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Brack Capital Properties N.V — Interim / Quarterly Report 2015
Aug 26, 2015
6700_ir_2015-08-26_0b97bc4b-ab27-4b8d-8896-61a3b59cfd14.pdf
Interim / Quarterly Report
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BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF 30 JUNE 2015
EURO IN THOUSANDS
INDEX
| Page | |
|---|---|
| Report on Review of Interim Condensed Consolidated Financial Statements | 2 |
| Interim Condensed Consolidated Statement of Financial Position | 3 - 4 |
| Interim Condensed Consolidated Income Statement | 5 |
| Interim Condensed Consolidated Statement of Comprehensive Income | 6 |
| Interim Condensed Consolidated Statement of Changes in Equity | 7 - 8 |
| Interim Condensed Consolidated Statement of Cash Flows | 9 - 11 |
| Notes to the Interim Condensed Consolidated Financial Statements | 12 - 18 |
| Directors’ Responsibility Statement | 19 |
| Appendix to the Interim Condensed Consolidated Financial Statements | 20 |
EY
Building a better working world
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
to the shareholders -
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
Introduction
We have reviewed the accompanying interim condensed consolidated statement of financial position of BCRE – Brack Capital Real Estate Investments N.V. (the “Company”) and its subsidiaries (together the “Group”) as of 30 June 2015 and the related interim condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the six-months period then ended, and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34 Interim Financial Reporting (IAS 34) as adopted by the European Union. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.
Scope of 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 of making inquiries, primarily of persons responsible for financial and accounting matters, and 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union.
Tel-Aviv, Israel
25 August, 2015
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 30 June 2015 | 31 December 2014 | |
|---|---|---|
| Unaudited | Audited | |
| Euro in thousands | ||
| ASSETS: | ||
| Non-current assets: | ||
| Investment property | 1,395,323 | 1,293,358 |
| Investments and loans to associates and joint ventures | 240,169 | 222,824 |
| Property, plant and equipment, net | 2,133 | 1,725 |
| Inventory of land | 37,924 | 37,576 |
| Other investments and loans | 35,880 | 49,770 |
| Restricted bank accounts and deposits | 975 | 2,035 |
| Deferred tax assets | 9,739 | 7,689 |
| Total non-current assets | 1,722,143 | 1,614,977 |
| Current assets: | ||
| Inventory of land and inventory of apartments under construction | 87,209 | 77,952 |
| Trade and other receivables | 24,307 | 21,598 |
| Other investments and loans | 49,002 | 21,451 |
| Restricted bank accounts and deposits | 16,826 | 22,995 |
| Marketable securities and other short-term investments | 6,163 | 5,465 |
| Cash and cash equivalents | 95,503 | 96,359 |
| Total current assets | 279,010 | 245,820 |
| Assets classified as held for sale | - | 16,330 |
| Total assets | 2,001,153 | 1,877,127 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 30 June 2015 | 31 December 2014 | |
|---|---|---|
| Unaudited | Audited | |
| Euro in thousands | ||
| EQUITY: | ||
| Attributable to the equity holders of the Company: | ||
| Share capital and premium | 149,020 | 149,020 |
| Convertible loan | 16,575 | 16,575 |
| Other reserves | (45,875) | (69,470) |
| Retained earnings | 147,941 | 171,222 |
| 267,661 | 267,347 | |
| Non-controlling interests | 461,033 | 437,020 |
| Total equity | 728,694 | 704,367 |
| LIABILITIES: | ||
| Non-current liabilities: | ||
| Derivative financial instruments | 1,540 | 542 |
| Interest-bearing loans and other borrowings | 861,197 | 966,832 |
| Other non-current liabilities | 7,781 | 8,472 |
| Deferred tax liabilities | 54,657 | 47,942 |
| Total non-current liabilities | 925,175 | 1,023,788 |
| Current liabilities: | ||
| Tax provision | 209 | 90 |
| Trade and other payables | 25,006 | 33,511 |
| Interest-bearing loans and other borrowings | 258,590 | 71,659 |
| Advances from buyers | 63,105 | 43,446 |
| Derivative financial instruments | 374 | 266 |
| Total current liabilities | 347,284 | 148,972 |
| Total liabilities | 1,272,459 | 1,172,760 |
| Total equity and liabilities | 2,001,153 | 1,877,127 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
25 August 2015
Date of approval of the interim financial statements
Ariel Podrojski
CEO
Harin Thaker
Chairman of Board
Nansia Koutsou
CFO
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
| | Six months ended
30 June | | Year ended
31 December |
| --- | --- | --- | --- |
| | 2015 | 2014 | 2014 |
| | Unaudited | | Audited |
| | Euro in thousands
(except for earnings/(losses) per share) | | |
| Gross rental income | 37,416 | 32,832 | 68,040 |
| Service charge, management and other income | 15,514 | ) 11,796 | ) 25,178 |
| Property operating and other expenses | (24,493) | ) (20,495) | ) (43,340) |
| Rental and management income, net | 28,437 | 24,133 | 49,878 |
| Proceeds from sale of residential units | 11,894 | 28,263 | 72,539 |
| Cost of sales of residential units | (9,801) | (23,032) | (62,740) |
| Gross profit from sale of residential units | 2,093 | 5,231 | 9,799 |
| Total gross profit | 30,530 | 29,364 | 59,677 |
| Revaluation of investment property, net | 3,574 | 24,565 | 112,118 |
| Gain from bargain purchase and loss from realization of
investments, net | - | - | 16,328 |
| Administrative expenses | (6,407) | (6,842) | (12,024) |
| Other income, net | 360 | 538 | 526 |
| Share based payments | (1,173) | (1,535) | (2,880) |
| Share of profit/(loss) of associates and joint ventures | (14,197) | 3,938 | 2,497 |
| Operating profit | 12,687 | 50,028 | 176,242 |
| Financial income | 23,743 | 1,934 | 12,216 |
| Financial expenses | (20,217) | (24,359) | (43,207) |
| Exchange rate differences, net | (19,168) | (4,676) | (50,970) |
| Financial expenses, net | (15,642) | (27,101) | (81,961) |
| Profit/(loss) before tax | (2,955) | 22,927 | 94,281 |
| Tax expense | (5,374) | (5,649) | (9,929) |
| Net profit/(loss) for the period | (8,329) | 17,278 | 84,352 |
| Profit/(loss) for the period attributable to: | | | |
| Equity holders of the Company | (23,281) | 588 | 30,042 |
| Non-controlling interests | 14,952 | 16,690 | 54,310 |
| | (8,329) | 17,278 | 84,352 |
| Earnings/(losses) per share attributable to equity holders of the
Company | | | |
| Basic | (0.14) | ) | 0.19 |
| Diluted | (0.14) | ) | 0.17 |
) Retrospectively application due to change in accounting policy, see note 2c.
*) Represented amounts lower than €0.01.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| | Six months ended
30 June | | Year ended
31 December
Audited |
| --- | --- | --- | --- |
| | Unaudited | | |
| | 2015 | 2014 | |
| | Euro in thousands | | |
| Net profit/(loss) for the period | (8,329) | 17,278 | 84,352 |
| Other comprehensive income/(loss): | | | |
| Items to be reclassified to profit or loss | | | |
| Exchange differences on translation of foreign operations, net | 15,517 | 767 | (9,699) |
| Share of other comprehensive income/(loss) of associates and joint ventures | 22,524 | (3,551) | (50,158) |
| Total other comprehensive income/(loss) | 38,041 | (2,784) | (59,857) |
| Total comprehensive income for the period | 29,712 | 14,494 | 24,495 |
| Total comprehensive income/(loss) attributable to: | | | |
| Equity holders of the Company | 442 | (1,061) | (6,106) |
| Non-controlling interests | 29,270 | 15,555 | 30,601 |
| | 29,712 | 14,494 | 24,495 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Attributable to the equity holders of the Company | |||
|---|---|---|---|
| Share capital and premium | Convertible shareholders' capital notes | Convertible loan | Foreign currency translation reserve |
| Euro in thousands | |||
| Balance as at 1 January 2014 (audited) | 68,726 | 59,585 | - |
| Profit for the year | - | - | - |
| Other comprehensive loss | - | - | - |
| Total comprehensive income/(loss) | - | - | - |
| Capital notes conversion | 59,585 | (59,585) | - |
| Issuance of shares | 25,530 | - | - |
| Issuance of convertible loan | - | - | 16,575 |
| Capital reduction | (4,821) | - | - |
| Share based payments | - | - | - |
| Transactions with non-controlling interests, net | - | - | - |
| Receipts from non-controlling interests | - | - | - |
| Distributions to non-controlling interests | - | - | - |
| Balance as at 31 December 2014 (audited) | 149,020 | - | 16,575 |
| Profit/(loss) for the period | - | - | - |
| Other comprehensive income | - | - | - |
| Total comprehensive income/(loss) | - | - | - |
| Share based payments | - | - | - |
| Transactions with non-controlling interests, net | - | - | - |
| Receipts from non-controlling interests | - | - | - |
| Distributions to non-controlling interests | - | - | - |
| Balance as at 30 June 2015 (unaudited) | 149,020 | - | 16,575 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Attributable to the equity holders of the Company | |||
|---|---|---|---|
| Share capital and premium | Convertible shareholders' capital notes | Foreign currency translation reserve | Share-based payment reserve |
| Euro in thousands | |||
| Balance as at 1 January 2014 (audited) | 68,726 | 59,585 | (25,091) |
| Profit for the period | - | - | - |
| Other comprehensive loss | - | - | (1,649) |
| Total comprehensive income/(loss) | - | - | (1,649) |
| Capital notes conversion | 59,585 | (59,585) | - |
| Issuance of shares | 23,611 | - | - |
| Share based payments | - | - | - |
| Transactions with non-controlling interests, net | - | - | - |
| Receipts from non-controlling interests | - | - | - |
| Distributions to non-controlling interests | - | - | - |
| Balance as at 30 June 2014 (unaudited) | 151,922 | - | (26,740) |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| | Six months ended
30 June | | Year ended
31 December
Audited |
| --- | --- | --- | --- |
| | Unaudited | | |
| | 2015 | 2014 | |
| | Euro in thousands | | |
| Cash flows from operating activities: | | | |
| Profit/(loss) for the period | (8,329) | 17,278 | 84,352 |
| Adjustments for: | | | |
| Depreciation | 146 | 88 | 189 |
| Gain from bargain purchase and other income, net | - | - | (16,328) |
| Revaluation of investment property, net | (3,574) | (24,565) | (112,118) |
| Share in loss/(profit) of entities accounted for using equity method | 14,197 | (3,938) | (2,497) |
| Deferred taxes, net | 4,674 | 4,823 | 10,175 |
| Tax provision | 127 | 59 | (1,662) |
| Share based payments | 1,173 | 1,535 | 2,880 |
| Other expenses | - | - | 2,111 |
| Financial expenses, net | 15,642 | 27,101 | 81,961 |
| Cash flow from operating activities before changes in working capital and provisions | 24,056 | 22,381 | 49,063 |
| Increase/(decrease) in advances from buyers | 19,659 | 5,228 | (96) |
| (Increase)/decrease in inventories of apartments under construction | (8,309) | 1,000 | 22,062 |
| (Increase)/decrease in trade and other receivables | (1,357) | 210 | (2,226) |
| (Decrease)/increase in trade and other payables | (2,109) | (3,782) | 145 |
| | 7,884 | 2,656 | 19,885 |
| Cash flows provided by operating activities | 31,940 | 25,037 | 68,948 |
| Cash flows from investing activities: | | | |
| Acquisition of newly consolidated subsidiaries and obtaining control in companies previously accounted for using equity method, net (a) | - | - | (4,327) |
| Investment and loans to associates and jointly controlled entities, net | (7,664) | 7,999 | 5,430 |
| Changes in investments, net | 2,532 | (11,586) | (17,106) |
| Acquisition and additions to property, plant and equipment | (76) | (202) | (1,205) |
| Acquisitions of investment property | (37,222) | (87,135) | (218,124) |
| Additions to investment property | (20,619) | (19,178) | (40,722) |
| Placement of restricted deposits, prepaid transaction costs and placement of long-term deposits in banks, net | 7,229 | (4,335) | (21,155) |
| Disposal of assets classified as held for sale | 15,962 | - | - |
| Interest received | 1,136 | - | 1,440 |
| Loans to related parties, net | - | (2,900) | (6,647) |
| Cash flows used in investing activities | (38,722) | (117,337) | (302,416) |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| | Six months ended
30 June | | Year ended
31 December
Audited |
| --- | --- | --- | --- |
| | Unaudited | | |
| | 2015 | 2014 | |
| | Euro in thousands | | |
| Cash flows from financing activities: | | | |
| Share capital issuance, net | - | 24,205 | 25,530 |
| Issuance of convertible loans | - | - | 16,575 |
| Repayment of capital note | - | (2,294) | (2,294) |
| Payment for capital reduction | (4,821) | - | - |
| Receipt of loans, net | 43,165 | 234,207 | 353,470 |
| Issuance of debentures, net | 3,268 | 15,221 | 80,334 |
| Repayment of long-term loans and debentures | (17,611) | (137,891) | (181,014) |
| Repayment of loans from partners and non-controlling interest | - | - | (9,633) |
| Interest paid | (15,825) | (14,930) | (33,328) |
| Transactions with non-controlling interests, net | 7,022 | 6,055 | 22,869 |
| Purchase of rights from non-controlling interests of subsidiaries | (3,832) | - | (10,125) |
| Loans received from associates | - | - | 361 |
| Repayment of loans from related parties | - | (5,657) | - |
| Distribution to non-controlling interests | (14,048) | (9,911) | (11,218) |
| Repayment of swap transaction, transaction costs and sale of derivatives, net | 7,141 | (3,418) | (3,418) |
| Exercise of stock options | 717 | 1,579 | 2,752 |
| Cash flows provided by financing activities | 5,176 | 107,166 | 250,861 |
| (Decrease)/increase in cash and cash equivalents | (1,606) | 14,866 | 17,393 |
| Foreign exchange differences, net | 750 | (319) | 2,043 |
| Cash and cash equivalents at the beginning of the period | 96,359 | 76,923 | 76,923 |
| Cash and cash equivalents at the end of the period | 95,503 | 91,470 | 96,359 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| | Six months ended
30 June | | Year ended
31 December
2014 |
| --- | --- | --- | --- |
| | 2015 | 2014 | |
| | Euro in thousands | | |
| (a) Acquisition of newly consolidated subsidiaries and
obtaining control in companies previously accounted for
using equity method: | | | |
| Assets and liabilities of subsidiaries on the purchase date: | | | |
| Working capital (excluding cash and cash equivalents), net | - | - | (2,011) |
| Fixed assets | - | - | (232) |
| Other investments and loans | - | - | (1,712) |
| Deferred tax assets | - | - | (2,107) |
| Investments in associates | - | - | (1,002) |
| Interest bearing loans and borrowings | - | - | 3,701 |
| Loss from obtaining control | - | - | (2,111) |
| Non-controlling interests | - | - | 1,147 |
| | - | - | (4,327) |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:- GENERAL
a. These financial statements have been prepared in a condensed format as of 30 June 2015 and for the six months then ended (“interim condensed consolidated financial statements”). These financial statements should be read in conjunction with the Company’s annual consolidated financial statements as of 31 December 2014 and for the year then ended (“annual financial statements”).
The interim condensed consolidated financial statements of the Company for the six months period ended 30 June 2015 comprise the Company and its subsidiaries and the Group’s interest in associates and joint ventures which are accounted for using the equity method. The Group is an international real-estate development and investment group.
b. The interim condensed consolidated financial statements were authorized in accordance with a resolution of the Board of Directors on 25 August 2015.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of the interim condensed consolidated financial statements:
The interim condensed consolidated financial statements for the six months period ended 30 June 2015 have been prepared in accordance with the International Financial Reporting Standard IAS 34 (“Interim Financial Reporting”) as adopted by the European Union.
b. New standards, interpretations and amendments adopted by the Company:
The significant accounting policies and methods of computation followed in the preparation of the interim condensed consolidated financial statements are identical to those followed in the preparation of the latest annual financial statements.
c. During the period the Company, changed its accounting policy from presenting service charges from tenants in Germany, which were previously presented on net basis, to a gross basis presentation. The Company is of the opinion that the new accounting policy provides a more relevant information to the users of the financial statements.
The effects of the change in accounting policy in view of the above on the Group’s consolidated financial statements are as follows:
In the consolidated income statement for the year ended 31 December 2014:
| As previously reported | Change | As currently presented | |
|---|---|---|---|
| Euro in thousand | |||
| Service charge, management and other income | 3,059 | 22,119 | 25,178 |
| Property operating and other expenses | (21,221) | (22,119) | (43,340) |
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In the consolidated income statement for the period ended 30 June 2014:
| As previously reported | Change | As currently presented | |
|---|---|---|---|
| Euro in thousand | |||
| Service charge, management and other income | 1,188 | 10,608 | 11,796 |
| Property operating and other expenses | (9,887) | (10,608) | (20,495) |
The change in accounting policy does not have any effect on the profit for the period/year and on the earning per share attributable to the equity holders of the Company.
NOTE 3: - FINANCIAL INSTRUMENTS
a. Set out below, are the carrying amounts and the fair value of the Group’s financial instruments that are not presented in the interim condensed consolidated financial statements at fair value:
| Carrying amount | Fair value | |||
|---|---|---|---|---|
| 30 June 2015 | 31 December 2014 | 30 June 2015 | 31 December 2014 | |
| Euro in thousands | ||||
| Financial liabilities: | ||||
| Debentures and interest payable on debentures | 310,836 | 278,147 | 321,866 | 287,195 |
The carrying amount of cash and cash equivalents, restricted deposits and other short-term investments, trade receivables, other accounts receivable, trade payables and other payables and interest-bearing loans and borrowing presented at amortized cost approximates their fair value. Fair value of the quoted debentures is based on price quotations at the reporting date.
b. The following table provides the fair value measurement hierarchy of the Group’s financial instruments as at 30 June 2015:
| Fair value hierarchy | ||||
|---|---|---|---|---|
| Total | Quoted prices in active markets (Level 1) | Significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |
| Euro in thousands | ||||
| Assets measured at fair value: | ||||
| Investment property | 1,395,323 | - | - | 1,395,323 |
| Marketable securities and other short-term investments | 6,163 | 6,163 | - | - |
| Other investments and loans | 24,641 | - | 24,641 | - |
| Liabilities measured at fair value: | ||||
| Derivatives | 1,914 | - | 1,914 | - |
| Interest-bearing loans and borrowings | 314,547 | - | - | 314,547 |
| Liabilities for which fair values are disclosed | 321,866 | 172,877 | - | 148,989 |
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: - FINANCIAL INSTRUMENTS (Cont.)
There have been no transfers between Level 1 and Level 2 during the period.
Quantitative disclosures fair value measurement hierarchy for Group's assets and Liabilities as at 31 December 2014:
| Fair value hierarchy | ||||
|---|---|---|---|---|
| Total | Quoted prices in active markets (Level 1) | Significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |
| Euro in thousands | ||||
| Assets measured at fair value: | ||||
| Investment property | 1,293,358 | - | - | 1,293,358 |
| Derivatives | 10,408 | - | 10,408 | - |
| Marketable securities and other short-term investments | 5,465 | 5,465 | - | - |
| Liabilities measured at fair value: | ||||
| Derivatives | 808 | - | 808 | - |
| Interest-bearing loans and borrowings | 320,430 | - | - | 320,430 |
| Liabilities for which fair values are disclosed | 287,195 | 157,908 | - | 129,287 |
c. Reconciliation of fair value measurements that are categorized within Level 3 of the fair value hierarchy in financial instruments:
| Financial instruments | ||
|---|---|---|
| 2015 | 2014 | |
| Euro in thousands | ||
| As of 1 January (audited) | 449,717 | 533,125 |
| Total loss recognized in profit or loss | 16,264 | 7,478 |
| Additions/repayments | (2,445) | (123,918) |
| Balance as of 30 June (unaudited) | 463,536 | 416,685 |
| Financial instruments | ||
| 2014 | ||
| As of 1 January (audited) | 533,125 | |
| Total loss recognized in profit or loss | 14,054 | |
| Additions/repayments | (97,462) | |
| Balance as of 31 December (audited) | 449,717 |
d. Valuation techniques:
The fair values of financial instruments not traded in active markets are determined using valuation techniques. Valuation techniques specific to financial instruments include:
- The fair values of interest swap contracts and CAP agreements are based on the present value of the estimated future cash flows determined using observable return curves.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: - FINANCIAL INSTRUMENTS (Cont.)
- The fair values of short term bank credits are based on the discounted cash flows determined using the observed rate of Euribor plus a margin.
e. The following describes the unobservable material data used in valuation:
| Valuation technique | Unobservable material data | Range (weighted average) | Sensitivity of fair value to change in data | |
|---|---|---|---|---|
| Financial liabilities: | ||||
| Loans | DCF | Discount interest | Euribor for 3 months plus 2.05 – 2.5 | 2% increase/decrease in discount rate will result in decrease/ increase of up to €11.1 million in fair value |
| Interest swap transactions | DCF | Payment curve | Euribor curve for the transaction period | 2% increase/decrease in Euribor curve will result in decrease/ increase of up to €6.3 million in fair value |
f. During 2014, a subsidiary of the Company, had entered into a currency exchange rate transaction between Euro and the United States Dollar and as a result had recorded a valuation gain in the amount of €10 million for the year ended 31 December 2014.
During the six months period ended on 30 June 2015, as a result of the further weakening of Euro against the United States Dollar, the subsidiary entered into an opposite currency transaction to fix the profit accumulated by that date, in the amount of €24 million. As a result of this additional transaction during the six months period ended on 30 June 2015, the subsidiary recorded a valuation gain in the amount of €14 million. In addition, the subsidiary has an option to cash out these transactions at any given date by the payment of a not material commission. In addition, during the six months period ended on 30 June 2015, the subsidiary had entered into a SWAP transaction for fixing the 6-months Euribor interest rate in the amount of €200 million. As a result of changes in the interest rate expectations, the subsidiary had closed this transaction during the period and recorded a gain in the amount of €7 million classified within "financial income" on the consolidated income statement.
NOTE 4:- MATERIAL EVENTS DURING REPORTING PERIOD
a. On 30 December 2014, a shareholders agreement in relation to the Novosibirsk project was signed between the joint venture ("JV") and the local partner. The project will include an agro industrial, wholesale and distribution center, which will be implemented by phases. According to this agreement the JV company was established, where JV hold 51% of the shares and the remaining 49% by the local partner.
According to the agreement, the partner had assigned to the JV the rights of the land plots with the total area of approximately 156 hectare, located in Novosibirsk region, which shall be used for the project development. The JV committed to fund up to 500 million Russian Ruble, as a consideration for its share in the project.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4:- MATERIAL EVENTS DURING REPORTING PERIOD (Cont.)
b. On 7 April 2015, a subsidiary of the Company in USA has acquired a new rented multifamily platform (“Century Lakes”) in Cincinnati, Ohio for the total amount of $17.2 million (€14.2 million). In order to finance the acquisition the subsidiary obtained a bank loan of $11.2 million (€9.2 million). The principal balance of the loan is payable on the loan maturity date on 6 May 2025. The facility carries interest at 4.07% per annum and is payable by monthly instalments.
c. On 29 May 2015, a wholly owned and controlled subsidiary of Brack Capital Properties N.V. (“BCP”) entered into a notarized sale agreement with a third party to purchase 430 residential units and 11 garages, spanning over a total area of 29 thousand square meters in several cities in northern Germany. The transfer of ownership and the payment of the full consideration of €24.5 million (including related transaction costs) were carried out on 30 June 2015. For the purpose of financing the purchase, the subsidiary entered into a loan agreement with a German bank for a non-recourse loan with final repayment date of 30 June 2020, in the total amount €17.6 million.
d. As of 30 June 2015, the Group had negative working capital in the amount of €68.3 million, due to the arriving maturity date of several subsidiaries' loan facilities by 30 June 2016. As of the date of approval of these financial statements, few subsidiaries had signed agreements for the prolongation of the facilities (see also note 6b) while other subsidiaries are currently negotiating the prolongation of the facilities.
e. Further to note 5b of the consolidated financial statements for the year ended 31 December 2014, due to the continuing decrease in oil and energy prices and the recent events in the Chinese economy, the Russian Ruble continues to weaken against the US Dollar by 25% (compared to 31 December 2014). The Group continues to monitor the economic developments in Russia which are external to the Group and beyond its control and is continuing taking steps to minimize its exposure to the situation.
NOTE 5:- SEGMENT INFORMATION
| Six months ended 30 June 2015 | Income producing commercial real estate | Income producing residential real estate | Property held for appreciation | Residential development | Other | Total |
|---|---|---|---|---|---|---|
| Euro in thousand | ||||||
| Gross rental income | 20,338 | 16,721 | 357 | - | - | 37,416 |
| Service charge, management and other income | 4,267 | 8,906 | 1,838 | 20 | 483 | 15,514 |
| Proceeds from sale of residential units | - | - | - | 11,894 | - | 11,894 |
| Cost of sales of residential units | - | - | - | (9,801) | - | (9,801) |
| Property operating and other expenses | (8,660) | (12,812) | (899) | (763) | (1,359) | (24,493) |
| Gross profit/(loss) | 15,945 | 12,815 | 1,296 | 1,350 | (876) | 30,530 |
| Revaluation of investment property, net | 8,224 | 8,522 | (13,172) | - | - | 3,574 |
| Share of profit of associates and joint ventures | (14,823) | - | - | 1,499 | (873) | (14,197) |
| Segment results | 9,346 | 21,337 | (11,876) | 2,849 | (1,749) | 19,907 |
| Administrative and other expenses, net | (7,220) | |||||
| Financial expenses, net | (15,642) | |||||
| Loss before tax | (2,955) |
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5:- SEGMENT INFORMATION (Cont.)
| Six months ended 30 June 2014 | Income producing commercial real estate | Income producing residential real estate | Property held for appreciation Euro in thousand | Residential development | Other | Total |
|---|---|---|---|---|---|---|
| Gross rental income | 19,808 | 12,891 | 133 | - | - | 32,832 |
| Service charge, management and other income | *) 4,062 | *) 7,259 | 30 | - | 445 | *) 11,796 |
| Proceeds from sale of residential units | - | - | - | 28,263 | - | 28,263 |
| Cost of sales of residential units | - | - | - | (23,032) | - | (23,032) |
| Property operating and other expenses | *) (8,855) | *) (9,459) | (1,906) | - | (275) | *) (20,495) |
| Gross profit/(loss) | 15,015 | 10,691 | (1,743) | 5,231 | 170 | 29,364 |
| Revaluation of investment property, net | 5,622 | 10,840 | 8,103 | - | - | 24,565 |
| Share of profit of associates and joint ventures | 4,324 | - | 206 | - | (592) | 3,938 |
| Segment results | 24,961 | 21,531 | 6,566 | 5,231 | (422) | 57,867 |
| Administrative and other expenses, net | (7,839) | |||||
| Financial expenses, net | (27,101) | |||||
| Profit before tax | 22,927 |
*) Retrospectively application due to change in accounting policy, see note 2c.
| Year ended 31 December 2014 | Income producing commercial real estate | Income producing residential real estate | Property held for appreciation Euro in thousands | Residential development | Other | Total |
|---|---|---|---|---|---|---|
| Gross rental income | 39,731 | 27,919 | 390 | - | - | 68,040 |
| Service charge, management and other income | *) 7,202 | *) 15,764 | 55 | - | 2,157 | *) 25,178 |
| Proceeds from sale of residential units | - | - | - | 72,539 | - | 72,539 |
| Cost of sales of residential units | - | - | - | (62,740) | - | (62,740) |
| Property operating and other expenses | *) (15,188) | *) (20,190) | (767) | (226) | (6,969) | *) (43,340) |
| Gross profit/(loss) | 31,745 | 23,493 | (322) | 9,573 | (4,812) | 59,677 |
| Revaluation of investment property, gain from bargain and loss from realization of investments, net | 38,973 | 11,619 | 78,798 | - | (944) | 128,446 |
| Share of profit of associates and joint ventures | 887 | - | 2,479 | - | (869) | 2,497 |
| Segment results | 71,605 | 35,112 | 80,955 | 9,573 | (6,625) | 190,620 |
| Administrative and other expenses, net | (14,378) | |||||
| Finance expenses, net | (81,961) | |||||
| Profit before tax | 94,281 |
*) Retrospectively application due to change in accounting policy, see note 2c.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6:- SUBSEQUENT EVENTS
a. Further to note 9a3 to the 31 December 2014 consolidated financial statements, in August 2015 the Supreme State Court has provided its approval for the acquisition by a subsidiary of the Company in USA of a rented residential building in the Upper West Side of Manhattan, New York. The building has a gross internal area of c.240,000 square feet.
b. In August 2015, BCP through its subsidiaries entered into two agreements with a German Banking Corporation for the extension of two existing loan facilities (Loan 1 and Loan 2). Loan 1 has been extended until 15 March 2023 and will bear interest at 3-months Euribor plus a margin of 1.39% (instead of 1.57% as per the previous agreement). Loan 2 has been extended until 15 April 2020 (with an option to extend for additional two years) and will bear interest at 3-months Euribor plus a margin of 1.33% (instead of 1.54% as per the previous agreement).
18
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
DIRECTORS' RESPONSIBILITY STATEMENT
DIRECTORS' RESPONSIBILITY STATEMENT
With reference to section 5:25d paragraph 2 under c of the Dutch Financial Supervision Act, the members of the Board of Directors of the Company hereby declare that, to the best of their knowledge:
- the interim condensed consolidated financial statements, which have been prepared in accordance with IAS 34 Interim Financial Reporting (IAS 34), give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and its consolidated subsidiaries; and
- the additional management information provided in the press release attached to the interim condensed consolidated financial statements include a fair view of the information required pursuant to section 5:25d paragraphs 8 and 9 of the Dutch Financial Supervision Act.
Amsterdam, 25 August 2015
Board of Directors BCRE - Brack Capital Real Estate Investments N.V.
BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.
APPENDIX TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LIST OF SIGNIFICANT INVESTEES
| Significant investees | Country of incorporation | Ownership interest | |
|---|---|---|---|
| 30 June 2015 | 31 December 2014 | ||
| BCRE Russian Properties Ltd | Cyprus | 85.07% | 85.07% |
| Brack Capital First B.V. | The Netherlands | 100% | 100% |
| Brack Capital Properties N.V. | The Netherlands | 34.76% | 34.63% |
| Brack Capital USA B.V. | The Netherlands | 100% | 100% |
| BCRE India B.V. | The Netherlands | 100% | 100% |