| | | 2019 | | 2018 |
At the beginning of the year | | 941,431 | | 863,337 |
First time adoption IFRS16 | | 8,343 | | - |
Transfers from investment property under construction | 18,672 | | 21,482 | |
Acquisitions | 8,652 | | 53,518 | |
Other capital expenditure | 7,105 | | 2,356 | |
Total investments | | 34,429 | | 77,356 |
Transfers to investment property under construction | | - | | (12,898) |
Disposals | | (27,553) | | (1,240) |
Net gain (loss) from fair value adjustments on investment property (like for like) | 3,280 | | 18,786 | |
Net gain (loss) from fair value adjustments on investment property | 816 | | (3,910) | |
In profit or loss | | 4,096 | | 14,876 |
In other comprehensive income | | - | | - |
Transfers out of level 3 | | - | | - |
Movement of right of use ground leases | | 23 | | - |
Total investment property (level 3) | | 960,769 | | 941,431 |
Lease incentives | | 4,726 | | 4,155 |
At the end of the year | | 965,495 | | 945,586 |
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 2019, 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 2019, and 1 January 2019, 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 € 4.7 million (2018: € 4.2 million) is deducted from the total fair value of investment properties.
The right of use of land is included as an integrated part of the Investment property. To compare the externally appraised values of the Investment property the lease liabilities are deducted from the Total investment property value.
| | 2019 | 2018 |
Investment Property | 965,495 | 945,586 |
Less: lease liabilities | (8,516) | - |
Valuation as per valuation report | 956,979 | 945,586 |
The specifications of acquisitions, other capital expenditure and the disposals are set out below.
Investments | 2019 | 2018 |
Experience | 8,235 | 17,058 |
Convenience | 105 | 30,422 |
Other | 7,417 | 8,394 |
Total Investments | 15,757 | 55,874 |
Disposals | 2019 | 2018 |
Experience | (474) | - |
Convenience | (12,360) | - |
Other | (14,719) | (1,240) |
Total disposals | (27,553) | (1,240) |
The investment property was sold with a negative result of € 0.7 million.
The significant assumptions with regard to the valuations are set out below.
2019 | | | | |
| | Experience | Convenience | Other | Total |
Current average rent (€/m²) | 371 | 219 | 172 | 236 |
Market rent (€/m²) | 386 | 206 | 156 | 228 |
Gross initial yield | 3.9% | 6.3% | 7.9% | 5.4% |
Net initial yield | 3.8% | 5.7% | 5.8% | 4.7% |
Current vacancy rate (VVO m²) | 1.7% | 3.3% | 8.4% | 4.9% |
Average financial vacancy rate | 1.5% | 2.3% | 7.0% | 3.3% |
Long-term growth rental rate | 1.5% | 1.4% | 1.3% | 1.4% |
Risk free (NRVT) | | | | 0.4% |
2018 | | | | |
| | Experience | Convenience | Other | Total |
Current average rent (€/m²) | 365 | 203 | 179 | 229 |
Market rent (€/m²) | 388 | 201 | 158 | 224 |
Gross initial yield | 3.9% | 6.2% | 8.3% | 5.5% |
Net initial yield | 3.6% | 4.9% | 6.3% | 4.5% |
Current vacancy rate (VVO m²) | 1.4% | 4.6% | 10.1% | 6.2% |
Average financial vacancy rate | 1.8% | 4.2% | 8.0% | 4.6% |
Long-term growth rental rate | 0.9% | 0.8% | 0.4% | 0.8% |
Risk free (NRVT) | | | | 0.5% |
The net valuation gain (loss) for the year included a positive fair value adjustment of € 18.1 million (2018: € 31.6 million) relating to investment properties that are measured at fair value at the end of the reporting period.
Direct operating expenses recognised in profit or loss include € 0.1 million (2017: € 0.1 million) relating to vacant investment property.
Investment property includes buildings held under finance leases. The carrying amount is € nil (2018: € nil).
Sensitivity analysis
The appraisal of the portfolio implies a net initial yield of 4.7% (2018: 4.5%). If the yields used for the appraisals of investment properties on 31 December 2019 had been 100 basis points higher (2018: 100 basis points higher) than was the case at that time, the value of the investments would have been 15.6% lower (2018: 16.9% lower). In this situation, the Fund’s shareholders’ equity would have been € 160 million lower (2018: € 170 million lower).
The table below presents the sensitivity of the valuation to changes in the most significant assumptions.
| | | 2019 | | 2018 |
Change rental rates | -5% | 5% | -5% | 5% |
Value of the investment property change | (40,329) | 56,161 | (47,279) | 47,279 |
| | | 2019 | | 2018 |
Change net initial yield | – 25 bps | + 25 bps | – 25 bps | + 25 bps |
Value of the investment property | 61,588 | (40,383) | 55,079 | (115,183) |