2. Other results from investment property
(in thousands of euros)
Gain/ (loss) on disposal of land
Result on sale of property
Gain/ (loss) on changes in fair value of land
Gain/ (loss) on changes in fair value of buildings
New ground leases granted
Total fair value gains and losses
Total other revenues from investment property
Fair value gains and losses
Investment property is measured at fair value. The fair value of buildings recognised under investment property is appraised twice a year by management through the deployment of independent external valuators. The fair value of land recognised under investment property is appraised primarily on the basis of internal valuations. In addition each year a different part of the land positions is appraised by independent external valuators. Fair value gains and losses are recognised in the statement of income in the year in which they arise. The assumptions applied in determining the market value are explained in note 11. Investment property.
The fair value adjustment to buildings was 68 million euros positive in 2018. This positive fair value development is driven by increased appetite in the Dutch real estate market and specifically in the Schiphol central business district area, resulting in a decrease of net initial yields compared to previous year. In 2017 a fair value loss of 42 million euros was recognised with respect to the valuation of two cargo buildings where direct platform access is no longer available for cargo handling, since the location will be used for aircraft handling. Excluding the fair value loss for these two buildings, the fair value gain amounted to 84 million euros in 2017.
The fair value gains of land of 35 million euros in 2018 is also caused by positive market developments which drives the gross yield compression.
The gains from granting new ground leases were related with the change in measurement of leasehold land from historical cost to fair value upon release. The market value is calculated by discounting the value of the future annual ground rents and the residual value under the contracts concerned (DCF method), using a discount rate based on the interest rate on Dutch government bonds plus a risk premium.
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