VALUATION REPORT - Hispania · VALUATION REPORT - HISPANIA ACTIVOS INMOBILIARIOS, S.A. 3 VALUATION...

VALUATION REPORT PROPERTY PORTFOLIO HISPANIA ACTIVOS INMOBILIARIOS, S.A.

Hispania Activos Inmobiliarios SOCIMI, S.A. Calle Serrano,30, 2º izquierda 28001 Madrid Date of Valuation: 31st December 2016

TABLE OF CONTENTS

1. VALUATION REPORT 2

VALUATION REPORT 3

SCOPE OF WORK & SOURCES OF INFORMATION 9

VALUATION ASSUMPTIONS 11

2. METHOD VALUATION 15

METHOD VALUATION 16

The contents of this Report may only be relied upon by:

(i) Addressees of the Report; or

(ii) Parties who have received prior written consent from CBRE in the form of

a reliance letter.

This Report is to be read and construed in its entirety and reliance on this Report is

strictly subject to the disclaimers and limitations on liability found in the last

paragraph of Section 1 of the “Valuation Report”. Please review this information

prior to acting in reliance on the contents of this Report. If you do not understand

this information, we recommend you seek independent legal counsel.

VALUATION REPORT - HISPANIA ACTIVOS INMOBILIARIOS, S.A.

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1 VALUATION REPORT


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VALUATION REPORT

CBRE Valuation Advisory S.A. Edificio Castellana 200

Pº de la Castellana, 202 8ª 28046 Madrid

Switchboard +34 91 598 19 00 Fax + 34 91 556 96 90

Report Date 21st February 2017

Addressee HISPANIA ACTIVOS INMOBILIARIOS SOCIMI, S.A.

Calle Serrano, 30- 2º izquierda.

28001 Madrid

The Property This valuation report gathers the valuations of the sixty six Real Estate assets that make up the Hispania Activos Inmobiliarios SOCIMI, S.A. portfolio at the vauation date.

Property Description

Hispania’s Real Estate portfolio comprises rental properties, destined to hotel, retail, office and resdential use. All of the assets are located in Spain.

Ownership Purpose

Investment

Instruction To inspect and value on the basis of Market Value the properties that comprise the portfolio of Hispania Activos Inmobiliarios SOCIMI, S.A, as at 31st December 2014 in accordance with your letter of instruction dated 22nd September 2014.

Valuation Date 31st December 2016

Capacity of Valuer External.

Purpose Internal purpose

Market Value € 2,007,990,000

(TWO BILLION SEVEN MILLION NINE HUNDRED AND NINETY THOUSAND EUROS)

Excluido IVA


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TYPOLOGY MARKET VALUE AS AT

31.12.2016

Hotel assets € 1,257,050,000

Tertiary assets – offices € 521,390,000

Residential assets € 229,550,000

TOTAL € 2,007,990,000

Our opinion of Market Value is based upon the Scope of Work and Valuation Assumptions attached, and has been primarily derived using comparable recent market transactions on arm’s length terms.

We have valued the Properties individually and no account has been taken of any discount or premium that may be negotiated in the market if all or part of the portfolio was to be marketed simultaneously, either in lots or as a whole.

Acquisition Costs For valuation purposes, we have estimated the acquisition costs for the properties belonging to the portfolio of Hispania Activos Inmobiliarios SOCIMI, S.A taking into account its gross market value. We have deducted such costs to each property, resulting therefore in a net market value.

The following table reflects the acquisition costs assumed for each property taking into account its gross market value:

Lower than 5 million euros

5-10 million euros

10-20 million euros

20-50 million euros

50-100 million euros

100-200

million euros

Higher than 200

millon euros

4.57% 4.07% 3.57% 3.07% 2.57% 2.32% 2.07%

These acquisition costs include stamp duty, legal, agency and registry fees.

The information shown in the table above correspond to the national average, although certain variations may exist depending on the autonomous community where the property is located, as well as an adjustment derived from the rounding off of market values.

Limitations As regular valuers of the Hispania Activos Inmobiliarios SOCIMI, S.A. portfolio, the assets have been inspected as they have been acquired by the Company, and when carrying out the semi-annual valuations.


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In the last year all assets have been inspected, including an interior visit.

For the valuation carried out on 31-12-2015 (VA16-0013), a check of the documentation was carried out, verifying that the data provided by our client in the leasing panels, which serve as a basis for the realization of the valuation, were correct and corresponded to what appears in the property titles, Building plans, leases, licenses and certifications of energy efficiency (in the buildings where they are available).

For the present valuation we have assumed the information provided by our Client in the lease panels and the investment data achieved until 31/12/2016 and budgeted for the next years.

Compliance with Valuation Standards

The valuation has been prepared in accordance with The RICS Valuation – Professional Standards January 2014 (“the Red Book”).

We confirm that we have sufficient current local and national knowledge of the particular property market involved, and have the skills and understanding to undertake the valuation competently. Where the knowledge and skill requirements of The Red Book have been met in aggregate by more than one valuer within CBRE, we confirm that a list of those valuers has been retained within the working papers, together with confirmation that each named valuers complies with the requirements of The Red Book.

Special Assumptions

None

Assumptions The property details on which each valuation is based are as set out in this report. We have made various assumptions as to tenure, letting, town planning, and the condition and repair of buildings and sites – including ground and groundwater contamination – as set out below.

If any of the information or assumptions on which the valuation is based are subsequently found to be incorrect, the valuation figures may also be incorrect and should be reconsidered.


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Variation from Standard Assumptions

For the valuation, the information provided by the property in terms of areas, landlords and the amount of "capex" (expenses of reform) budgeted and incurred in real estate has been taken into account. Also, given that we do not have the expense details that can be passed on and not passed on to each asset, we have assumed that the costs of real estate are passed on to the tenants in proportion to the space they occupy, according to market standards.

Market Conditions The values stated in this report represent our objective opinion of Market Value in accordance with the definition set out above as of the date of valuation. Amongst other things, this assumes that the properties had been properly marketed and that exchange of contracts took place on this date.

Verification We recommend that before any financial transaction is entered into based upon these valuations, you obtain verification of the information contained within our report and the validity of the assumptions we have adopted.

We would advise you that whilst we have valued the Properties reflecting current market conditions, there are certain risks which may be, or may become, uninsurable. Before undertaking any financial transaction based upon this valuation, you should satisfy yourselves as to the current insurance cover and the risks that may be involved should an uninsured loss occur.

Valuer The Property has been valued by a valuer who is qualified for the purpose of the valuation in accordance with the RICS Valuation – Professional Standards (The Red Book).

Independence The total fees, including the fee for this assignment, earned by CBRE Valuation Advisory S.A. (or other companies forming part of the same group of companies within Spain) from the Addressee (or other companies forming part of the same group of companies) are less than 5.0% of the total Spain revenues.

Conflicts of Interest

We confirm that no conflict of interest exists.

Reliance This report is for the use only of the party to whom it is addressed for the specific purpose set out herein and no responsibility is accepted to any third party for the whole or any part of its contents.


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Publication Neither the whole nor any part of our report nor any references thereto may be included in any published document, circular or statement nor published in any way without our prior written approval of the form and context in which it will appear.


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Such publication of, or reference to this report will not be permitted unless it contains a sufficient contemporaneous reference to any departure from the Royal Institution of Chartered Surveyors Valuation – Professional Standards or the incorporation of the special assumptions referred to herein.

We have been informed by our Client that this document, the Valuation Report Extract, will be published in compliance with the requirements of EPRA.

Atentamente,

Fernando Fuente

MRICS

RICS Registered Valuer

Vicepresident

Pablo Carnicero

MRICS


Director

Dolores Fernández

MRICS


Head of Departament

T: +34 91 514 39 32 T: +34 91 514 38 46 T: +34 91 514 38 31

E:[email protected] E:[email protected] E:[email protected]

CBRE Valuation Advisory, S.A.

T: +34 91 598 19 00

F:+ 34 91 556 96 90

W: www.cbre.es

Project Reference: VA17-0085- Valuation Report Extract

Report Version: Standard Valuation Report template_2016 Español Final Version Agosto

mailto:[email protected]

mailto:[email protected]

mailto:E:[email protected]

http://www.cbre.es


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SCOPE OF WORK & SOURCES OF INFORMATION

Sources of Information

We have done our work based on the information provided by our client, which we have considered correct and complete. Hispania Activos Inmobiliarios SOCIMI has provided us with the necessary information for valuation, among which we highlight:

- Table of built surfaces of each property for rent.

- Updated lease panel of the properties for rent.

- Detail of pending and invested CapEx for each property.

- Completion periods of the qualification for the dwellings subject to some social regime.

- Profit and loss accounts and hotel leases.

- Details of the project to be developed on the “Village” floor.

The Property The report includes a brief summary of the details of the properties under valuation in which we have based our valuation.

Inspection As regular valuers of the Hispania Activos Inmobiliarios SOCIMI, S.A. portfolio, the assets have been inspected as they have been acquired by the Company, and when carrying out the semi-annual valuations.

In the last year all assets have been inspected, including an interior visit.

Areas Measurements have been made on the plans provided, which correspond to 50% of the properties of the portfolio, although these measurements have been limited to spot checks. In no case has a complete measurement of each property been carried out, but a sampling by way of verification.

Environmental Matters

We have not received an environmental report relating to the properties. Additionally, we have not carried out any investigation into the past or present uses of the Property, nor of any neighbouring land, in order to establish whether there is any potential for contamination and have therefore assumed that none exists.


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Repair and Condition We have not carried out building surveys, tested services, made independent site investigations, inspected woodwork, exposed parts of the structure which were covered, unexposed or inaccessible, nor arranged for any investigations to be carried out to determine whether or not any deleterious or hazardous materials or techniques have been used, or are present, in any part of the Property. We are unable, therefore, to give any assurance that the Property is free from defect.

Town Planning For the valuation carried out the 31/12/2015 (VA16-0013), we have checked the urban information provided by our Client. This documentation consists of copies of licenses (works, first occupation, activity, operation, tourist activity ...) and final qualification in the case of social housing (VPOs).

Titles, Tenures and Lettings

Details of title/tenure under which the Property is held and of lettings to which it is subject are as supplied to us. We have not generally examined nor had access to all the deeds, leases or other documents relating thereto. Where information from deeds, leases or other documents is recorded in this report, it represents our understanding of the relevant documents. We should emphasise, however, that the interpretation of the documents of title (including relevant deeds, leases and planning consents) is the responsibility of your legal adviser.

We have not conducted credit enquiries on the financial status of any tenants. We have, however, reflected our general understanding of purchasers’ likely perceptions of the financial status of tenants.


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VALUATION ASSUMPTIONS

Capital Values The valuation has been prepared on the basis of “Market Value” which is defined as:

“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion".

No allowances have been made for any expenses of realisation nor for taxation which might arise in the event of a disposal. Acquisition costs have not been included in our valuation.

No account has been taken of any inter-company leases or arrangements, nor of any mortgages, debentures or other charges.

No account has been taken of the availability or otherwise of capital based Government or European Community grants.

Rental Values Rental values indicated in our report are those which have been adopted by us as appropriate in assessing the capital value and are not necessarily appropriate for other purposes nor do they necessarily accord with the definition of Market Rent.

The Property Where appropriate we have regarded the shop fronts of retail and showroom accommodation as forming an integral part of the building.

Landlord’s fixtures such as lifts, escalators, central heating and other normal service installations have been treated as an integral part of the building and are included within our valuations.

Process plant and machinery, tenants’ fixtures and specialist trade fittings have been excluded from our valuations.

All measurements, areas and ages quoted in our report are approximate.


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Environmental Matters

In the absence of any information to the contrary, we have assumed that:

(a) the Property is not contaminated and is not adversely affected by any existing or proposed environmental law;

(b) any processes which are carried out on the Property which are regulated by environmental legislation are properly licensed by the appropriate authorities.

Repair and Condition In the absence of any information to the contrary, we have assumed that:

(a) there are no abnormal ground conditions, nor archaeological remains, present which might adversely affect the current or future occupation, development or value of the property;

(b) the Property is free from rot, infestation, structural or latent defect;

(c) no currently known deleterious or hazardous materials or suspect techniques, including but not limited to Composite Panelling, have been used in the construction of, or subsequent alterations or additions to, the Property; and

(d) the services, and any associated controls or software, are in working order and free from defect.

We have otherwise had regard to the age and apparent general condition of the Property. Comments made in the property details do not purport to express an opinion about, or advise upon, the condition of uninspected parts and should not be taken as making an implied representation or statement about such parts.

Title, Tenure, Planning and Lettings

Unless stated otherwise within this report, and in the absence of any information to the contrary, we have assumed that:

(a) the Property possesses a good and marketable title free from any onerous or hampering restrictions or conditions;


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(b) all buildings have been erected either prior to planning control, or in accordance with planning permissions, and have the benefit of permanent planning consents or existing use rights for their current use;

(c) the Property is not adversely affected by town planning or road proposals;

(d) all buildings comply with all statutory and local authority requirements including building, fire and health and safety regulations;

(e) only minor or inconsequential costs will be incurred if any modifications or alterations are necessary in order for occupiers of each Property to comply with the provisions of the relevant disability discrimination legislation;

(f) there are no tenant’s improvements that will materially affect our opinion of the rent that would be obtained on review or renewal;

(g) tenants will meet their obligations under their leases;

(h) there are no user restrictions or other restrictive covenants in leases which would adversely affect value;

(i) where appropriate, permission to assign the interest being valued herein would not be withheld by the landlord where required; and

(j) vacant possession can be given of all accommodation which is unlet or is let on a service occupancy.


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LEGAL NOTICE

This valuation report (the “Report”) has been prepared by CBRE Valuation Advisory, S.A.

(“CBRE”) exclusively for Hispania Activos Inmobiliarios SOCIMI, S.A. (the “Client”) in

accordance with the terms of the instruction letter dated 22nd September 2014 (“the

Instruction”). The Report is confidential and it must not be disclosed to any person other

than the Client without CBRE's prior written consent. CBRE has provided this report on

the understanding that it will only be seen and used by the Client and no other person is

entitled to rely upon it, unless CBRE has expressly agreed in writing. Where CBRE has

expressly agreed that a person other than the Client can rely upon the report then CBRE

shall have no greater liability to any party relying on this report than it would have had if

such party had been named as a joint client under the Instruction.

CBRE’s maximum aggregate liability to all parties, howsoever arising under, in

connection with or pursuant to reliance upon this Report, and whether in contract, tort,

negligence or otherwise shall not exceed the fees for this instruction.

CBRE shall not be liable for any indirect, special or consequential loss or damage

howsoever caused, whether in contract, tort, negligence or otherwise, arising from or in

connection with this Report. Nothing in this Report shall exclude liability which cannot be

excluded by law.

METHOD VALUATION - HISPANIA ACTIVOS INMOBILIARIOS, S.A.

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2 METHOD

VALUATION


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METHOD VALUATION

COMPARABLES METHOD

The comparison method of valuation consists of the application of a price per sq m, which we have previously obtained from market studies involving similar investment transactions that have taken place in the past months in the area.

In order to calculate the market value of the property, we have homogenized the market prices using several parameters such as area, location and town hall planning. Furthermore, once this has been done, the comparables are weighted according to the similarity with the property under appraisal. The homogenization has been made using our experience in the valuation and letting of similar assets in the area.

DISCOUNTED CASH FLOW METHODOLOGY

This method is increasingly being used throughout Europe for complex valuations with many variables. It is also the method which would be adopted by international investors who are the most likely purchasers. However, we insist that the results obtained using this methodology are always compared with recent transactions taking place in the market in terms of price €/m² and initial yields.

The discounted cash flow methodology is based upon an explicit forecast of the likely net income to be generated by the subject property over a defined forecast period followed by a deemed disposal of the property at the termination of that period.

The cash-flows are discounted at a target Internal Rate of Return on comparable properties in order to generate market value. In this way, the Net Present Value represents the price that could be paid for the property to obtain the target Internal Rate of Return.

In practice, the Internal Rate of Return adjusts to reflect the risk of the investment. In terms of our methodology, this would reflect the risks of the assumptions made. The key variables of the “Discounted Cash Flow” are: the net income, the exit value and the target Internal Rate of Return used to discount the cash-flows.


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MÉTODO DE CAPITALIZACIÓN / TRADICIONAL

The Investment Method is used when a single tenant property is either vacant, rack rented or producing rental income close to the Market Rent. To obtain a value the net rent is capitalised into perpetuity.

The appropriate yield is chosen from market evidence, where comparisons are made to sales of similar types of buildings, however, the rate needs to be adjusted to reflect risks such as obsolescence of the building, tenant defaults and lease lengths, rental and capital value growth or decline.

This method doesn’t consider any growth in rent due to CPI increase, nor due to market movements – the method applies different approaches when capitalizing the rent – these are: Initial Yield, Hardcore and Term and Reversion.

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