Bundesimmobiliengesellschaft m.b.h. - BIG

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Bundesimmobiliengesellschaft m.b.H.
Analysis
Key factors driving the Aaa rating of Bundesimmobiliengesellschaft (BIG) are its 100% ownership by the Republic of
Austria (rated Aaa), the strategic importance of the services provided and its financial ties to the State. BIG's activities
are chiefly government-related, entailing the administration and management of properties required by the state to
carry out its functions, predominantly schools, university buildings and ministry premises. As such, BIG's activity is
therefore less vulnerable to volatile demand and the bulk of its revenues come from the State in the form of rents.
Although BIG's stand-alone financials are less sound than those of a comparable private sector entity, its closeness to
the State and State functions strongly mitigate this factor. I think State starts in capital letter.
Business Franchise
Contact Phone
July 2004
London
Janne Thomsen 44.20.7772.5454
Gabriele Baur
New York
Yves J Lemay 1.212.553.1653
BACKGROUND
BIG has responsibility for managing the Austrian Republic's real estate, with a portfolio predominated by schools and
universities (72%) and other administrative buildings (28%). BIG's activities involve renting out the buildings to the
various government entities, carrying out renovations and new investments and handling possible sales of redundant
buildings and land. BIG's holdings include a small housing portfolio, comprising mainly the current and former homes
of civil servants and other public sector employees. Finally, BIG offers facilities management services if required by the
tenants. BIG consists of a holding company, Bundesimmobiliengesellschaft mbH (BIG) and three subsidiaries — BIG
Services, BIG Bauträger und Maklerges MbH and BIG Liegenchaftsverwertungsges BmH- 100% owned by BIG and consolidated
into BIG's accounts. This report focuses on the consolidated accounts.
THE PURPOSE OF BIG'S CREATION WAS TO IMPROVE EFFICIENCY
BIG was created by law in 1992 with the objective of centralising the property management of the public sector, making
it more efficient and, more importantly, trying to make the various departments more cost-conscious. The underlying
premise is that if departments are obliged to pay and account for their usage of buildings, space will only be used
if really needed. This should in theory allow surplus stock to be put to alternative use or sold off.
AS OF BEGINNING OF 2001, BIG STARTED TO OWN THE PROPERTIES
Following a revision of the act regulating BIG's activities 2000, the entity now owns the properties previously leased
from the state. The purchase price was set at €2.4 billion, with the transfer being completed during 2003. The purchase
was financed with debt.

PRICE FOR THE TRANSFERRED ASSETS IS DEEMED FAIR
Moody's views €2.4 billion as a fair price for the transferred assets. According to an independent valuation of the properties
by the Technische Universität Wien, the market value is €6.9 billion. The lower transfer value takes into account
the specialist nature of the properties — i.e. they possibly have a lower re-sale value — and future investment needs.
Moreover, should BIG ever sell any of the transferred assets in the future with a positive margin over the purchase
price, the entity would then have to pay a share of the gain to the state, i.e. a formulaic calculation of the share, taking
into account the gain on disposal. This would equate to paying out around 70% of the capital gain.
STATE OWNERSHIP STRONGLY SUPPORTS RATING
The 100% ownership of BIG by the Republic of Austria provides comfort that the owner will:
• Support the entity in the event of a problem arising
• Remain the main tenant of BIG, and hence provide revenue/margin stability
• Determine policy (tasks and obligations) of the entity going forward, while taking financial stability into
account
• Supervise and control the activities of BIG
The State's ownership could only be reduced below 100% through a change in the law pertaining to Bundesimmobiliengesellschaft.
Although this is not impossible, to date the Austrian State has signalled no intention of effecting
such a change, as BIG is regarded as a vital instrument in the management of the State's properties. BIG's accounts are
audited by the Federal Audit Office.
Furthermore, there are no plans to extend the entity's activities to the private sector to a material degree.
Although the law in question allows for BIG to carry out commercial property marketing and development, such activities
are supposed to be of a subsidiary nature and there are currently no plans to expand commercial activities beyond
asset sales of surplus or unused properties and land.
Financial Fundamentals
2003 RESULTS IN LINE WITH PREVIOUS YEARS
BIG's after-tax results fell by almost 3% to €59 million in 2003 from €61 million in 2002; however, they remained positive.
Although operating revenue growth outstripped that of operating expenditure by 2%, BIG's increasing funding
costs from taking over properties from the central government during the year resulted in a slightly lower profit.
RENTAL INCOME AND BUILDINGS OCCUPANCY
Rental income is the mainstay of BIG's income, representing more than 90% of total operating revenues. Of this, 95%
comprises rents received from the state - i.e. from various ministries that use the buildings. The Federal Ministry for
Education accounts for the majority (67%) of BIG's rental income in the form of schools and universities, followed by
other Federal Tenants (27% each) and other Tenants (6%) (see Figure I: 2003 Property Occupancy Breakdown of total
book value €3,940 billion). Rents are paid monthly or quarterly for all properties, whereas housing rents are paid monthly.
2 Moody’s Analysis
2003 Property Occupancy Breakdown of total book value (€3,940 billion)
Ministry of Finance
6%
Other Ministries
5%
Ministry of internal
Affairs
7%
Third Party Tenants
3%
Ministry of Justice
7%
Ministry for Education
72%

There are options for giving notice under the rental agreements; the notice period is one year for tenants, covering
70% of the total revenue. However, the tenants are deemed to be relatively stable, since the ministries need the
properties as a base from which to provide services such as education. The notice periods for new projects or major
renovations benefit from a clause that forbids the tenant from giving notice during the debt amortisation period (usually
20-25 years).
RENT LEVELS TAKE INTO ACCOUNT A REASONABLE MARGIN AND THE NEED FOR INVESTMENT
Rents have been fixed on a market basis, while taking into account the relatively specialised nature of the properties,
and as of 2003 indexed to a designated consumer price index with a one-year lag (currently CPI 1996). Adjustments are
only allowed if they are 5% above this index, and the adjustment will then be in full. As such, the potential for rental
increases is not considered to be particularly flexible. During 2003, rental income grew by 1%, considerably below the
4.5% achieved the previous year, although this was in line with budget.
COST KEPT UNDER CONTROL
BIG's management is focused on cost efficiency and project management, and has been successful in keeping operating
costs at an acceptable level. We expect the prudent cost management to continue. Cost control of projects also
includes joint-venture activities at BIG's subsidiaries. Some savings have also taken place due to reductions in personnel
costs, in connection with restructuring of the companies.
GOING FORWARD
Total consolidated results are expected to remain positive but considerably lower than in 2003, given that financial
expenditure is projected to grow at an average rate of 8% during the period to an average nominal amount of €30 million
per annum. According to BIG's latest long-term plans, growth in rental income is expected to grow at a compound
rate of 6.5% over the next five years. Other income — among other arising from the disposal of propertiesremains
slightly more unstable due to its very nature, but is still expected to represent around 10% of total operating
revenues.
DEBT GROWTH EXPECTED TO BE MODERATED
BIG's stock of debt has risen relatively rapidly since 2000 as a result of the entity having taken over properties from the
central government. Based on BIG's long-term budgets, debt is not expected to grow considerably as it is believed to
have reached its growth peak in 2004 at around €3.7 billion.
€ million
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-
2001
2002
2003
Debt Developments
2004 Budget
2005 Estimated
2006 Estimated
2007 Estimated
2008 Estimated
Maturity profiles appear reasonably stable, with more than 64% of the total stock of debt having five years or
more to maturity and, of the remainder in 2003, an acceptable 30% falling due within one year. Around 89% of the
total debt is euro-denominated, with the balance in Swiss francs. Interest rate stability is afforded by the fact that over
72% of the total stock is in fixed rates. BIG makes use of financial derivatives in order to hedge interest and currency
exposures. The entity has acceptable prudent counterparty guidelines in place.
Moody’s Analysis 3

OVERALL ADEQUATE LIQUIDITY PROFILE
BIG's cash flows are predictable— i.e. 90% of the rental income (mainstay of BIG's income) comes from the State and
are paid quarterly. Cash outflows, mostly, project financing and debt servicing, are also predictable. Mismatches are
funded via BIG's Euro Commercial Programme (rated P-1) of €1 billion of which in average approx. €114 million were
drawn in 2003 (11% of the total). This amount ranged from a minimum of 0 to a maximum of around €200 million at
any given day. In addition to this, BIG uses short term drawing rights with banks. No back up facilities are in place, yet
the predictable nature of BIG's cash-flows and its closeness to the Austrian government are mitigating factors.
Related Research
Banking System Outlook:
Banking System Outlook: Austria, December 2003 (80700)
Analysis:
Austria, October 2003 (79706)
Special Comments:
Moody’s Sovereign Ratings: A Ratings Guide, March 1999 (43788)
A Quantitative Model for Local Currency Government Bond Ratings, September 2003 (79404)
A Quantitative Model for Foreign Currency Government Bond Ratings, February, 2004 (81176)
Rating Methodology:
Revised Country Ceiling Policy, June 2001 (67679)
To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report
and that more recent reports may be available. All research may not be available to all clients.
4 Moody’s Analysis

Bundesimmobliengesellschaft Mbh
Summary Balance Sheet (EUR 000's) 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
Cash & central bank 14,360 38,488 48,196 12,159 3,502 40 3,675 18,181
Due from banks 0 0 0 0 0 0 0 0
Securities 5,748 0 0 0 0 0 0 0
Gross loans 0 0 0 0 0 0 0 0
Loan loss reserves (LLR) 0 0 0 0 0 0 0 0
Fixed assets 739,912 1,215,653 1,282,624 1,334,779 1,976,404 2,817,593 3,614,492 4,025,940
Other assets 104,314 35,431 19,904 39,162 86,374 127,830 116,316 101,185
Total assets 864,333 1,289,572 1,350,724 1,386,100 2,066,280 2,945,463 3,734,482 4,145,307
Total assets (USD million) 862,348 1,448,306 1,438,710 1,382,918 2,061,536 2,938,701 3,977,747 4,655,556
Demand deposits 0 0 0 0 0 0 0 0
Savings deposits 0 0 0 0 0 0 0 0
Due to banks 88,353 52,368 76,070 62,313 327,602 570,641 404,602 405,855
Market funds 0 0 0 0 0 0 0 0
Other liabilities 176,092 285,007 247,015 233,004 135,792 408,731 415,919 430,692
Total liabilities 850,020 1,276,398 1,321,288 1,334,923 1,808,357 2,589,665 3,411,321 3,823,290
LT/Subordinated debt 585,576 939,023 998,203 1,039,606 1,344,963 1,610,293 1,547,983 1,298,627
Shareholders' equity 14,312 13,174 29,436 51,177 257,923 355,798 323,161 322,016
Total Liabilities+Shareholders' equity 864,333 1,289,572 1,350,724 1,386,100 2,066,280 2,945,463 3,734,482 4,145,307
Summary Income Statement (EUR 000's)
+Interest income 155,957 194,863 249,824 260,037 292,927 677,073 697,229 680,634
-Interest expense 19,613 92,429 97,090 102,628 140,128 331,653 416,952 431,298
=Net interest income 136,344 102,434 152,734 157,409 152,799 345,420 280,277 249,336
+Trading income 0 0 0 0 0 0 0 0
+Fees & commissions 0 0 0 0 0 0 0 0
+Other operating income 530 123 57 38 156 7,881 6,088 58,401
=Operating income 136,873 102,557 152,791 157,447 152,955 353,301 286,365 307,737
-Personnel expenses 1,893 2,170 2,395 2,398 3,142 12,294 13,366 16,241
-Other operating expenses 97,224 42,250 76,887 76,839 69,675 80,311 17,888 20,551
= Operating funds flow 37,756 58,137 73,509 78,210 80,138 260,696 255,110 270,945
-Amortisation/depreciation 25,435 49,888 56,419 60,617 64,925 118,871 150,101 164,715
=Preprovision income (PPI) 12,321 8,249 17,090 17,593 15,213 141,825 105,009 106,231
-Loan loss provisions (LLP) 0 0 0 0 0 0 0 0
+Other non operating adjustments [1] 195 3,209 413 382 565 354 366 -2,116
+Extraordinary profit / loss 0 0 0 0 0 -11,142 1,116 0
=Pretax income 12,516 11,458 17,503 17,975 15,778 131,037 106,492 104,114
-Taxes -4,110 0 1,954 3,200 403 47,833 45,970 45,514
=Net income 16,626 11,458 15,549 14,775 15,375 83,204 60,522 58,601
-Minority interests 0 0 0 0 0 0 0 0
=Net income (group share) 16,626 11,458 15,549 14,775 15,375 83,204 60,522 58,601
Real Growth Rates (Inflation Deducted) (%)
Liquid assets — -100.00 — — — — — —
Gross loans — — — — — — — —
Problem loans — — — — — — — —
LLR — — — — — — — —
Total assets — 46.99 4.22 1.91 46.87 39.34 23.94 8.51
Customer deposits (demand and savings) — — — — — — — —
Market funds & due to banks — -41.60 44.54 -18.65 417.97 70.27 -30.69 -1.95
Shareholders' equity — -9.31 122.33 72.65 396.53 34.85 -11.21 -2.59
Risk weighted assets — — — — — — — —
Operating Income — -26.18 48.24 2.33 -4.29 125.79 -20.77 5.05
Operating Expenses — -25.40 43.17 2.34 -2.97 50.08 -16.17 8.61
Preprovision Income — -34.04 106.16 2.23 -14.81 811.30 -27.62 -1.11
Loan Loss Provisions — — — — — — — —
Net Income — -32.10 35.03 -5.64 2.52 429.00 -28.90 -5.35
Income Statement in % Average Assets
Operating income 15.84 9.52 11.57 11.51 8.86 14.10 8.57 7.81
Operating expenses 14.41 8.76 10.28 10.22 7.98 8.44 5.43 5.11
Preprovision income 1.43 0.77 1.29 1.29 0.88 5.66 3.14 2.70
Loan loss provision 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net income 1.92 1.06 1.18 1.08 0.89 3.32 1.81 1.49
Moody’s Analysis 5

Bundesimmobliengesellschaft Mbh (Continued)
Summary Balance Sheet (EUR 000's)
Liquidity, Funding & Balance Sheet
Composition
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
Avg. liquid assets % avg. total assets 0.66 0.27 0.00 0.00 0.00 0.00 0.00 0.00
Avg. gross loans % avg. total assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Avg. customer deposits % avg. total funding 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Avg. interbank funds % avg. total funding 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Avg. market funds (excl. interbank) % avg. total funding 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Avg. liquid assets % avg. customer deposits — — — — — — — —
Avg. gross loans % avg. customer deposits — — — — — — — —
Avg. market funds reliance [2] — — — — — — — —
Avg. RWA % avg. total assets — — — — — — — —
6 Moody’s Analysis

Moody’s Analysis 7

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8 Moody’s Analysis