Portfolio and valuation
The value of the Italian shopping centre portfolio increased slightly from € 1,110.2 million at year-end 2007 to € 1,128.3 million at the end of 2008. This increase was the product of the acquisition of the IKEA store at Le Gru (€ 46.2 million, including acquisition costs) and investments in the portfolio and the pipeline (€ 4.1 million) on the one hand and write-downs in the value of existing properties (-€ 32.2 million) on the other. The acquisition of the IKEA store at Le Gru took the total retail area owned and managed by Corio Italia to more than 197,200 m2. Le Gru is a dominant shopping centre in a strategically strong location in the city of Turin. The acquisition of the IKEA store will enable Corio Italia to strengthen the profile of Le Gru further as a retail destination, with a total gross lettable floor area of around 80,000 m2, of which 46,500 m2 are owned and managed by Corio. There were no disposals during the year under review.
The revaluation in 2008 was € 32.2 million negative, or -2.8% (2007: +15.3%) compared with the book value at year-end 2008 before revaluation. This was the result of rent increases on the one hand and rising yield requirements on the other. In general, there were few comparable transactions to substantiate the appraisals, and Italian appraisers generally assumed an increase in required yields of between 25 and 65 basis points, depending on the quality and dominance of the shopping centre, its location and regional differences. Net initial yields for first-class shopping centres are around 5.5-5.75%, while for secondary centres a figure of around 7% is the norm. The good, stable quality of the Corio centres and the resultant cash flows meant the increase in the yield for Corio centres remained in the lower segment of the above range. In fact, the increase in rent for the Globo and Udine properties actually outstripped the upward yield shift, so that these properties increased in value slightly. The theoretical net yield of Corio’s shopping centres in Italy increased in the light of the uncertainty in the market from 5.3% at year-end 2007 to 5.6% at year-end 2008.
Source: Annual Report 2008, Chapter Review of operations, page 88 (PDF, 2,1 MB)
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