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FAQs
- Why are there so many versions of NAV?
Each measure of NAV represents something different, and some are more meaningful than others. There are four types of NAV to be found in our results announcements:
- Statutory NAV
- Gross NAV (NAV)
- Triple NAV (NNNAV)
- Grainger NAV (GNAV)
All property companies produce NAV measures, and they are a useful comparator. However care should be taken to ensure that comparisons made are really like for like, since, as has been demonstrated above, there are many different definitions and indeed each person’s interpretation of the definition may be different.
Further explanations of the calculations of our NAV measures can be found in the other questions.
- What are the different NAV measures that you present?
We present:
- Statutory NAV
- Gross NAV (NAV)
- Triple NAV (NNNAV)
- Grainger NAV (GNAV)
Statutory NAV is the value presented as a result of applying IFRS to our group. As we hold a significant amount of our properties as stock, which are shown at cost, this valuation does not in any way measure the market value of our properties, and therefore significantly undervalues the group.
Gross NAV uplifts the value of our stock properties to investment value (the amount the properties are worth subject to the tenancies subsisting). It also excludes goodwill and any mark to market adjustments for financial assets such as interest rate swaps. There is however no tax provided in relation to any valuation gains on properties.
NNNAV deducts full deferred and contingent tax (at 30%) from the market value of the properties. It also includes our debt and financial instruments at fair value.
Grainger NAV recognises that there is value in the reversionary surpluses embedded in our portfolio. The reversionary surplus is the difference between vacant possession value and investment value, and will be realised at some point in the future when the property falls vacant and is sold. We can estimate when this surplus will be realised (based on the estimated average age of our tenants and their anticipated life expectancy), so we discount the surplus over the number of years until we expect to achieve vacancy, then deduct tax. Basic Grainger NAV assumes no hpi and a discount rate of WACC plus 3%.
- Why do you not just use your statutory balance sheet NAV?
Many of Grainger's properties are held as stock, and under IFRS these are held at cost. Grainger has purchased properties over many years, so some of the historic costs are considerably lower than their current value. Our statutory balance sheet therefore significantly undervalues our assets. Market value measures of Grainger's NAV are therefore much more meaningful.
- How do you calculate NAV?
Based on September 2006 accounts, NAV is calculated as follows:
| | £'m |
| Statutory NAV per IFRS accounts | 251 |
| Add: | amount required to uplift stock properties from cost to market value, and value uplifts in joint ventures | 539 |
| Less: | Goodwill | (2) |
| Add: | Uplift to increase the value of Grainger shares held within the group’s employee benefit trust from cost to market value | 4 |
| Add: | fair value adjustments relating to IAS 39, Financial assets included in statutory balance sheet | 2 |
| Less: | Minority interests | (4) |
| Addback: | deferred tax provided on revaluation gains on properties held as fixed assets | 89 |
| Gross NAV | 879 |
| Gross NAV per share (pence) | 677p |
- How do you calculate NNNAV?
Based on September 2006 accounts, NNNAV is calculated as follows:
| | £'m |
| Gross NAV (as calculated above) | 879 |
| Less: | fair value adjustments relating to IAS 39, Financial assets which were included in statutory balance sheet but were taken out for Gross NAV calculation, plus a further fair value adjustment on fixed rate debt (net of deferred tax) | (3) |
| Less: | deferred tax provided on revaluation gains on properties held as fixed assets (again as per the statutory balance sheet) | (89) |
| Less: | contingent tax – ie the tax (at 30%) that would arise if all of the stock properties were sold at the value at which they are included in the Gross NAV calculation | (154) |
| NNNAV | 633 |
| NNNAV per share (pence) | 487p |
Note that the deferred and contingent tax is within NNNAV as if it were payable immediately. This will not be the case, since it will arise as we achieve vacancies of our properties. By estimating the average time to vacancy (based on life expectancy of our tenants) we can apply a discount factor to the deferred and contingent tax. If we discount this tax using Grainger's WACC at 30 September 2006, the this adds 86p per share to NNNAV.
- How do you calculate Grainger NAV (or GNAV)?
Based on September 2006 accounts, GNAV is calculated as follows:
| | £'m |
| NNNAV (as calculated above) | 633 |
| Add: | Taxed, discounted reversionary surplus. | 140 |
| | The reversionary surplus is the difference between the vacant possession value of a property and its investment value. This will be realised upon sale of the asset, following vacancy. We therefore can estimate when on average this surplus will be realised and discount it over the appropriate number of years. We then tax this discounted number. We use WACC plus 3% as the discount rate and assume no hpi. | |
| GNAV | 773 |
| GNAV per share (pence) | 595p |
We have more recently introduced some sensitivities to GNAV, for example, applying some modest levels of house price inflation (to the reversionary surplus only), and also showing the effect of discounting at lower discount rates.
- What assumptions do you use for Grainger NAV?
Over the last few years we have presented a basic Grainger NAV using very prudent assumptions:
- Assumes no house price inflation
- Utilises a discount rate of WACC plus 3%
We have more recently introduced some sensitivities to GNAV, for example, applying some modest levels of house price inflation (to the reversionary surplus only), and also showing the effect of discounting at lower discount rates.
At the year end announcement in November, we also showed the effect of discounting the deferred tax included in NNNAV, given that it not payable immediately. Using the same estimates for expected vacancy as used to value the reversionary surplus, and the same discount rates, we have discounted the deferred tax.
We have provided a Grainger NAV Calculator on our website to allow you to enter your own assumptions.
- Isn't it too prudent to assume no house price inflation in calculating basic Grainger NAV?
We set out a few years ago to open the debate on how the reversionary surplus should be measured. As a result of much comment since that time, although we still produce Grainger NAV on that prudent basis, we now also produce sensitivities to allow interested parties to see the effects of less prudent assumptions. We have also provided a Grainger NAV Calculator, to allow you to enter your own assumptions.
- Why do you use WACC plus 3% to calculate basic Grainger NAV?
We set out a few years ago to open the debate on how the reversionary surplus should be measured. As a result of much comment since that time, although we still produce Grainger NAV on that prudent basis, we now also produce sensitivities to allow interested parties to see the effects of less prudent assumptions. We have also provided a Grainger NAV Calculator, to allow you to enter your own assumptions.
- What is the difference between deferred tax and contingent tax?
Deferred tax is the tax that we are required to provide in our accounts under IFRS. For us this means providing for tax on all revaluation gains on assets held as fixed assets in our accounts. It also means that we provide deferred tax where we have bought a company and the assets in that company are held at less than their market value, on that difference. Contingent tax is the tax that we provide in arriving at NNNAV and is primarily recognised on assets held as stock at cost in our balance sheet. These assets are lifted to market value in arriving at the Gross NAV balance sheet, but the tax is not deducted until you move to NNNAV.
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