Retail Estates : Half-Year results on 30 september 2020

PRESS RELEASE

Periodic statement - regulated information

Ternat, 20 November 2020

HALF-YEAR RESULTS ON 30 SEPTEMBER 2020

STRONG RESULTS OF THE SECOND QUARTER CONSIDERABLY LIMIT THE LOSSES OCCURRED DUE TO THE CLOSURE MEASURE IN THE FIRST QUARTER.

DECLINE IN EPRA EARNINGS COMPARED TO THE PAST FINANCIAL YEAR LIMITED TO

• 2.26 MILLION. THIS LIMITED DECREASE CORRESPONDS TO 2.10% OF THE NET RENTAL
  INCOME FOR THE CLOSED FINANCIAL YEAR 2019-2020.

OUT-OF-TOWN RETAIL SECTOR RECOVERED QUICKLY AFTER THE END OF THE LOCKDOWN PERIOD.

VALUATION OF REAL ESTATE PORTFOLIO STABLE IN SPITE OF CORONA WAVE FOLLOWING COMPLETE RECOVERY OF RENTAL INCOME TO PRE-CORONA LEVEL.

MAJORITY OF RETAIL UNITS OF BANKRUPT FNG GROUP (BRANTANO) TAKEN OVER BY OTHER PLAYERS IN THE SECTOR UNDER UNCHANGED RENTAL CONDITIONS.

HALF-YEAR REPORT 2020-2021 AVAILABLE.

INTRODUCTION

COVID-19 update

Due to a second unprecedented wave of coronavirus infections, the retail trade sector is disrupted again in various European countries. Once again, the Belgian government was compelled to impose a closure obligation on a large number of non-food businesses for a period of six weeks, from 2 November to 13 December 2020. The Dutch government renewed its trust in shop owners and consumers and did not take national measures, but gave local governments the authority to take the decision at local level. However, both countries did decide to close the catering businesses.

Fortunately, the new lockdown in Belgium affects less retail properties in the Retail Estates portfolio than in the months of April and May. This time, more types of businesses are regarded as "essential": DIY shops, personal care businesses and garden centres, for instance, have not had to close. In practice, this means that out of the portfolio of approximately 750 properties in Belgium, 443 have been impacted, compared to 624 during the previous lockdown. All 25 catering businesses in Belgium and the Netherlands have had to close. The rental income from the closed retail units for the period from 2 November to 13 December 2020 amounts to € 5.83 million on a pro rata temporis basis. Retail Estates will again try to reach an agreement with each individual customer with regard to an equitable distribution of the rent. It is too early yet to make a prognosis in this respect. After the reopening of the retail units after the first lockdown, it became clear that many of our tenants were able to compensate for their loss of sales to a large extent thanks to their location in the "corona friendly" out-of-town areas and the high demand for interior decoration articles. However, other customers who mainly sell season-related articles suffered a considerable loss of margin and consequently already had very few reserves at the start of the new lockdown period. In this context, a possible extension of the closure period until after the New Year may cause serious damage to the retail trade sector, as the holiday period is very important for many shop owners.

A. HALF-YEAR RESULTS

1. ACTIVITY REPORT FOR THE FIRST HALF-YEAR2020-2021 ENDING ON 30

SEPTEMBER 2020

1.1. RENTAL INCOME AND OCCUPANCY RATE

The net rental income amounted to € 49.82 million in the first six months of the financial year, a decrease by 5.71% with respect to the comparable six months in the 2019-2020 financial year. The net rental income in that period amounted to € 52.84 million. The decrease can be explained by the discounts granted within the context of COVID 19 (€-5.86 million) and by the creation of a provision for doubtful receivables for € 2.48 million, especially for the rent due of FNG Brantano for the first quarter. The rental income has increased compared to last year (€ +4.48 million) thanks to the new investments of the current and the previous financial year.

The occupancy rate on 30 September 2020 was 97.10%, compared to 97.92% on 31 March 2020 due to a delay in re- letting as a result of the coronacrisis. Rental income recovered almost completely in the second quarter. Brantano also paid its rent / occupancy compensation during this period.

1.2. FAIR VALUE1 ON THE REAL ESTATE PORTFOLIO

The fair value of the real estate portfolio (including non-current assets under construction) on 30 September 2020 amounted to € 1,722.28 million, which represents an increase by € 60.52 million (+3.64%) compared to the fair value on 31 March 2020 (€ 1,661.75 million). This is attributable to the investments and divestments in the first quarter and the variations in the fair value of investment properties.

The variation in the fair value of the real estate portfolio is €-3.21 million and can mainly be explained by an increase in value in the property portfolio of €1.56 million and the depreciation of the transaction costs at the time of the initial valuation for the acquisition of the retail parks at Den Bosch and Maastricht (€-4.77 million).

Based on the contractually owed rent, rent return (versus investment value) on the portfolio as determined by the real estate experts amounts to 6.61%.

As of 30 September 2020, the real estate portfolio consists of 1,004 properties with a lettable surface of 1,193,401 m².

1.3. INVESTMENTS2 - RETAIL PARKS

The Netherlands

ACQUISITION OF RETAIL PARK "DE BOSSCHE BOULEVARD"

On 7 April 2020 Retail Estates acquired the retail park "De Bossche Boulevard", situated in 's-Hertogenbosch (the Netherlands - province of North Brabant). This retail park has a surface area of approximately 50,000 m² and has a strong regional appeal in an area of 960,000 inhabitants living a 20 minutes' drive or less away. The city of Den Bosch itself has 154,000 inhabitants, accounting for the largest group of customers. The customer zone is located in the centre of the Breda-Utrecht-Eindhoven triangle. Together with the Randstad region and the province of Limburg, this is the area where Retail Estates concentrates its investments on account of the strong purchasing power present in the region and its economic performance.

De Bossche Boulevard comprises 29 retail units, all of which are let, mainly to retail chains like Praxis, Mediamarkt, Leen Bakker, Kwantum, Prenatal and X²O.

• Fair value: investment value as determined by an independent real estate expert, with hypothetical transfer taxes deducted pursuant to IFRS13. The fair value is the book value under IFRS (see also note 21 in the 2019-2020 annual report).

• The purchase and sales values of the investments and divestments are in line with the fair value estimated by the real estate experts

It's a retail park of the latest generation, where not only large-scale retail activities are allowed, but where electric appliances, sports articles and baby items can be sold as well. The net rental income amounts to € 4.53 million, which comes down to an average rent of € 93/m². This amount is below the national average and that of the other retail parks owned by Retail Estates in the Netherlands.

The amount invested is € 68.70 million and the fair value calculated by the real estate expert Cushman & Wakefield amounts to € 65.42 million. This acquisition was entirely financed with the proceeds of the successful issue of a bond loan of € 75 million, which was completed by Retail Estates in late December 2019.

ACQUISITION OF RETAIL PARK BELVÉDÈRE MAASTRICHT (THE NETHERLANDS, PROVINCE OF LIMBURG)

On 13 February 2020 Retail Estates entered into an agreement with a view to the purchase of the retail park Belvédère (phase 1), constructed in Maastricht. The complex consists of 7,850 m² of retail area subdivided into five retail units, which will all be let to retail chains from the home decoration section (i.a. Jysk, Beter Bed, Leen Bakker, Carpetright). Retail Estates acquired the buildings on 2 June 2020. Rental agreements have been entered into for a period of 10 years, with an option for 5-year extensions. The investment amounts to € 10 million (exclusive of recoverable VAT) and generates a rental income of € 0.66 million. The real estate expert Cushman &Wakefield set the fair value at € 9.97 million. Maastricht is the capital of the Dutch province of Limburg and is known in the retail sector as one of the best shopping areas in the Netherlands. Its historic city centre attracts customers from beyond the Dutch borders. The city itself has approximately 121.0000 inhabitants and is situated in a prosperous region, extending from Amsterdam over the Randstad region to the Southern Netherlands, where Retail Estates concentrates its investments. The construction of the Belvédère retail park is part of the Belvédère urban development plan, within the context of which the city of Maastricht aims at the reconversion of derelict industrial estates with a surface area of approximately 300 ha. This development plan previously led to the conversion of a major industrial heritage site, the Sphinx factory, into a new city district that also accommodates retail trade in the form of a branch of Loods 55, a large-scale home decoration store. Conversely, the Belvédère retail park will be constructed at a new business site that was created after the demolition of industrial buildings. The city of Maastricht is one of the last Dutch cities to grant permits for a retail park destined for large-scale retail trade. Retail Estates therefore regards this acquisition as a great opportunity, increasing

the total number of retail parks in the Netherlands to 17.

FINANCING

These acquisitions were fully financed with the proceeds from the successful issue of a bond loan of EUR 75 million that Retail Estates completed at the end of December 2019.

1.4 NON-CURRENT ASSETS UNDER CONSTRUCTION

On 30 September 2020 the total amount of the non-current assets under construction is € 31.27 million.

• The company invests in the extending of its retail cluster at Namen-Zuid(Jambes-Belgium). It concerns a forward-financing operation, which will have the legal form of a real estate leasing with respect to Brico Planit.
  The extension concerns the construction of a new building on the one hand and the renovation of an existing building on the other hand, resulting in a total retail area of 15,905 m². The building is constructed to suit Brico Planit, but will at the same time be a multifunctional area offering different possibilities. The total investment was contractually limited to € 17.95 million. The investment will be made according to the "open book" principle, with a yield of 6.50% determined in advance. Execution has started in September 2019 and completion is expected by April 2021.