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between willing and well-informed parties, inclusive of transactions
costs (mainly transfer taxes) to be paid by the acquirer. It does
not reflect the costs of future investments that could improve the
property or the benefits associated with such costs.
Valuation methodology
The valuation methodology adopted is mainly based on the follow-
ing methods:
Method of estimated rental value capitalisation (ERV
capitalisation)
This method consists in capitalising the estimated rental value of
the property by using a capitalisation rate (‘yield’) in line with the
investment market. The choice of the capitalisation rate used is
linked to the capitalisation rates applied in the real estate invest-
ment market, which takes into account the property location, the
quality of the buildings and that of the tenant, and the quality and
duration of the lease at the valuation date. The rate corresponds
to the rate anticipated by potential investors at the valuation date.
To determine the estimated rental value, one takes into account
the market data, the location of the property and the quality of the
building.
The resulting value must be adjusted if the passing rent generates
operational income higher or lower than the estimated market value
used for capitalisation. The valuation takes into consideration the
charges that will need to be incurred in the near future.
Discounted cash flow method (DCF)
Under this method, it is required to assess the net rental income
generated by the property on a yearly basis for a specific period
and discounted at today’s value. The projection period generally
varies between 10 and 18 years. At the end of the period, a residual
value is calculated using a capitalisation rate that takes into
account the anticipated condition of the building at the end of the
projection period, discounted at today’s value.
Residual value method
The value of a project is determined by defining the development
potential on site. This implies that the intended use of the project
is known or foreseeable in a qualitative (planning) and quantitative
manner (number of square metres that can be developed, future
rents, etc.). The value is obtained by deducting the costs upon com-
pletion of the project from its anticipated value.
Approach by market comparables
This method is based on the principle that a potential purchaser
will not pay more for the acquisition of a property than the price
recently paid on the market for similar properties.
Transaction Costs
In theory, the disposal of properties is subject to a transfer tax
charged by the Government and paid by the acquirer, which rep-
resent substantially all transaction costs. For properties situated
in Belgium, the amount of this tax mainly depends on the mode of
transfer, the capacity in which the acquirer acts and the property’s
location. The first two variables, and therefore the amount of tax
payable, are only known once the sale is contracted. Based on a
study from independent real estate experts dated 8 February 2006
and periodically reviewed, the “average” transaction cost for prop-
erties over €2,500,000 is assessed at 2.5%.
The fair value (as defined under IFRS 13 and by the BEAMA’s (Belgian
Asset Managers Association) press release of 8 February 2006) for
properties over €2,500,000 can therefore be obtained by deducting
2.5% of “average” transaction cost from their investment value. This
2.5% figure will be reviewed periodically and adjusted if on the insti-
tutional investment transaction market a change of at least ±0.5%
in the effectively “average” transaction cost is observed.
For properties with an investment value under €2,500,000, transfer
taxes of 10% or 12.5% have been subtracted, depending on the
region of Belgium where they are situated.
The transfer taxes on properties in France and the Netherlands
have been deducted in full from their investment values to obtain
their fair values.
Assets subject to a sale of
receivables
Cofinimmo is owner of several buildings of which the rents have
been sold in the past to a third party. The valuers have valued those
properties as freehold (before sale of receivables). At the request of
Cofinimmo, the values mentioned below represent for these build-
ings the freehold value net of the rents still due (residual value), as
calculated by Cofinimmo. This calculation by Cofinimmo has not
been analysed in depth by the valuers. In the forthcoming quarters,
the residual value will evolve in such a way as to be, at the maturity
of the sale of the receivables, equivalent to the freehold value.
Investment value and sale value
(fair value)
Taking into account the three opinions, the investment value
(transaction costs not deducted) of Cofinimmo’s total real estate
portfolio as of 31 December 2014 is estimated at
€
3,329,211,000.
Taking into account the three opinions, the fair value, after the
deduction of the “transaction” transfer costs, of Cofinimmo’s
total real estate portfolio as of 31 December 2014, correspond-
ing to the fair investment value under IAS/IFRS, is estimated at
€
3,199,183,000.
On this basis, the yield on rent, received or contracted, including
from assets that form the object of an assignment of receivables,
but excluding projects, land and buildings undergoing refurbish-
ment, and after the application of imputed rent to the premises
occupied by Cofinimmo, amounts to 6,55% of the investment value.
If the properties were to be let in full, the yield would increase to
6,88%.
Investment properties have an occupancy rate of 95,19%.
The contractually passing rent and the estimated rental value
on the empty spaces (excluding projects, buildings undergoing
refurbishment and assets that form the object of an assignment
of receivables) for let space plus the estimated rental value for
vacant space is 2,47% above the estimated fair rental value for the
whole portfolio at this date. This difference results mainly from the
inflation indexation of contractual rents since the inception of the
in-place leases.
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