Quarterly Report • Nov 27, 2015
Quarterly Report
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half-yearly financial report 2015-2016
| REAL ESTATE PORTFOLIO | 30/09/15 | 31/03/15 |
|---|---|---|
| Total retail properties | 632 | 554 |
| Total lettable area in m² | 701,801 | 611,076 |
| Estimated fair value in EUR | 975,749,000 | 837,121,000 |
| Estimated investment value in EUR | 999,780,000 | 857,862,000 |
| Average rent prices per m² | 94.16 | 92.48 |
| Occupancy rate | 98.17% | 98.78% |
| BALANCE SHEET INFORMATION | 30/09/15 | 31/03/15 |
|---|---|---|
| Shareholders' equity | 447,467,000 | 381,212,000 |
| Debt ratio (RREC legislation*, max. 65%) | 52.18% | 51.54% |
| RESULTS | 30/09/15 | 30/09/14 |
|---|---|---|
| Net rental income | 29,243,000 | 25,541,000 |
| Property result | 29,056,000 | 25,367,000 |
| Property charges | -1,934,000 | -1,638,000 |
| General costs and other operating costs and income | -1,418,000 | -1,545,000 |
| Operating result before result on the portfolio | 25,704,000 | 22,183,000 |
| Result on the portfolio | 1,319,000 | 1,291,000 |
| Operating result | 27,023,000 | 23,474,000 |
| Financial result | -8,470,000 | -8,514,000 |
| Net result | 17,989,000 | 14,737,000 |
| Net current result (excl. result on the portfolio) | 16,670,000 | 13,446,000 |
| INFORMATION PER SHARE | 30/09/15 | 31/03/15 |
|---|---|---|
| Number of shares | 8,819,213 | 7,559,473 |
| Net asset value IFRS | 50.74 | 50.43 |
| Net asset value EPRA | 53.46 | 53.68 |
| Net asset value (investment value) excl. dividend excl. IAS 39 | 54.60 | 53.34 |
| Closing price on closing date | 77.00 | 76.64 |
|---|---|---|
| Over-/undervaluation compared to net asset value IFRS | 51.75% | 51.97% |
* The Royal Decree of 13 July 2014 (the "RREC R.D.") in execution of the Law of 12 May 2014 (the "RREC Law") on regulated real estate companies (Belgian REITs).
Key figures Management report 4 Financial report 14 Share performance report 38 Real estate report 44 Miscellaneous 50
| 4 |
|---|
| $\overline{14}$ |
| 38 |
| 44 |
| 50 |
Retail Estates is a leading market player thanks to a portfolio that has been built up in a consistent manner, based on its market knowledge. " "
Retail property Orchestra, Braine l'Alleud
In recent years, Retail Estates has focused on continuously strengthening the quality of its properties and on expanding its real estate portfolio, thus ensuring consistent growth in the long term thanks to location, quality and diversification of tenants.
In the short term, this objective is pursued through the constant monitoring of the occupancy rate of the portfolio, the rental income and the costs of maintenance and management.
Rental income during the first half of the financial year amounts to EUR 29.56 million, 14.58% up on the figure for the comparable half of the 2014-2015 financial year. At that time, rental income amounted to EUR 25.80 million. This increase is almost entirely attributable to the growth of the real estate portfolio.
The occupancy rate on 30 September 2015 remains at a high 98.17%, compared with 98.78% on 31 March 2015.
The fair value of the real estate portfolio (project developments included) amounts to EUR 975.75 million. The rental yield (in relation to the investment value) on this portfolio established by the real estate experts is 6.67% based on the actual rent.
The stability of the value of peripheral retail properties is explained mainly by continuing interest on the part of wealthy private individuals and – national and foreign – institutional investors in this type of investment. Retail Estates nv noticed this when carrying out its annual ongoing divestment programme.
Retail Estates nv also holds a significant interest of 85.37% in the real estate certificates issued by Immobilière Distri-Land nv. The fair value of this property portfolio, consisting of 11 retail properties, as at 30 September 2015 amounts to EUR 17.71 million.
Retail Estates nv's share in the total fair value of the real estate properties of the real estate certificate amounts to EUR 14.00 million. The value of the Immobilière Distri-Land nv's real estate portfolio has been declining over the past three years, because of the systematic sale of several retail properties.
As at 30 September 2015, the real estate portfolio consists of 632 properties with a lettable area of 701,801m².
On 20 May 2015, Retail Estates nv acquired the exclusive control of Fimitobel nv, owner of a retail property in Aalst. This acquisition is part of the execution of the framework agreement concluded with Orchestra-Prémaman Belgium nv on 14 October 2014. The investment value of this property amounts to EUR 1.91 million and it will generate an annual gross rental income of EUR 0.13 million. The framework agreement has thus been completed, except for the part regarding the acquisition of a retail property in Aartselaar, with a value of EUR 2.85 million. The transfer of this property has been postponed due to the absence of the necessary OVAM certificates.
With effect on 30 June 2015, 69 retail properties were acquired with an acquisition value of EUR 129 million, through the acquisition of the control of four real estate companies. The properties represent an expected annual rental income of EUR 7.94 million. The real estate portfolio of these companies consists
Retail Estates nv is one of Belgium's largest real estate companies, specialised in peripheral retail properties. Its property portfolio consists of 632 properties in Belgium, representing a total retail area of 701,801m² and a fair value of EUR 975.75 million.
Retail Estates nv manages its property portfolio itself and has a proven track record in real estate development and redevelopment for its own account.
Retail Estates nv is a listed company (Euronext Brussels), with a market capitalisation of EUR 679.08 million on 30 September 2015.
Although management endeavours to limit the risk factors to a minimum, careful account still has to be taken of a certain number of risks. For an overview of these risks, reference is made to pages 4 to 9 of the annual report 2014-2015.
1 Fair value: investment value as determined by an independent real estate expert and from which the hypothetical transaction costs have been deducted. The fair value is the book value as defined in IFRS (see also note 21 in the 2014-2015 annual report).
2 The purchase and sale values of the investments and disposals are in line with the investment values as appraised by the real estate experts.
The retail park contains 6 retail properties with a total surface area of 5,936m² and an expected annual rental income of EUR 0.68 million. Tenants of the retail park include Brantano, Torfs, Blokker and Leen Bakker.
4 retail properties were acquired in Waregem along Gentsesteenweg. The properties have a total surface area of 5,000m² and an expected annual rental income of EUR 0.39 million.
Lastly, 3 retail properties were acquired in Verviers along Boulevard de Gérardchamps. Total shop area is 4,770m² and expected annual rental income is EUR 0.32 million. Its main tenants are Brantano, Maxi Toys and Blokker.
On 10 April 2014, Retail Estates nv and be-MINE nv concluded a cooperation agreement for the development of a retail park, with a total built-up area of 18,000m². On 27 May 2014, the partners established a special purpose company "Mijn Retail nv".
The retail park has been delivered on 31 August 2015 and, except one, all 12 units are let. The 11 let units have already opened to the public. The following retailers will rent a unit at the Beringen site: Brico, AVA, Albert Heijn, Chaussea, ZEB, Vanden Borre, Maxi Zoo, Bent, Lola&Liza, H&M and Bel&Bo.
On 30 September 2015, the interest of the minority shareholder in Mijn Retail nv has been acquired for an amount of EUR 11.77 million. The 11 let retail properties represent an expected annual rental income of EUR 1.67 million. The estimated rental value of the unlet retail area amounts to EUR 0.15 million.
On 1 June 2015, the project in Erpent was delivered. A retail property of 951m², let to Eclipse sprl (dealer Auping), was opened. The expected annual rental income amounts to EUR 0.12 million.
of 9 retail parks and 2 individual retail properties. All locations have a proven positive track record of more than 25 years, with the exception of the retail park in Westerlo, which suffered from the opening of a retail park in its immediate vicinity, in Olen.
Two retail parks situated in Antwerp (Merksem) and Liège (Rocourt) are among the top 5 of best locations in the city periphery retail market. The other seven retail parks have a strong regional customer base. They are located in Bierbeek (Korbeek-Lo, municipality bordering Leuven), Braine l'Alleud, Eupen, Overijse, Verviers, Waregem and Westerlo (Oevel). The two individual retail properties are located in Sint-Pieters-Leeuw (Ruisbroek). With the exception of three properties in Westerlo that will be rebuilt, all retail properties have been leased, almost all to chain stores.
-The retail park in Antwerp (Merksem) is located along Bredabaan and consists of 13 retail properties with a total surface area of 15,892m², with an expected
annual rental income of EUR 2.14 million. The park's tenants include C&A, Shoe Discount, Vanden Borre and Carpetright.
Net rental income rose from EUR 25.54 million to EUR 29.24 million. This is mainly due to the acquisition of additional properties in the current financial year and the contribution of retail properties purchased during the previous financial year and which are contributing 100% for the first time this financial year. Compared with 30 September 2014, the real estate portfolio grew by EUR 207.93 million. With respect to 31 March 2015, the portfolio grew by EUR 138.63 million.
After deduction of property charges, this gives an operating property result of EUR 27.12 million compared to EUR 23.73 million last year.
Property charges amount to EUR 1.93 million compared to EUR 1.64 million the year before. The increase is thus in line with the increase in rental income. The general costs amount to EUR 1.42 million, a decrease with EUR 0.13 million compared to the previous year. This decrease is mainly due to the single non-recurrent cost in the previous financial year
within the framework of the change of status from vastgoedbevak/sicafi to regulated real estate company, compensated by the increase in taxes on collective investment funds. After deduction of general costs, Retail Estates nv posts an operating result before result on the portfolio of EUR 25.70 million. The operating margin is 87.90%.
Net earnings from disposals of investment properties amount to EUR 0.52 million out of total sales of EUR 3.79 million. Variations in the fair value of investment properties amount to EUR 0.80 million, representing the net surplus of various positive and negative variations.
The financial result is EUR -8.47 million, a decrease in costs of EUR 0.04 million compared with the same period last year. Retail Estates nv finances its real estate portfolio mainly with long-term bank debts at fixed interest rates. The average interest rate as at 30 September 2015 is 3.79%.
Over the past six months, 1 retail property was sold for a net selling price of EUR 1.58 million. On this building, a net added value of EUR 0.014 million was realised. The retail property sold is situated in Bilzen (let to JBC). The fair value of this property at the time of sale amounted to EUR 1.56 million.
By notarial deed of 15 September 2015 the real estate certificate Distri-Land sold the property in Kuurne, let to Carpetland, for a net selling price of EUR 2.35 million. On 30 October 2015, the sale proceeds were paid to the certificate holders. On this sale, Retail Estates nv realised an added value of EUR 0.34 million.
Furthermore, 6 plots of land of the Westende site have been sold, for a net selling price of EUR 0.072 million per plot of land. On these 6 plots of land an added value of EUR 0.026 million per plot of land was realised.
These divestments are part of an annual reoccurring sales programme concerning individual retail properties that, due to their location or retail size and/or the business activity practiced therein, do not fit within the core portfolio of Retail Estates nv.
During the subscription period with preferential subscription rights, closed on 21 May 2015, 1,113,317 new shares have been subscribed, being 88.38% of the new shares.
The 878,538 non-exercised preferential subscription rights have been sold on 26 May 2015 in an accelerated private placement to investors, as
described in the prospectus. Investors acquiring the scrips irrevocably undertook themselves to subscribe 146,423 new shares, at the same subscription price and in accordance with the same subscription rate, i.e. one new share at EUR 60.50 for six scrips. The realisation of the capital increase was established on 28 May 2015. The gross proceeds of the operation amounted to EUR 76,214,270 and were entirely reinvested (see 1.3).
On 30 June 2015, the merger by absorption of the company Gentpoort nv by the company Frun Park Wetteren nv was established.
On 6 July 2015 and 24 September 2015, the merger proposals regarding the merger by absorption of the companies, respectively, Frun Park Wetteren nv and Aalst Logistics nv, were submitted.
Mergers of subsidiaries facilitate the administrative management and lead to a decrease of the taxable income of Retail Estates nv's subsidiaries.
Half-yearly results as at 30 September 2015: net current result of the Group3 up by 23.98% compared to 30 September 2014 - fair value of the real estate portfolio up to EUR 975.75 million.
For the six months to 30 September 2015, the net current result (i.e. profit before the results on the portfolio) amounts to EUR 16.67 million, an increase of 23.98% compared to the same period in the previous year.
3 Retail Estates nv and its subsidiaries. 2 The purchase and sale values of the investments and disposals are in line with the investment values as appraised by the real estate experts.
On 21 April 2015 Mr. Francis Vroman resigned as a non-executive director of Retail Estates nv. The mandate of Mr. Richard Van Besauw as an independent director, which expired on 3 July 2015, was not renewed due to the reaching of the age limit.
At the annual shareholder's meeting of 3 July 2015, Mr. Rudy De Smedt and Mr. René Annaert were appointed as a, respectively, non-executive and independent director, with immediate effect. Their mandates will expire, similar to those of the other directors, at the annual shareholders' meeting of 2016.
This half-yearly report contains a number of futureoriented statements. Such statements are subject to risks and uncertainties which means that the actual results can differ significantly from those expected on the basis of such future-oriented statements in this interim statement. Significant factors that can influence such results include changes in the economic situation and commercial, fiscal and environmental factors.
On 29 October 2015 Retail Estates nv acquired the exclusive control of the company Texas Management nv. This company is owner of a site in Nivelles, where a new retail park was constructed.
This retail park consists of 4 retail properties with a total surface area of 5,779m² and generates an expected annual rental income of EUR 0.58 million. The investment in this transaction amounts to EUR 9.02 million.
This transaction reflects the intention of Retail Estates nv to increase its investments in Walloon Brabant.
On 16 October 2015, the merger proposal regarding the merger by absorption of the company Mijn Retail nv was submitted.
The net result (share Group) for the first half of the year is EUR 17.99 million, consisting of the net current result of EUR 16.67 million and the result on the portfolio of EUR 1.32 million. Per share this represents a net current result available for distribution of EUR 1.98 for the first half of the year (on the basis of the weighted average number of shares).
The fair value of the property portfolio, including project developments, amounts to EUR 975.75 million as at 30 September 2015, compared to EUR 837.12 million on 31 March 2015.
The net asset value (fair value) per share amounts to EUR 49.14 (excluding 50% of the expected dividend) as at 30 September 2015. As of 31 March 2015 this was EUR 47.33 (excl. dividend).
The debt ratio amounts to 52.18% as at 30 September 2015 compared to 51.54% on 31 March 2015.
The macro-economic uncertainties do not enable predictions to be made as to the evolution of the fair value of property or the negative variations in the fair value of financial hedging instruments. The evolution of the net asset value of the share, which is sensitive to such variations and uncertainties, is therefore uncertain.
The expected dividend (EUR 3.20 gross per share) is confirmed. This represents a 3.23% increase in the dividend compared with 2014-2015. These expectations were filled in the hypothesis of stable consumer spending and provided a positive evolution of rents. However, it has been identified that at the moment, contrary to previous financial years, the inflation by rent indexation hardly has its role in the rental increase.
"
" The reinforcement of the company's registered capital for the fourth time allows further growth of the company.
| INCOME STATEMENT (in € 000) | 30.09.15 | 30.09.14 |
|---|---|---|
| Rental income | 29,559 | 25,797 |
| Rental related expenses | -316 | -256 |
| Net rental income | 29,243 | 25,541 |
| Recovery of property expenses | ||
| Recovery of rental charges and taxes normally payable by tenants on let properties |
3,143 | 2,750 |
| Rental charges and taxes normally payable by tenants on let properties | -3,313 | -2,916 |
| Other rental related income and expenses | -17 | -9 |
| Property result | 29,056 | 25,367 |
| Technical costs | -873 | -720 |
| Commercial costs | -171 | -103 |
| Charges and taxes on unlet properties | -103 | -111 |
| Property management costs | -785 | -701 |
| Other property costs | -2 | -2 |
| Property costs | -1,934 | -1,638 |
| Operating property result | 27,122 | 23,728 |
| Operating corporate costs | -1,418 | -1,545 |
| Other current operating income and expenses | ||
| Operating result before result on portfolio | 25,704 | 22,183 |
| Result on disposals of investment properties | 519 | 451 |
| Result on sales of other non-financial assets | ||
| Changes in fair value of investment properties | 1,278 | 840 |
| Other result on portfolio | -478 | |
| Operating result | 27,023 | 23,474 |
| Financial income | 12 | 76 |
| Net interest charges | -8,456 | -8,569 |
| Other financial charges | -26 | -21 |
| Financial result | -8,470 | -8,514 |
4 The net current result is calculated as follows: net result excluding changes in the fair value of investment properties and excluding result on the disposal of investment properties.
5 The net profit per ordinary share is calculated as follows: net result divided by the weighted average number of shares.
6 The profit available for distribution per share is calculated as follows: adjusted net operating result divided by the total number of shares. The adjusted net operating result is the consolidated net profit adjusted for a number of elements of a non-current nature, the result on the disposal of investment properties and the changes in fair value of investment properties and project developments.
7 The net current result per share is calculated from the weighted average number of shares, counted from the time of issue (which does not necessarily coincide with first dividend entitlement date). Calculated on the number of dividend-entitled shares, the net current result per share amounts to EUR 1.89 per share at 30.09.2015 versus EUR 1.84 per share at 30.09.2014.
| INCOME STATEMENT (in € 000) | 30.09.15 | 30.09.14 |
|---|---|---|
| Result before taxes | 18,553 | 14,960 |
| Taxes | -564 | -223 |
| Net result | 17,989 | 14,737 |
| Attributable to: | ||
| Shareholders of the Group | 17,989 | 14,737 |
| Minority interests | ||
| Note: | ||
| Net current result (share Group)4 | 16,670 | 13,446 |
| Result on portfolio | 1,319 | 1,291 |
| RESULT PER SHARE | 30.09.15 | 30.09.14 |
| Number of ordinary shares in circulation | 8,819,213 | 7,290,411 |
|---|---|---|
| Weighted average number of shares | 8,419,951 | 7,290,411 |
| Net profit per ordinary share (in €)5 | 2.14 | 2.02 |
| Diluted net profit per share (in €) | 2.14 | 2.02 |
| Profit available for distribution per share (in €)6 | 1.86 | 1.86 |
| Net current result per share (in €)7 | 1.98 | 1.84 |
| Statement of other comprehensive income (in € 000) | 30.09.15 | 30.09.14 |
|---|---|---|
| Net result | 17,989 | 14,737 |
| Other components of other comprehensive income, recyclable in income statements: | ||
| Impact on the fair value of estimated transfer rights and costs resulting from the hypothetical disposal of investment properties |
-3,299 | -457 |
| Changes in the effective part of the fair value of authorised hedging instruments qualifying for hedge accounting as defined by IFRS |
593 | -2,134 |
| COMPREHENSIVE INCOME | 15,283 | 12,146 |
| 30.09.15 | 30.09.14 |
|---|---|
| 18,553 | 14,960 |
| $-564$ | $-223$ |
| 17,989 | 14,737 |
| 17,989 | 14,737 |
| 16,670 | 13,446 |
| 1,319 | 1,291 |
| 30.09.15 | 30.09.14 |
|---|---|
| 8,819,213 | 7,290,411 |
| 8,419,951 | 7,290,411 |
| 2.14 | 2.02 |
| 2.14 | 2.02 |
| 1.86 | 1.86 |
| 1.98 | 1.84 |
| ASSETS (in € 000) | 30.09.15 | 31.03.15 |
|---|---|---|
| Non-current assets | 976,379 | 837,602 |
| Goodwill | ||
| Intangible non-current assets | 130 | 120 |
| Investment properties8 | 975,749 | 837,121 |
| Other tangible non-current assets | 490 | 357 |
| Financial non-current assets | ||
| Trade receivables and other non-current assets | 10 | 5 |
| Current assets | 23,997 | 9,837 |
| Non-current assets or groups of assets held for sale | 4,799 | 4,819 |
| Trade receivables | 5,249 | 1,168 |
| Tax receivables and other current assets | 3,962 | 1,399 |
| Cash and cash equivalents | 7,948 | 1,469 |
| Deferred charges and accrued income | 2,039 | 982 |
| TOTAL ASSETS | 1,000,376 | 847,439 |
| SHAREHOLDERS' EQUITY AND LIABILITIES (in € 000) | 30.09.15 | 31.03.15 |
| Shareholders' equity | 447,467 | 381,212 |
| Shareholders' equity attributable to the shareholders of the parent company | 447,467 | 381,212 |
| Capital | 193,512 | 166,902 |
| Issue premiums | 149,709 | 101,839 |
| Reserves | 86,257 | 77,233 |
| Net result of the financial year | 17,989 | 35,238 |
| Minority interests | ||
| Liabilities | 552,908 | 466,227 |
| Non-current liabilities | 425,473 | 379,217 |
| Provisions | 67 | 82 |
| Non-current financial debts | 401,066 | 340,379 |
| Credit institutions | 371,308 | 310,631 |
| Other | 29,758 | 29,748 |
| Other non-current financial liabilities | 24,340 | 38,756 |
| SHAREHOLDERS' EQUITY AND LIABILITIES (in € 000) | 30.09.15 | 31.03.15 |
|---|---|---|
| Current liabilities | 127,436 | 87,010 |
| Current financial debts | 71,682 | 57,209 |
| Credit institutions | 71,682 | 57,209 |
| Trade debts and other current debts | 34,900 | 10,024 |
| Other current liabilities | 14,367 | 15,367 |
| Accrued charges and deferred income | 6,487 | 4,410 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 1,000,376 | 847,439 |
| DEBT RATIO | 30.09.15 | 31.03.15 |
| Debt ratio9 | 52.18% | 51.54% |
| NET ASSET VALUE PER SHARE (in €) - SHARE GROUP | 30.09.15 | 31.03.15 |
| Net asset value per share IFRS10 | 50.74 | 50.43 |
| Net asset value per share EPRA11 | 53.46 | 53.68 |
| Net asset value per share (investment value) excl. dividend excl. IAS 3912 | 54.60 | 53.34 |
| 8 Including project developments (IAS 40). 9 The debt ratio is calculated as follows: liabilities (excluding provisions, accrued charges and deferred income, financial instruments and deferred taxes), divided by the total assets (excluding financial instruments). 10 The net asset value per share IFRS (fair value) is calculated as follows: shareholders' equity (attributable to the shareholders of the parent company) divided by the number of shares. 11 The net asset value per share EPRA (fair value) is calculated as follows: shareholders' equity (excluding changes in the effective part of the fair value of authorised hedging instruments qualifying for hedge accounting as defined by IFRS) divided by the number of shares. |
12 The net asset value per share excl. dividend excl. IAS 39 (investment value) is calculated as follows: shareholders' equity (excluding the impact on the fair value of estimated transfer rights and costs resulting from the hypothetical disposal of investment properties, excluding changes in the effective part of the fair value of authorised hedging instruments qualifying for hedge accounting as defined by IFRS and excluding dividend) divided by the number of shares.
| STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (in € 000) | Capital ordinary shares |
Issue premiums | Reserves* | Net result of the financial year |
Minority interests | TOTAL Shareholders' Equity |
|---|---|---|---|---|---|---|
| Balance according to IFRS on 31 March 2014 | 160,962 | 93,095 | 73,900 | 28,568 | 0 | 356,525 |
| - Net appropriation of profits 2013-2014 | ||||||
| - Transfer of portfolio result to reserves | 3,260 | -3,260 | 0 | |||
| - Transfer of net current result to reserves | 3,437 | -3,437 | 0 | |||
| - Reclassification between reserves | 0 | |||||
| - Dividends of the financial year 2013-2014 | -21,871 | -21,871 | ||||
| - Capital increase | 0 | |||||
| - Capital increase through contribution in kind | 0 | |||||
| - Minority interests | 0 | |||||
| - Costs of capital increase | 0 | |||||
| - Other | -102 | -102 | ||||
| - Global result 30/09/2014 | -2,591 | 14,737 | 12,146 | |||
| Balance according to IFRS on 30 September 2014 | 160,962 | 93,095 | 77,904 | 14,737 | 0 | 346,698 |
| Balance according to IFRS on 31 March 2015 | 166,902 | 101,839 | 77,233 | 35,238 | 0 | 381,212 |
| - Net appropriation of profits 2014-2015 | ||||||
| - Transfer of portfolio result to reserves | 6,131 | -6,131 | 0 | |||
| - Transfer of net current result to reserves | 5,673 | -5,673 | 0 | |||
| - Reclassification between reserves | 0 | |||||
| - Dividends of the financial year 2014-2015 | -23,434 | -23,434 | ||||
| - Capital increase | 28,344 | 47,870 | 76,214 | |||
| - Capital increase through contribution in kind | 0 | |||||
| - Minority interests | 0 | |||||
| - Costs of capital increase | -1,734 | -1,734 | ||||
| - Other | -74 | -74 | ||||
| - Global result 30/09/2015 | -2,706 | 17,989 | 15,283 | |||
| Balance according to IFRS on 30 September 2015 | 193,512 | 149,709 | 86,257 | 17,989 | 0 | 447,467 |
| * Detail of the reserves (in € 000) | Legal reserve | Reserve for the positive/negative balance of changes in the fair value of real estate properties |
Available reserves | Impact on the fair value of estimated transfer rights and costs resulting from the hypothetical disposal of investment properties |
Reserve for the balance of changes in the fair value of authorised hedging instruments qualifying for hedge accounting as defined by IFRS |
Results carried forward from previous financial years |
TOTAL |
|---|---|---|---|---|---|---|---|
| Balance according to IFRS on 31 March 2014 | 437 | 86,926 | 7,859 | -18,386 | -23,882 | 20,946 | 73,900 |
| - Net appropriation of profits 2013-2014 | |||||||
| - Transfer of portfolio result to reserves | 3,260 | 3,260 | |||||
| - Transfer of net current result to reserves | 3,437 | 3,437 | |||||
| - Reclassification between reserves | -1,429 | 1,429 | 102 | -102 | 0 | ||
| - Capital increase through contribution in kind | 0 | ||||||
| - Minority interests | 0 | ||||||
| - Costs of capital increase | 0 | ||||||
| - Other | -29 | -102 | 29 | -102 | |||
| - Global result 30/09/2014 | -457 | -2,134 | -2,591 | ||||
| Balance according to IFRS on 30 September 2014 | 408 | 88,757 | 9,288 | -18,843 | -26,016 | 24,310 | 77,904 |
| Balance according to IFRS on 31 March 2015 | 411 | 88,757 | 9,103 | -20,860 | -24,587 | 24,409 | 77,233 |
| - Net appropriation of profits 2014-2015 | |||||||
| - Transfer of portfolio result to reserves | 6,131 | 6,131 | |||||
| - Transfer of net current result to reserves | 5,673 | 5,673 | |||||
| - Reclassification between reserves | -3,160 | 3,160 | 82 | -82 | 0 | ||
| - Capital increase through contribution in kind | 0 | ||||||
| - Minority interests | 0 | ||||||
| - Costs of capital increase | 0 | ||||||
| - Other | -74 | -74 | |||||
| - Global result 30/09/2015 | -3,299 | 593 | -2,706 | ||||
| Balance according to IFRS on 30 September 2015 | 411 | 91,728 | 12,263 | -24,151 | -23,994 | 30,000 | 86,257 |
| CASH-FLOW STATEMENT (in € 000) | 30.09.15 | 30.09.14 |
|---|---|---|
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE SEMESTER | 1,469 | 2,188 |
| 1. Cash-flow from operating activities | 30,355 | -365 |
| Operating result | ||
| Interest paid | 27,023 -9,515 |
23,474 -8,297 |
| Interest received | 6 | 42 |
| Corporate taxes paid | -195 | -3,164 |
| Corporate taxes received | ||
| Other | 551 119 |
-474 |
| Non-cash elements to be added to / deducted from the result: | -1,089 | -1,182 |
| * Depreciations and write-downs | ||
| - Depreciation / Write-downs (or write-backs) on tangible and intangible assets |
105 | 66 |
| - Depreciation / Write-downs (or write-backs) on trade receivables | 140 | 58 |
| * Other non-cash elements | ||
| - Changes in the fair value of investment properties | -1,278 | -840 |
| - Profit on disposal of investment properties | -519 | -451 |
| - Other result on portfolio | 478 | |
| * Other | -15 | -15 |
| Change in working capital requirements: | 13,455 | -10,764 |
| * Movement of assets | ||
| - Trade receivables and other receivables | -2,715 | -1,628 |
| - Tax receivables and other current assets | -2,562 | 422 |
| - Deferred charges and accrued income | -619 | -1,699 |
| - Long-term assets | -6 | |
| * Movement of liabilities | ||
| - Trade debts and other current debts | 9,031 | -9,152 |
| - Other current liabilities | 8,916 | 4 |
| - Accrued charges and deferred income | 1,410 | 1,289 |
| CASH-FLOW STATEMENT (in € 000) | 30.09.15 | 30.09.14 |
|---|---|---|
| 2. Cash-flow from investment activities | -82,299 | -9,018 |
| Purchase of intangible assets | ||
| Purchase of investment properties | -34 | -21 |
| Disposal of investment properties and assets held for sale | -16,832 3,786 |
-4,732 4,167 |
| Acquisition of shares of real estate companies | -69,108 | -15,081 |
| Disposal of shares of real estate companies | 6,691 | |
| Purchase of other tangible assets | -111 | -42 |
| Disposal of other tangible assets | ||
| Disposal of non-current financial assets | ||
| Income from trade receivables and other non-current assets | ||
| 3. Cash-flow from financing activities | 58,423 | 9,756 |
| * Change in financial liabilities and financial debts | ||
| - Increase in financial debts | 85,262 | 52,757 |
| - Decrease in financial debts | -64,062 | -22,044 |
| * Change in other liabilities | ||
| - Increase (+) / Decrease (-) in other liabilities - Increase (+) / Decrease (-) in minority interests |
-13,823 | 914 |
| * Change in shareholders' equity | ||
| - Capital increase and issue premiums | 76,214 | |
| - Costs of capital increase | -1,734 | |
| * Dividend | ||
| - Dividend for the previous financial year | -23,434 | -21,871 |
| CASH AND CASH EQUIVALENTS AT THE END OF THE SEMESTER | 7,948 | 2,561 |
Rounding up or down to the nearest thousand can lead to rounding-off differences between the balance sheet and income statement and the attached details.
f
Corporate transactions of the past semester were not processed as business combinations such as required under IFRS 3 definition, based on the conclusion that this definition is not applicable, given the nature and the size of the acquired companies. The companies in question own a limited number of properties which are not intended to be kept on as an independent businesses. The companies are fully consolidated.
In accordance with article 13 § 2 of the R.D. of 14 November 2007, Jan De Nys, managing director, declares that, to his knowledge,
IFRS 8 defines an operating segment as follows: an operating segment is a component of the company (IFRS 8.2):
Given that peripheral retail properties account for more than 90% of the Retail Estates nv's portfolio, a breakdown of activities by operating segment is not relevant. The board of directors does not use any other segment in its decision-making process.
In accordance with the modified IAS 40 standard, project developments are included under investment properties. On purchase they are valued at purchase cost, including incidental expenses and non-deductible VAT.
After initial recognition, projects are valued at fair value once contractors have been found, the necessary licences are acquired, and the properties are let. This fair value valuation is based on the valuation by the real estate expert, after deduction of work still to be done.
The interim financial report for the first six-month period ending on 30 September 2015 has been drawn up in accordance with accounting standards which are consistent with the International Financial Reporting Standards as implemented by the RREC legislation and in accordance with IAS 34 'Interim financial reporting'.
Determining the fair value of the investment properties in accordance with IAS 40 'Investments properties', the independent real estate expert deducts an estimated amount of transfer rights and costs from investment properties. The impact on the fair value of investment properties as a result of these estimated transfer rights and costs in case of a hypothetical disposal of investment properties is processed directly in the shareholders' equity on the account 'lmpact on the fair value of estimated transfer rights and costs resulting from the hypothetical disposal of investment properties', as explicitly provided by the aforementioned legislation. In the first sixmonth periods ending on 30 September 2015 and 30 September 2014, the respective amounts of EUR -3.30 million and EUR -0.46 million were recognised directly in the shareholders' equity in this account.
In these condensed interim financial statements the same accounting principles and calculation methods are applied as in the consolidated financial statements for the year ending on 31 March 2015.
For the fourth time since its listing on Euronext in March 1998, the company has giving all of its shareholders the opportunity to share in the growth of the company and its profitability. The proceeds are invested in the growth of the real estate portfolio.
The general guidelines of the financial plan are included in the annual and half-yearly financial reports. The annual and half-yearly financial reports will describe and justify how the financial plan has been implemented during the period under review and how the public RREC will implement the plan in the future.
Since 2008-2009, the debt ratio of Retail Estates nv has risen above 50%. In the aforementioned financial year, the debt ratio was 56%, subsequently remaining stable at around 53%. In 2014, the debt ratio decreased at a level under 50% as a result of the capital increase, to rise above 50% again as from 30 September 2014. Throughout its history, the Retail Estates nv's debt ratio has never exceeded 65%.
The board of directors considers a debt ratio of + 55% ideal for the shareholders of the public regulated real estate company in terms of the return and the current earnings per share. The impact of every investment on the debt ratio is reviewed and if necessary the investment is not carried out if it has a negative influence on the debt ratio.
Based on the current debt ratio of 52.18%, Retail Estates nv has an investment potential of EUR 366.37 million without exceeding as such a debt ratio of 65%, and an investment potential of EUR 195.53 million without exceeding a debt ratio of 60%.
Every quarter, the board of directors is presented with a prognosis of how the debt ratio will evolve during the following quarter. The board also discusses any
deviations which may have occurred between the estimated and actual debt ratio during the previous quarter.
The projection of the debt ratio as at 31 December 2015 takes into account the following assumptions:
• disposals in the third quarter 2015-2016 No disposals are planned.
The results of the third quarter as indicated in the budget for 2015-2016, approved by the board of directors.
Investments amounting to EUR 9.90 million are planned in the third quarter of the financial year 2015-2016.
Considering the aforementioned assumptions, the debt ratio as at 31 December 2015 would amount to 51.65%.
A projection is also made of the debt ratio as at 31 March 2016 (end of the financial year). This projection takes into account the following assumptions:
• disposals in the second semester 2015-2016 No disposals are planned.
• results of the second semester 2015-2016 The results of the second semester as indicated in the budget for 2015-2016, approved by the board of directors.
A project can relate to a plot of land, a building to be demolished, or an existing building whose purpose is to be changed, requiring considerable renovation work to realise the desired purpose.
Article 24 of the RREC R.D. of 13 July 2014 requires public regulated real estate companies (Belgian REITs) to establish a financial plan with an implementation schedule when its consolidated debt ratio exceeds 50% of consolidated assets. The financial plan describes the measures to be taken to prevent the consolidated debt ratio from exceeding 65% of consolidated assets.
A separate report on the financial plan is prepared by the auditor, confirming that the latter has verified the method of drawing up the plan, particularly as regards the economic bases, and that the figures contained in this plan concur with the accounts of the public RREC.
| Calculation debt ratio (in € 000) | 30.09.15 | 31.03.15 |
|---|---|---|
| Liabilities | 552,908 | 466,227 |
| To be excluded: | 30,894 | 29,434 |
| I. Non-current liabilities | 24,407 | 25,024 |
| Provisions | 67 | 82 |
| Authorised hedging instruments | 23,994 | 24,587 |
| Deferred taxes | 346 | 355 |
| II. Current liabilities | 6,487 | 4,410 |
| Provisions | ||
| Authorised hedging instruments | ||
| Accrued charges and deferred income | 6,487 | 4,410 |
| Total debt | 522,014 | 436,793 |
| Net reduction debt | ||
| Total assets | 1,000,376 | 847,439 |
| DEBT RATIO | 52.18% | 51.54% |
Investments amounting to EUR 9.90 million are planned, all of which in the third quarter of the financial year 2015-2016.
Considering the additional planned investments and the earnings expectations for the full year, the debt ratio at 31 March 2016 would amount to 50.76%.
The projection of the debt ratio only takes into account acquisitions and disposals in respect of which a private agreement has been signed (without conditions precedent), and investments that are planned and contracted out. Credits to expire are supposed to be refinanced for the same amount.
The valuation of the real estate portfolio also has an impact on the debt ratio. Considering the current capital basis, the maximum debt ratio of 65% would be exceeded in the event of a reduction in the fair value of investment properties of more than EUR 197.27 million. This reduction in value could be the result of an increase in the yield (if the rental values remain unchanged, the yield would have to increase by 1.72% in order to exceed the debt ratio) or a reduction in rents (if the yields remain unchanged, the rents would have to drop by EUR 13.16 million). Historically, the fair value of the real estate portfolio has always risen or was at least stable since the company was set up. There are currently no indications in the market to assume an increase in the yield.
In the event that substantial value reductions occur that cause the debt ratio to exceed 65%, Retail Estates nv can sell a number of its properties. Retail Estates nv has a solid track record with regard to selling properties at their estimated investment value. In the 2012-2013 financial year, 14 retail properties, 2 carcass apartments, 1 food service building, 3 plots of land, 1 small and middle-sized building and 1 villa were sold for a net selling price of EUR 19.25 million. In the 2013-2014 financial year, 4 retail properties and 2 carcass apartments were sold for a net selling price of EUR 5.07 million. In the 2014-2015 financial year, 9 retail properties were sold for a net selling price of EUR 8.08 million and the company Belgium Retail 1 Luxembourg sàrl was sold for an amount of EUR 8.22 million. Globally speaking, these properties were sold at the estimated investment value. At 30 September 2015, 1 retail property was sold for a net selling price of EUR 1.58 million and 1 retail property from the Distri-Land portfolio was sold for a net selling price of EUR 2.35 million.
Retail Estates nv is of the opinion that, based on
no additional measures need to be taken to prevent the debt ratio exceeding 65%. It is the intention of the public RREC to maintain or to re-establish the debt ratio between 50% and 55%. This level is evaluated regularly and will be reviewed by the board of directors if deemed necessary in the light of changing market and influencing factors.
| (in € 000) | 30.09.15 | 30.09.14 |
|---|---|---|
| Within one year | 63,148 | 53,056 |
| Between one and five year(s) | 213,484 | 218,752 |
| Within more than five years | 360,180 | 254,338 |
During the first half of this financial year, Retail Estates nv expanded its property portfolio with 82 let retail properties and 4 unlet properties. These represent a rental income of EUR 9.50 million. In the consolidated figures as of 30 September 2015 these new properties represent a rental flow of EUR 2.19 million.
In the first semester of the financial year, two properties were divested. These properties represent a rental income of EUR 0.23 million. In the consolidated figures
as of 30 September 2015, these properties represent EUR 0.059 million.
The rise in rental income is mainly due to the growth of the real estate portfolio.
The following table shows by way of theoretical exercise how much rental income Retail Estates nv is certain to receive based on the current lease agreements.
This does not alter the theoretical risk of all tenants making use of their legal right of cancellation at the end of the current three-year period. In this case, all retail properties would by definition be vacant within 3 years and 6 months.
The Group concludes commercial rental contracts for its buildings, for a minimum period of 9 years, which, in most cases, can be terminated by the tenant upon expiry of the third and sixth year, subject to a 6 months' notice prior to the expiry date. The rents are usually due in advance on a monthly basis (sometimes quarterly). They are indexed annually, on the anniversary of the lease agreement.
Taxes and levies, including property tax, the insurance premium and the common charges, are, in principle,
borne by the tenant. To guarantee compliance with the obligations imposed on the tenant by virtue of the agreement, some tenants must provide a rental guarantee, usually in the form of a bank guarantee, worth three months' rent.
At the start of the agreement, an inventory of fixtures is drawn up between the parties, by an independent expert. On expiry of the agreement, the tenant must return the leased premises in the state described in the inventory of fixtures drawn up on taken up the occupancy, subject to normal wear and tear. The tenant cannot transfer the lease agreement or sublet the premises fully or partially, unless prior written permission is obtained from the lessor. The tenant must register the agreement at own expense.
Of all loans, EUR 384.35 million have a variable interest rate. These are all long-term loans. 74% of the outstanding loans are financed on a fixed basis. They are either loans with a variable interest rate hedged via interest rate swap contracts, or loans with a fixed interest rate. An interest rate swap converts a variable interest rate into a fixed interest rate. The average interest rate of the loans is 3.79%. Retail Estates nv has agreed in principle on a debt ratio of 60% with its banks.
The most important financial instruments of the Group are financial and trade receivables and debts, investments, cash and cash equivalents and financial instruments such as 'interest rate swaps'.
During the first half of the financial year control was acquired of five real estate companies for a total amount of EUR 69.11 million. The acquisition of the companies was paid for in cash. This resulted in a
EUR 127.72 million increase of investment properties, a EUR -4.65 million variation of working capital and a EUR 53.96 million increase of financial debts.
| Investment properties | Assets held for sale | Total | ||||
|---|---|---|---|---|---|---|
| Investment and revaluation table (in € 000) |
30.09.15 | 31.03.15 30.09.15 | 31.03.15 30.09.15 | 31.03.15 | ||
| Balance at the end of the previous financial year |
837,121 | 745,916 | 4,819 | 4,385 | 841,940 | 750,301 |
| Acquisition through purchase or contribution real estate companies |
127,617 | 28,383 | 127,617 | 28,383 | ||
| Capitalised interest cost | 219 | 250 | 219 | 250 | ||
| Acquisition and contribution of investment properties |
12,579 | 70,777 | 12,579 | 70,777 | ||
| Disposal through sale of real estate companies |
-6,874 | 0 | -6,874 | |||
| Disposal of investment properties | -1,429 | -2,314 | -1,838 | -5,474 | -3,267 | -7,788 |
| Transfers to assets held for sale | -1,818 | -5,908 | 1,818 | 5,908 | 0 | 0 |
| Other transfers | -50 | -50 | 0 | |||
| Change in fair value (+/-) | 1,511 | 6,889 | 1,511 | 6,889 | ||
| At the end of the semester/ financial year |
975,749 | 837,121 | 4,799 | 4,819 | 980,549 | 841,940 |
| OTHER INFORMATIONS | ||||||
| Investment value of the property | 999,780 | 857,862 | 4,919 | 4,939 | 1,004,699 | 862,801 |
| Breakdown by due date of credit lines (in € 000) | 30.09.15 | 31.03.15 |
|---|---|---|
| Non-current | ||
| Bilateral loans - variable or fixed rate | 371,308 | 310,631 |
| Other | 29,758 | 29,748 |
| Subtotal | 401,066 | 340,379 |
| Current | ||
| Bilateral loans - variable or fixed rate | 71,682 | 57,209 |
| Subtotal | 71,682 | 57,209 |
| Total | 472,748 | 397,588 |
| Breakdown by maturity of non-current financial debts (in € 000) | 30.09.15 | 31.03.15 |
| Between one and two year(s) | 112,705 | 93,705 |
| Between two and five years | 286,131 | 214,013 |
| More than five years | 2,230 | 32,661 |
| Project developments (in € 000) | 30.09.15 | 31.03.15 |
|---|---|---|
| Balance at the end of the previous financial year | 34,171 | 8,077 |
| Increase during the semester/financial year | 11,454 | 28,119 |
| Completion during the semester/financial year | -33,030 | -2,026 |
| At the end of the semester/financial year | 12,595 | 34,171 |
The categories correspond with the following financial instruments:
The aggregate financial instruments of the Group correspond with level 2 in the fair values hierarchy. Fair value valuation is carried out regularly.
Level 2 in the fair values hierarchy includes the other financial assets and liabilities, in respect of which the fair value is based on other information, which can, directly or indirectly, be determined for the relevant assets or liabilities.
The valuation techniques regarding the fair value of the level 2 financial instruments are the following:
The fair value of debts having a fixed interest rate is estimated by means of an actualisation of their future cash flows, taken into account the Group's credit risk.
On 4 July 2012, the control was acquired over Retail Warehousing Invest nv by the acquisition of an interest of 62.50% of its shares. The agreement concluded with a view to acquiring the control provides that Retail Estates nv, at the latest on 1 July 2016, acquires all shares of this company that are not yet fully owned by Retail Estates nv, on the basis of the same valuation formula laid down in order to acquire control on 4 July 2012. Upon acquisition of the minority interest, the underlying real estate value used in this formula will be checked against the valuation of the real estate expert applicable at that time and, as the case may be, be limited to that valuation in accordance with Article 37 of the RREC Law of 12 May 2014.
As of 31 December 2012, the balance sheet has been drawn up on the assumption that all minority interests are acquired (in accordance with IFRS), irrespective of the timing of such acquisition and on the assumption that such acquisition is paid for in cash. This reflects the maximum debt ratio on the basis of the available information and the development stage of the projects. The impact on the current liabilities amounts to EUR 14.29 million.
Below is an overview of the financial instruments as at 30 September 2015:
| Summary of financial instruments as at closing | Categories | Book value | Fair value | Level |
|---|---|---|---|---|
| date 30.09.15 (in € 000) | ||||
| I. Non-current assets | ||||
| Financial non-current assets | C | 2 | ||
| Loans and receivables | A | 10 | 10 | 2 |
| II. Current assets | ||||
| Trade receivables and other receivables | A | 9,211 | 9,211 | 2 |
| Cash and cash equivalents | B | 7,948 | 7,948 | 2 |
| Total financial instruments on the assets side of the balance sheet |
17,169 | 17,169 | ||
| I. Non-current liabilities | ||||
| Interest-bearing liabilities | A | 2 | ||
| Credit institutions | A | 371,308 | 374,793 | 2 |
| Other | A | 29,758 | 35,417 | 2 |
| Other non-current liabilities | A | 346 | 346 | 2 |
| Other financial liabilities | C | 23,994 | 23,994 | 2 |
| II. Current liabilities | ||||
| Interest-bearing liabilities | A | 71,682 | 71,682 | 2 |
| Current trade debts and other debts | A | 49,267 | 49,267 | 2 |
| Total financial instruments on the liabilities side of the balance sheet |
546,355 | 555,499 |
Introduction
We have reviewed the condensed consolidated interim figures of Retail Estates nv and its subsidiaries as of 30 September 2015, consisting of the condensed consolidated income statement, the statement of other comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in shareholders' equity and the condensed consolidated cash flow statement for the 6-month period then ended, as well as the explanatory notes (together: "condensed consolidated interim figures"). The board of directors is responsible for the preparation and presentation of these condensed consolidated interim figures in accordance with IAS 34, as adopted by the European Union and implemented by the royal decree of 13 July 2014. Our responsibility is to express a conclusion on these condensed consolidated interim figures based on our review.
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists in making inquiries, primarily of persons responsible for financial and accounting matters, and in applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim figures on 30 September 2015 is not prepared, in all material respects, in accordance with IAS 34, as adopted by the European Union and implemented by the royal decree of 13 July 2014.
The consolidated financial statements of Retail Estates nv for the year ended 31 March 2015 have been audited by another auditor, who issued an unqualified audit opinion on these consolidated financial statements on 27 May 2015.
Sint-Stevens-Woluwe, 27 November 2015
The statutory auditor PwC Bedrijfsrevisoren bcvba / Reviseurs d'entreprises sccrl Represented by Damien Walgrave Bedrijfsrevisor / Réviseur d'entreprises
Since its listing on Euronext Brussels, Retail Estates' results and portfolio have been growing continuously and consistently. " "
Retail park Crescend'Eau, Verviers
• half-yearly report 2015-2016 • Retail Estates • 41
During the first six months of the 2015-2016 financial year, the stock market price fluctuated between EUR 64.44 and EUR 77.94. The graph above shows the share performance of the Retail Estates share in comparison with the BEL 20 since the stock exchange listing. The Retail Estates share has increased in value over the period by 144.21% while the BEL 20 has increased by 12.34%. The average closing price during the first semester is EUR 70.84.
0
| NET ASSET VALUE PER SHARE (in €) | 30.09.15 | 31.03.15 | 30.09.14 |
|---|---|---|---|
| Net asset value per share IFRS13 | 50.74 | 50.43 | 47.56 |
| Net asset value per share EPRA14 | 53.46 | 53.68 | 51.12 |
| Net asset value per share excl. dividend excl. IAS 3915 | 54.60 | 53.34 | 52.16 |
| Gross dividend | 3.10 | ||
| Net dividend | 2.325 | ||
| Share price on closing date | 77.00 | 76.64 | 61.50 |
| dividend | ||
|---|---|---|
13 The net asset value per share IFRS (fair value) is calculated as follows: shareholders' equity (attributable to shareholders of the parent company) divided by the number of shares.
14 The net asset value per share EPRA (fair value) is calculated as follows: shareholders' equity (excluding changes in the effective part of the fair value of authorised hedging instruments qualifying for hedge accounting as defined by IFRS) divided by the number of shares.
15 The net asset value per share excl. dividend excl. IAS 39 (investment value) is calculated as follows: shareholders' equity (excluding the impact on the fair value of estimated transfer rights and costs resulting from the hypothetical disposal of investment properties, excluding changes in the effective part of the fair value of authorised hedging instruments qualifying for hedge accounting as defined by IFRS and excluding dividend) divided by the number of shares.
Retail Estates nv is listed on the Euronext continuous market. As at 30 September 2015, the market capitalisation of Retail Estates nv amounts to EUR 679.08 million.
The net asset value (NAV) of the share in the case of a property valuation at fair value is EUR 50.74.
The change in net asset value is explained by the further decline in market value of interest rate hedging instruments and the payment of a dividend for the 2014-2015 financial year.
| Announcement results third quarter financial year 2015-2016 | 19 February 2016 |
|---|---|
| Announcement annual results financial year 2015-2016 | 27 May 2016 |
| Dividend made available for payment | 8 July 2016 |
Retail Estates' cluster strategy results in an optimisation of the management costs. "
Retail Estates has been investing since 1998 in retail been built up over 17 years that on 30 September 2015 consists of 632 buildings, representing a gross builton retail area of 701,801m². Its fair value amounts to EUR 975.75 million.
r
Valuation as at 30 September 2015
Retail Estates nv enlists the services of Cushman & Wakefield and CBRE as its real estate experts. In practice, each real estate expert values a part of the real estate portfolio.
Cushman & Wakefield's report dated 30 September 2015 covers a portion of the property of Retail Estates nv and its subsidiaries. This reports mentions amongst others:
"We have the pleasure to give you our valuation update as at 30 September 2015 of both the Retail Estates and Distri-Land portfolio.
We confirm that we carried out this task as an independent expert. We also confirm that our valuation was carried out in accordance with the national and international standards and their application procedures, amongst other in the valuation of "GVV" (Regulated Real Estate Companies - Belgian REITs) – (According to the present decisions. We preserve ourselves the right to review our valuation in case of modified decisions).
The fair value is defined as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller
in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. This definition corresponds to our definition of the market value.
The sale of a building is in theory subject to transfer rights collected by the government. This amount depends amongst other on the transfer manner, the profile of the purchaser and the geographical situation of the building. The first two conditions and the amount to pay for the rights is only known when the sale has been concluded. On the basis of a representative sample of the market (between 2003 and 2008) the weighted average of the rights (average transfer costs) equals 2.50% (for goods with a higher value than 2,500,000 EUR).
For goods with a value higher than 2,500,000 EUR we obtain a sales value excluding costs corresponding with the real value ("fair value") as set by the international accounting standard IAS 40, by subtracting 2.50% of the investment value.
The properties are here considered as a portfolio.
Our "investment value" is based on the capitalisation with a Gross Yield of the passing rent, taking into account possible corrections like vacancy, step-rents, rent-free periods, etc. The Gross yield is depending on current output on the investment market, taking into account the location, the suitability of the site, the quality of the tenant and the building on the moment of the valuation.
In order to calculate the investment value of the retail park in Tongeren and the Distri-Land portfolio, we
have capitalised its adjusted market rent. It is standard market practice to take into account that no more than 60% of the gap between the actual passing rent and the estimated rental value (ERV) can be bridged in renegotiations. This is the case when the market rent is higher than the actual rent paid. This is mainly due to the high legal protection for sitting tenants under Belgian commerce law.
When now the market rent (ERV) is under the passing rent however, the highest rent a landlord should hope to achieve is the market rent. Since, being prudent, one should assume that the sitting tenant will use the break to negotiate his rent downward and bring it in line with the market.
The portfolio of Immobilière Distri-Land nv has as at 30.09.2015 an investment value (corrections incl.) of EUR 18.15 million and a fair value of EUR 17.71 million. The investment value, in absolute terms, increased with 0.67%. This gives a yield of 6.20% for Immobilière Distri-Land nv.
We obtain an investment value (corrections incl.) as at 30.09.2015 for the portfolio16 of EUR 450.11 million and a fair value of EUR 439.13 million. On the basis of the investment value, the portfolio decreases in absolute terms with 0.24% compared to 30.06.2015."
The report by CBRE dated 30 September 2015 covers a portion of the property of Retail Estates nv and its subsidiaries. The investment value of this real estate
16 Portfolio : Retail Estates nv + Immobilière Distri-Land nv + Tongeren + Frun Park Wetteren nv
is hit hardest when consumer confidence wanes. The share of this segment in the real estate portfolio of Retail Estates nv amounts to 20.91% (compared with 21.07% as at 31 March 2015).
Individual peripheral retail properties are individual retail properties adjacent to the public highway. Every outlet has its own car park and entrance and exit roads, connecting it to the public highway, and making it easily recognisible. In the immediate vicinity, there are, in principle, no retail properties of the same kind.
Retail clusters are a collection of peripheral retail properties, located along the same traffic axis and, from the consumer's point of view, they form a self-contained whole, although they do not possess a joint infrastructure other than the traffic axis. This is the most typical concentration of peripheral retail properties in Belgium.
Retail parks are made up of retail properties that, in conjunction with other shops, form part of an integrated commercial complex. All properties use a central car park with a shared entrance and exit road. This enables consumers to go to several shops without having to move their cars. A location of this kind will typically have at least five properties.
Other real estate consists mainly of offices, residential dwellings, hospitality establishments and a logistics complex at Erembodegem. The Erembodegem site was leased in its totality to Brantano nv under a 10-year lease agreement that ends on 31 May 2024. Retail Estates nv only invests in real estate properties used for the aforementioned purposes if they are already embedded in a retail property or are part of a real estate portfolio that can only be acquired as a whole.
Retail premises under development are premises that form part of a new-build project or a renovation project.
is herewith estimated at EUR 543.23 million and the fair value at EUR 529.98 million. These properties account for a rental income of EUR 35.50 million, representing a gross yield of 6.49%.
The investment market is evolving in different directions under the influence of the world-wide economic uncertainties. On the one hand a number of foreign institutional investors have realised their investments faster than originally intended, in order to secure their capital gains and reinvest in their home markets where the credit crunch is offering new purchase opportunities. On the other hand the private market remains active, with wealthy private investors showing continuing interest in transactions of between EUR 1 and 5 million. The rental market remains active, but is more sensitive than in the past to quality of location, with a preference for retail properties on multi-shop sites (retail parks) or along major city access roads with strong concentrations of similar properties (retail clusters). Isolated buildings in well-populated residential areas are popular with food supermarkets.
Retailers selling footwear and clothing (26.89% compared with 26.52% as at 31 March 2015) and retailers selling food, electrical products and toys, account for more than 51% of the leased surface area. Both categories provide a stable basis, because they are the least sensitive to economic fluctuations. Moreover, the socio-economic permits for these activities are the most difficult to obtain. This is conducive to an increase in the value of the properties on the one hand and a stronger loyalty to the location on the other.
In the home furnishing sector, which has the biggest margins, there is scope for significant rent increases in favourable economic times. However, this sector
| RETAIL ESTATES | |||
|---|---|---|---|
| 30.09.15 | 31.03.15 | ||
| Estimated fair value18 (in €) | 975,749,000 | 837,121,000 | |
| Yield (investment value) | 6.67% | 6.80% | |
| Contractual rents (in €) | 65,166,201 | 55,880,428 | |
| Contractual rents incl. rental value of vacant buildings (in €) | 66,079,622 | 56,511,608 | |
| Total m² in portfolio | 701,801 | 611,076 | |
| Number of properties 61.19 |
632 | 554 | |
| Occupancy rate | 98.17% | 98.78% | |
| Total m² under development | 4,310 | 32,496 |
18 This fair value also contains the project developments, which are not included in the fair value as mentioned in the real estate experts' conclusions on 17 30 September 2015.
17 The diagrams 'commercial activities of tenants' and 'type of building' show percentages based on the total surface area on 30 September 2015.
The Retail Estates expert team is at your service.
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Retail park V-Mart, Bruges
This is the term to be used for the purchase of a building. Any conveyance fees payable are included in the acquisition price.
NAV (Net Asset Value) means equity divided by the number of shares.
These are companies that have a central purchasing department and operate at least five different retail outlets.
m The debt ratio is calculated as follows: liabilities (excluding provisions, accrued charges and deferred income, hedging instruments and deferred taxes), divided by the total assets (excluding hedging instruments).
The index-linked basic rents as provided in the lease agreements as of 30 September 2015, before deduction of gratuities or other benefits granted to tenants.
The ratio of the most recently paid gross dividend to the final share price of the financial year over which the dividend is payable.
This is the value of the real estate portfolio, including costs, registration charges, fees and VAT, as estimated each quarter by an independent expert.
The exit tax is a special corporate tax rate applied to the difference between the fair value of the registered capital of companies and the book value of its capital at the time that a company is recognised as a regulated real estate company, or merges with a regulated real estate company.
This value is equal to the amount for which a building could be swapped between properly informed parties, consenting and acting under normal competitive conditions. From the point of view of the seller, it must be construed minus the registration charges.
The gross dividend per share is the operating profit distributed.
The International Financial Reporting Standards are a set of accounting principles and valuation rules prepared by the International Accounting Standards Board. The aim is to simplify international comparison between European listed companies.
Listed companies are required to prepare their consolidated accounts according to these standards starting from the first financial year beginning after 1 January 2005.
An Interest Rate Swap is an agreement between parties to exchange interest rate cash flows during a predetermined period of time on an amount agreed beforehand. This concerns only the interest rate cash flows. The amount itself is not swapped. IRS is often used to hedge interest rate increases. In this case, a variable interest rate will be swapped for a fixed one.
The net dividend is equal to the gross dividend after retention of 25% withholding tax.
The occupancy rate is calculated as the ratio of the surface area actually leased out to the surface area available for leasing, expressed in m².
Retail Estates is a public regulated real estate company. The intention of the legislator is that an RREC must guarantee optimum transparency of the property investment and generate maximum cash flow, while the investor enjoys a range of advantages. The regulated real estate company is under the control of the Financial Services and Markets Authority and is subject to a specific scheme.
Retail properties grouped along roads leading into and out of cities and towns. Each peripheral retail property has its own car park and an entrance and exit road connecting to the public highway.
A real estate certificate is a security that entitles the holder to a proportionate part of the income obtained from a building. The holder also shares in the proceeds if the building is sold.
Achieved and unachieved higher or lower values relative to the most recent valuation by the expert.
A collection of peripheral retail properties, located along the same traffic axis and, from the consumer's point of
view, they form a self-contained whole, although they do not possess a joint infrastructure other than the traffic axis.
Retail properties that form part of an integrated commercial complex and are grouped together with other retail properties. All properties use a central car park with a shared entrance and exit road.
The Royal Decree of 13 July 2014 in execution of the Law of 12 May 2014 on regulated real estate companies (Belgian REITs).
This is the total number of shares at the closing date multiplied by the closing price at the closing date.
| Name: | Retail Estates nv |
|---|---|
| Status: | Public regulated real estate company ("RREC" - 'Belgian REIT') according to Belgian law |
| Address: | Industrielaan 6, 1740 Ternat, Belgium |
| Tel: | +32 (0)2 568 10 20 |
| Fax: | +32 (0)2 581 09 42 |
| E-mail: | [email protected] |
| Website: | www.retailestates.com |
| Register of legal entities: | Brussels |
| VAT: | BE 0434.797.847 |
| Enterprise number: | 0434.797.847 |
| Date of incorporation: | 12 July 1988 |
| Status as fixed-capital real estate investment fund granted: |
27 March 1998 (until 23 October 2014) |
| Status as regulated real estate company granted: |
24 October 2014 |
| Duration: | Unlimited |
| Management: | Internal |
| Auditor: | PwC Bedrijfsrevisoren bcvba – Woluwegarden-Woluwedal 18, at B-1932 Brussels, represented by Mr. Damien Wagrave |
| Financial year closing: | 31 March |
| Capital at 30.09.2015: | 198,435,728.35 EUR |
| Number of shares at 30.09.2015: | 8,819,213 |
| Annual shareholders' meeting: | First Friday of July |
| Share listing: | Euronext – continuous market |
| Financial services: | KBC Bank |
| Value of real estate portfolio at 30.09.2015: |
Investment value EUR 999.78 million – fair value EUR 975.75 million (incl. value of "Immobilière Distri-Land nv" real estate certificates) |
| Real estate experts: | Cushman & Wakefield and CBRE |
| Number of properties at 30.09.2015 632 | |
| Type of properties: | Peripheral retail real estate |
| Liquidity provider: | KBC Securities |
| Belgian law |
|---|
| Brussels, represented by Mr. Damien Wagrave |
| Investment value EUR 999.78 million – fair value EUR 975.75 million (incl. value of "Immobilière Distri-Land nv" real estate certificates) |
Openbare GVV - SIR publique
Industrielaan 6 B - 1740 Ternat T. +32 (0)2 568 10 20 F. +32 (0)2 581 09 42
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