INTERIM MANAGEMENT REPORT

Transcription

1 BENI STABILI GROUP INTERIM MANAGEMENT REPORT 31 March 2014

2 C O N T E N T S Page CORPORATE OFFICERS AND CONTROL BODIES 2 KEY PROPERTY AND FINANCIAL INDICATORS AS AT 31 MARCH DATA RELATING TO SHAREHOLDERS AND MARKET PERFORMANCE 5 MAIN EVENTS DURING THE FIRST QUARTER OF FINANCIAL REVIEW 7 MAIN EVENTS SUBSEQUENT TO THE CLOSING OF THE QUARTER 19 CURRENT-YEAR OUTLOOK 19 ANNEXES: 1. Basis of presentation and consolidation area Consolidated financial statements Information on compliance with statutory requirements Declaration of the Interim Management Report, pursuant to Art. 154-bis, paragraph 2 of Italian Legislative Decree 58/98 30

3 CORPORATE OFFICERS O AND CONTROL BODIES Board of Directors Executive and Investment Committee Enrico Laghi Chairman- Independent Enrico Laghi Presidente - Indipendente Aldo Mazzocco Managing Director Aldo Mazzocco Member Isabella Bruno Tolomei Frigerio Directorr - Independent Leonardo Del Vecchio Member Françoise Pascale Jacqueline Debrus Directorr - Independent Christophe Joseph Kullmann Member Leonardo Del Vecchio Directorr Giacomo Marazzi Member- Independent Christophe Joseph Kullmann Directorr Jean Gaston Laurent Directorr Giacomo Marazzi Directorr - Independent Clara Pierfranca Vitalini Directorr - Independent Massimo Cavallo Secretary Remuneration Committee Appointments Committee Enrico Laghi Chairman - Independent Enrico Laghi Chairman - Independent Giacomo Marazzi Member - Independent Françoise Pascale Jacqueline Debrus Member - Independent Clara Pierfranca Vitalini Member - Independent Giacomo Marazzi Member - Independent Control and Risks Committee Giacomo Marazzi Enrico Laghi Clara Pierfranca Vitalini Chairman - Independent Member - Independent Member - Independent Supervisory Body pursuant to Italian Leg. Decree 231/01 Maurizio Arena Chairman Olivier Francois Joseph Esteve Member Ernesto Grandinetti Member Carlo Longari Member Member/ Internal Sabrina Petrucci Audit Board of Statutory Auditors Marcellino Bortolomiol Luciano Acciari Fabio Venegoni Gianluca Pivato Chairman Statutory Auditor Statutory Auditor Alternate Auditor Francesco Freschi Alternate Auditor Independent Auditors Mazars S.p.A. 2

4 KEY PROPERTY AND FINANCIAL INDICATORS AS AT 31 MARCH 2014 Key property indicators Carrying amounts of rents 0,8% on a like-for-like basis compared to Average maturity of lease contracts (millions of Euro) (*) (years) (*) The figures do not include the sublease of via Piemonte. Otherwise, the rents would amount to 58.1 million for 2013 and 57.6 million for Occupancy rate (Core Portfolio) Market value of real estate portfolio (millions of Euro) 100.0% 98.0% 96.0% 98.5% 98.7% 4, , , % 4, % 90.0% ,

5 Key economic, financial and equity indicators Net Group Income (millions of Euro) Net Group recurring cash result (millions of Euro) NNNAV (millions of Euro) 0,961 per share as at ,929 per share as at ,500 1, , ,300 1, ,100 1, , ,900 1, ,700 1, ,500 1, , , , INTEREST COVER RATIO EBITDA (excluding sales margins) / net cash financial charges LTV Net debt/real estate portfolio value % 52.0% 51.5% 51.0% 50.5% 50.0% 49.5% 49.0% 48.5% 52.1% 51.7% 49.9% 49.8% Accounting value of net debt/carrying amount of real estate portfolio (including preliminary sales contracts and transfer tax) Accounting value of net debt/carrying amount of real estate portfolio For further details on the above figures (in millions), see "Financial review". 4

6 DATA RELATING TO SHAREHOLDERS AND MARKET PERFORMANCE 50,9% Foncière des Régions Créditt Agricole Fidelityy International Limited Fidelityy Management & Research Company 5,0% Market 2,0% 2,0% 40,1% Source: Consob Az.html?hkeywords=&docid=45&page=0&hits=246&nav=false&filedate=27/01/2014&sem=/documenti/assetti_proprietari/ semestre1-2014/116985_az.html&link=pie-chart+capitale+ordinario=/documenti/assetti/semestre1-2014/ TOrdDich.html%3b+Pie-chart+ +Capitale+votante=/documenti/ /assetti/semestre1-2014/116985_tvotdich.html, Foncière des Régions The company shareholders as at 31 March 2014 consist of Foncière des Régions by 50.9%, Crédit Agricole (Amundi Asset Management) by approximatelyy 5.0%, Fidelity International Limitedd by approximately 2.0% and Fidelity Management & Research Companyy by approximately 2.0% %, whereas the free floatt amounts to 40.1% (*). Source: Bloomberg; figures as at 31 March 2014 During the first quarter of 2014, the Beni Stabili security recorded a positive performancee of +25.8% compared to +14.6% of the FTSE MIB index and to +6.7% of the EPRA index. Ass at 31 March 2014, the price of the security was 0.63, corresponding to a market capitalisation of approximately 1,198 million. (*) As from April 2014, the company shareholders changed and consist of Foncière des Régions R by 50.9% %, Crédit Agricole (Amundi Asset Management) by approximately 5.0% and Fidelity International Limited by approximately 2.0%, whereas the free float amounts to 42.1%. 5

7 MAIN EVENTS DURING THE FIRST QUARTER OF 2014 Property renting Albeit the difficult market conditions continued, renting activities in the quarter lead to the signing of 9 new contracts for approximately 5,062 square metres, corresponding to around 2,260 thousand in new fully operative annual rents. These contracts will be activated mainly after the end of the quarter. Added to these new contracts are 15,042 square meters renegotiated in the quarter corresponding to annual rents of 2,899 thousand (on average +52% with respect to the previous annual rents of 1,901 thousand). Moreover, 3 new rental contracts were activated during the first quarter, signed in previous financial years for square meters, corresponding to 1,165 thousand fully operative annual rents. Added to these are 3 renegotiations of 4,838 square metres with rents in line with previous rents. Property purchases and sales During the first quarter of 2014, no properties were acquired. However, property sales continued in accordance with the objective of asset turnover and of reducing the Loan to Value, and concerned 4 properties belonging to the Imser 60 SIINQ S.p.A. portfolio (leased to Telecom Italia S.p.A.) and some parking spaces of a property in Rome. The sales were at a price totalling 15,383 thousand, in line with the carrying amount including marketing costs totalling 15,377 thousand. Moreover, as at 31 March 2014, there are 7 preliminary sales contracts, corresponding to properties for a carrying amount of 25,256 thousand. These properties will be sold at a price in line with the aforesaid carrying amount. Issue of two bonds On 22 January 2014, Beni Stabili S.p.A. SIIQ issued, through a public placement procedure, unsecured senior bonds for a nominal amount totalling 350,000 thousand and a unit value of 100 thousand. The bond, maturing in 4 years, had a deferred annual coupon of 4.125% and was issued at par. The bonds were listed on the official list of the Luxemburg Stock Exchange and admitted to trading on the regulated market of the Luxemburg Stock Exchange. The net revenue of the bond issue was used for the early redemption of loans of 344,029 thousand. At the same time of this issue, the related hedging derivatives against interest rate fluctuations for a nominal value of 345,350 thousand were extinguished in advance, by payment of the fair value at the end of the year of 6,893 thousand. On 31 March 2014, Beni Stabili S.p.A. SIIQ issued, through a private placement procedure, unsecured senior bonds for a nominal amount totalling 250,000 thousand and a unit value of 100 thousand. The bond, maturing in 5 years, has a deferred annual coupon of 3.5% and was issued at the price of compared to the nominal price, with an initial yield of 3.602%. The bonds were listed on the official list of the Irish Stock Exchange and admitted to trading on the regulated market (Main Securities Market) of the Irish Stock Exchange. 6

8 The net proceeds of the bond issue were used to refinance the existing debt in order to optimise the financial structure of the Group. By means of the above transactions, totalling 600,000 thousand, the Group substantially completed the refinancing of maturities in 2014 and halved the maturities of mortgage loans in 2015 (today amounting to approximately 345,500 thousand and with maturities mainly in the second half of 2015), also reducing significantly the average cost of debt in the medium and long term and fixing an average duration of approximately 3.78 years. FINANCIAL REVIEW Results for the first quarter of 2014 The following table shows the results for the first quarter of 2014, compared with the data from the corresponding period last year. Thousands of Euro 1st quarter st quarter 2013 Net rental revenues 48,548 46,895 Profit/(Loss) on disposal of properties (588) 3,318 Net service revenues 2,834 2,421 Staff costs (2,408) (2,286) Overheads (3,416) (3,617) Total operating costs (5,824) (5,903) Other revenues and income/(other costs and charges) (589) (1,128) Operating profit before property write-ups/(write-downs) 44,381 45,603 Portfolio property write-ups/(write-downs) - - Operating profit 44,381 45,603 Net financial income/(charges) (31,406) (31,445) Change in fair value of the convertion options related to bond 2018 and 2019 (45,227) (4,356) Financial charges related to early settlement of borrowings and to the closing of derivative contracts (16,156) (1) Financial charges on property sales (850) (2,223) Total net financial income/(charges) (93,639) (38,025) Profit/(loss) on investments in other companies EBT (49,020) 8,317 Tax 66 (1,280) Net income (48,954) 7,037 Profit/(loss) attributable to minority interest (198) (135) Net Group Income (49,152) 6,902 Basic earnings per share (*) ( ) Diluted earnings per share (*) ( ) (*) For further details on the earnings per share calculation method, see Annexe Earnings per share. The negative net Group income of the first quarter of 2014 was 49,152 thousand, compared to a positive income of the first quarter of 2013 of 6,902 thousand. Excluding from the results of the two compared quarters the measurement effect of the conversion options of the existing convertible bonds ( 44,480 thousand and 4,232 thousand for 2014 and 2013, respectively, net of the tax effect) and the net costs for early redemption of loans and related derivative instruments ( 16,154 thousand in 2014 and 1 thousand in 2013, net of the tax effect), the two results are substantially in line, amounting to 11,482 thousand for the first quarter of 2014 and 11,135 thousand for the first quarter of In fact, the reduction of the operating result ( 1,222 thousand) attributable to the reduction in the sales margin ( -3,906 thousand), net of the increase in net rental revenues ( 1,653 thousand), of services ( 413 thousand) and of minor operating costs ( 618 thousand) and the increase in the result attributable to 7

9 minority shareholders ( 63 thousand), were more than offset by the improvement in financial charges and by investments ( 911 thousand), by the improvement of the taxes for the period, mainly attributable to the above-mentioned decrease in sales margin ( 721 thousand), as detailed further on. Net rental income Net rental income amounted to 48,548 thousand ( 46,895 thousand for the first quarter of 2013) as detailed in the table below: Thousands of Euro Description 1st quarter st quarter 2013 Changes Rental revenues and guaranteed rentals 57,621 58,085 (464) Write-down/loss on receivables from tenants (665) (1,244) 579 Net property costs (8,408) (9,946) 1,538 Net rental Income (contribution margin from rents) 48,548 46,895 1,653 Gross rental revenues in the first quarter of 2014 amounted to 57,621 thousand, compared to 58,085 thousand in The change amounting to 464 thousand is attributable to: expiry/closing of lease contracts of -5,500 thousand; disposal of properties of -1,094 thousand; renegotiations and new contracts of +5,585 thousand; ISTAT adjustments and other minor impacts of +545 thousand. On a like-for-like basis, gross rents increased by 0.8% (+1.0% if related to the Core Portfolio only) 1. The incidence of the net rental margin on rental revenues increased from 80.7% of the first quarter of 2013 to 84.3% of the first quarter of This positive change is mainly due: i) to the absence of a non-recurring cost incurred in the first quarter of 2013 (a higher revenue of 4.3%), related to the late delivery of a property still being developed due to the block of the PGT (territorial zoning plan) of Milan; ii) to lower writedowns/losses on receivables from tenants (a higher revenue of 1.2%). These effects were partially offset by: i) the decrease in gross rental revenues (a lower revenue of 1%); ii) the higher IMU tax compared to the one estimated as at 31 March 2013 (a higher cost of 1%). Profit/(Loss) on disposal of properties The sales of the quarter concerned 4 properties and some parking spaces with a carrying amount of 15,221 thousand. The net margin achieved from these sales (less brokerage expenses and other costs borne for their completion, totalling 156 thousand) is positive and amounts to 6 thousand ( 3,318 thousand for the quarter of 2013). Net service revenues 1 The like-for-like growth rate for rent revenues is calculated on rents relating to the stabilised portfolio, i.e. the growth rate deriving from; 1) the effect of indexing to inflation; 2) the effect of vacancy increases or decreases on the portfolio; 3) the effect of rent renegotiated on lease termination or new rents. The stabilised portfolio is the portfolio adjusted for sales and reclustering. If the impact of these property releases (and subsequent re-leasing) - subject-matter of major renovation works by the Group's internal development division - is excluded, the gross carrying amount of rents would be -0.7% (-0.6% if related to the Core portfolio only). This growth rate excludes the positive effect of specific contract adjustments related to the buildings leased to Telecom Italia. 8

10 Net service revenues amount to 2,834 thousand, compared to 2,421 thousand of the first quarter of The increase of these net revenues (amounting to 413 thousand) is mainly due to: i) the reduction of costs related to the provision of services ( 277 thousand), mainly attributable to the decrease in commission expense borne for the management of the real estate funds by Beni Stabili Gestioni S.p.A. S.G.R. ( 301 thousand); ii) the increase in service revenues ( 136 thousand), mainly related to the increase in income for services provided to the above-mentioned funds. Operating costs Staff costs increased by 122 thousand, from 2,286 thousand in the first quarter of 2013 to 2,408 thousand in the first quarter of This increase is attributable to non-recurring costs related to staff resignations. Overheads amounted to 3,416 thousand, compared to 3,617 thousand of the first quarter of The decrease is attributable to lower costs for: services provided to the Group by the parent company Foncière des Régions ( - 59 thousand); commissions related to sureties released in favour of third parties ( -88 thousand); technical, professional and other services ( -223 thousand); partially offset by the increase in costs for: fees to Corporate Officers ( +86 thousand); rentals payable ( +83 thousand). Other revenues and income / (other costs and charges) The item other revenues and income and other costs passed from a negative balance of 1,128 thousand to a negative balance of 589 thousand. The improvement of 539 thousand is mainly attributable to lower provisions for risks and charges and lower write-downs of receivables. Portfolio property write-ups/(write-downs) Group properties are valued on a semi-annual basis, on 30 June and 31 December, using the specific appraisals prepared by independent experts. As a result, property write-ups/(write-downs) were not applied in either quarter under comparison. Financial income/(costs) Net financial charges are broken down as follows: 9

11 Thousands of Euro Description Financial income on bank current accounts and time deposits Other financial income Total financial income Medium to long term financial charges - cash portion (23,437) (24,882) Financial charges on short term - cash portion (340) (441) Medium to long term financial charges - non cash portion (4,133) (5,783) Committed lines (344) (595) Financial charges on property sales (850) (2,223) Fair value changes in derivatives instruments (2,560) 1,297 Inflation swap differentials (969) (1,172) Other financial costs (219) (252) Total financial charges (32,852) (34,051) Financial charges related to the early settlement of borrowings and to the closing of derivatives contracts (16,156) (1) Change in fair value of convertion option related to bonds 2018 and 2019 (45,227) (4,356) Total (93,639) (38,025) Net financial charges of the first quarter of 2014 amounted to 93,639 thousand, compared to a balance of 38,025 thousand in The net increase is mainly attributable to the measurement effect of the conversion option of the convertible bonds issued in 2013 and to costs related to the early redemption of loans and derivative instruments completed in the quarter (totalling 61,383 thousand in the first quarter of 2014 and 4,357 thousand in the same period in 2013). In particular: cash financial charges decreased by 1,546 thousand, mainly due to the reduction in the average cost of debt in the short, medium and long-term, determined by the reduction in the average base rate, which more than offset increases in ongoing costs of some structured loans; the non-utilisation commissions of credit lines decreased by 251 thousand; swap differentials on inflation recorded an improvement of 203 thousand and sundry financial charges decreased by 33 thousand; for the non-cash portion of financial charges, the increase of 43,078 thousand is mainly due to the recognition, contemplated in the accounting standards of reference in the presence of equity-linked instruments that envisage the possibility of meeting the conversion requests also through cash payments, to the negative change in fair value of the conversion options of the bonds issued in 2013 and maturing in 2018 and 2019 (higher charges of 40,871 thousand, compared to the first quarter of 2013), in addition to the change in fair value of financial instruments (negative of 3,777 thousand, compared to the first quarter of 2013); in particular, the very significant growth of the fair value of the conversion options in the quarter is due to the rapid and significant appreciation of the Beni Stabili security recorded in the period, which increased considerably its volatility and, as a result, the value of the conversion option. However, it should be noted that, on the basis of the regulations of these loans, the Company has the right to fully or partially meet the conversion requests of the bondholders, through the delivery of newly issued shares; charges related to property sales and early redemptions increased by 14,782 thousand, mainly due to the early repayment of loans and derivative instruments completed in the quarter; the increase in financial income is attributable to higher interests to banks ( 371 thousand) due to higher average cash deposits, net of the decrease in interests on other receivables ( 158 thousand), mostly due to the collection of tax receivables. 10

12 Profit/(loss) on investments The balance of the item as at 31 March 2014 refers to net revaluations of investments and securities held by the Group ( 206 thousand) and to dividends from real estate funds ( 32 thousand). Whereas, the balance as at 31 March 2013, amounting to 739 thousand, referred to the income obtained from the transfer of 12% of the investment in the subsidiary Beni Stabili Property Service S.p.A. ( 546 thousand), to net revaluations of investments held by the Group ( 137 thousand) and to dividends from real estate funds ( 56 thousand). Tax In accordance with the regulations for companies that have opted for the special SIIQ/SIINQ regime, taxes for the year refer exclusively to the results of activities other than the exempt leasing activity and they are broken down as described below: Description Current tax (747) (1,015) Deferred tax liabilities Deferred tax assets 377 (1,218) Total tax (current and deferred) 6 (1,278) Prior years taxes adjustments Review of deferred taxes accrued in prior years - (48) Total review of prior years taxes (current and deferred) 60 (2) Total taxes 66 (1,280) In particular, current and deferred taxes include taxation on services, property sales in the first quarter of 2014 and in previous financial years (due to the application of deferred taxation for IRES purposes over five years) and property rents associated with trading properties. Minorities profit/(loss) The minorities profit/(loss) for the quarter increased from 135 thousand in 2013 to 198 thousand in 2014 and mainly refer to the minority interests of the result of Beni Stabili Gestioni S.p.A. S.G.R. 11

13 EPRA recurring net income The Beni Stabili Group, in accordance with the policies of the Foncière des Régions Group and to international best practices, used the EPRA recurring net income as alternative indicator of performance. This indicator is calculated by adjusting the consolidated net result, from which are excluded: i) contribution margin of sales (capital gain and related costs) and financial costs deriving from the early repayment of loans and derivative financial instruments; ii) non-cash items (items of a valuation nature on properties and derivative financial instruments, amortisation and depreciations, etc.); iii) the most significant extraordinary and non-recurring items. The EPRA recurring net income of the Group amounts to 20,339 thousand as at 31 March 2014, compared to 18,338 thousand of the same period of The improvement of 2,001 thousand is mostly attributable to the decrease in financial charges and overheads, partially offset by an increase in the tax burden. The following table indicates, for each income statement item, the adjustments made for calculating the EPRA recurring net income of the Group. Thousands of Euro NET GROUP INCOME (49,152) 6,902 Extraordinary and non-recurring costs/(revenues) 14,377 2,095 Other revenues and income/other costs and charges (a) 662 2,384 Other non-cash revenues and income/other non-cash costs and charges - 3 Overheads (b) Net financial charges - cash (c) 9, Net financial charges - non cash 4,308 - Income and charges from investmens - (546) Non-cash costs/revenues 54,915 9,950 Amortisation, depreciation, write-downs, provisions and release of funds (inc. staff termination benefits) 388 1,188 Fair value stock option and free share Financial charges and income 54,722 8,843 Income and charges from investmens (206) (137) Costs/revenues associated with property sales 1,447 (1,095) Net sales margin (including margin on investment sales) (d) (6) (3,318) Net financial charges associated with sales (e) 554 1,618 Financial charges associated with non-cash sales Net write-ups of properties sold afterwards (f) - - Net financial charges associated with non-cash sales Effect of income tax and minority interests (1,248) 486 Non-cash deferred/prepaid taxes (753) 263 Current taxes (g) (488) 275 Minorities profit/(loss) (7) (52) EPRA RECURRING NET CASH INCOME OF THE GROUP (*) 20,339 18,338 Net Group recurring cash income per share (**) Diluted net Group recurring cash income per share (**) (*) Monetary adjustments (a)+(b)+(c)+(d)+(e)+(f)+(g)+(h) totalled -10,129 thousand in the first quarter of 2014 ( - 1,213 thousand in the first quarter of 2013). (**) As regards the calculation of the figures per share, the following considerations were made: i) basic figures: the recurring cash result of the Group was divided by the weighted average of ordinary shares in issue in the period; ii) diluted figures: the recurring cash result of the Group was adjusted for expenses, net of the related tax effect, relating to instruments to which the potential additional ordinary shares with dilutive effects correspond, which are added to the weighted average of ordinary shares in issue in the period. Note that these adjustments were made only when the potential ordinary shares linked to dilutive instruments had the effect of reducing the result per share. Moreover, note that the convertible bonds issued in the previous financial year were considered to have a diluting effect, considering the intention of Beni Stabili - should the right of conversion be exercised - to repay the bonds in cash rather than assign its own ordinary shares, at least up to the amount of the nominal value of the bond. 12

14 Extraordinary and non-recurring costs/revenues: the adjustments of the first quarter of 2014 mainly refer to non-recurring costs related to the early repayment of loans and derivative instruments. Non-cash costs/revenues: the adjustments made in this respect relate mainly to net financial charges that are adjusted mainly to take account of non-cash portions of financial charges, mainly related to the application of the amortised cost, to the early settlement of the derivative instruments (allocated amount to the income statement of the cash flow hedge reserve related to early settled instruments) and to the fair value change in derivative instruments, including the change in fair value of the conversion option of the convertible bonds maturing in 2018 and The adjustment to minorities profit relates to the allocation to minorities of the economic effects of adjusted income statement items. Financial position The following table shows the financial position of the Group as at 31 March 2014 in comparison with 31 December Thousands of Euro Investment properties, properties under development and operating properties 3,898,026 3,888,810 Properties for commercial use and held for sale 255, ,364 Intangible assets 1,167 1,127 Other tangible assets and non-current receivables 135, ,490 Securities and investments 44,434 44,283 Net w orking capital (66,017) (57,609) Net invested capital 4,268,663 4,298,465 Financed by: - provisions and derivatives 188, ,446 - net deferred tax liabilities/(assets) (57,321) (56,560) - non-current payables 109, ,767 - net debt 2,148,007 2,163,865 - minority interests 13,131 13,281 - Group equity 1,867,077 1,897,666 Total 4,268,663 4,298,465 Net debt/group equity ratio LTV = Net debt/ real estate portfolio rate 51.7% 52.1% Net invested capital The 29,802 thousand decrease in net invested capital is mainly due: to the net decrease of other tangible assets and non-current receivables of 17,617 thousand, due: i) to the reduction in the deposit, set up in 2013 as a result of the drawing of a guarantee granted in relation to a securitisation of the Imser 60 portfolio, due to the decrease in creditworthiness of the guarantor bank from 102,500 thousand to 85,000 thousand; ii) to the drop in non-current receivables for rentals ( 171 thousand) recognised mainly due to the recognition over a straight-line basis of rents provided by IAS 17; to the negative change in net working capital of 8,408 thousand mainly attributable: o o to the net increase in tax payables of 10,387 thousand, mainly related to the recognition of the IMU payable for the quarter ( 6,000 thousand) and to an increase in current VAT payable ( 4,235 thousand); to the increase in trade payables ( 1,413 thousand). 13

15 The aforementioned decreases were partially offset by: o the decrease in payables for purchases of properties ( 1,769 thousand), for the partial payment of the loan extended for the acquisition of the shopping mall in Vigevano (PV); o the increase in net receivables from property leases and receivables from services ( 803 thousand) and of other receivables ( 820 thousand); to a net decrease of 3,968 thousand in real estate portfolio. The following table summarises the changes in the different categories of properties: (Thousands of Euro) Investment properties Properties under development Operating properties Properties included among assets held for sale Properties for commercial use Total Balance as at ,611, ,300 19, ,717 72,647 4,157,174 Capex , ,408 Sales (15,187) (35) (15,222) Reclassifications (*) (1,680) - - 1, Amortisation - - (154) - - (154) Balance as at ,610, ,548 19, ,537 72,643 4,153,206 (*) The Item reclassifications refers entirely to the property in Sulmona via Circonvallazione Orientale 58, reclassified from item Investment properties to item properties included among assets held for sale since subject to preliminary sale agreement signed during the first quarter of In particular: o capex totalling 11,408 thousand includes: i) 7,674 thousand of works completed and technical consultancy for the progress in renovation/development projects; ii) 3,618 thousand of capitalisation of financial charges; iii) 116 thousand for salaries to Group employees who worked directly on the construction sites; o the decrease for sales, corresponding to the carrying amount of the properties transferred during the quarter, amounted to 15,222 thousand; to the increase in the item Securities and investments of 151 thousand related to net revaluations in investments and securities ( 204 thousand), partially offset by the partial repayment of the nominal value of quotas in the real estate fund "Securfondo" ( 53 thousand); to the increase of 40 thousand of intangible assets, almost entirely related to software purchases of the quarter, net of amortisation. Provisions and derivatives Provisions (for risks and charges and for staff termination benefits) increased compared to 31 December 2013 of 609 thousand (overall balance of thousand as at 31 March 2014 compared to an overall balance of 6,493 thousand as at 31 December 2013), mainly due to provisions for future charges to be borne, according to the sale agreements, on the property in via Pergolesi, Milan, sold in the previous financial year ( 593 thousand). The payable for derivative instruments as at 31 December 2014 amounts to 181,265 thousand, against a payable of 146,953 thousand as at 31 December The balance as at 31 December 2014 includes: i) 73,125 thousand ( 27,898 thousand as at 31 December 2013) referring to the fair value of the conversion options of the bonds issued during the year 2013, which were recorded among liabilities in compliance with the international accounting standards; ii) 108,140 thousand ( 119,055 thousand as at 31 December 2013) related to fair value of swaps on interest rates (mainly for hedging) and on inflation. The table below illustrates the changes for the quarter of the payable for derivative instruments. 14

16 Thousands of Euro Convertion options related to the bond 2018 and 2019 "Hedge accounting" derivatives (interest rate and inflation derivatives) Derivatives "held for trading" (interest rate derivatives) Total Balance as at , ,334 13, ,953 Spreads (paid)/collected - (7,227) (978) (8,205) Decreases due to early settlement following property sales - (645) (20) (665) Decreases due to other early settlements - (7,506) - (7,506) Change in fair value recognised to the Cash Flow Hedge Reserve - 1,919-1,919 Change in fair value recognised to Income Statement 45,227 1,324 2,138 48,689 Costs related to new derivatives contracts/costs for swap recostruction Reclassification - (538) Balance as at ,125 92,741 15, ,265 Net deferred tax liabilities/(assets) Net deferred taxes of 57,321 thousand were recorded compared to 56,560 thousand as at 31 December The net change of 761 thousand is broken down in the table below: Thousands of Euro Tax losses Diff.between carrying amount/tax value of properties Undeducted costs/untaxed revenues Fair value of derivative financial instruments pass-through taxation of real estate fund results Total Balance as at (112) (52,040) (3,485) (416) (507) (56,560) Net changes booked to the Income Statement - (424) (400) 4 67 (753) Net changes not booked to the Income Statement (10) - (8) Balance as at (112) (52,464) (3,883) (422) (440) (57,321) The change in net deferred taxes is mainly attributable: i) to the release of net deferred tax liabilities due to the sale of properties carried out both in the quarter and in previous financial years (in relation to the deferred IRES tax in five financial years of capital gains on property sales); iii) to the allocation of prepaid taxes on the temporary non-deductibility of interest expense; ii) to the partial reversal of deferred taxes recorded in previous years against the margin realised through the repurchase of bonds issued by Imser Securitisation 2 S.r.l.; iv) to the effect of pass-through taxation of the result of real estate funds held by the Group (ex Italian Law Decree 78/2010). Non-current payables Non-current payables decreased by 17,365 thousand mainly due to the decrease in the payable recognised in connection with the activation of the liquidity facility taken out as a guarantee for the securitisation of the Imser 60 portfolio, as a result of the down-grading of the guarantor bank (balance totalling 85,000 thousand as at 31 March 2014 compared to a balance totalling 102,500 thousand as at 31 December 2013). 15

17 Net debt An analysis of net debt as at 31 March 2014 is provided below: Thousands of Euro Borrow ings from banks and financial institutions 810,566 1,277,367 of w hich: - short term portion 70, ,770 - medium-long term portion 739,813 1,084,597 Bonds 1,051, ,947 of w hich: - short term portion 15,842 21,141 - medium-long term portion 1,035, ,806 Convertible bonds 568, ,184 of w hich: - short term portion 6,588 5,690 - medium-long term portion 561, ,494 Total borrowings 2,430,544 2,314,498 Cash and cash equivalents (282,537) (150,633) Net debt 2,148,007 2,163,865 Net debt as at 31 March 2014 amounts to 2,148,007 thousand compared to 2,163,865 thousand of 31 December The carrying amounts of borrowings increased by 116,046 thousand ( 115,401 thousand in nominal values) as shown below. Thousands of Euro Carrying amount Nominal value Total carrying amount of borrow ings as at ,314,498 2,368,646 Transfer from medium-long term portion to short term portion 15,564 15,564 Change in overdraft facilities (51,811) (51,811) Repayment of current payables and of ordinary instalments (2,806) (2,849) Advance repayment of loans for property sales (243) (243) Early settlement of borrow ings (82,721) (82,964) Change in short term borrowings (122,017) (122,303) Transfer from short term portion to medium-long term portion (15,564) (15,564) Advance repayment of loans for property sales (33) (31) Early settlement of borrow ings (329,776) (332,305) Up-front fees Change in medium-long term borrowings (344,784) (347,900) Change in borrow ings from banks and financial institutions (466,801) (470,203) Issue of bonds 594, ,000 Interest accrued during the period (at actual interest rate) 2,792 2,792 Capital repayments envisaged in the repayment plan (4,566) (5,555) Advance repayment of bonds for property sales (12,533) (12,533) Change in bond issue 579, ,704 Interest accrued during the period (at actual interest rate) 3, Change in convertible bonds 3, Total carrying amount of borrow ings as at ,430,544 2,484,045 Borrowings from banks and financial institutions decreased from 1,277,367 thousand of 31 December 2013 to 810,566 thousand as at 31 March 2014, down by 466,801 thousand. This decrease is attributable : o to the early redemption of medium/long term loans, mainly maturing in ( 412,497 thousand) and to the repayment for the quarter of short-term credit facilities ( 51,811 thousand), made with the liquidity arising from the issue in the quarter of convertible bonds; o to the payment of the instalments falling due on medium/long-term loans as envisaged by the repayment plans ( 2,806 thousand), net of the effect related to the amortisation of up-front costs ( 589 thousand) following application of the amortised cost approach; 16

18 o to early settlements mainly on property sales ( 276 thousand). As at 31 March 2014, committed short-term credit facilities of 8,000 thousand and short-term overdraft facilities of 20,000 thousand are used, totalling 28,000 thousand ( 28,291 thousand including interest accruing). Unused and committed short-term credit facilities amounted to 164,500 thousand. The average residual life of all committed short-term credit facilities as at 31 March 2014 is 3.58 months, whereas the related average cost for the quarter was 2.46%. Unused overdraft credit facilities amounted to 48,600 thousand at the end of year. The actual cost of floating rate borrowings for the first quarter of 2014, calculated using the amortised cost method and without taking into account interest rate swaps, was: 2.15% (3.22% for 2013) for medium/long-term floating rate mortgage loans; 4.25% (5.33% for 2013) for other medium/long-term floating-rate borrowings. The effective interest rate for the first quarter of 2014 applied to fixed rate borrowings from banks and other financial institutions was 6.07% (6.02% in 2013). Bonds in issue increase in total by 579,727 thousand. This increase is due to the issue in the quarter, by Beni Stabili S.p.A. SIIQ, of two bonds totalling 594,034 thousand (the first one of a nominal value of 350,000 thousand, with coupon amounting to 4,125% on an annual basis and maturing in January 2018, the second one of a nominal value of 250,000 thousand, with coupon amounting to 3,50% on an annual basis and maturing in April 2019) and of the subsequent increase in interest accrued of 2,792 thousand (calculated at the effective interest rate), net of charges paid for ordinary amortisation and for early repayments due to property sales of 17,099 thousand. These two bonds are added to those already issued in 2002 and refinanced in 2006 for the loan of the Imser 60 portfolio (leased to Telecom Italia). The actual cost for the first quarter of 2014 of the bonds issued for the loan of the Imser 60 portfolio, calculated at amortised cost and without making allowance for hedges, was equal to 8.33% for fixed rate securities (8.33% in 2013) and to 2.88% for floating rate securities (2.41% in 2013). Whereas, with reference to the two bonds issued in the quarter, the annual nominal rate is 4.125% (4.4% effective interest rate) for the loan maturing in 2018 and 3.50% (3.8% effective interest rate) for the loan maturing in Convertible bonds increased from 565,184 thousand on 31 December 2013 to 568,304 thousand on 31 March 2014, due to interests accrued for the period, net of the coupons paid. The annual nominal rate of the three existing convertible bonds is 3.875% (6.17% effective interest rate) for the loan maturing in 2015; 3.375% (4.70% effective interest rate) for the loan maturing in 2018 and 2.625% (4.91% effective interest rate) for the loan maturing in The change in cash and cash equivalents during the quarter can be broken as follows: Thousands of Euro Group recurring cash income of first quarter ,339 Cash items excluded from the Group recurring cash net income (*) (10,129) Minorities profit/(loss) excluded from the Group recurring cash net income 205 Cash flow from operating activities after taxes of first quarter ,415 Changes in payables/receivables (current and non-current) 8,513 Investing / divesting activities 3,759 Financing activities 109,217 Change in cash and cash equivalents of first quarter ,904 17

19 (*) For details of these items, see the previous comments under the analysis of the EPRA recurring net income of the Group. For further information on changes in receivables and payables, investing and financing activities, please refer to the Statement of Cash Flows. Group Equity and Minority Interests Group Equity as at 31 March 2014 amounted to 1,867,077 thousand. The decrease of 30,589 thousand is mainly due to the loss for the quarter ( -49,152 thousand), partially offset by the increase related to the fair value calculation of the derivative instruments, of 18,552 thousand. The net decrease of 150 thousand of minority interests recorded in the quarter is due to distribution of dividends by Beni Stabili Gestioni S.p.A. SGR ( 348 thousand), net of the result for the period attributable to minority interests ( 198 thousand). The Net Asset Value (NAV) of the Group as at 31 March 2014, calculated on the basis of the EPRA guide lines amounts to 2,039.8 million ( per share), compared to the NAV of 31 December 2013 amounting to 2,036.9 million ( per share). The NNNAV - triple NAV - (NAV net of both deferred taxes on the property portfolio and of mark-to-market of derivatives on interest rates and fixed-rate borrowings net of the related tax effect) calculated on the basis of the EPRA guidelines amounts to 1,780.6 million ( per share) compared to NNNAV as at 31 December 2013 of 1,840.0 million ( per share). The decrease in mainly attributable to the negative change in fair value of the conversion options of the bonds issued in 2013 and maturing in 2018 and 2019, in addition to the change in fair value of the other fixed rate borrowings. (Millions of Euro) Shares 1,915,341,904.0 NAV pe r share Market value of investment properties (including premises) 3,629.2 Market value of properties under development market value of properties for commercial use 72.9 Market value of assets held for sale Other assets and liabilities 34.7 Payables net of cash (2,148.0) Gross NAV 2, Deferred taxes on portfolio and exit tax payable 12.7 NNAV 2, MtM of derivatives (194.1) MtM spread on borrow ings (55.2) MtM spread on convertibile bond (24.1) Tax 0.8 NNNAV 1, (*) The MtM (mark to market) value of the inflation rate swap for the Imser 60 portfolio was calculated in accordance with the future inflation forecasts taken into account by the independent appraiser in the valuation of the portfolio. Note well: For calculation purposes, Group equity is adjusted to express the fair value of the entire real estate portfolio (including premises and trading properties), together with fixed rate borrowings. In this respect, note that such calculations were carried out taking into account the change in fair value of fixed rate borrowings and derivatives. With reference to the fair value measurement of the real estate portfolio, it was assumed to be equal to the one calculated in December 2013 by the independent experts, plus capitalisations for the period for works and financial charges net of any price adjustment. The Gross NAV represents the difference between the value of Group assets and liabilities before the taxation of properties and "mark to market" accounting of financial items. Also taking into consideration the deferred taxation on properties and tax payables for exit tax, we move from the Gross NAV to the NNAV. Lastly, the NNNAV also considers the mark to market of financial instruments. As in previous years, the NNNAV was calculated by only taking the fluctuation of interest rates into account in the fair value measurement of borrowings, and not the spreads on outstanding liabilities. Note that the diluted NAV is not presented in that as at 31 March 2014, in accordance with the provisions of IAS 33 and the EPRA guidelines, there are no instruments with a diluting effect on the NAV. The only 18

20 instruments with potential dilutive effect issued by the Group are represented by the three outstanding convertible bonds. However, the conversion options of the loan maturing in 2015 and of the loan maturing in 2019 as at 31 March 2014 are out of the money, whereas considering the exercise of the conversion for the loan maturing in 2018, whose conversion option as at 31 March 2014 is in the money, also considering the right of Beni Stabili to repay part of the bonds in cash rather than issue new shares on conversion and the intention of the Company in case of exercising the conversion to repay the bonds up to the amount of a cash outlay equal to the nominal value of the loan, would have an antidilutive effect. MAIN EVENTS SUBSEQUENT TO THE CLOSING OF THE QUARTER Property disposal In April 2014, the sale of the property of Bolzano, via Garibaldi 80 belonging to the portfolio leased to Telecom Italia, was completed. The sale occurred at a price that corresponds to the carrying amount of the traded property, amounting to thousand. Moreover, an agreement to sell premises used for commercial purposes and 4 parking spaces of the property in via Fancelli, Rome, was signed at values substantially in line with the carrying amounts. CURRENT-YEAR OUTLOOK The first quarter of 2014 was characterised by a general optimism in relation to the improvement of the world economy and the liquidity of the capital markets. Italy has also benefited from this positive sentiment and the demand for profitable investments from investors strengthened and allowed several domestic companies to access again institutional borrowing markets at more favourable conditions. However, the Country's recovery projections for 2014 are lower than last year's expectations and volatility remains high. The commercial real estate sector shows some signs of a recovery although there are still strong elements of weakness, due both to the low demand for space and to the difficult economic and financial conditions of many tenants, especially medium and small. However, also in the first three months of the year, foreign investors confirmed a strong interest in the Italian market, which was expressed by the growing number of quality real estate transactions. In this context, the Beni Stabili group consolidated in the quarter its presence on the international financial markets, strengthening its capital raising capacity. In fact, in the first months of 2014, Beni Stabili issued unsecured bonds of 600 million, albeit without an official rating, using the resources to repay the most expensive debts, releasing assets from mortgages and improving the average cost of debt. Therefore, currently, the Group has nothing to worry about from the point of view of financial maturities and stability of the related economic conditions, rationalised at least until In operational terms, despite the difficult economic framework, the results of the first quarter of 2014 were generally positive, thanks to the continuous effort made by the Group to keep the rents constant and limit property and structure management costs. The human and financial resources of the Company are therefore focused on the defence of the Core real estate portfolio, already rationalised over the years, through an active portfolio management, in the strongest positions of the Italian market. These activities should allow Beni Stabili to safeguard the soundness of the real estate portfolio and its ability to generate income and should guarantee a cash flow generation for 2014 at least in line and basically increasing with the one of the year just ended. 19

21 Beni Stabili Group Annexe 1 - Interim Management Report as at 31 March 2014 (continued) BASIS OF PRESENTATION AND CONSOLIDATION AREA The Interim Management Report as at 31 March 2014 was drawn up according to provisions set out in Art. 154-ter of Italian Legislative Decree 58/1998. All accounting data disclosed were measured in compliance with international accounting standards (International Accounting Standards IAS and International Financial Reporting Standards - IFRS), integrated by the related interpretations (Standing Interpretations Committee - SIC and International Financial Reporting Interpretations Committee IFRIC) issued by the International Accounting Standards Boards (IASB) and adopted by the European Commission according to the procedure as per Art. 6 of the Regulations (EC) no. 1606/2002. In particular, reference should be made to the "Notes to the Financial Statements" of the consolidated financial statements of the Beni Stabili Group as at 31 December 2012 for a description of the accounting policies used, taking into account the fact that these accounting policies have been applied consistently across all the periods presented in the Interim Management Report as at 31 March 2014 (31 March 2014, 31 December 2013, 31 March 2013). Note that the compared data indicated in the consolidated financial statements and in the detailed tables, if considered appropriate for a better comparison, were reclassified. Reference should be made to the Consolidated Financial Statements of the Beni Stabili Group as at 31 December 2013 for a description of the criteria used in determining the basis of consolidation. 20