Cofinimmo - Annual Financial Report 2015

REPORT BY

THE REAL ESTATE EXPERTS

CONTEXT

We have been engaged by Cofinimmo to value its real estate assets as

of 31 December 2015 with a view to finalising its financial statements

at that date.

Cushman & Wakefield (C&W), PwC Entreprise Advisory cvba/scrl (PwC)

and JLL sprl/bvba have each separately valued a part of the portfolio of

offices and other properties

C&W and PwC have each separately valued part of the portfolio of

nursing homes in Belgium. C&W and JLL France have each separately

valued part of the portfolio of nursing homes and other care facilities

in France.

The portfolio of clinics in The Netherlands has been valued by PwC

Netherlands.

The healthcare portfolio in Germany is valued by PwC Germany.

The portfolios of pubs in Belgium and the Netherlands have been

valued by C&W.

The portfolio of insurance agencies in France has been valued by C&W.

C&W, PwC and JLL have in-depth knowledge of the real estate markets

in which Cofinimmo is active and have the necessary, recognised pro-

fessional qualifications to perform this assessment. In conducting this

assessment, they have acted with complete independence.

As is customary, our assignment has been carried out on the basis

of information provided by Cofinimmo regarding tenancy schedules,

charges and taxes borne by the landlord, works to be carried out and

all other factors that could affect property values. We assume that the

information provided is complete and accurate.Our valuation reports

do not in any way constitute an assessment of the structural or

technical quality of the buildings or an in-depth analysis of their energy

efficiency or of the potential presence of harmful substances. This

information is well known to Cofinimmo, which manages its properties

in a professional way and performs technical and legal due diligence

before acquiring each property.

Other properties: semi-industrial, retail, leisure and residential.

THE OFFICE MARKET

The share of Cofinimmo’s portfolio in the office sector stood at 39.6%

of the overall portfolio in 2015. For the first time, the share of health real

estate was therefore higher than that of office real estate; this reflects

the strategy advocated by the regulated investment company (SIR).

In 2015, the Belgian office market posted a take-up of less than

500,000 sq m (leases, extensions, owner-occupier acquisitions). This

represents a fall in activity of close to 20% compared with 2014.

There were marked differences in activity between the various mar-

kets and regions as well as in the main ratios that are used to assess

activity in the office real estate market. Flanders posted a take-up

of 160,000 sq m in 2015, a 10% increase over the previous year; this

was mainly driven by activity in Ghent and Antwerp. Ghent was also

the most active office market in the country; take-up in this market

increased, the vacancy rate is low and the level of prime rent is rising.

In Wallonia, activity also increased by 17% compared with 2014.

However, in absolute terms, this upturn only equates to a 4,000 sq m

increase in take-up. The Walloon market is limited by smaller markets

and activity mainly driven by public occupiers. However, cities such as

Liège have a vacancy rate of close to 0% for the most recent buildings;

a number of projects are being developed to offset this lack of supply

as demand does exist.

In terms of the level of rent, the same trend is seen across the country

as a whole with stability in the marketplace since 2010. Increases or

reductions in values have been limited. Prime rents stand at around

€ 130 per sq m per year and € 150 per sq m per year in regional

markets.

In Brussels (including suburbs), the situation is different. In fact, the

level of take-up stands at a historic low of only 300,000 sq m, repre-

senting a fall of almost 30% compared with 2014. The lack of transac-

tions for spaces over 20,000 sq m and delays by public authorities in

their selection processes weighed heavily on office real estate activity

in Brussels in 2015.

However, the vacancy rate has been in continuous decline since

2010 and stood at less than 10% by the end of the year. Substantial

disparities are still seen between districts and availability is rising for

the oldest buildings, raising some major challenges for their future

occupation. Given this context, it is worth noting that the process of

converting offices into residential or retirement homes appears to

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Property Report /

report by the Real estate experts