Rating Rationale
Scope Ratings has evaluated the financial stability of Codic Group (cons.) based in Brussels, Belgium. Based on the methodology for corporations, the rating assessment took quantitative and qualitative criteria into account. The quantitative rating is based on the financial statements for the years 2009/2010 to 2011/2012 ending April 30. The final assessment resulted in a corporate rating of BBB-, with a negative outlook.

The Codic Group’s portfolio consists of business parks, offices, shopping malls and multifunctional development projects. At the time of evaluation, the group had 15 ongoing development projects in Belgium, France, Luxembourg and Spain. Codic had also received several offers for one of its office development projects in Madrid and was considering selling its last problematic project on the Spanish market. This sale would generate a loss of EUR2.2 million in 2012/2013 and would free up a significant amount of equity, which could be allocated to other, more profitable projects. Over the coming months, Codic will focus on its growing and well known markets in Belgium, France and Luxembourg.

Regarding the rating, it should be noted that Codic also holds significant assets in Hungary and Romania. However, all existing projects in these two countries have been frozen. In Romania, the company pursues a subdivision development strategy. This has a negative impact on Codic’s performance as over 60% of the available equity is tied up in projects that have been put on hold and thus cannot be allocated to other, more profitable projects. The Board of Directors decided to maintain the book value of these assets in the last annual accounts 2011/2012 due to the absence of any valuation reference (no transaction of significant size has taken place in these markets), and to continue with the development of its land and projects when the market conditions improve (on-going concern).

The lack of performance in central Europe is offset by a very profitable pipeline in north-western Europe. The company has therefore decided that there is no need to dispose of its assets in unfavorable conditions in central Europe. Accordingly, no adjustment for these assets has been made in the quantitative part of this analysis. Nevertheless, it should be noted that the real value currently implies a high degree of uncertainty regarding sales prices.

Despite a foreseeable decline in the profitability ratios in the short-term due directly to the Spanish sale, the current capital structure is quite sufficient to enable the Group to finance future projects. In addition, strong liquidity ratios since 2009/2010 also testify to the creditworthiness of the company.

From a qualitative point of view, the group is very well positioned. The company has clearly structured processes, a highly experienced management team and flagship projects with strong value-creating potential. The negative outlook has been assigned because of the losses related to the company’s withdrawal from the Spanish market.

Company
Codic International is a well-established real estate developer active in several European countries: Belgium since 1970, Luxembourg since 1989 and France since 1990. These three markets currently represent the core activities of the Codic Group. The group specializes in the development of offices, shopping centers and multi-functional projects in Europe. Over the past 10 years, the company has developed over 1 million square meters. Codic works with reputable architects, renowned for innovative designs and architecture, and positions itself as a key player in large international projects. Furthermore, Codic has collaborated with recognized market players on major projects (Hammerson, Icade, Vinci, Immobel).