Corio - Why people buy

Variable pipeline

Projects in the variable pipeline are specific acquisition projects or projects in the existing portfolio that have potential for development or redevelopment, but have not reached the same stage of compliance with the above criteria as projects in the fixed pipeline. A project is assigned to the variable pipeline if:

• It has been approved by Corio’s Management Board and also, depending on its size, by the Supervisory Board, or the Management Board has given a mandate to negotiate;
• The parties involved have signed an exclusive declaration of intent;
• Profitable investments to expand and/or revitalise existing projects in the portfolio are being worked on.

In the case of projects in the variable pipeline, Corio is not or no longer competing with other parties in the market, but new projects in this pipeline still have a term or condition with which the parties have to comply. Projects in this pipeline that involve expanding or revitalising existing properties are projects that are controlled by Corio, but still need to be fully specified, for instance because all the permits have not yet been obtained. As a result, there is still an element of uncertainty as to their timing. Investments in existing projects are only included in this pipeline if they will generate additional income. Projects in the variable pipeline at the 2008 year-end totalled around € 1.6 billion (2007: € 1 billion), including € 73.6 million already invested. In the case of projects in the variable pipeline, amounts already invested are sufficiently secured (e.g. by bank guarantees), so that the investments will be recovered if the projects do not go ahead. The increase was primarily attributable to the balance of the transfer of projects from the prospect pipeline (2007: € 800.8 million) to the variable pipeline and the removal of some other projects from the variable pipeline. One turnkey project was cancelled and a number of expansions of properties in the portfolio were removed from the pipeline because they were not yet opportune. The latter will be reassessed in due course on the basis of an investment proposal.

The geographical spread of the fixed and variable pipelines is as follows: Netherlands 35%, Italy 33%. Turkey 21%, France 10% and Spain 1%.
The net yield of projects in the fixed and variable and pipelines is expected to be around 6.7% upon completion. This is still above the net initial yield for new acquisitions in the current market and the net yield on the current retail portfolio. The dynamics and long lead-times of property projects mean that opening dates are difficult to predict in the longer term. The following table provides an indication of the forecast investments by project completion dates. The geographical spread over the different home markets will be more balanced following completion of the pipeline.

The figures in the above table assume that the entire foreign offices and industrial portfolio will be sold by 2012.

According to the classification of the pipeline by the degree of commitment, projects are committed for a total sum of € 744.4 million (including € 240.1 million already invested), € 896.1 million can be deferred (including € 117.7 million already invested) and € 1,072.0 million can be waived (including € 15.5 million already invested). It should again be noted that security has been provided for amounts already invested in projects that can be cancelled. The pipeline less the investments already made can be divided as follows, with the fixed pipeline reflecting commitments not shown in the balance sheet.

See also:

Fixed and variable pipeline

Source: Annual Report 2008, Chapter Review of operations, page 47 (PDF, 2,1 MB)

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