Accumulate confirmed, target price lowered

– Valuation: Based on lowered forecasts and slightly changed valuation parameters, we reduced our target price to EUR 6.3 (EUR 6.9). At 0.57x P/BV09e and 20.7x EV/EBITDA09e, CAII is traded in line with its closest peers. Main upside triggers are in our opinion beside an overall low valuation of the real estate sector, expected improvements in operating result, based on contributions from finalized developments, disposals of properties and cost cutting measures.

– 3Q09 earnings review: CAII came in with a net loss of EUR -26mn, which was 13% higher than expected. Beside still relatively high (but diminishing) negative revaluations also the operating result contributed to the deviation to our estimates, but was flat compared with 3Q08.

– Strong operating cash flow: Rental income and net operating income rose slightly due to finalization of Sava City and Capital Square in 2Q. Operating cash flow remained strong (+7.9% y/y, -2% q/q), despite lacking contribution from sales of properties.

– Outlook 2009: As net loss in 1-3Q09 already exceeded our previous FY09 estimate of EUR -95.4mn, we revise our FY09 forecast downward to EUR -118.6mn (+24.2%) and also adjusted our mid-term estimates somewhat. Main deviation to our previous FY09 forecast comes from a higher negative revaluation result.

– Outlook 2010: Recent market data indicate a stabilization of yields, but the rental market is still under pressure. We therefore lowered our rental income estimate, but foresee EBITDA to rise on finalization of development projects and cost cutting. Net result is expected to turn positive on a balanced revaluation result.