Cofinimmo Forecasts Dividend Cut on Office Rents, Refurbishments

Cofinimmo SA, Belgium’s biggest real-estate investment fund, said it will cut its dividend next year because of lower rents in the Brussels office market and the reconversion of an office building vacated by Belfius Bank NV.

Earnings before changes in property values, interest-rate derivatives and disposal gains will decline to 7 euros a share from 7.61 euros last year, Brussels-based Cofinimmo said today in a statement. It plans to cut its common-stock distribution over 2013 earnings by 7.7 percent to 6 euros per share.

“This is a clear disappointment because we believed management was determined to keep paying out 6.50 euros a share, Jaap Kuin, an analyst at ING Bank NV in Amsterdam, wrote in an investor note. “We see a reset dividend of 6 euros as still slightly above cash flow per share and management will need to execute accretive deals in the healthcare and sale-and-leaseback segment to bridge the gap.”

Cofinimmo has steered away from the Brussels office market in recent years, which still represents more than 46 percent of its property investments valued at 3.31 billion euros ($4.44 billion). While acquisitions and developments of pre-let nursing homes on long-term leases will account for more than half of planned investments through 2015, Cofinimmo will also spend 93 million euros on office refurbishments. That includes the reconversion of two blocks, one of which was vacated by Belfius Bank last year, into apartments. The indemnity paid by Belfius for the remaining 21 months of the lease boosted profit by 70 cents a share last year.

The shares declined as much as 1.5 percent on Euronext Brussels, the largest intraday drop in more than two months, and traded at 88.80 euros, down 1.12 euros, at 10 a.m. local time.

Occupancy of Cofinimmo’s Brussels offices declined to 91.65 percent at the end of last year from 93.07 percent a year earlier. That compares with a vacancy rate of about 11 percent for the Brussels office market, according to CB Richard Ellis, Cofinimmo said. Cofinimmo’s offices lost 2.2 percent of their value last year.

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