annual financial statement 2011 - conwert Immobilien Invest SE

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CONWERT IMMOBILIEN INVEST SE ANNUAL FINANCIAL 2011 STATEMENT ANNUAL REPORT 2011 80 The ECO Group portfolio was appraised by various experts in 2010. In order to develop a comparison with the prior year, individual properties from the different asset classes (office, retail, entertainment, parking) were selected through sampling to produce a representative overview of the portfolio. The parameters used to determine value were then compared with the previous year. Rental income was generally stable or slightly higher than the previous year. The discount rates were substantially higher and reflected an increase in the estimated market risk. Maintenance expenses were increased or decreased to reflect the current state of the property. The comparable parameters used to value the ECO portfolio in 2010 are as follows: Rental income per year in € million Fair value in € million Discount rate in % Maintenance *) Brunn am Gebirge, Campus 21 2011 6.5 102.3 6.0 8.0 2010 Graz, Eggenberger Allee 5.0 116.5 3.3 4.4 2011 1.0 15.6 5.5 10.0 2010 Innsbruck, Cineplexx 1.0 15.2 5.5 7.9 2011 1.5 20.6 7.0 8.0 2010 Eferding, FMZ 1.7 21.7 6.5 4.6 2011 0.3 2.9 7.5 7.0 2010 Vienna, Neubaugasse 0.3 2.9 7.0 7.0 2011 0.3 6.6 4.0 3.0 2010 0.3 5.9 3.3 7.0 *) Based on gross annual income 8.1.1.3. DERIVATION OF THE DISCOUNT RATE The property appraisers developed the discount rate in two different ways: Under the first method, the discount rate was based on similar transactions realised on the market. The second method involved the evaluation of alternative forms of investment (fixed-interest, no-risk securities, etc.) and the subsequent development of additions or deductions to the discount rate. 8.1.1.4. SENSITIVITY ANALYSIS Sensitivity analyses for the Austrian submarket show that a decrease of 25% in the average discount rate would increase fair value by roughly 27% (2010: 19%). In contrast, an increase of 25% in the average discount rate would reduce the average fair value by approx. 19% (2010: 14%). in %
INTRO | MANAGEMENT REPORT | | FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Notes 8.1.2. THE GERMAN PROPERTY MARKET The portfolio of the conwert Group in Germany covers all sectors (residential, office, commercial and warehouse), whereby residential properties are the predominant category. 8.1.2.1. APPLIED VALUATION METHODOLOGY The internationally accepted discounted cash flow method (DCF) was used to value the properties in the German portfolio, with the exception of the objects attributable to the ECO Group. This method is based on a dynamic investment calculation that focuses exactly on valuation parameters and, in this way, allows for the transparent determination of market value. The DCF method begins with ten years of monthly forecasts for the future cash inflows and outflows connected with the valuation object. The payment flows at the beginning of each month are discounted back to the valuation date to determine the specific effects of relevant incoming and outgoing payments during the forecast period on the market value of the object as of the valuation date. The discount rate used for the calculation reflects the market situation and the expected return of a potential investor as well as the forecast uncertainty connected with future payment flows. Since the weighting of future payment flows decreases and forecast uncertainty increases during the forecast period, cash flows after this period are normally capitalised based on a growth rate and discounted back to the valuation date. The DCF method determines the average market value that investors would generally be prepared to pay for the property on the valuation date under the given economic circumstances in order to realise an appropriate return on investment consistent with their respective business model. A combined asset value and income capitalisation approach was used to value most of the properties in the German ECO portfolio, whereby the weighting between these two methods was based on the use of the property and the extent of the deviation. The DCF method was used in a limited number of cases. The following international standards formed the basis for valuation in Germany: Professional associations: Description of valuation guidelines Royal Institution of Chartered Surveyors (RICS) "Red Book" The European Group of Valuers Associations (TEGoVA) "Blue Book" International Valuation Standards Committee (IVSC) "White Book“ 8.1.2.2. PARAMETERS FOR THE DETERMINATION OF VALUE The following section presents detailed information on special parameters that were used to determine the value of the Group’s properties in Germany. The table shows the range, i.e. the highest and lowest value, for each parameter. Based on these considerations, the discount in this submarket remained relatively constant. The risk assessment was increased slightly for several objects. In the German submarket, the discount rates ranged from 3.8% to 9.5% (2010: 3.5% to 7.0%). 81
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