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annual financial report 2009. protection. Since the beginning of time, the tree has been a source of protection. Whether providing shelter and home to early man, or as a central pillar in complicated ecosystems, the simple tree is a symbol of strength and security. Adapting constantly to its surroundings, it is a natural example of reliability, longevity and endurance.. It is fascinating that just as early man sought shelter and protection from a tree, modern man today is doing his best to protect them... ...now we all know that trees play a fundamental role in the protection of our planet. Cofinimmo is the foremost listed Belgian real estate company specialising in The buildings represent a total area of 1,695,629m² and a fair value rental property. The company benefits from the fiscal Sicafi regime in Belgium of €3,040.74 million. and the fiscal SIIC regime in France. Cofinimmo is an independent company, which manages its properties and Its core investment segments are office property and care homes representing clients-tenants in-house. 58.4% and 26.4% respectively of the Group’s total portfolio. It also comprises the It is listed on Euronext Brussels, where it is included in the BEL20 index, and Pubstone portfolio (12.8%), a real estate partnership concluded with AB InBev. Euronext Paris. Its shareholders are mainly private individuals and institutional The properties are mainly located in Belgium (84.2%). The assets abroad investors from Belgium and abroad, looking for a moderate risk profile concern, on one hand, the investments in the nursing and care sector in France combined with a high dividend yield. (11.0%) and, on the other hand, the Dutch Pubstone portfolio (4.8%). annual financial report 2009. protection. 02 Risk management It is therefore not a coincidence that 06 Letter to the Shareholders Cofinimmo has chosen the tree and its 08 Key figures 11 Management report values as the theme for this Report. 11 Strategy 15 Transactions and performances in 2009 Analogous to the tree being a refuge for 35 Management of financial resources many, Cofinimmo too wants to offer this 39 Summary of the consolidated accounts 42 Forecasts 2010 important asset to its clients, investors, 45 Appropriation of results its team and partners. Just like the tree, 47 Corporate Governance Cofinimmo wishes to take part in the 47 Decision-making bodies duty to protect the planet, and continues 57 Other parties involved 59 Rules and procedures to adapt itself to the circumstances 63 Company responsibility of today’s ever-changing world. 63 Corporate social responsibility 66 Human resources management Thanks to this adaptability and its 67 IT Management 69 Cofinimmo in the stock market creativity, Cofinimmo has been able 69 The ordinary share to firmly embed its roots in the soil 71 The preference share throughout the seasons of 2009. 71 The bonds 72 Shareholders structure 72 Shareholders calendar 75 Property report 75 Introduction 76 Geographic location 77 Office market 79 Consolidated property portfolio 85 Report by the real estate expert 89 Annual accounts 90 Consolidated accounts 94 Notes to the consolidated accounts 132 Statutory auditor’s report 133 Company accounts 137 Standing document 137 General information 141 Share capital 146 Extracts from the articles of association risk management. Strategic management Before acquiring a property, the Group carries out an internal Risk associated with the economic climate valuation to determine the price of the building within The activities of Cofinimmo and its subsidiaries (“the Group”) a long-term management perspective, and carries out are partly linked to trends in the general business cycle, indirectly a technical, administrative, legal, accounting and fiscal due influencing take-up of office space by the private sector. diligence following constant analysis procedures, mostly with The current economic crisis could have a prolonged negative the support of external specialised consultants. Moreover, impact on demand and occupancy rates for office space as well an independent real estate expert values each acquisition as on rents and could push up the risk of default by existing or disposal of a property. tenants, service suppliers, building contractors and other contractual counterparties. The economic climate could also lead Risk associated with the deterioration of properties and risk to a downward revision of the value of the real estate portfolio. of large-scale works However, the impact of this cycle on the Cofinimmo results and Despite an optimal maintenance programme, buildings may valuation is mitigated by the duration of the leases (at 31.12.2009 deteriorate as component parts suffer, wear and tear over time the average lease term was 11.0 years), by the diversification of or become architecturally or technically obsolescent. The Group the client portfolio (317 clients) and by the fact that nearly one ensures that its properties are renovated to keep them attractive third of the tenants come from the public rather than the private to its client-tenants or else sells them if the price offered is higher sector. The properties other than offices, namely nursing homes than the estimated net value of the anticipated renovation costs. and clinics (in Belgium and France), pubs (in Belgium and the Netherlands, all rented long term to AB InBev) and the Public- A loss of value may also stem from the deterioration of nearby Private Partnerships are not or only little sensitive to fluctuations properties or of the whole district in which the property owned in the general economic climate. by the Group is situated. Risk associated with the investment and development business In order to prevent excessively rapid deterioration, a systematic The diversification of the Group’s portfolio allows for a better policy of maintenance and replacement of equipment planned distribution of risk and is founded on: over the long term is applied. • acquiring office properties often rented long term to high calibre occupants; Risk associated with changes in fair value of properties • acquiring care homes and clinics rented long term The property portfolio is valued quarterly by independent real to reputable operators; estate experts having the requisite qualifications and in-depth • long-term real estate partnerships with carefully experience of the market. The fair value of properties estimated selected corporate operators; by them (their investment value less the estimated transaction • Public-Private Partnerships for buildings with costs) is entered under the heading “Investment properties” specific purposes. on the asset side of the Cofinimmo company and consolidated balance sheets. Changes in value are entered under the heading As part of its strategy, Cofinimmo carries on a minor development “Result on portfolio” in the company and consolidated income activity for own account, allowing it to maximise the return on its statements and can have a negative or positive impact on the investments. This development activity remains restricted to 10% net result. maximum of the portfolio fair value so as not to affect the Group’s risk profile. 3. The values determined by the experts represent the estimated The same applies in France, where the initial term is, however, market values of the properties. Consequently, fluctuations in the 12 years. At 31.12.2009, the average lease term in the care sector market value of the portfolio are reflected in the net asset value, was 24.7 years in Belgium and 9.9 years in France. which is published quarterly. At 31.12.2009, a change in value of 1% for the property portfolio would have had an impact At 31.12.2009 the entire pub portfolio is let to the Belgian and of approximately €30.41 million on the net result and of Dutch subsidiaries of AB InBev SA for a residual average approximately €2.17 on the intrinsic value per share. It would minimum term of 20.8 years. also have had an impact on the debt ratio of around 0.5%. Risk of tenant insolvency Risk associated with regulations and administrative procedures Cofinimmo is exposed to the risk of insolvency among its client- Modifications to regulations concerning town planning tenants. The financial consequences of such a failure are all the and environmental protection can have an adverse effect more important where the client represents a significant share of on the Group’s capacity to manage a property. Accordingly, the portfolio. At 31.12.2009, the top 5 tenants accounted for 52.8% the withdrawal of a permit to have a certain number of private of rental income (see also page 18), with the first 2 office tenants parking places in a building can make it less attractive than coming from the public sector. a neighbouring property. Likewise, the obligation to reduce the size of a building when carrying out major renovation works Before accepting any new client, a credit risk analysis is requested can be detrimental to its fair value. Lastly, the introduction from an outside rating agency. An advance deposit or bank of new or more stringent rules on pollution of the ground guarantee is usually required from non-public sector tenants or energy consumption can significantly impact on the costs corresponding to 6 months rent. incurred to keep the property operational. Rents are payable in advance, on a monthly, quarterly or yearly Property management basis. A quarterly provision covering property charges and taxes Risk of vacancy incurred by the Group but contractually rechargeable to tenants is The Group actively manages its client base in order to minimise also requested. vacancies and tenant turnover in the office segment. The property management team is responsible for swiftly resolving tenant The level of rental defaults recorded net of recoveries complaints while the commercial team maintains regular contact represents 0.088% of total turnover over the period 1996-2009.