REAL ESTATE - The future of the €1.2bn real estate investment trust agreed between the Belgian government and real estate firm Cofinimmo looked precarious last week amid speculation that the government would re-route property destined for the trust in a bid to balance its 2006 budget.

The speculation follows a lawsuit filed against the state by AXA over the government’s selection of Cofinimmo as a partner in a sicafi – a fixed-capital real estate investment trust. The insurance firm claimed the government had failed to follow the agreed process for selection.

In a note issued last week, ratings agency Standard & Poor’s confirmed the firm’s long-term rating of ‘creditwatch, with negative implications’ based on the suit. However, S&P analyst Andreas Lindahl said it would be in the government’s best interest to resolve the issue before the end of the year.

"If the government had the choice, it would be resolved," he said. "Having to revisit the original tender will be a big deal for them. They don’t want these issues popping up again."

Yet Cofinimmo chief financial officer Jean-Edouard Carbonelle told IPE Real Estate that the government could shunt the portfolio earmarked for the sicafi into a subsidiary set up 10 years ago. This would enable it to balance this year’s budget – but it would also mean relaunching the tender in 2007.

This view marks a departure from his earlier assessment that, worst-case, the government would ask the three main bidders to resubmit parts of their bids according to the tender criteria.

"The important thing is what the government will do, not what Standard & Poor’s thinks the government will do," said Carbonellle.

AXA’s claim rested on the selection of Cofinimmo as preferred bidder and the attribution of points according to criteria including strategic vision, finance, properties contributed by the bidder and the role of the state buildings agency.

The usually sanguine Carbonelle still found grounds for optimism. "The government will want to keep the portfolio as one portfolio, which is good news," he said.

The sicafi would comprise 79 buildings used by Belgian and EU agencies and 12 properties from Cofinimmo’s own portfolio.

"This is a tremendously big deal in Belgium," Lindahl said. "There aren’t many projects like this one."