Antwerp, 20 February 2007- Property Investment fund Intervest Retail releases today its results on 31 December 2006. (comparable figures for 2005 between brackets)
The market of the commercial real estate looks back to a very strong year, the rental income as well as the investment value have increased more than the average.
The occupancy rate of the portfolio of Intervest Retail remains with 95,5 % at a high level. Without taking into account the Factory Shopping Messancy the occupancy rate even reaches 99,1 %.
As a result of the favourable rental market and through an active management, higher rental prices are obtained by all letting transactions (rental renewals and new rentings) which results in increasing rental prices of 7,8% on the average.
This positive evolution is reflected in the increase in value of the portfolio. Without Factory Shopping Messancy the fair value of the operating portfolio increases with 5,7 % (€ 13 million).
Intervest Retail looks back to an active year with the redevelopment of the Wooncentrum Van de Ven in Olen, the project of the commercial centre Julianus in Tongeren, the continued commercialisation of the Factory Shopping Messancy and the sale of twelve non strategic buildings.
For the redevelopment of the Wooncentrum Van de Ven in Olen, the negotiations with a strong brand, i.e. a tenant who has to attract other tenants, are in an advanced stage. During 2006 the building permit has been granted by the municipality of Olen. A neighbour-competitor asked the Council of State the suspension and the cancellation of the execution of the building permit. The auditor advised the Council to reject the request of suspension and the Council will soon pronounce its verdict. A verdict concerning the request of cancellation will probably last a few years. In practice, the development of large-scale commercial projects often faces resistance. The above mentioned procedures before the Council of State are not exceptional and do not immediately prevent the building of the project.
The building and the letting process of the commercial centre Julianus in Tongeren are according to plan. The opening is planned for the last quarter of 2007. The total acquisition value will amount to circa € 18 million. The investment will contribute positively to the operating result as from 2008.
In 2006 a lot of attention has gone to the evolution of Factory Shopping Messancy. The attractive value of the centre is highly appreciated after improvements on the level of architecture and design. Minale Design has even received the award "Janus du Commerce" by the Institut Français du Design for their work in Messancy. Nevertheless the reasonable occupancy rate and the sustained marketing efforts, it is a fact that during last year the number of visitors and the turnover figures have grown insufficiently so that additional rental incentives are necessary to support the exploitation of several tenants. All this has incited the property expert to carry out important negative corrections on the fair value. In the last quarter of 2006 the fair value has been reduced to € 29,4 million (- € 8,5 million).
The rental income of Intervest Retail, € 18,5 million, is for 2006 similar to last year. The decrease of the rental income as a result of the sale of investment properties in 2006 (€ 1,6 million) is largely compensated by the indemnity received from the arbitrational procedure against the property developer of Factory Shopping Messancy (€ 0,8 million related to rental income) and the increased rental income in Factory Shopping Messancy (€ 0,5 million).
The property charges rise compared to 31 December 2005 with € 0,4 million. The increase is due to the higher operating costs in Factory Shopping Messancy. Indeed, since the second quarter of 2005, these costs are no longer capitalised, but taken directly into the operating result. These are mainly marketing costs that cannot be passed on to the tenants.
The operating result before the result on the portfolio decreases with € 0,4 million and reaches € 13,8 million (€ 14,2 million) resulting principally from the higher vacancy costs concerning the factory outlet at Messancy.
In 2006 a less-value of € 1,2 million has been realised on the sale of non strategic properties.
The positive variation of the fair value in 2006 of € 3,5 million results from the valuation the property expert (€ 3,0 million) and the spread of rental incentives granted to the tenants (€ 0,5 million). The fluctuations in value of the real estate are composed on the one hand of value increases (€ 13,0 million) and on the other hand of value reductions (- € 10,0 million).
The financial result amounts to - € 3,9 million compared to - € 3,4 million, due to the increase of interest charges. This increase is on the one hand due to interest charges related to Factory Shopping Messancy that are no longer being capitalised and, on the other hand, to the increase of the short term interest rates. In the context of the arbitrational judgment against the project developer of Factory Shopping Messancy the property investment fund received an amount of € 0,1 million of moratory interests (included in the amount of € 1,4 million received indemnity).
The net result of the financial year amounts to € 12,3 million in 2006 compared to € 18,7 million in 2005. The important decrease of the net profit comes principally from the change in fair value of the real estate portfolio in 2006 (€ 3,5 million) compared to 2005 (€ 8,4 million).
The operating profit distributable as dividend, based on the statutory annual accounts of Intervest Retail SA, amounts to € 10,0 million in 2006 compared to € 10,9 million in 2005. Consequently the gross distributable result amounts in 2006 to € 1,97 per share which corresponds to our previous formulated expectations.
The fair value of the portfolio on 31 December 2006 amounts to € 281 million (€ 285 million on 31 December 2005). This net decrease results from the sale of 12 buildings in 2006 (- € 20 million), investments in Tongeren (€ 9 million) and in some retail properties (€ 4 million) and the evolution of the value of the portfolio (€ 3 million).
The net asset value (fair value) per share amounts to € 34,21 (€ 33,81). Given that the share price on 31 December 2006 was € 39,70, the Intervest Retail share is quoted with a premium of 16 % compared to this net asset value.
According to the calculation method in article 6 of the Royal Decree of 21 June 2006, the debt ratio is 39,0 % on 31 December 2006 (40,7 % on 31 December 2005).
On the short term our efforts will be once more concentrated on improving the quality of the existing real estate portfolio and the analysis of different scenarios of growth. For the financial year 2007 the main challenge is the continued commercialisation of Factory Shopping Messancy. The sale of Factory Shopping Messancy can potentially be taken into consideration if a favourable opportunity should occur during 2007.
The result of 2007 will mainly depends on the (financial) success of Factory Shopping Messancy. The number of visitors and the turnover figures must grow, so that higher turnover rents can be generated and the costs have to be reduced. The indemnity received in 2006 of the property developer of Factory Shopping Messancy because of not respecting the obligations of result has a one-time positive effect of € 1 million on the net result of the property investment fund in 2006. Without new investments, which contribute immediately to the operating result of the property investment fund, the expectation is that the profit per share in 2007 will be lower than in 2006.
Consequently, Intervest Retail will purposefully concentrate its efforts in 2007 in order to acquire new investments. In view of the important demand of investment products on the market this will happen with the necessary cautiousness.
Note to the editors: for more information, please contact:
Intervest RETAIL SA, Jean-Paul Sols - CEO or Inge Tas - CFO, tel. 03/287.67.87
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