TK Development joint venture sells shopping center in Czech Republic (DK/CZ)

The TK Development joint venture has concluded an agreement to sell the Futurum shopping center in Brno, the Czech Republic, to the Central European investment company Meinl European Land Ltd. The sales price for the Futurum shopping center is €36 million (DKK 268 million), based on a return of 9% p.a. for the investor. The sale is expected to be completed at end-January 2005.

The Futurum shopping center is situated in Brno, the second largest city in the Czech Republic with 390,000 inhabitants. The center, which covers an area of 35,000 m², opened in October 2001. In addition to 90 specialty stores, the center includes a hypermarket owned and operated by Carrefour, a French hypermarket operator.

As part of the deal, it has been agreed that TK Development is to manage the center through its subsidiary Euro Mall Centre Management.

The joint venture was established in November 2002 (see stock exchange announcement no. 18/2002) to operate four of TK Development’s Central European shopping centres, including the Futurum shopping center in Brno, theCzech Republic.

The purpose of the joint venture was to cooperate on the operation of the shopping centers for a period of time and to sell them to a new investor later. With a view to acquiring a share of the added value that would be generated by sound operation of the centers and an improvement in the Czech economy, TK Development retained a 20 % stake in the centres through the joint venture. The return will initially be distributed as a preferential return to TK Development’s joint venture partners, subsequently as a preferential return to TK Development, and ultimately TK Development will receive 50 % of the remaining return. Since the establishment of the joint venture, TK Development has also been in charge of managing the centers.

The joint venture agreement means that TK Development’s share of the joint venture profits will increase from 20 % to 50 % in step with the joint venture’s payment of the preferential return to the other partners. The agreement to sell the Futurum shopping center, Brno, means that TK Development can expect a profit share in excess of 20 %, and apart from TK Development’s ownership interest, the sale is thus expected to yield a return that is higher than the preferential return payable to TK Development’s joint venture partners. However, the ultimate earnings are subject to uncertainty until the remaining three shopping centers owned by the joint venture have been sold and the final joint venture profits determined. No decision has been made on the timing of the sale of these three shopping centers, but TK Development’s share of the joint venture can be expected to contribute good earnings for the Group in future financial years.

Moreover, with this sale of the Futurum shopping center in the Czech Republic and the three previous Central European deals made in December 2004, TK Development has shown that the sales potential and pricing of shopping centers in Central Europe have improved substantially.

The agreement to sell the Futurum shopping center in the Czech Republic underpins Management’s expectations for a breakeven result of about DKK 0 after tax for the 2004/05 financial year.

Source: TK Development

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