Belgian state property sell-off to continue

The Belgian federal government is widely expected to continue to sell government buildings in the coming years in order to balance its budget, whatever the outcome of the elections on June 10 and in spite of rising criticism from political parties from left and right. Last year, the government sold 62 buildings for EUR 576 mln to Belgian real-estate investor Befimmo. Separately, between 2000 and 2005, it sold 48 buildings (including the finance ministry) and in the coming year the government has plans for the sale of another 52 buildings.

Finance minister Didier Reynders also wants to sell the country’s prisons. The sale of the 62 government buildings in 2006 ended in a messy last-minute deal at the end of the fiscal year in December, after the Belgian administrative council blasted an earlier deal brokered in the summer of 2006. The finance minister was reprimanded for granting the sale of the buildings to Belgium’s largest investment fund Cofinimmo (worth EUR 1.7 bn) without proper motivation and forced to reopen the procedure.

In the second round of bidding, the deal was won by Befimmo, Belgium’s second largest real-estate investor, which outbid Cofinimmo, insurance company Axa and German investor IVG by several million euros. Befimmo paid the government EUR 576 mln for a 90% participation in an investment vehicle containing the buildings, with the government retaining 10%. Befimmo will be responsible for the maintenance of the buildings, while the government will pay rent till 2033. Befimmo said it is pleased with the both the financial construction and the buildings themselves.

But the deal has been severely criticised by politicians and economists, as well as a number of professionals who claim the quality of the buildings offered was inconsistent and that bidders were not given enough time to study the objects. The level of government transparency also came under attack as did the price of the package, with critics arguing it could have been a lot higher if the government had attracted more foreign parties to take part in the sale. The socialist minister for budget affairs Freya van den Bossche retorted that real estate was not the governments ‘core-business’ and that renting the buildings back would relieve the government of high maintenance costs.

Critics quickly pointed, however, out that the rental costs would be twice as high as the sale price at the end of the 27-year contract, shifting a large financial burden to future generations. In spite of this criticism, the present government seems bent on selling another 52 buildings it owns (including the buildings of the Royal Belgian Meteorological Institute) and expects to obtain at least EUR 250 mln in a similar procedure.

‘Sale-and-leaseback’ constructions are also being considered by local and regional governments, including the Walloon and Brussels authorities. There are opportunities there for foreign investors, but they should get to know the country well, warns Bernard Cardon de Lichtbuer, former ceo of Cofinimmo. ‘Belgium is a small country and everybody knows each other.’

See the June issue of PropertyEU Magazine for a round-up of all the major commercial real state news and deals from around Europe in the last few weeks. This issue also includes a cover story on developments in the Benelux on page 14. Click on the link below to get your copy now.