observed transaction is based on unobservable data and that adjustment is significant to
the fair value measurement as a whole, the fair value measurement would be categorised
within Level 3 of the fair value hierarchy for disclosure purposes.
A Level 3 categorisation is likely to be the most common. For example, in
February 2013, EPRA published its position paper on IFRS 13 – EPRA Position Paper
on IFRS 13, Fair Value Measurement & Illustrative Disclosures. In this publication it is
stated that:
‘Estimating the fair value of an investment property inevitably requires a significant
range of methodologies, inputs, and adjustments to reflect the wide range of factors
which contribute towards the value of a property e.g. state and condition, location,
in-place leases, development potential, infrastructure, etc. Consequently, even in
1410 Chapter 19
the most transparent and liquid markets – and depending on the valuation
technique – it is very likely that valuers will use one or more significant
unobservable inputs or make at least one significant adjustment to an observable
input. Accordingly, it is likely that the vast majority of property valuations will fall
within the level 3 category.’23
IFRS 13 expands the disclosures related to fair value to enable users of financial
statements to understand the valuation techniques and inputs used to develop fair
value measurements.
In summary, it requires the following additional disclosures for all entities regardless
of the model of measurement or the valuation technique used in measuring
investment property:
• the level of the fair value hierarchy within which the fair value measurement in its
entirety is categorised; [IFRS 13.93(b)]
• for Level 2 and Level 3 measurements, valuation technique and the inputs used,
and changes in the valuation technique, if applicable, and the reasons for those
changes; [IFRS 13.93(d)] and
• if the highest and best use of a non-financial asset differs from its current use,
disclose that fact and the reason for it. [IFRS 13.93(i)].
For entities applying the fair value model in measuring investment property, the
following additional disclosure should be made:
• for Level 3 measurements, quantitative information regarding the significant
unobservable inputs; [IFRS 13.93(d)]
• amount of transfers between Level 1 and Level 2, the reasons and related
accounting policies; [IFRS 13.93(c)]
• for Level 3 measurements, a reconciliation from the opening balances to the
closing balances (including gains and losses, purchases, sales, issues, settlements,
transfers in and out of Level 3 and reasons and policies for transfer and where all
such amounts are recognised); [IFRS 13.93(e)]
• for Level 3 measurements, the total gains or losses included in profit or loss that
are attributable to the change in unrealised gains or losses relating to those assets
and liabilities held at the reporting date, and a description of where such amounts
are recognised; [IFRS 13.93(f)]
• for Level 3 measurements, a description of the valuation process used by the entity;
[IFRS 13.93(g)] and
• for Level 3 measurements, a narrative description of the sensitivity of the fair value
measurement to changes in unobservable inputs if a change in those inputs might
result in a significantly different amount and, if applicable, a description of
interrelationships between those inputs and other unobservable inputs and of how
they might magnify or mitigate the effect of changes in the unobservable inputs.
[IFRS 13.93(h)].
Unibail-Rodamco included the following disclosures in its 2017 financial statements, in
addition to those disclosed in Extract 19.3 above.
Investment
property
1411
Extract 19.13: Unibail-Rodamco SE (2017)
5.2.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS [extract]
Note 5
INVESTMENT PROPERTIES, TANGIBLE AND INTANGIBLE ASSETS, GOODWILL [extract]
5.1. Investment
properties [extract]
5.1.2.
Investment properties at fair value [extract]
(€Mn)
12/31/2017
Shopping centres
31,250.9
France
14,490.4
Central Europe
4,069.5
Spain
3,567.8
Nordics
3,360.2
Austria
2,410.6
Germany
2,102.2
The Netherlands
1,250.2
Offices
3,221.1
France
2,946.4
Other countries
274.7
Convention & Exhibition
2,709.5
TOTAL
37,181.5
Conven-
Total
tion &
invest-
Properti
Shopping
Exhibi-
ment
es held
(€Mn)
Centres Offices
tion
properties
for sale
Total
12/31/2016 29,580.8
3,182.8
2,663.4
35,426.9
–
35,426.9
Acquisitions 61.4
5.9
–
67.2
–
67.2
Capitalised expenses(1) 668.4
47.2
134.7
850.2
–
850.2
Disposals/exits from the scope of
consolidation(2) (232.6)
(364.7)
–
(597.2)
–
(597.2)
Reclassification and transfer of
category 10.7
8.8
4.7
24.3
–
24.3
Discounting impact
2.1
–
–
2.1
–
2.1
Valuation movements
1,190.8
342.5
(93.2)
1,440.1
–
1,440.1
Currency translation
(30.7)
(1.4)
–
(32.1)
–
(32.1)
12/31/2017 31,250.9
3,221.1
2,709.5
37,181.5
–
37,181.5
(1)
Capitalised expenses mainly include:
– shopping centres in France, Sweden, Spain and Austria;
– offices in France;
– Convention & Exhibition sites such as Parc des Expositions de la Porte de Versailles.
(2)
Disposals mainly include one office building in France and several non-core assets in Sweden, France and
Spain (see note 1 “Significant events of the year”).
1412 Chapter 19
Valuation assumptions and sensitivity
Considering the limited public data available, the complexity of real estate asset valuations, as well as the fact that
appraisers use in their valuations the non-public rent rolls of the Group’s assets, Unibail-Rodamco believes it
growth rates and exit yields, are used by appraisers to determine the fair values of Unibail-Rodamco’s assets.
As at December 31, 2017, 97% of Unibail-Rodamco’s portfolio was appraised by independent appraisers.
The outstanding balances of deferred lease incentives and key monies amortised over the firm term of the lease, which
corrected the appraisal value, represented –€73.0 Mn.
The following tables provide a number of quantitative elements used by the appraisers to assess the fair valuation of
the Group’s assets.
Shopping Centres
All shopping centres are valued using the discounted cash flow and/or yield methodologies.
CAGR
Net initial
Rent in €
Discount
Exit
of
Shopping Centres – 12/31/2017
yield
per sqm(1)
Rate(2)
yield(3)
NRI(4)
Max
7.7%
901
13.0%
9.0%
11.8%
France Min
2.0%
122
5.3%
3.5%
1.6%
Weighted
average
4.0%
537
5.7%
4.0%
4.2%
Max
6.8%
583
7.9%
7.6%
3.2%
Central Europe
Min
4.7%
205
6.4%
4.7%
2.3%
Weighted
average
4.9%
416
6.7%
5.0%
2.5%
Max
8.2%
813
11.3%
7.0%
3.7%
Spain
Min
4.0%
117
7.0%
4.2%
2.3%
Weighted
average
4.7%
320
7.5%
4.7%
3.3%
Max
5.2%
488
8.7%
5.0%
5.3%
Nordics Min
4.0%
201
6.5%
3.9%
2.9%
Weighted
average
4.3%
387
6.8%
4.2%
3.3%
Max
7.2%
471
8.0%
6.6%
4.1%
Germany Min
3.9% 252
5.9%
6.6%
2.4%
Weighted
average
4.5%
310
6.4%
3.9%
3.3%
Max
4.4%
395
6.2%
4.5%
3.0%
Austria Min
4.1%
377
6.1%
4.1%
2.7%
Weighted
average
4.2%
386
6.2%
4.1%
2.9%
Max
8.6%
406
9.0%
8.8%
4.7%
The Netherlands
Min
4.4%
124
5.8%
4.2%
2.8%
Weighted
average
5.0%
256
6.3%
5.0%
3.3%
Net initial yield, discount rate and exit yield weighted by Gross Market Value (GMV).
(1) Average annual rent (minimum guaranteed rent + sales based rent) per asset per m2.
(2) Rate used to calculate the net present value of future cash flows.
(3) Rate used to capitalize the exit rent to determine the exit value of an asset.
(4) Compounded Annual Growth Rate of Net Rental Income determined by the appraiser (between 6 and 10 years
depending on duration of DCF model used).
Investment
property
1413
Based on an asset value excluding estimated transfer taxes and transaction costs, the Shopping Centre division’s net
initial yield decreased to 4.3% as at December 31, 2017, from 4.4% as at December 31, 2016.
A change of +25 basis points in net initial yield, the main output of the appraisal models, would result in a downward
adjustment of –€1.793 Mn (or –5.5%) of the shopping centre portfolio value (excluding assets under development or
accounted for using the equity method), including transfer taxes and transaction costs.
OFFICES
Appraisers value the Group’s offices using the discounted cash flow and yield methodologies.
Net initial
yield on
CAGR
occupied
Rent in €
Discount
Exit
of
Offices – 12/31/2017
space
per sqm(1)
Rate(2)
yield(3)
NRI(4)
Max 11.4%
734
9.5%
8.2%
2.4%
France Min
3.9%
106
4.2%
3.4%
–5.1%
Weighted
average
5.5%
502
5.3%
4.5%
0.2%
Max
9.4%
219
9.4%
7.8%
2.6%
Nordics Min
6.2%
108
7.1%
5.2%
1.4%
Weighted
average
7.6%
196
7.9%
6.3%
2.2%
Max 11.7%
159
13.8%
9.8%
26.8%
Other countries
Min
2.7%
23
5.9%
4.1%
0.6%
Weighted
average
5.3%
114
7.4%
5.9%
11.1%
Net initial yield, discount rate and exit yield weighted by GMV. Vacant assets, assets considered at bid value and
assets under restructuring are not included in this table.
(1) Average annual rent (minimum guaranteed rent) per asset per m2. The computation takes into account the areas allocated to company restaurants.
(2) Rate used to calculate the net present value of future cash flows.
(3) Rate used to capitalize the exit rent to determine the exit value of an asset.
(4) Compounded Annual Growth Rate of NRI determined by the appraiser (between 3 and 10 years, depending on duration of DCF model used).
For occupied offices and based on an asset value excluding estimated transfer taxes and transaction costs, the Office
division’s net initial yield fell by –23 basis points to 5.6% as at December 31, 2017.
A change of +25 basis points in net initial yield, the main output of the appraisal models, would result in a downward
adjustment of –€146 Mn (–4.4%) of the office
portfolio value (occupied and vacant spaces, excluding assets under
development or accounted for using the equity method), including transfer taxes and transaction costs.
1414 Chapter 19
CONVENTION & EXHIBITION
Based on these valuations, the average EBITDA yield (recurring earnings before interest, tax, depreciation and
amortization divided by the value of assets, excluding estimated transfer taxes and transaction costs) of Viparis
consolidated venues decreased by –8 basis points from December 31, 2016 to 5.3% as at December 31, 2017.
A change of +25 basis points of the WACC as determined at December 31, 2017 would result in a downward
adjustment of –€121.0 Mn (–5.1%) of the Convention & Exhibition portfolio value.
5.1.3.
Investment properties under construction at cost [extract]
(€Mn)
12/31/2017
Shopping centres
1,021.3
France
323.7
Central Europe
32.6
Spain
117.6
Nordics
–
Austria
–
Germany
271.6
The Netherlands
275.8
Offices
314.3
France
314.3
Other countries
–
Convention & Exhibition
7.2
TOTAL
1,342.8
As at December 31, 2017, assets under construction valued at cost are notably:
• offices developments such as Trinity and Phare-Sisters in La Défense;
• shopping centres extension and renovation projects such as Mall of The Netherlands
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 278
