Excem Capital Partners Sociedad de Inversión Residencial SOCIMI, S.A. Valuation Report April 13, 2018
Executive Summary
Executive Summary Background Scope of Work Valuation Methodology Valuation Conclusion EXCEM SIR ( the Company ) was founded on November 16, 2015 and its compliance with the SOCIMI tax regime was notified on August 17, 2016. It is part of the EXCEM Group, which operates in the Real Estate, Finance, Trading and Technology businesses. EXCEM SIR belongs to the Real Estate division, and its main activity is the acquisition and promotion of urban properties for subsequent lease. EXCEM SIR has requested the services of Grant Thornton to fulfil the conditions for classification as a Listed Real Estate Investment Company or SOCIMI, which require the inclusion of an independent valuation report as part of the listing particulars for the Alternative Investment Market (MAB). The purpose of our work was to estimate the fair market value ( FMV ) of 100% of the shares of EXCEM SIR as of March 31, 2018. The following methodologies were applied: Adjusted Book Value ( ABV ) to estimate the value of 100% of the shares of EXCEM SIR. Discounted Cash Flows ( DCF ) to: estimate the value of the real estate assets owned by the Company according to the real estate appraisals prepared by Grupo Tasvalor, S.A., estimate the equity adjustment required due to the Company structural costs. According to the scope of our services and the terms set forth in our engagement letter, we consider that the FMV of 100% of EXCEM SIR shares as of March 31, 2018 can be reasonably be placed in the region of 16,908 thousand euros, equivalent to a share price of 1,4 euros.
Estimate of value Valuation methodology Valuation conclusion
Estimate of value Valuation methodology Adjusted Book Value We consider the ABV approach as the appropriate basis for the valuation of EXCEM SIR. The ABV approach indicates the FMV of a company's equity by adjusting the assets and liabilities to their equivalent FMV, including the consideration of contingent liabilities. In order to apply this method, it is necessary to obtain a FMV for each relevant asset and liability using one or several approaches. The value of 100% of the equity will be equal to the sum of the FMV of assets less the sum of the FMV of liabilities. This approach is suitable when the valuation target is: - A holding company / conglomerate (where value refers to the capacity to generated income from assets, which can be valued separately using appropriate methods). - Capital intensive businesses. - Real Estate firms. - Distressed companies. The kinds of adjustments which need to be taken into consideration to value each asset and liability may include the following: - Substitution of non-current assets like property investments at their current market value net of taxes. - Valuation of financial assets and liabilities at market prices. - Estimating the realizable value of intangible assets. - Valuation of treasury shares at fair value. - Estimation of current fixed costs, so that the impact of the costs incurred in order to manage the balance sheet assets is included in the equity. In this case, the assets of the balance sheet to which an adjustment has been made are the real estate assets. Such adjustments were based on the valuations of the real estate properties realized by Tasvalor, which has determined the FMV of the assets owned by the Company located in Madrid. Tasvalor prepared the real estate appraisals in accordance with the RICS Regulation Standards, incorporating the IVCS International Valuation Rules.
Estimate of value (cont.) The methodology applied by Tasvalor was the DCF approach: - The calculation of the property FMV by DCF has been made based on the expected rental income for the first annuity provided by the Company. In the following annuities, an annual increase of 3% each September is considered for revenues, and expenses grow according to the expected amounts provided by the Company. - The expenses related to the properties, included in their appraisals, are: community expenses, maintenance, insurance and tax (IBI). Some structural costs associated with the properties have not been considered in the appraisals prepared by Tasvalor. - The calculation period considered is 10 years. - The divestment value of the property at the end of the calculation period considered is the current twelve months rental income increased by 3% annually, as stated before. The rental income considered in the last year has been capitalized at an perpetuity rate of 5,15%, which is calculated as an increase of 1,25 bps over an initial rate of 3,90%. - The cash flows are discounted at a 5,5% discount rate. In addition, as aforementioned, given that the valuation made by Tasvalor does not consider the structural costs incurred by the Company and incurring in these costs is essential to be able to add value through the management of the assets valued, the adjusted book value calculation requires an additional adjustment based on this concept, resulting in a negative value adjustment. Furthermore, we have considered the possibility of adjusting the debt from financial entities for loans that were not carried at their FMV, but given the time to maturity and the homogeneity of the average interest rates throughout the calculation period considered, we have concluded that its book value reasonably reflects its FMV.
Estimate of value (cont.) Valuation Conclusion - EXCEM SIR Adjusted Book Value Based on EXCEM SIR balance sheet as of March 31, 2018, we have valued 100% of the shares of the Company and we have adjusted its book value taking into account the FMV of its assets and liabilities according to the detailed table on the right. The adjustments made correspond to the difference between the FMV and the book value of the following items: - Properties: adjusted by a total amount of 7.549 thousand euros, in accordance with the assets valuation made by Tasvalor (see Appendix 1). - Structural costs: adjusted by a total negative amount of 1.688 thousand euros, calculated from information provided by the Company (see Appendix 2). The adjustments are expressed in gross amounts, no potential tax adjustments derived from capital gains generated have been considered. On the basis of these adjustments, the value of 100% of the shares of EXCEM SIR can reasonably be around 16.908 thousand euros, equivalent to 1,4 euros per share. The graph shows the total adjustment applied to the book value of equity of EXCEM SIR as of March 31, 2018, resulting in the FMV by the ABV approach. Source: GT Adjusted Book Value 000 Book Value of Equity as of Valuation Date 11.048 Adjustments to Book Value 5.861 Properties Adjustment 7.549 Structural costs Adjustment (1.688) Adjusted Book Value as of March 31, 2018 16.908 Number of shares (000) 12.053 Adjusted Book Value per Share ( ) 1,4 Source: GT
Appendices Properties details Structural costs details
Appendix 1 Properties details Properties Details Property Prov ince Land I Building II Total (I + II) = III Market Value IV Gain / (Loss) IV - III Valuation Date Discount Rate Financial Entity Amount Financed Rey Francisco 10 Madrid 420.000 283.754 703.754 754.303 50.549 22/02/2018 5,5% Sabadell 342.468 Ronda Valencia 8 Madrid 219.000 148.131 367.131 532.391 165.260 22/02/2018 5,5% Sabadell 214.145 Aviación Española 12 Madrid 294.000 198.506 492.506 791.891 299.385 22/02/2018 5,5% B.Popular 287.190 Vallehermoso 69 Madrid 270.000 182.420 452.420 727.947 275.527 22/02/2018 5,5% Sabadell 264.207 San Bernardo 10 Madrid 363.000 245.337 608.337 1.089.422 481.085 22/02/2018 5,5% Sabadell 354.871 Hermosilla 118 Madrid 267.000 180.643 447.643 718.984 271.341 22/02/2018 5,5% Popular 254.819 Cardenal Cisneros 86 Madrid 345.000 233.233 578.233 887.981 309.748 22/02/2018 5,5% Popular 337.348 San Bernardo 97-99 Madrid 303.000 204.776 507.776 731.736 223.960 22/02/2018 5,5% Liberbank 346.745 Hilarion Eslava 58 Madrid 300.000 202.748 502.748 887.225 384.477 22/02/2018 5,5% Popular 291.900 Donoso Cortés 86 Madrid 234.000 158.646 392.646 779.637 386.991 22/02/2018 5,5% Bankinter 229.010 Alcalá 182 Madrid 276.000 186.722 462.722 875.861 413.139 22/02/2018 5,5% Liberbank 316.074 Jorge Juan 82 Madrid 300.000 202.801 502.801 687.095 184.294 22/02/2018 5,5% Sabadell 292.394 Don Ramón De La Cruz 100 Madrid 282.000 190.634 472.634 727.693 255.059 22/02/2018 5,5% Bankinter 275.185 Doctor Esquerdo 20 Madrid 294.000 198.784 492.784 837.476 344.692 22/02/2018 5,5% Bankinter 287.966 Andrés Mellado 67 Madrid 267.000 180.447 447.447 743.295 295.848 22/02/2018 5,5% Bankinter 260.942 Francisco Silvela 69 Madrid 342.000 231.369 573.369 1.040.188 466.819 22/02/2018 5,5% Bankinter 335.167 Maudes 50 Madrid 228.000 154.524 382.524 640.605 258.081 22/02/2018 5,5% Bankinter 223.010 Bailén 49 Madrid 360.000 243.459 603.459 824.964 221.505 22/02/2018 5,5% Sabadell 352.090 Colegiata 11 Madrid 429.000 286.000 715.000 1.090.956 375.956 22/02/2018 5,5% Sabadell 415.182 San Bernardo 124 Madrid 318.000 215.207 533.207 701.464 168.257 22/02/2018 5,5% Sabadell 310.884 Bordadores 4 Madrid 291.000 194.613 485.613 608.600 122.987 22/02/2018 5,5% Liberbank 278.135 Conde Romanones 13 Madrid 357.000 240.819 597.819 787.197 189.378 22/02/2018 5,5% Caja Jaen 345.160 Fucar 22 Madrid 297.000 200.966 497.966 600.337 102.371 22/02/2018 5,5% Bankinter 290.950 Colegiata 9 Madrid 330.000 220.000 550.000 656.527 106.527 22/02/2018 5,5% Abanca 321.456 Joaquín María López 23 1D Madrid 285.000 190.000 475.000 726.980 251.980 22/02/2018 5,5% Bankinter 274.791 General Moscardó 23 1º 3 Madrid 291.000 194.000 485.000 741.416 256.416 22/02/2018 5,5% Sabadell 280.860 Ferraz 69 Madrid 285.000 192.442 477.442 755.695 278.253 22/02/2018 5,5% Targo Bank 278.284 Ventura Rodríguez 11 Madrid 420.000 280.000 700.000 994.418 294.418 22/02/2018 5,5% Bankinter 371.988 Total 8.667.000 5.840.982 14.507.982 21.942.284 7.434.302 8.433.222 Source: Tasvalor y GT Note: the v alues of the column called Building, show gross book v alue (accumulated depreciation not included, 114.907)
Appendix 2 Structural costs details Structural Costs Details '000 2018 (9 meses) 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 (3 meses) Management Ex pense 145 196 178 122 126 129 133 137 141 146 38 Real Estate Appraisal (accrued in 5 y ears) 4 5 4 4 4 - - - - - - Notary Ex pense (accrued in 5 y ears) 14 19 14 14 14 - - - - - - Cost of Lifts - 28 Properties 37 49 37 37 37 - - - - - - Acquisition Fee 1% (accrued in 5 y ears) 26 34 26 26 26 - - - - - - Equity Fee 0,8% (28 Properties) 76 - - - - - - - - - - Financing Fee 0,8% (accrued in 5 y ears) 12 17 12 12 12 - - - - - - Total 314 319 271 215 219 129 133 137 141 146 38 Period 0,38 1,25 2,25 3,25 4,25 5,25 6,25 7,25 8,25 9,25 10,25 Discount Rate 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% 5,50% Discount Factor 0,98 0,94 0,89 0,84 0,80 0,75 0,72 0,68 0,64 0,61 0,58 Present Value of CF 307 299 240 181 174 98 95 93 91 89 22 Total Value 1.688 Source: the Company, GT
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