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D I R E C T O R S R E P O R T

Valuation and Calculation


of Net Asset Value

V A L U E
Valuation nomic situation. The individual risk is specific to each
Castellum carried out an internal valuation of all prop- property, and comprises a weighted assessment of the
erties as of December 31st 2002. The valuation was following considerations:

A S S E T
carried out in a uniform manner, and was based on a The propertys category.
ten-year cash flow model, which was described in The town/city in which the property is located.
principle on the previous page. The propertys location within the town/city with ref-
This internal valuation was based on an individual erence to the propertys category.
assessment for each property of both its future earn- The right property, i.e. it has the right design, is

N E T
ings capacity and its required yield. In assessing a appropriate and makes efficient use of space.
propertys future earnings capacity we took into Technical standard with regard to such criteria as the
account not only an assumed level of inflation of 1.5 % choice of material, the quality of public installations,

A N D
but also the potential rental income from each con- furnishing and equipment in the premises and apart-
tracts rent and expiry date compared with the esti- ments.
mated current market rent, as well as changes in occu- The nature of the lease agreement, with regard to such
pancy rate and property costs. Included in property issues as the length, size and number of agreements.

M O D E L / V A L U A T I O N
costs are operating expenses, maintenance, tenant
improvements, ground rent, real estate tax, and leasing The cost of borrowed capital varies depending on the
and property management. property category, and amounts to 6.07.0 %.
The required yield on total capital is calculated by
Assumptions on the required yield etc weighting the required yield on equity and the cost of
The assumptions that are the basis for Castellums borrowing on the basis of equity/assets ratio levels of
valuation are shown in the table below. 2545 %, depending on the property category. The
The required yield on equity is different for each required yield on total capital is used to discount the
property, and is based on the following assumptions: expected 10-year future cash flow, while the residual
The risk parameters are different for each property, value is discounted by calculating the return on total
and can be divided into two parts general risk and capital minus inflation.
individual risk. The general risk is a payment for the The apartments have been valued as rental apart-
fact that a real estate investment is not as liquid as a ments and not as tenant-owners rights.
bond, and that the asset is affected by the general eco-

V A L U A T I O N

ASSUMPTIONS PER PROPERTY CATEGORY 31-12-2002

Office/Retail Warehouse/Industrial Residential


Real interest rate 4.0% 4.0% 4.0%
Inflation 1.5% 1.5% 1.5%
Risk 5.8%12.0% 7.9%15.3% 4.4%8.5%
Return on equity 11.3%17.5% 13.4%20.8% 9.9%14.0%

Interest rate 6.5% 7.0% 6.0%


Equity/assets ratio 35% 45% 25%
Return on total capital 8.2%10.4% 9.9%13.2% 7.0%8.0%

Rental value, SEK/sq.m. year 1 1 044 575 898


Occupancy rate year 1 91.1% 92.8% 99.1%
Property costs, SEK/sq.m. year 1 299 160 359

C A S T E L L U M A N N U A L R E P O R T 2 0 0 2 41
D I R E C T O R S R E P O R T

REAL ESTATE VALUE AND NET ASSET VALUE CHANGE IN NET ASSET VALUE

Book Surplus/net
Valuation, Valuation, value, asset value,
Category SEKm SEK/sq.m. SEKm SEKm SEKm SEK/share
Office/Retail 10 392 9 645 7 874 2 518 Net asset value 31-12-2001 6 993 171
Warehouse/Industrial 4 942 4 464 3 847 1 095 Dividend 266 7
Residential 1 056 9 286 745 311 Cash flow after tax +663 +16
Projects and land 958 671 287 Change in value after tax +112 +3
Total 17 348 13 137 4 211 Net asset value 31-12-2002 7 502 183
Deferred tax, 28% 1 179
Disclosed equity 4 470
Net asset value 7 502
Net asset value per share
(41,000,000 shares), SEK 183

Development projects and building permissions of value, but also in order to reflect the composition of
Projects in progress have been valued using the same the portfolio as a whole in terms of category and geo-
principle, but with deductions for outstanding invest- graphical location of the properties. Svefas valuation
ment. Sites with building permission and land have of the selected properties amounted to SEK 9,816 mil-
been valued on the basis of an estimated market value lion, within a value range of +/510 %. Castellums
per square metre. valuation of the same properties amounted to SEK
9,702 million. It can be confirmed that at the level of
The value of the property portfolio the portfolio the external and internal valuations corres-
The internal valuation reveals a long-term value deter- pond, although there are individual differences.
mined on an earnings basis of SEK 17,348 million,
equivalent to a surplus value of SEK 4,211 million. Net asset value
The change in property value, net less than 1 %, is Net asset value per share was SEK 183, compared to
chiefly explained by a smaller increase in value in SEK 171 per share at the end of the previous year. The
Greater Gothenburg, while other regions has basically net asset value calculation and changes over the years
remained unchanged with the exception of Greater are shown in the tables above.
Stockholm that shows a smaller decrease in value.
The table above show the long-term value deter- Uncertainty range
mined on an earnings basis and the distribution of sur- It should, however, be emphasised that a propertys
plus value per property category. true value can only be confirmed when it is sold. Prop-
erty valuations are calculations performed according
External valuation to accepted principles and on the basis of certain
In order to guarantee the valuation more than 100 assumptions. The value ranges stated for property valu-
properties, representing 56 % of the value of the port- ations, which are usually between +/10 %, should be
folio, were valued by Svefa AB. The properties were viewed as indications of the uncertainty that may exist
selected on the basis of the largest properties in terms in such assessments. The table on the following page

42 C A S T E L L U M A N N U A L R E P O R T 2 0 0 2
D I R E C T O R S R E P O R T

V A L U E
shows how each parameter is affecting the valuation above the previous years valuation of the properties
and the net asset value. sold. This is chiefly explained by residential proper-
It can, however, be confirmed that during 2002 ties valued as rental apartments being sold to tenant

A S S E T
Castellum sold properties for a total sales price of owners associations and the sales of undeveloped
around SEK 503 million, which was SEK 91 million land with building permissions.

N E T
A N D
BALANCE SHEET

V A L U A T I O N
31-12-2002 31-12-2002 31-12-2001 31-12-2000
SEKm as per accounts Surplus value adjusted adjusted adjusted

Assets
Properties 13 137 +4 211 17 348 16 551 14 790
Other fixed assets 55 55 55 56
Current receivables 117 117 339 62
Cash and bank 20 20 20 11
Total assets 13 329 +4 211 17 540 16 965 14 919

Shareholders equity and liabilities


Shareholders equity 4 470 +3 032 7 502 6 993 6 339
Equity/assets ratio 34% 43% 41% 42%
SEK per share 109 183 171 155
Deferred tax liability 9 +1 179 1 188 1 098 781
Interest-bearing liabilities 8 264 8 264 8 254 7 245
Non-interest-bearing liabilies 586 586 620 554
Total shareholders equity and liabilities 13 329 +4 211 17 540 16 965 14 919

SENSITIVITY ANALYSIS

Valuation, SEKm Net asset value, SEKm Net asset value, SEK/share
Outcome as on 31-12-2002 17 348 7 502 183
Uncertainly range, /+10% in valuation 15 613 19 083 6 253 8 751 153 214
Real growth in rental value, /+1% 15 000 20 200 5 811 9 555 142 233
Required yield, +/1 percentage unit 15 700 19 400 6 315 8 979 154 219
Tax rate, 14% instead of 28% 17 348 8 091 197

C A S T E L L U M A N N U A L R E P O R T 2 0 0 2 43

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