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ANNUAL ACCOUNTS /
Notes to the consolidated accounts
NOTE 20. GOODWILL
Pubstone
Cofinimmo’s acquisition in two stages (31.10.2007 and 27.11.2008) of
89.90% of the shares of Pubstone Group SA/NV (formerly Express
Properties SA/NV) (see page 31 of the 2008 Annual Financial Report)
generated a goodwill for Cofinimmo resulting from the positive dif-
ference between the acquisition cost and Cofinimmo’s share in the
fair value of the net asset acquired. More specifically, this goodwill
results from:
•
the positive difference between the conventional value offered
for the property assets at the acquisition (on which the price
paid for the shares was based) and the fair value of these
property assets (being expressed after deduction of the
transfer duties standing at 10.0% or 12.5% in Belgium and at
6.0% in the Netherlands);
•
the deferred tax corresponding to the theoretical assumption
required under IAS/IFRS of an immediate disposal of all the
properties at the closing date. A tax rate of respectively
34% and 25% for the assets located in Belgium and in the
Netherlands has been applied to the difference between the
tax value and the market value of the assets at the acquisition.
Cofinimmo Investissements et Services (CIS)
Cofinimmo’s acquisition of 100% of the shares of Cofinimmo
Investissements et Services (CIS) SA (formerly Cofinimmo France SA)
on 20.03.2008 generated a goodwill for Cofinimmo resulting from the
positive difference between the acquisition cost and the fair value of
the net asset acquired. More specifically, this goodwill results from
the positive difference between the conventional value offered for
the property assets at the acquisition (on which the price paid for
the shares was based) and the fair value of these property assets
(being expressed after deduction of the transfer duties standing at
1.8% and 6.2% in France).
Changes in the goodwill
(x €1,000)
Pubstone
Belgium
Pubstone
Netherlands
CIS France
Total
Cost
AT 01.01.2014
100,157
39,250
26,929
166,336
AT 31.12.2014
100,157
39,250
26,929
166,336
Writedowns
AT 01.01.2014
33,380
3,600
36,980
Writedowns recorded during the financial year
11,000
11,000
AT 31.12.2014
44,380
3,600
47,980
Book value
AT 01.01.2014
66,777
35,650
26,929
129,356
AT 31.12.2014
55,777
35,650
26,929
118,356
Impairment test
At the end of the financial year 2014, the goodwill was subject
to an impairment test (executed on the groups of properties to
which it was allocated per country), by comparing the fair value
of the properties plus the goodwill to their value in use.
The fair value of the buildings is the value of the portfolio as
established by the independent real estate experts. This fair value
is established using three valuation methods: the ERV (Estimated
Rental Value) capitalisation approach, the expected cash flow
approach and the residual valuation approach. To carry out the
calculation, the independent real estate experts take as main
assumptions the indexation rate, the discount rate and the build-
ings’ estimated end-of-lease disposal value. These assumptions
are based on market observations taking into account investors’
expectations, particularly regarding revenue growth and market
risk premium. For further information, see the Report of the Real
Estate Experts of this Annual Financial Report.
The value in use is established by the Group according to
expected future net cash flows based on the rents stipulated in
the tenants’ leases, the expenses to maintain and manage the
property portfolio, and the expected gains from disposals. The
main assumptions are the indexation rate, the discount rate, an
attrition rate (number of buildings and corresponding volume of
revenues for which the tenant will terminate the lease, year after
year), as well as the buildings’ end-of-lease disposal value. These
assumptions are based on the Group’s knowledge of its own port-
folio. The yield expected from its equity is used as discount rate.
Given the different methods used to calculate the fair value of the
buildings as established by the independent real estate experts
and the value in use as established by the Group, as well as the
fact that the assumptions used to calculate each of these may
differ, the two values may not be the same and the differences
can be justified.
For 2014, the result of this test (illustrated in the table below)
leads to an impairment of K€11,000 on the goodwill of Pubstone
Belgium. For Pubstone Netherlands and CIS France, no impair-
ment was recorded. During the financial year 2014, the fair values
of Pubstone Belgium and Pubstone Netherlands recorded neg-
ative changes of K€508 and K€1,899 respectively, while the fair
value of CIS France recorded a positive change of K€969.
Assumptions used in the calculation of the value
in use of Pubstone
A projection of future net cash flows was drawn up for the remain-
ing duration of the lease bearing on the rents less the mainte-
nance costs, investments and operating expenses, as well as the
proceeds from asset disposals.
During this remaining period, an attrition rate is taken into account
based on the terms of the lease signed with AB InBev. The build-
ings vacated are assumed to have all been sold. At the end of the
initial 27-year lease, a residual value is calculated. The disposal
price of the properties and the residual value are based on the
average value per square meter of the portfolio determined by the
expert on 31.12.2014, plus a 15% (2013: 20%) margin as from the
fourth year, and indexed at 1% (2013: 1.8%). This margin is based
on the realised gains observed on the sale of cafés/restaurants
since the acquisition of the Pubstone portfolio.
This average margin on the disposals made since 2007 amounts
to 45% and includes not only the margins on the assets vacated
by AB InBev but also the margins on the assets not vacated by AB
InBev and sold. The latter were mostly bought by people having a
special interest in buying the property, for example the operator