Retail Estates : Announcement of the annual results of the 2022-2023 financial year

PRESS RELEASE

Periodic statement - regulated information - insider information

Ternat, 26 May 2023

ANNOUNCEMENT OF THE ANNUAL RESULTS OF THE FINANCIAL YEAR 2022-2023

THE 25TH ANNIVERSARY OF THE FIRST STOCK EXCHANGE LISTING OF RETAIL ESTATES IS CELEBRATED WITH EXCELLENT ANNUAL FIGURES.

AFTER THE CORONAVIRUS CRISIS, THE OUT-OF-TOWN RETAIL REAL ESTATE MARKET NOW ALSO COPES WITH THE CONSEQUENCES OF THE ENERGY CRISIS AND THE HIGH INFLATION AND PROVES ITS RESILIENCE.

THE EPRA EARNINGS PER SHARE AMOUNT TO € 6.34, REPRESENTING AN INCREASE OF 9% COMPARED TO PREVIOUS FINANCIAL YEAR. AN ATTRACTIVE GROWTH IS ACHIEVED, EVEN AFTER CORRECTION FOR THE NON-RECURRING EFFECT RELATED TO THE FBI QUALIFICATION IN THE NETHERLANDS. THE PROCEEDS OF THE CAPITAL INCREASE OF JUNE 2022 WERE INVESTED IN ACQUISITIONS IN THE NETHERLANDS, THUS ELIMINATING THE DILUTIVE EFFECT OF THE ISSUE OF NEW SHARES.

THE CONTINUED INTEREST OF INVESTORS IN RETAIL PARKS ALL OVER EUROPE IS REFLECTED IN STABLE VALUATIONS. ACROSS THE ENTIRE REAL ESTATE PORTFOLIO, AT CONSTANT COMPOSITION, THE INCREASE IN VALUE COMPARED TO 31 MARCH 2022 IS 3.22%.

THE OCCUPANCY RATE OF 98.08% HAS RETURNED TO THE LEVEL OF THE 25-YEAR AVERAGE.

THE DEBT RATIO HAS DECREASED TO A HISTORICALLY LOW LEVEL, NAMELY 44.77%.

THE INTEREST RATE RISKS FOR THE NEXT THREE FINANCIAL YEARS ARE ALMOST COMPLETELY HEDGED. THE AVERAGE BANK FINANCING COST EQUALS TO 2.06%.

2022-2023 TARGET AS STATED IN THE THREE-YEAR PLAN 2022-2025 IS EXCEEDED; € 12.95 MILLION INVESTMENTS IN ESG OBJECTIVES OUT OF A TOTAL THREE-YEAR OBJECTIVE OF € 30 MILLION CAPEX AND € 3.6 MILLION OPEX.

INCREASE OF THE PROPOSED DIVIDEND OF € 4.60 FOR FINANCIAL YEAR 2021-2022 TO € 4.90 AS A RESULT OF THE STRUCTURALLY INCREASED PROFITABILITY, BY THE DISTRIBUTION OF AN INTERIM DIVIDEND IN THE FORM OF AN OPTIONAL DIVIDEND.

Annual results for the period 01.04.2022 through 31.03.2023

1. 2022-2023 FINANCIAL YEAR IN A NUTSHELL

Retail Estates celebrates the 25th anniversary of it first stock exchange listing with the highest profits ever. The value increase of the real estate investments reflects the resilience of the out-of-town retail real estate sector in spite of the trials and tribulations caused by the energy crisis and the unprecedented inflation that caused the costs of construction and the wage costs to soar. Nevertheless, the economic context was difficult due to the energy crisis, which affected both consumers and retailers, and a surge of inflation that quickly went out of control. Even if the inflation could be controlled, its impact on the interest costs would still be noticeable for a considerable period of time. All over Europe, out-of-town retail parks are highly sought after by real estate investors on account of their excellent performance over the recent turbulent years, marked by the COVID-19 epidemic and the energy crisis. This explains why the valuation of these investments remains stable in spite of the increased funding costs.

The entire retail sector faces an increase in cost base. The indexation of wages and rents reinforced the impact of the soaring energy costs. Many retailers have been able to mitigate the effect by raising their prices and/ or lowering their margins, but this was not an option for some segments. In particular the highly competitive environment of the food retail sector only allows narrow profit margins, making it difficult to return to its pre- COVID-19 profitability level. Whenever it was deemed necessary to protect the tenants' profitability, Retail Estates has accepted limited rent reviews in line with market standards, which will take effect on the next expiration date of the lease agreements. No rent reductions or index caps were granted. The occupancy rate remained at a high level, 98.08%, and lease renewals continue without interruptions.

The proceeds of the June 2022 capital increase were used to acquire the non-food part of a retail park in Venlo (the Netherlands), with an investment of € 34.44 million. Another major investment made in cooperation with a Dutch partner concerns the acquisition of 17 retail properties in home decoration mall Alexandrium in Rotterdam (the Netherlands) for an amount of € 26.03 million. These investments yield € 5.26 million in rent on an annual basis.

Our targets relating to sustainability investments in line with our ESG strategy were exceeded by far. These investments, including photovoltaic installations, insulation and high-performance glazing, are made in cooperation with our tenants on a "win-win" basis with a view to increasing the sustainable rentability and value retention of our retail properties.

In the past financial year, the resilience of our retail real estate segment was reflected in an increase in rental income to € 125.86 million and an EPRA result1 of € 88.20 million. The qualification of the favourable FBI (fiscal investment institution) status in the Netherlands after years of procedures has had a positive impact in the form of a non-recurring result of € 7.7 million relating to previous financial years. It contributed to an increase of the EPRA earnings per share to € 6.34 versus € 5.84 in the previous financial year.

The value of our real estate investments, at constant composition, increased during the past financial year by

• 56.6 million, or 3.22%. This increase represents the positive balance of a series of corrections that can be explained partly by the increase in rents and partly by higher sales prices. The most significant value increases were observed in the Netherlands. A limited number of individual retail properties were sold with a gain of
• 0.14 million compared to the fair value.

1 EPRA earnings are calculated as follows: net result excluding changes in the fair value of investment properties, excluding the result on the disposal of

investment properties, excluding changes in the fair value of financial assets and liabilities and excluding minority interests relating to the aforementioned elements.

As was the case in the previous financial years, a lot of attention was paid to the extension of the current bank financing and the hedging of the interest rate risks. The shareholders' equity was strengthened with a

• 54.15 million capital increase in June 2022 and the incorporation of extraordinary profits into the reserves. As a result, the debt ratio decreased from 49.15% on 31 March 2022 to 44.77% on 31 March 2023. Retail Estates retains an important investment capacity within the context of the targeted maximum debt ratio of 50%.

Rental incomeincreased up to € 125.86 million (+€ 10.08 million) mainly as a result of indexation and acquisitions made during the past financial year.

The investment properties(including non-current assets under construction) increased from € 1,759.88 million to

• 1,888.56 million. This can mainly be explained by the expansion of the portfolio by € 60,78 million, investments in the existing portfolio amounting to € 17.14 million, the sale of investment properties for an amount of
• 9.66 million and a positive revaluation of the existing real estate portfolio for an amount of € 55.92 million.

On 26 May 2023 the Board of Directors of Retail Estates decided to distribute an interim dividend in the form of an optional dividend, for the financial year 2022-2023 (which started on 1 April 2022 and ended on 31 March 2023) amounting to € 4.90 (€ 3.43 net, i.e. the net dividend per share after deduction of withholding tax at a rate of 30%) per share (participating in the profits of financial year 2022-2023).

Taking into account the obligation of Retail Estates as a public BE-REIT to pay out dividends pursuant to article 13 of the Royal Decree of 13 July 2014 on regulated real estate companies, the Board of Directors will propose to the annual general meeting of 24 July 2023 to not pay any additional dividend for the financial year 2022- 2023.

2. OPERATIONAL ACTIVITIES

2.1. INVESTMENTS

Investments

Acquisition of "Tref Center Venlo"

On 4 July 2022, Retail Estates invested € 34.44 million in the acquisition of a 90% interest in retail park Tref Center in Venlo (the Netherlands - province of Limburg). The investment took place in cooperation with the Dutch real estate investor Westpoort Vastgoed, which acquired a 10% interest in the same transaction. The share of Retail Estates in the transaction amounts to € 34.44 million and generates a rental income of

• 2.52 million, representing an initial yield of approximately 7%. According to real estate expert Cushman & Wakefield, the investment value of Retail Estates' share equals to € 35.5 million and the fair value amounts to € 32.83 million.

The retail park Tref Center has been developed around Tref Box, a hypermarket that is not included in the transaction. It is a combination of food and non-food retailers that is rarely seen in the Netherlands but is quite common in the United Kingdom. The park comprises 19 retail properties with a total surface area of 31,295 m2 and a petrol station. The main tenants include Lidl, Pets Place, Basic Fit, KFC, Leen Bakker, Jysk, Bever Sport (AS Adventure) and Beter Bed. The retail park has been widely known in the Venlo region for over 50 years and has a customer zone extending from Venlo (100,000 inhabitants) to across the German border. Venlo is the second largest city of the province of Limburg, after Maastricht. Retail Estates already invested in this region in the past, in particular in Maastricht and in Heerlen.

Acquisition of "Home decoration mall Alexandrium"

The home decoration mall Alexandrium (Alexandrium III) features 55 home decoration retail units spread over a surface area of approximately 60,000 m2 and it includes 900 roof parking spaces. The location can be reached perfectly by car as well as by train, the underground railway and by bus from the city of Rotterdam and the surrounding area. Since its construction the complex has become a supraregional shopping destination for furniture and interior decoration articles in the broadest sense, in one of the most attractive shopping areas in the Netherlands with 650,000 inhabitants.

The home decoration mall Alexandrium was opened in 1997 and sold at that time to various private investors and (shop) owners. The structural connection between the home decoration mall Alexandrium, the regional Shopping Center Alexandrium (Alexandrium I - owned by Klépierre) and the retail park Alexandrium Megastores (Alexandrium II - owned by CBREGI) creates a very complementary mix and a retail offer that is exceptional for the Netherlands, with a total of 200 retail units over a surface area of 110,000 m². All shops are open 7 days a week, and Alexandrium attracts 15 million visitors each year. In terms of the number of visitors, Alexandrium III is one of the locations where the current tenants in general have their top performing retail units in the Netherlands. Virtually 100% of the home decoration mall are currently let.

The retail units acquired by Retail Estates via its 50% subsidiary under Dutch law, Alex Invest N.V., are let to tenants the majority of whom are already part of the company's existing Dutch portfolio of 14 retail parks. In its urban planning the city of Rotterdam has aimed at a maximum efficiency at this location by opting for a covered 3-floor home decoration shopping center. This acquisition is therefore perfectly in line with the policy and location preferences of Retail Estates.

Late December 2022, 13 retail properties with a total retail area of 19,951 m2 were acquired for an amount of € 22.35 million. These retail properties yield an annual rental income of € 2.25 million.

At the end of March, additional investments were made in the same home decoration mall for a total amount of € 4.1 million. This acquisition yields an annual rental income of € 0.49 million.

On the date of the acquisition, the investment was below the fair value estimated by the real estate expert CBRE. As a result of these acquisitions, Retail Estates controls approximately 37% of the retail area of the home decoration mall Alexandrium III.

Cooperation with Westpoort Alexandrium B.V.

These properties were purchased by Alex Invest N.V., a company under Dutch law. The investment is funded by loans granted by Retail Estates (60%) and a capital injection by Retail Estates and its partner Westpoort Alexandrium B.V. (40%).

Westpoort Alexandrium B.V. is controlled by the Roobol family, who has acquired a 50 % participating interest in N.V. Alex Invest via a € 6 million capital increase.

With this acquisition, both specialised retail real estate investors have joined forces in order to consolidate the ownership structure of the home decoration mall Alexandrium. By combining their expertise in retail as well as real estate, the new owners have the unique knowhow to ensure the lasting success of the home decoration mall and guarantee further growth, together with the other owners and retailers. Two strong partners also make it possible to better control the shopping center's future development, including with respect to ESG objectives or criteria.

Non-current assets under construction

On 31 March 2023 the total amount of the non-current assets under construction is € 16.33 million. We distinguish five types of non-current assets under construction: speculative land positions (the so-called "land bank", i.e. residual lands of existing portfolios that are intended for possible development or will be sold at a later stage if no development is possible); prospective projects, projects under predevelopment, projects under development and projects specifically linked to sustainability.

On 31 March 2023, the speculative land positions represented € 0.94 million, the prospective projects represented € 8.76 million, the projects under predevelopment represented € 2.02 million, the projects under development represented € 3.56 million and the projects specifically linked to sustainability represented € 1.06 million.

A. Non-current assets under construction - prospection

In 2014, Retail Estates acquired the retail park in Wetteren with 14 retail units and a gross retail area of 10,423 m². The retail park, which opened in 2008, is known as Frunpark Wetteren. It is very successful and attracts consumers from far and wide. In 2016, Retail Estates acquired, by way of speculation, an adjacent plot of land with two SME properties (investment of approx. € 9 million), which are currently let. According to the Spatial Implementation Plan, a permit can in principle be obtained for retail properties destined for large-scale retail as well as for SME properties.

The original plans, according to which the adjacent plots of land would be entirely developed as a retail area, were not accepted. The expenses incurred for the already completed procedures, amounting to

• 0.45 million, were accounted for into the results. Retail Estates negotiated a partnership with an SME developer with a view to a mixed development of the site: partly as an SME area and partly as a retail area. The extension of the retail area will cover a surface area of 5,000 m². The investment in this extension will amount to € 4.75 million. The permit is expected by late 2023, completion of the works by the end of 2024.