Highlights first three months 2006
CEO Maarten Hulshoff: "We are pleased with the good results in the first three months of 2006, which are mainly due to Rodamco Europe's focus on top quality retail in dominant locations in key European cities as well as our active retail management. Also in the first quarter of 2006, the market has shown continuous strong investor demand for top quality retail investments and still increasing cross-border investment activity in Europe. Although high quality opportunities are limited and expensive in the current environment, Rodamco Europe has a €2.4 billion pipeline portfolio, of which 37% is committed. This clearly shows Rodamco Europe's ability to secure growth into the future. The total portfolio including the total pipeline currently tops the €11 billion mark. Rodamco Europe will continue to look for investment opportunities in the retail sector across Europe.
PERFORMANCE
PORTFOLIO GROWTH
Property assets increased by €224 million to €9,319 million in the first three months of 2006 compared to €9,095 million at the end of 2005. The contributors to this increase were the substantial valuation results of investment property (€167 million) and pipeline (€5 million), capital expenditures (€18 million), capital expenditures in pipeline projects (€47 million at cost), divestments (minus €1 million) and other movements (minus €12 million).
TRIPLE NET ASSET VALUE
IFRS ignores some business aspects in valuing real estate companies. In line with the Best Practice Policy Recommendations of the European Public Real Estate Association (EPRA) for transparent, uniform and comparable financial information by real estate companies, Rodamco Europe allows for some adjustments in the shareholders' equity, reflected in triple net asset value ("Triple NAV" or "NNNAV"). These performance measures do not replace the IFRS measures, but provide additional information to help the investors understand the performance of Rodamco Europe.
|
Net asset value: |
5,516 mln |
|
Valuation surplus on pipeline projects: |
51 mln |
|
Nominal deferred taxes: |
383 mln |
|
Discount deferred taxes: |
-205 mln |
|
Marked-to-market value of loans and borrowings: |
-6 mln |
|
Triple NAV |
5,739 mln |
The Triple NAV increased by 5.9% to €5,739 million at the end of March 2006, or €64.02 per share (end of 2005: €60.44) before final 2005 dividend per share of €2.17 that was paid in April 2006.
DIRECT RESULT AFTER TAX
Rodamco Europe focuses on direct result after tax as the key operational performance indicator and for its dividend policy. Direct result after tax approximates the net cash earnings of the company over the period. It comprises net rental income, other income and expenses minus the administrative expenses (also referred to as EBITDAV) minus the net interest expenses, the net foreign exchange result, the current part of income tax expense and a part of the minority interest. Direct result after tax increased 11.4% to €93.7 million in the first three months of 2006, compared to €84.1 million in the same period of 2005. This was largely driven by the pipeline projects coming into operation and the net effect of acquisitions and divestments during the last nine months of 2005.
RENTAL INCOME
Net rental income increased 12.5% to €136.2 million, compared to €121.1 million in the first three months of 2005 and the gross rental income increased 11.5% to €157.9 million (Q1 2005: €141.6 million). The gross rental income increase is primarily a result of rent generated from acquisitions during 2005 (€7.8 million; mainly Amstelveen in the Netherlands and Jumbo in Finland), from properties coming into operation (€9.8 million; mainly the shopping centers in the Netherlands Vier Meren, Spazio and parts of Almere, Parquesur extension in Spain and Chodov in the Czech Republic) and rent increases of €4.3 million.
The increase in gross rental income was partially offset by the effect of disposals, mainly Mecc in the Netherlands (exhibition, office, hotel), Hallunda and Sollentuna in Sweden (shopping centers), Pontis Haus (offices) and Rozalia Park (logistics) in Central Europe and 2 offices in Paris, France with a total negative effect of €4.9 million on gross rental income in 2006.
Overall occupancy decreased slightly to 97.7% in March 2006 compared to the end of 2005 (97.9%), retail occupancy decreased slightly to 98.4% (end 2005: 98.6%).
Like-for-like growth in net rental income was 2.5%, which is lower than the like for like growth in Q1 2005 (3.9%, including correction for one-offs), mainly due to lower indexation in France.
The Loss of Rent improved during the first quarter of 2006 to 3.9% (year end 2005: 4.6%) due to divestments.
Property operating expenses (excluding net service charges) increased with 9.5% to €20.7 million in the first three months of 2006 (Q 1 2005: €18.9 million). This increase is lower than the 11.5% growth rate of gross rental income, reflecting active management as well as quality improvement as a result of rejuvenation of the portfolio.
ADMINISTRATIVE EXPENSES
The administrative expenses increased 17.9% to €11.2 million in the first three months of 2006 compared to €9.5 million in the same period of 2005. This was mainly caused by increased staffing due to the growth of the investment portfolio, an increase of ICT expenses and an increase of compliance activities.
NET FINANCING RESULT
Net interest expenses increased 17.2% from €26.2 million in the first three months of 2005 to €30.7 million in the same period of 2006, which is somewhat lower than the increase in the average debt with 18.0%. The interest expenses regarding the external financing increased € 2.0 million in the first three months of 2006 compared to the same period of 2005. The net financing increased from €2.7 billion at the end of March 2005 to €3.2 billion at the end of March 2006. The average interest rate decreased to 3.82% at the end of March 2006 (4.29% at the end of March 2005). The lower average interest rate was partly compensated by lower interest income of € 1.8 million, due to lower capitalized interest and higher other interest expenses of € 0.7 million (mainly the interest of the French SIIC exit tax liability).
Under IFRS the foreign exchange result (€0.3 million) and the change in fair value of financial instruments are also included in the net financing result. In the first three months of 2006, a positive fair value result of financial instruments of €2.7 million was reported, primarily arising on interest rate swaps not being directly linked to specific loans, thus not subject to hedge accounting treatment.
TAXES
The change in deferred tax position as a result of valuation results and the realization of deferred tax assets (losses carry forward) resulted in €22.9 million of deferred income tax expense (Q1 2005: €13.0 million). The deferred tax expenses are calculated using the effective tax rates for those countries where there is no tax efficient status like in the Netherlands (FBI) and in France (SIIC).
Income tax expense amounted to €0.7 million, compared to €0.9 million in the first three months of 2005.
NET SHAREHOLDERS' PROFIT
Net Profit not only takes the direct result after tax into account, but also includes non-cash items ('indirect result after tax') such as the valuation result, the result on disposals of investment property, the fair value result derivative financial instruments and the deferred tax expense. The net profit under IFRS fully includes any minority share. The net shareholders' profit (net profit attributable to Rodamco Europe's shareholders) excludes minority shares and is used under IFRS as the main indicator for Rodamco Europe's overall performance. The 12.5% increase in net rental income compared to the first three months of 2005, but especially the increase of the valuation result in Q1 2006 has led to the 68.7% growth in net shareholders' profit to €244.8 million.
RESULTS PER SHARE
Direct result after tax per share increased 11.4% to €1.05 in the first three months of 2006, compared to €0.94 in the comparable period of 2005. The net shareholders' profit per share amounted to €2.74 for the period up to Q1 2006, an increase of 68.7% compared to €1.62 in Q1 2005.
VALUATION RESULT AND RESULT ON DISPOSALS
The valuation result of Rodamco Europe's property portfolio added €172 million in value in the first three months of 2006. This valuation result is mainly caused by a yield shift. The net initial yield on investment property moved from 6.1% end of 2005 to 6.0% per 31 March 2006.
Valuation results on investment properties in all sectors were positive during the first three months of 2006 (€167 million), revaluations on retail investment properties were €154 million, offices showed a positive revaluation of €10 million and logistic €3 million. Revaluation result on investment properties in all countries over the period were positive as well: the Netherlands and Belgium (€52 million), France (€32 million), Spain (€40 million), the Nordic countries (€30 million) and Central Europe (€13 million).
A valuation result of €5 million was realized on pipeline projects mainly due to the opening of the Allee Center extension in Germany.
Rodamco Europe divested at a total sales price of €1 million in assets, consisting of the sale of some industrials in France.
FINANCING DEVELOPMENTS
Net financing remained stable at €3.2 billion at the end of March 2006. Approximately 69% of the debt was fixed rate funded as per March 31 2006, and the average interest rate at that date was 3.82% (year-end 2005: 3.86%).
SENSITIVITY ANALYSIS
As an indication of sensitivity[2], a change in interest rates of 100 basis points would have an impact of €8.5 million on direct result per annum; a plus or minus yield shift of 50 basis points would affect 2006 indirect result with negative €700 million (+50 basis points) to positive €820 million (-50 basis points); a 10% change in the SEK/€ exchange rate would have a €21 million impact on shareholders' equity.
SUBSEQUENT EVENTS
- On April 12 2006, Rodamco Europe successfully priced a €500 million five year fixed rate bond. The bond offers a coupon of 4.125% and was sold to international institutional investors;
- On 19 April 2006, the majority of the shops of Stadshart Almere, the Netherlands, have been opened. The transfer of ownership is expected to take place by mid-year 2006. The pipeline project Stadshart Almere was committed in 2002 for approximately € 240 million, generating a net initial yield on investment of around 7%. It adds 65,000 m2 retail space, 4,000m2 leisure, 8,000 m2 cinema and 2,000m2 office space to the city center of Almere;
- On 20 April 2006, the Annual General Meeting of shareholders has appointed Mr. Peter M. van Rossum as Chief Financial Officer and member of the Management Board;
- On 3 May 2006, Rodamco Europe has signed an agreement with Provast for the acquisition of the commercial space in Markthal in Rotterdam, including the first covered market hall in the Netherlands. The Markthal will be acquired for approximately € 28 million with an expected net initial yield of 6.5%.
- On 4 May 2006, Rodamco Europe has opened the largest part of the total 16,000 m2 of shopping space in De Parade in Bergen op Zoom. The market value Rodamco Europe's share in De Parade is approximately € 45 million and produces a net initial yield of 6.3%.
OUTLOOK
As indicated in the full year 2005 results press release, Rodamco Europe expects direct result after tax, (this figure excludes the (indirect) valuation result, fair value result derivative financial instruments, result on disposal of investment property and deferred tax expense) over the full year 2006 to increase by more than 7%.
The direct result after tax growth in the first three months of 2006 shows a higher increase due to acquisitions and projects coming into operations later in 2005, therefore the Q1 result is not representative for the whole year.
This outlook is based on the current property portfolio and estimated timing of completion of pipeline projects and disregards changes in IFRS policies, the potential effects of additional acquisitions and divestments and the potential effects of significant changes in exchange rates, interest rates and the economic situation.
FINANCIAL CALENDAR
|
14 August 2006 |
Publication Interim Results 2006 |
|
13 November 2006 |
Publication Q3 2006 results |
COMPANY PROFILE RODAMCO EUROPE N.V.
Rodamco Europe with headquarters in Rotterdam, the Netherlands, is both investor and manager of its dominant shopping centers in its home regions The Netherlands & Belgium, the Nordic countries, France, Spain and Central Europe. Top quality shops and shopping centers form 93% of Rodamco Europe's €9.3 billion investment portfolio. This makes Rodamco Europe the largest listed property investment and management company in the retail sector in Europe. Rodamco Europe is listed on the Stock Exchanges in Amsterdam, Paris, Frankfurt and Brussels. A Euronext 100 company, Rodamco Europe is included in the Euronext AEX Index (AEX) and in the MSCI World Index. For more information on Rodamco Europe, please visit our website: www.rodamco.com.
Note for the editor; for more information, please contact:
Rodamco Europe NV
Vivienne van Asten - de Leeuw, Investor Relations
Tel: +31 (0) 10 217 6400
E-mail: investors@rodamco.com / media@rodamco.com
Hill & Knowlton Nederland
Machteld Merens
E-mail: mmerens@hillandknowlton.com
Arie Bos
E-mail: abos@hillandknowlton.com
Tel. No.: +31 (0) 20 404 4707
Certain of the statements contained in this release are statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. The outlook is based on the current property portfolio and estimated timing of completion of pipeline projects and disregards the potential effects of acquisitions and divestments, or significant changes in exchange and interest rates. Actual results, performance or events may differ materially from those in such statements due to, among other things, (i) general economic conditions, in particular economic conditions in Rodamco Europe's core markets, (ii) performance of financial markets,(iii) interest rate levels, (iv) currency exchange rates, (v) changes in laws and regulations, and (vi) changes in the policies of governments and/or regulatory authorities. Rodamco Europe assumes no obligation to update any forward-looking information contained in this document.
[1] Before final dividend 2005 of €2.17 per share
[2] All amounts in this paragraph are estimated amounts.
The press release including tables (in Dutch) can be downloaded from the following link:
The press release including tables (in English) can be downloaded from the following link:
