EUROCOMMERCIAL PROPERTIES N.V.: 2004 ANNUAL RESULTS

 

The board of Eurocommercial Properties N.V. announced today that as a result of higher earnings in the financial year to 30 June 2004 it proposes increasing the Company's annual dividend by 5% to € 1.50 per depositary receipt (10 ordinary shares) from € 1.43 in 2003. Shareholders will again be offered the option of taking new shares from the Company's share premium reserve if they wish, instead of the cash dividend. The price for these shares will be announced on 29 October 2004.

 

Net property income for the year rose to € 76.5 million from € 66.3 million largely as a result of property purchases. The overall net income after interest and other expenses was € 44.9 million for 2003/2004 and represents an increase of approximately 13% over € 39.6 million last year. All overhead expenses are now charged to income. Previously, 30% of these costs were charged against the revaluation reserve, as had been the normal practice with similar Dutch property companies. The previous comparative numbers have been adjusted to reflect the accounting change in order to show underlying earnings.

 

Net asset value before income appropriation improved by 3% to € 23.16 per depositary receipt as a result of an increase of independent property valuations and after allowing for an appropriate increase in the provision for potential future capital gains taxes. An amount of € 40 million has been released from this provision to pay Italian capital gains tax in December 2004 at the concessionary reduced rate of 19% compared with the current corporate income tax rate of 37%. As a result of this concession the tax book values of the majority of the Italian property portfolio have been stepped up to 96% of market values. The net asset value in June 2003 was € 22.53 per depositary receipt.

 

The Company's property portfolio performed well over the year with a total return of 8.9%. The overall property occupancy rate is 99%. Average retail sales in the galleries of the Company's shopping centres were up 1.8% on 2003 but individual centres have shown increases of up to 10%.

The Company's independently assessed property values increased 2.3% overall compared with 2003.

 

 

The Company has decided to apply for the new French tax regime for real estate property investment companies listed on the Paris Stock Exchange (Euronext Paris) as from 1 July 2005. As from that date the revenues and capital gains from the French portfolio of the Company will be tax exempt. As a counterpart of this exemption, real estate property investment companies, which have elected for this new tax system - so called 'Sociétés d'investissements immobiliers cotées' (SIIC) - will have to pay, over four years, an exit tax equal to 16.5% of the latent capital gains amount relating to French property. The Company has included in its provision for potential future capital gains taxes an amount of € 19.6 million for exit tax based on the market value of the French property portfolio as per 30 June 2004. The Company expects to be listed on Euronext Paris in the first half year of 2005.

 

The Company has changed its organisation in Italy to separate the management of its own properties from the third party work undertaken by its subsidiary Larry Smith Italia, the prominent specialist retail property consultant it purchased in 2001. The Company has transferred to its own office in Milan management and accounting staff who will be responsible for its portfolio of 8 shopping centres. The Company has also changed its involvement in Larry Smith Italia by selling the shares in the underlying company and leasing the trademark to five of its directors. ECP will, in return for the use of the Larry Smith name, the rights to which ECP retains, receive a fixed annual royalty or a percentage of turnover whichever is the higher for a term of 10 years with the Larry Smith directors having the right to buy the trademark from the seventh year on. ECP and Larry Smith will therefore continue their mutually rewarding relationship, with Larry Smith continuing to do leasing, catchment studies and on site management work on some ECP centres. This transaction has significant benefits for both parties - for ECP, its dedicated management team will no longer be involved in third party work whilst ECP retains a financial interest in Larry Smith's extremely successful business.

 

The Company will comply with the Dutch Corporate Governance Code published in December 2003 by the Corporate Governance Committee (also known as Tabaksblat Committee). Full details will be set out in the Company's annual report to be published by the end of September. At the Annual General Meeting to be held on 2 November 2004 proposals to amend relevant statutes to comply with the best practices of the Tabaksblat Code will be tabled.

 

Property investment markets are extremely strong with demand exceeding supply. ECP is, as always, active in the market but is setting firm price parameters that reflect its expectations of income growth, rather than necessarily keeping pace with the latest record price. ECP is, also in view of market conditions, focussing on improving and expanding its existing centres. It is normally possible to achieve yields up 2% higher through creating extensions compared with buying ready made investments through the market.

 

For additional information please contact:

 

 

 

 

 

* The Company's shares are listed in the form of bearer depositary receipts on Euronext Amsterdam

(the Amsterdam Stock Exchange). 1 bearer depositary receipt represents 10 ordinary registered shares. The calculation of the direct and indirect investment results is based on the weighted average of the number of depositary receipts representing the ordinary shares in issue over the year using Netherlands GAAP. The weighted average number of depositary receipts over the period is 29,937,616.

 

**The comparative figures were adjusted for the change in accounting policies.

 

Group offices:   London 4 Carlton Gardens London SW1Y 5AB Tel: 44(0) 20 7925 7860 Fax: 44(0) 20 7925 7888

Milan Via Del Politecnico 3 20121 Milan Tel:  39 02 76 07 591 Fax: 39 02 76 01 61 80

Paris 10 Rue du Havre 75009 Paris Tel: 33 (0) 1 48 78 06 66 Fax: 33 (0) 1 48 78 79 22