Valuation portfolio

In accordance with the Royal Decree of 7 December 2010 on the property investment funds, the real estate portfolio is valued four times a year by an independent expert. The expert's valuation is based on the fair value in accordance with the Beama interpretation IAS 40 and is thus reported on the balance sheet.

Intervest Retail has appointed 3 property experts for the valuation of its portfolio:

• Cushman & Wakefield
• CB Richard Ellis
• de Crombrugghe & Partners

Cushman & Wakefield

The Cushman & Wakefield methodology is based on the ERV (Estimated Rental Value) with adjustments that take into account the current rent paid and/or any other element that influences the value, e.g. costs of vacancies.

They base their determination of the market rental value on their knowlegde of the real estate market and on recent transactions concluded by the Retail department. The rental value is influenced, inter alia, by:

• location 
• suitability of the site 
• qualities of the building 
• market circumstances.

The allocated unit price is multiplied by the surface area of the commercial in order to reach a total estimated rental value.
For the inner-city shops, the “zone A” principle is used. This methodology uses a three-step process to calculate the total estimated value. 

The first step involves calculating the first 10 metre depth over the full facade width of the premises at  100% of the estimated rent/m2, the next 10 metres at 50% and the rest at 25%. Storeys are charged at 25% or at a fixed estimated amount depending on location and usability.

Next, the Adjusted ERV is calculated: this is 60% of the difference between the current rent and the ERV. If the current rent is higher than the ERV, the Adjusted ERV is equal to the ERV and the 60% rule doesn’t apply.

A following step consists of determining a yield or capitalisation rate for which an investor would be prepared to buy the premises. The gross value before corrections is obtained. Possible corrections can be applied (e.g. vacancy costs), whereafter the investment value (deed in hand) is achieved.

CB Richard Ellis

Method 1: Valuation on the basis of the capitalisation of rental income

• deduction from the net current value of the difference between the adjusted ERV and the current rental income for the rest of the current rental period in case that the estimated market rental value exceeds the current rental income
• increase by the current net value of the difference between the current rental income and the estimated market value for the remaining period of current rental period if the estimated market value is lower than the current rental income
• deduction of the rental discount given
• deduction for the necessary expenses to the property
• deduction for the expected vacancy periods

Method 2: Valuation based on the actualizing of the income

de Crombrugghe & Partners

Method 1: Capitalisation method of the rental value

• supply and demand of tenants and buyers of comparable real estate
• yields trends
• inflation expectation
• current interest rates and interest rates expectations

• local surroundings 
• availability of parking 
• infrastructure 
• accessibility by private and public transport 
• facilities such as public buildings, stores, hotels, restaurants, banks, schools, etc. 
• development (construction) of comparable real estate 

• operating and other expenses
• type of construction and level of quality
• state of maintenance
• age
• location and representation
• current and potential alternative usage possibilities

Method 2: Income approach according to a DCF (Discounted Cash Flow)

Value real estate portfolio on 31 December 2011