14. Investment property
(in millions of euros) | Total investment property |
Composition as at 1 January 2021 | |
Cost | 260 |
Accumulated depreciation and impairments | -131 |
Carrying amount as at 1 January 2021 | 129 |
Changes in 2021 | |
Investments | 1 |
Depreciation and amortisation | -7 |
Disposals | - |
Impairment losses | - |
Reversal of impairments | - |
Other movements | 1 |
Total changes during the financial year | -5 |
Composition as at 31 December 2021 | |
Cost | 263 |
Accumulated depreciation and impairments | -139 |
Carrying amount as at 31 December 2021 | 124 |
Changes in 2022 | |
Investments | 2 |
Depreciation and amortisation | -7 |
Disposals | -1 |
Impairment losses | - |
Reversal of impairments | - |
Other movements | 1 |
Total changes during the financial year | -5 |
Composition as at 31 December 2022 | |
Cost | 263 |
Accumulated depreciation and impairments | -144 |
Carrying amount as at 31 December 2022 | 119 |
In addition to business premises on behalf of third parties, the real estate assets 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 16).
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 indication of impairment. Based on management estimates, there are no indications of impairment on this portfolio. Further impairment analyses have therefore not been performed.
As a result of the effects of COVID-19, discounts of € 9 million were granted for 2022 (2021: € 17 million). These discounts are amortised over the remaining term of the rental contracts.
The total contractual rent until the end of the leases amounts to approximately € 299 million at the end of 2022 (2021: € 200 million). No contingent rent is charged. The term of the contracts is broken down as follows:
(in € millions) | < 1 year | 1-2 years | 2-3 years | 3 to 4 years | 4-5 years | > 5 years | Total |
Rental income | 2 | 23 | 17 | 16 | 6 | 235 | 299 |
The direct rental income was € 27 million (2021: € 26 million). Direct rental costs include maintenance costs, property charges and direct management costs totalling € 9 million (2021: € 9 million).
Accounting policy
Real estate assets include real estate held to earn rental income, for capital appreciation, or both. Real estate assets are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of self-produced assets includes the cost of materials, direct labour costs, a reasonable portion of the indirect production costs and borrowing costs. Where relevant, the estimated costs of dismantling and removing the asset and the costs of restoring the site where the asset was located are added to the total cost.
The following accounting policies apply to investment property:
Components
If real estate assets consist of components with different useful lives, then 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 for different types of investment property is as follows:
Asset type | Depreciation period |
Foundations and underlying land | 100 years |
Structure and core | 50 years |
Façades and outer walls | 33 years |
Roofing | 15 years |
Interior finishing | 15 years |
Technical equipment | 15 years |
The specified useful life is an average for the assets concerned and for any components of which those assets consist. The depreciation method, remaining useful life and residual value are reviewed each year.