 % 7.5 %
* Adjustment to reflect individual cases; range includes at least 98 % of all valuation units
VALUATION RESULTS Net initial yield
4.9 %
Actual rent multiplier
14.6 X
Fair value per m²
€ 981 per m² of lettable area
In the first nine months of 2015 the positive result from fair value measurement was € 231.4 million (prior-year period: € 58.1 million).
22
NOTES
GAGFAH S.A. INTERIM REPORT 9M
3. PROPERTY, PLANT AND EQUIPMENT The decrease in property, plant and equipment is mainly due to the reclassification to investment property of former owner-occupied parts of an office building amounting to € 5.3 million. 4. RECEIVABLES The decrease in receivables since year-end 2014 is mainly caused by incoming payments for prior year's sales. 5. OTHER FINANCIAL ASSETS The increase in other financial assets since year-end 2014 is caused by receivables against Vonovia SE as a result of the integration of GAGFAH GROUP into the cash pooling of Vonovia. 6. BANK BALANCES AND CASH ON HAND Bank balances and cash on hand comprise all cash and cash equivalents disclosed in the Unaudited Condensed Consolidated Interim Statement of Financial Position and break down as follows:
09-30-2014 0.1
12-31-2014 0.1
09-30-2015 0.1
Bank balances
132.4
94.2
45.2
Restricted cash
94.7
60.6
35.8
168.4
154.9
81.1
€ million
Cash on hand
Bank balances and cash on hand
7. ASSETS HELD FOR SALE The decrease of assets held for sale since year-end 2014 reflects the sales status of several selling projects. Furthermore, a part of the assets held for sale has been reclassified to investment property due to a change in policy. 8. EQUITY The development of consolidated equity of GAGFAH S. A. is presented in the Consolidated Interim Statement of Changes in Equity. GAGFAH S.A. had issued convertible bonds with a total volume of € 375.0 million on May 13, 2014. On December 19, 2014, GAGFAH had notified bondholders and the capital markets about the voluntary public takeover offer by Vonovia SE (at that time Deutsche Annington Immobilien SE) to shareholders of GAGFAH S.A. This notice included, inter alia, a reference to the change-of-control clause in the terms and conditions of the convertible bonds. As of the relevant change-of-control date of January 21, 2015, pursuant to the convertible bonds’ terms and conditions, convertible bonds holders with a total of approximately € 355 million nominal value (ca. 95 %) had submitted a valid conditional conversion notice. As of February 20, the majority of the remaining convertible bonds with a nominal value of about € 20 million had submitted a regular conditional conversion notice and were also redeemed in shares and based on the adjusted conversion price. All together this led to the creation of 30,213,623 shares and the corresponding increase of subscribed capital of € 37.8 million and share premium of € 528.7 million. In the course of this transaction,
NOTES
23
GAGFAH S.A. INTERIM REPORT 9M
260,040 treasury shares with an amount of € 2.3 million have also been used for conversion. At the end of September, the total number of GAGFAH S. A. shares outstanding was 246,175,637, of which 541 were treasury shares. Subscribed capital Subscribed capital relates to the parent company’s capital stock of € 307.7 million and comprises 246,175,637 shares, each with a nominal value of € 1.25. The increase of € 37.8 million since year end 2014 is due to the conversion of the convertible bond as described above. Share premium The increase of € 512.8 million within the first nine months of 2015 is mainly due to the conversion of the convertible bond as described above (effect on share premium: € 528.7 million), partly compensated by a reduction of € 15.9 million due to the cash-settlement of stock options. Revenue reserves – unrealized gains / losses from derivative financial instruments Revenue reserves in connection with unrealized gains / losses from derivative financial instruments result from interest rate swap agreements and include the corresponding net valuation movements of € 4.3 million (prior year: € -13.5 million) and the corresponding income tax effect of € -1.4 million (prior year: € 4.3 million). For further information on financial derivatives we refer to section H. 2. “Financial Risk Management”. Revenue reserves – unrealized gains / losses from pension provisions Total revenue reserves in connection with unrealized gains / losses from pension provisions result from actuarial gains / losses. The discount rate for the calculation of the pension provisions has changed since December 31, 2014. GAGFAH GROUP had to make a corresponding adjustment, leading to a decrease in pension provisions of € 4.6 million (prior year: an increase of € 18.8 million) and a related income tax effect of € -1.5 million (prior year: 6.0 million). This led to a change in revenue reserves in connection with defined benefit plans of € 3.1 million (prior year: -12.8 million). Dividend The Annual General Meeting of Shareholders on April 17, 2015, decided to pay a dividend of € 0.35 per share for the financial year 2014 to the minority shareholders of GAGFAH S.A. Vonovia SE will forgo any dividend entitlement for the fiscal year 2014. Non-controlling interests Non-controlling interests include unrealized losses from derivative financial instruments in connection with interest rate swap agreements contracted by non-controlling interests. This item includes the net valuation movements of € -0.1 million (prior year: € -84.3 million) and the corresponding income tax effect of € 0.0 million (prior year: € 12.3 million). Due to these valuation effects, on September 30, 2015, the non-controlling interests have a deficit balance. For general information on financial derivatives we refer to section H. 2. “Financial Risk Management”. The dividends to non-controlling interests of € 2.1 million (prior year: € 3.9 million) relate to non-controlling interests of WOBA subgroup and HB Funds. 9. DEFERRED TAX ASSETS AND LIABILITIES Deferred tax liabilities increased from € 448.0 million as of December 31, 2014, to € 556.1 million mainly because of the positive effect from measurement from valuation. Deferred tax assets increased from € 25.1 million as of December 31, 2014, to € 25.4 million. Of the netted difference of € -107.8 million, € -104.9 million were recognized in expenses and € -2.9 million were recognized as other comprehen-
24
NOTES
GAGFAH S.A. INTERIM REPORT 9M
sive income. The net deferred tax liabilities result from deferred tax assets from loss carryforwards of € 224.2 million (prior year: € 253.3 million) netted with deferred tax liabilities from temporary differences of € 780.3 million (prior year: € 617.2 million) mainly in connection with differences from measurement of investment property and assets held for sale. The takeover of GAGFAH Group by Vonovia SE led to no significant change in the amount of deferred tax assets and liabilities. 10. FINANCIAL LIABILITIES Financial liabilities total € 4,551.4 million (prior year: € 4,928.0 million) and mainly relate to the financing of residential real estate assets. Due to the refinancings closed in 2013 and 2014, the largest part of the financial liabilities is non-current. Of the total financial liabilities, € 4,350.4 million (prior year: € 4,511.2 million) relate to unsubsidized loans. Overall, loans amounting to € 194.6 million were repaid in the first nine months of 2015, as compared to 677.0 million in the same period of 2014. Thereof, loans amounting to € 50.1 million (prior year period: € 575.8 million) were fully repaid in the first nine months of 2015. The decrease in financial liabilities is mainly due to the conversion of the convertible bonds with an amount of € 359.6 million as of December 31, 2014. The Group monitors credit terms very closely in light of its refinancing needs. The debt maturity profile and interest payment are key parameters. Overall financial liabilities have weighted average years to maturity of 5.3 years (prior year 5.1 year) and a current interest rate of 2.8 % (prior year 2.7 %). As of the reporting date, there were undrawn credit facilities in the amount of € 62.4 million (prior year: € 320.0 million), which comprise liquidity facility agreements between Goldman Sachs Bank USA and GERMAN RESIDENTIAL FUNDING 2013-1 LIMITED of € 45.6 million (prior year: € 47.8 million), between Bank of America N.A., London Branch, and GERMAN RESIDENTIAL FUNDING 2013-2 LIMITED of € 16.8 million (prior year: € 17.2 million). The maturity of the revolving loan facility agreement between Barclays Bank PLC and GAGFAH Holding GmbH, on the other hand, with an amount of € 25.0 million (prior year: € 25.0 million) ended on March 21, 2015. In prior year an additional amount of € 230.0 million resulted from a loan agreement between GAGFAH Acquisition 2 GmbH, GAGFAH Erste Grundbesitz and Berlin Hyp AG. 11. OTHER CURRENT LIABILITIES The decrease in other current liabilities is mainly due to the derecognition of derivative financial liabilities / the option component in connection with the total conversion of the convertible bond.
NOTES
25
GAGFAH S.A. INTERIM REPORT 9M
F. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME 1. INCOME FROM THE LEASING OF INVESTMENT PROPERTY Income from the leasing of investment property is mainly attributable to the leasing of apartments. The increase compared to the prior year is mainly the result of a larger portfolio due to acquisitions, of rent growths and of a considerably lower vacancy rate. 2. PROFIT FROM THE SALE OF INVESTMENT PROPERTY AND ASSETS HELD FOR SALE The increase of income from the sale of investment property and assets held for sale and of the carrying amount of the sold investment property and assets held for sale compared to the prior year corresponds to the higher number of sold units in 2015. 3. NET FINANCING EXPENSES Net financing expenses break down as follows:
9M 2014
9M 2015
Interest expenses related to loans
-123.7
-114.1
Amortization of financial liabilities
-19.1
-18.1
€ million
Interest share of pension obligations
-3.3
-2.1
Amortization of EK02 liability
-1.8
-0.8
Fees for commercial mortgage-backed floating rate notes
-1.6
-0.9
Other interest expenses
-3.1
-0.8
-32.8
-2.0
-185.4
-138.8
Result from the fair value measurement of derivatives Financial expenses Financial income Net financing expenses
1.1
0.2
-184.3
-138.6
Net financing expenses are the sum of interest expenses on borrowings and the cost of refinancing of our Group’s indebtedness, adjusted by interest income and the result from the fair value measurement of derivatives. Interest expenses related to loans decreased substantially to € 114.1 million in the first nine months of 2015 from € 123.7 million in the prior-year period. The decrease reflects lower interest rates as a result of the successful refinancing as well as lower interest payments as a consequence of the scheduled amortization of financial liabilities in the course of the financial year 2014. In the first nine months of 2015 loans in an
26
NOTES
GAGFAH S.A. INTERIM REPORT 9M
amount of € 194.6 million were repaid and the convertible bonds were fully converted into GAGFAH S.A. shares. This positive effect was supported by a lower loss from the fair value measurement of derivatives of € 2.0 million (prior-year period: € 32.8 million). This led to a much better result of net financing expenses of € 138.6 million (prior-year period: € 184.3 million). 4. INCOME TAXES Income taxes totaled expenses of € 114.2 million (prior year: € 54.4 million) and comprise deferred income tax expenses of € 104.9 million (prior year: € 46.4 million) and current income tax expenses of € 9.3 million (prior year: € 8.0 million). The increase in deferred tax expenses is mainly due to an increase in temporary differences from measurement of investment property and assets held for sale.
G. N OTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS The line item “Other non-cash expenses / income” contains expenses of € 36.4 million (prior year: € 54.8 million) and mainly includes the result from the fair value measurement of derivatives, non-cash interest expenses and income/expenses for share-based remuneration. The cash received from the sale of investment property and assets held for sale of € 193.8 million (prior year: € 152.6 million) is calculated as the aggregate of income from the sale of investment property and assets held for sale and the cash-relevant changes in receivables from sales of land and buildings and prepayments received. For detailed information on cash, cash equivalents and on restricted cash please refer to section E.6. “Bank balances and cash on hand”.
NOTES
27
GAGFAH S.A. INTERIM REPORT 9M
H. OTHER NOTES 1. ADDITIONAL DISCLOSURES ON FINANCIAL INSTRUMENTS The following table shows carrying amounts and fair values of all financial instruments included in the Unaudited Condensed Consolidated Interim Financial Statements:
€ million
Assets Bank balances and cash on hand Investments Receivables from sales of land and buildings Rent receivables Derivative financial assets measured at fair value
Amortized cost
Fair value recognized in profit or loss (accumulated)
Fair value recognized in equity (accumulated)
Fair Value 09-30-2015
81.1
81.1
0.0
0.0
81.1
0.9
0.9
0.0
0.0
0.9
LaR
9.4
9.4
0.0
0.0
9.4
LaR
9.7
9.7
0.0
0.0
9.7
Category in accordance with IAS 391
Carrying amount 09-30-2015
LaR AfS
aFVtpl
8.5
0.0
8.5
0.0
8.5
Other financial assets
LaR
37.3
37.3
0.0
0.0
37.3
Other1
LaR
49.3
49.3
0.0
0.0
49.3
Financial liabilities Convertible bonds, debt component
FLAC
-4,451.8
-4,451.8
0.0
0.0
-4,653.3
FLAC
0.0
0.0
0.0
0.0
0.0
Other financial liabilities Derivative financial liabilities measured at fair value Derivative financial liabilities measured at fair value
FLAC
0.0
0.0
0.0
0.0
0.0
aFVtpl cashflow hedge
0.0
0.0
0.0
0.0
0.0
-99.6
0.0
0.0
-99.6
-99.6
Trade payables
FLAC
-19.9
-19.9
0.0
0.0
-19.9
Liabilities to tenants Liabilities from operating expenses not yet invoiced
FLAC
-16.6
-16.6
0.0
0.0
-16.6
FLAC
-31.7
-31.7
0.0
0.0
-31.7
Other
FLAC
-33.2
-33.2
0.0
0.0
-33.2
Liabilities
1
28
LaR: Loans and Receivables AfS: Available-for-Sale Financial Assets aFVtpl: at Fair Value through profit or loss FLAC: Financial Liabilities measured at Amortized Cost
NOTES
GAGFAH S.A. INTERIM REPORT 9M
€ million
Assets Bank balances and cash on hand Investments Receivables from sales of land and buildings Rent receivables Derivative financial assets measured at fair value
Amortized cost
Fair value recognized in profit or loss (accumulated)
Fair value recognized in equity (accumulated)
Fair Value 12-31-2014
154.9
154.9
0.0
0.0
154.9
0.9
0.9
0.0
0.0
0.9
LaR
32.8
32.8
0.0
0.0
32.8
LaR
11.9
11.9
0.0
0.0
11.9 0.0
Category in accordance with IAS 391
Carrying amount 12-31-2014
LaR AfS
aFVtpl
0.0
0.0
0.0
0.0
Financial receivables
LaR
0.0
0.0
0.0
0.0
0.0
Other
LaR
33.4
33.4
0.0
0.0
33.4
Financial liabilities Convertible bonds, debt component
FLAC
-4,564.2
-4,564.2
0.0
0.0
-4,674.1
FLAC
-359.6
-359.6
0.0
0.0
-361.6
Other financial liabilities Derivative financial liabilities measured at fair value Derivative financial liabilities measured at fair value
FLAC
-4.1
-4.1
0.0
0.0
-4.1
aFVtpl cashflow hedge
-191.6
0.0
-174.2
0.0
-191.6
-110.7
0.0
0.0
-110.7
-110.7
Trade payables
FLAC
-31.9
-31.9
0.0
0.0
-31.9
Liabilities to tenants Liabilities from operating expenses not yet invoiced
FLAC
-18.9
-18.9
0.0
0.0
-18.9
FLAC
-31.4
-31.4
0.0
0.0
-31.4
Other
FLAC
-37.7
-37.7
0.0
0.0
-37.7
Liabilities
1
LaR: Loans and Receivables AfS: Available-for-Sale Financial Assets aFVtpl: at Fair Value through profit or loss FLAC: Financial Liabilities measured at Amortized Cost
Financial assets from the category “Loans and Receivables (LaR)” have short-term maturities. For this reason, their carrying amounts approximate their fair values. All trade payables are current. Bank balances and cash on hand, receivables and other liabilities are predominantly short term. Therefore, their carrying amounts (book values) correspond approximately to their fair values. IFRS 13 requires that the classification of financial instruments at fair value be determined by reference to the source of inputs used to derive the fair value. This classification uses the following three-level hierarchy: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2: i nputs other than quoted prices included within level 1 that are observable for the asset or liability either directly (i.e., as prices) or indirectly (i.e., derived from prices); • Level 3: i nputs for the asset or liability that are not based on observable market data (unobservable inputs).
NOTES
29
GAGFAH S.A. INTERIM REPORT 9M
In the Group’s Condensed Consolidated Interim Financial Statements, derivatives are the only financial instruments measured at fair value as shown in Table 1. These derivatives themselves are not actively traded, but were valued by using a model with inputs that are directly or indirectly observable market data (Level 2). As of September 30, 2015, the valuation was based on the following term structure:
12-31-2014
09-30-2015
Interest rate for six months
0.171
-0.037
Interest rate for one year
0.325
-0.052
Interest rate for two years
0.074
-0.042
Interest rate for five years
0.232
0.238
%
The residual terms of the interest rate derivatives except one swap are more than one year – the same as the residual terms of mirrored loans. 2. FINANCIAL RISK MANAGEMENT The Group applies derivative financial instruments (interest rate swaps and caps) to manage interest rate risks resulting from the Group's operating business and financing. The following interest rate swaps existed as of the balance sheet date:
12-31-2014
09-30-2015
Nominal value of interest rate swaps
2,821.6
2,763.1
Fair value of interest rate swaps
-111.7
-91.1
0.0
8.5
-111.7
-99.6
€ million
thereof recognized on the assets side thereof recognized on the liabilities side
The ineffective part from changes in the fair value of the interest rate swaps of € -2.0 million (prior year: € -32.8 million) is recognized through profit or loss as part of the financial expenses.
30
NOTES
GAGFAH S.A. INTERIM REPORT 9M
The effective part of the interest rate swaps of € 4.2 million (prior year: € -97.8 million) and the corresponding income tax effect of € -1.4 million (prior year: € 16.6 million) is recognized directly in equity (other comprehensive income). For further information, please refer to section E.8. “Equity” - “Revenue reserves – Unrealized gains / losses from derivative financial instruments” and “Non-controlling interests”. The following interest rate caps existed as of the balance sheet date:
€ million
Nominal value of interest rate caps Fair value of interest rate caps
12-31-2014
09-30-2015
226.4
219.8
0.0
0.0
Due to the fact that the cap rates are higher than the current EURIBOR, the estimated fair values of the interest rate caps amount to € 0.0 million. 3. CONTINGENT LIABILITIES AND OTHER FINANCIAL OBLIGATIONS AND RECEIVABLES The obligations and receivables have not changed significantly since year-end 2014. A detailed description of the contingent liabilities and other financial obligations and receivables can be found in the Notes to the Consolidated Financial Statements as of December 31, 2014. 4. MANAGEMENT On March 6, 2015, Gerhard Zeiler resigned from his position as Chairman and Independent Director and Daniel Just and Hendrik Jellema resigned from their positions as Directors of the Company. On the same day, Dr. Pierre Berna was co-opted as Independent Director and Rolf Buch was co-opted as Board Member. New Chairman is Dieter H. Ristau. At the Annual General Meeting of Shareholders of April 17, 2015, Dr. Pierre Berna and Rolf Buch were confirmed and elected for a term ending at the Annual General Meeting to be held in mid of 2020. On April 1, 2015, Thomas Zinnöcker and Gerald Klinck resigned from their positions as members of the Senior Management of the Company's subsidiaries. On June 30, 2015 Nicolai Kuß resigned from his position as Chief Operating Officer and left the GAGFAH GROUP. 5. SIGNIFICANT EVENTS AFTER THE INTERIM REPORTING DATE On October 21, 2015, the Osnabrücker Wohnungsgesellschaft mbH paid the amount of € 91.0 million to HSH Nordbank AG for the purpose of the full repayment of the loan granted by institutional lenders. Furthermore, another € 128.7 million were paid by GBH Acquisition GmbH to HSH Nordbank AG for the purpose of the full repayment of the loan granted by institutional lenders on October 22, 2015.
NOTES
31
OTHER
33
Financial Statement Certification
34 Glossary
36
Disclaimer
37 Imprint
GAGFAH S.A. INTERIM REPORT 9M
FINANCIAL STATEMENT CERTIFICATION To the best of our knowledge, we hereby confirm that, in accordance with the applicable generally accepted reporting standards, the Consolidated and Stand-alone Financial Statements reflect the true asset, financial, and earnings situation of GAGFAH S. A. and the Group and that the Directors’ Report is a true and fair representation of the business development including the income and general situation of G AGFAH S. A. and the Group and that the material risks and opportunities regarding the expected development of GAGFAH S. A. and the Group have been described therein.
Dieter H. Ristau Dr. Pierre Berna Yves Wagner, Ph. D.
Rolf Buch Thomas Zinnöcker
OTHER
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GAGFAH S.A. INTERIM REPORT 9M
GLOSSARY CAPEX Work on a building or an apartment that leads to value enhancements. Capex can be capitalized and does not impact the consolidated statement of comprehensive income.
CONDO SALES PROGRAM Sale of individual apartments (single-unit sale) to tenants or retail investors.
EBIT Earnings before interest and taxes.
EBITDA Earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is the EBITDA as reported in the statement of comprehensive income adjusted for certain noncash and non-recurring items.
EBT Earnings before taxes.
FUNDS FROM OPERATIONS (FFO) Recurring FFO before sales is calculated as EBITDA, adjusted for non-cash and non-recurring items. FFO per share figures are calculated by dividing the nominal amount by the undiluted weighted average number of shares (excluding treasury shares) for the respective period.
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OTHER
GAGFAH S.A. INTERIM REPORT 9M
HB FUNDS The HB Funds are comprised of four closed-end real estate funds. All units held in these funds are non-core and therefore not part of GAGFAH’s core residential portfolio. The sale of the HB Funds assets was initiated in 2010, and out of a total of initially 7,130 units held in 20 different funds, 6,814 have already been sold as of the reporting date and 16 funds have been liquidated. The remaining 316 units are held in one HB Fund. The HB Funds are structured in the legal form of “economic fractional ownership” in which G AGFAH holds the majority of shares. GAGFAH M, one of GAGFAH S. A.’s operating subsidiaries, acts as trustee and manager of the funds.
LIKE-FOR-LIKE BASIS (L-F-L) Residential units GAGFAH owned at both dates: as of the current reporting date and as of the comparable prior-year reporting date, irrespective of whether a unit is vacant or not.
RECOVERABLE OPERATING EXPENSES Recoverable operating expenses are expenses incurred in connection with managing our properties and can be charged back to our tenants. These expenses include public charges on the property, such as • • • • • • •
real estate tax snow removal water supply / sewage building cleaning drainage gardening heating
• • • • • • •
lighting warm water chimney cleaning maintenance of elevators insurances street cleaning garbage removal
REPAIRS AND MAINTENANCE (R&M) The work that is done for fixing or upkeeping an apartment. R&M expenses are not capitalized.
VACANCY A unit is considered vacant if there is no valid lease agreement in place as of the respective date.
OTHER
35
GAGFAH S.A. INTERIM REPORT 9M
DISCLAIMER FORWARD-LOOKING STATEMENTS This Report contains statements that constitute forward-looking statements. Such forward-looking statements relate to, among other things, future commitments to acquire real estate and achievement of acquisition targets, timing of completion of acquisitions and the operating performance of our investments. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may”, “will”, “should”, “potential”, “intend”, “expect”, “endeavor”, “seek”, “anticipate”, “estimate”, “overestimate”, “underestimate”, “believe”, “could”, “project”, “predict”, “continue”, “plan”, “forecast” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results from operations or of financial conditions or state other forwardlooking information. Our ability to predict results or the actual effect of future plans or strategies is limited. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance may differ materially from those set forth in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecast results or stated expectations, including the risk that G AGFAH S. A. will be unable to increase rents, sell or privatize further units or further reduce management costs.
ROUNDING EFFECTS Percentages and figures in this report may include rounding effects.
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OTHER
GAGFAH S.A. INTERIM REPORT 9M
IMPRINT GAGFAH S. A. 2–4, rue Beck L-1222 Luxembourg Grand Duchy of Luxembourg RCS Luxembourg B109526 www.GAGFAH.com
Realization Berichtsmanufaktur GmbH, Hamburg
AGFAH S. A. is a joint stock G corporation organized under the laws of the Grand Duchy of Luxembourg qualifying as a securitization company under the Luxembourg Securitization Law of March 22, 2004. The core business of GAGFAH S. A.’s operating subsidiaries is the ownership and management of a residential property portfolio located in Germany.
OTHER
37
