REAL ESTATE - Dutch real estate development company Nieuwe Steen Investments (NSI) has entered exploratory talks on cooperation with Israel-based property developer Habas HZ Investments, it announced.

At Habas’ request, NSI is investigating a possible strategic cooperation, aimed at expansion of its real estate portfolio whilst using Habas’ expertise, it said.

Habas HZ Investments – part of Habas Group – develops and owns real estate, mainly in Israel, Europe and North America, partly through a property company, listed at the Tel-Aviv stock exchange.

According to NSI, Habas would like to acquire an interest of at least 20% of NSI’s outstanding shares through a public offer at an indicative price of €21.90. Shareholders will be entitled to the (interim) dividend until the offer is made, it said.

Habas Group specialises in exclusive real estate projects, and the construction of offices and commercial real estate.

Meanwhile, NSI reported 2006 returns of 16%, or €2.28 per average outstanding share.

NSI’s direct results went up by €1.9m to €48.5m (2005: 46.6m). Its rental income amounted to €91.9m (€88.4m), it said. Managing costs were 9.8% of rental income. The indirect results are €33.1m.

The company realised its target of maintaining an occupational rate of over 93%. Despite an expensive market for direct property investments, it succeeded in placing €76m in new investments, it said.

"The expectations for 2007 are cautiously optimistic. Partly depending on the possibility of reinvesting the proceeds of the sale of the residential portfolio, and the development of the rental market for offices, a direct result of €1.30 to €1.40 per share is expected."

The market value of NSI’s property portfolio has risen to €1.3bn. In addition to a €18.7m revaluation, the portfolio increased by €70m in purchases, and €6.1m through investments and renovation projects, the company stated.

NSI’s portfolio consists of 1,063 residential and 168 other objects. The book value per category is 44% offices, 36% retail, 9% residential, 5% industrial and 6% large-scale retail.

To maximise shareholder value, NSI is planning to dispose of a large part of its residential portfolio in 2007, it said.

NSI is a (closed-end) property investment company with variable capital. It invests in "high-quality property in the Netherlands, with a high initial yield". Its property portfolio is in principle financed with a maximum of 50% of outside capital.