The Belgian rental market for office property was affected during 2004 by a low take-up and falling rents in certain districts. Against this unfavorable background, Cofinimmo´s commercial teams focused on enhancing existing customer loyalty, forging closer ties with the real estate agents and, finally, matching rents for marketed properties to market levels.
Overall during the year, 27,700m² were let to new customers and 26,900m² were let to existing clients as a result of lease renegotiations or extensions. The success of this approach helped mitigate the impact of the gloomy climate currently affecting occupancy rates and, consequently, the current result.
Despite the current state of the rental market, Cofinimmo in fact managed to marginally improve its current net result per ordinary share in 2004 (â¬8.35 or +0.5%) compared with 2003 and above all to considerably outstrip its forecast of June 2004 of â¬8.00 (+4.4%). This last development is primarily due to the improvements in the financial result. Furthermore, the net result per ordinary share (comprising the unrealised and realised gains and losses) moved up sharply (+13.4%) from â¬6.80 in 2003 to â¬7.71 in 2004 thanks to a good level of realised gains and a decrease by 13.2% of unrealised losses on the portfolio.
Once again, investors in the Cofinimmo ordinary share can congratulate themselves on their investment as the total yield is surpassing 16% (of which 6.48% gross dividend yield and 10.12% price appreciation). For 2005, the proposed distribution assures a gross dividend yield of 6.06% compared with the closing price of 31.12.2004.
During the course of 2004, Cofinimmo pursued its growth trend in an active investment market. On the strength of the acquisitions made in 2004, the portfolio actually surpassed the threshold of 2 billion euros (â¬2,088.8 million) at the end of 2004. All of these investments comply with the strategic criteria set by the company, namely to improve the net current result, the firm duration of leases (minimum 9 years), location quality and calibre of tenant. The acquisitions made during 2004 allowed Cofinimmo to considerably increase its foothold in the Central Business District (CBD) zone of Brussels (46.0% at end-2004 compared to 38.9% one year earlier).
The company was also active and innovative during 2004 in financing its business, proceeding to carry out two capital increases, firstly to finance half the acquisition of the Egmont complex (â¬83.3 million) and secondly to refinance the share of the minority interests (institutional investors) in the absorbed subsidiary Belgian Office Properties (BOP) (â¬75.8 million). These two operations gave rise to the issue of nearly 1.5 million preference shares with priority but capped yield (6% on average), convertible from 2009 into ordinary shares (1 for 1), which have been issued undiscounted against the market price and at a higher price in comparison with the revalued net asset value.
Furthermore, taking advantage of the decreasing loan margins, the Cofinimmo group refinanced close on half its financial debt by means of a bond issue offered for public subscription (â¬100 million â" 10 years) through Cofinimmo Luxembourg SA, and by concluding a new syndicated loan (â¬200 million â" 5 years) and 2 new bilateral credit lines (â¬150 million â" 5 years). The average term of the credit lines was thus 4.5 years as from 31.12.2004. In addition, the company´s average financing cost was considerably reduced.
Finally, Cofinimmo demonstrated its capacity for renovating large-scale properties when the Belliard I-II building was delivered in June 2004, fully renovated, to the Committee of the Regions and the Economic and Social Committee of the European Union, which have moved into these premises.
Outlook for 2005
Cofinimmo is not expecting the rental market for office property in Belgium to take off. The company will continue to pursue its current operational strategy, responding efficiently to its clientsâ needs and closely watching out for inve
