Annual Report 2011-2012

Independent valuer's report
Wüest & Partner

Commission

Wüest & Partner AG and W&P Immobilienberatung GmbH (Wüest & Partner), BNP Paribas Real Estate Valuation France and Troostwijk (“the valuers”) were commissioned by the Group Management of Züblin Immobilien Holding AG to perform a valuation, for accounting purposes, of the properties and property units held by Züblin Immobilien Holding AG and its associated companies (the “Züblin Group”) as at 31 March 2012 (reporting date). The valuation encompasses all investment properties as well as sites and investment properties under construction.

Involved parties

The portfolio of the Züblin Group is diversified within Switzerland, France, Germany and the Netherlands. The valuations in the different countries have been done by:

Portfolio Switzerland

Wüest & Partner has been fully responsible for the valuations of the Swiss properties.

Portfolio Germany

Wüest & Partner, in coordination with its German subsidiary, W&P Immobilienberatung GmbH, has been fully responsible for the valuations of the German properties.

Portfolio France

BNP Paribas Real Estate Valuation France has been fully responsible for the valuations of the French properties. Wüest & Partner has been responsible for the coordination of the valuations and the consolidation of the French results into the same reporting format as in Germany and Switzerland. The results were not changed as part of this consolidation.

Portfolio Netherlands

Troostwijk has been fully responsible for the valuations of the Dutch properties. Wüest & Partner has been responsible for the coordination of the valuations and the consolidation of the Dutch results into the same reporting format as in Germany and Switzerland. The results were not changed as part of this consolidation.

Valuation standards

The valuers hereby confirm that the valuations were performed in accordance with national and international standards and guidelines such as the International Valuation Standards (IVSC) and the standards of the Royal Chartered Surveyors (Red Book). The market values determined for the investment properties conform with the concept of “fair value” as defined in the International Financial Reporting Standards (IFRS) on the basis of revised IAS 40, Paragraphs 33–55 (investment property). Investment properties under construction intended for future use as investment properties are listed in Züblin Immobilien Holdings balance sheet in accordance with IAS 40.

Definition of fair value

“Fair value” is defined as the amount for which a property would most probably be exchanged on the open market at the valuation date between two independent and knowledgeable parties, willing to buy and sell respectively, with due allowance made for a reasonable marketing period. In compliance with IAS 40 Paragraph 51, no allowance is made in the determination of fair value for future value-enhancing investments (improvements) nor for any associated additional income. Likewise excluded are property transfer costs, real property gains and value-added taxes plus any other costs incurred or commissions paid during the process of selling real estate. Nor is any account taken of Züblin's liabilities in respect of taxation (apart from ordinary property taxes) and financing costs.

Valuation method

In valuing properties of the Züblin Group, the valuers applied the discounted cash flow (DCF) method, by which the market value of a property is determined as the total of all projected future (100 years) net earnings discounted to the valuation date. The net earning is discounted separately for each property with due allowance for specific opportunities and threats, and adjustment in line with market conditions and risks. In order to comply with the French valuation regulations (edicted by Afrexim, the French Valuation Companies' association), BNP Paribas Real Estate Valuation France have adopted three different methods:

  • direct income capitalisation, where the passing and potential revenue of each property are capitalised before deduction of any outstanding capital expenditure;
  • DCF approach on a 10-year period;
  • market comparison approach, based on prices per sq m observed in comparable transactions.

The Market Value is finally determined by comparing the results obtained by the three different methods.

In order for the Market Value of the properties composing the French portfolio to be comparable with the rest of the Züblin portfolio, Wüest & Partner have subsequently used plausible valuation assumptions, which enabled them to arrive at the Value determined by BNP Paribas Real Estate Valuation France using the methodology described earlier.

Valuation method

Wüest & Partner, BNP Paribas Real Estate Valuation France and Troostwijk are familiar with all the properties in their respective region, having carried out in-spections and examined the documentation provided. The properties have been analysed in detail in terms of their quality and risk profiles (attractiveness and lettability of rented premises, construction type and condition, micro- and macro-location etc.). Currently unlet premises are valued with due allowance made for a reasonable marketing period.

The valuers will inspect the properties a minimum of every three years as well as following the purchase of properties and upon completion of larger refurbishments and investment projects.

Within the review period from 1 October 2011 to 31 March 2012 the following properties have been visited:

Switzerland Germany

3 Properties 10 properties

visited by Wüest & Partner AG visited by W&P Immobilienberatung GmbH

France Netherlands

No site visits No site visits

Results

A total of 60 investment properties and property units were valued as at 31 March 2012. The fair value of all 60 valued properties, in accordance with IAS 40, as determined by the valuers on the valuation date is:

Switzerland Germany

9 properties with a total value of CHF 370 360 000 27 properties with a total value of EUR 274 663 460

France Netherlands

8 properties with a total value of EUR 317 750 000 16 properties with a total value of EUR 102 210 000

Changes during reporting period

Within the review period from 1 September 2011 to 31 March 2012, no investment properties were sold.

Independence and confidentiality

The valuation of the properties of the Züblin Group have been performed by Wüest & Partner, BNP Paribas Real Estate Valuation France and Troostwijk independently and neutrally in conformity with their business policies. The valuation was carried out solely for those purposes specified above; Wüest & Partner, BNP Paribas Real Estate Valuation France and Troostwijk shall accept no liability in respect of third parties.

Zurich, 23 April 2012

Wüest & Partner

Dr. Christoph Zaborowski

Chartered Surveyor MRICS, economist, Partner

Pascal Marazzi

Director

Amsterdam, 23 April 2012

Troostwijk Taxaties

Ir. Jordy Kleemans

Consultant & Taxateur van onroerende zaken

Paris, 23 April 2012

BNP Paribas Real Estate Valuation France

Jean-Claude Dubois MRICS

Chartered Surveyor MRICS, Chairman, Member of the I.F.E.I

Annex: valuation assumptions

Investment properties

The following nominal discount rates were applied to the property valuation:

Table 1 Region Minimum discount rate (%) Maximum discount rate (%) Mean discount rate (%)*
       
Switzerland 4.54 5.75 5.04
France 7.32 8.04 7.62
Germany 7.20 10.16 8.30
Netherlands 8.21 10.26 8.78
All regions 4.54 10.26 7.16

* Average of discount rates for individual valuations, weighted by market value

The investment property valuations are based on the following general assumptions:

  • The rent rolls from Züblin Group used in the valuation are dated 31 March 2012.
  • A one-phase DCF model was adopted. The valuation period extends for 100 years from the valuation date, with an implicit residual value in the 11th period.
  • Discounting is based on a risk-adjusted interest rate. Rates are determined individually for each property on the basis of appropriate benchmarks derived from arm's-length transactions. They may be broken down as follows: risk-free interest rate + property risk (immobility of capital) + premium for macro-location + premium for micro-location depending on use + premium for property quality and income risk + any other specific premiums. Nominal discount rates range between 4.54 and 10.26 depending on the property, use and location (see Table 1).
  • Unless otherwise stated, the valuations assume inflation as following (where a nominal discount rate is applied, this is adjusted accordingly):

– Switzerland: 1.0%

– France: 2.0%

– Germany: 2.0%

– Netherlands: 2.0%

  • Credit risks posed by specific tenants are not explicitly factored into the valuation.
  • Specific indexation of existing rental agreements is accounted for on an individual basis. After expiry of the contracts, an indexation factor of 40% to 100% (local average for every country and usage) and an average term of contract of 5 years are assumed.
  • For existing tenancies, the timing of individual payments is assumed to comply with the terms of the lease. Following lease expiry, cash flows for commercial premises are taken to be quarterly in advance, for housing monthly in advance.
  • In terms of running costs, entirely separate service charge accounts are assumed, with no tenancy-related ancillary costs to be borne by the owner.
  • The maintenance (repair and upkeep) costs were calculated using a building analysis tool. This tool is used to estimate the remaining lifespan of individual components based on their present condition, to model periodic refurbishments and to calculate the associated annual renewal fund allowances. The calculated values are plausibility tested using cost benchmarks derived from Wüest & Partner surveys.

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Annual Report 2011-2012

Annual Report 2011-2012 (8.16 MB)