Agat Ejendomme

Earnings Release • Sep 12, 2014

Company announcement no. 16/2014

Aalborg, Denmark, 2014-09-12 08:46 CEST (GLOBE NEWSWIRE) --

SUMMARY

RESULTS FOR THE FIRST HALF OF 2014/15

During the first six months of the 2014/15 financial year, TK Development
recorded results of DKK 15.0 million before tax, excluding discontinuing
activities, against DKK -16.3 million in the first half of 2013/14.

The results after tax amounted to DKK 7.0 million in the first half of 2014/15
against DKK -30.1 million in the first half of 2013/14.

The balance sheet total amounted to DKK 3,204.7 million at 31 July 2014 against
DKK 3,347.1 million at 31 January 2014. Consolidated equity totalled DKK
1,553.9 million versus DKK 1,553.7 million at 31 January 2014, corresponding to
a solvency ratio of 48.5 %.

Cash flows for the period amounted to DKK 4.3 million against DKK 0.8 million
in the same period the year before. Net interest-bearing debt amounted to DKK
1,335.0 million at 31 July 2014 against DKK 1,435.1 million at 31 January 2014.

With effect from 1 February 2014, the Group has implemented IFRS 11, Joint
Arrangements, which has resulted in changes to the Group’s accounting policies.
The Group’s partly owned enterprises that are jointly controlled with other
parties, and which have previously been 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

In the first quarter of 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.

In the second quarter of 2014/15, TK Development sold and handed over building
rights for about 7,200 m² at Østre Teglgade in Copenhagen to a private
investor. The profit on the sale was recognized in the second quarter of
2014/15.

In Poland TK Development sold and handed over a share of the Group’s plot in
Bytom to Decathlon in the second quarter of 2014/15. The plot was sold at a
loss, but Decathlon contributes to boosting interest and development potential
in the area.

After the reporting date, TK Development has entered into a conditional
agreement for the sale of the jem & fix section of the Group’s retail park
project at Marsvej, Randers, to a private investor.

Moreover, a conditional agreement has been concluded after the reporting date
regarding the sale to a private property company of the SuperBest premises
forming part of the Group’s project at Vasevej, Birkerød.

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. The pre-construction sale started in December 2013, and
pre-reservations have been received for 34 % of the units. Construction of the
residential units, which are being sold as owner-occupied apartments to private
users, started in June 2014, and handover to the buyers is slated for spring
2016.

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 half
the premises have been concluded. Construction started in May 2014, and the
opening is scheduled for autumn 2015. TK Development will receive fee income
from the jointly owned company for developing, letting and managing the
construction of the project.

In Esbjerg TK Development owns a plot earmarked for the construction of a new
shopping centre, BROEN, of about 29,800 m². A building permit has been granted
for the project. Before construction can start, the project must undergo a
validation and approval procedure to ensure safe railway operations, etc. The
validation process is under way and expected to be completed in autumn 2014,
thus allowing construction to start up immediately afterwards. Discussions are
being held with PFA regarding the sale of a share of the project at its current
stage. Thus, if a final agreement is reached, PFA will participate in
completing the project. This falls in line with the Group’s business model,
whose aims include entering into partnerships regarding major development
projects.

The Group’s project portfolio in the property development segment comprised
388,000 m² at 31 July 2014 (31 January 2014: 405,000 m²).

ASSET MANAGEMENT

The total portfolio of properties that are under asset management and thus
generate cash flow comprised 113,250 m² and amounted to DKK 1,537.3 million at
31 July 2014, including joint venture projects, compared to DKK 1,934.2 million
at 31 January 2014.

The annual net rent from the current leases corresponds to a return on the
carrying amount of 5.7 %. Based on full occupancy, the return on the carrying
amount is expected to reach 7.2 %. This figure reflects a large spread in the
returns on individual centres, as particularly local tenants are recording
difficulties. The current letting situation is affected by vacancies and
short-term rent discount agreements with tenants.

In the first quarter of 2014/15, TK Development completed the sale of 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, reduced the balance sheet total and made a
substantial contribution to the Group’s free cash resources.

A share of the Group’s completed retail property in Brønderslev, Denmark, was
sold to a private investor in the second quarter of 2014/15 and handed over to
the buyer after the reporting date. In this connection Management has revalued
the total property, and a writedown of the property value was recognized in the
second quarter of 2014/15.

DISCONTINUING ACTIVITIES

The results for the discontinuing activities before tax amounted to DKK -6.3
million in the first half of 2014/15 against DKK -8.0 million in the first half
of 2013/14.

At 31 July 2014 the balance sheet total for the discontinuing activities
amounted to DKK 306.0 million against DKK 367.7 million at 31 January 2014, a
decline of 16.8 %. The reduction relates mainly to the handover of the first
phase of the DomusPro Retail Park project, which has been sold in advance to
the investor.

An agreement regarding the sale of another of the Group’s German investment
properties, a residential rental property on the outskirts of Berlin, has been
concluded after the reporting date. The property has been sold to a private
investor at a price equal to the carrying amount.

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 will be built in two 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. Construction of the second project phase will start once a
satisfactory occupancy level has been reached.

The timing and phase-out of the discontinuing activities are subject to major
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 for the Group remains
unchanged compared to its assessment in the Group’s Annual Report, published in
early April 2014. However, in Management’s opinion, there is an increased risk
of faltering economic growth, for one thing due to the geopolitical uncertainty
in Ukraine, which may result in more difficult market conditions in Finland and
Poland in particular.

The Group’s markets are characterized by expectations for subdued financial
growth and rising consumer confidence, although varying in strength from
country to country. An increase in private consumption is still anticipated.

Management has observed diminishing uncertainty in the property markets, but
the decision-making process of tenants, investors and financing sources remains
lengthy and carefully considered. However, Management has observed that the
historically low interest level has contributed to increasing interest in real
property as an asset class, particularly among institutional investors.

The Group is experiencing an easing in finance restraints. The options for
procuring financing vary from project to project, depending on the type,
location and status of the properties concerned, including letting and sales.
Generally, lenders continue to require relatively high equity financing for new
projects, but there also appears to be some relaxation of these requirements.

FINANCIAL ISSUES

In the first quarter of 2014/15, TK Development completed the sale of its 75 %
stake in the Fashion Arena Outlet Center in Prague, the Czech Republic. This
sale has substantially strengthened the Group’s financial platform.

At 31 January 2014 project credit facilities of DKK 0.1 billion were due to
expire prior to the end of January 2015. The credits have all been repaid in
connection with the sale of projects, or refinanced.

TK Development has a general agreement with the Group’s main banker about
operating and project credits. When last reviewed, the agreement was extended
until mid-2015.

OUTLOOK FOR 2014/15

Management maintains the previously announced profit estimate for 2014/15.
Thus, Management anticipates positive results of about DKK 40 million before
tax, excluding discontinuing activities, for the 2014/15 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 2014/15.

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 2013/14
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”.

Contact information:

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