12. Real estate assets
(in millions of euros) | Total investment property |
Composition as at 1 January 2020 | |
Cost | 263 |
Accumulated amortisation and impairments | (128) |
Carrying amount as at 1 January 2020 | 135 |
Changes in 2020 | |
Investments | - |
Depreciation | (8) |
Disposals | - |
Impairments | - |
Reversal of impairments | 3 |
Other movements | (1) |
Total changes during the financial year | (6) |
Composition as at 31 December 2020 | |
Cost | 260 |
Accumulated amortisation and impairments | (131) |
Carrying amount as at 31 December 2020 | 129 |
Changes in 2021 | |
Investments | 1 |
Depreciation | (7) |
Disposals | - |
Impairments | - |
Reversal of impairments | - |
Other movements | 1 |
Total changes during the financial year | (5) |
Composition as at 31 December 2021 | |
Cost | 263 |
Accumulated amortisation and impairments | (139) |
Carrying amount as at 31 December 2021 | 124 |
In addition to business premises on behalf of third parties, the real estate assets also include other properties that are leased to third parties or held as strategic real estate. In addition, the Group has real estate for its own use and is recognised under property, plant and equipment. The rental agreements usually contain a period of several years during which notice of termination is not possible. These real estate objects and property, plant and equipment (real estate for own use) are not part of the Main Rail Network cash-generating unit (as described in note 14).
In view of the nature, diversity and locations (station areas), the fair value of the real estate portfolio is not determined periodically, unless there is an impairment. No impairments have occurred on this portfolio and the fair value is expected to exceed the carrying amount of the real estate assets. The Group has reached this conclusion based on indicative management estimates from which there are no indications of impairment.
As a result of COVID-19, discounts of €17 million were granted for 2021 (2020: €19 million). These rent reductions have led to a write-down of the accounts receivable balance by € nil (31 December 2020): €13 million). €17 million will be amortised over the remaining term of the leases (2020: €6 million).
The total contractual rent until the end of the leases amounts to approximately €200 million at the end of 2021 (2020: €359 million). No contingent rent is charged.
The direct rental income amounts to €26 million (2020: €29 million). Direct rental costs include maintenance costs, property charges and direct management costs totalling €9 million (2020: €6 million).
Measurement basis
Real estate assets include real estate held to earn rental income or for capital appreciation, or both. Real estate assets are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of self-manufactured assets includes the cost of materials, direct labour costs, a reasonable proportion of indirect production costs and financing costs. Where relevant, the estimated costs of dismantling and removing the asset and restoring the site on which the asset is located are added to the cost.
The following policies apply to real estate assets:
Components
If real estate assets consist of components with different useful lives, these components are accounted for as separate items under real estate assets.
The carrying amount of a real estate asset includes the cost of renewing (part of) the asset when that cost is incurred and when it is probable that the renewal will lead to future economic benefits. All other costs of maintaining the assets are recognised as an expense in the income statement as incurred.
Depreciation
Depreciation of real estate assets is applied on a straight-line basis, less residual value and on the basis of the estimated useful life of each individual item of property, plant and equipment. Depreciation is charged to the income statement.
The estimated useful life of real estate assets is as follows:
Asset type | Depreciation period |
Foundations and underlying land | 100 years |
Structure and core | 50 years |
Facades and outer walls | 33 years |
Roofing | 15 years |
Interior finish | 15 years |
Technical equipment | 15 years |
The useful life indicated is an average of the assets included therein and of the components of the assets, if any. The depreciation method, remaining useful life and residual value are assessed annually.