BCRE.L Regulatory News (BCRE)

 12 September 2016

BCRE - Brack Capital Real Estate Investments N.V.

("BCRE" or the "Company")

Interim Results

The Board of BCRE - Brack Capital Real Estate Investments N.V. releases the results of the Company, its subsidiaries and the Company's interest in associates and joint ventures (together the "Group") for the six months period ended 30 June 2016 (the "Period").

Trading update for the Period

· The Group generated revenues of €40.5 million from rental income during the Period (30 June 2015: €37.4 million).

· The net asset value ("NAV") of the Group amounted to €204.6 million as at 30 June 2016 (31 December 2015: €240.7 million); mainly reflecting the current economic situation in Russia. 

· As at 30 June 2016, the aggregate value of assets in which the Company is interested (in different percentages) was approximately €2.1 billion (31 December 2015: €2.1 billion).

· Following the last year's acquisition of 720 West End Avenue, a major residential building in the Upper West Side of Manhattan, the programme of the replacement site on 125th Street, Manhattan is progressing well.

· At 90 Morton Street, a major development in the West Village, Manhattan, the condo offering plan for the project has been approved by the New York City attorney general.

· Following the successful launch of the Indigo Lower East Side hotel in Manhattan, the 295 room hotel, operated by InterContinental Hotel Group, is ramping up well with a monthly net operating income ("NOI") exceeding $1 million in May and June 2016.

· Completed the setting-up of a private real estate investment trust ("REIT"), to carry out our multifamily business in the USA, currently managing over 500 units in Cincinnati, Ohio.

· BCRE Germany continued to expand its income producing portfolio, with new deals exceeding €80 million in value and approximately 70,000 sq m of lettable area in Kiel, Nordrhein Westfalen and Hannover1.

· BCRE Germany issued 60,058 additional bonds during the Period, at a price of NIS1,021 each; total gross proceeds amounted to NIS61.3 million.

· Standard & Poor's Maalot, a credit rating agency accredited by Israel, increased the credit rating of BCRE Germany and its existing debentures to ilAA- from ilA+ with stable outlook.

· The Company continues stabilizing the Russian platform, as the shopping center in Dmitrov, the logistic warehouse in Lobnia and the Kazan's main retail module are almost fully occupied, whereas the Lyubertsy shopping center and the two additional modules in Kazan are still ramping up.

· Completed the sale of Fountain Court in Manchester UK at a significant upside to its acquisition cost.

· The Company raised $29.6 million during the Period within the extended bonds programme.

· Under the share buyback programme initiated in June 2016, the Company repurchased during the Period approximately 1.32 million shares for a total consideration of €1.17 million and approximately 0.04 million shares for a total consideration of €0.04 million in July 2016.

· During the Period, both the Company and BCRE Germany distributed to their shareholders approximately €4.8 million and €6 million, respectively in relation to 2015.

Harin Thaker, Chairman, said:

I am pleased to report the results of the Group for the first half of 2016. The Company continues to maintain a healthy financial position and has improved its liquidity through fund raising activity under the extended bonds programme during this Period. The Company may consider raising additional capital for pursuing opportunities and to benefit its operations.

The buyback programme initiated by the Company towards the end of the Period was positive in reducing the discount between the share price and the NAV per share. The Company may again consider a share buyback programme in the future, depending on the movement in share price vis-à-vis NAV growth.

We are confident that the Group's broad based business, with diversified revenue streams in the US and Germany, provide a strong foundation for continuing growth.

Ariel Podrojski, Chief Executive Officer, said

Over the Period, we have continued the process of streamlining our business and geographic presence through increasing focus on our US and German platforms while discontinuing certain non-core activities. At the same time, we continued working towards the stabilization of our Russian portfolio.

Our portfolio in Germany continues to expand through new acquisitions and internally through the increase in rental income. The Grafental project in Dusseldorf is also progressing well. In addition, our core projects in Manhattan, New York are advancing in line with our strategy.

In Russia, despite some recent macro indicators showing several signs of stabilization, the conditions continue to be challenging with the consumer market remaining under pressure.

ENQUIRIES:

Our key markets

Set out below are the highlights for the Period in relation to the Group's main regional platforms.

USA

The Group's portfolio in the US (valued at approximately $909 million) is mainly focused on residential conversion activity and the lodging market in Manhattan, in addition to income producing activities that include multifamily properties in Cincinnati, Ohio.

Following last year's acquisition of 720 West End Avenue, a major residential building with a gross area of approximately 240,000 sq ft in the Upper West Side of Manhattan, the programme of the replacement site on 125th Street, Manhattan is progressing well, with the demolition of the existing building completed and the excavation and the foundation works to commence soon.

At 90 Morton Street, a major development in the West Village Manhattan, with a net area of approximately 90,000 sq ft, the condo offering plan for the project has been approved by the New York City attorney general and the permits to begin development work have been received.

The Group's position in the Manhattan lodging market with three hotels (valued at approximately $469 million) continues to advance, as the Indigo Lower East Side hotel is ramping up well, with a monthly NOI exceeding $1 million in May and June 2016. In addition, the 230 room CitizenM Hotel in Times Square recorded an average occupancy of 84% and an average daily rate of $228 per room during the Period. The construction of the 300 room CitizenM Hotel at Bowery Street is progressing well and is scheduled to be completed in the second half of 2017.

In line with our strategy, BCRE USA completed the establishment of a private REIT structure for the multifamily residential business. The existing 516 multifamily units in Cincinnati, Ohio (valued at approximately $38 million) have been transferred into the REIT structure. The performance of the US multifamily residential portfolio continues to improve with an overall average occupancy of around 96%, yielding an annualized NOI of approximately $2.8 million.

Germany

The Company's interest in Brack Capital Properties N.V. ("BCRE Germany") is 34.76% as of 30 June 2016.

During the Period BCRE Germany performed exceptionally well, with the rental income growing by approximately 8% to €35.1 million (30 June 2015: €32.6 million), net profit attributable to equity holders growing by approximately 18% to €27.8 million (30 June 2015: €23.5 million) and funds from operations, excluding contribution from the Grafental project in Dusseldorf, increasing by approximately 23% to €28 million (30 June 2015: €22.8 million).

With the recent acquisitions, BCRE Germany now holds approximately 387,000 sq m of commercial assets with around 96% overall occupancy and over 10,000 multifamily residential units with a total area of around 598,000 sq m with around 96% overall occupancy.

During the Period BCRE Germany's residential portfolio recorded a 5% increase in the rental income from same assets and an 11.3% increase in rental income in new leases compared to the corresponding period last year.

BCRE Germany's development projects (about 1,400 residential units currently being built or under planning in Dusseldorf and Aachen) that are expected to drive high growth and generate attractive cash flows and profitability, are also progressing well, as sell out prices and rate of sales improved significantly.

Standard & Poor's Maalot, a credit rating agency accredited by Israel, increased the credit rating of BCRE Germany and its existing debentures to ilAA- from ilA+ with stable outlook.

Russia

The range of sanctions and their extension, continue to have a significant negative effect on the Russian economy. Despite oil prices rising from very low levels, some recent macro indicators showing signs of stabilization in the Russian economy and reduced currency volatility, the Company's management foresees the Russian consumer market remaining under pressure for a prolonged period of time.

The Company continues to focus on stabilizing the Russian platform as the shopping center in Dmitrov, the logistic warehouse in Lobnia, and Kazan's main retail module are almost fully occupied whereas the Lyubertsy shopping center and the two additional modules in Kazan are still ramping up. In addition, BCRE Russia is in discussions with its lenders, which are expected to result in improved loan terms for some assets.

Outlook

The Company continues pursuing its business plan in the US for the existing assets, as well as growing its income producing arm in the US through the REIT.

Backed by a strong tailwind in the form of low interest rates and positive demographic trends, the Company expects that the German platform results will continue to improve, as the platform operational metric further enhances and the income producing portfolio grows.

Despite the challenging situation of the Russian economy, the Company believes that its asset stabilization strategy and the efforts for improving the loans terms for some assets in this geography will turn fruitful.

Forward-looking statements

This report contains certain forward-looking statements with respect to the financial condition, results of operations and businesses of BCRE - Brack Capital Real Estate Investments N.V. These statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.

On behalf of the Board

Harin Thaker

Chairman

BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF 30 JUNE 2016

EURO IN THOUSAND

INDEX

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REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

to the shareholders -

BCRE - BRACK CAPITAL REAL ESTATE INVESTMENTS N.V.

Introduction

We have reviewed the accompanying interim condensed consolidated statement of financial position of BCRE - Brack Capital Real Estate Investments N.V. (the "Company") and its subsidiaries (together the "Group") as of 30 June 2016 and the related interim condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the six months period then ended, and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34 Interim Financial Reporting (IAS 34) as adopted by the European Union. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS