H1 2013 14 uk

TK Development – new strategy and execution of it

Barkarby Gate, Sweden 20,000 m2

TK Development – Interim Report H1 2013/14 – 26 September 2013

Contents

1. Business model

• Mission and business model • Markets and segments • Relations with tenants and investors

2. Execution of announced strategy

• Strategic targets – execution of announced strategy

3. The Group’s results • Financial highlights and key ratios • Outlook

4. Project portfolio

• Development • Asset Management

5. New sales

• Sale of Barkarby Gate (Sweden) • Sale of DomusPro (Lithuania) • Other new sales

2


Futurum Hradec Králové, Czech Republic 28,250 m²

1. Business model

3


Mission statement

4

The overall mission of TK Development is to create added value by developing real property. The Group operates in the property development and services environments, and specializes in being the creative and result-oriented link between tenants and investors.


TK Development - the creative link

5

Business model

Engineers Architects

Option/purchase of site

Tenant requirements

Investor requirements

Authorities

Subcontractors Contractors

Investors

Tenants

Finished projects

Project management

Letting

Sale


Business areas

6

Development Asset Management

• Primary business area is the development of real property.

• Developing projects from the conceptual phase through to project completion.

• Projects can be executed based on one of several models:

a) Sold projects • Forward funding • Forward purchase

b) Projects with partners c) On TK Development’s own

books based on a high degree of confidence in the letting and sales potential.

d) Services for third parties.

• Secondary business area is asset management.

• Owning, operating, maturing and optimizing completed projects for a medium-long operating period that matches the potential for adding value.

1 2


• The Group has chosen to focus on Denmark, Sweden, Poland and the Czech Republic.

• The Group focuses on the segments: • Shopping centres • Stores/superstores • Mixed.

• The macroeconomic indicators in the

form of GDP and unemployment are showing modest growth expectations in all the Group’s markets.

Markets and segments

7

Markets and segments

Denmark

Sweden

Poland

Czech Rep.

Shopping centres ● ● ● ●

Stores/superstores ● ● ● ●

High-street properties ● ●

Offices ● ●

Mixed ● ● ● ●

Residential ● ●

Macroeconomic expectations

Denmark

Sweden

Poland

Czech Rep.

2013e 2014e 2013e 2014e 2013e 2014e 2013e 2014e

GDP growth (% y/y)

0.8 1.3 1.0 2.2 1.3 2.2 0.3 1.6

Unemploy-ment (%)

7.6 7.2 8.1 7.8 11.0 11.0 8.1 8.4

Source: IMF, April 2013


Relations with tenants and investors

8

Tenants Investors

Due to close relations and long-standing experience, the Group has extensive knowledge about the tenants’ and the investors’ requirements and wishes.

http://www.google.dk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=3lqdoAhTaVQj_M&tbnid=pKZ9sxJgpyZtUM:&ved=0CAUQjRw&url=http://www.sweatshop.co.uk/brands/adidas.html&ei=BJcDUv2rDobWtQbZ44DwBQ&bvm=bv.50500085,d.Yms&psig=AFQjCNGQmdb__1WWj1NxLBR2-5Z85HUSPg&ust=1376053377642992

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http://www.commerzreal.com/

http://www.ivg.de/index.asp

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Sillebroen Frederikssund, Denmark 25,000 m²

2. Execution of announced strategy

9


Strategic targets

The activities will be limited to Denmark, Sweden, Poland and the Czech Republic. The portfolio of projects not initiated (plots of land) is to be reduced from about DKK 1.1 billion to about DKK 500 million. The balance sheet is to be adjusted with a solvency rate of about 40 %. Overheads are to be reduced by around 20 % relative to 2012/13. Financing costs are to be normalized as as result of the initiatives implemented.

10


• The activities in Germany, the Baltic States, Finland and Russia are to be phased out • German activities have been downscaled through the sale of investment

properties. • Retail park, DomusPro, Vilnius, has been conditionally sold to BPT. • Offices in Berlin and Helsinki will be closed down in autumn 2013.

Execution of announced strategy

11

Market focus: Denmark,

Sweden, Poland and the Czech Rep.

Reduction of the portfolio of projects not

initiated (land)

Cost trimming

• Overheads are to be reduced by around 20 %, with half of the reduction deriving from the discontinuation of activities in Germany, the Baltic States and Finland.

• Cost-reducing measures have been implemented and are expected to achieve full impact in the course of 2014/15.

• The portfolio of projects not initiated (plots of land) is to be reduced from about DKK 1.1 billion to about DKK 500 million over a two-year period

• This process is progressing satisfactorily and according to plan.


• The balance sheet is to be adjusted, with a solvency ratio of about 40 %

• Following the implementation of the capital increase in September 2013, the solvency ratio constitutes about 40 %.

12

Solvency ratio of about 40 %

Lower financing costs

Management believes that a platform for normalized earnings will have been established once the above-mentioned adaptions have been implemented.

• Financing costs are to be normalized as a result of the initiatives implemented • In connection with the implementation of the capital increase, the Group has

reached agreements for a reduction of the interest payable on several major credits.

• Ongoing negotiations about interest rate reductions for other credits.

Execution of announced strategy


Development of town centre Køge, Denmark 27,500 m²

3. The Group’s results

13


Financial highlights and key ratios

14

(DKKm)

2008/09 2009/10 2010/11 2011/12 2012/13

H1

2012/13

H1

2013/14

Financial highlights:

Net revenue 1,073.2 1,384.9 602.4 359.8 632.3 129.3 218.8

Gross profit/loss 375.0 200.5 256.0 195.8 -139.5 49.4 76.7

Operating profit/loss (EBIT) 201.7 57.5 127.2 65.5 -241.1 -3.6 29.5

Profit/loss before tax 168.0 39.4 74.2 14.3 -326.0 -40.0 -24.3

Profit/loss 155.2 25.4 73.6 27.0 -493.3 -186.6 -30.1

Balance sheet total 3,816.1 4,377.3 4,622.0 4,639.5 4,009.3 4,538.8 3,941.4

Project portfolio 2,541.3 3,249.5 3,424.7 3,498.1 3,030.9 3,615.2 3,002.5

Equity 1,506.0 1,593.4 1,866.0 1,876.4 1,389.7 1,697.7 1,355.7

Cash flows from operating activities -331.7 -582.8 -182.7 -78.8 45.6 -75.0 43.1

Net interest-bearing debt, end of period 1,509.5 2,178.9 2,170.2 2,244.9 2,206.1 2,327.6 2,183.4

Key ratios:

Return on equity (ROE) 10.5 % 1.6 % 4.3 % 1.4 % -30.2 % -20.9 % -4.4 %

Solvency ratio (based on equity) 39.5 % 36.4 % 40.4 % 40.4 % 34.7 % 37.4 % 34.4 %

Price / book value 0.4 0.5 0.5 0.3 0.4 0.4 0.3


H1 2013/14 at a glance

• Second phase of retail park in Danderyd in Sweden was handed over to Commerz Real.

• First-phase units of the Group’s residential project in Bielany, Warsaw, Poland, were

handed over • 61 % handed over to buyers. In total, 88 % of first-phase units have been sold.

• Sale and hand-over of a minor, German investment property.

• 11 % reduction of overheads compared to H1 2012/13 • measures have been initiated to reduce the cost level by

about 20 % relative to 2012/13, with half of the reduction deriving from the discontinuation of activities in Germany, Finland and the Baltic States.

• Capital increase with gross proceeds of DKK 230.5 million was

implemented in September 2013.

• Agreements for new sales, see details below.

15


NAV per share PRO FORMA – at 31 July 2013 – AFTER IMPLEMENTATION OF CAPITAL INCREASE (98,153,335 shares)

0

5

10

15

20

25

30

35

40

45

DKK per share NAV ASSETS LIABILITIES

(40.1) (1.6) (38.5) (0.6)

(2.3)

(11.4)

(2.0) (5.0)

(17.2)

(-20.7)

(-3.4)

(16.0)

1,6

86

49

0

19

4

1,1

23

22

8 6

0

3,7

81

16

1

3,9

42

2,0

33

33

4

1,5

75

16


Outlook for 2013/14

17

Management maintains its expectations for the financial year 2013/14.

• Management anticipates positive results before tax for the continuing activities for the 2013/14 financial year.

• The timing and phase-out of the discontinuing activities are subject to major uncertainty, and the results of these activities are therefore not included in the outlook for the 2013/14 financial year.


BROEN, shopping centre Esbjerg, Denmark 29,800 m²

BROENshopping.dk Facebook.com/BROENshopping.dk

4. Project portfolio

18


Business area: Development

19

1

• Comprises the following markets: Denmark, Sweden, Poland and the Czech Republic.

• Development potential of 451,000 m².

• Total gross carrying amount of the portfolio amounts to DKK 1,147 million.

Development potential in square metres

Denmark Sweden Poland Czech. Rep.


BROEN, shopping centre

Esbjerg, Denmark

Residential Park, Bielany

Warsaw, Poland Bytom Retail Park

Bytom, Poland

The Kulan commercial district

Gothenburg, Sweden Amerika Plads (lots A & C)

Copenhagen, Denmark

Shopping centre 29,800 m2

Shopping centre/services 45,000 m2

Offices/residential 24,800 m2

Residential/services 48,350 m2

Retail park 25,800 m2

Østre Teglgade

Copenhagen, Denmark

Offices/residential 32,700 m2

Stuhrs Brygge

Aalborg, Denmark

Mixed 72,000 m2

Jelenia Góra

Jelenia Góra, Poland

Shopping centre 24,000 m2

20

Barkarby Gate

Stockholm, Sweden


Development = DKK 1,147 million (carrying amount) Business area: Development

Not initiated (selected)

DomusPro retail park

Vilnius, Lithuania


Completed

In progress

Res. Park, Bielany, phase I

Warsaw, Poland

Residential units 2,950 m2

Amerika Plads

Copenhagen, Denmark

Underground car park 16,000 m2

1

August 2013: In progress

August 2013: In progress


• Comprises the following markets: Denmark, Sweden, Poland and the Czech Republic.

• Total portfolio of properties amounts

to DKK 1,939 million.

• Focus on selling completed projects in order to: • Free up cash resources • Strengthen the financial platform • Secure financial resources to start

up new projects.

Business area: Asset Management

21

Denmark Poland Czech Rep.

Breakdown of value by country (carrying amount in DKK million)

2


Futurum Hradec Králové Hradec Králové Czech Republic

Galeria Tarnovia Tarnów Poland

22

28,250 m², 20 % ownership interest


Sillebroen Frederikssund Denmark


Business area: Asset Management Asset management = DKK 1,939 million (carrying amount)

Asset Management

The return on the carrying amount of the properties is 6.7 %. Based on full occupancy, the return on the carrying amount is expected to reach 7.9 %

2

Fashion Arena Prague Czech Republic


Galeria Sandecja Nowy Sącz Poland


Ringsted Outlet, Denmark

Retail Park, Most, Czech Rep.

Retail park, Aabenraa, Denmark

Shopping-street property Brønderslev, Denmark


2011/2012 2012/2013 H1 2013/14

Futurum Hradec Králové, SC, Czech Republic 97 % 100 % 100 %

Galeria Tarnovia, SC, 16,500 m2, Poland 96 % 96 % 94 %

Sillebroen, SC, 25,000 m2, Denmark 89 % 91 % 92 %

Fashion Arena Outlet Center, OC, 25,000 m2, Czech Republic 90 % 97 % 96 %

Galeria Sandecja, SC, 17,300 m2, Poland 95 % 96 % 97 %

Ringsted Outlet, OC, 13,200 m2, Denmark 59 % 61 % 62 %

Most, RP, 6,400 m2, Czech Republic 84 % 91 % 91 %

Aabenraa, RP, 4,200 m2, Denmark 100 % 100 % 71 %

Brønderslev, shopping-street property, 2,400 m2, Denmark 43 % 93 % 93 %

23

*)

Business area: Asset Management Occupancy rates

*) Extension only

**)

**) Biva A/S in bankruptcy occupies 28.6 % of the retail park

2


Fashion Arena Outlet Center, Prague, Czech Republic 25,000 m²

5. New sales

24


Sale of Barkarby Gate, Stockholm, Sweden

25

Barkarby Gate

Retail park

Barkarby Gate

Stockholm, Sweden

• On 13 June 2013 the 20,000 m² retail park project Barkarby Gate (Stockholm, Sweden) was sold based on forward funding.

• The buyer is a fund managed by Cordea Savills.

• Construction was started up in August 2013 immediately after the option to purchase land for the project was exercised.

• Opening is scheduled for autumn 2014.


Sale of DomusPro, Vilnius, Lithuania

26

DomusPro

Retail park

DomusPro

Vilnius, Lithuania

• On 5 August 2013 the about 11,100 m² retail park project DomusPro (Vilnius, Lithuania) was conditionally sold.

• The buyer of the project is BPT Baltic Opportunity Fund, which is managed by BPT Asset Management.

• The first phase of about 7,500 m² has a current occupancy rate of 79 %, with supermarket operator RIMI as the anchor tenant.

• Opening is scheduled for spring 2014.


Other new sales

• Conditional agreement for the sale of 80 % of a

planned shopping centre in Frýdek Místek, the Czech Republic • will maintain 10 % ownership interest. • 14,800 m². • fee income for letting and construction

management, among other things. • construction start expected in autumn 2013.

• Agreements regarding letting and sale of several

minor retail projects have been concluded.

• Agreement concluded regarding the sale of a further German investment property • expected to be handed over to the buyer in

early October 2013. • selling price amounts to DKK 43.8 million

(carrying amount).

Frýdek Místek

Shopping centre

Frýdek Místek, Czech Republic

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Disclaimer

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The expectations mentioned in this Interim Report, including earnings expectations, are naturally subject to risks and uncertainties, which may result in deviations from the expected results. Various factors may impact on expectations, as outlined in the section "Risk issues" in the Group’s Annual Report for 2012/13, particularly the valuation of the Group’s project portfolio.

H1 2013 14 uk

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