Letting efforts progressed favourably during the year, particularly in Fabege’s project properties. As a result, Fabege recognised considerable positive unrealised value changes in both projects and investment properties.
Property value
At 31 December 2011, the portfolio had an estimated market value of SEK 29.2bn (27.0). The average discount rate for the portfolio was 7.9 per cent (7.9) and is based on the nominal interest rate on fiveyear government bonds plus a premium for general property-related risk general risk for properties and for object-specific premiums. The weighted required yield at the end of the calculation period was 5.7 per cent (5.9).
Value changes
Unrealised value changes on Fabege’s properties totalled SEK 1,093m (843) during the year. The write-up/increase corresponds to a value increase of about 4.2 per cent during the year. The value change resulted from declining yield requirements and from future cash flows.
To this should be added value growth through project gains. The average yield requirement in the property portfolio declined 0.14 per cent compared with year-end 2010. The yield has declined in all sub-markets. The net impact of the value changes increased further as a result of improved cash flows in the properties and positive results from projects. The investments made in the portfolio will ultimately lead to a lower vacancy ratio and higher rents in the portfolio, thus bolstering cash flow and value growth.
Valuation principles
All properties in Fabege’s portfolio are externally valued at least once a year by independent appraisers. Since 2000, property valuations have been conducted in accordance with the guidelines established by the Swedish Property Index. In 2011, the properties were valued by Newsec Analys AB, whose appraisers are authorised by ASPECT, the Association for Chartered Surveying, Property Evaluation and Transactions. Valuations were performed regularly during the year.
Each quarter, internal valuations are also conducted of parts of the portfolio, as well as an internal overall value assessment of the entire portfolio. The internal valuation is performed using the same methodology as the external valuations.
Property categories
Valued properties are divided into the following categories:
- Investment Properties in normal operation, for which a cash flow valuation is performed.
- Project Properties undergoing major redevelopment with contracted tenants, for which a cash flow valuation is performed.
- Other Project Properties and undeveloped land valued using the locationprice method.
Investment and Project Properties
For Investment Properties, a cash flow model is used in which the present value of net operating income less reinvested investments over a five- or ten-year period is calculated. The present value of the residual value at the end of the period is also calculated. All premises are subject to an individual market-based assessment of rents.
For leased premises, an estimated market rent is used for the cash flow calculations after the expiration of the lease. The assessment of such factors as market rents, future running costs and investments was performed by external appraisers using information from Fabege’s organisation. Operating and maintenance expenses were based on historical results, and on budget figures and statistics pertaining to similar properties. Cash flow analyses with calculation periods exceeding five years are applied if deemed motivated due to long leases.
Other Project Properties
Valuations of Other Project Properties are based on the prevailing planning conditions and listed price levels in connection with the sale of undeveloped land and building rights. The value of on-going new builds is generally deemed to correspond to the property’s market value plus project expenses paid at the time of valuation.
Fabege's ten largest properties by value, per 31 December 2011
| Property |
Area |
Sqm |
| Trängkåren 7 |
Marieberg |
76,716 |
| Lagugårdsgärdet 1:48 |
Norra Djurgårdsstad |
37,765 |
| Bocken 39 |
Arenastaden |
19,909 |
| Apotekaren 22 |
Norrmalm |
31,599 |
| Fräsaren 11 |
Solna Business Park |
39,383 |
| Uarda 5 |
Arenastaden |
0 |
| Fräsaren 12 |
Solna Business Park |
36,526 |
| Smeden 1 |
Solna Business Park |
45,693 |
| Bocken 35 |
Norrmalm |
15,362 |
| Barnhusväderkvarnen 36 |
Norrmalm |
25,642 |
Market value and yields by sub-markets, per 31 December 2011
| Sub-market |
Market value, SEKm |
Per cent |
Yield, % |
| Stockholm inner city |
16,809 |
58 |
5.4 |
| Solna |
9,856 |
34 |
6.2 |
| Hammarby Sjöstad |
2,215 |
7 |
6.3 |
| Other markets |
270 |
1 |
7.0 |
| Total |
29,150 |
100 |
5.7 |