CONTINUED RENTAL GROWTH INCREASES PROPERTY INCOME;
DIRECT INVESTMENT RESULT FOR NINE MONTHS UP 6.0% ON 2008
Eurocommercial Properties (ECP) is now effectively a pure retail property company following the sale of its last office building.
Rental growth continued in ECP’s French, Italian and Swedish shopping centres and other retail properties, averaging 4.9% on a like for like basis and 6.0% in total, taking into account increased floor space as a result of completed extensions.
There have been no significant increases in vacancies or rental arrears.
Direct Investment Result ECP’s direct investment result (net property income less net interest expenses, company expenses and corporate income taxes) for the nine months to 31 March 2009 rose 6.0% to € 49.0 million from € 46.3 million for the previous corresponding period ended 31 March 2008.
The direct investment result per depositary receipt, which includes the depositary receipts that were issued as stock dividend in November 2008, increased by 5.4% to € 1.37 per depositary receipt compared with € 1.30 for the same period in 2008.
Adjusted and IFRS Net Asset Value
Property valuations were not undertaken at the end of the nine month period in accordance with the Company’s policy to only commission independent revaluations at the half year and year ends. The adjusted net asset value per depositary receipt therefore changed minimally since December 2008, reflecting only accrued income and currency movements.
The adjusted net asset value figure for 31 March 2009 was € 35.40 per depositary receipt compared with € 34.94 at 31 December 2008 and € 40.16 at 31 March 2008, reflecting decreased property values over the twelve month period. Adjusted net asset values do not take into account contingent capital gains tax liabilities if all the properties were to be sold
simultaneously nor do they take into account the fair value of financial derivatives (interest rate swaps) which are used to stabilise interest costs.
The IFRS net asset value at 31 March 2009, after allowing for contingent capital gains tax liabilities if all properties were to be sold simultaneously and the fair value of the interest rate swap contracts, was € 30.45 per depositary receipt compared with € 30.48 at 31 December 2008
and € 35.97 at 31 March 2008.
CONTINUED RENTAL GROWTH INCREASES PROPERTY INCOME;
DIRECT INVESTMENT RESULT FOR NINE MONTHS UP 6.0% ON 2008
Eurocommercial Properties (ECP) is now effectively a pure retail property company following the sale of its last office building.
Rental growth continued in ECP’s French, Italian and Swedish shopping centres and other retail properties, averaging 4.9% on a like for like basis and 6.0% in total, taking into account increased floor space as a result of completed extensions.
There have been no significant increases in vacancies or rental arrears.
Direct Investment Result ECP’s direct investment result (net property income less net interest expenses, company expenses and corporate income taxes) for the nine months to 31 March 2009 rose 6.0% to € 49.0 million from € 46.3 million for the previous corresponding period ended 31 March 2008.
The direct investment result per depositary receipt, which includes the depositary receipts that were issued as stock dividend in November 2008, increased by 5.4% to € 1.37 per depositary receipt compared with € 1.30 for the same period in 2008.
Adjusted and IFRS Net Asset Value
Property valuations were not undertaken at the end of the nine month period in accordance with the Company’s policy to only commission independent revaluations at the half year and year ends. The adjusted net asset value per depositary receipt therefore changed minimally since December 2008, reflecting only accrued income and currency movements.
The adjusted net asset value figure for 31 March 2009 was € 35.40 per depositary receipt compared with € 34.94 at 31 December 2008 and € 40.16 at 31 March 2008, reflecting decreased property values over the twelve month period. Adjusted net asset values do not take into account contingent capital gains tax liabilities if all the properties were to be sold
simultaneously nor do they take into account the fair value of financial derivatives (interest rate swaps) which are used to stabilise interest costs.
The IFRS net asset value at 31 March 2009, after allowing for contingent capital gains tax liabilities if all properties were to be sold simultaneously and the fair value of the interest rate swap contracts, was € 30.45 per depositary receipt compared with € 30.48 at 31 December 2008
and € 35.97 at 31 March 2008.
Rental Growth
Overall rental growth for the total portfolio was 6.0%. This figure allows for higher rental levels on the increased floor area of certain shopping centres.
Like for like (same floor area) rental growth in the Company’s retail properties for the twelve months remained solid, averaging 4.9% for the Company overall, with a 4.9% increase in France, 3.9% in Italy and 6.7% in Sweden. The comparable figures for the same period in 2008
were 5.1% overall, 4.7% in France, 5% in Italy and 5.7% in Sweden.
Occupancy Cost Ratios Total occupancy cost ratios (rent plus marketing contributions, service charges and property expenses as a proportion of sales turnover including VAT) for ECP galleries excluding hypermarkets at the end of the period were 7.8% overall; 7.7% in France, 8.0% in Italy and 7.5%
in Sweden.
Occupancy and Arrears
Vacancies in ECP centres remain under 1% and there has been little increase in rental arrears (more than 90 days) which currently stand at under 0.7% of total rental income for the latest relevant quarter.
Property Sale, Extensions and Refurbishments The sale of the Amsterdam office building Kingsfordweg 1 for € 86.5 million was completed on
March 31 2009. The proceeds have been used to reduce short term debt.
The 9,000m2 extension and refurbishment of Ingelsta Shopping in Norrköping will be completed on time on 20 May and is 99% leased, with the remaining space expected to be signed for shortly. 34 new shops have been added to the gallery bringing the total to 50, including ICA Maxi, H&M, Stadium, KappAhl, Lindex, MQ, Esprit, Gina Tricot, Cubus and a new food court.
The total cost of the project is approximately € 33 million and will deliver a net return on cost of 7.0%.
Construction of the new food court at Carosello, Milano is on schedule. Tenants for all 10 of the new units have agreed heads of terms which are progressively being converted into final lease agreements.
Market Commentary
Reductions in GDP and increases in unemployment have occurred in France, Italy and Sweden as the recession bites. Retail spending, however, has held up reasonably well in the circumstances, except understandably in the large electrical and household sectors. Rents in sound shopping
centres in ECP’s markets are not therefore under significant pressure and at the date of this report, the Company has not reduced rents, nor is it expecting any general reduction in rents in its centres.
Paradoxically, the majority of the few requests for rent reductions have come from the strongest international tenants who need reductions least, rather than from smaller local organisations.
Property investment markets, unsurprisingly, have been very quiet, with the only major shopping centre sale being in Monza, north of Milano, at € 143 million and a net yield of around 5.8%. As a comparable for valuation purposes this is a complex transaction because of a long head lease
without market reviews and the fact that the centre is largely underground. However, it does indicate that there has not been a widespread or significant increase in yields for good centres where rental income is secure.
|
