Befimmo : Interim statement as at 31 March 2017

REGULATED INFORMATION EMBARGO | 11 MAY 2017 | 5.40 PM

 Nice transactions at the start of the fiscal year 

• Beobank first major tenant of the Quatuor

• Value crystallisation of the Brederode complex

• Stable fair value of the portfolio

• EPRA earnings of €0.94 per share, in line with the outlook

• Net result of €2.05 per share

• Net asset value of €56.83 per share

• Unchanged outlook of EPRA earnings and dividend for the fiscal year

1. Key events of the first quarter of 2017 2

2. Property portfolio as at 31 March 2017 3

3. Financial report as at 31 March 2017 6

4. Befimmo share 10

5. Dividend forecast 10

6. Forthcoming publications 11

7. Appendix 1 12

8. Appendix 2 15

9. Appendix 3 18

   As a reminder, since 3 July 2016, the "Alternative Performance Measures (APM)"1 Guidelines of the European Securities Markets Authority (ESMA) have been applicable. The APMs within the press release are identified with a footnote at the first mention of the APM in this press release. The full list of APMs, their definition, their utility and the related reconciliation tables are included in Appendices 1 and 2 to this press release and are published on the Befimmo website: http://www.befimmo.be/en/investors/publications/alternative - performance-measures.

   1 For more information, please consult Report "Final Report - ESMA Guidelines on Alternative Performance Measures" on the ESMA website (https://www.esma.europa.eu/).

   The Board of Directors of Befimmo SA met on

   9 May 2017 to close the annual financial statements as at 31 March 2017

10. KEY EVENTS OF THE FIRST QUARTER OF THE 2017 FISCAL YEAR

    BEOBANK FIRST MAJOR TENANT OF THE QUATUOR

    In March 2017, Befimmo signed an agreement2 with Beobank on the occupancy of a tower of about 22,000 m² in the Quatuor3 project (60,000 m² - Brussels North Area). The agreement provides for the building to be made available for a fixed term of 15 years as from its hand-over in the course of 2020. Within this framework, the current lease of Beobank in the La Plaine building (15,180 m² - Brussels decentralised) will be extended until that date. A third of the Quatuor project is thus already pre-let more than 3.5 years before hand-over.

    VALUE CRYSTALLISATION OF THE BREDERODE COMPLEX

    In late March 2017, Befimmo granted a 99-year leasehold on the Brederode4 complex to CBRE Global Investors (on behalf of one of its SMA5 clients) for an amount of €122 million, corresponding to a yield of 3.69%.

    This operation generates a net capital gain of €0.85 per share and reduces the LTV ratio by 3.3% (in absolute terms, calculated on the bases of the ratio as at 31 December 2016). The EPRA earnings outlook, published on page 69 of the Annual Financial Report 2016, take account of the execution of this operation.

    This operation is in line with the objective of punctually crystallising value, in a Brussels office market where the search for yields in an environment of low interest rates creates opportunities for quality properties, which are well-located and occupied on a long-term basis.

    2 Under the condition precedent of obtaining the permit.

    3 For more information, please consult pages 26 and 65 of the Annual Financial Report 2016.

    4 This concerns the Brederode 13 (11,340 m²), Brederode 9 (6,864 m²) and Namur 48 (1,517 m²) buildings. For more information, please consult pages 36, 37 and 65 of the Annual Financial Report 2016.

    5 "Separate Managed Accounts".

11. PROPERTY PORTFOLIO AS AT 31 MARCH 2017

12. KEY FIGURES OF THE PROPERTY PORTFOLIO

    31.03.2017	31.12.2016
    Fair value of portfolio (in € million)	2 443.9	2 511.7
    Gross initial yield on properties available for lease	6.22%	6.07%
    Gross potential yield on properties available for lease	6.53%	6.40%
    Occupancy rate of properties available for lease	95.23%	94.79%
    Weighted average duration of leases	7.78 years(a)	8.07 years(a)
    Reversion rate of properties available for lease	-9.96%(b)	-9.50%(b)
    EPRA vacancy rate	5.24%	5.71%
    EPRA Net Initial Yield (NIY)	5.84%	5.65%
    EPRA Topped-up NIY	6.05%	5.81%

    (a) Excluding the Noord Building and the WTC II buildings, the weighted average duration of leases would be 9.15 years as at 31 December 2016 and 8.89 years as at 31 March 2017. As from 31 March 2017, Befimmo calculates the average duration of leases based on its portfolio of properties available for lease.

    (b) Excluding the Noord Building and the WTC II buildings, the reversion would be -4.95% as at 31 December 2016 and -5.09% as at 31 March 2017.

    RENOVATION AND CONSTRUCTION PROJECTS

    Over the first quarter of the fiscal year, Befimmo invested €8.3 million in its portfolio. The main renovation and construction projects are listed in the table below.

    For more information on these projects, please consult pages 24 to 27 of the Annual Financial Report 2016, which is available on the Befimmo website (www.befimmo.be).

    Building	Location	Type	BREEAM certification	Rental situation	Scheduled completion	Total investment
    Guimard 5,500 m²	Brussels CBD Leopold district	Renovation	Design "Excellent" aimed	Ongoing commercialisation	Q3 2017	€13 million
    Eupen - Rathausplatz 7,200 m²	Eupen Wallonia	Renovation - construction	-	100% let for a duration of 25 years as from hand-over	Phase 1: Q3 2018 Phase 2: Q4 2019	€13.7 million(a)
    Quatuor Building 60,000 m²	Brussels CBD North Area	Demolition Noord Building and construction Quatuor Building	Design "Excellent" aimed	Being offered for lease - 22.000 m² pre-let for a duration of 15 years as from hand-over	36 months as from early 2018	€150 million
    Paradis Express 35,000 m²	Liège Wallonia	Construction	Design "Excellent" aimed	-	2020	€50 million(b)
    WTC IV 53,500 m²	Brussels CBD North Area	Construction	Design "Outstanding" obtained	-	According to commercialisation	€140 million

    (a) The €18.0 million appearing in the Annual Financial Report 2016 include the acquisition value of the Eupen project (the acquisition occurred during the 1st quarter of the 2017 fiscal year).

    (b) "All-in" construction cost of the office part (21,000 m²).

    Furthermore, after 46 years of uninterrupted occupation by Belgian Government departments, the current lease with the Buildings Agency in Tower II of the WTC (Brussels North Area) will expire in December 2018. Within the framework of the co-ownership of Towers I and II, Befimmo is working on a number of scenarios for this site, in a perfect location opposite the Gare du Nord, to redevelop it into a multifunctional value-creating project.

    CHANGE IN FAIR VALUES6 OF THE PROPERTY PORTFOLIO

    Offices	Change over the quarter(a)	Proportion of portfolio(b) (31.03.2017)	Fair value (31.03.2017)	Fair value (31.12.2016)
    	(in %)	(in %)	(in € million)	(in € million)
    Brussels CBD and similar(c)	-0.74%	53.2%	1 300.3	1 423.0
    Brussels decentralised	-2.14%	3.6%	88.0	88.4
    Brussels periphery	-1.37%	5.9%	145.4	147.0
    Flanders	0.02%	20.1%	491.4	493.4
    Wallonia	1.77%	8.1%	196.8	194.2
    Luxembourg city	2.14%	4.1%	101.4	99.3
    Properties available for lease	-0.35%	95.1%	2 323.2	2 445.3
    Properties that are being constructed or developed for own account in order to be leased	10.35%	4.9%	118.6	66.3
    Investment properties	0.13%	99.9%	2 441.8	2 511.7
    Property held for sale	-0.35%	0.1%	2.1	-
    Total	0.13%	100.0%	2 443.9	2 511.7

    (a) The change over the quarter is the change in fair value between 1 January 2017 and 31 March 2017 (excluding the amount of investments and disinvestments).

    (b) The proportion of portfolio is calculated based on the fair value of the portfolio as at 31 March 2017.

    (c) Including the Brussels airport zone, in which the Gateway building is situated.

    As at 31 March 2017, the fair value of Befimmo's consolidated portfolio was €2,443.9 million, as against

    €2,511.7 million as at 31 December 2016.

    This change in value incorporates:

    • The disinvestments carried out:

      • the granting of a 99-year leasehold on the Brederode complex; and

      • the sale of the Liège - Digneffe building at a value in line with its fair value;

    • the investments carried out within the portfolio;

    • the changes in fair value booked to the income statement.

    Excluding the amount of the investments and the disinvestments, the change in value of the portfolio amounted to +3.1 million (+0.13%) over this first quarter of the fiscal year.

    6 These values are established in application of the IAS 40 standard which requires investment properties to be booked at "fair value". Fair value is obtained by deducting the average costs for transactions established by independent real-estate experts, from the "investment value". These costs amount to (i) 2.5% for property worth more than €2.5 million and (ii) 10% (Flanders) or 12.5% (Wallonia and Brussels) for property worth less than €2.5 million.