Management Reports • Aug 31, 2010
Management Reports
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Orco Property Group Société Anonyme Parc d'Activités, 40 L-8308 Capellen RCS Luxembourg B 44996
Management Report as at 30 June 2010 31 August 2010 30 2010
ORCO Property Group ('the Group' and Eastern Europe since 1991, currently owning and managing assets of approximately EUR 1.7 Billion. The Group has a strong local presence in its main markets, namely Prague, Ber Warsaw and Budapest, as well as offices in Bratislava, Moscow and Hvar (Croatia). the Group') is a real estate investor and developer established in Central presence main as Moscow a conducted in 2009, all the Group operations and assets ) is real Berlin,
As a consequence of the restructuring now belong to two business lines belong to lines:
The positive trend which started steady yield compression across CEE & German markets The towards the end of 2009 continued throughout 2010 and led to compression & German markets: of 2009
| Prime Yield - Office | |||||
|---|---|---|---|---|---|
| Q4 2009 | Q2 2010 | ||||
| Berlin | 5.5% | 5.20% | |||
| Budapest | 7.75% | 7.50% | |||
| Prague | 7.25% | 7.00% | |||
| Moscow | 12.00% | 10.00% | |||
| Warsaw | 7.25% | 7.00% |
Source: Jones Lang Lasalle Research
As investor interest returned to the real estate market valuations of some properties went u market, yield started compressing again, of went up for the first time since 2008. yield compressing and
During the first half of 2010, the volume of real estate transactions completed in CEE reached EUR 1,700 Million, representing a continue to predominantly focus on the core Central European markets Republic), but also on Russia accounting for 25 % of investment transactions in Q2 2010. half of 2010, the in , 190% increase year-on-year (source: CBRE). tinue predominantly (Poland, Czech Russia, which was the second largest market in terms of activity, Investors
Analysts from Jones Lang LaSalle's offices in Prague, Warsaw, Bucharest and Budapest have noted a revival in the real estate investment market and expect the situation in the region to improve over the remaining months of 2010. A gradual increase of pressure on yields is to be expected as a result of the greater value and number of transactions in the region. % aSalle's offices the in remaining A to a of the markets of the Group, Q1 2010 represented the strongest start to the the market of aSalle's the to on-year totaling
In Berlin, one of the key market year in terms of lettings since 2005. Indeed, office lettings increased by 2 108,700 sqm. In the first three months of the year, June 2010. Prime headline rents remained unchanged /sqm/month for the fifth successive quarter. in lettings increased 22% year-on three of the the vacancy rate averaged 9.80% by end of e remained in the city centre, at around EUR 20
Recovery of Prague office market still is oversupply and high vacancy ( the first half of 2010 (year-ongrowth, current market activity remains driven by lease events, portfolio churn and corporate activity including office consolidation and the realization of space efficiencies rather than expansionary plans. However, as the volum minimal, it is expected that vacancy landlords. overy is somewhat slower. Tenant demand is picking up, but there high (13.8%). Rental prices have been still under pressure during -year comparison of rents). In the absence of strong economic market lease events, consolidation than. as volume of office supply coming to the market in 2010 is vacancy will decrease in H2 2010 and will have a positive impact for vacancy in city at somewhat ). prices have e of market in and
Polish residential market has been in best shape, due to macroeconomic development in lagging behind because of significant oversupply compared to the volume of demand. In addition, difficult mortgage conditions imposed by the banks since the beginning of the year further weakened the demand. been resilient demand and positive the country. Czech Republic and Slovakia, however, have been oversupply volume by banks since beginning of
H1 2010 Management Report
In the Czech and Slovak Republic discounts have been at an all time high in H developers' need to sell the stock on inventory in order to proceed with new projects. Czech and Slovak Republic volumes of unsold stock in the apartment and housing sector are decreasing although at a minimal clients able to purchase an apartment or house has decrease have an H1 on Republic of at pace. Supply still outstrips demand. In general the amount of decreased to that of years past. 1 2010, due to In both the
Supply: In Prague, unsold stock construction starts are decreasing. Indeed, in 2009, King Sturge recorded a 16% decrease of commenced construction compared to 2008 and a 17% in dwellings. In addition, for the first four months of 2010, (year-on-year decrease of 40%) whereas 2,594 dwellings have been completed (year decrease of 8%). is expected to start decreasing by the end of 2010 as are Indeed, King construction increase on number of completed In the only 786 flats have been started in Prague year decrease 40%) been pace. Supply In ofd years past.the crease number flats been (year-on-year
Demand: seems set to increase accumulated significant liquidity, before the end of 2010, as banks, which now seem to have significant start being more flexible in mortgage lending: seem to
Since the second half of 2009, sales were recorded mainly f Sturge expects that the value of mortgages granted this year will range from CZK 75 Billion to CZK 85 Billion. About CZK 74 Billion were granted to households via mortgages in 2009, down 35% compared with the previous year. Since 2009, were for small, affordable apartments the value mortgages range CZK were households 2009, the previous those factors, asking prices kept declining in over the 2nd quarter of small, apartments. King
As a result of those various factors a similar rate as in the first quarter r in first and are expected to stabilize by year end. 2010, at
The residential market in Poland has proved to be stronger in H Here, demand has been positively impacted by the willingness of banks to provide mortgages and by the still attractive interest rates. stock in Warsaw is 9002 PLN/sqm (down residential schemes are by 9% cheaper comparing to overall primary offer. The Poland H1 2010 than in Czech Republic. been and the interest Prices have also stabilized. The average price of new is by 1.6% since H2 2009). The newly launched Czech launched666 dwellings
Supply: in Q1 2010 there was than in the corresponding period of 2009). In general it is expected than 2010 will be better the previous year in terms of the number of construction. The market offer increased for the second successive quarter this time by several hundred of units exceeding Amongst others, this was caused by re suspended. 1,666 dwellings started by developers in Warsaw (i.e. 32% more period than 2010 betterprevious the ond hundred of 13,000 this was caused re-launches of projects where construction had earlier been than 000 dwellings.
Demand: after a fairly good result recorded in Q4 2009 resid level of 2,400 units in the beginning of 2010. Although current sales result in the Warsaw market are not comparable to results noted during the boom period they are still close to the long average. Q4 residential sales remained on satisfying units in in to results they are unches ential on long-term
In March 2009 a "Procédure de Sauvegarde" Property Group S. A. ('the Company') September 2009. At the Company's application, the another six months (until 25 March 2010) and then renewed until 25 June 2010. protection of the Safeguard Procedure its strategic conversion and financial restructur Court to allow the Company to finalize its The Safeguard plan was circularized to creditors on were in favor of the proposed plan. The details of the management report accompanying the 2009 consolidated financial statements a de (Safeguard Procedure) was opened for Group A. by the Commercial Court of Paris, expiring on At application, Safeguard Procedure was extended for another months 2010) until Procedure, the Company made significant progress in implementing restructuring plan. The second extension was granted by the to Safeguard plan and communicate it to the creditors. was to 31 March 2010. A majority of creditors the Safeguard plan were published in the the 2009 consolidated statements. was the Orco by the 25 rocedure Under the , the made implementinging The was to (57%) afeguard in guard plan. This
On 19 May 2010, the Paris Commercial plan combines a strategic and operational restructuring and a debt rescheduling plan. The rescheduling plan aims at repay interests, and interests to accrue during the below, with effect from 30 April business plan and reflects the necessity for the Group to invest in its Court approved the Company's Safeguard plan combines a debt repaying 100% of the admitted claims (including nominal, accrued interests, Safeguard plan) over ten years as per the schedule April 2011. This repayment schedule is consistent with the Group's business reflects to current including over ten the consistent development
projects, land bank and assets all liabilities. so as to generate the future cash flows allowing the repayment of
| Year | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|
| % of the total liability | 2% | 5% | 5% | 5% | 5% |
| Year | 6 | 7 | 8 | 9 | 10 10 |
| % of the total liability | 5% | 10% | 14% | 20% | 29% |
The Court appointed Maître Laurent le Guernevé as "Commissaire à l'exécution du plan" in charge of overseeing the performance Company. Maître Le Guernevé will more specifically be in charge of distributing Company's creditors the amounts that are due to them under the safeguard plan. approving the Safeguard plan ended the observation period opened as "Commissaire l'exécution du in the implementation of the Safeguard plan by the Guernevé in charge amounts that are due them the plan on 25 March 2009 among the The judgment n 2009.
In line with IFRS standards, the rescheduli the existing amortized value and accrued interests amounting to EUR 2010. The counterpart is the recognition of the market value of the new termed out liability. standards, rescheduling of the existing bond debt led to the derecognition of and accrued EUR 406.0 Million as at the liability. d illion as 19 May
As a result of the high effective interest rate applicable to the Company (23 a report established by Grant Thornton third parties amounts to EUR recognized as a gain. result the (23.1%, as determined in Grant Thornton), the fair value as at 19 May 2010 of the bonds held by EUR 136.4 Million, with the difference of EUR 269.6 , as the Million being
Until the end of the Safeguard plan, the difference between the market value be repaid will accrue through the income statement on the basis of the effective interest rate method. The interest expense of each period (30 April to 30 April) corresponds to the effective interest of 23.1% applied to the bonds' amortized value after repayment. will increase the balance of the bonds on the balance on which the interest will be calculated the next period. The interest expense is therefore set to increase each year. On that basis, the Safeguard rescheduling is set to increas EUR 34.4 Million over 2011 and EUR 38.5 Million over 2012 ( remains the same). the and income of . of period 30 April) to to value This amount of interest increase of the will be interest that rescheduling is increase from EUR 30.8 Million if no Safeguard rescheduling and EUR Million (if the amount of bonds in circulation the amount to . This if to if amount
On 10 June 2010, a third party filed an the 19 May 2010 judgment approv 2010, opposition with the Commercial Court of Paris approving the Company's Safeguard plan. the Paris regarding
This third party opposition was filed by Mr. Luc Leroi, bondholder representative for the « O 2010 » (ISIN FR0010249599), « CONVERTIBLE 2013 » (ISIN FR0010333302), and « OBSAR 2014 » (ISIN XS0291838992 and XS029184062). Regarding these three bonds, the third party opposition contests the maximum bond liability to be reimbursed within the opposition Mr. representative « FR0010333302), « and to be Safeguard plan OBSAR uard plan.
As long as the Commercial Court of Paris opposition, the underlying judgment approving the hearing is expected in October. remote. has not rendered a decision on the third party Safeguard plan is fully effective. . The Company sees the risk of this opposition being accepted as rendered on effective. A first court this as
In April 2010 Orco completed three 16.2 Million. The new investors Managers, Neptune Invest, Alandia Investissements, Lansdowne Capital, Hillgrove Investments Group and Finplat. April 2010 completed three different capital increases for a total equity amount of EUR illion. investors are professional investment funds, such as Axa Investment
The Company issued a total of 3,110,000 new shares, priced at EUR 5.61 (for the first capital increase) and EUR 5.00 (for the second and third capital increases). The price per share in the second and third capital increases reflects the fact that the new admitted to trading and remain recorded, as nominee account (" register until a prospectus is approved by the CSSF. the various legal arguments regarding t admissions for the new shares issued following the second and third capital increases validated and the corresponding shares Neptune Alandia Hillgrove issued new 5.61 5.00 third capital in reflects shares are not immediately compte nominatif pur" As of August 2010, as the CSSF still reviews various legal the legal challenge (see below), the prospectus for shares corresponding not yet listed for trading. total amount re funds, as Axa are ) in the is not
The capital increases were legally challenged by certain shareholders. First, three of the Company's minority shareholders acting in concert, Millenius Investments S.A., Clannathone Stern S.A. and Bugle Investments Ltd (collectively the "Applicants") reque against the Company dated 14 April 2010 in Luxembourg (before "le Juge des référés de Luxembourg") a suspension of the first third capital increase had not yet been published. B President of the Tribunal acting as the " capital were undertaken in the interest of the Company». Applicants on 25 May 2010. A procedural hearing took place on 8 June 2010. During that hearing it was decided that arguments would be presented on December 2010. by in Millenius and Investments requested in a pleading in des and second capital increases. . At the time of pleading the not been By order dated 22 April 2010, acting the Juge des Référés" underlined that « the increases of This decision was appealed by the Applicants May procedural on 8 During hearingwas decided on a next hearing to take place sted a pleading y order 22 2010, the Vice underlined increases by hearing on 18
On 23 April 2010, 17 May 2010 and 1 June 2010 the Applicants filed their submissions on the merits ("au fond") against the Company and its new shareholders, AXA Investment Managers, Hillgrove Investments Group Limited, Finplat, Lansdowne Capital, Neptune Invest and Alandia Investments with the District commercial court in Luxembourg ("Tribunal d'arrondissement de Luxembourg, siégeant en matière commercial"). The purpose of these claims is to cancel resolutions number 1 and 2 of the Company's which, under Article 5 of the Company's by authorized to increase the share capital up to EUR 300,000,000 and, alternatively to cancel the resolutions of the board of directors´ dec capital increases. These claims also aim at cancelling the April 2010. ("au fond") AXA Investment Lansdowne Invest ments court Luxembourg d'arrondissement is 2 the General Assembly held on 8 July 2008 pursuant to , Article by-laws, the Company's board of directors was share up alternatively cancel decisions dated 6, 8 and 14 April 2010 related to the capital Company's General A ments held 2008 toboard isions dated related three Assembly of 26
The Company considers that it has strong arguments to actions and therefore expect that court renders a decision in favor of the Applicants. annual general meeting shall be cancelled pursuant to a board of directors shall not be allowed to use article 5 of the by share capital increases, the decision will only affect the future. But if the judge considers that the share capital increase shall be cancelled on the basis of other grounds, the cancellation shall have a retroactive effect and would result in an invalidation of one or all of the three capital increases. If this were to happen any of the relevant shares that had been s guaranteed or otherwise transferred would have to be returned and the underlying deals would have to be unwound. Moreover the Company would have to return the capital received. This would result in significant transactional complexity in unwi result in a change of the shareholding structure and the voting rights. Further, there is a corporate risk that the invalidation of the capital increases would result in the cancelation of the Company´s general meeting held on 26 of April 2010, including the mandates of the board of directors. In turn, this could render the board of directors´ decisions since 26 April 2010 invalid that contest the legitimacy of these legal tions expect they will be rejected. However, there still remains in the In this regard, if the judge considers that the shall legal technicality (vice de forme article 5 of by-laws in order to complete other future. be basis retroactive would all of three to that would to deals capital received. unwinding those deals. In addition it would in change the shareholding there would the of ng directors. of 2010 invalid. the of these a risk that the considers ), the laws sold, pledged, nding deals. it , approximately
On the General Assembly held on 43% of the voting rights were present and/or represented confidence in the Company's previous members for another two years: Jean Bernard Kleiner, Nicolas Tommasini, Alexis Juan, Robert Couke, Guy Wallier, and Prosperita and Geofin. Assembly 26 April 2010 in Capellen, Luxembourg, where a represented, the shareholders confirmed their Board of Directors, by renewing the mandate of all its Jean-François Ott (Chairman), Ales Vobruba, Silvano Pedretti, Nicolas Wallier, S.P.M.B. he irectors, the of all François S.P.M.B., Ott&Co
In May 2010, S.P.M.B. a.s., a Czech legal entity represented by Ms Eva Janečková, resigned from the Company's Board of Directors. S.P.M.B. was elected to the Company's Board of Directors by the General Assembly the Board of Directors to the Company on Company acknowledged such resignation during its meeting of a.s., entity representedEva resigned held on 8 July 2009. S.P.M.B. announced its resignation from of 19 May 2010, and the Board of Directors of the acknowledged of 20 May 2010.
As of June 2010, bank debt amounts to EUR 1. income producing commercial assets. The GSG loan, which represents 30% of the total bank debt, is secured until June 2012. bank amounts 1.0 Billion, with 77% of the bank loans financing which of debt, is June renegotiate/extend bank loans related to its core s resignation and of loans xtend related coreillion been turned been till 2013.
In 2010 the Group continued to successfully renegotiate/e projects:
The Safeguard Procedure was positive by spurring a 'conciliation process' for restructuring bank loans. The partnership of the Company with its local financing banks has been confirmed by the 92% approval of the Safeguard plan their loans to the Group subsidiaries. by a of with its local by 92% plan by banks benefiting from the mother Company guarantee on to
The Group began the construction in 2008 on this luxury high Warsaw, Poland. The zoning permit and construction permit were respectively received in 2006 and 2007. 17 floors were already completed representing a total investment costs amounting to approximately complaints against both the zoning approval and the construction permit. After the Voivode rejected the complaints, the Group filed an appeal to the Provincial Administrative Court who declared the construction permit void in July 2009, thus bringing the the high-rise apartment tower in downtown floors were completed total on the construction EUR 40 Million when a group of neighbours began filing nts both zoning After thecomplaints, the Administrative in thus project to a standstill. by banks the rise apartment the a neighbours nts Mazovian
Subsequently, the case went all the way March 2010, it was ruled that the zoning approval was legal, thus preventing further appeals. However, on 24 June 2010, the Supreme National Court (NSA) decided to send this matter to the Mazovian Voivode for additional consideration thereby further delaying the restart of construction. The Court confirmed that the Group was validly granted the permit for derogation from the legal provisions and did not commit any errors. All charges of the NSA referred to the f and procedures of the administrative authorities, not the actions of the Group. up to the Supreme Administrative Court and on 15 that approval send matter to dditional thereby restart permit the NSA procedures the not to to Supreme formal defects
According to the information from the Mazovian Voivode Office, the final decision on Złota 44 is expected on September 3rd. According to Polish media t possibility of cancelling the building permit; it is only considered to acknowledge the permit or to ask the Warsaw Mayor Office for completing the documentation. According to information Mazovian Voivode the Voivode is reported to exclude the the permit; only considered acknowledge permit the Office documentation.international business community reported ernational community
The overwhelming support received locally and throughout the int makes the management confident that these challenges will be construction can restart. waived soon so that so Złota 44
In July 2010, the Company reached an agreement with Bank for the restructuring of the joint venture and the long term bank financing cash and secures increased priority payments from loan repayments, while Hospitality Invest S.A. is fully recapitalized and the long term bank loan secured. with AIG Global Real Estate Europe and Erste shareholder loans granted to its Central European hospitality financing. The Company recovers upfront EUR 6.7 ash from to 75% of future free cash flows Estate hospitalityupfront Million after bank
At the same time, the Group announced the sale of the commercial development for Peugeot in Warsaw with EUR 5.2 Million cash, out of which EUR 3.8 Million net cash in and EUR 1.4 Million of cash unblocked. This transaction will be reflected in , while the long sale Million and This be the Q3 2010 development revenues. revenues.
Over the first 8 months of 2010, EUR development sales have been realized. 8 143.6 Million of asset disposals and commercial realized.
| Asset disposal | Description | Kind of deal | Date of Sale |
Date of transfer |
Sales price EUR Million |
DTZ Value (31,12,2009) EUR Million |
Variation Sales price vs DTZ |
Loan balance at date of sales incl. Sw ap Costs EUR Million |
|
|---|---|---|---|---|---|---|---|---|---|
| 1-Asset disposals | |||||||||
| Closed Transactions | |||||||||
| Helberger | Office Asset in Frankfurt |
asset | 12/14/2009 | 2/1/2010 | 11.0 | 11.0 | 0.0% | 8.5 | |
| Office Asset | |||||||||
| Wasserstrasse | in Duesseldorf | asset | 12/23/2009 | 3/30/2010 | 8.2 | 8.4 | -2.4% | 7.0 | |
| Geneststrasse 6 | GSG Asset | asset | 2/1/2010 | 29/02/2010 | 1.8 | 1.7 | 8.6% | 1.1 | |
| Kufuerstendamm 103/104 | Asset in Berlin on Kurfuerstendamm Residential Asset |
asset | 3/29/2010 | 5/21/2010 | 8.0 | 8.2 | -2.4% | 4.8 | |
| Luetticherstrasse 49 | in Berlin | asset | 3/4/2010 | 6/30/2010 | 1.0 | 1.0 | 0.0% | 0.9 | |
| Letenska | Office Asset in Prague Appartments in |
asset | April 2010 | April 2010 | 0.4 | 0.4 | -7.0% | 0.4 | |
| Americka 3 | Vinhorady/Prague | fractional sales | H1 2010 | H1 2010 | 0.1 | 0.1 | 26.0% | 0.0 | |
| Amercika Park Residential | Appartments in Vinhorady/Prague | fractional sales | H1 2010 | H1 2010 | 0.3 | 0.3 | 0.7% | 0.0 | |
| Belgicka 36 | Appartments in Vinhorady/Prague | fractional sales | May 2010 | May 2010 | 0.1 | 0.1 | -31.8% | 0.0 | |
| Transferred in H1 2010 | 30.9 | 31.2 | -0.9% | 22.7 | |||||
| Transactions signed as of 31 August 2010 (not recognized in H1 2010) | |||||||||
| Max-Planck Strasse | Office Asset in Koeln | asset | 5/10/2010 | 5.4 | 5.8 | -6.9% | 3.0 | ||
| Brunnenstrasse 27 | Asset in Berlin mixte use | asset | 5/7/2010 | 1.7 | 1.4 | 21.4% | 1.1 | ||
| Cumberland | empty mixted use building in Berlin | asset | 7/9/2010 | 8/25/2010 | 29.0 | 28.0 | 3.6% | 20.0 | |
| Kolin | land bank plot | LB | Q3 2010 | Q3 2010 | 0.5 | 0.2 | 130.0% | 0.0 | |
| OBI Decin | retail plot | Land Bnak | Q3 2010 | Q3 2010 | 1.3 | 1.5 | -13.3% | 0.0 | |
| Not transferred in H1 2010 | 37.9 | 36.9 | 2.6% | 24.1 | |||||
| Total Assets disposal | 68.8 | 68.1 | 1.0% | 46.772 | |||||
| 2-Commercial development sales | |||||||||
| Closed Transactions | |||||||||
| H20 | office developemnt in Duisburg | asset | 3/30/2010 | 6/1/2010 | 32.5 | 29 12.1% |
24.8 | ||
| Sew o (Oranienburg) Alpha (Rostock) |
Health Care development Health Care development |
share share |
5/3/2010 5/3/2010 |
5/3/2010 5/3/2010 |
10.8 9.6 |
10.6 8.8 |
1.9% 9.1% |
7.1 6.9 |
|
| Epsilon (Guetersloh)* | Health Care development | share | 5/3/2010 | 5/3/2010 | 12.1 | 11.9 | 1.7% | 7.4 | |
| FFSE (furniture)* | Entity holding the funrniture for Health Care asset | share | 5/3/2010 | 5/3/2010 | 2 | 0 N/A |
0 | ||
| HC Trudering* | Plot of Land | asset | 8/7/2009 | 6/25/2010 | 1.8 | 1.8 | 0.0% | 0 | |
| Transferred in H1 2010 | 68.8 | 62.1 | 10.8% | 46.2 | |||||
| Transactions signed as of 31 August 2010 (not recognized in H1 2010) | |||||||||
| Danzigerstrasse 73-77* | Health Care Development | asset | 5/3/2010 | 5.5 | 5.5 | 0.0% | 5.5 | ||
| 74.3 | 9.9% | 51.7 | |||||||
| Total Commercial development sales 67.6 Asset disposals: 5 buildings in Germany and some residential apartments in Prague out Asset 5 in residential apartments Prague of the Asset Asset Management portfolio portfolio have been sold and transferred and for a total amount for total of EUR 30.9 Million (with average sales prices in line with DTZ valuation (with valuation). After accounts closing, three more disposals were completed in Germany for a total amount of EU a EUR 36.1 Million: Max R 36.1 |
|||||||||
| Plank office building in Koln, Brunnenstrasse in Berlin, Cumberland in Berlin. Cumberland Berlin. Commercial development sales: Commercial H2 H2 Office, an office building located in Duisburg has been sold office building Duisburg sold for EUR 32.5 Million with a gross margin amounting to EUR 2.7 Million margin 2.7 Million. Million. In addition, EUR 34.5 Million have been recognized in revenues for the sale of 4 Healthcare projects in Germany with a for a gross margin of EUR 3.4 Million. The Danzigerstrasse healthcare project in Berlin and the and |
Peugeot commercial building in Warsaw Million but will be transferred in Q3 2010. Peugeot commercial have also been sold for a total amount of EUR 9.2 be in for total advanced (see
In addition, several sites from the Company land section 5.1.3). bank are in advanced sales negotiation
Five years ago, the Company Privatization Fund ("CPF") regarding th entered into a Shareholders' Agreement with the Croatian regarding the formerly state owned company Suncani Hvar dd.
In sharp contrast to the Group commitment, the CPF repeatedly breached many of its contractual obligations, notably with respect to solving ownership issues that were inherited from the former communist regime, participating in Supervisory Board decisions, or simply meet representatives. As a result, the CPF's conduct blocked the regular operations and the development of Suncani Hvar dd Group's financial (approximately EUR 60 Million) and managerial breached issues inherited Supervisory meeting with the Company . the conduct blocked and dd. entered Hvar managerialexpiration the the CPF breached as such, overand action this55.6% and
On 12 July 2010, slightly before improperly alleging that the Company CPF was entitled to unilaterally terminate it. At the same time, the CPF then launched a widespread media campaign against both slightly the expiration date of the agreement, the CPF sent a formal letter breached the terms of the agreement and that as such, the entitled to the then media the Company and Suncani Hvar dd.
The Company has decided to seek justice against the CPF under the Shareholders' Agreement and to bring claims against the CPF at the international level Suncani Hvar not be found over the fall period. should a global solution over
Despite the information spread in the media, the Company has not lost Suncani Hvar d.d. claimed by the CPF stake. The Company maintains its shareholding stake in Suncani Hvar d.d. at 55. perceives CPF's claims as completely without ground Suncani be the ad in media, any shareholding in Suncani CPF and no legal action was launched by CPF to claim this shareholding d.d. without ground.
The Gross Asset Value or GAV corresponds to sum of the market value of all real estate assets held by the Group on the basis of the consolidation scope. The IFRS balan integrates the investment properties at their market value. The GAV is (generally at the December closing) an independent expert. Value of of estate by the basis of scope. The at at least determined on the basis of a valuation report established by ce sheet only least once a year
As the market conditions remained largely stable since December 2009, the Board of directors is in the opinion that, except on projects where recent residential development sales indicated further price decreases or further investments were realized a small number of real estate assets had seen their market value change over the first half of 2010. Therefore only these identified assets were submitted to an independent expert. value of the assets revalued went from representing an increase of 5.8%. independent expert valuation report is shown below: ined stable December the the that, residential on projects under construction, onl small real had value Therefore to independent EUR 693 Million as of December 2009 to EUR The list of assets which were revalued on the basis of an of n under construction, only The total Million December 2009 733 Million list of which of
| Asset name | Description |
|---|---|
| GSG portfolio | 45 income prodcucing assets located in Berlin |
| Brunnenstrasse156 | Mixed use building located in Berlin |
| Franklinstrasse 9-15a | Mixed use building located in Berlin |
| Kudamm 102 | Mixed use building located in Berlin |
| Invalidenstrasse 112 Mixed use building located in Berlin | |
| Capellen | Office building located in Luxembourg |
| Jeremiasova | Light industrial building located in Greater Prague |
| Na Porici | Mixed use building located in Prague |
| Radio Free Europe | Office building located in Prague |
| Szervita parking | Car park building located in Budapest |
| Szervita office | Office building located in Budapest |
| Residence Diana | Office building located in Warsaw |
| Molcom | Logistic warehouses located in Greater Moscow |
57% of the portfolio fair value has been assessed by management concluded to the stability of the fair value. For assets held for sale, the fair value was adjusted to the expected selling price. For the development assets the fair value changes mainly corresponds to the decrease in the remaining development costs, the adjustment to the sales prices effectively achieved over the first h as a result of the sales achieved over the first half of the year differences. fair has assessed the management. On most assets, the to the assets fair to assets crease the to half of 2010, the change in the number of units held achieved and the foreign exchange most , change the 815 at EUR 24
| In EUR Thousand | Gav December 2009 |
Sales | Capex P&L |
Capex BS |
COGS | Change in value |
GAV June 2010 |
|---|---|---|---|---|---|---|---|
| Asset Management | 1,040 | (31) | 0 | 4 | 0 50 |
1,063 | |
| Development | 775 | (0) | 3 | 5 (86) |
(26) | 671 | |
| Total | 1,815 | (31) | 3 | 9 (86) |
24 | 1,734 | |
| As of June 2010, on Group has been estimated 2009. This evolution results from the exit of properties consequently to asset and development sales amounting to EUR 117 Million, the investment in project under construction and permitting of land bank amounting to EUR 12 Million and a net positive change in market value for E |
sults | a at EUR 1 Million, to 12 and |
of | consequently change |
portfolio, portfolio | the basis of a review of the real estate portfolio, the portfolio value of the 1,734 Million compared to EUR 1,815 Million as at December |
As of June 2010, on the basis of a review of the real estate portfolio, the portfolio value of the Group has been estimated at EUR 1 2009. This evolution results from the exit of properties consequently to asset and development sales amounting to EUR 117 Million, the investment in project under construction and permitting of land bank amounting to EUR 12 Million and a net positive change in market value for E Million. a portfolio, portfolio 1,734 Million compared to EUR 1,815 Million as at December
863,1 Land Bank Residential As set M anageme nt 1,0 63283,6 165,9 221,3 200,0 Commercial Rental Assets Hospitality Develo p me nt 6 71
The Group's development portfolio consists of land bank and real estate properties designated as future development, residential and commercial developments designated to be sold or transferred to its Asset Management business line. 's of bank asdevelopments sold anagement line. 's 33% commercial
As of June 2010, the Group's development developments, 11% of residential under construction developments Zlota for EUR 48 Million, Mostecka for bank and 14% of finished goods to be sold Klonowa for EUR 21 million or 3%, Kosic for EUR 12 Million or 2%of Minister Gaerten for EUR 11.0 Million or 2%,). Czech and Polish projects represent respectively 29% and 16% of the development gross asset value while the running development business in Germany still represent 42%. GAV amounts to EUR 671 Million (33 residential of the integrality comes from , for EUR 14 Million, Benice for EUR 10 million finished be sold mainly composed of Koliba for EUR 25 Million or 4% 3%, for Polish represent 29% gross value business in stilltotal Development corrected cash investments has million, 42 % of land EUR 25 Million sh
The total valuation of the Development business, corrected from sales and ca been decreasing by EUR 106 Million in over the first half while continuing the finalization of existing development Million in the first half of 2010, reflecting mainly the existing development. sales closed
The Group's commercial development portfolio consists of properties that the Company has developed or is developing across CEE region to keep and manage or sell. The properties in this portfolio are office, retail or mixed 's portfolio region thisor mixed-use buildings.
The GAV of the commercial developments reached Million in December 2009. The variation is due to: developments reached EUR 221 Million in June 2010 vs. 09. The variation to: 2010 EUR 280
Over the first half of 2010, H2 Office, an office building located in Duisburg has been sold for EUR 32.5 Million with a gross margin amounting to EUR 2.7 Million have been recognized in revenues for the sale of 4 Healthcare developments and one land) in Germany Duisburg EUR Million. In addition, EUR 34. in revenues of projects Germany with a gross margin of EUR 3.6 Million. 34.7 Million (3 completed
The Danziger str. health care project in Berlin have also been sold for a total amount of EUR 9.2 Million but will be transferred in Q3 2010. care Berlin and the Peugeot commercial building commercial building in Warsaw
As of end of June 2010, the main commercial project Budapest (estimated delivery in Q was made: 33% pre-leased (+13% Head of Terms signed) December 2009. EUR 3.6 Million been sold total EUR be in the under construction is Vaci 1 in downtown in Q3 2011). During the first half of 2010 significant rental progress leased (+13% Terms signed) as of June 2010, compared to 19% in Million investment was realized during the first half of 2010. in 2011). of significant of 2010, to the first %, interests
Over the eleven commercial assets completed Asset Management before the end of commercial during 2009, four were sold, four transferred to 2009 and three are still to be sold:
average rental income for the rented space stands at 22 working on the sale and leasing with the aim of closing a deal within the c rented €/sqm. The Group is actively with the aim of closing coming 6 to 9 months. oming 6 months.
The Group residential developments Prague, Warsaw and Bratislava be reached are esidential are aimed at the middle and upper middle segment of the Bratislava.
The variance of EUR -46 Million EUR 166 Million) compared to December 2009 (EUR 2 46 over the first half of 2010 with a gross asset value amounting to 212 Million) is driven by:
The portfolio of projects which are contributing to the 2010 made of 9 projects, most of them being completed in terms o These projects are: Million sales closed the 23 net in investments.the residential revenues is , of construction in 2009 essentially or earlier.
During the first six months of 2010, a total of 106 FPC's (forward purchase showing a 38% decrease year-on of 106 contracts on-year. contracts) were signed
This variance is mainly driven by the versus 105 in 2009), where most of the projects which were under construction in 2009 have now been completed and new sales are booked directly as PC's (purchase contracts). These FPC figures do not include the pre 1B, which are under reservation contracts mainly. This sluggish performance of the Czech market (44 units in 2010 were construction and are PC's do not pre-sales signed on Americka 11, Mosteck Czech (44 the summer sales Americka Mostecka and Benice
As for Poland, as a result of the slight market rebound been picking up since Q4 2009 Feliz Residence and Mokotowska 59. In Klonowa Aleja, a popular residential project which will be the main revenue contributor in 2H 2010, transaction prices grew by over 3% from Q4 2009 to Q1 2010 and by a further 1.9% from Q1 2010 to Q2 reservation rebound, the number of transaction on all three projects open for sale in Warsaw: Klonowa Aleja, 59. Aleja, in transaction to % 2010. transactions closed has n 014 units:
The backlog on projects either finalized or under construction amounts to 1 order backlog (units covered by a future purchase or a reservation contract) of jects either finalized construction 1.014 units including an covered future a reservation 171
As of June 2010, the inventories include 436 completed residential units (Poland 204 units, Czech Republic 166 units, Slovakia 66 units) with a remaining bank debt of EUR 23.9 Million. of June inventories completed (Poland units, 66 units), for a total expected sales price of EUR 79.5 Million bank EUR Million.
During the first six months of 2010, the Company completed construction works on Americka 11 (14 units) and started refurbishment works on Mostecka (5 central Prague. As of July, Mostecka Benice 1B (38 units) in the outskirts o fitted out in the first half of 2010 and planning to finish another 8 units in 2H 2010. of Company construction on (55 units). Both projects are located in was already pre-sold by 16.3% and Americka 11 by outskirts of Prague is also making progress, with two houses of and 20%. Prague already
Zlota 44 is the only residential project where construction works were put on hold before finalization (see point 4.4 for the latest news on the building permit) half 2010.the works were for latest the permit).
Although a number of additional residential projects are ready for ground Hranic or Kamelie in Prague, Orco intends to first certain level of reservation contracts residential projects break, decrease its existing inventory before launching those new projects. for example U and reach a
The total GAV of the land bank (including empty buildings classified in the IFRS financial information under investment properties or inventories 2010 is stable at EUR 283.6 Million which EUR 202.7 Million of commercial land bank (including Bubny), EUR bank with a residential project in place and EUR projects (plotting programs, solar farms, etc). recorded over the first half of 2010. of the land empty and land plots to develop or financial under Million (compared to EUR 282.5 Million as at December 2009) land 55.8 25.1 Million of land bank having other kind of ects programs, solar No change in the fair value assumptions has been redevelop inventories) as of June of Million of land Million of ofin
As of June 2010, Orco held some 3.3 Million sqm are unzoned) leverage of its 10 years business planning permit, or when existing master/urban plan allows construction in line with the Group intentions. Land is considered unzoned when there is no master/urban plan in place or when it needs to be changed. the first half some 4.2 Million sqm of land plots (0.9 Million sqm are in its land bank which development constitute one of the main usiness plan. Land is considered zoned when there is a valid building or planning or when with . is when plan or when zoned while development . Land when
| Land Bank as of June 30, 2010 (sqm) | |||||||
|---|---|---|---|---|---|---|---|
| Czech Republic | zoned | 124,000 | |||||
| unzoned | 1,420,000 | ||||||
| Poland | zoned | 135,000 | |||||
| unzoned | 253,000 | ||||||
| Slovakia | zoned | 0 | |||||
| unzoned | 17,000 | ||||||
| Russia | zoned | 0 | |||||
| unzoned | 1,455,000 | ||||||
| Germany | zoned | 82,000 | |||||
| unzoned | 0 | ||||||
| Croatia | zoned | 0 | |||||
| unzoned | 134,000 | ||||||
| Total | zoned | 341,000 | |||||
| unzoned | 3,279,000 | ||||||
| Grand Total | zoned & unzoned | 3,619,000 |
In the Czech Republic, besides several zoned projects (Kamelie in Prague 8, Trinovia in Prague 4, U hranic and Kosik 3b in Prague 10) enormous potential. the 3b the Group owns a number of unzoned owns sites with
The most important one is Bubny, a 25 ha site located in central Prague. As reflected in the approved Safeguard plan, the Company refocused around two main activities: most important a 25 in in afeguard changed its development strategy which is two activities: which now
The Group is currently actively working on the Master Plan marketing of the plots and developments ly in order to be able to start concrete plots developments. financing equity for the be to on 2-5), Nupaky,
In the Czech Republic, the Company is working on the Doupovkska and Praga. Czech on zoning on Benice (phases 2
In Poland, zoning of Phase 1 of the Bialystok site (approx stage and the Group is confident in achieving master plan in the coming months. In addition, in June 2010 the building permit for Przy Parku project was validated (4,000 in Warsaw, Ochota district). ning Phase site (approximately 220,000 sqm) is in the final is in achieving months. Przy Parku sqm residential project 000 residential by end the however is in
In Russia, the Company expects to restart zoning works expects for Kaluga by the end of the year.
No sale of land bank has been recorded advanced sales negotiations of several sites, as presented below: been during the first half 2010. The Group
The Group Asset Management business line Properties') is comprised of rental assets management (generating income from management fees as fund manager). business (formerly named 'Commercial Investment assets, hospitality assets and Endurance real estate fund income fees fund latest named fundMillion in
As of June 2010, the GAV of the value (81% for rental assets and investments, the fair value of the Group asset management represented EUR 1,063 Milli 19% for hospitality assets). Corrected from sales of asset Asset Management portfolio has increased by EUR of assets and EUR 37 Million.
The Group rental portfolio encompasses assets focusing on commercial buildings. the beginning of this chapter, a part of the rental portfolio was revalued as of June bringing its value up to EUR 86 EUR 853 Million. The 10 million encompasses As indicated in the as 863 Million. In December 2009 the GAV of rental assets change is split in: 2010, thus assets amounts to
Please refer to point 4.6 of this report.
Over the first half of 2010 EUR 3.8 Million finalization the class A warehouse of Molcom with first 3.8 investments have mainly been realized for the finalization with clients moving in over the second quarter. investments have clients moving over second quarter.GSG portfolio
The change in value is mainly driven by and Molcom, a slight yield compression on key assets and a positive 6% of the HUF/EUR, increase of 14% of USD/EUR and increase of 12% of a better operational performance on the currency effect (decrease the HUF/EUR, of 12% RUB/EUR). of RUB/EUR).
The entire GSG portfolio in Berlin of its fair value. It is estimated December 2009. The positive valuation gain is due to increase in and decrease of yield and discount rates by 25 bp for the 10 best assets of the portfolio disposed of Genesstrasse 6 during 815,000 sqm of leasable area contributed (compared to EUR 23.7 Million in Berlin has been submitted to an external valuer for the reassessment to EUR 465.8 Million compared to EUR 445.2 positive occupancy and decrease of best of the first quarter of 2010 (sold for EUR 1.8 ble area with EUR 25.5 Million to the Group revenues illion over the first half of 2009), i.e. an increase by 9.3%. an valuer .2 Million as at and rental income portfolio. GSG Million). The
In a remaining challenging environment average on the GSG portfolio. occupancy rate by 0.6% to 77.1% and to increase the average sqm (from EUR 4.80 to EUR 4.82) sqm and since take-over in July 2007 net rental income per sqm increased by 7.3% prices at an average of EUR 5.20 environment, prices and occupancy rates slightly . Over the first half of 2010, the Group managed to increase the by 0.6% 77.1% commercial net rental income per 1. The net take-up in the first half of 2010 amounted to 5,064 over in is totaling 54,161 sqm. During the same period the average come increased 7.3%. New leases were contracted 10% above ex 5.20/ sqm net-rent. increased on et up period contracted existing
| Today | 2010 | 2009 | 2008 | 2007 Takeover |
||||
|---|---|---|---|---|---|---|---|---|
| 30.06. | 31.03. | 31.12. | 30.09. | 30.06. | 31.03. | 31.12. | 30.06. | |
| Net rents/sqm | 4,82 | 4,82 | 4,80 | 4,78 | 4,76 | 4,72 | 4,66 | 4,49 |
| occupancy rate (%) |
77,1% | 76,9% | 76,5% | 75,6% | 75,1% | 75,0% | 74,6% | 70,5% |
Molcom Logistic Complex has introduced as of May 2010 a new billing system, which charges tenants per operations (per palette, inbound, outbound, storage, packaging, labeling etc than by square meter. All new clients are being charged according to this new billing system, while the existing clients are migrating to it gradually. entry into the Register of potentially dangerous indust accordance with the legislation of the Russian Federation for the purposes of of goods with the different danger factors. introduced of new operations labeling meter. this system,clients Molcom has obtained a Certificate about entry into industrial enterprises and is appropriate in accordance the Russian of storage goods the factors. In order to secure higher revenue stream, Molcom is etc.) rather Certificate rial is of the type n revenue Molcom
1 please note that the increase is based on the commercial business line which represents 79% of the total GSG portfolio and du to the EPRA/BPR Standard adoption GSG gross rents were reported increase based business 79% portfolio to Standard depicts now rents without service charges to tenants in contrast to early reports where due charges to reports
now focusing on optimizing the occupied area. As of June 2010, However, Molcom has already signed agreements billing system, the average rent per sqm has also increased from RUB 20 Dec 2009 to RUB 27.5 per sqm achievements, the evolution of the currency and the improvement of the attractiveness of the Russian market, the logistic complex Million to EUR 63.9 Million. on occupied occupancy reached Molcom has already agreements bringing occupancy at 81%. Given the new sqm RUB 20.3 per sqm per day as of June 2010. As a result of the operational achievements, the improvement the market, logistic fair value went up over the first half of 2010 by EUR 11.0 occupancy 68.5%. occupancy per day as of As a irst half of 11.0the market is
The letting activity in Central and Eastern European markets has remained very challenging, especially for large assets. However, as the amount of new supply coming to minimal and macroeconomic recovery s dropping and positively impact the letting activity over the second half of the year. activity remained the new coming seems on the way, it is expected that vacancy will the over year. way, that start
| Rental Assets | GLA (sq m) | Occupancy (%) |
Average rent (€/sq m) |
|---|---|---|---|
| portfolio | |||
| Czech Republic | 158,075 | 78.1% | 6.36 |
| Hungary | 29,598 | 57.6% | 15.76 |
| Poland | 35,487 | 78.8% | 3.09 |
| Slovakia | 10,355 | 8.0% | 23.08 |
| Luxembourg | 7,744 | 99.2% | 20.53 |
| Germany | 855,608 | 77.4% | 5,9 |
| ow GSG portfolio | 815,284 | 77.1% | 5.83 |
| ow Other German assets | 40,324 | 84.3% | 7.87 |
| Russia | 110,535 | 68.5% | 19.23 |
| Total Portfolio | 1207,402 | 75.8% | 7.58 |
During the first six months of 2010, t impacted by the expiration of sporitelna in Bubenska, Prague (28 Budapest Bank (14,000 sqm office building, released by the main tenant in 2010), Stribro Industrial Park (22,400 these buildings generated EUR 3.5 Million The Company also received release notice for its Budapest Bank building ( was subsequently emptied in July 2010. first the performance of the rental portfolio was several important leases in Central Europe, such as Ceska Bubenska, (28,000 sqm office building, released as of January 2010), 000 sqm building, in January and (22,400 sqm released in June 2010). Over the first half of 3.5 compared to EUR 1.9 Million over the first ha release notice Bank building (14,000 negatively , , July 2009, the half of 2010. 14,000 sqm) which
Moreover, leasing of the newly developed assets year, as many prospective tenants ask better rental rates for their existing locations rather than actually moving out. leasing of assets has been moving slowly in the first half of the ospective asking for price offers remained more interested in getting in half in 1st company one International
The average commercial leasing deal at the moment takes around signing of the contract. For a large locations than moving leasing deal 6 months from 1st viewing to large sqm request from a company using one of the big
leasing agents, it is not uncommon for the deal to take around 9 months. The activity of Q should lead to a crystallization of closed deals in Q uncommon months. Q lead to closed Q3. Q2
In Prague, new lease contracts (Na Porici), thus bringing occupancy at Hradcanska offices has been substantially reduced neighbouring Blanka tunnel, which shall be completed in September of this year activities on Bubenska started in June 2010, after having repositioned the asset for small companies as tenants. Letting of signed with a canteen operator, which ew or letters of intent were signed on Hradcanska and Palace Archa , 33.6% and 54.6% respectively. The attractiveness of substantially by the construction works on , which completed 2010, after Letting Stribro has started during the summer 2010; a first deal is to be operator, will provide much needed service for new tenants by works the year. Leasing 10; to tenants.
In Budapest, a pre-lease contract was Departments Store in Budapest, with expected start in Q1 lease signed for a high-end restaurant on the top floor expected 2011. of Paris
As of June 2010, the hospitality The investment market and operational performances of projections and therefore no external valuation was requested as of June 2010 of assets total 1,734 of operated rooms divided in two portfolios. and of hotels remained stable compared to was of 2010. remained
The Group owns a portfolio of boutique hotels and extended stay residences across Central and Eastern Europe capital cities managed and operated subsidiary of the Company under the MaMaison brand, Starlight and Courtyard hotels are owned through a joint venture as a result integrated at 50% in the Group portfolio and consolidated accounts. residences capital until beginning of July 2010 by ubsidiary the by Marriott. joint (excluding the Pachtuv Palace owned at 100%) and are a fully owned All (excluding at are
The properties are overall of a very good quality with no need of of significant capital expenditures.
The first half of 2010 was clearly divided in two periods. Over the first quarter, experienced a decrease in occupancy and ADR as a co market. However over the second of the management and the new sales team the hotels achieved last year which allows us to have for the first half of the year reached almost 55%. Figures in the table below are at 100% before taking into account the integration percentage. clearly divided in two decrease in and consequence of a still depressed touristic quarter the market lived a rebound and together with the effort management the the achieved improved results to a positive outlook for the rest of the year. Average f table are 100% into the market together compared to Average occupancy
| CEE hotels June YTD |
Number of assets |
Number of rooms |
Occupancy | YTD June 2010 revenues |
YTD June 2010 GOP |
YTD June 2010 NOP |
|---|---|---|---|---|---|---|
| % | EUR Million EUR Million EUR Million | |||||
| Czech Republic | 5 | 484 | 54.2% | 5.6 | 1.3 | 0.8 |
| Poland | 3 | 220 | 47.9% | 2.9 | 0.7 | 0.4 |
| Slovakia | 1 | 32 66.8% |
0.3 | 0.1 | 6.5 | |
| Russia | 1 | 84 65.2% |
3.1 | 1.2 | 0.7 | |
| Hungary | 3 | 161 | 61.4% | 1.3 | 0.5 | 0.4 |
| Total CEE hotels | 13 | 981 | 54.9% | 13.2 | 3.8 | 8.8 |
The Group also owns a 55.6 % Exchange, which is fully consolidated into the Company. Suncani Hvar owns hotels on the Hvar island off the coast of Split, Croatia, that together have over 1,000 rooms which is approximately 90 per cent of the total hotel capacity of Hvar City. interest in Suncani Hvar, a company listed on the Zagreb Stock which owns and operates the off of together cent of City. in company 10
No major capital expenditure was undertaken either fully refurbished or in need of complete refurbishment. Some of the hotels were c used as staff accommodation. As the hotels are highly reliant on the summer season due to their location in the Island of Hvar, most of them are closed until early June in the hotels over the first half of 2010 as fully need were are Island them closed June. they are closed or
Despite the media noise over disputes with the State as is expected to see results in substantial improvement compared to last year. the joint venture partner, the summer season is to
Cash and cash equivalents have EUR 63.7 Million. Unrestricted information on restricted cash) EUR 21.8 Million as at December 2009. within companies that are not directly or indirectly held at 100%. increased by EUR 6.7 Million over the first half of 2010, to reach cash (see note 9 of the condensed consolidated interim increased by EUR 13.7 Million to EUR 35.5 Million compared to as EUR 17.4 Million of the Group available cash that to condensed financial is held
The calculation of the Loan to v value (LTV) as of June 2010 is shown in the table below:
| In EUR Thousand | June 2010 |
December 2009 |
June 2009 |
|
|---|---|---|---|---|
| Non current liabilities | ||||
| Financial debts | 490 684 | 484 634 | 626 340 | |
| Current liabilities | ||||
| Financial debts | 531 919 | 595 776 | 522 040 | |
| Current assets | ||||
| Current financial assets | -390 | -488 | -1 754 | |
| Liabilities held for sale | 37 876 | 51 451 | 10 715 | |
| Cash and cash equivalents | -63 744 | -57 040 | -66 813 | |
| Net debt | 996 345 | 1 074 333 | 1 090 528 | |
| Investment property | 1 071 801 | 1 072 304 | 1 125 522 | |
| Hotels and own-occupied buildings | 234 281 | 215 393 | 224 701 | |
| Properties under development | 0 | - 9 117 |
||
| Financial assets | 33 522 | 32 353 | 60 093 | |
| Inventories | 398 455 | 482 605 | 460 507 | |
| Assets held for sale | 46 675 | 48 930 | 21 380 | |
| Revaluation gains on projects and prop. | -8 039 | -3 095 | 25 967 | |
| Fair value of portfolio | 1 776 695 | 1 848 490 | 1 927 287 | |
| Loan to value before bonds | 56,1% | 58,1% | 56,6% | |
| Bonds | 231 461 | 468 616 | 442 826 | |
| Accrued interests on bonds | 0 | 16 860 | 11 293 | |
| Loan to value | 69,1% | 84,4% | 80,1% |
additional assets sale / debt repayments or level of the major Group subsidiary Orco Germany, which stands at 78.2%, remains an important concern for the Group. reduction, and further share capital increase. increase. The LTV
The financial debts strongly decrease as a result of the derecognition of the amortized cost of the Company's bonds as at 19 May 2010 and the recognition at fair value of the "Safeguard bonds" at the same date (net decrease of EUR sale of assets and developments (EUR 13.2 Million). This is partially compensated by foreign exchange differences (EUR + the accrual of actuarial interests (EUR Millions). the stands importantdecrease as the amortized 2010 the value the same of EUR -252.9 Million) and the repayment of bank loans upon the -81.5 Million) and other repayments of bank loans (EUR This foreign interests 15.9 Million) and new bank draw downs (EUR nk other - +8.8 Million), draw 14.4
| in EUR Million | Less than one year | Total | |||
|---|---|---|---|---|---|
| As at 30 June 2010 | 578,3 | 337,6 | 276,7 | 99,3 | 1 291,9 |
| As at 31 Decem ber 2009 | 706,4 | 18,5 | 650,8 | 224,7 | 1 600,4 |
Out of the EUR 1.3 billion borrowings, EUR 1, Million relate to bonds issued by the Company or Orco Germany S.A. and EUR to loans from joint venture partners and finance leases. EUR 1,043.7 Million relate to bank loans, EUR relate the Company S.A. EUR 16. leases. bank 231.5 8 Million relate
77% of the bank loans relate to income producing assets (development projects under delivery and buildings producing rents or other operational revenues), compared to 62% as at December 2009. While in sharp decrease, bank and projects under construction. It is a priority of the Group, as developed in the Business Plan, to continue reducing that ratio by completing land bank, land sales and sale of non core assets loans producing deliverydings or compared to at 23% of the bank loans still relate to non income producing land projects under Group, Businessratio completing or initiating development projects nd non assets. on existing
The amount of borrowings classified as 'to be repaid within one year has substantially decreased by EUR -128.1 Million as a result of the asset and development sales (EUR repayments of bank loans (EUR to the Safeguard plan (EUR -52.0 loan extensions obtained or breaches of covenants solved (EUR are partially offset by increases due to foreign exchange (EUR +1. (EUR +5.2 Million) and accrued actuarial interest (EUR +1.3 Million amount as be repaid one year of -54.4 loans -3.6 Million), the derecognition of the Company's bonds subject 52.0 Million), and transfers to longer maturity mainly obtained covenants -26.1 Million). These amounts rtially to foreign +1.5 Million), new draw downs accrued +1.3 Million). Western and interest more properties. become available going forward, 1 to 2 years 2 to 5 years M ore than 5 years 54.4 Million), other of as a result of
This amount includes EUR 8.5 Million of bonds' first instalment within the Safeguard plan, EUR 102.3 Million of loans financing assets that are held or planned for sale and EUR 168.5 Million of assets and developments that are finalized or under construction. The management is confident in its abilities to further refinance or prolong the remaining EUR needed. The amount of debt to be renegotiated in the short term amounts to EUR 100.9 Million. includes EUR Million of instalment plan, .3 or sale and developments or under abilities prolong 299.0 Million of debt where Million). 299.0 debt value ratios new expect
Access to debt financing for real estate projects remains difficult and no major changes are expected in the short term. Banks still (65% in Western Europe) while the spread between yields and interest rates remains high. Refinancing has become more available for stable income producing properties. We expec financing will become more freely available going forward, although very gradually. The to debt financing projects arethe only accept very low loan-to-value ratios for new projects
To the Company's knowledge, there is no or very little liquidity on OPG bonds 2011, 2012 and 2014. Small or medium sized deals have occurred for the Bonds 2010 and 2013 since March 2010 for a volume of EUR 5.4 stands at 22% of nominal value, whereas only four deals have been observed for the bond 2010 at 26% of nominal value. Nevertheless, it cannot be concluded that a price ran and 26% of nominal value is the price at which OPG bonds are traded on average as traded volume on the market is too low. The Company has not been provided with over the counter data. little or sized have 4 Million. The weighted average trading price of the Bond 2013 of have been nominal cannot be that a ranging between 22% of the ging
Using similar calculation methodologies as in previous years, the Group Net Asset Value per share as of June 2010 is at EUR per share decreased to EUR 7.5 of EUR 5.2. This dilution has been more than compensated by the impact of the bond revaluation upon approval of the Safeguard plan amounting to EUR and of is price OPG are traded with counter methodologies years, Net is 25.3 compared to EUR 8.2 as at December 20 as a result of the capital increases at an average price per share been of the 19.2 per share. (NAV) 2009. The NAV per bonds
Major publicly traded property investors however do not use and follow the EPRA (European Public Real Estate Associations) Company therefore plans to introduce in 2010 the EPRA "Triple Net Asset Value per share" methodology described below, whereby investors not the Group's historic methodology Public Real recommendations. The plans Asset , triple net NAV reaches EUR 23.9 per share share.
| June 2010 |
December 2009 |
|
|---|---|---|
| Consolidated equity | 320,517 | 56,578 |
| Fair value adjustments on investment portfolio Fair value adjustments on hotels and own occupied buildings Fair value adjustments on properties under development Fair value adjustments on inventories Deferred taxes on revaluations Goodwills Own equity instruments |
0 8,972 0 -17,011 65,236 -22,748 78 |
0 10,562 0 -13,657 58,438 -22,748 82 |
| Net asset value | 355,045 | 89,255 |
| Net asset value per share Existing shares New total of shares after April capital increases Net asset value per share after April capital increases |
25.26 14,054 |
8.16 10,944 14,054 7.50 |
| June 2010 |
December 2009 |
|
| Net asset value | 355,045 | 89,255 |
| Effect of dilutive instruments | 169,547 | |
|---|---|---|
| Deferred taxes on revaluations | -65,236 | -58,438 |
| Market value of bonds (50% discount on Orco Germany at 2010.06) | 46,135 | 231,185 |
| Triple Net asset value | 335,943 | 431,548 |
| Triple net asset value per share | 23.90 | 12.27 |
| Fully diluted shares | 14,054 | 35,165 |
Orco historic NAV Methodology:
The net asset value as a consequence of the definition below is calculated as follows:
The Net Asset Value is calculated on a group share basis starting from the IFRS consolidated balance sheet values (see the balance sheet and the variation thereon reported in the IFRS consolidated financial statements) with adjustments: The asset value of • real estate other operational are the owners Company is from consolidated and variation financial value investment at IFRS value adjustments are the difference between their carrying value in the
• Fair value adjustments: as for real estate assets and developments, only investment properties are at fair value on the IFRS balance, the fair valu consolidated balance sheet and their fair market value.
• Deferred taxes on revaluations: Group share in the deferred taxes recognized in the IFRS balance sheet on the valuation adjustments on real estate assets and developments.
• Goodwill: IFRS goodwill is not recognized in the real estate net asset value calculation.
• Own equity instruments: as they are not recognized in the IFRS balance sheet and the net asset value estimate uses all the shares in circulation for the calculation of the per share data, own equity instruments are added at their fair market value. fair value.in IFRS balance adjustments on • not in net value equity are balance calculation the own instruments at their The net performance indicator.
The triple net NAV is an EPRA recommended performance indicator.
Starting from the NAV following adjustments are taken into consideration:
Effect to dilutive instruments: financial instruments issued by company are taken into account. When they have a dilutive impact on NAV, meaning when the exercise price is lower than from the NAV. The n from the exercise of the dilutive instruments is added to the number of existing shares to obtain the fully diluted number of shares. ollowing taken consideration:to into have dilutive meaning when than The number of shares resulting number surplus to market of financial e umber to up. between
Derivative instruments: the calculation includes the surplus or deficit arising from the mark instruments which are economically effective hedges but do not qualify for hedge accounting under IFRS, including related foreign exchange differences. which do IFRS, Market of estimate of bonds group. It is the difference between group
Market value of bonds: an estimate of the market of the bonds issued by the gro share in the IFRS carrying value of the bonds and their market value. As at December 31 2009 the Group share of the bonds' carrying value and accrued interests amount to EUR 465.2 Million. in the value of the Group value accrued Million.
Over the first half of 2010 the Group recorded a net profit amounting to EUR compared to a net loss of EUR 269.6 Million on the recognition at fair value amortization rescheduling of the Safeguard plan. a net EUR a 199.9 Million last year. This profit includes a net gain of the bonds of the Company included in the 237.7 Million year. includes of EUR
Revenues increased by 23% to EUR in 2009, mainly as a result of the sale of m of Safeguard % EUR 163.1 Million from EUR 132.3 Million over the same period , mainly result of major commercial developments sales in Germany. the of over Germany.sales
The improvement of the operating performance explain the significant increase 2009) to EUR 21.3 Million as at and margin on sales of commercial developments of the adjusted EBITDA by EUR 9.9 Million (compared to 30 June 30 June 2010.
| In EUR Thousand | 30 June 2010 |
30 June 2009 |
31 December 2009 |
|---|---|---|---|
| Revenue | 163 076 | 132 315 | 251 531 |
| Net profit/(loss) from fair value adjustments | 26 629 | -153 282 | -177 598 |
| Other operating income | 2 333 | 3 626 | 3 150 |
| Net loss on disposal of assets | -273 | -769 | -631 |
| Cost of goods sold | -87 899 | -72 327 | -115 726 |
| Employee benefits | -21 055 | -23 884 | -49 286 |
| Amortisation, impairments and provisions | -8 311 | -106 048 | -89 354 |
| Other operating expenses | -36 730 | -39 978 | -76 303 |
| Operating result | 37 770 | -260 347 | -254 217 |
| Interest expenses | -51 530 | -41 694 | -86 850 |
| Interest income | 3 101 | 5 052 | 8 707 |
| Foreign exchange result | -6 910 | -643 | 4 686 |
| Other net financial results | 255 405 | -20 706 | -36 700 |
| Financial result | 200 066 | -57 991 | -110 157 |
| Result before income taxes | 237 836 | -318 338 | -364 374 |
| Income taxes | -4 335 | 60 948 | 48 858 |
| Net Result for the year | 233 501 | -257 390 | -315 516 |
| Result attributable to: non controlling interests |
-4 232 | -57 533 | -64 952 |
| Net Result Group Share | 237 733 | -199 857 | -250 564 |
Revenues have increased year on year by 23% to EUR strong increase mainly results from major commercial development quarter with the development business line revenues amounting to EUR 101. Management business line revenues slightly decreased by EUR Million. have year by to 163.1 Million as at June 2010. This results deliveries over the second to 101.6 Million. The Asset decreased 0.6 Million, down Million 2010. deliveries Million. , down to EUR 61.5
| In EUR Thousand | Development | Asset management |
TOTAL |
|---|---|---|---|
| Revenues H1 2010 | 101 586 | 61 490 | 163 076 |
| Revenues H1 2009 | 70 182 | 62 133 | 132 315 |
| Variation YoY | 31 404 | -643 | 30 761 |
Revenues of the Development business line increased by EUR major commercial development sales in Central Europe. Excluding sales of two abandoned projects Hofe and City Gate amounting to EUR that period amounted to EUR abandoned projects. increased by 31.4 Million as a result of commercial developments sales in Germany, partially compensated by lower residential over H1 2009 and EUR 28.4 Million), the development business line turnover to 41.8 Million. The analysis below excludes the sales related to the residential (Fehrbelliner Million), over
The residential development sales have decreased from EUR 2009 to EUR 29.8 Million over the same period in units have been delivered compared to residential EUR 35.4 Million over the first half of the in 2010. Over the first six months of 2010, units 226 over the same period in 2009. The sales 2010. the first six 188
The mortgage market conditions in Prague and Bratislava sales results. Only on Kosik project in Prague some 44 contracts were cancelled the fact that buyers were not able to get their mortgage applications approved. remained resilient, as sales remained constant in terms of revenue and volume year over year. The decrease is also partially the consequence of the rundo Germany that were contributing by EUR 1.1 Million over H1 2009. he market Prague remained restricted, thus impacting the sales Prague 44 cancelled, mainly that buyers able get mortgage applications approved. Warsaw revenue year over decrease also the rundown of residential developments in , , due to Warsaw however wn developments for
As decribed in section 2 of this report second half 2010. report, the market outlook is however slightly improving for the
In H1 2010, main developments contributin Drawska for EUR 3.7 Million and Million, Nove Dvory for EUR 1.8 Million in the Czech Republic. contributing to the revenues are Malborska for EUR Mokotowska for EUR 1.5 Million in Poland; Kosic for EUR Million, Radotin for EUR 1.6 Million and Benice for EUR 1.5 12.8 Million, Kosic for 3.5
The Group continues preparing permit applications for new developments to be launched in 2011 and 2012 depending on the level of reservations preparing permit launched depending reservations. EUR EUR Million
During the first half of 2010, the commercial development revenues reached compared to EUR 5.4 Million included the revenues of NWDC rents on commercial developments in inventory. EUR 4.0 Million of rents (mainly Sky Office for EUR inventory and EUR 67.7 Million of development EUR 71.7 over the same period in 2009. In 2009, those revenues mainly (company sold during the second quarter of 2009) and some developments Over the first half of 2010, the revenues include rents for 3.0 Million) on unsold developments in from sales of projects. company the second of the half the on in Germany on H2Office
The significant increase in 2010 m development in Duisburg, the German has been contracted for EUR 32. gross margin on this sale amounts to mainly results from the sales closed in Germany e healthcare portfolio. H2 Office development in Duisburg has been for 32.5 Million, while the bank liabilities reached EUR 24.8 on this sale to EUR 2.7 Million. H2 4.8 Million. The
The three German healthcare completed and operating healthcare development, were sold for a total consideration of EUR liabilities reached EUR 22.4 Million. The gross margin on the plots amounts to EUR 3.6 Million development in Berlin which will be trans operating centers, together with one plot ready for , were 32.8 Million while the bank reached 22.4 Million. healthcare sales and including the Million. The sale of healthcare portfolio also included will transferred in H2 2010. , together Million the including also the Danziger
Revenues from the Asset Management hospitality and services (mainly business line reached EUR 61.5 slightly decrease by EUR 0.2 Million and hospitality revenues increase by EUR 0. decrease is mainly due to the decrease of EUR 0. management service (essentially Endurance Fund). business line include revenues from rental assets, mainly Endurance Fund). In H1 2010, the revenues generated by this Million (EUR 62.1 Million in H1 2009). While rental revenues and revenues by 0. the 0.9 Million in the revenue stream from Endurance Fund).1 generated this0.5 Million, the stream
Rental and asset management revenues June 2009 to EUR 47.9 Million in June 2010. compensations with a decrease of EUR 1. beginning of 2010, a decrease of EUR 1.6 Million on Bubenska/Vltavska as the major tenant has left the building, a decrease of EUR 0.6 Million on Radio Free Europe building as rent was cashed in USD in November 2009, a decrease of EUR 0.4 Million on Molcom as a result of reduced occupancy partially compensated by foreign exchange gains and a net increase of EUR 2.0 Million on GSG portfolio. slightly decreased year on year from EUR This small variance is the consequence of major decrease 1.7 Million on the assets sales closed in 2009 and 1.6 on Bubenska/Vltavska major ease 0.6 Free as Molcom a partially by foreign gains of Prague market the approximately 800 Thousand sqm, contributed with EUR 48.1 Million in is of on the with 25.5
In the second half of 2010, while revenues should grow on all Prague properties and on Molcom with an improved market outlook, the business line will be impacted by the departure of the Budapest Bank single tenant in Budapest.
GSG in Berlin, with a total NLA of approx Million revenue in the first half 2009. Occupancy rate increased to 77.1% remained stable at EUR 4.8 per sqm. of 2010 compared to EUR 23.8 Million over the same period in . versus 76.5% as of December 2009 and d average rent
After a weak first quarter 2010, the hospitality market revived in the second quarter with strong improvement in occupancy and revenues slight increase in revenues to EUR period in 2009. After first the market and revenues. Over the first half of 2010, hospitality activities show a to 11.0 Million compared to EUR 10.6 Million over the same
Operating expenses correspond to the sum of the expenses" lines of the income statement. The operating expenses amount to EUR 57.8 Million compared to EUR 63.9 Million over the same period in 2009, a decrease of 10%. This decrease is the consequence of the restructuring plan implemented Safeguard protection. The most important evolutions can be seen on Employee benefits ( sales and marketing costs (-31%), Administration costs ( 72%). to the "Employee benefits" and the "Other operating the amount the in 10%. This restructuring in 2009 and accelerated under the ( 31%), costs (-11%), and Other operating expense ospitality Other 09 and accelerated (-12%), 11%), expenses (-
The table below (with figures in EUR Million) gives a detail of the consolidated operating expenses.
| The table below (with figures in EUR Million) gives a detail of the consolidated operating s expenses. |
detail the | |||
|---|---|---|---|---|
| 30 June 2009 |
30 June 2010 |
Variation | ||
| Employee benefits | -23,884 | -21,055 | 2,830 | |
| Leases and rents | -2,168 | -2,617 | -449 | |
| Building maintenance and utilities supplies | -16,118 | -16,320 | -202 | |
| Marketing and representation costs | -3,047 | -2,088 | 959 | |
| Administration costs | -13,394 | -11,864 | 1,530 | |
| Taxes other than income tax | -3,313 | -3,303 | 10 | |
| Other operating expenses | -1,937 | -540 | 1,398 | |
| Total | -63,862 | -57,785 | 6,076 | |
| Operating expenses on the German run down activities amount to EUR 8.5 Million compared German EUR 8.7 Million over the first half of 2009. While the restructuring already impacts the operations, the stability of operating expenses is marked by the costs of the major commercial the of development sales closed over the first half of 2010. Those costs are to steadily go down to zero over the coming 12 months as the current non core ass as GSG, operating expenses of the German activities decreased by EUR 0.4 Million. Hvar operating expenses have decreased by EUR 1.4 Million as a result of the cost cutting Hvar expenses have measures implemented in the low season. Other implemented low |
by | marked costs ets Million a |
of assets and developments are sold. Including 0.4 hospitality activities operating expenses also activities |
recurring go down zero sold. |
| decreased by EUR 0.6 Million. Excluding Germany and hospitality, operating expenses have decrease Excluding and which EUR 1.2 Million on employee benefits. 1.2 Million on |
have decreased | by 3.8 Million out of | ||
(*): restatement of EUR 3.5 Million allocation of warrant 3.5
It is the Group strategy to orderly Safeguard Procedure helped to avoid sale of assets at distressed prices. proceed on its strategic asset disposal program, and the
In H1 2010, EUR 30.9 Million real estate statement, mainly in Germany with Helberger in Frankfurt for EUR the Ruhr Region for EUR 8.2 Million and Ku sales generated a net accounting loss of EUR of distressed real asset sales have been recognized in profit and loss mainly in 11.0 Million, Wasserstrasse in Ku-Damm 103 in Berlin for EUR 8.0 Million net 0.3 Million and net cash inflow of EUR and asset recognized profit Million. The asset 9.5 Million.
The adjusted EBITDA amounts to EUR 21.3 Million compared to EUR 11.4 Million as at June 2009. This significant increase results from the combination of reduced operating expenses and sale of major commercial develo adjusted compared Million commercial developments.
| in Eur Thousand | Development | Asset Management |
TOTAL |
|---|---|---|---|
| Operating result | -4 494 | 42 264 | 37 770 |
| Net gain from fair value adjustments on | |||
| investment property | -109 | -26 520 | -26 629 |
| Amortisation, impairments and provisions | 4 003 | 4 308 | 8 311 |
| Past valuation on goods sold | 1 622 | - 1 622 |
|
| Net gain/(loss) on abandoned developments | - | 0 | |
| Net loss on disposal of assets | 40 | 234 | 274 |
| Stock options and warrants | - | - 0 |
|
| Adjusted EBITDA H1 2010 | 1 062 | 20 285 | 21 347 |
| Adjusted EBITDA H1 2009 | -6 441 | 17 833 | 11 391 |
| Variation | 7 503 | 2 452 | 9 956 |
| impairments – Net gain or loss on the sale of abandoned developments or loss sale the net results on sale of assets or subsidiaries. of While the average gross margin on residential developments sold over the first half of 2010 residential decreased from 21% to 13%, a total gross margin of EUR 6.5 Million was recorded on the sale of commercial developments. Such sales and margins (unless a sale could be cl Such development within 6 months) will not be repeated over the second half. Hotels contribute development months) negatively by EUR 1.7 Million. |
over | – Net gain or loss on disposal of assets) and | first of closed on Sky Office osed Sky |
| 6.1.5. Valuation adjustments and impairments adjustments The net result from fair value adjustments on investment properties as at June 2010 amounts to value EUR 26.6Million (EUR -153.3 Million in June2009). Million June2009). |
properties | ||
| Valuation gains have been recognized on the best located assets have been on mainly the top 10 office buildings of GSG and Radio Free Europe building in Prague. GSG Radio |
with a selection comprising building Prague. |
||
| The amortization, impairments and provisions amounting to EUR The impairments provisions include EUR -1.9Million impairments Million on in 2009). Most impairments were recognized on residential developments in the Czech Republic. on |
on properties and development projects (EUR | -8.3 developments |
Million as at June 2010 -99.0 Million |
Adjusted EBITDA is the recurring operational cash result calculated by deduction from the operating result of non elements and non recurring elements (Net gain or loss on fair value adjustments provisions – Correction of costs of goods sold being the reversal of past non cash valuation adjustments and impairments – Net gain or loss on the sale of abandoned developments the net results on sale of assets or subsidiaries. recurring by gain – Amortisation, impairments and f costs adjustments or loss sale – Net gain or loss on disposal of assets) and of non-cash Amortisation, and
While the average gross margin on residential developments sold over the first half of 2010 decreased from 21% to 13%, a total gross margin of EUR 6.5 Million was recorded on the sale of commercial developments. Such sales and margins (unless a sale could be cl development within 6 months) will not be repeated over the second half. Hotels contribute negatively by EUR 1.7 Million. residential first of Such closed on Sky Office development months) over osed Sky on -99.0 Million
The net result from fair value adjustments on investment properties as at June 2010 amounts to EUR 26.6Million (EUR -153.3 Million in June2009). value properties Million June2009).
Valuation gains have been recognized on the best located assets mainly the top 10 office buildings of GSG and Radio Free Europe building in Prague. have been on with a selection comprising GSG Radio building Prague.
The amortization, impairments and provisions amounting to EUR include EUR -1.9Million impairments in 2009). Most impairments were recognized on residential developments in the Czech Republic. The impairments provisions -8.3 Million as at June 2010 Million on properties and development projects (EUR
The impact of fair value and impairment following: impairments on real estate assets are detailed by country as
| In EUR Million | June 10 | June 09 | ||||
|---|---|---|---|---|---|---|
| Revaluation | Impairment | Total | Revaluation | Impairment | Total | |
| Germany | 23,829 | 877 | 24,707 | -60,138 | -35,384 | -95,522 |
| Czech Republic | 2,793 | -2,906 | -113 | -57,672 | -21,561 | -79,233 |
| Poland | 100 | -130 | -30 | -7,710 | -10,602 | -18,312 |
| Hungary | -660 | 0 | -660 | -19,704 | -9,594 | -29,298 |
| Slovakia | 0 | -201 | -201 | -4,793 | -2,837 | -7,630 |
| Luxembourg | 567 | 0 | 567 | -2,031 | -158 | -2,189 |
| Croatia | 0 | 0 | 0 | -71 | -1,947 | -2,018 |
| Russia | 0 | 425 | 425 | -1,161 | -16,795 | -17,956 |
| Total | 26,629 | -1,935 | 24,694 | -153,282 | -98,878 | -252,160 |
| 6.1.6. Financial result Out of a total of gross interest EUR 21.0 Million (EUR 17.1 EUR |
of Million 17.2 Million |
expenses of EUR 51.5 over 2009) out of which: on the Company |
bonds | Million, (including |
Million, interests on bonds account for IRS) restructured |
by the |
The increase of interest expenses is also the consequence projects under development such as Sky or Zlota, the balances of which P&L. crease of lower capitalization on as Zlota, is now being major booked in
Interests on other loans amount to EUR to 30.5 Million:
The net interest expenses over H1 2010 amount to EUR 48.4 Million to be compared to a total Adjusted EBITDA of EUR 21.3 Million. interest expenses by adjusted EBITDA. achieve such coverage: EUR Million compared of 21.3 It is a management priority to achieve a full coverage of adjusted EBITDA. Three main elements of the Safeguard plan are set to a achieve Safeguard
Restart frozen projects such as Zlota 44, start delayed but 'ready to go' projects such as Kamelie and sell or develop the land bank once zoning is obtained. but land obtained.
Sell cash flow negative assets (ie which produce more interests expenses than EBITDA). It has particularly started in Germany with the sale of assets such as Cumberland, Helberger or Wasserstrasse, to continue over H2. cash negative produce BITDA). It started in Germany assets Wasserstrasse, over H2.
The financial result shows a gain of EUR over the same period in 2009. The financial result has been positively influenced by the gain on the revaluation of the bonds following the the derecognition of the Company's bonds upon approval of the Safeguard plan, financial results' essentially relate to interest rate swaps at fair value through profit and loss the still conservative approach for impairment tests on financial recei change on the USD 25 million on despite possibilities of recovery) 200.1 Million compared to a loss of EUR in The by of Safeguard plan (see point 3.2). Apart from the impact of nition of relate swaps profit and receivables, with for example the Russian Rubin advance (written down to 0 in the 2008 accounts despite possibilities recovery). compared a 58.0 Million the 'Other net and example no
| in EUR Thousand | 30 June 2010 |
30 June 2009 |
|---|---|---|
| Change in carrying value of liabilities at amortised cost | 269 602 | 0 |
| Change in fair value and realised result on derivative instruments | -1 238 | -2 666 |
| Change in fair value and realised result on other financial assets | 257 | -14 738 |
| Other net finance charges | -13 216 | -3 302 |
| Total | 255 405 | -20 706 |
The income taxes amount to EUR income taxes losses (most of them buildings). amount -4.3 Million composed mainly of EUR 4.3 Million of deferred most them on the revaluation gains of GSG and Radio Free Europe
Achieve between EUR 280 and 300 million of revenues in 2010 depending on the timing in the sale of commercial developmen in developments and the delivery of residential developments.
in EUR Thousand
| Assets | ||
|---|---|---|
| 30 June 2010 |
31 December 2009 |
|
| NON-CURRENT ASSETS | 1,408,926 | 1,392,979 |
| Intangible assets | 48,402 | 48,903 |
| Investment property | 1,071,801 | 1,072,304 |
| Property, plant and equipment | 252,451 | 235,677 |
| Hotels & own-occ.buildings | 234,281 | 215,393 |
| Fixt. and fittings & other equip. | 18,170 | 20,284 |
| Financial assets at Fair Value through Profit and Loss statement |
33,522 | 32,353 |
| Deferred tax assets | 2,750 | 3,742 |
| CURRENT ASSETS | 555,184 | 630,554 |
| Inventories | 398,455 | 482,605 |
| Trade receivables | 28,762 | 31,379 |
| Other current assets | 63,821 | 56,347 |
| Derivative instruments | 12 | 2,695 |
| Current financial assets | 390 | 488 |
| Cash and cash equivalents | 63,744 | 57,040 |
| Assets held for sale | 46,675 | 48,930 |
| TOTAL | 2,010,785 | 2,072,463 |
| in EUR Thousand | ||
|---|---|---|
| Equity and liabilities | ||
| 30 June 2010 |
31 December 2009 |
|
| EQUITY | 367,632 | 104,730 |
| Equity attributable to the owners of the Company | 320,517 | 56,577 |
| Non controlling interests | 47,115 | 48,153 |
| LIABILITIES | 1,643,153 | 1,967,733 |
| Non-current liabilities | 847,461 | 1,021,463 |
| Bonds | 222,964 | 409,397 |
| Financial debts | 490,684 | 484,634 |
| Provisions & other Long Term liabilities | 16,816 | 16,918 |
| Derivative instruments | 11,720 | 9,289 |
| Deferred tax liabilities | 105,277 | 101,225 |
| Current liabilities | 757,816 | 894,819 |
| Current bonds | 8,497 | 59,219 |
| Financial debts | 531,919 | 595,776 |
| Trade payables | 31,790 | 33,480 |
| Advance payments | 43,643 | 53,212 |
| Derivative instruments | 41,035 | 44,380 |
| Other current liabilities | 100,932 | 108,752 |
| Liabilities linked to assets held for sale | 37,876 | 51,451 |
| TOTAL | 2,010,785 | 2,072,463 |
| 30 June | 30 June | |
|---|---|---|
| 2010 | 2009 | |
| Operating result | 37,770 | -260,347 |
| Net (profit) /loss from fair value adjustments on investment property | -26,629 | 153,282 |
| Amortisation, impairments & provisions | 8,311 | 106,048 |
| Net loss on disposal of assets | 273 | 769 |
| Adjusted operating profit/(loss) | 19,725 | -248 |
| Financial result | -1,596 | -227 |
| Income tax paid | -368 | -2,096 |
| Financial result and income taxes paid | -1,964 | -2,323 |
| Changes in operating assets and liabilities | 59,412 | -42,700 |
| NET CASH FROM /USED IN OPERATING ACTIVITIES | 77,173 | -45,271 |
| Capital expenditures and tangible assets acquisitions | -8,930 | -19,267 |
| Proceeds from sales of non current tangible assets | 31,329 | 45,992 |
| Purchase of intangible assets | -37 | -254 |
| Purchase of financial assets | -691 | -905 |
| Net interest paid | -28,437 | -34,084 |
| NET CASH USED IN INVESTING ACTIVITIES | -6,766 | -8,518 |
| Net issue of equity instruments to shareholders | 16,129 | 380 |
| Proceeds from borrowings | 14,350 | 69,866 |
| Repayments of borrowings | -94,712 | -34,084 |
| NET CASH USED IN/ FROM FINANCING ACTIVITIES | -64,233 | 36,162 |
| NET INCREASE IN CASH | 6,174 | -17,627 |
| Cash and cash equivalents at the beginning of the period | 57,040 | 83,799 |
| Exchange difference on cash and cash equivalents | 530 | 641 |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 63,744 | 66,813 |
As of the beginning of 2010, Orco has introduced a new headcount methodology, which recalculates the part-time employees includes only the active employees those on long-term sick leave or maternity leave are not included. As introduced whichtime to a full time equivalent. At the same time, this method the (incl. contracted staff) at the time of reporting, meaning that a full method
As of June 2010 the total Compa the one reached in June 2009 ( countries. The positive variation when compared to December 2009 figures is due to additional hospitality employees during the summer season. term maternity leave ompany headcount reached 2,272. This value is comparably lower to (2582 employees), reflecting the continuous downsizing is due during season. across all
As of 19 April 2010, the subscribed and fully paid 44,869,850.60 in 2009) is represented by 14,053,866 shares (10,943,866 in 2009) without nominal value. the paid-up capital of EUR 57,620,850.60 (EUR 2009) by up ge, the regarding 1130
To the best of the Company's knowled ownership of the Company's shares as of the Company's knowledge, the following table sets out information regarding the the 30 June 2010.
On 19 March 2010, the Company was notified by Millenius Investments S.A. ("Millenius"), a Luxembourg company having its registered office at registered with the Luxembourg Trade and Companies Register under number B149.601 that it crossed the threshold of 5% of the voting rights of the Company on 16 March 2010 and holds 7.744% of the voting rights in the Comp March ("Millenius"), registered 37 rue d'Anvers, L-1130 Luxembourg, Luxembourg Trade Companies number the and voting Company.
| Shareholders | No. of | % of | % of | |
|---|---|---|---|---|
| shares | capital | voting rights | ||
| Lansdowne Capital | 1 000 000 | 7,12% | 7,12% | |
| Axa Investment Managers | 874 835 | 6,22% | 6,22% | |
| Millenius* | 847 600 | 6,03% | 6,03% | |
| Neptune Invest S.à.r.l | 740 000 | 5,27% | 5,27% | |
| Hillgrove Investments Group | 300 000 | 2,13% | 2,13% | |
| FINPLAT SA | 300 000 | 2,13% | 2,13% | |
| Clannathone* | 227 000 | 1,62% | 1,62% | |
| Ott&Co S.A | 176 343 | 1,23% | 1,23% | |
| Bugle* | 30 000 | 0,21% | 0,21% | |
| Treasury shares | 9 101 | 0,06% | 0,06% | |
| (suspended) | ||||
| Other | 9 548 987 | 67,97% | 67,97% | |
| General Assembly before the end of April 2010. Millenius Investments S.A Luxembourg, RCS B 149.601, whose directors are Gaël Paclot, a French National |
., a « société anonyme | They are composed of: | » located 37 rue d'Anvers, L | 37 d'Anvers, L-1130 |
| whose | Paclot, | |||
| residing in Switzerland, Jean Van den Esche and Mario Brero and which economic Switzerland, beneficiary is Gaël Paclot, 44 rue Berard, CH ry Gaël 44 Clannathone Stern S.A. Clannathone Bruxelles, RCS 0867341435, represented by MM Alain Bremont, Jean Johanna Klerk, and whose and Bugle Investments Ltd. Suite 13, First Floor, Oliaji Trade Centre, Francis Rachel Street, Victoria, Mahe, Republic Floor, of Seychelles, which representative and economic beneficiary is Marc Catellani, a French representative national residing in Switzerland. |
, a « société anonyme , an « international business company |
CH-1936 Verbier (Switzerland). » located 11, rue des Colonies, B 11, economic beneficiary is Eric Cleton, a French national. , French national » Street, |
which B-1000 Jean-Louis Geylard and Louis and » located in Seychelles, Mahe, a |
On 24 March 2010, a group of shareholders declared to the Company a holding of 10.09% of the Company's shares and voting rights. They asked the Company's Board of Directors to convene a General Assembly before the end of April 2010. March a of asked They are composed of:
On 19 April 2010, Axa Investment Managers S.A. Investment Managers UK Ltd. United Kingdom, incorporated under number 1431068 holds 704,835 shares representing 5.86 % of voting rights of the Company and Coeur Défense Tour B La Défense 4, 100 esplan RCS number : 393 051 826 RCS Nanterre holds 170,000 shares representing 1.41 % of voting rights of Company. In total Axa Investment Managers holds via its subsidiaries 874,835 shares representing 7.27 % of voting rights of the Company. Axa Investment notified on behalf of its subsidiaries: Investment , with registered office at 7 Newgate Street London, EC1A 7NX, holds 704,835 5.86 the Axa Investment Managers Paris with registered office at Défense 4, esplanade du Général de Gaulle 92400 Courbevoie, te London, registered ade
On 23 April 2010 Neptune Invest S.à.R.L. cedex, Tour Allianz Neptune, 20, place de Seine, France, registered with RCS Nanterre, number 444 592 455 notified the Company that it hold 5.50 % of voting rights of Company S.à.R.L. with registered office at F-92086 Paris la Défense Neptune, Seine, with it holds 740,000 of the Company's shares, representing rights 92086 s Company's registered notified the
On 23 April 2010 Lansdowne Capital S.A. la Liberté 25, L-1931 Luxembourg, Grand Duchy of Luxembourg, R.C.S. Luxembourg n Company that it holds 1,000,000 of Company's shares, representing 7.43% of the voting rights of the Company. S.A. a stock company with registered office at Avenue de 1931 Luxembourg, Duchy holds 1,000,000 y's not aware person directly of collected on notifications the exceeding down the thresholds of 2,5%, 5%, 10%, 15%, 20%, 33%, 50%
None of the Company's principal shareholders has voting rights different from any other holders of the Company's Shares.
To the Company's knowledge, the Company is not aware of any person who owns, directly or indirectly, or exercises control of the Company.
The information collected is based on the notifications received by the Company from any shareholder exceeding either up or down t and 66% of the aggregate rights of vote in the Company.
Any shareholder crossing down the threshold of 2.5% has been withdrawn from the chart, as no obligation exists under Luxembourg law to inform the reached. 66% the the down of has withdrawn as Luxembourg Company when the 0% threshold has been he ompany 0% . 30 June 2010,
During 2009, the stock option plan voted by the Board of Directors on 21 January 2008 was not allocated due to the financial conditions. 63,000 options at EUR 75.6 are outstanding. During voted allocated the No options were exercised in 2010. As at EUR
The Extraordinary Shareholders' Meeting of 8 July 2008 renewed the authorisation granted by shareholders to the Board of Directors on 18 May 2000, in accordance Luxembourg corporate law and in addition enhanced the limit of the authorised capital. The Board of Directors was granted full powers to proceed with the capital increases within the revised authorised capital of EUR 300 option of eliminating or limiting the shareholders' preferential subscription rights as to the issuance of new shares within the authorised capital. Extraordinary Shareholders' July the byshareholders the Board of May with article 32 corporate law Directors powers to 300,000,001.20 under the terms and conditions it will set, with the of eliminating or shares capital. with 32-3 (5) of
The Board of Directors has been authorised and empo single operation or in successive tranches, through the issuance of new shares paid up in cash, capital contributions in-kind, transformation of trade receivables, the conversion of convertible bonds into shares or, upon approval of the Annual General Shareholders' Meeting, through the capitalisation of earnings or reserves, as well as to set the time and place for the launching of one or a succession of issues, the issuance price, terms and conditions of subscript of new shares. This authorisation is valid for a five The been empowered to carry out capital increases, in a the shares kind, r, of through earnings as set place launching of subscription and payment authorisation five-year period ending on 8 July 2013. will wered carry capital akind, ion year July
A total of EUR 57,620,850.60 has been used to date under this authorisation. under
As such, the Board of Directors still has a potential of EUR 242,379,150. Considering that all new shares are issued at the par value price of EUR 4.10, a potential total of 59,116,866 new shares may still be created. has 242,379,150.60 at its disposal. that shares issued created. 60 its
No transaction on treasury shares occurred during the transaction shares during first six months of 2010.
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