annual financial statement 2011 - conwert Immobilien Invest SE

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%).
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