Annual financial report 2013

Management Report

/ Strategy

Strategy

Cofinimmo invests in buildings used by companies as networks of direct

sales points of products or services to their clients.

Cofinimmo acquires these networks, which consist of a large number

of small buildings, from a company wishing to outsource its distribution

properties, and then rents them back to the company on a long-term

lease. Cofinimmo’s partners are strong companies with a recognised pro-

fessionalism and reputation.

The Pubstone portfolio comprises 1,055 cafés and restaurants in Belgium

and the Netherlands, leased to AB InBev for an initial term of 23 years. The

Cofinimur I portfolio is made up of 263 insurance agencies and mixed-

use buildings, leased to MAAF, a subsidiary of the French insurance Group

Covéa, for an initial term of 9.7 years.

These investments present the following advantages for Cofinimmo:

•

the properties are let under long-term leases;

•

their location makes them essential for the tenant’s business, and

therefore most of them have a high potential for lease renewal;

•

the properties are let back to their seller, who must therefore pay the

rent on them after the sale, the seller thus tends to ask a reasonable

price per square metre;

•

if the tenant leaves, a high proportion of these properties can be

sold as retail units or reconverted into housing;

•

if the properties were to become vacant and were to be put up for

sale by Cofinimmo, they would often be attractive for local private

investors;

•

considering the size of the buildings and their geographical

distribution, the risk of having incorrectly estimated the value on

divestment is lower than in the case of a large property;

•

finally, the tenant company is naturally inclined to communicate with

Cofinimmo, its main landlord, in order to develop its geographical

sales network, which gives Cofinimmo a heads-up as to the

buildings which lease will not be renewed on expiry and allows

Cofinimmo to target new properties that the tenant may wish to

integrate into its network.

Management

The responsibility for the maintenance of the Pubstone and Cofinimur I

networks is partially assumed by the tenant.

For more information, see the chapter “Property of Distribution Networks”

of this Annual Financial Report.

Strategy

The public authorities and non-profit organisations such as universities

are facing a growing need to renovate existing buildings or build new ones

so as to create public premises with a better architectural and environ-

mental quality and improve the living conditions for their occupants.

They no longer want the responsibility of building and maintaining

these properties. One of the solutions open to them is the Public-Private

Partnership. As Cofinimmo is constantly on the lookout for stable, low-risk

investments and is conscious of the role it can play in renovating and

improving the urban fabric on a lasting basis, it invests in this type of

projects, even including non-traditional buildings such as courthouses,

fire stations, residences for student housing, police stations and prisons.

These operations generally involve finance lease agreements and do not

entail Cofinimmo acquiring ownership in perpetuity of the properties

Management

Cofinimmo generally has maintenance obligations in these partnerships,

which cost is covered by a specific fee paid by the occupier or is inte-

grated in the rent.

Public-Private Partnerships being accounted for as financial assets, they represent 0% of the investment properties.

Cofinimmo does not benefit from their residual value because the counterparties are granted a purchase option at the end of the lease. Depending on the case, the price for exercising

this option is either purely symbolic or far below the estimated market value after this horizon, or may even reflect the building’s construction price depreciated using a straight-line

model. Ownership is often transferred to the public authority automatically and free of charge at the end of the contract.

PUBLIC-PRIVATE PARTNERSHIPS (PPP)

Accompanying the public authorities in the modernisation

and renewal of their property portfolio in Belgium

PROPERTY OF DISTRIBUTION NETWORKS

Sale and leaseback transactions

Optimisation of the sales points for the activity of the tenant

Long-term leases

15.9%