Audited

24. Investment property

Development of investment property
in € thousand	Investment property	Payments on account and plants under construction	Total
Carrying amount as of 1 January 2018	172,838	7,046	179,884
Acquisition or production cost
1 January 2018	324,818	7,046	331,864
Additions	10,537	2,359	12,896
Disposals			0
Reclassifications	5,740	- 5,740	0
31 December 2018	341,095	3,665	344,760
Accumulated depreciation, amortisation and impairment
1 January 2018	151,980	0	151,980
Additions	8,056		8,056
Disposals			0
Reclassifications			0
31 December 2018	160,036	0	160,036
Carrying amount as of 31 December 2018	181,059	3,665	184,724

Carrying amount as of 1 January 2019	181,059	3,665	184,724
Acquisition or production cost
1 January 2019	341,095	3,665	344,760
Additions	2,478	6,743	9,221
Disposals		- 8	- 8
Reclassifications			0
31 December 2019	343,573	10,400	353,973
Accumulated depreciation, amortisation and impairment
1 January 2019	160,036	0	160,036
Additions	8,788		8,788
Disposals			0
Reclassifications			0
31 December 2019	168,824	0	168,824
Carrying amount as of 31 December 2019	174,749	10,400	185,149

Investment property mainly relates to warehouses converted to office space and other commercial real estate in Hamburg’s Speicherstadt historical warehouse district, as well as logistics warehouses and surfaced areas.

As in the previous year, additions mainly result from conversion costs in connection with changes of use.

Rental income from investment property at the end of the financial year was € 52,870 thousand (previous year: € 50,870 thousand). The direct operating expenses for investment property, which are fully attributable to rental income, amounted to € 18,919 thousand (previous year: € 17,082 thousand).

Fair value is calculated and measured annually by HHLA’s Real Estate segment. The associated inputs are classified as level 3 in the fair value hierarchy, see Note 7.

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Fair value reconciliation
in € thousand	2019	2018
As of 1 January	618,616	651,292
Change in fair value (not realised)	6,390	- 32,676
As of 31 December	625,006	618,616

The valuation method used to measure the fair value of investment property as well as the key unobservable input factors applied

Valuation method

Key unobservable input factors

Relationship between key unobservable input factors and measurement at fair value

The estimated fair value would increase (fall) if

Fair values are measured by applying the discounted cash flow method (DCF method) to the forecast net cash flows from managing the properties. This method is based on detailed forecasts of ten years or up to the end of the useful lives of properties with a remaining useful life of less than ten years. The cash flows are discounted using standard market interest rates. Property-specific fair value is determined on the basis of property-specific measurement criteria.

Contractually agreed rental income

the contractually agreed rental income was (higher) lower

Expected rent increases

the expected rent increases were higher (lower)

Vacancy periods

the vacancy periods were shorter (longer)

Level of occupancy

the level of occupancy was higher (lower)

Rent-free periods

the rent-free periods were shorter (longer)

Possible termination of the tenancy agreement

tenancy agreements were not terminated (were terminated)

Re-leasing

the property was re-leased sooner (later)

Operating, management and maintenance costs

operating, management and maintenance costs were lower (higher)

Rent for the land

the rent was lower (higher)

Discount rate
(3.61 to 7.01 % p.a.)

the risk-adjusted discount rate was lower (higher)

Regarding existing restrictions on the disposal and use of buildings in connection with the renting of the associated properties from the Free and Hanseatic City of Hamburg, see the explanatory remarks on leases in Note 45.

Investments

Payments for investments in property, plant and equipment, investment property and intangible assets.