| | | 2016 | | 2015 |
At the beginning of the year | | 521,589 | | 445,936 |
Transfers from investment property under construction | 232,447 | | 85,239 | |
Investments | 10,896 | | 8,475 | |
Total investments | | 243,343 | | 93,714 |
Transfers to investment property under construction | | - | | - |
Disposals | | (1,702) | | (520) |
Net gain (loss) from fair value adjustments on investment property (like for like) | (3,381) | | (23,864) | |
Net gain (loss) from fair value adjustments on investment property | 3,898 | | 6,323 | |
In profit or loss | | 517 | | (17,541) |
In other comprehensive income | | - | | - |
Transfers out of level 3 | | - | | - |
Total investment property (level 3) | | 763,747 | | 521,589 |
Lease incentives | | 1,866 | | 4,504 |
At the end of the year | | 765,613 | | 526,093 |
The Fund’s investment properties are valued by external valuation experts on a quarterly basis. The external valuation expert is changed every three years. On 31 December 2016, these properties were revalued by independent professionally qualified valuation experts who hold a recognised relevant professional qualification and had recent experience in the locations and categories of the investment properties valued. The carrying values of investment property as at 31 December 2016, and 1 January 2016, are in line with the valuations reported by the external valuation experts.
Since the accounting effect of lease incentives granted is included under non-current assets the recognised amount € 1,866,000 (2015: € 4,504,000) is deducted from the total fair value of investment properties.
Investments and investment property under construction | 2016 | 2015 |
Experience | 204,180 | 85,238 |
Convenience | 38,979 | 77 |
Other | 184 | 8,399 |
Total Investments and investment property under construction | 243,343 | 93,714 |
Disposals | 2016 | 2015 |
Experience | - | - |
Convenience | - | - |
Other | (1,702) | (520) |
Total disposals | (1,702) | (520) |
The significant assumptions made relating to the valuations are set out below.
2016 | | | | |
| | Experience | Convenience | Other | Total |
Current average rent (€/m²) | 368 | 216 | 179 | 233 |
Estimated rental value (€/m²) | 395 | 205 | 167 | 231 |
Gross initial yield | 4.2% | 6.4% | 8.0% | 5.8% |
Net initial yield | 3.9% | 5.2% | 6.9% | 5.0% |
Current vacancy rate (LFA m²) | 3.2% | 14.6% | 5.4% | 7.2% |
Current financial vacancy rate | 1.1% | 3.6% | 9.3% | 5.3% |
Long-term growth rental rate | 2.0% | 10.7% | 10.2% | 15.3% |
Average 10-year inflation rate (IPD Nederland) | | | | 1.0% |
2015 | | | | |
| | Experience | Convenience | Other | Total |
Current average rent (€/m²) | 395 | 205 | 192 | 225 |
Estimated rental value (€/m²) | 390 | 193 | 174 | 211 |
Gross initial yield | 4.9% | 7.6% | 8.1% | 6.8% |
Net initial yield | 4.2% | 6.8% | 7.0% | 5.9% |
Current vacancy rate (LFA m²) | 0.1% | 4.2% | 6.8% | 5.2% |
Current financial vacancy rate | 2.5% | 1.5% | 7.9% | 5.8% |
Long-term growth rental rate | 1.4% | 1.8% | 1.6% | 1.6% |
Average 10-year inflation rate (IPD Nederland) | | | | 1.5% |
The vacancy rate showed an upward trend due to some bankruptcies.
The net valuation gain (loss) for the year included a positive fair value adjustment of € 29,213 (2015: € 12,141) relating to investment properties that are measured at fair value at the end of the reporting period.
The valuation of the investment properties takes into account a rent-free period/rent incentives ranging from 1 to 3 months after occupation.
As at 31 December 2016, the Fund had unprovisioned contractual obligations for future repairs and maintenance of € 0.5 million (2015: € 0.3 million).
Direct operating expenses recognised in profit or loss include € 0.1 million (2015: € 0.2 million) relating to vacant investment property. Investment property includes buildings held under finance leases. The carrying amount is € nil (2015: € nil).
Sensitivity analysis
The appraisal of the portfolio implies a net initial yield of 5.0% (2015: 5.9%). If the yields used for the appraisals of investment properties on 31 December 2016 had been 100 basis points higher (2015: 100 basis points higher) than was the case at that time, the value of the investments would have been 15.6% lower (2015: 13.5% lower). In this situation, the Fund’s shareholders’ equity would have been € 128 million lower (2015: € 76 million lower).
The table below presents the sensitivity of the valuation to changes in the most significant assumptions.
| | | 2016 | | 2015 |
Change rental rates | -5% | 5% | -5% | 5% |
Value of the investment property change | (38,281) | 38,281 | (26,305) | 26,305 |
| | | 2016 | | 2015 |
Change net initial yield | - 25 bps | + 25 bps | - 25 bps | + 25 bps |
Value of the investment property change | 40,318 | (36,477) | 23,147 | (21,275) |