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Fair value of investment properties
Investment properties are accounted for at fair value using the fair
value model in accordance with IAS 40. This fair value is the price at
which a property could be exchanged between knowledgeable and
willing parties in normal competitive conditions. It is determined by the
independent experts in a two-step approach.
In the first step, the experts determine the investment value of each
property (see methods below).
In a second step, the experts deduct from the investment value an esti-
mated amount for the transaction costs that the buyer or seller must
pay in order to carry out a transfer of ownership. The investment value
less the estimated transaction costs (transfer duties) is the fair value
within the meaning of IAS 40.
In Belgium, the transfer of ownership of a property is subject to the
payment of transfer duties. The amount of these taxes depends on the
method of transfer, the type of purchaser and the location of the prop-
erty. The first two elements, and therefore the total amount of taxes to
be paid, are only known once the transfer has been completed.
The range of taxes for the major types of property transfer includes:
•
sale contracts for property assets: 12.5% for properties located
in the Brussels Capital Region and in the Walloon Region, 10% for
properties located in the Flemish Region;
•
sale of property assets under the rules governing estate traders:
4.0% to 8.0%, depending on the Region;
•
long lease agreement for property assets (up to 50 years for
building leases and up to 99 years for long lease rights): 2.0%;
•
sale contracts for property assets where the purchaser is a public
body (e.g. an entity of the European Union, the Federal Government,
a regional government or a foreign government): tax exemption;
•
contribution in kind of property assets against the issue of new
shares in favour of the contributing party: tax exemption;
•
sale contract for shares of a real estate company: no taxes;
•
merger, split and other forms of company restructuring: no taxes,
etc.
The effective rate of the transfer tax therefore varies from 0% to 12.5%,
whereby it is not possible to predict which rate would apply to the
transfer of a given property before that transfer has effectively taken
place.
In January 2006, all the independent real estate experts
2
who carry
out the periodic valuation of the Belgian Sicafis’/Bevaks’ assets were
asked to compute a weighted average transaction cost percentage to
apply on the Sicafis’/Bevaks’ property portfolios, based on supporting
historical data.
For transactions concerning properties with an overall value exceeding
2.5 million EUR, given the range of different methods for property trans-
fers (see above), the experts have calculated, on the basis of a repre-
sentative sample of 220 transactions which took place in the market
between 2003 and 2005 and totalling 6.0 billion EUR, that the weighted
average transfer tax comes to 2.5%. This percentage is reviewed annu-
ally and, if necessary, adjusted at each 0.5% threshold.
For transactions concerning properties with an overall value of less
than 2.5 million EUR, transaction costs of between 10.0% and 12.5%
apply, depending on the Region in which the property is located.
At 01.01.2004 (date of transition to IAS/IFRS), the transaction costs
deducted from the investment value of the property portfolio amounted
to 45.5 million EUR and were recorded under a separate equity item
entitled “Impact on the fair value of estimated transaction costs and
transfer duties resulting from the hypothetical disposal of investment
properties”.
The 2.5% transaction costs have been applied to the subsequent
acquisitions of buildings. At 31.12.2015, the difference between the
investment value and the fair value of the global portfolio amounted to
127.99 million EUR or 6.10 EUR per share.
It is worth noting that the average gain in relation to the investment
value realised on the disposals of assets operated since the change-
over to the Sicafi/Bevak regime in 1996 stands at 9.26%. Since that
date, Cofinimmo has undertaken 165 asset disposals for a total of
1,542.32 million EUR. This gain would have been 11.25% if the deduction
of transaction costs and transfer duties had been recognised as from
1996.
The transfer duties applied to the buildings located in France, the
Netherlands and Germany amount to 6.77%, 3.87% and 4.80%
respectively.
1
Note 22 reconciles the total changes in fair value of the investment properties.
2
Cushman & Wakefield, de Crombrugghe & Partners, Winssinger & Associés, Stadim and Troostwijk-Roux.
Development projects
(x 1,000 EUR)
2015
2014
AT 01.01
88,966
130,533
Investments
34,932
47,858
Acquisitions
6,158
4,705
Transfer from/to Properties available for lease
-49,381
-73,648
Sales/Disposals (fair value of assets sold/disposed of)
-19,287
-15,646
Increase/Decrease in the fair value
1
156
-4,836
AT 31.12
61,544
88,966
Assets held for own use
(x 1,000 EUR)
2015
2014
AT 01.01
8,875
9,146
Investments
51
14
Increase/Decrease in the fair value
1
-301
-285
AT 31.12
8,625
8,875
177