SUMMARY OF THE PROSPECTUS

Transcription

1 SUMMARY OF THE PROSPECTUS This Summary has been prepared in Dutch and has been translated by Retail Estates NV into English and French. Retail Estates NV is responsible for the consistency between the Dutch, French and English versions of the Summary. In case of discrepancies between the different versions of this Summary, the Dutch version will prevail. The Dutch version of this Summary can be obtained in the same manner and at the same locations as this document. Section A. Introduction and warnings This Summary has been drafted on the basis of the publication requirements ( Elements ) set out in Section A to E below. Since some of the Elements need not to be discussed for shares, it is possible that the numbering of the Elements is not continuous. Element A.1 Introduction and warnings This Summary must be read as an introduction to the Prospectus with respect to the public offering to subscribe to New Shares and to acquire or transfer the Preferential Subscription Rights, the Private Placement of Scrips and the admission to trading of the New Shares on Euronext Brussels. Any decision to invest in the New Shares, the Preferential Subscription Rights or the Scrips as part of the Transaction should be based on consideration by the investor of the Prospectus as a whole and on any and all information provided in the Prospectus (including information by reference). Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the relevant member state, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. A.2 Not applicable. Civil liability attaches only to those persons who have tabled the Summary including any translation thereof, but only if the Summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in the New Shares, the Preferential Subscription Rights or the Scrips. Section B. Issuer Element B.1 B.2 B.3 The legal name and commercial name Retail Estates. The domicile and legal form of the issuer, the legislation under which the Company operates and its country of incorporation Retail Estates is a public limited liability company ( naamloze vennootschap ) organised and existing under the laws of Belgium, with registered office at 1740 Ternat (Belgium), Industrielaan 6. As a public regulated real estate company ( RREC, Belgian REIT), Retail Estates NV falls within the scope of the RREC Law of 12 May 2014 and the RREC Royal Decree of 13 July A description of, and key numbers relating to, the nature of the current activities and core business Retail Estates NV is a specialised regulated real estate company, mainly possessing peripheral 1

2 retail real estate, located in the outskirts of residential areas or along access roads to urban centres (so-called peripheral retail properties ). The Company acquires these real properties from third parties or builds and commercialises stores on its own behalf. Additionally, Retail Estates NV possesses other real estate (such as offices, apartments, small and middle-sized properties and warehouses) and real estate certificates. As at 31 December 2014, the portfolio of Retail Estates NV consisted of individual peripheral retail properties, retail clusters and retail parks for an amount of EUR million (of the total portfolio, including assets held for sale), and of other real estate for an amount of EUR million. The following types of buildings are part of the fixed assets of Retail Estates NV: Individual peripheral retail properties: individual retail properties adjacent to the public highway. Every outlet has its own car park and entrance and exit roads, connecting it to the public highway, and making it easily recognisable. In the immediate vicinity, there are, in principle, no retail properties of the same kind. Retail clusters: a collection of peripheral retail properties, located along the same traffic axis and, from the consumer s point of view, they form a self-contained whole, although they do not possess a joint infrastructure other than the traffic axis. This is the most typical concentration of peripheral retail properties in Belgium. Retail parks: made up of (typically at least five) retail properties that, in conjunction with other shops, form part of an integrated commercial complex. All properties use a central car park with a shared entrance and exit road. This enables consumers to go to several shops without having to move their cars. Other real estate; mainly offices, residential dwellings, hospitality establishments and (by means of exception) a logistics complex at Erembodegem. Retail Estates NV only invests in real estate properties used for the aforementioned purposes if they are already embedded in a retail property or are part of a real estate portfolio that can only be acquired as a whole. Retail premises under development: premises that form part of a new-build or a renovation project. Key factors relating to the Company: Total surface m² 606, , ,452 Real estate portfolio Fair value (EUR) 801,059, ,916, ,593,000 Occupancy rate 98.61% 98.17% 98.13% Fair value individual retail properties, retail clusters and retail parks (EUR) 782,748, ,720, ,123,000 Fair value other real estate (EUR) 18,311,000 18,196,000 20,470,000 % retail properties 97.71% 97.56% 96.97% % other 2.29% 2.44% 3.03% 2

3 B.4a B.5 B.6 A description of the most significant recent trends affecting the Company and the industries in which it operates The out of town retail market has continued the trend of last year in Q The sale period of January did not reveal any big, but correct, results. The retailers were satisfied, but nothing more. This can be extended to the whole first quarter of 2015 where results were correct without too much enthusiasm of the retailers. The vacancy in the periphery stays limited, partly due to the conservative expansion policy applied by retail chains. New properties continue to be let, although the decision making process is taking more and more time just as in the second half of Nevertheless, supply and demand remain in balance and we see that top locations in the peripheral retail market are easily occupied. The above is in contrast with the city center B-locations, where difficulties have arisen and visible vacancy has manifested on several locations in the past quarters. This trend is spreading to the B- locations in the periphery where little vacancy is present, though the letting of available surfaces becomes tougher. As retail parks are concerned, market demand exceeds supply, this is mostly due to the sustained interest of the city center retailers who want to enter new retail parks on the one hand and the preference of clustering around existing peripheral retailers on the other hand. The further regionalization of the socio-economic legislation could possibly contribute to a further decrease of the future retail park stock. With respect to the investment market, both private as well as public investors remain having a high interest. Individual out of town retail units and smaller volumes are popular among the private investors, who can still acquire an attractive reutrn on these type of investments. However, a downward pressure on yields is present due to demand exceeding supply. Units with bigger volumes have become a rare investment product in Belgium, mostly retail parks and big out of town retail portfolios. From the institutional investor perspective, the amount of potential buyers for this type of product is increasing, with several national and international players being highly active and yields that are under pressure. The decrease in future stock can only confirm this trend." 1 Group of which the Company is a part and position of the Company within the Group The Company has six subsidiaries (Aalst Logistics NV, Finsbury Properties NV, Frun Park Wetteren NV, Retail Warehousing Invest NV (institutional RREC), Mijn Retail NV and Gentpoort NV). All of these subsidiaries are exclusively controlled (under IFRS) by the Company (together, the Group). The Company holds 100% of the shares in these subsidiaries, except for Retail Warehousing Invest NV (62.50%) and Mijn Retail NV (51,01%). The shares of Gentpoort NV are held by Frun Park Wetteren NV (100%). At present, the Company has one subsidiary, Retail Warehousing Invest NV, registered with the FSMA as an institutional RREC. Shareholding on the basis of the transparency declarations On the basis of the transparency declarations, received by the Company prior to the Date of the Prospectus, the major Existing Shareholders are: Shareholder Date of Registered % at date of Pro forma % at Date registration participation registration 3 of Prospectus 4 Groep Stichting 09/08/ , Administratie 'Het Torentje' 1 FPIM 2 03/12/ , KBC Groep NV 18/04/ , Federale Verzekeringen 31/10/ , AXA NV 30/11/ , Public TOTAL N.A Source: Cushman & Wakefield, Explanation regarding the Valuation Report dd. 31 March

4 1 This registration pertains to shares held by Leasinvest Real Estate Comm. VA 2 This registration pertains to shares held by Belfius Verzekeringen NV, Belins Finance SA and Belfius OFP 3 On the basis of the denominator at the time of the registration. 4 On the basis of the number of voting rights, which appears from the information received by the Company of its shareholders at the Date of the Prospectus, and taking into account the denominator applicable at the Date of the Prospectus (7,559,473 Shares). Each Share carries one vote. B.7 Currently, Retail Estates NV is not being controlled in the sense of Article 5 of the Belgian Companies Code. Selected historical key financial information presented for each financial year of the period covered by the historical financial information, and any subsequent interim financial period, and comments Selected financial information (in EUR x 1,000) CONSOLIDATED RESULT Net rental result 38,917 25,541 47,024 41,402 35,473 Real estate result 38,637 25,367 46,761 40,959 35,204 Real estate expenses -2,493-1,638-3,044-2,549-2,165 General expenses of the -2,270-1,545-2,400-2,263-2,194 Company Operating Result regarding the portfolio 33,874 22,183 41,316 36,147 30,844 RESULT REGARDING THE PORTFOLIO Variations of the fair value of investment properties (+/-) Result regarding the sale of investment properties (+/-) Result regarding the portfolio ,260 8,579 9, ,273 1,291 3,496 8,882 9,346 Financial result excl. IAS 39 result Taxes on net current operating result -12,944-8,514-15,787-14,771-12, NET RESULT 22,022 14,737 28,568 29,582 27,360 4

5 NET CURRENT OPERATING RESULT 20,749 13,446 25,072 20,700 18,014 Net current operating result/share Result regarding the portfolio/share Net result/share Distribution rate (compared to distributable profit) Number of Shares at the end of the period N/A N/A 86.46% 80.84% 83.78% 7,559,473 7,290,411 7,290,411 5,813,122 5,437,074 Gross dividend/share N/A N/A Net dividend/share CONSOLIDATED BALANCE SHEET NAV*/Share before distribution of profits of the current financial year (fair value) NAV*/Share after distribution of profits of the current financial year (fair value) NAV (excl. IAS 39 result)*/share after distribution of profits of the current financial year (fair value) NAV*/Share before distribution of profits of the current financial year (investment value) NAV*/Share after distribution of profits of the current financial year (investment value) NAV (excl. IAS 39 result)*/share after distribution of profits of the

6 current financial year (investment value) Share price PREMIUM/DISCOUNT of 46.20% 33.67% 28.36% 33.35% 18.32% the price compared to NAV* after distribution of profits DEBT RATIO** 51.04% 51.72% 49.10% 55.75% 51.08% FIXED ASSETS Intangible fixed assets Investment properties 801, , , , ,472 Other tangible fixed assets Trade receivables and other fixed assets Fixed assets 801, , , , ,938 CURRENT ASSETS Assets held for sale 6,066 5,800 4,385 7,488 13,159 Trade receivables 1,758 2, Tax receivables and other 1,322 1,479 1,899 1,084 1,216 current assets Cash and cash 2,213 2,561 2,189 1,879 1,450 equivalents Deferred charges and 1,080 2, accrued income Current assets 12,439 14,287 9,620 11,509 17,006 TOTAL ASSETS 813, , , , ,944 EQUITY Capital 166, , , , ,174 Share premium 101,839 93,095 93,095 52,857 43,268 Reserves 77,365 77,904 73,900 57,760 49,533 Result 22,022 14,737 28,568 29,582 27,360 Minority interests Equity 368, , , , ,336 LIABILITIES Long-term liabilities 382, , , , ,561 Short-term liabilities 63,123 65,534 33,516 43,644 28,047 LIABILITIES 445, , , , ,608 6

7 TOTAL EQUITY AND LIABILITIES 813, , , , ,944 * NAV = net asset value = equity (NAV/Share refers to the net value per share). ** For the exact calculation of the debt ratio, we refer to Article 13, 1 of the RREC Royal Decree of 13 July Comments regarding the historical financial information Interim period 01/04/2014 to 31/12/2014 Investments: conclusion Acquisitions and own developments for the period 01/04/2014 to 31/12/2014, less divestments, resulted in an increase of the real estate portfolio of EUR million. Net rental income rose over this period by EUR 4.32 million as a result of these new investments. Balance sheet and profit and loss account The investment properties (including project developments) have increased from EUR million to EUR million. This can mainly be explained by the expansion of the portfolio with EUR million and the sale of investment properties and real estate companies with EUR 9.19 million. The fixed assets held for sale have increased from EUR 4.38 million to EUR 6.07 million. At the end of each quarter, in the assets held for sale, the assets are recorded for which the sales agreement has already been signed but the deed has not yet been executed. As at 31 December 2014, assets worth EUR 5.90 million were added to the assets held for sale and assets worth EUR 4.22 million were sold. The long-term liabilities amount to EUR million and consist of million long-term financial liabilities, with an average term of 3.25 years. The remaining long-term liabilities pertain to provisions, authorised cash flow cover (interest swaps), deferred taxes and debts for the further acquisition of shares in Retail Warehousing Invest NV and Mijn Retail NV, which are not yet fully owned by Retail Estates NV. The net current result (this is the net result without the result regarding the portfolio) amounts to EUR million compared to EUR million last year. Interim period 01/04/2014 to 30/09/2014 Investments: conclusion Acquisitions and own developments for the period 01/04/2014 to 30/09/2014, less divestments, resulted in an increase of the real estate portfolio of EUR million. Over this period, the new investments had an impact of EUR 0.30 million and the divestments had a negative impact on the result of EUR 0.32 million. Balance sheet and profit and loss account The investment properties (including project developments) have increased from EUR million to EUR million. This can mainly be explained by the expansion of the portfolio with EUR million and the sale of investment properties and real estate companies with EUR 9.19 million. The fixed assets held for sale have increased from EUR 4.38 million to EUR 5.80 million. At the end of each quarter, in the assets held for sale, the assets are recorded for which the sales agreement has already been signed but the deed has not yet been executed. As at 30 September 2014, assets worth EUR 3.26 million were added to the assets held for sale and assets worth EUR 1.85 million were sold. The long-term liabilities amount to EUR million and consist of million long-term financial liabilities, with an average term of 3.5 years. The remaining long-term liabilities pertain to provisions, authorised cash flow cover (interest swaps), deferred taxes and debts for the further acquisition of shares in Retail Warehousing Invest NV and Mijn Retail NV, which are not yet fully owned by Retail Estates NV. The net result (share Group) for the first half of the year amounts to EUR million, consisting of the net current result of EUR million and the result on the portfolio of EUR 1.29 million. Per share this represents a net current result available for distribution of EUR 1,84 for the first half of 7

8 the year (on the basis of the weighted average number of shares). Financial year compared to financial year Investments: conclusion Acquisitions and own developments in the financial year less divestments resulted in an increase of the real estate portfolio of EUR million. As a result of these investments, the total rental income increases by EUR 2.60 million in the financial If the acquisitions would have taken place on 1 April 2013, the rental income would have increased by EUR 5.72 million. Balance sheet and profit and loss account The investment properties (including project developments) have increased from EUR million to EUR million. This can mainly be explained by the expansion of the portfolio with EUR million and the sale of investment properties with EUR 3.63 million. The fixed assets held for sale have decreased from EUR 7.49 million to EUR 4.38 million. At the end of each quarter, in the assets held for sale, the assets are recorded for which the sales agreement has already been signed but the deed has not yet been executed. Assets worth EUR 0.30 million were added to the assets held for sale in the financial year and assets worth EUR 3.58 million were sold. The long-term liabilities amount to EUR million and consist of million long-term financial liabilities, with an average term of 3.8 years (the bond placement after 31 March 2014 for an amount of EUR 30 million already taken into account). The remaining long-term liabilities pertain to provisions, authorised cash flow cover (interest swaps), deferred taxes and debts for the further acquisition of shares in Retail Warehousing Invest NV, which are not yet fully owned by Retail Estates NV. The net current result (this is the net result without the result regarding the portfolio) amounts to EUR million compared to EUR million last year. Financial year compared to financial year Investments: conclusion Acquisitions and own developments in the financial year less divestments resulted in an increase of the real estate portfolio of EUR million. As a result of these investments, the total rental income increases by EUR 4.65 million in the financial If the acquisitions would have taken place on 1 April 2012, the rental income would have increased by EUR 6.3 million. Balance sheet and profit and loss account The investment properties (including project developments) have increased from EUR million to EUR million. This can mainly be explained by the expansion of the portfolio with EUR million and the sale of investment properties with EUR 5.05 million. The fixed assets held for sale have decreased from EUR million to EUR 7.49 million. At the end of each quarter, in the assets held for sale, the assets are recorded for which the sales agreement has already been signed but the deed has not yet been executed. Assets worth EUR 8.53 million were added to the assets held for sale in the financial year and assets worth EUR million were sold. The long-term liabilities amount to EUR million and consist of million long-term financial liabilities, with an average term of 3.4 years. The remaining long-term liabilities pertain to provisions, authorised cash flow cover (interest swaps), deferred taxes and debts for the further acquisition of shares in Retail Warehousing Invest NV, which are not yet fully owned by Retail Estates NV. The net current result (this is the net result without the result regarding the portfolio) amounts to EUR million compared to EUR million last year. Financial year compared to financial year Investments: conclusion The acquisitions and own developments in the financial year less divestments resulted in an increase of the real estate portfolio of EUR million. As a result of these investments, the total rental income increases by EUR 1.11 million in the financial If the acquisitions would have taken place on 1 April 2011, the rental income would have increased by EUR 2.55 million. 8

9 Balance sheet and profit and loss account The investment properties (including project developments) have increased from EUR million to EUR million. This can mainly be explained by the expansion of the portfolio with EUR million and the sale of real estate investments with EUR 6.41 million. The fixed assets held for sale have increased from EUR million to EUR million. At the end of each quarter, in the assets held for sale, the assets are recorded for which the sales agreement has already been signed but the deed has not yet been executed. Assets worth EUR million were added to the assets held for sale in the financial year and assets worth EUR million were sold. The long-term liabilities amount to EUR million and consist of million of long-term financial liabilities, with an average term of 3.8 years. The remaining long-term liabilities pertain to financial instruments and long-term deferred taxes. B.8 B.9 B.10 B.11 The net current result (this is the net result without the result regarding the portfolio) amounts to EUR million compared to EUR million in the previous financial year. Not applicable. Profit forecast or estimate The Company does not make any profit forecast or estimates. However, the Company publishes a dividend outlook. Retail Estates NV s target is a dividend of EUR 3.20 gross for the financial year 2015/2016. (please refer to Element C.7). The Company points out that this dividend outlook is not a profit outlook. The Auditor s reports do not contain any reserve, except in respect of the comparative figures of 31 December 2013 of the consolidated interim financial information as per 31 December 2014 that has not undergone a limited review and is therefore subject to a reserve. Working capital statement On the date of the Prospectus, the Company is of the opinion that, taking into account its available cash and cash equivalents and its available credit lines, it has sufficient working capital to meet its present requirements and cover the working capital needs for a period of 12 months as of the date of the Prospectus. Section C. Securities Element C.1 A description of the type and the class of the securities being offered and/or admitted to trading, including any security identification number All New Shares will be issued according to Belgian law. The New Shares are ordinary shares representing the registered capital, of the same class, fully paid up, attaching voting rights, and no par value. They attach the same rights as the Existing Shares. The New Shares participate in the Company s result in the same way as the other Shares (it being understood that they will not entitle the shareholders to benefit from the annual dividend of the previous financial year 2014/2015). Hence, they entitle the shareholders to benefit from the full dividend (if any) for the current financial year which started on 1 April The New Shares shall have the same ISIN code as the Existing Shares: (ISIN BE ). The ISIN Code of the Preferential Subscription Rights is BE C.2 C.3 C.4 Currency of the securities issue EUR. The number of shares issued and fully paid and number of shares issued and not fully paid. The par value per share or statement that the shares have no par value As at the Date of the Prospectus, the Company s registered capital is represented by 7,559,473 Shares, no par value and fully paid up. A description of the rights attached to the securities Dividend: Please refer to Element C.7 and E.3. 9

10 Rights upon liquidation: After the payments of debts, expenses and liquidation costs, the proceeds of the liquidation are distributed pro rata amongst all shareholders, in proportion to their participation. Voting rights: Each Share carries one vote, subject to the legal situations of suspension. The shareholders may vote by proxy. Preferential subscription right in case of a capital increase by way of contribution in cash: In accordance with the RREC Law of 12 May 2014, the articles of association of the Company provide that in case of a capital increase by means of a contribution in cash, the shareholders preferential subscription right referred to in the Belgian Companies Code may be restricted or cancelled, but only if the existing shareholders are granted an irrevocable allocation right upon granting new securities. Such irrevocable allocation right must meet the following requirements: (i) it must relate to all newly issued securities, (ii) it is granted to the shareholders in proportion to the part of the registered capital represented by their shares at the time of the transaction, (iii) at the latest on the eve of the start of the subscription period, a maximum price per share is announced and (iv) in that case, the subscription period must be open for at least 3 stock exchange days. The right must not be granted in case of a contribution in cash with restriction or cancellation of the preferential subscription right, as a supplement to a contribution in kind as part of the distribution of an optional dividend, to the extent that this is actually made payable for all shareholders. C.5 C.6 C.7 A description of any restrictions on the free transferability of the securities There are no other restrictions on the free transferability of the New Shares than those applying ipso jure. No lock-up obligations were entered into with respect to the New Shares. Admission to trading and place where the securities will be traded A request has been filed with Euronext Brussels for the admission to trading of the New Shares, which will be issued as part of the Transaction. It is expected that the New Shares will trade as of 28 May 2015, under the same ISIN-code as the Existing Shares (BE ). A description of dividend policy Pursuant to Article 13, 1 of the RREC Royal Decree of 13 July 2014, the Company must pay out (as a capital allowance) an amount that is at least equal to the positive difference between the following amounts: 80% of the amount equal to the sum of the corrected result and the net surplus values upon realisation of real estate, which are not exempt from the obligation to pay out, in accordance with the RREC Royal Decree of 13 July 2014; and the net reduction, during the financial year, of the Company s indebtedness, as set out in the RREC Royal Decree of 13 July Although the Company is a public regulated real estate company, it remains subject to Article 617 of the Belgian Companies Code, according to which a dividend may only be paid if, as a result of such payment, the net assets at closing of the relevant financial year do not drop below the amount of the fully paid up capital plus all reserves, which may not be paid out pursuant to the law or the articles of association. Just like in previous years, Retail Estates expects the dividend for the financial year 2015/2016 to grow similar with previous years, as a result of which it is minimally inflation resistant. For the financial year 2015/2016, Retail Estates NV s target is a dividend of EUR 3.20 gross. This would imply an increase of 3.23% compared to the proposed annual dividend for the financial year 2014/2015 (EUR 3.10 gross, in respect of which the annual shareholders meeting shall decide on 3 July 2015). The Company expects that the pay-out ratio will be less than 100%. If the business cash flow for the financial year 2015/2016 (against the current expectations) would not be sufficient to result in such a dividend, the Company can, if it wishes to do so, use the distributable reserves (in the sense of Article 617 of the Belgian Companies Code). The Company points out that this dividend outlook is not a profit outlook. 10

11 Section D. Risks Element D.1 Risks that are specific to the Group and its industry The Company is of the opinion that the risk factors set out below may have an impact on its activities and its capacity as the issuer of the Shares. Most of these factors relate to uncertain events, which may or may not occur and the Company is not in a position to make representations regarding the fact whether these events will occur or not. The risk factors may relate to the Company or to any of its subsidiaries (together, the Group). The Group is subject to risks that may affect the markets where its properties are located: (i) Risks related to the economic situation: potential changes regarding the main macroeconomic indicators or a general economic slow-down in one of the markets may have an adverse impact on, inter alia, the rental values and the occupancy rate, the development of the interest rates, the development of the fair value of the real estate portfolio and the tenants solvency. (ii) Risks related to the real estate market as a whole: the main risks to which the Company is exposed pertain to, as the case may be, too much supply on a certain local real estate market and a decrease of the occupancy rate of its buildings, potential difficulties to maintain rent levels and the value of the real estate portfolio in case of new lease agreements or the extension of existing lease agreements, and the risk of losses in case of sales compared to the historical acquisition value. (iii) Economic risks in connection with the Group: an irregular evolution of the consumer trust and/or unemployment per region or municipality may cause a considerable turnover drop with the tenants, on a local level. Although not a single tenant is occupying property that, in aggregate, represents more than 20% of Retail Estates NV s consolidated assets, there may be a considerable impact on Retail Estates NV when a tenant would suddenly be facing financial problems. Operational and property-related risks for the Company: (i) Rental income risk: the Group is exposed to the risk of loss of rental income related to the departure of tenants on interim termination dates or upon expiry of the lease agreement. This loss of rental income risk depends on the risk of a negative development of consumer spending and the risk of a general drop in retail business turnover. (ii) Vacancy risk and loss of rental income: the vacancy risk and the risk of loss of rental income resulting from this may considerably increase in the future in case of an economic crisis. (iii) Risk of the fact that the tenants do not fulfil their financial obligations: irrespective of the current economic circumstances, the Group is exposed to the risk that its tenants do not comply with their financial obligations. The Group is not insured against nonpayment of the tenants. (iv) Risk in connection with the development of the fair value of the buildings: the Group is exposed to fluctuations in the fair value of its real estate portfolio, as the independent real estate experts valuation reports show. (v) Risk of damages: in order to cover the risk of the financial consequences resulting from severe damages, the buildings are covered by several insurances. However, should many damages occur in the buildings of the Group s real estate portfolio, this may have considerable financial consequences for the Group, due to an increase of the insurance premiums. (vi) Risk related to large construction works: there is a risk that works must be carried out due to wear and tear of the buildings or with a view to changing the architectural concept of the fronts of the buildings. There are also risks related to large construction works (including delays, exceeding the budget and organisational problems). As a result of the continuous bad economic climate in the building industry, the ten-year warranty legally provided by general contractors can be undermined because of unexpected failures. (vii) Traffic infrastructure risk: the shops usually benefit from a reconstruction of the roads. However, it cannot be excluded that, in exceptional cases, some stores may suffer from such reconstruction works, due to the fact that access to these stores would become more difficult. (viii) Inflation risk: the Group s lease agreements contain indexation clauses on the basis of the health index, as a result of which the annual rental income develops together with the inflation. The inflation risk to which the Group is exposed mainly concerns the costs connected to the rent, inter alia in connection with renovation and investment 11

12 (ix) (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) (xvii) (xviii) (xix) works, which may be indexed on a different basis than the health index, and therefore may develop faster than the rents. Deflation risk: The Group is partially protected against the risk of deflation, since almost all lease agreements of the Group contain provisions according to which the rent can never drop below the level of the base rent. However, also for these lease agreements, it cannot be excluded that the rent drops to a level below the current rent, although higher than the base rent. Expropriation risk: pursuant to the applicable legislation, the Group s real estate may be the object of expropriation measures by the competent authorities for public interest reasons. Risks related to merger, de-merger or take-over transactions: real estate companies that are taken over are subsequently typically absorbed by Retail Estates NV, as a result of which all assets and liabilities of these companies are transferred to Retail Estates NV. It cannot be excluded that these transactions may result in the transfer of hidden liabilities to the Group. Environmental risks: the Group is exposed to environmental risks. If an environmental risk should occur, this may have substantial financial consequences for the group (soil clean-up measures, removal of asbestos, etc.). Staff turnover risk: taking into account its relatively small team of employees, the Group is exposed to a disorganisation risk in case of a departure of certain key employees. Risk of claims: the Company and other Group entities are party to claims and may be so in the future as well. Development of the rental market: in the light of developments in the rental market, the Group is subject to risks connected to vacancy, lettability, tenant quality, obsolescence of the buildings and the development of supply and demand on the rental market. Structural condition of the buildings: the Group is subject to risks in connection with the structural condition of its real estate portfolio, such as (i) the presence of hidden defects in the structural condition of the buildings in its real estate portfolio; and (ii) obsolescence and wear and tear of the buildings in its real estate portfolio. Fair value of peripheral retail real estate: fluctuations in the value of the portfolio affect the Company s equity. The value of the portfolio is inflation resistant, although interest-sensitive. Risks relating to obtaining building and socio-economic permits: the value of peripheral retail real estate is determined to a large extent by the presence or absence of all required building permits and authorisations. In case a store is put to a different use, the granted permit must be replaced, which can be time-consuming and non-transparent and therefore involve a vacancy risk. The Group is also exposed to the risk that the tenants do not comply with the socio-economic legislation, townplanning and other regulatory obligations. The transfer of authority in the regulation regarding the socio-economic permits presently leads to uncertainty about the actual entry into force of certain regional initiatives as well as the initiatives still to come from the other Regions. Compliance risks: compliance risks relate to the risk that the relevant legislation is not being properly complied with, or that employees are not acting in an upright fashion. The Company is subject to risks regarding the regulatory framework of its activities: (i) Risk in relation to the evolution of the legislation: new legislation or changes in existing legislation or a different application and/or interpretation of such legislation by the administration or the courts may have a considerable adverse effect on the Company s profitability and the fair value of its portfolio. E.g. the exit tax due in case of (inter alia) a merger is calculated on the basis of a Circular Letter of the Belgian tax authorities, the interpretation or practical application of which may change anytime. (ii) Risks relating to the legal status of a public regulated real estate company: in its capacity as a public RREC, the Company is subject to provisions containing restrictions regarding (inter alia) the activities, the debt ratio, profit and loss processing, conflicts of interest and corporate governance. The Company may not be in a position to fulfil these requirements in case of a significant change in its financial situation or otherwise. As a public RREC, Retail Estates NV is exposed to the risk of future changes in the legislation regarding regulated real estate companies. In addition, there is also a risk that the regulator (FSMA) imposes sanctions in case of non-compliance with the applicable rules. In that case, Retail Estates NV loses the benefit of the special tax regime of regulated real estate companies, and there is a risk that it must prepay its loans early and the loss of the this legal status may have an 12

13 (iii) adverse effect on the activities, result, profitability, financial situation and the prospects of the Company and the Group as a whole. Risks related to legal status of an institutional regulated real estate company: as at the Date of the Prospectus, Retail Estates NV controls one institutional RREC, i.e. Retail Warehousing Invest, which is subject to provisions containing restrictions regarding (inter alia) the activities, result processing, conflicts of interest and corporate governance. The main risk related to this legal status is the loss of the benefit of the special tax regime of an RREC, the risk that it must prepay its loans early and a potential adverse effect on the activities, result, profitability, financial situation and the prospects of Retail Warehousing Invest NV and the Group as a whole. Financial risks for the Company: (i) Interest risks: as at 31 December 2014, the Group has a debt ratio of 51.04%, as a result of which the Company is exposed to an interest risk. This risk is covered by the fact that most of the financial debts have a fixed interest rate or a floating interest rate hedged against interest increases. (ii) Liquidity risk: the Group is exposed to a liquidity risk, which, in case its financing agreements are terminated or not extended, may result from a lack of cash assets. (iii) Risk related to the fluctuations of the fair value of the hedging instruments: Retail Estate NV uses interest rate swaps to hedge the interest risk on long-term loans with a floating interest rate. If the Euribor interest rate drops significantly, the fair value of these instruments will undergo a negative variation, which, however, does not have an impact on Real Estate NV s net result. (iv) Risk related to the banks: entering into a financing agreement or investing in an interest hedging instrument with a financial institution results in a counter party risk in case the financial institution does not fulfil its obligations. In order to limit such counterparty risk, the Group works with seven different banks. The Group s financial model is based on structural indebtedness, as a result of which its cash position with financial institutions is in principle rather limited. (v) Risk related to the covenants of financing agreements or the bond loan: the Company is exposed to the risk that its loans are reviewed, terminated or subject to early prepayment if it does not comply with its covenants under these loan agreements. In addition, the Company is exposed to the risk of mandatory early prepayment under the loan agreements in case of a change of control over the Company, noncompliance with its obligations and default. The Company, in the event of certain defaults or a change of control, is also exposed to the risk of early repayment of the bond it has issued. (vi) Exchange rate risk. To date, the Group exclusively invests in the euro zone and is not exposed to exchange rate risks. D.3 Risks that are specific to the Shares (i) (ii) (iii) (iv) (v) (vi) Liquidity of the share: the Share is characterised by a rather limited liquidity. The Share price may be affected considerably in case there would be no liquid market for the New Shares. Limited liquidity of the preferential subscription rights market: there is no guarantee that there will be a market for the Preferential Subscription Rights. It is possible that the liquidity on that market will be very limited. Preferential Subscription Rights of the shareholders which are not exercised or not exercised in full: existing shareholders will experience dilution as a result of the Offering if they do not or could not exercise their Preferential Subscription price in full. Possibility of future dilution of the shares: if the Company would decide in the future to increase its capital, this may result in a dilution of the participation of the Shareholders (who would not exercise, in case of a contribution in cash, their preferential subscription right or their irrevocable allocation right at that time). Volatility of the share price and yield of the share: the Share price may be influenced by certain external or internal changes or developments, economic, monetary and financial elements, market fluctuations and the current economic situation. Please note that the Subscription Price should not be considered as an indication for the market price of the Shares. Drop in the share price or the Preferential Subscription Rights: the sale of a certain number of Shares or Preferential Subscription Rights on the market or the impression that such sales might occur may have a negative impact on the Share price. 13

14 Section E. Offer Element E.1 The total net proceeds and an estimate of the total expenses of the issue/offer, including estimated expenses charged to the investor by the issuer or the offeror The costs in connection with the Transaction are estimated at approximately 2.20% of the gross proceeds of the Transaction (in case the Transaction is fully subscribed to). The costs encompass, inter alia, the fees for the Company s advisors, administrative costs and publication costs and the placement fee for the Managers (2% of the amount of the subscriptions pursuant to the Transaction, excluding subscriptions by certain Existing Shareholders who have engaged in subscription commitments). All costs are borne by the Company. E.2a On that basis, and in case the Transaction is fully subscribed to, for a total amount of EUR 76,224,676 (capital and issue premium), the net proceeds from the Transaction are estimated at EUR million. Reasons for the offer, use of proceeds, estimated net amount of the proceeds In case the Transaction is fully subscribed to, the capital increase (including the issue premium) amounts to EUR 76,224,676 and the net proceeds approximately amount to EUR million. Retail Estates NV intends to use the net proceeds from the Transaction to continue its growth strategy and hence, to expand its real estate portfolio, within the debt ratio range of 50 to 55%, which the Board of Directors aims at (this does not exclude that this range may be exceeded during shorter periods). Reminder: as at 31 December 2014, the Company s debt ratio is 51.04%. The Company will invest the net proceeds from the Transaction in announced and new real estate investments, for an amount of approximately EUR million and will, in a first stage, use the balance to decrease its financial debts by approximately EUR 8.92 million In April 2014, the Company committed to invest, through Mijn Retail NV, in a retail park in Beringen with a total investment value of EUR 28 million. The completion of this new construction requires an additional investment of EUR 25 million. For the realisation of this retail park, the required permits have been obtained and the construction works are in progress. The retail park is expected to be delivered by the end of June 2015, with a view to an opening as from September In addition, a minimum amount of EUR million will be reserved to meet the purchase commitments in 2016 that were previously entered into with respect to the shares of Retail Warehousing Invest NV, which today are not in the possession of Retail Estates NV and which must be acquired from the minority partner no later than 30 June In accordance with relevant IFRS provisions, this requirement is already reflected in the consolidated balance sheet. The Company is also investing in the expansion of its retail parks. Thus, the Company has plans to expand its existing retail cluster in Wetteren, which would mean an estimated investment of EUR 15 million. However, the necessary permits still need to be acquired and agreements concluded with potential tenants. Completion is expected no earlier than the second half of The Company also intends to invest in the expansion of its retail cluster at Namur South, at its own expense on behalf of a DIY shop in Jambes, in the creation of retail facilities of approximately 8,000m², with a projected additional investment of EUR 12 million. However, the necessary permits still need to be acquired and agreements concluded with a potential tenant. Completion is expected in the first half of Further investment projects will in principle consist of investments in prominent locations with quality tenants. Pending the use of these amounts, the Company will, in a first stage, improve its financial debt position with the Group s banks. More specifically, the Company mainly intends to repay outstanding debt under existing revolving credit facilities, in order to use the net proceeds of the Transaction to the extent that there are no projects that need immediate financing and due to reasons of efficiency as to the management of the cash flow, it being understood that the Company can issue utilisation requests under these credit facilities as soon as this is required with a view to its growth (however, subject to the potential use of part of the proceeds from the Transaction for final repayment of certain credit facilities that mature within a period of 12 months after the Date of the Prospectus). As at 31 December 2014, the Company has EUR million long-term loans that mature within a year. EUR million loans mature in 2 to 5 years and EUR million 14

15 E.3 loans mature in more than 5 years. On the Date of this summary, Retail Estates NV cannot predict with certainty how the proceeds of the Transaction shall be used specifically, or the amounts that will actually be spent on or allocated to the aforementioned use. The Company shall, within its own discretion, determine the amounts and the timing of the Company s actual expenses, which will depend on many factors such as the development of the Group s debt ratio, the availability of appropriate investment possibilities, the conclusion of agreements with appropriate conditions with potential sellers, the net proceeds of the Transaction and the Company s operational costs and expenses. Hence, the Board of Directors and the Company s management will have a lot of flexibility to use the net proceeds of the Transaction. A description of the terms and conditions of the offer 1. General terms and conditions of the Transaction: The Transaction consists of the Offer and the Private Placement. The Offer is a public offer to subscribe to the New Shares by exercising the Existing Shareholders Preferential Subscription Rights, or the Preferential Subscription Rights of the investors, acquired during the Subscription Period. Also, the New Shares may be subscribed to by exercising the Scrips, acquired as part of the Private Placement of Scrips (these are the securities, into which the non-exercised Preferential Subscription Rights are automatically converted at the closing date of the Subscription Period). The New Shares are issued in accordance with a resolution in principle of the Board of Directors of 5 May 2015 within the framework of the authorised capital. The decision of the capital increase has been made subject to the realisation of the following conditions precedent: - Approval of the Prospectus and the amendment to the Articles of Association (following the capital increase) by the FSMA; - Signing of the Placement Agreement and the absence of termination of this agreement on account of one of its stipulations; and - Confirmation of the quotation of the Preferential Subscription Rights and the New Shares on Euronext Brussels and after their detachment respectively issue. 2. Amount of the Transaction: If the total amount of the Transaction is subscribed, the capital increase (issue premium included) amounts to EUR 76,224,676. If the total amount of the Transaction is not subscribed, the Company has the right to increase the capital for the amount actually subscribed. No minimum amount has been described for the Transaction. 3. Subscription Price and Subscription Rate: The Subscription Price amounts to EUR per New Share. This Subscription Price represents a discount of 17.34% compared to the closing price of the Share on Euronext Brussels on 4 May 2015 (i.e. EUR 73.20, after deduction of the proposed gross dividend of EUR 3.10 for the financial year 2014/2015, which is expected to be approved by (and paid after) the annual shareholders meeting of 3 July 2015). The holders of Preferential Subscription Rights can subscribe to the New Shares on the basis of a Subscription Rate of one New Share for six Preferential Subscription Rights owned. Except for the Subscription Rate, no minimum or maximum amount for subscription has been determined in the context of the Transaction with Preferential Subscription Right. All New Shares to which the Existing Shareholders or owners of Preferential Subscription Rights and subscribers through Scrips, subscribe in application of the Subscription Rate, will be allocated to them. All subscriptions are binding and irrevocable, besides in case of, and under the conditions applicable, the publication of an appendix to the Prospectus. The Subscription Price was determined on 5 May 2015 by the Board of directors, in consultation with the Managers, based, amongst others, on the market price of the Shares on Euronext Brussels after deduction of the proposed gross dividend for the financial year 2014/2015, on which, as usual in similar transactions, a discount was applied, as determined by the Board of directors, in consultation with the Managers, in the light of market conditions and the requirements applicable at that time. 4. Subscription Period and subscription procedure with Preferential Subscription Right: The Subscription Period with Preferential Subscription Right starts on 7 May 2015 (from 8 p.m.) and ends on 21 May 2015 (until 4 p.m.) (included). For Existing Shareholders holding their Existing Shares as dematerialised shares (on a securities account), the corresponding number of Preferential Subscription Rights will be booked automatically onto their securities account with their bank or other financial intermediary. In principle, their financial institution will inform them on the procedure to be followed in order to exercise or trade their Preferential Subscription Rights on Euronext 15