TK Development enters agreement with EUROPOLIS regarding estka shopping centre (CZ)

TK Development has entered into an agreement to sell and develop the Šestka shopping center in Prague, the Czech Republic. The sales price is about €70 million (about DKK 522 million), based on a return for the investor of 7.5 % p.a.

The buyer, EUROPOLIS is a major player on the Eastern and Central European property market. At the end of 2004, the total value of the portfolios managed by EUROPOLIS was estimated to be €900 million, and major acquisitions have since been made and planned.

The sale is based on a forward funding model that involves payment by instalments in step with the completion of construction.

The 32,000 m² Šestka shopping center is being developed by TK Development's subsidiary group, Euro Mall Holding. The 10,000 m² hypermarket has been let to Hypernova, which is owned by the Dutch hypermarket operator, Royal Ahold. The remaining floor space in the centre will be occupied by more 100 stores.

The Šestka shopping center is being built in the Prague 6 district, one of the largest and most attractive residential areas in Prague with more than 100,000 residents.

The Center will have a prime location between the ring road and one of the major approach roads to Prague down-town. Construction will be initiated in October 2005, and the shopping centre is scheduled to open in October 2006.

The agreement regarding the sale and development of the Šestka shopping centre will generate earnings for TK Development in the 2005/06 and 2006/07 financial years

Value of investment properties in Central Europe adjusted
Management has ascertained a continuation of the positive market trend in Central Europe in the 2005/06 financial year, in addition to the general decline in rates of return that has characterized the market in recent years.

The diminishing rates of return required overall by investors are reflected by the number of deals completed in the market, and have led to higher prices in sales negotiated by the Group in the current financial year – most recently in connection with the agreement to sell the Šestka shopping centre in the Czech Republic.

As a consequence, Management has adjusted the value of the Group's investment properties in the Euro Mall Holding Group, which will affect the estimated operating profit for 2005/06 by DKK 90 million, based on a return of 8 % p.a.

Provision relating to sales price receivable on the Field's project
At 1 December 2004, TK Development transferred its stake in the Field's project to its Norwegian partner, Steen & Strøm. The agreed price was DKK 1.5 billion, of which an amount of about DKK 1.1 billion was received on account.

The final sales price will be determined on 1 March 2007, based on the performance of the center. The crucial element will be the rent payments received in 2006, including turnover-related rent obtainable in addition to the agreed-upon minimum rent from the individual tenants.

As previously stated by the Group, most recently in the 2004/05 Annual Report, a risk of up to DKK 100 million is associated with assessing the value of the receivable.

The owner of the centre now expects center operations to require a running-in and maturing period of five years against the previous expectation of three years. Coupled with the development in the performance of the centre, this has caused TK Development's Management to make a DKK 100 million writedown to meet the uncertainty attaching to the final sales price.

Upward revision of profit expectations
In light of the information disclosed about the sale and development of the Šestka project, along with other activities in the region, the basic Central European activities are considered highly satisfactory, contributing more than expected to the Group's operating profit. To this must be added the increased value of investment properties, resulting in a highly satisfactory operating performance for the Euro Mall Holding Group as a whole in 2005/06.

The Northern European activities are progressing according to plan and the Group maintain

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