Following a public tendering procedure entitled "Sicafi 2006 Real Estate Partner" Cofinimmo has been chosen by the Council of Ministers as the Real Estate Partner for the new property company which the Belgian Federal Government wishes to set up before year end under the sicafi regime and to see listed next year.
The portfolio of the new company will consist in 79 office properties (as well as the platform for erection of the WTC 4 tower) all located in Belgium and let to the Buildings Agency (Belgian State) for the use of the Federal Ministries or to the European Commission. Its total office surface will be 600,000 m² and its total value will reach 1.2 billion.
The name of the new sicafi is not yet chosen and it is still designated as the "Sicafi 2006".
Cofinimmo will first form the company and will contribute in kind 12 of its properties for an estimated amount of 525 million. The State will then contribute in cash an amount corresponding to 10% of the capital. In a third step the Sicafi 2006 will buy from the State 67 properties for an amount contractually set at 647 million including transfer taxes and take over a financial lease obligation relating to one of the properties for 74 million. These transactions will be completed on 31 December 2006 at the latest.
The average lease length and the initial gross rental yield of the portfolio will be respectively 14.7 years and 6.4%.
In the first three years refurbishments will be carried out by the Sicafi 2006 in properties originally owned by the State for an amount of 52 million, whilst 50,000 m² of other assets also originated from the State will be vacated by their occupants and will need to be redeveloped.
The Sicafi 2006 will still this year apply to the Banking, Finance and Insurance Commission for the sicafi status. In accordance with the regulations, Cofinimmo acting as sole sponsor of the new sicafi will within 12 months after the date of grant of the sicafi status proceed with the initial public offering (IPO) of between minimum 30% and maximum 33% of the shares of the Sicafi 2006 and will apply for their listing on Euronext Brussels.
After the IPO the capital of the new sicafi will be distributed as follows:
- Cofinimmo: 57 to 60%
- Belgian State: 10%
- Float: 30 to 33%
In function of the number of shares which will be bought and of the introduction price, the amount of the IPO should approach 200 million.
On the basis of the significant premium against net asset value currently prevailing on the market, it is likely that the IPO will result in a premium for the shares to be sold.
Given the magnitude of the contribution of the State to the portfolio of the company, Cofinimmo has committed itself to pass on to the Government the entire capital gain of the IPO. Cofinimmo will also make in 2006 a 20 million non reimbursable advance payment to the State on this IPO capital gain.
The sum of the price paid by the Sicafi 2006 for the properties sold by the State, less the amount of the leasing obligation taken over plus the amount of the prepayment on the IPO capital gain, will result in an impact on the Government 2006 budget of 593 million.
The Sicafi 2006 will be a limited company (société anonyme/naamloze vennootschap). The functioning of the new entity within the Cofinimmo group will ensure its managerial autonomy by an appropriate design of the by-laws and of the corporate governance charts that will fully comply with the Belgian Corporate Governance Code. A managing director will be selected in the nearby future who is currently not active with any of the two shareholders.
During the 12 months period dating from the execution of the agreement with the State Cofinimmo will extend its support for the formation of the company and for its technical, financial and administrative management after which the company should be equipped with all skills required to function in an autonomous way.
Until the IPO a Steering Committee formed by representatives of the State, of its financial, legal and prop