Agat Ejendomme

Annual Report • Mar 27, 2015

Company announcement no. 6/2015

Aalborg, Denmark, 2015-03-27 08:49 CET (GLOBE NEWSWIRE) --

Summary

RESULTS FOR 2014/15

In 2014/15 TK Development recorded results of DKK 36.7 million ) before tax,
excluding discontinuing activities, against DKK 3.9 million ) in 2013/14. The
results for the year are in line with expectations.

The Group’s total results after tax amounted to DKK -37.7 million against DKK
-49.0 million in 2013/14.

The balance sheet total amounted to DKK 2,845.2 million at 31 January 2015
against DKK 3,347.1 million at 31 January 2014. Consolidated equity totalled
DKK 1,509.4 million versus DKK 1,553.7 million at 31 January 2014,
corresponding to a solvency ratio of 53.1 % (31 January 2014: 46.4 %).

The cash flows for the year amounted to DKK 17.4 million against DKK 0.4
million the year before. Net interest-bearing debt amounted to DKK 1,000.4
million at 31 January 2015 against DKK 1,435.1 million at 31 January 2014.

With effect from 1 February 2014, the Group implemented IFRS 11, Joint
Arrangements, which resulted in changes to the Group’s accounting policies. The
Group’s partly owned enterprises that are jointly controlled with other
parties, and which were previously included in the consolidated financial
statements by pro-rata consolidation, must be recognized according to the
equity method after the implementation of IFRS 11. The amendment affects a
great number of items in the income statement, assets, equity and liabilities,
and the overall result is a reduction of the Group’s balance sheet total. The
amendment has no impact on either the results or the equity of the Group.

PROPERTY DEVELOPMENT

The following plots of land were sold in the 2014/15 financial year:

TK Development previously owned an attractively located project area of about
37,000 m² at Teglholmen in Copenhagen. This project area was sold at a profit
to private investors in 2014/15.

In 2014/15 TK Development entered into an agreement to sell a building lot of
13,000 m2 at Amerika Plads, Copenhagen, 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 handover to A.P. Møller - Mærsk A/S is expected to take place in
mid-2015, and the profit on the sale will thus impact TK Development’s results
in 2015/16.

In addition, the following development projects have been sold and initiated:

In Barkarby in the northwestern part of Stockholm, TK Development has developed
a 20,000 m² retail park. The retail park has been sold on a forward-funding
basis and handed over to a fund managed by Cordea Savills. The retail park
premises have been let to such tenants as XXL (sports store), Clas Ohlson,
Intersport, Toys”R”Us, Burger King, Pizza Hut and the fitness chain Nordic
Wellness. Construction began in August 2013 and was completed in January 2015.
The project was handed over to the investor in January 2015, thus impacting
results positively in 2014/15.

TK Development previously owned a property of almost 3,000 m² at Vasevej in
Birkerød, rented by SuperBest. This property was sold and handed over to a
private property company in 2014/15, and the selling price corresponds to the
carrying amount. Moreover, a number of minor projects have been sold, including
several superstores in Denmark.

TK Development has entered into cooperation with AP Pension regarding the
development of about 12,500 m2 at Amerika Plads, lot C, primarily for
residential use. In 2014/15 the building site was handed over to a newly
established, jointly owned company, in which AP Pension has a 50 % ownership
interest. Udviklingsselskabet By & Havn I/S and TK Development own the
remaining 50 % in equal shares. TK Development’s share of profit on the sale of
this building site was recognized in 2014/15. The aim is to build about 120
high-quality apartments for sale to private owners. Construction is scheduled
to start in mid-2015. The profits anticipated on the development, construction
and sale of the project will be recognized upon handover of the apartments to
the respective buyers, expected to take place from the beginning of 2017.

In Esbjerg, Denmark, TK Development owns a plot earmarked for the construction
of a new shopping centre, BROEN, of about 29,800 m². Having received good
backing from future tenants, the Group has concluded lease agreements for more
than 60 % of the premises. A building permit has been granted for the project,
but before construction can start, the project must undergo a validation and
approval procedure to ensure safe railway operations, etc. (CSM approval).
Several delays in the validation process have postponed project startup. The
validation report is now expected to be available in spring 2015, with
construction to start immediately afterwards. After the reporting date, TK
Development has concluded a conditional agreement with CapMan Real Estate,
which will join the project at its current stage, with a 65 % ownership
interest, and thus participate in completing its development. The agreement is
subject to the condition that the CSM approval is obtained.

TK Development is working on the second phase of the Bielany residential
project in Warsaw, Poland, which consists of 297 residential units and service
facilities. 49 % of the units have been sold in advance. Construction is
progressing as planned, and handover to the buyers is scheduled for spring
2016. The residential units are being sold as owner-occupied apartments to
private users.

In Jelenia Góra in Poland, TK Development is developing a shopping centre of
about 24,400 m². The project is being executed as a joint venture with Heitman,
in which the Group has an ownership interest of 30 %. Lease agreements for
about 61 % of the premises have been signed. Construction started in May 2014,
and the opening is scheduled for autumn 2015. TK Development receives fee
income from the jointly owned company for developing, letting and managing the
construction of the project.

In 2014/15 TK Development conditionally sold a 6,000 m² office project in
Aalborg, Denmark. The project is being developed 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 began in March 2014, and the project will be handed over to the
investor in June 2015. Earnings from the sale will be recognized in 2015/16
upon handover of the project to the investor.

TK Development is developing a project in Køge, Strædet, 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 impact results positively 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. Construction of the first
phase was initiated in March 2015.

The Group’s project portfolio in the property development segment comprised
351,000 m² at 31 January 2015 (31 January 2014: 405,000 m²).

ASSET MANAGEMENT

Management has previously announced its aim to sell one or more major completed
projects, as such sales could contribute significantly to the Group’s free cash
resources, reduce its balance sheet total and reinforce solvency.

TK Development has sold its 75 % stake in the Fashion Arena Outlet Center in
Prague, the Czech Republic. The outlet centre has been sold to Meyer Bergman,
and the selling price for the whole centre amounts to EUR 71.5 million. This
sale has generated a profit compared to the carrying amount.

In addition, TK Development has sold its 20 % stake in the Futurum Hradec
Králové shopping centre in the Czech Republic, also to Meyer Bergman. The
selling price for the entire centre, including the hypermarket section, which
TK Development has acquired together with the other owners, GE Capital and
Heitman, for about EUR 12 million as part of the deal, amounts to EUR 87.6
million, which is on a par with the carrying amount.

In 2014/15 TK Development made a DKK 44.5 million writedown for impairment of
the Group’s Sillebroen shopping centre in Frederikssund. The shopping centre
was written down because Management has decided to change the letting concept,
including to introduce alternative concepts, and thus expects the net rent
potential to be lower than previously estimated.

Following these sales, the total portfolio of properties that are under asset
management and thus generate cash flow comprised 85,200 m² and amounted to DKK
1,256.1 million at 31 January 2015, including joint venture projects, compared
to DKK 1,934.2 million at 31 January 2014. The portfolio reduction of DKK 678.1
million is primarily attributable to the sales completed.

The annual net rent from the current leases in the total portfolio corresponds
to a return on the carrying amount of 4.4 %. This figure reflects a large
spread in the returns on individual centres, as particularly local tenants are
recording difficulties. Based on full occupancy, the return on the carrying
amount is expected to reach 6.7 %. 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’s activities in Germany, Finland, the Baltic States and Russia
are being phased out.

The results before tax of the discontinuing activities amounted to DKK -54.1
million in 2014/15 against DKK -38.9 million in 2013/14, of which DKK -17.3
million derives from current operations, DKK -14.6 million from losses
recognized on completed sales, and DKK -22.2 million from impairment losses on
the remaining assets.

Management accords strict priority to phasing out those of the Group’s
activities that are categorized as discontinuing activities, and has chosen to
implement sales at a price below the carrying amount. In order to speed up the
phase-out, Management has moreover chosen to write down the remaining assets by
an amount of DKK 22.2 million.

Since 31 January 2014 the balance sheet total for the discontinuing activities
has been reduced by 32 %, amounting to DKK 250.3 million at 31 January 2015.
The reduction relates mainly to the handover of the first phase of the DomusPro
Retail Park project in Vilnius, which has been sold in advance to the investor,
and the sale of a German investment property.

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

-- In Germany: an investment property and two minor plots of land.
-- In Finland: a minor plot of land.
-- In the Baltic States: a retail park project, see below, and two plots of
land.
-- In Russia: a minor project for letting.

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 selling price is based on a return requirement of 8.5 %.
The retail park is being built in phases. The first phase of about 7,500 m² was
completed in March 2014 and handed over to the investor in the first quarter of
2014/15. The second phase of the project of about 3,800 m² has been fully let,
and construction started at the beginning of 2015.

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

It is Management’s general assessment that the Group’s markets are showing
signs of recovery. There is a general sense of optimism in the property
markets, with better opportunities than before for financing the purchase of
real property and a fair amount of investor interest. The historically low
interest level has contributed to increasing interest in real property as an
asset class, particularly among institutional investors.

In Management’s opinion, the determining variables in property development –
land prices, construction costs, rental rates and selling prices – have once
more reached a level enabling projects to be executed at a satisfactory profit.

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 – retail, office, residential and mixed – 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 residential
projects to account for a larger share of the Group’s portfolio in future
because the Group wishes to exploit the attractive project opportunities within
the residential segment.

FINANCIAL ISSUES

In 2014/15 TK Development sold its 75 % stake in the Fashion Arena Outlet
Center in Prague and its 20 % stake in the Futurum Hradec Králové shopping
centre, also in the Czech Republic. In addition, TK Development has completed a
number of other sales. Overall, these sales mean that the Group has
considerably reduced its interest-bearing debt, while substantially
strengthening its financial platform.

Net interest-bearing debt amounted to DKK 1,000.4 million at 31 January 2015
against DKK 1,435.1 million at 31 January 2014.

At 31 January 2015 project credit facilities of DKK 0.5 billion were due to
expire prior to the end of January 2016. These credits have largely been
extended after the reporting date.

TK Development has a general agreement with the Group’s main banker about
operating and project credits. The agreement is usually renegotiated once a
year and runs until 1 May 2015. After the reporting date, the agreement was
extended until 1 May 2016.

OUTLOOK FOR 2015/16

Management 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 announcement, 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”, particularly the
valuation of the Group’s project portfolio, as described under “Business risks”
and “Risks related to the presentation of financial statements”.

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

Contact information:

TK Development A/S, Frede Clausen, President and CEO, tel. +45 8896 1010.