Portfolio and valuation
The value of the Turkish portfolio fell from € 352.9 million at year-end 2007 to € 333.4 million at year-end 2008 (including investments in the associates Akmerkez and Teras Park). Growth in the portfolio was attributable to a number of acquisitions totalling € 57.1 million plus investments in the portfolio and pipeline projects totalling € 45.2 million. Furthermore, the portfolio was reduced by the revaluation of wholly owned projects (€ 19.5 million negative) and movements in associates (€ 96.2 million negative).
A total of € 29.2 million was invested in the 365 shopping centre in Ankara at year-end 2007, which at that time was still under development and which was opened to the public in May 2008 (see the Special for more information). The price of this centre, which has a gross lettable floor area of 27,800 m2, was relatively low because it is based on a 20-year lease. The remaining 70% interest in the Adacenter centre in Adapazari was acquired during the year under review. At year-end 2007, the 30% stake in this shopping centre was included under investments in associates for € 17.0 million. The project was acquired for a total of € 55.2 million. The Adacenter shopping centre, with a gross lettable floor area of 23,400 m2, opened to the public in December 2007. The centre has a primary catchment area of around 350,000 inhabitants. It is well let to familiar international and national brands such as Carrefour, Cinemars (cinemas), C&A, Teknosa, LCW, Deichmann, Mudo, Koton and Benetton. Corio also completed a large retail unit of more than 1,600 m2 adjacent to Adacenter for a total of € 1.9 million. This unit has been let to DIY retailer Tekzen, which is also a good anchor for the centre. Corio Türkiye took over the management and letting of the shopping centre in April 2008.
The main investments, totalling € 41.1 million, related to land acquisitions for projects under development in Malatya and Tarsus (see Pipeline). The remaining € 2.5 million was invested in the commissioning of the Adacenter and 365 shopping centres.
Corio’s 46.92% participating interest in Akmerkez GYO in Istanbul, the 40% stake in Teras Park in Denizli and the 25% interest in the Akkoza shopping centre project being developed in Essenyurt (Istanbul) are included under investments in associates. The total investment in associates declined from € 317.5 million at year-end 2007 to € 221.3 million at the end of 2008. This was due to the transfer of the 30% stake in Adacenter to investments in property (€ 17.0 million) and the total results of the associates for the year (€ 81.4 million negative). A dividend was received for Akmerkez GYO of € 10.5 million, resulting in a fall in the value of the investment. Finally, there were negative revaluations (€ 96.7 million) and a gain on foreign exchange of € 12.7 million. Corio will increase its participating interest in Teras Park to 51% in the first quarter of 2009.
The revaluation of projects in full ownership amounted to € 19.5 million negative in 2008, or -15.6% compared with the book value for 2008 before revaluation. Including valuations of associates (Akmerkez and Teras Park), the write-down in value amounted to € 116.3 million, or -25.9% compared with the book value for 2008 before revaluation. Up to the end of the second quarter, the credit crisis had virtually no effect on Turkey because property was less leveraged and the banks had virtually no (subprime) mortgages on their books. The withdrawal of foreign investments had an effect on bond prices as the year progressed, however. The lack of sufficient reference property transactions also had an effect on the yield requirement used in appraisals. The result was a net increase in the future cash flow discount percentage of around 200 basis points. In addition, declining growth in consumer spending impacted on sales in shopping centres. Combined with the devaluation of the Turkish lire against the US dollar and the euro, in which the contractual rent obligations are denominated, a number of rent discounts had to be given in the fourth quarter of the year. Additional rent discounts were included in the appraisals for the year 2009 and 2010. The theoretical net yield of both properties in full ownership and properties of associates, but excluding properties under development, was 8.2% at year-end 2008.
Source: Annual Report 2008, Chapter Review of operations, page 113 (PDF, 2,1 MB)
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