BRACK CAPITAL PROPERTIES NV

Transcription

1 CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2015 IN THOUSANDS OF EUROS Company address: Brack Capital Properties NV Barbara Strozzilaan HN Amsterdam The Netherlands Chamber of Commerce No

2 INDEX Page Board of Directors Report 3 Consolidated Statements of Financial Position Consolidated Statements of Profit or Loss and Other Comprehensive Income 48 Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Appendix to Consolidated Financial Statements - List of Material Subsidiaries Company Balance Sheet 130 Company Income Statement 131 Notes to the Company Financial Statements Other information 134 Independent Auditors' Report 135 Appendix Dutch corporate Governance Code

3 BOARD OF DIRECTORS REPORT Preamble Brack Capital Properties NV (hereinafter: "the Company") hereby submits the Board of Directors' report for a period of twelve months ending on December 31, 2015 (hereinafter: "the Reported Period" or "the Report Period. These financial statements have been prepared for statutory purposes in the Netherlands. The company has issued shares (ISIN NL ) and debentures (ISIN IL , IL and IL ) which are traded on the Tel Aviv Stock Exchange in Israel. These financial statements do not constitute an offer to subscribe for, buy or sell the securities mentioned herein. It cannot be used or relied on for purposes of making any investment decision with respect to any securities. For more current information regarding Brack Capital Properties NV, please consult the press releases, annual reports, regulatory filings, presentations and other documents available at The financial statements attached in this report are presented according to International Standards the IFRS and as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code. The company securities were listed for trade on the Tel-Aviv stock Exchange ("TASE") in December Due to the registration the company must comply with the Israeli Securities Law of 1968 and Securities Regulations ("ISL")and part of the Israeli Companies Law of 1999 ("ICL"). The company and its advisors' opinion is that in general the regulatory environment in Israel is far more detailed and restricted than the one the company needs to comply under the Dutch corporate Governance Code ("DCGC") with respect to most material aspects. It should be mention that the company is forbidden from marketing its securities in Holland and who ever is interested in the Company's securities must refer to the Company's official publications which are made public in the Tel Aviv Stock Exchange Ltd ("TASE") official announcements' web site at: ("Maya"). For detailed analysis of the company compaly with the DCGC please refer to the DCGC appendix. All the data in this report refer to the consolidated financial statements unless otherwise stated. In this report: "The report date or "the date of the report" December 31, "Report signing date" or "the date of signing the report" August 22 nd, "The reported period" the year of Below are the Company's principal results for the year ended December 31, Profitability in 2015, the Company's net income attributed to the Company's shareholders amounted to EUR 63.4 million compared to income of EUR 38 million in The following is the contribution of income producing real estate and residential development activities to the Company's results: - Income producing real estate in 2015, the FFO amounted to EUR 24.3 million compared to EUR 19.9 million in In the fourth quarter of 2015, the FFO amounted to EUR 6.54 million grossing up an annual FFO of EUR 26.2 million. - Residential development activity- in 2015, the contribution to profit in the Grafental project amounted to EUR 13.7 million (consolidated) from the completion of delivering Stage A (21 flats), delivery of 63 flats from Stage B1 and delivery of Stage B2 in full (79 flats and 713 m 2 of commercial spaces). 3

4 2. Operating segments key operational data 1. a. Residential development Grafental project 2 Stage Number of flats Expected revenues (EUR in millions) Expected income (EUR in millions) Entrepreneurial profit (in percentage) Sales (in percentage) Revenue recognition until now A % 100% 100% B % 99.8% 50% B % 100% 100% B % 86% 0% Total % 96% 60% b. Income producing real estate 3 Zoning Area (square meters) Actual Return of rental fees 4 ERV Return 5 Actual NOI return 4 NOI return according to ERV 6 Occupancy rate Residential % 9.1% 6.6% 8.3% 96% Commercial % 7.5% 6.4% 7.0% 96% Total % 8.2% 6.5% 7.6% 96% - Residential: in the fourth quarter of 2015, rental fees increased by 4.5% from identical assets and 10 % in rental fees per square meter in new rentals compared to the corresponding quarter in Due to the increased rental fees in the residential market in Germany, the actual rental fees are lower by 16% than the rental fees prevailing in the market. - Commercial: from the beginning of the year agreements were signed with new tenants with an average increase of 18% in rental fees per square meter and with an average agreement term of 10 years. In addition, the Company commenced the process of betterment of several commercial centers (including Kaufland which is an anchor tenant) by using existing construction rights (about 12 thousand sq.m) gradually while securing in advance long term commitments with tenants. 3. Balance sheet structure and financial solvency a. Equity and NAV: The equity attributed to the Company's shareholders amounted to approximately EUR million and the NAV 7 amounted to EUR million as of the report date. 1 As of the signing date of the report 2 Data according to 100%, the effective corporation's share in the project is 83%; sales include reservations. 3 Assets consolidated in the Company's financial statements including transactions after the balance sheet date. 4 Data of February 2016 in annual terms divided by the carrying values. 5 ERV estimated rental value the expected annual return provided that all of the assets are leased in full occupancy in return for the rental fees prevailing in the market 6 Actual NOI plus the difference between actual rental fees and the ERV divided by the carrying values. 7 EPRA NAV for information regarding the index and the calculation manner see section 5 of part A. 4

5 b. Debt ratios: the LTV ratio 8 is 52.9% and the debt ratio to net CAP 9 is 58.11% as of the date of the report. The EBITDA ratio to interest expenses (only from the income producing portfolio, excluding operating income from entrepreneurship activity) is 2.88 in the fourth quarter of c. Liquidity: cash and liquid balances amounted to approximately EUR 80.8 million as of the report date. Concise description of the Corporation and its business environment Areas of activity The Company, its subsidiaries and associates companies (hereinafter, collectively: "the Group") have been operating in the field of real-estate in Germany, in four primary activity sectors: residential income producing real estate, commercial income producing real estate, entrepreneurship residential real estate in Düsseldorf and betterment of land in Dusseldorf. Below are the details on the major developments in said sectors (as occurred) in the reported period and until the signing date of the report: Residential income-producing real-estate as of the report date, the Group owns 9,900 apartments, with a total leasing area of approximately 571,000 m 2. Commercial income-producing real-estate as of the report date, the Group owns 32 commercial incomeproducing properties 10 in the commercial segment (offices and commerce) with an overall leasing area of approximately 377,000 m 2. Entrepreneurship Residential Real estate in Düsseldorf For details regarding the marketing, sales and performance of stage B (304 units) of the project, see "Material events during the reported period". Betterment of land in Dusseldorf - the Company owns 2 land complexes in Dusseldorf, Germany, undergoing advanced procedures for changing the zoning from offices to residential. For details regarding the Company's progress in the zoning changes of the lands in Dusseldorf, see the section Material events during the reported period". Property financing The Company consistently works for maximizing the return-risk profile for its shareholders by means, inter alia, of optimization of the capital/debt structure, both on property level and on corporation level. To that end the Company uses the following sources: bank loans, bonds raising in Israel etc. Below are the details on updates in the aforesaid financing methods (as occurred) in the reported period and until the signing date of the report: Bank loans the Company has bank loans amounting to EUR 571,878 thousand. As of the report date, the average rate of interest of these loans is approximately 2.1%. The average duration of the loans is about 3.2 years. Bonds the Company has three series of bonds (non convertible to shares) rated by S&P Maalot Ltd. (Maalot) with AA-ating as of the signing date of the report: Series A at a scope of approximately NIS 285,760 thousand par value with an interest (linked) of approximately 4.8% per year with an average duration of approximately 2.2 years, series B at a scope of approximately NIS 220,000 thousand par value with an interest (linked) of approximately 3.29% per year with an average duration of approximately 4.5 years and Series C at a scope of NIS 100,122 thousand par value with an interest (linked) of approximately 3.3% per year with an average duration of approximately 7.5 years. 8 Net debt to total balance sheet, net 9 For details regarding the calculation manner, see part E designated disclosure to the bondholders, section 4c, the CAP ratio calculation in this report. 10 In addition, there is property of an associate spanning over an area of 7,000 m 2 in the city of Chemnitz. 5

6 Activity environment For details regarding the activity environment of the Company in Germany, see section 1.6 of Chapter A "Description of the corporation's state of affairs" which is attached to this periodic report. Material Events in the Report Period Extending agreements with an anchor tenant in February 2015, the Company entered into an agreement with the anchor tenant Kaufland to extend the existing lease agreements until in 4 commercial assets (Aschersleben,Bad Aibling,Borken and Glauchau). Leasing an entire office building after the betterment process in March 2015, the Company entered into an agreement with a governmental tenant for leasing all premises of the office building Schanzenstrasse in Dusseldorf for 10 years after the completion of a betterment process. The annual rental fees according to the agreement is EUR 720 thousand compared to EUR 485 thousand generated by the asset in Purchase of residential portfolio in Kiel, northern Germany on May 29, 2015, the Company (through a sub subsidiary) entered into a notarized sale agreement with a third party that is not related to the Company and/or to its controlling shareholder (in this sub section only: the seller) under which the seller w-ill sell the Company 430 residential units in northern Germany (in this sub section only: the acquired assets) for a total of EUR 24.5 million (including related transaction costs). For the purpose of financing the purchase, the Company (through a sub subsidiary) entered into a loan agreement with a German bank in the amount of EUR 17.6 million under non-recourse terms which its final repayment date is 5 years from the date of extending the loan. On June 30, 2015 said transaction was completed 12. Approval of credit rating from Maalot on July 19, 2015, the credit rating company Standard & Poors Maalot approved for the Company and its bond series A, B and C the rating of ila+ stable 13. It is mentioned Extending loan agreements for OBI assets - On August 20, 2015, the Company (through sub subsidiaries) entered into agreements with a German bank to extend 2 existing loans; the first one is for the Titan portfolio (6 assets) and the second for the Mars portfolio (2 assets). All of these assets are leased entirely to the retail chain OBI (respectively, the agreements, loan 1 and loan 2). Loan 1 (at a total amount of EUR 49.5 million) was extended until March 15, 2023 bearing now a lower interest margin of 1.39% per annum (instead of 1.57%) (on the Euribor for 3 months) to be repayable at an annual rate of 3.75% where the interest and principal are payable every quarter until the final repayment date in which the unsettled principal balance is paid. Loan 2 (at a total amount of EUR 13 million) was extended until April 15, 2020 with an option for an additional extension of 2 years bearing now a lower interest margin of 1.33% (instead of 1.54%) per annum (on the Euribor for 3 months) to be repayable at an annual rate of 4.60% where the interest and principal are payable every quarter until the final repayment date in which the unsettled principal balance is paid. Purchase of an additional residential portfolio in Kiel, northern Germany - on December 18, 2015, the Company (through a sub subsidiary) entered into a notarized sale agreement with a third party who is not related to the Company and/or to its controlling shareholders (only in this sub section: the seller) under which the seller shall sell the Company 296 residential units in northern Germany (only in this sub section: the acquired assets) for a total consideration of EUR 20.4 million (including related transaction costs). For the purpose of financing the purchase, the Company (through a sub subsidiary) entered into an agreement with a German bank to 11 In addition to 3 option periods of 5 years each. 12 For additional information, see the Company's immediate reports dated June 2, 2015 and July 1, 2015 (references and , respectively) which are brought in this report by way of reference. 13 For additional information, see Maalot's rating activity report which was attached to the Company's immediate report dated July 19, 2015 (reference number ) which is brought in this report by way of reference. 6

7 obtain a loan of EUR 14 million under non- recourse terms which its final repayment date is 5 years from the date of extending the loan. On March 1, 2016, said transaction was completed 14. Progress with the development of the residential project in Düsseldorf For details regarding the major developments in the development of the residential project in Düsseldorf in the reported period and until the date of signing the report see section 1.9 of the "Description of the corporation's state of affairs" which is attached to this periodic report. In addition, the Company wishes to draw attention to the following major developments: a. Forward sale in Stage B2 In July 2013, the Company entered into a contingent agreement with a German pension fund for forward sale of Stage B2 of the project for a total consideration of EUR 30 million representing EUR 3,523 per m 2 net (including the consideration for the parking). For additional information regarding this transaction, see immediate reports dated July 25, 2013 (Reference number and ) which are brought in this report by way of reference 15. The construction of Stage B2 commenced in April 2014 and delivering possession of the buildings to the purchaser was carried out in October In the fourth quarter of 2015 the Company recognized in its financial statements a profit of EUR 6.3 million from said stage. b. Performance and marketing of stage B1 the construction of Stage B1 commenced in April 2014 and ended in the fourth quarter of The Company commenced the marketing of Stage B1 of the project in September 2013, which includes 108 flats in multi-family construction and 10 townhouses (about 18,000 m 2 gross) and until February 2016, all 118 apartments in this stage were marketed (signed agreements and reservations) were marketed (about 99.85% of this stage, 4 parking spaces remained unsold) for a total consideration of EUR million. As of the report date and date of signing the report, advances of EUR 51.9 million and EUR million, respectively, were received from apartment purchasers. c. Delivery of apartments and profit recognition of Stage B1 as of the report date, the Company delivered 63 apartments out of 108 apartments of the stage and the delivery of the remaining 45 apartments was carried out in January February Consequently, the Company recognized a profit of EUR 5.88 million in the last quarter of An additional profit of EUR 4.4 million will be recognized by the Company in the first quarter of 2016 upon the delivery of the remaining apartments of the stage. The remaining profit for the stage of EUR 1.4 million will be recognized in the Company's financial statements upon delivering the 10 townhouses to be carried out in the third quarter of 2016 upon completion of their construction. d. Marketing and sales of Stage B3 the marketing of stage B3 commenced in January 2015 and until the date of signing the report 96 apartments were marketed (signed agreements and reservations) (about 86 % of this stage) for a total consideration of EUR 47.5 million. As of the report date and the date of signing the report, advances of EUR 12.1 million and EUR million, respectively, were received from apartment purchasers. e. Stage C in June 2015, the Company filed an application for a building permit for Stage C which includes 109 flats and 125 parking spaces at a total scope of 16,000 m 2 gross. The Company expects to start construction of Stage C in the second quarter of 2016 immediately upon receiving the building permit. f. Planning Stages D and E the Company commenced the planning of Stages D and E that will include 110 flats each and 15 townhouses (10 in Stage D and 5 in Stage E) at a total scope of 32,000 m 2, gross, intending to file applications for building permits for these stages in the second half of For additional information see the immediate reports of the Company from December 20, 2015 and February 21, 2016 (references numbers: and , respectively) which are brought in this report by way of reference. 15 For additional information regarding this transaction, see immediate reports dated July 25, 2013 (Reference number and ) which are brought in this report by way of reference 7

8 For additional information on the performance and marketing status of the stages under construction of the project, see the tables below. Project marketing 2015 (Consolidated) Data according to 100% The effective corporation's share in the project 83%) As of the report signing date Quarter 4 As of the report signing date Quarter 4 Stage B1 Stage B3 Cumulative agreements signed in the current period: Flats )#( Flats total monetary consideration (including for parking, EUR in 56,338 54,891 44,092 31,889 thousands) Flats (square meters) 14,332 13,961 10,760 7,711 Average price per sq.m (EUR) (including consideration for parking) 3,931 3,932 4,098 4,135 Apartment Reservations* as of the report signing date: Flats )#( - 7 Flats total monetary consideration (including for parking, EUR in - 3,445 thousands) Flats (square meters) Average price per sq.m - 4,177 Cumulative signed agreements and reservations until the report signing date: Flats )#( Flats total monetary consideration (including for parking, EUR in 56,338 47,537 thousands) Flats (square meters) 14,332 11,585 Average price per sq.m 3,931 4,103 Marketing rate on the last date of the period (- signed agreements) Marketing rate on the last date of the period (- signed agreements and reservations) Advances from tenants (EUR in thousands) Marketing rate of the project (%) As of the report signing date As of December 31, 2015 As of the report signing date As of December 31, % 97.3% 79.9% 57.8% 99.8% 86.2% As of the report signing date Advances from tenants: As of December 31, 2015 As of the report signing date As of December 31, ,143 51,870 16,762 12,106 Rate of Advances from tenants (%) 96% 91.9% 30.4% 21.9% Spaces in respect of which agreements and reservations were not signed as of the report signing date: Flats )#( - 11 Flats total monetary consideration (including for parking, EUR in 89 7,632 thousands) 4 unsold parkings Flats (square meters) - 1,678 Average price per sq.m - 4,548 8

9 Total cumulative cost attributed to spaces in respect of which binding agreements were not yet signed in the statement of financial position (consolidated) (EUR in thousands) 65 2,984 *)Reservation is a process where a potential purchaser signs a document that includes a description of the apartment and its registered number, number of purchased parking spaces and their registered numbers, amendments to specifications, if any, including the total price (apartment, parking spaces, amendments to specifications) and payment terms. The purchaser deposits EUR 2,000 for the reservation. The reservation is not legally binding and the purchaser may cancel such reservation without a penalty. 9

10 Forecast of revenues, costs and entrepreneurial profits of the stages in progress and planning (EUR in thousands). Stage B1 Stage B3 Stage C (in planning) 16 Total expected revenues 56,426 55,169 55,072 Advances from apartment purchasers as of the report date 51,870 12,106 0 Advances from apartment purchasers as of the date of signing the report 54,143 16,762 0 Total cumulative costs invested 41,288 23,582 10,469 Total costs remaining for investment 3,487 20,001 33,333 Total expected cost (including land (EUR in thousands) 44,775 43,584 43,803 Completion rate (engineering/monetary)(excluding land)(%) % 41.8 % 3.0 % Total expected entrepreneurial profit 11,651 11,585 11,269 Total entrepreneurial profit recognized in the Company's financial statements (consolidated) cumulatively as of the report date 5, Rate of expected entrepreneurial profit (%) 26.0% 26.6 % 25.7 % Expected completion date and profit recognition Fourth quarter of 2015 and the first and third quarter of Fourth quarter of 2016 Expected marketing commencement and performance in the second quarter of Expected completion date fourth quarter of In accordance with accounting principles, the Company recognizes revenues, costs and gross profit deriving from the stages in progress upon completion of performance and delivering the apartments to the tenants. The following is a summary of expected revenue, cash flow and entrepreneurial profit, not yet recognized in the financial statements of the Company, from stages in progress and from stages under the approved urban scheme which its execution has not yet begun, in Grafental project: From sold apartments (EUR in thousands) 16 The performance and marketing of Stage C are expected to commence in May 2016 upon receiving the building permit. 17 It is stressed that engineering completion rate is not identical to apartment delivery rate and profit recognition rate from delivering the apartments that was carried out when the apartments were delivered. See Note 2v to the consolidated financial statements which is attached in Chapter C of this periodical report. 18 It is indicated that in the framework of Stage B1, in addition to the 108 apartments (all of which were delivered until early March 2016) 10 townhouses are in stages of construction which will be completed only in the third quarter of 2016 and the Company will recognize the profit accordingly. 10

11 Data according to 100%. The corporation's effective portion in the Revenue not yet project 83% recognized Stages in progress (stages b1, and b3) 75,490 From apartments that were not yet sold (EUR in thousands) Data according to 100%. The corporation's effective portion in the Revenue not yet project 83% recognized Stages in progress (stages b1 and b3) 7,720 Stages C E (under approved urban scheme) not yet in progress 149,862 Total 157,582 Cash flow not yet recognized 27,929 Cash flow not yet recognized 2,986 52,372 55,358 Entrepreneurial profit not yet recognized 15,741 Entrepreneurial profit not yet recognized 1,621 34,450 36,071 Betterment of the land in Dusseldorf and changing the zoning to residence the following are the main developments in the betterment of lands in Dusseldorf in the reported period and until the date of signing the report: a. with respect to the remaining land in Grafental project that includes construction rights of thousand m 2 for offices (the parcel of land): in the reported period, the Company with the Dusseldorf municipality, advanced a new urban scheme for the complex such that it will be feasible to build on the entire parcel of land, with the formal approval of the new urban scheme, which is in progress an additional 650 flats in addition to 850 flats that are included today in the valid urban scheme and (in total 1,500 flats). The Company estimates that if the urban scheme is approved, the 300 flats out of the 650 flats deriving from changing the zoning will be available for construction to commence in the second half of 2017 and the balance will be available for construction to commence in 2018 b. Purchase of several office and residential buildings in Grafenberg neighborhood for betterment in August 2014, the Company consummated the purchase of land spanning over 20,000 m 2 erected thereon residential and office buildings (generating annual income of EUR 220 thousand) in Grafenberg one of the luxurious neighborhoods of Dusseldorf and adjacent to the Grafental project which is constructed by the Company in Dusseldorf 20. In the reported period, the Company advanced with the Dusseldorf municipality a new urban scheme for the complex that will allow to construct a residential project on the land that will include 80 up to 100 flats (a constructed area of 20,000 m 2, gross) (instead of the existing buildings). The Company estimates that said plans will be approved, if at all, by the municipality until the end of 2016 and the land will be available for construction (with the necessary approvals) until the beginning of The following is a summary of expected revenue, cash flow and entrepreneurial profit expected from the betterment of the land in Dusseldorf The Company has not yet decided how to use the land under the change of zoning from offices to residence in Grafental and/or the land in Grafenberg including the development of any of such parcels of land. The decision to develop the above lands or any of them is subject to consummating the relevant approval procedures of urban scheme, the market conditions that shall prevail upon completing the urban scheme, the ability to obtain financing for developing the project in the said lands, the availability of equity resources required to realize said development plans, meeting financial ratios and more. The data shown in the table below were calculated under the assumption that the Company shall elect to develop the land complexes and the rates of entrepreneurial profit and cash flow in future stages shall be similar to the rates of the Grafental project that are in progress as of the report date (entrepreneurial profit of 25% - 26% and cash flows of 35% - 40% of the scope of sales). 19 For additional details see section in the "Description of the Company's state of affairs" in the 2015 periodic report. 20 For additional details on the transaction see the immediate report dated August 31, 2014 (reference ) the information in which is brought in this report by way of reference. 11

12 Data according to 100% (EUR in thousands) Revenue not yet recognized Parcel of land under the change of zoning from offices to residence in Grafental 22 and the land in 440,539 Grafenberg Cash flow not yet recognized 155,407 Entrepreneurial profit not yet recognized 95,375 The information described above in connection with stage B3 in progress and stages C E of the Grafental project (which are included in the approved urban scheme) which their performance was not yet commenced and in connection with the betterment of the lands for residence in Dusseldorf and the change of their zoning (including the expected dates of completion) regarding the total expected sales,the expected entrepreneurial profit and expected cash flows before taxes,is a forward looking information which is not under the full control of the Company and the actual materialization of such change of zoning,in whole or in part,is uncertain. The information is based on information possessed by the Company as of the report date, regarding: 1) demand for residential spaces in Dusseldorf; 2) market prices of residential spaces in Dusseldorf generally and in the area of the projects (including competing projects comparable with the Company's projects); 3) accumulated know how and experience of the Company's management and project managers in the segment; 4) the Company's forecasts and estimates regarding the costs of construction, development, marketing of projects based on the costs of the stages that as of the report date are in progress; and other estimates of the Company. It is uncertain whether the change of zoning will take place and/or consummated, if any, since its consummation is subject to the planning and construction procedures required under German law, the consummation of which is not controlled by the Company. In addition,even if the approvals are received and the Company will resolve to establish the projects independently and the performance of the projects will be executed, change in circumstances (including without derogating from the generality of the foregoing decrease in demand for flats in Dusseldorf and/or decrease in market prices of flats in Dusseldorf) or increase in construction costs (and other costs) and/or the formation of special conditions that may significantly change the Company's estimates detailed above and have a material impact on the expected revenues from the projects,including their overall profitability. 22 The corporation's effective portion in said parcel of land is 83%. 12

13 Part A Board of Directors Explanations in regard to the State of the Corporations' Businesses, the Results of its Activities, its Equity and Cash Flow; (1) Financial Position Assets As of December As of December EUR in thousands Explanation for the change Current assets Cash and cash equivalents 55,820 60,205 See details in the statement of cash flows Balances receivable from banks Gain from currency hedging transactions, for 24,969 - immediate withdrawal Restricted deposits and other receivables 12,031 15,505 Tenants 5,677 4,648 Other financial assets ,365 Inventory of buildings under construction 59,589 64,901 Total current assets 158, ,624 The decrease derives from classification into balances receivable from banks On one hand, increase in inventory for progress in the construction of the new stages and classification from long term inventory of land to short term and on the other hand, decrease in inventory due to delivery of apartments in stages A and B. Non-current assets: Investments measured at equity 5,005 5,005 Inventory of real estate 25,591 37,576 Investment property real estate rights 101,038 78,033 Investment property 980, ,552 Restricted deposits for investments in assets 175 2,035 Other accounts receivable and other financial assets 1, Fixed assets Deferred taxes 8,585 6,270 Total non-current assets: 1,122,483 1,042,645 The decrease derives from classification of inventory to short term Revaluation profits, classification of assets for redevelopment and investments. The increase in the reported period derives from purchasing residential portfolio in northern Germany, Capex investments in existing assets and revaluation profits. Total assets 1,281,068 1,198,269 13

14 Liabilities As of December 31 As of December Explanation for the change Current liabilities: EUR in thousands Current maturities of loans from banks 68,491 14,223 Current maturities of debentures 16,623 15,302 Loans for financing inventory of buildings under construction 3,500 9,500 Current maturities of other financial liabilities Accounts payable 20,073 15,740 Advances from apartment purchasers 35,687 43, ,767 98,477 Total current liabilities Non-current liabilities: Loans from banks and others 499, ,892 The increase derives from the classification of loans as current liabilities according to the original amortization schedule. It is stressed that a refinance agreement for 7 years of a loan that was classified as a current maturity was signed in February For information see events after the balance sheet date. Part of the short term loans in respect of the land was attributed to stages in progress and therefore was classified to short term. It is noted that the balance of the construction loan in respect of the performance of stages B1, B2 and B3 is zero. The increase in the reported period mainly derives from a provision for the completion of Stage B in Granfental project. The main decrease in the reported period derives on one hand - from the classification of loans as current liabilities according to the original amortization schedule and current principal repayments and on the other hand taking a loan to finance the purchase of asset portfolio in northern Germany. Debentures 127, ,470 Other liabilities 3,148 3,155 Other financial liabilities Deferred taxes 51,512 35, , ,611 The decrease in the reported period mainly derives from principal payment of debentures according to their original amortization schedule net of the effect of exchange rate translation differences. Total liabilities 826, ,088 Equity Equity attributable to equity holders of the company 345, ,596 Non controlling interests 108,577 99,585 Total equity 454, ,181 Income for the period and proceeds from exercise of options. Total liabilities and equity 1,281,068 1,198,269 14

15 (2) Activity Results Year ended December 31, Year ended December 31, Year ended December 31, Explanation for the change EUR in thousands Revenues from rental of properties 66,415 60,512 49,540 Revenues from property management and others 26,277 22,119 18,185 Purchase of new assets and increase in rental fees in identical assets Property management expenses ) 24,072( ) 21,401( ) 17,798( Cost of maintenance of rental properties ) 8,105( ) 6,331( ) 5,363( Rental and management revenues, net 60,515 54,899 44,564 Revenues from sale of apartments 68,372 70,933 - Cost of sale of apartments ) 54,637( ) 58,499( - Gain from the sale of apartments 13,735 12,434 - General and administrative expenses ) 11,090( ) 9,325( ) 8,104( General and administrative expenses attributed to inventory of apartments under construction and inventory of real estate. ) 1,799( ) 2,082( ) 1,755( Delivery of apartments in Stages A and B of the residential project Increase in the Company's scope of activity selling and marketing expenses ) 242( ) 367( ) 707( Cost of share based payment ) 1,525( ) 1,554( ) 1,132( Increase in the value of investment property, net 44,256 23,304 32,534 Operating profit 103,850 77,309 65,400 Financing income Financing expenses excluding the effect of exchange rate differences, CPI and hedging transactions, net ) 21,162( ) 20,520( (16,672) Effect of exchange rate differences, CPI and currency hedging transactions, net 3,424 10,353 (5,040) Change in the value of loans and interest rate swap transactions, net 6,023 ) 13,949( (646) A result of an increase in bank loans for financing the purchase of new assets Decrease in the interest curve in Europe and hedging transactions Equity in losses of associates, net - - (1,675) Income (loss) before taxes on income 92,217 53,484 41,682 Taxes on income ) 14,725( ) 6,029( ) 2,613( Reported net income 77,492 47,455 39,069 Net income attributed to: Company shareholders 63,439 37,954 25,838 Non-controlling interests 14,053 9,501 13,231 15

16 3) Cash flows Cash flows provided by operating activities (Cash flows used in operating activities) Cash flows provided by investing activities (Cash flows used in investing activities) Cash flows provided by financing activities (Cash flows used in financing activities) Year ended December 31, 2015 Access to financing sources the Company evaluates its accessibility to financing sources as very high in light of its financial strength, the stability of core activity, and the good relationships it has created with the banks financing real-estate projects in Germany. It is indicated that for the period of twelve months ended December 31, 2014, the Company has in its solo reports (but not in the consolidated statements) negative cash flows from operating activity amounting to EUR 1,619 thousand and for the period of twelve months ended December 31, 2015, the Company has in its solo reports, positive cash flows from operating activity deriving from the effect of exchange rate differences on cash balances and therefore is not representative. The Board has determined, based on its examination, that this does not indicate on liquidity difficulty since cash flows and liquid balances in the Company (solo) and unrestricted liquid balances which can be distributed immediately in subsidiaries as of the signing date of the report amount to EUR 47 million compared to current liabilities in the Company (solo) amounting EUR 19 million and an expected payment of capital distribution of EUR 6 million 23 so the Company (solo) has a working capital surplus of EUR 22 million consisting of cash balances and liquid balances. The Board believes that the issue at hand is merely technical whereas in view of the high liquid balances maintained by the Company (solo), the Company elected not to receive management fees or distribute dividends from a wholly owned subsidiary (Brack German Properties B.V) and therefore no current revenues were recorded under the separate activity of the Company (solo) in a manner that will result in negative cash flows from operating activity of the solo company in said periods. (4) FFO (Funds from Operations) Year ended December 31, 2014 EUR in thousands Calculating FFO the FFO index is calculated as the net profit (loss) attributed to Company's shareholders from the income generating activity only excluding the income from sale apartments in the Grafental project with some adjustments for non-operating items, which are affected from the revaluation of the fair value of assets and liabilities. It deals mainly with adjustments of the fair value of investment property, miscellaneous capital profits and losses, miscellaneous amortizations, adjustment of expenses for management and marketing of the Düsseldorf project (since the revenues in respect of this project are not taken into account in the FFO), changes in fair value recognized for financial instruments, deferred taxes and non controlling interests for the above items. The Company believes that the this index reflects more correctly the Company's operating results, without the entrepreneurial project, and its publication will provide a more correct basis for comparing the Company's operating results in a certain period with past periods, and will enable the comparison of the operating results with other realestate companies in Israel and in Europe. The Company clarifies that the FFO index does not represent cash flows from operating activity according to generally accepted accounting principles, does not reflect cash held by the Company and its ability to distribute it, and does not replace the reported net profit (loss). In addition, it is clarified that these indices do not constitute data audited by the Company's auditors. Below is the calculation of the Company's FFO for the said periods: Year ended December 31, ,048 70,484 35,606 ) 45,246( ) 133,530( )166,490( ) 39,187( 89, ,346 Explanation for the change Expansion of the Company's activity and progress of the residential project Purchase of new assets 23 see events after balance sheet date 16

17 Net profit (loss) attributed to the Company's shareholders Adjustments for net profit (loss): Three months ended December 31, 2015 Three months ended December 31, 2014 Year ended December 31, 2015 Year ended December 31, ,563 11,246 63,439 37,954 A. Adjustments for revaluations Decrease (increase) in the value of investment property and adjustments of liability value relating to investment property Revaluation of loans and interest swap transactions at fair value B. Adjustments for non cash flow items Cost of share-based payment and changes in capital reserves Amortization of financing costs, indexing and non cash currency hedging transactions Interest component in hedging transactions Deferred tax expenses (income) and taxes for past years C. Unique items / new activities / ceased activities / other Depreciation and contributions, professional services and onetime expenses ) 10,978( ) 5,072( ) 38,575( )19,218( ) 62( ) 1,357( ) 6,385( 10, ,734 1,567 1,877 ) 2,111( (1,788) )9,514( ,426 3,286 12,366 5,337 ) 246( ) 468( 1, Expenses relating to project management and marketing in connection with the establishment of residential project in Düsseldorf and adjustments in respect of current leasing activity in the project Gain from sale of apartments Total of adjustments to net profit (loss) ,862 3,002 ) 10,201( ) 1,281( ) 11,400( )10,320( ) 13,025( ) 5,782( ) 39,167( )18,059( F.F.O 6,538 5,464 24,272 19,895 As aforesaid, the FFO in the three months ended December 31, 2015 amounted to approximately EUR 6.54 million, grossing up an annual FFO of EUR 26.2 million. 17

18 5) EPRA NAV Index Net Asset Value (EUR in millions) The EPRA NAV is an index purported to show the net asset value of the real estate company according to the status paper of EPRA - European Public Real Estate Association. The EPRA NAV reflects the net asset value of the Company assuming that assets are held for a long term and therefore certain adjustments are required such as neutralizing deferred taxes deriving from revaluation of investment property and neutralizing the fair value of derivative financial instruments. Furthermore, the adjustments made by the Company under this index include the addition of profits that were not yet recognized in the statements in respect of apartments under construction that were sold in Grafental project (stages A and B). The Company believes that this index reflects more correctly the net asset value of the Company and its publication will enable the comparison to other real estate companies in Israel and Europe. The Company clarifies that the EPRA NAV index data do not represent a valuation nor they represent a substitute to the data contained in the financial statements. It is further clarified that these data are not audited by the Company's auditors. The following is the calculation of the EPRA NAV index and the adjusted EPRA NAV index of the Company: December 31, 2015 EUR in millions December 31, 2014 EUR in millions Equity attributed to the Company's shareholders Plus deferred taxes for EPRA adjustments (net of non controlling interest) Net of fair value of derivative financial instruments, net (net of non controlling interest) Plus profits that were not yet recognized in respect of apartments under construction that were sold in stage B of the residential project EPRA NAV Net Asset Value

19 6) Events after the date of the report, affecting the Company's financial position BRACK CAPITAL PROPERTIES NV Capital distribution to shareholders on January 11, 2016, the Company' general meeting of shareholders approved to carry out a capital distribution to its shareholders in the total amount of EUR 6,041 thousand (out of the premium reserve on the Company's shares) 24. Purchase of land in Aachen, Germany - on February 26, 2016, the Company (through a sub subsidiary) entered with a third party who is not related to the Company and/or its controlling shareholders (the "Partner") into a notarized sale agreement with a third party who is not related to the Company and/or its controlling shareholders (the seller) to acquire ownership rights to the land in the city of Aachen in Germany, on which an old plant which is not in use is erected, for a total consideration of 6 million, to be paid on the completion date after the required conditions are met. The Company and the partner intend to work collaboratively to change the zoning of the land into residential zoning such it would be feasible to construct residential units after demolishing the existing building. For the avoidance of doubt, it is clarified that the Company has not yet made its final decision regarding the development of the project and its dates 25. Change in the ESOP3 conditions on January 27, 2016 and February 4, 2016, the Company's remuneration committee and the Board of Directors (respectively) approved a modification to the plans from 2013 for the allocation of options to employees (ESOP 3) (the existing plans) with respect to the acceleration of the vesting dates as follows: the Company's competent organs may approve a mechanism for accelerating the entitlement of all or any of the offerees with respect to all or any of the warrants that were not yet vested in case the employee is dismissed (other than in circumstances where he is not entitled to severance pay as specified in the Severance Pay Law 1963) and/or upon transferring the control of the Company. The modification of the plans and the approval of accelerating the entitlement dates for exercising non marketable ESOP 3 options issued to joint CEOs and the VP of entrepreneurship and development of the Company are subject to the approval of the Company's general meeting of shareholders which was called for March 21, Purchase of additional assets in Kiel, northern Germany on March 16, the Company (through a sub subsidiary) entered into a notarized sale agreement with a third party who is not related to the Company and/or to its controlling shareholders (only in this sub section: the seller) under which the seller shall sell the Company 287 residential units in northern Germany (only in this sub section: the acquired assets) for a total consideration of EUR 36 million (including related transaction costs). For the purpose of financing the purchase, the Company (through a sub subsidiary) conducts negotiations with a German bank for an agreement to obtain a loan of EUR 25 million under non-recourse terms which its final repayment date is 5 years from the date of extending the loan. The transaction is expected to take place on July 1, Refinance of Leipzig on February 1, 2016, the Company entered into a refinance agreement for a major portion of the Leipzig portfolio (about 2,790 residential units not including Leipzig Am Zoo) for 7 years. The new loan of EUR 57.5 million (similar to the unsettled principal balance of the loan from 2011) which repayment date is April 30, 2023 bears a fixed interest for 5 years of 1.12% per annum with an annual principal repayment of 2% of the original loan amount. Under the refinance, a credit facility of EUR 17.4 million was approved for the Company until 2023 where is used it will bear a variable interest plus a margin of 1% per annum. Sale of an asset in Dusseldorf - on March 4, 2016, the Company (through a sub subsidiary) entered into a notarized sale agreement with a third party who is not related to the Company and/or to its controlling shareholders for the sale of rights in a building which is not occupied from 2013 which undergoes betterment procedures in a total area of 3,985 m 2 located in Dusseldorf. The consideration was set at EUR 5,050 thousand. It 24 For additional information see the Company's immediate reports dated November 25, 2015 (2 reports) and January 11, 2016 (references , and , respectively) which are brought in this report by way of reference. 25 For additional information see the Company's immediate report dated February 28, 2016 (reference which is brought in this report by way of reference. 26 For additional information see the Company's immediate report dated February 29, 2016 (reference which is brought in this report by way of reference. 19

20 is noted that the asset is not pledged and the consideration is expected to be received in full by the Company upon the transaction completion date in July Increase of credit rating from Maalot on March 15, 2016, the credit rating company Standard & Poors Maalot increased for the Company and its bond series A, B and C the rating of ilaa- stable For additional information, see Maalot's rating activity report which was attached to the Company's immediate report dated July 19, 2015 (reference number ) which is brought in this report by way of reference. 20

21 Part B Exposure to Market Risks and Way of Managing Them BRACK CAPITAL PROPERTIES NV Market risks to which the Company is exposed Exchange rate effects as of the report date, the Company's net currency exposure, net of the liabilities for which the Company carried out currency hedging transactions is at a rate of 3.97% of its total scope of assets as a result of the Company's liabilities due to the bonds (Series A, B and C) that were issued to the public in Israel and are denominated in NIS. Other than that, the Company is not exposed to material changes in currency exchange rates, as most of its activities, assets and liabilities are denominated in EUR. The Company reviews from time to time, the possibility, and hedges its liabilities in NIS, partly or wholly, against future changes in the EUR/NIS exchange rate. The fair value of the Company's primary financial instruments As at the report date, most of the Company's financial instruments are presented at their fair value. Below are sensitivity tests for changes in the fair value of the Company's primary financial instruments, due to changes in the interest (in EUR thousands): The basic interest is 3-month Euribor. December 31, 2015: 10% 5% Fair Value -5% -10% Bonds )* Fixed-interest loans Interest rate swap transactions which are not recognized as accounting hedging Cap interest ceiling fixing transactions which are not recognized as accounting hedging Total 1, , ) 156,750( ) 152,291( ) 970( 19 ) 309,992( ) 767( ) 41( ) 28( ) 1( ) 837( ) 1,541( ) 83( ) 56( ) 3( ) 1,683( *) The fair value of the bonds is presented at its quoted value in the Tel Aviv stock exchange. The sensitivity tests are performed based on the interest basis deriving from this value. Below are sensitivity tests for changes in the fair value of the Group's primary financial instruments, due to changes in the EUR-NIS exchange rate (in EUR thousands): December 31, 2015: Bonds (net of cash held in NIS) 10% 15,204 5% 7,602 Fair Value )152,040( -5% )7,602( -10% )15,204( 21