VALUATION REPORT update

Transcription

1 Property: VALUATION REPORT update Office property Address: Hamburger Chaussee 8 D Kiel Prepared for: Prime Office A/S Skt. Knuds Torv 3,3 DK-8000 Aarhus C Purpose of valuation: Determination of the market value in accordance with Red Book standard for internal accounting purposes. Date of valuation: Date of inspection: This valuation is a desktop update of the former reports. von Borries Advisory-Partners Büro Hamburg: Zippelhaus Hamburg Büro Uelzen: Büro Uelzen: Gut Golste 4 A Natendorf Tel +49 (0) Fax +49 (0) info@vb-ap.de Inhaber: Christof von Borries

2 Table of Contents No. Section Page 1 Executive Summary 3 2 Short description Building construction Building structure Legal situation Valuation comments Market value and conclusion 11 3 Appendix 12 Gut Golste 4 A I Natendorf Tel: 040/ page 2 of 46

3 1 Executive Summary Basic information Object: Owner: Date of inspection: Inspected units: Address: Hamburger Chaussee 8 D Kiel Municipality distr.: Kiel Federal state Schleswig-Holstein MC Immobilieninvest II GmbH office unit Property Use class: Year of construction: Year of reconstruction: Year of refurbishment: Site area: Surrounding area use: office property ,682 sq. m. office, residential Units areas Vacant units Vacant areas % Residential: % Office: 8 3, % Retail: % Storage: % Parking lots: % Garages: % Others: Gastronomy % Others: medical practice % Others: % Total 76 3, % Building materials: Roof: Windows: Facades: Basement: Staircases: Installations: Type of construction: concrete construction, flat and hipped roof aluminium framed insulated glass brick stone, clinker basement in front building, massive construction concrete construction, mostly with artificial stone medium, modern standard steel concrete frame construction Authorities Building law: Environmental/contamination issues: Taxes: Preservation order: Encumbrances land register: Encumbrances public obligations: development pl: MK mixed core use; building land contamination suspicion but no decontamination needed free none 2 entries pipeline, way leave 2 entries pipeline, way leave Gut Golste 4 A I Natendorf Tel: 040/ page 3 of 46

4 State of maintenance (1) Very good condition - (4) Medium condition - (7) Very poor condition, in need of immediate repair State of maintenance roof: State of maintenance windows: State of maintenance facade: State of maintenance basement State of maintenance staircases State of maintenance technical installations: State of maintenance other relevant issues: Overall state of maintenance: Backlog: 1) X X X X X X X X none Additional assessments Location quality Residential: Location quality Commercial: Rent ability residential units: Rent ability commercial units: Sale ability: Eligibility for collateral in the short run: Eligibility for collateral in the long run: Alternative use: Type of alternative use: Method for the valuation: X X none Discounted cash flow X X X X Special conditions Special conditions in the rental contracts: Special conditions in the purchase contract: none n/a Other information Are there any interest between the tenants and the owner: Is the rent in the rental contracts specified for each category of use: Rental contracts including VAT Other/additional relevant information: 1) 1=best; 7 very poor no yes no no Value Date of purchase: Sales price within the last 2 years: Cap. Rate in 10 years: Discount rate: Market value: Value per square meter useable area: n/a n/a 7.00% 4.25% 5,800,000 1,700 /sq. m. Gut Golste 4 A I Natendorf Tel: 040/ page 4 of 46

5 2 Short description 2.1 Building construction Property type: Office property Year of : construction: 2002 modernization: reconstruction of ground floor in 2015 refurbishment: 2015 Construction: Type of construction: steel concrete frame construction Interior walls: concrete, light weight construction Floor slabs: reinforced concrete Facade: brick stone, clinker Windows: aluminium framed insulated glass Roof: concrete construction, flat and hipped roof Staircase: reinforced concrete with artificial stone Balconies: roof terrace Installations: Heating: long distance heating Warm water: electric boilers Electrical: average quality Lift: 1 person elevator Others: none Fitting quality: Office: medium Other special fittings: Condition of the building: Latest modernization/ maintenance: 2.2 Building structure Number of buildings: None The property is well maintained and leaves a good impression. No damages detected. Ground floor: reconstructed from costumer area to usual office space 5 storey front building with four storey rear annex building Building structure: Basement: only front building, storage, technic Ground floor: office Upper floors: office Gut Golste 4 A I Natendorf Tel: 040/ page 5 of 46

6 Units, areas and income: use rental units space vacancy current rent occup. vacant total occup. vacant total rate /sq. m. total (month) residential % office , , % , med. pract % retail % hotel % gastro % storage % special % sub. comm , , % , subtotal , , % , parking out % , parking in % other % total , ,412 34, total p.a. 418, Tenant quality: Techniker Krankenkasse The company currently has approx. 9m insured persons and 13,000 employees and is the biggest health insurer in Germany. The company is further growing and expanding and is known as a solvent tenant. 2.3 Legal situation Building law: Zoning plan M - Mixed use area Development plan from 1994 MK mixed core use, floor to area ratio 1.7, site coverage index 0.4 Special local constitutions: Land register: None Rights (no changes assumed): The parking lots on the valuation property can only be accessed via the adjacent plot in the north. For the valuation it is implied that a way-leave is recorded in favour of the valuation property. Encumbrances: Easement (right of pipeline and way) for the owner of the plot 277 (west neighbour). No impact on the value. Register of public obligations: Way and pipeline leave for the adjacent plot, as drawn into the plans (please see appendix); no impact on the value. Sewer construction costs have to be paid when the property is connected to the public canalization. According to a notice in the available documents it was arranged in the purchase contract that the seller pays Gut Golste 4 A I Natendorf Tel: 040/ page 6 of 46

7 the fee and the entry will then be deleted (pls. see appendix). Register of contaminated sites: Contamination suspicion, because of the former uses (gas plant, petrol station). Besides, an analysis found out within the building permission process that there is partially a contamination of the soil with some chemical materials. Currently there is no decontamination needed, but in the future a soil examination might be required. As far as we know the contamination does currently not affect the use of the plot, but is estimated as a weak latent risk for the future. Preservation order: Status of taxes and contributions: Other not registered agreements: Building permission: The building is not listed as an ancient monument. The plot is currently free of encumbrances through taxes and contributions (no changes assumed). None available The planning permission is not included in the available documentation. The material legality of the existing building development is assumed. Gut Golste 4 A I Natendorf Tel: 040/ page 7 of 46

8 2.4 Valuation comments Valuation model: Comments on rent level: The analysis is based on a discounted cash flow analysis of the property with a 10 year view and a resale of the property at the end of year 10 (calculation see appendix). In this valuation model we use an equivalent yield for discount and resale that implicitly accounts for inflation and growth as well as the current property and the investment market including the particular characteristics of the property such as letting situation, location and building quality. Office: Market rents for office space in Kiel: Simple/ standard locations 5.00 to 6.00 /sq. m. Medium/ average locations 6.00 to 7.00 /sq. m. Good location 7.00 to 9.50 /sq. m. Best location/ new building to /sq. m. Rental offers for office space in the surrounding: Radius 500m 6.00 to /sq. m. Radius 1km 6.50 to /sq. m. The rent of the single tenant is set at 9.95 /sq. m. after prolongation of the lease. This is in the upper range of the market, especially in this B-location. But the high rent takes into account that the tenant does not pay any VAT. The normal rent for an alternative user would be slightly lower. Therefore the sustainable rent is estimated at 9.50 /sq. m. Due to their fast expansion it is not for certain that the tenant TKK will stay in the building. However since TKK is well established in this location and is currently refurbishing the complete rental area, we assume that there is quite a chance to keep them in the building. Storage: The storage space in the basement is leased together with the office units on a marketable level. Parking spaces: The market rents for outside parking lots range between 30 and 60 /lot. The rented parking lots vary from 30 to 45. The current rent level is estimated as sustainable. Comments on the lease terms/ conditions: For an overview of the commercial contracts please see appendix. Additional information: The tenant pays all recoverable costs based on the law and is responsible for small repairs Gut Golste 4 A I Natendorf Tel: 040/ page 8 of 46

9 Tenant improvements: To relet a unit the landlord has to improve the unit to meet the requirements of a new tenant. Tenant improvements of 100 /sq. m. are calculated for all units depending on estimated tenant change. Deferred maintenance/capital expenditures: Saleability: Lettability: Alternative use: Capitalisation rate (resale): Discount rate: Deferred maintenance: none It is a solid and young building in a solitary but sustainable office agglomeration in Kiel. A disadvantage is the less demanded volume of between 5m and 10m in a B-city. But the solvent tenant is a positive aspect. There we estimate medium to good saleability, which would be better if it was a part of the entire Prime Office portfolio. There is a hard competition in the Kiel office market. We estimate a medium lettability, especially on the current rent level. None - existing use is sustainable. The chosen capitalisation rate is used to calculate the supposable resale value of the property in 10 years. Based on a market situation comparable to today and in consideration of the basic advantages and disadvantages of the property a cap rate of 7.00% was chosen. The yield is used to calculate the present value of the cash flows over a 10 year term. The used valuation model is based on an equivalent yield that implicitly accounts for inflation and growth. Based on the expected investment risk and the current market situation we assess a discount rate of 4.25%. This yield leads to a gross multiplier of approx based on a short term solvent single tenant contract, which is within the medium range of comparable sales and in the market range for modern properties in good locations. Market trends: Purchasers cost: LOCATION GROSS YIELD TREND very good g good g average g simple g An asset deal is assumed. Cost for broker, legal and transfer tax have to be deducted from the capital value. Gut Golste 4 A I Natendorf Tel: 040/ page 9 of 46

10 Market value per sq. m. 1,700 /sq. m. Legal 1.00% Tax 6.50% Broker 3.25% Total 10.75% Comments on the sales price: n/a Gut Golste 4 A I Natendorf Tel: 040/ page 10 of 46

11 2.5 Market value and conclusion Based on our calculations and in accordance with Red Book we estimate the market value of the property Hamburger Chaussee 8, D Kiel on the date December 19, 2016 at 5,800, in words: five million eight hundred thousand Euros Conclusion: The property is a single tenant office building with outside parking areas and a remaining 3 year lease term. It is a good quality building in a solitary office agglomeration at the inner city border of Kiel. Location and building are sustainable for back office use, well reachable by car. The building is flexible enough for a change into the structure of a multi-user situation. Therefore we estimate only an average eligibility for collateral in the long term and a good eligibility for collateral in the short term. Hamburg, 24/02/17 i.a. Steffen Schroeder von Borries Advisory-Partners No conflict of interest We confirm that we have no conflict of interest, either with the Borrower or with the properties in question. We also confirm that von Borries Advisory-Partners does not benefit (other than from receipt of the valuation fee) from this valuation instruction. Copyright The Client assures that all valuations, reports, plans, drafts, renderings, tables and calculations will only be used for those purposes specified in the contract and will not be published without the prior consent of von Borries Advisory Partners in each individual case. The Client will only pass on the results of Advisor s work to third parties, even if directly connected with the Client, with the explicit prior written consent of the Advisor. Indemnity insurance von Borries Advisory-Partners assure that the amount of their professional indemnity insurance is limited to 2.5 million on a per case basis. Gut Golste 4 A I Natendorf Tel: 040/ page 11 of 46

12 3 Appendix Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6 Appendix 7 Appendix 8 Appendix 9 Appendix 10 Appendix 11 Appendix 12 Appendix 13 Appendix 14 Comparables Conditions of the rental contracts DCF Calculation Layout plan SWOT Analysis Macro - micro location analysis Market situation Cadastral map Copy of land register Statement of the Environmental Agency Register of public obligations Preservation order Status of taxes and contributions Photo documentation Layout plan Gut Golste 4 A I Natendorf Tel: 040/ page 12 of 46

13 Comparables Appendix 1 Sales comparables # year type location YOC usable area purchase price multiplier office/ com. Walkerdamm ,409 1,440, , office/ com. Wall ,223 2,000, , office/ com. Holstenbrücke ,120 2,570, , office/ com. City Centre ,550 20,900, , office/ com. Fabrikstraße ,180 16,300, ,776 price /m² Asking office rents in neighbourhood Distance km sq.m. rent /m² Notes , Sophienblatt , City centre , Südfriedhof midtown , midtown Gut Golste 4 A I Natendorf Tel: 040/ page 13 of 46

14 parking other commercial VALUATION REPORT Conditions of the rental contracts Appendix 2 # Tenant use kind units Interest betw. tenant/ owner Start of contract End of contract Prolongation / option Space sq. m. current /sqm current income month Rent adjustment Remarks 1 Techniker Krankenkasoffice health ensurance 8 no x 5 years 3, , % CPI change/ Techniker Krankenkasstorage health ensurance 2 no x 5 years % adjustment (base 2010) outside occupied parking out , outside vacant parking out 0.00 inside occupied parking in 0.00 inside vacant parking in 0.00 Total 76 3, , WALT 3.00 Gut Golste 4 A I Natendorf Tel: 040/ page 14 of 46

15 parking commercial VALUATION REPORT DCF Calculation Appendix 3 Gross Rental Income U s e tenant No. units space sqm current rent /sqm sustain. rent /sqm Leaseup period in months Rent adjustment in years year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 resale office (Techniker Krankenkasse 8 3, , , , , , , , , , , ,553 storage (Techniker Krankenkas ,640 11,640 11,640 8,899 11,644 11,741 11,741 11,741 11,741 11,741 11,741 parking out (outside occupied) ,680 31,680 31,680 31,680 31,680 31,680 31,680 31,680 31,680 31,680 31,680 parking out (outside vacant) parking in (inside occupied) parking in (inside vacant) Total 76 3, , , , , , , , , , , ,973 Non Recoverable Cost management 2.00% -8,348-8,348-8,348-6,375-8,137-8,199-8,199-8,199-8,199-8,199-8,199 running maintenance 6.50 /sqm -22,181-22,181-22,181-22,181-22,181-22,181-22,181-22,181-22,181-22,181-22,181 cost of tenant fluctuation (vacancy) other NRC Total of non recs 7.31% -30,529-30,529-30,529-28,556-30,318-30,381-30,381-30,381-30,381-30,381-30,381 Net Rental Income 386, , , , , , , , , , ,593 Capital Expenditures deferred maintenance capex tenant improvements/ modernisation -85,312 Property resale Cap Rate 7.00 % 5,422,757 5,422,757 Net Cash Flow 386, , , , , , , , ,593 5,802,350 Discount Rate 4.25 % 371, , , , , , , , ,996 3,826,866 Net Present Value 6,490,023 Tansaction cost 10.75% -697,677 For Information Value 5,792,345 Multiplier on current rent Price per sqm 1,700 Market Value (rounded) 5,800,000 Multiplier on sustainable rent Resale multiplier von Borries Advisory Partners 2016 Gut Golste 4 A I Natendorf Tel: 040/ page 15 of 46

16 SWOT analysis Appendix 4 Strengths: Weaknesses: Opportunities: Threats Sustainable inner city border location with a good accessibility and visibility from the street Comprehensive number of parking lots Solid building quality with a flexible structure, also changeable into a multi-tenant property Solvent single tenant with a 4 year lease term plus a 5 year option Overall good demand for office buildings in B-city centre locations A little solitary location, the agglomeration consists of 3 office buildings No urban surrounding, below average supply infrastructure Unfavourable volume, too big for private investors, too small for institutional investors Main tenant with a remaining lease term of only 3 years Slightly increasing office rent level in the future due to less new office developments Growing service sector leads to higher demand for office space in the city The main tenant will prolong the contract Overall building quality with a good competitive position Stagnating average office rent level over the last years Current rent level in the upper range of the market and not attainable in case of re-letting Property locations outside the city center are less demanded by investors no core investment Gut Golste 4 A I Natendorf Tel: 040/ page 16 of 46

17 Macro location analysis on city level Appendix 5 Macro location map: City: Socio-demographic facts: Key facts: Economic trends: Kiel (capital of the federal state) Inhabitants: Approx (+2.5% in 3 years) Unemployment rate: city 8.8%/ Germany 5.7% Purchase power: 88.0 (average = 100) Kiel, as a harbour city at the Baltic sea, is an intersection of the ferry and goods traffic to Scandinavia and the eastern European countries since the 1960ies. The capital of the federal state is situated near the Kiel Canal (Nord-Ostsee-Kanal), which is one of the most frequented waterways of the world. Kiel is the cultural and economic centre of the northern part of Schleswig- Holstein. A university with 29,000 students, a comprehensive retail landscape as well as the adjacent Baltic Sea provide a high quality of life and leisure. Kiel is worldwide known for the Kieler Woche, Germany s sailing event with more than 3 million visitors each year. Kiel s economic structure is widely diversified and the city is more and more developing into a high tech location with an increasing portion of the service sector. Historically the location is known for the harbour and especially the shipbuilding. A specialized industrial sector is still a strong part of the local economy represented by e.g. Caterpillar, J.P. Sauer & Sohn, Heidelberger Druckmaschinen AG and the arms manufacturer (Rheinmetall) as well as dockyards in the harbour (Howaldtswerke, Deutsche Werft AG, Schleswig-Holsteins submarine manufacturing). The index of the economic climate, currently at 122, has definitely increased within the last year and is driven by the good German domestic demand. Gut Golste 4 A I Natendorf Tel: 040/ page 17 of 46

18 Micro location analysis on vicinity level Appendix 6 Micro location map: Surroundings: The district Südfriedhof in which the property is located is characterized by mixed-use buildings. On the one hand there is a large green area near a cemetery; on the other hand there are office buildings and residential buildings partly with retail units on ground level. Along the street side of Hamburger Chaussee 8 are mainly office buildings of similar construction years. Over the road on the other side are older mixed-use buildings with some small retail shops on the ground floor and residential use on the upper floors. Distance: Public transport: Bus station in front of the building Motorway: A1 AS Kiel-Westring in 2km Railway: Kiel central station in 1km Airport: Hamburg-Fuhlsbüttel in about 1 hour by car City centre: 2km Assessment of the location quality: Medium office location - the valuation property is located on the southern edge of the office zone Südliche City. It can easily be reached by bus and by car. Moreover, the central station is not far away. Gut Golste 4 A I Natendorf Tel: 040/ page 18 of 46

19 turnover in bn. VALUATION REPORT Market situation Appendix 7 German investment market: The German real estate investment market is further in record mode, but has calmed down for a moment. After the 3rd quarter of 2016 the turnover has had a slightly damped dynamic of 14% below last year s result. But this is further only based on the lack of supply of core properties. Basically the German real estate investment market is unimpressed by the geopolitical crises all over the world and benefits from an increasing amount of international capital looking for a safe haven like the economically stable country Germany. Therefore the country is in the focus of international investment capital, approx. 40% of the turnover came from foreign investors. The market is prospering over all sections and is driven by the further very low interest rates and the lack of alternative investment possibilities on the financial market. After a short irritation about the economic influence of the Brexit the market is now back in a usual business mode. The further intensive monetary policy of the EZB is very likely entailing further positive market conditions. The market participants are expecting a turnover of again slightly below 50bn. in COMMERCIAL REAL ESTATE INVESTMENT GERMANY ,00 50, ,60 23,00 25,60 30,00 40,00 33, Q forecast 2016 The most popular investment class is still the core segment and office properties (40% of the turnover) and retail properties (25% of the turnover). But due to low yields and a restricted number of offers the volume of core plus investments is increasing and so are B-locations of A-cities and also A-locations in B-cities. Furthermore the market acts according to the motto big is beautiful, the demand increases in line with the volume of a transaction. 44% of the transactions are above 100m. Major players on the market are still institutional investors (>50% of turnover) like special funds and insurances as well as pension funds and private offices. The prime yields have again slightly declined and are now on a historically low level of 3.7% for office and 3.6% for retail in prime locations. Market participants are accepting the 3% as the new 5% as Gut Golste 4 A I Natendorf Tel: 040/ page 19 of 46

20 the usual investment yield for core investments. The high demand also leads to a further yield compression and the yields of all risk classes gradually converge. Kiel Investment market: Prime gross yield office property: 6.5% Prime gross yield retail property: 5.3% Gut Golste 4 A I Natendorf Tel: 040/ page 20 of 46

21 Cadastral map Appendix 8 Gut Golste 4 A I Natendorf Tel: 040/ page 21 of 46

22 Copy of Land Register Appendix 9 Gut Golste 4 A I Natendorf Tel: 040/ page 22 of 46

23 Gut Golste 4 A I Natendorf Tel: 040/ page 23 of 46

24 Statement of the Environmental Agency Appendix 10 Gut Golste 4 A I Natendorf Tel: 040/ page 24 of 46

25 Register of public obligations Appendix 11 Gut Golste 4 A I Natendorf Tel: 040/ page 25 of 46

26 Gut Golste 4 A I Natendorf Tel: 040/ page 26 of 46

27 Gut Golste 4 A I Natendorf Tel: 040/ page 27 of 46

28 Gut Golste 4 A I Natendorf Tel: 040/ page 28 of 46

29 Preservation order Appendix 12 Due to building age and appearance we assume that the building is not listed as an ancient monument. Gut Golste 4 A I Natendorf Tel: 040/ page 29 of 46

30 Status of taxes and contributions Appendix 13 Gut Golste 4 A I Natendorf Tel: 040/ page 30 of 46

31 Photo documentation Appendix 14 Front view Hamburger Chaussee Hamburger Chaussee Gut Golste 4 A I Natendorf Tel: 040/ page 31 of 46

32 Rear side Back yard Back yard Gut Golste 4 A I Natendorf Tel: 040/ page 32 of 46

33 Entrance Entrance Staircase Gut Golste 4 A I Natendorf Tel: 040/ page 33 of 46

34 Office units, refurbished Office units Office units Gut Golste 4 A I Natendorf Tel: 040/ page 34 of 46

35 Office units Office units Office units Gut Golste 4 A I Natendorf Tel: 040/ page 35 of 46

36 Office units Office units Office units Gut Golste 4 A I Natendorf Tel: 040/ page 36 of 46

37 Attic floor Roof Cellar archive Gut Golste 4 A I Natendorf Tel: 040/ page 37 of 46

38 Cellar, electric installation Cellar, electric installation Cellar, heating connection Gut Golste 4 A I Natendorf Tel: 040/ page 38 of 46

39 Layout plans Appendix 10 Basement Gut Golste 4 A I Natendorf Tel: 040/ page 39 of 46

40 Ground floor Gut Golste 4 A I Natendorf Tel: 040/ page 40 of 46

41 First floor Gut Golste 4 A I Natendorf Tel: 040/ page 41 of 46

42 Second floor Gut Golste 4 A I Natendorf Tel: 040/ page 42 of 46

43 Third floor Gut Golste 4 A I Natendorf Tel: 040/ page 43 of 46

44 Fourth floor Gut Golste 4 A I Natendorf Tel: 040/ page 44 of 46

45 Fifth floor Gut Golste 4 A I Natendorf Tel: 040/ page 45 of 46

46 Sixth floor Gut Golste 4 A I Natendorf Tel: 040/ page 46 of 46