Agat Ejendomme

Earnings Release • Sep 11, 2015

Company announcement no. 12/2015

Aalborg, Denmark, 2015-09-11 08:48 CEST (GLOBE NEWSWIRE) --

SUMMARY

Results for the first half of 2015/16

During the first six months of 2015/2016, TK Development recorded results of
DKK 0.7 million) before tax, excluding discontinuing activities, against DKK
15.0 million) in the first six months of 2014/15.

The Group’s total results after tax amounted to DKK -7.2 million against DKK
7.0 million in the first half of 2014/15.

The balance sheet total amounted to DKK 2,835.3 million at 31 July 2015 against
DKK 2,845.2 million at 31 January 2015. Consolidated equity totalled DKK
1,510.0 million versus DKK 1,509.4 million at 31 January 2015, corresponding to
a solvency ratio of 53.3 % (31 January 2015: 53.1 %).

Cash flows for the period amounted to DKK -14.5 million against DKK 4.3 million
in the same period the year before. Net interest-bearing debt amounted to DKK
978.1 million at 31 July 2015 against DKK 1,000.4 million at 31 January 2015.

Property development

The sales completed by TK Development in the first half of 2015/16 included the
following:

In a joint venture with a contractor and other partners, TK Development has
developed apartments for young people totalling about 1,500 m² at Smallegade,
Frederiksberg, Denmark. Following completion of construction, the apartments
were ready for occupation in December 2014. In the first quarter of 2015/16, TK
Development sold its share of the joint venture at a profit to one of the other
owners.

The Group is developing a retail project of about 3,700 m² at Marsvej in
Randers, Denmark. The first phase of about 1,550 m² has been completed and let
to jem & fix and Petworld. The Petworld premises were handed over to a private
investor in the first quarter of 2015/16. The selling price corresponds to the
carrying amount.

TK Development has developed a 6,000 m² office project in Aalborg, Denmark, for
the international Alfa Laval Group, which has entered into a long-term lease
for the property. The project has been sold to PensionDanmark at a total price
of DKK 126.1 million. Construction was completed in April 2015, and the
finished project was handed over to the investor in June 2015 as planned.
Earnings from the sale were recognized in the second quarter of 2015/16.

TK Development has sold a lot of about 13,000 m2 at Amerika Plads, Copenhagen,
Denmark, to A.P. Møller - Mærsk A/S. The selling price amounts to DKK 97.5
million, and TK Development’s ownership interest is 50 %. The lot was handed
over to A.P. Møller - Mærsk A/S in June 2015, and the profit on the sale thus
impacted TK Development’s results in the second quarter of 2015/16.

Moreover, TK Development is involved in several ongoing building projects,
including major development projects initiated in the first half of 2015/16:

In Esbjerg, Denmark, TK Development is working on the development and
construction of a new shopping centre, BROEN, of about 29,800 m². Having
attracted keen interest from future tenants, the Group has concluded lease
agreements for more than 60 % of the premises. The anchor tenants include
Kvickly, H&M, Bahne, Fona, Imerco, Sportmaster and Gina Tricot. A contamination
cleanup process and preliminary construction works have been completed in the
past months, and the first turf was cut at the end of May 2015. The shopping
centre is scheduled for completion in spring 2017.

The sale to CapMan Real Estate of a 65 % stake in the project was completed in
May 2015. CapMan Real Estate joined the project at the then current stage and
is participating in completing its development. The sale will have no immediate
impact on the Group’s results. The project earnings relate to the earnings
potential on the remaining 35 % ownership interest, to which must be added
continuous fee income from letting and project development.

TK Development is developing the Strædet project in Køge, Denmark, of about
34,300 m², excluding parking facilities. The project is being built immediately
next to Køge Station and the town centre shopping area. The total project, to
be executed in three phases, will comprise a retail project of about 19,000 m²;
public service facilities of about 9,000 m², including a town hall and
rehabilitation centre; and residential premises of about 6,300 m². In addition,
the project will comprise parking facilities of about 13,000 m². The retail
project, complete with the parking facilities of about 13,000 m², has been sold
conditionally to the Finnish company Citycon based on a 6.25 % return. This
sale is expected to have a major positive impact on results in the 2017/18
financial year upon handover of the completed project to Citycon. In addition,
an agreement has been made with Køge Municipality regarding its takeover of
building rights for both the town hall and rehabilitation centre. These
building rights are expected to be handed over to the municipality at the end
of the 2015/16 financial year. Construction of the first phase began in March
2015, while construction work on the next phase is expected to start in autumn
2015.

In Bielany in Warsaw, Poland, TK Development is developing a residential
project of about 53,700 m². The first phase of 7,850 m² has been completed and
sold to private users. The plan is to initiate construction of the remaining
approx. 45,850 m² in three successive phases. The second project phase consists
of 297 residential units and service facilities. The residential units are
being sold as owner-occupied apartments to private users, and 67 % of the units
have been sold in advance. Construction has started, and handover to the buyers
is slated for spring 2016.

Overall, TK Development has ongoing construction projects covering more than
100,000 m², of which more than 65,000 m² represents construction projects
initiated in Denmark in the first half of 2015/16. Construction of a further
15,000 m² will start in the third quarter of 2015/16, and the Group is
recording good progress on a range of other projects in the portfolio.

The Group’s project portfolio in the Property development business area
comprised 314,000 m² at 31 July 2015 (31 January 2015: 351,000 m²).

Asset management

The total portfolio of properties that are under asset management and thus
generate cash flow comprised 117,200 m² and amounted to DKK 1,382.7 million at
31 July 2015, including joint venture projects, compared to DKK 1,256.1 million
at 31 January 2015.

The annual net rent from the current leases in the total portfolio corresponds
to a return on the carrying amount of 4.1 %. This figure reflects a large
spread in the returns on individual properties. Based on full occupancy, the
return on the carrying amount is expected to reach 6.2 %. The current letting
situation is affected by vacancies, short-term rent discount agreements and
improvement initiatives that have not yet materialized.

Discontinuing activities

TK Development is phasing out its activities in Germany, Finland, the Baltic
States and Russia.

The results for the discontinuing activities before tax amounted to DKK -4.1
million in the first six months of 2015/16 against DKK -6.3 million in the
first six months of 2014/15. At 31 July 2015 the balance sheet total for the
discontinuing activities amounted to DKK 245.7 million against DKK 250.3
million at 31 January 2015.

The Group had the following discontinuing activities at 31 July 2015:

-- Germany: an investment property and two minor plots of land, totalling DKK
103.9 million.
-- Finland: a minor plot of land, totalling DKK 7.2 million.
-- The Baltic States: a retail park project, see below, and two plots of land,
totalling DKK 96.2 million.
-- Russia: a minor project for letting, totalling DKK 22.6 million.

TK Development’s DomusPro Retail Park project in Vilnius, Lithuania, has been
conditionally sold to BPT Baltic Opportunity Fund, which is managed by BPT
Asset Management. The first phase of about 7,500 m² was handed over to the
investor in the 2014/15 financial year. The second phase of the project of
about 3,800 m² has been fully let. Construction of this phase started in spring
2015, and the premises will be handed over to the buyer upon completion in
2016.

The timing and phase-out of the discontinuing activities are subject to
uncertainty. The phase-out is progressing, and the risk exists that these
activities may be phased out at a value lower than their carrying amount.

Market conditions

Management’s general assessment of the market conditions in the property sector
is unchanged compared to the Group’s most recently published assessment.
Generally, property markets are characterized by optimism, reasonable
opportunities for financing property acquisitions and a fair amount of investor
interest. The historically low interest level and surplus of liquidity have
contributed to increasing interest in real property as an asset class,
particularly among institutional investors.

Management believes that new projects can be executed at a satisfactory profit
in the current market.

The Group’s markets are characterized by expectations for moderate to
respectable growth and a moderate rise in private consumption, although varying
in strength from country to country. Climbing Internet sales are expected to
intensify competition in the retail trade sector in the years to come.

TK Development has the competencies to execute large and complex development
projects – in the retail, office, residential and mixed segments – and will
continue to prioritize such projects. At the same time, TK Development will
focus on executing more small-scale projects with a fairly short completion
time on which the Group can generate reasonable earnings without tying up a
large amount of capital for a prolonged period. Such projects will typically be
combined residential and retail projects. Management expects a larger share of
the Group’s portfolio to consist of residential projects in future because the
Group wishes to exploit the attractive project opportunities within the
residential segment.

The activity level is increasing in the Property development business area, and
the Group is working on several new project opportunities in the retail and
residential segments.

Financial issues

Net interest-bearing debt amounted to DKK 978.1 million at 31 July 2015 against
DKK 1,000.4 million at 31 January 2015.

Project credit facilities of DKK 495.9 million at 31 January 2015 that were due
to expire prior to end-January 2016 were prolonged in the first quarter of
2015/16.

TK Development has a general agreement with the Group’s main banker about
operating and project credits. In the first quarter of 2015/16, the agreement,
which is usually renegotiated once a year, was extended until 1 May 2016.

Outlook for 2015/16

Management still anticipates positive results of about DKK 40 million before
tax, excluding discontinuing activities, for the 2015/16 financial year.

The timing and phase-out of the discontinuing activities are subject to major
uncertainty. The activities are in the process of being discontinued, and the
Group risks incurring further losses before the phase-out is complete.
Therefore, the results before tax of the discontinuing activities have not been
included in the outlook for 2015/16.

The expectations mentioned in this Interim Report, including earnings
expectations, are naturally subject to risks and uncertainties, which may
result in deviations from the expected results. Various factors may impact on
expectations, as outlined in the section Risk issues in the Group’s 2014/15
Annual Report, particularly the valuation of the Group’s project portfolio, as
described under Business risks and Risks related to the presentation of
financial statements.

Further information is available from Frede Clausen, President and CEO, on tel.
+45 8896 1010.

*) Adjusted for tax withheld from Income from investments in joint ventures.