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OPINION
We confirm that our valuation has been done in accordance
with national and international market practices and standards
(International Valuation Standards issued by the International Valuation
Standards Council and included in RICS Valuation – Professional
Standards January 2014, the Red Book of the Royal Institute of
Chartered Surveyors.
The Investment value (in the context of this valuation) is defined as
the amount most likely to be obtained at normal conditions of sale
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 following
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 invest-
ment market. The choice of the capitalisation rate used is linked to the
capitalisation rates applied in the real estate investment 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 completion 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 represent sub-
stantially all transaction costs. For properties situated in Belgium, the
amount of this tax mainly depends on the mode of transfer, the capac-
ity 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 properties over EUR 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 EUR 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 institu-
tional 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.
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