Interim / Quarterly Report • Jul 25, 2017
Interim / Quarterly Report
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| NSI HIGHLIGHTS 3 | |
|---|---|
| CEO COMMENTS 4 | |
| INCOME, COST AND RESULTS 5 | |
| NETHERLANDS PROPERTY MARKET OVERVIEW 7 | |
| REAL ESTATE PORTFOLIO 8 | |
| BALANCE SHEET, NAV & FINANCING 12 | |
| CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 13 | |
| EPRA KEY PERFORMANCE MEASURES 28 | |
| REVIEW REPORT PWC 27 | |
| APPENDIX II – SUPERVISORY BOARD ONLY 28 |
European Public Real Estate Association - Please refer for all EPRA definitions to www.epra.com/bpr
The estimated rental value (ERV) is the valuer's estimate of the open market rent that a property in its current state can reasonably be expected to achieve given its characteristics, condition, amenities, location and local market conditions.
The contractual rent for let space plus the ERV for vacant units.
G4 refers to the locations Amsterdam, Den Haag, Rotterdam en Utrecht.
NSI calculates its interest coverage ratio for a given period by expressing the net rental income as a multiple of the net financing expenses.
The loan to value ratio is calculated by expressing the balance sheet value of interest bearing debts plus short term debts to credit institutions, net of cash and cash equivalents, as a percentage of the total real estate investments, including assets held for sale.
| Publication trading update Q3 2017 | 26 October 2017 | For additional info please contact: |
|---|---|---|
| Publication preliminary results 2017 | 30 January 2018 | NSI N.V. |
| Publication annual report 2017 | 9 March 2018 | Investor Relations |
| Publication trading update Q1 2018 | 19 April 2018 | |
| Publication half year results 2018 | 19 July 2018 | Dirk Jan Lucas |
| T +31 (0)20 763 0368 | ||
| Ex-dividend date | 31 July 2017 | E [email protected] |
| Record date | 1 August 2017 | |
| Stock dividend election period | 2 – 16 August 2017 | Publication date: |
| Payment of final dividend | 21 August 2017 | 25 July 2017 |
| (€ '000) | Supplemental2 | IFRS3 | |||
|---|---|---|---|---|---|
| H1 2017 | H1 2016 | H1 2017 | H1 2016 | Change % | |
| Revenues and Earnings | |||||
| Gross rental income | 45,640 | 45,787 | 32,400 | 30,122 | 7.6% |
| Net rental income | 36,446 | 33,910 | 25,273 | 21,839 | 15.7% |
| Direct investment result | 24,175 | 19,842 | 21.8% | ||
| Indirect investment result | 13,372 | -9,050 | |||
| Total investment result | 37,547 | 10,792 | 247.9% | ||
| EPRA earnings per share (€) | 1.35 | 1.11 | 21.4% | ||
| Dividend per share (€) | 1.04 | 1.04 | 0.0% | ||
| EPRA cost ratio A (incl. direct vacancy costs) | 26.4% | 31.3% | -4.9pp | ||
| EPRA cost ratio B (excl. direct vacancy costs) | 23.9% | 26.7% | -2.8pp |
| (€ '000) | 30 Jun 2017 | 31 Dec 2016 | Change % |
|---|---|---|---|
| Balance Sheet | |||
| Real estate investments | 879,323 | 770,434 | 14.1% |
| Assets held for sale | 195,899 | 389,923 | -49.8% |
| Net debt | -410,176 | -512,267 | -19.9% |
| Equity | 629,441 | 604,254 | 4.2% |
| IFRS equity per share (€) | 34.70 | 33.76 | 2.8% |
| EPRA NAV per share (€) | 35.44 | 34.61 | 2.4% |
| EPRA NNNAV per share (€) | 34.89 | 33.56 | 4.0% |
| Net LTV | 38.1% | 44.1% | -6.0pp |
| Number of ordinary shares outstanding4 | 18,137,084 | 17,900,230 | 1.3% |
| Weighted average number of ordinary shares outstanding | 17,961,734 | 17,900,230 | 0.3% |
| Jun 17 | Dec 16 | |||||
|---|---|---|---|---|---|---|
| Offices | HNK | Retail5 | Other | Total | Total | |
| Number of properties | 107 | 13 | 19 | 3 | 142 | 165 |
| Market value (€m) | 721 | 157 | 186 | 11 | 1,075 | 1,160 |
| Contracted rent (€m)6 | 57 | 13 | 15 | 1 | 86 | 98 |
| ERV (€m) | 70 | 20 | 16 | 1 | 107 | 116 |
| Lettable area (k sqm) | 477 | 122 | 106 | 15 | 720 | 870 |
| EPRA Vacancy rate | 20.5% | 33.2% | 16.1% | 13.8% | 22.2% | 21.4% |
| WAULT (years) | 5.2 | 3.1 | 5.0 | 4.2 | 4.8 | 4.7 |
| Average rent/sqm (€/p.a.) | 164 | 171 | 185 | 98 | 167 | 149 |
| EPRA net initial yield | 5.9% | 4.4% | 6.1% | 10.0% | 5.6% | 6.0% |
1 Based on unaudited results. 2016 numbers are adjusted to align with the following elements as reported in the 2016 year end results: 1) Lease incentives amortization from NRI to GRI, 2) Allocation of overhead from indirect to direct result, 3) Rent of NSI Head Office eliminated in GRI and admin expenses 2 Figures with Retail and Belgium reported as continuing operations, IOW as discontinued operations (sold)
3 Retail, Belgium and Intervest (IOW) operations accounted for as discontinued operations under IFRS regulations as adopted by the EU
4 The number of ordinary shares has changed due to stock dividend and a share consolidation see "Condensed consolidated financial information" note 13
5 Keizerslanden in Deventer that was sold in April is included in Retail, with the delivery and transfer of this asset set for 2018 and NSI benefitting from revenues in the meantime.
6 Before rent free and other rent incentives
The execution of our new strategy to become the leading valueadd Dutch office specialist, as announced in February 2017, is firmly on track. In H1 we sold €2377m of non-core assets and acquired €99m of offices with good medium term value-add potential. We now have circa €1.1bn of assets, of which 81% in offices and HNK.
The €151m disposal of 16 retail assets in April (at book value) and the €74m disposal of our Large Scale Retail portfolio in June (at a 9% premium) have reduced our retail exposure to €1648m. The pace of retail disposals is expected to slow from here, as the focus is now shifting to individual asset deals. As we have stated before, we are in no rush whatsoever and will sell only when the opportunity is right for our shareholders.
In H1 2017 we have taken the final step in reducing our list of appraisers to three well-recognised international firms. Whilst we have seen a further write down of our provincial offices, a positive revaluation of the G4 offices and the HNK assets has more than compensated for this.
In what is an improving, but still discerning, investment market, we report an 0.6% average uplift in capital values for H1 2017. The evidence of our €237m in disposals so far this year, on average at circa 3% ahead of the December 2016 book value, should provide further comfort in our valuations.
The 22.2% vacancy rate per H1 has been negatively impacted by the disposal of retail assets with lower vacancies. The like-for-like occupancy rate is down by 0.8%, largely due to three major office lease expiries in Q1.
We expect the occupancy rate to improve in H2 2017, even as we continue to face further lease expiries, in part as we expect to sign new tenants and in part due to continued asset rotation.
As of this interim report we will start to provide regular updates on the sustainability of our portfolio. Obviously there is more to sustainability than energy labels, but we recognise that this is where the focus is for the market for now. The Dutch Government has stipulated that as of 2023 all office buildings must have an energy label of C or better.
As of H1 2017 79 % (by value) of our office assets (including HNK) already have a C label or better. We estimate that it will cost €5m to upgrade all our offices to C label over the coming years.
We continue to work towards exiting the retail business. In certain of our retail assets we may invest additional capital first, if it will enable us to achieve a better exit later on.
A pick up in liquidity is noticeable in several regional office markets. This allows us to consider a wider range of options for some of our smaller non-G4 office assets. We will look to exploit this opportunity as to continue to rationalise our office portfolio. At present NSI is still active in 50+ local office markets and by reducing this number we can further improve our cost efficiency.
Following a review of the transformation potential of our assets we have reduced the list of opportunities to 9 assets, as we prefer to focus only on the larger, most promising, opportunities. We are preparing detailed plans for each opportunity and have no intention in exiting early if this would result in giving away most of the embedded upside to a third party developer.
As per the end of H1 2017 the LTV is 38.1%. The acquisition in Leiden announced post close results in an increase in the LTV to 39.3%. This is below the 40-45% target range previously indicated, but for now we are comfortable at the lower end of this range as a strong balance sheet does allow us to consider moving up the risk curve selectively, in search for better returns.
The LTV is set to remain volatile, depending on the timing and size of future disposals and acquisitions. We aim to retain a prudent balance sheet – taking into account the improving risk profile of the business – especially as the Dutch property cycle continues to mature.
Following a significant turnover in staff over the past 12 months, the new team is largely in place now. With the start of a trainee programme in September we are building a business that is ready for the future.
The EPRA EPS for H1 2017 is €1.35 per share. We expect a lower level of EPS for H2, due to the effect of recent disposals and as we plan to increase maintenance spending in H2. Whilst further acquisitions and disposals could still significantly impact the outlook, we forecast a 2017 EPRA EPS in the range of €2.52- €2.55.
We have decided to keep the 2017 interim dividend at €1.04 and will once again offer shareholders a share dividend alternative.
We are working hard to strengthen the business on many fronts. The portfolio quality and the still relatively modest occupancy rate are key priorities at this time. We are confident about the success of the ongoing transition, which is being supported by the positive outlook for the Dutch economy and for the G4 office markets in particular.
Bernd Stahli
7 Including Keizerslanden shopping centre
8 Excluding Keizerslanden shopping centre
In the interest of continuity and clarity in our reporting, in this section the retail portfolio is treated as if it has not been discontinued. The notes to the IFRS condensed consolidated financial information later in this report treat both retail and Belgium as discontinued operations, in accordance with IFRS as adopted by the European Union.
EPRA EPS for first half of 2017 is €1.35, a 21.4% increase compared to the same period last year. The results are impacted by various one-offs, both positive and negative.
In H1 2017 NSI incurred one-off restructuring costs of €0.7m. Total one-off costs are largely off-set by one-off revenues. Most of the positive one-offs are reflected in operating costs and in nonrecoverable service charges.
The indirect result for H1 2017 is €0.74 per share, which is positively impacted by €6.9m in asset revaluations, a €3.2m book profit on disposals and a €3.4m positive non-cash market-tomarket gain on financial derivatives.
Gross rental income in the first half of 2017 is down by 0.3% (€0.1m), mainly due to net disposals. One-offs in GRI are €0.9m lower than for the comparable period last year.
Gross rents are down €0.3m (-0.9%) on a like-for-like basis, due to a lower occupancy rate. As a result of an improved operating margin like-for-like net rents are up by €0.5m (1.8%).
Non-recoverable service charges of €1.2m are €1.0m lower than last year. Roughly half of the reduction is due to one-off releases of provisions relating to retail assets that have been sold.
Operating costs in H1 2017 are 17.1% (€1.6m) lower compared to H1 2016. Adjusting for one-offs, operating costs are circa €1.1m lower than last year.
NRI in H1 2017 is up by 7.5% (€2.5m). Excluding one-offs in both 2017 and 2016 NRI is up by 6.8%.
NSI has changed the way it is allocating its property management costs to operating costs. The new system is based on actual costs rather than on a fixed percentage of GRI. Consequently, property management costs are €0.6m higher than last year's restated figure.
The operating margin increased to 79.9%, up 5.8% on H1 2016 (74.1%). Lower costs, in particular maintenance costs, office acquisitions with better margins and one-offs all contribute to the higher margin. The operating margin for HNK is up, even though it has been negatively affected by the change in the cost allocation.
Administrative expenses are €4.4m, a €0.2m decrease versus 2016. One-offs in admin expenses amount to €0.8m versus €0.6m in the first half of 2016. These costs mainly relate to personnel change and consultancy and audit fees.
NSI continues to seek a further reduction in overhead costs. Costs are expected to decline further due to ongoing cost cutting. In H1 2017 NSI has consolidated its entire staff on one floor, down from two, and the vacated floor has been let, generating additional income.
NSI continues to lower its funding costs, benefitting from lower margins and lower swap rates post the refinancing at the end of 2016 in combination with a reduction in the amount of debt. Financing costs are down €2.2m compared to H1 2016.
The cost of debt is 2.8% at the end of June 2017, stable compared to the end of 2016. Paying down the RCFs at below average margins has had a negative impact on the average interest rate, whilst the cancelation of a swap with an effective rate of 4.81% had a positive impact on the cost of debt.
At June 2017 all assets have been externally appraised. The total revaluation for the half year is €6.9m, or 0.6%, with capital values in Amsterdam up 5.5% and in Other Netherlands down -8.3%.
The net result on asset disposals for H1 2017 is €3.2m. A positive €6.5m result on the disposal of the Large Scale Retail portfolio is reduced by sales costs for transactions of in total €237m.
The derivatives portfolio shows a positive revaluation of €3.4m in the first half of 2017, as a consequence of the shorter duration of the legacy swaps and a small change in the yield curve.
In H1 2017 the retail portfolio and the last wholly-owned asset in Belgium are reported as discontinued operations. In H1 2016 the remaining stake in IOW in Belgium was reported as discontinued operation.
In July 2017 2 office buildings (in Maarssen and Gouda) were sold for a total amount of €2.5m, one at book value and one at a small premium.
On 18 July the Court of Appeal has rendered its judgement that Swiss Partners must pay an amount of € 4.9m, excluding legal interest.
On 19 July the District Court of Amsterdam has dismissed the claim of € 1.6m of the insurance company of one of the tenants in 't Loon Heerlen.
On 28 July NSI is set to acquire a €17.5m office building in Leiden.
| (€ '000) | Continuing | Discontinued | Adj. to | |||||
|---|---|---|---|---|---|---|---|---|
| Offices | HNK | Other | Belgium | Retail | TOTAL | discontinued | TOTAL | |
| Gross rental income | 25,588 | 6,422 | 389 | 42 | 13,198 | 45,640 | -13,240 | 32,400 |
| Service costs not recharged | -622 | -496 | 101 | -9 | -210 | -1,237 | 219 | -1,018 |
| Operating costs | -3,752 -2,367 | 10 | -5 | -1,843 | -7,958 | 1,848 | -6,110 | |
| Net rental income | 21,214 | 3,559 | 500 | 28 | 11,145 | 36,446 | -11,173 | 25,273 |
| Administrative costs | -503 | -134 | -3,552 | -1 | -234 | -4,425 | 235 | -4,190 |
| Earnings before interest and taxes | 20,711 | 3,424 | -3,052 | 26 | 10,911 | 32,021 | -10,938 | 21,083 |
| Net financing result | -3 | 0 | -7,834 | -1 | 4 | -7,834 | -4 | -7,838 |
| Direct investment result before tax | 20,708 | 3,424 | -10,887 | 26 | 10,916 | 24,187 | -10,941 | 13,245 |
| Corporate income tax | -2 | -8 | -3 | -12 | 3 | -9 | ||
| Direct investment result discontinued operations | 10,938 | 10,938 | ||||||
| Direct investment result / EPRA earnings | 20,708 | 3,423 | -10,894 | 23 | 10,916 | 24,175 | 24,175 | |
| Revaluation of investments | 4,035 | 4,705 | 631 | -970 | -1,479 | 6,922 | 2,449 | 9,372 |
| Net result on sale of investments | 216 | 0 | 2,974 | 3,190 | 2,974 | 216 | ||
| Other indirect costs and income | -30 | 14 | -3 | -19 | 3 | -16 | ||
| Net financing result | 3,374 | 3,374 | 3,374 | |||||
| Indirect investment result before tax | 4,221 | 4,719 | 4,005 | -970 | 1,492 | 13,467 | -522 | 12,945 |
| Corporate income tax | -95 | -95 | -95 | |||||
| Indirect investment result discontinued operations | 522 | 522 | ||||||
| Indirect investment result | 4,221 | 4,719 | 3,910 | -970 | 1,492 | 13,372 | 13,372 | |
| Investment result discontinued operations | 11,460 | 11,460 | ||||||
| Total investment result | 24,929 | 8,142 | -6,984 | -947 | 12,408 | 37,547 | 37,547 |
The Dutch economy is expected to grow by 2.5% in 2017, with the level of unemployment below 5% and falling. Consumer spending is increasing. The economic recovery has spread well beyond the Randstad, underpinned by house price inflation and persistent low interest rates.
This is having a positive effect on the Dutch real estate market, in particular on Amsterdam. Transaction volumes are above precrises highs, as investors appear to like the prospects for rental growth and yield levels that are relatively high in comparison to other European office markets.
The vacancy in the Dutch office market in H1 2017 has fallen to circa 6.5m sqm out of a stock of 54m sqm, a circa 12% vacancy rate. This is down from 12.7% at year-end 2016, according to JLL. In the period 2014 to 2016 most of the fall in the vacancy rate was due to net withdrawals and conversions, but this year it is mostly net take-up that is driving vacancy levels down.
Amsterdam is healthy and experiencing good rental growth. The vacancy rate at H1 2017 is circa 8%, and below 4% for modern grade-A space. Prime rents are up by 10-15% over the past year. Prime rents for the South-Axis submarket are now in excess of €400 per sqm and for many other submarkets rents are now well in excess of €200 per sqm. CBRE expects 7% pa rental growth for Amsterdam for 2017 and 2018, as new development supply is limited to a few submarkets.
Beyond Amsterdam the outlook is improving. Central Utrecht is performing well, with rental growth expected at 8% pa10. The Hague is seeing incentives being reduced, with rental growth bound to come next. Rotterdam, in contrast, appears to be lagging. In regional markets like Eindhoven and Den Bosch there is a noticeable pick up in leasing activity, but vacancy rates are often too high to expect any rental tension any time soon.
The continued strength of the housing market, in combination with an increasing number of local authorities recognising that some office markets are no longer fit for purpose, is resulting in a steady flow of office conversion projects. Whole office submarkets are in the process of being taken out for conversion, with Hoofddorp and Amersfoort as most notable examples.
At NSI we are being approached on a regular basis by local developers that are opportunistically looking for well-located secondary office stock to convert to alternative use. Assets are priced off residual land values including the running cash flow, with capital values in the range of €200-1600 per sqm.
In Amsterdam new development activity is mostly limited to the South-axis and Houthavens market. The current new supply is set to add circa 2% to the Amsterdam office stock by 2019 and is already mostly pre-let. The City of Amsterdam is considering to allow more development, including in other submarkets, but with no major new supply due before 2020 the near term outlook for rents is set to remain healthy.
The Utrecht central station area is set to see 208,000 sqm of new supply by 2022 which, given an office stock for the entire city of Utrecht of 2.5m sqm, is adding circa 8% of stock. As this location is prime/central and supported by excellent infrastructure this appears a good market to develop into.
The number of providers of flex offices and the stock of flex offices is increasing more or less in tandem with the strong growth in demand in recent years. In 2016 circa 7% of the office take up in Amsterdam was flex office-based and take up is estimated to grow at circa 20% pa.
The challenge for most flex office providers is the competition for the best space (and nowadays also the lesser space) from regular office tenants. Having to make concessions on location/product and facing higher ingoing rent costs as a result, for some the rollouts programmes will only work as long as demand is improving in line with the economy.
Some operators are bound to find out that growth is not the same as profitability. Especially those operators that are running smaller flex office facilities are at risk of a margin squeeze.
The outlook for retail is mixed. Consumer confidence is improving, but most of the growth in retail sales is enjoyed online and not in store. In some of the best high streets, including in Amsterdam, it appears prime rents have been pushed too far, whereas in most other markets rents have stabilised at lower levels.
Investment demand is strong, particularly in Amsterdam and the other G4 cities. Transaction volumes in 2017 are set to surpass previous record levels. Good quality product is becoming scarce and trades at yields that are no longer of interest for value-add or international private equity operators. Instead, these are attracting foreign capital with relatively modest return requirements.
Investors are moving up the risk curve in search for returns. Some provincial office markets are seeing a resurgence in interest, in part for the higher yield, if the WAULT is long enough, or for the potential to convert some assets into residential. Few investors are willing to buy vacancy in these markets in the hope that tenant demand will return.
Prime office yields in Amsterdam are now sub 4%. In the better submarkets yields of 5.5% are being noted for new product, but it is also still possible to find yields in excess of 7% for what are generally good quality buildings.
In the other G4 markets of Utrecht, The Hague and Rotterdam yields for prime assets are often still at 6.5%+.
9 The data in this section is based on a variety of industry sources and
reports, including JLL, CBRE and Cushman & Wakefield
10 Source CBRE for 2017 and 2018
During the first 6 months of 2017 NSI has sold 2711 and acquired 3 assets. The majority of disposals are retail assets, which have been sold in 2 portfolio deals. A portfolio of 16 assets was sold at the end of April for €151m and the Large Scale Retail portfolio comprising 6 assets was sold at the end of June for €74m. A further small retail asset in Heerlen was sold in Q1. A total of 4 smaller offices in Heerlen, Groningen, Zwolle and Elst have been disposed during the period for €8.6m. NSI acquired 3 offices in Amsterdam and Utrecht for €99m.
| # assets | Value €m | Value % | |
|---|---|---|---|
| Offices | 102 | 713 | 66% |
| HNK | 13 | 157 | 15% |
| Other | 2 | 9 | 1% |
| Total Investment properties | 117 | 879 | 82% |
| Held for sale | 25 | 196 | 18% |
| Total portfolio | 142 | 1,075 | 100% |
The share of Offices and HNK is 81% of the portfolio by value in Q2 2017, up from 66% at the end of 2016. The rotation out of smaller assets into larger, more efficient, assets continues apace. The average asset value is €7.6m in Q2 2017 (€7.0m Q4 2016).
The H1 2017 EPRA vacancy rate is 22.2%, a 0.8% deterioration from the end of last year. The increase is mostly due to the sale of retail assets with lower vacancy levels and the expiry of three large office leases in Q1. HNK continues to lease up well (-3.8%).
The improvement in the Offices vacancy rate (-0.8%) is driven by asset rotation, with the like-for-like vacancy rate for the standing portfolio increasing due to some large leases expiring in Q1.
| Total portfolio | 21.4% | 0.8% | 0.0% | 22.2% |
|---|---|---|---|---|
| Other | 16.5% | -2.7% | 0.0% | 13.8% |
| Retail | 12.5% | 2.5% | 1.1% | 16.1% |
| HNK | 37.1% | -3.9% | 0.0% | 33.2% |
| Offices | 21.3% | 2.1% | -2.9% | 20.5% |
| Dec 16 | L-f-l | Other | Jun 17 |
Net rental income in Q2 2017 is up 1.8% on a like-for-like basis compared to Q2 2016, with continued strong growth in HNK. In Offices the like-for-like has been particularly impacted by a lease expiry in Meppel, as reported in the first quarter.
| Total portfolio | 26.5 | 26.0 | 0.5 | 1.8% |
|---|---|---|---|---|
| Other | 0.5 | 0.5 | 0.0 | 4.8% |
| Retail | 5.4 | 5.2 | 0.2 | 3.2% |
| HNK | 3.5 | 2.9 | 0.6 | 20.9% |
| Offices | 17.1 | 17.4 | -0.3 | -1.9% |
| €m | €m | €m | % | |
| Q2 17 | Q2 16 | Change | L-f-l |
11 Including Keizerslanden in Deventer
One-offs in Q2 16 and Q2 17 are roughly stable and so have had no impact on the Q2 like-for-like reported.
The average lease maturity is stable compared to December 2016 at 4.8 years. This is a comfortable level, particularly when taking into account the typically shorter leases at HNK and the value add acquisitions in the first half of the year with typically shorter lease terms.
At the end of June 2017 the portfolio is 3.5% over-rented, a major improvement compared to 6.7% at December 2016. This is partly due to the expiry of legacy over-rented lease contracts, partly due to the effect of disposals and acquisitions and partly due to an improvement in ERVs.
ERVs increased by 1.2% on a like-for-like basis. The ERVs for Offices and HNK are up by 1.3% and 2.1% respectively. In contrast retail ERVs are marginally lower, reflecting a still more challenging environment.
| Dec 16 | Jun 17 | |
|---|---|---|
| Offices | -8.3% | -3.2% |
| HNK | 0.3% | 2.4% |
| Retail | -6.3% | -9.2% |
| Other | -17.3% | -13.9% |
| Total portfolio | -6.7% | -3.5% |
| Dec 16 €m |
Jun 17 €m |
Change €m |
Change % |
|
|---|---|---|---|---|
| Offices | 55.7 | 56.5 | 0.8 | 1.3% |
| HNK | 19.9 | 20.3 | 0.4 | 2.1% |
| Retail | 13.7 | 13.6 | -0.1 | -0.6% |
| Other | 1.3 | 1.3 | 0.0 | 1.6% |
| Total portfolio | 90.6 | 91.7 | 1.1 | 1.2% |
12 Reversion = ERV let space / contractual rent
13 In 2016 HNK managed office ERVs are adjusted. Managed office ERVs are equal to contracted rents
The ERV bridge highlights that most of the upside sits in proactively reducing the vacancy.
The EPRA net initial yield for the portfolio is 5.6%, down 40bps in comparison to the end of 2016. The fall is mostly due to portfolio rotation, with now a lower weight to slightly higher yielding retail assets, and due to the small uplift in capital values in H1 2017.
| Yields | ||||
|---|---|---|---|---|
| EPRA Net Initial Yield | Reversionary yield | |||
| Jun 17 | Dec 16 | Jun 17 | Dec 16 | |
| Offices | 5.9% | 6.0% | 9.7% | 9.9% |
| HNK | 4.4% | 4.3% | 12.9% | 13.1% |
| Retail | 6.1% | 6.4% | 8.7% | 8.8% |
| Other | 10.0% | 10.9% | 11.5% | 10.9% |
| Total | 5.6% | 6.0% | 10.0% | 10.0% |
The portfolio is externally appraised per June 2017. The uplift for H1 2017 is €6.9m (0.6%). The investment market continues to be polarised. Office values are up, largely driven by positive revaluations in Amsterdam (€18m; 5.5%).
The acquisitions made in 2015 and 2016 continue to perform well. Assets from the Cobra portfolio and Glass House were up 4.8% on average. In Other Randstad (€0.1m) the investment market is stabilising, whilst Other Netherlands (-€11.7m) remains a buyer's market. 107 -6 24
The HNK portfolio has noted a positive revaluation of €4.7m. The assets in Amsterdam and Utrecht are driving the uplift, whereas both Rotterdam and Den Bosch have seen small mark downs. The remaining HNKs are relatively stable.
The valuation of the retail portfolio is marginally down due to a small negative impact from lower ERVs.
| (€m) | Valuation | Revaluation | |||
|---|---|---|---|---|---|
| Jun 17 | Positive | Negative | Total | % YoY | |
| Offices | 721 | 26 | -22 | 4 | 0.6% |
| HNK | 157 | 8 | -3 | 5 | 3.1% |
| Retail | 186 | 2 | -4 | -1 | -0.8% |
| Other | 11 | 1 | -1 | 0 | -2.9% |
| Total | 1,075 | 37 | -30 | 7 | 0.6% |
The acquisitions in H1 have significantly increased the exposure to the Amsterdam market and the wider G4. As per June 2017, the G4 makes up 66% of the Offices portfolio, up from 54% at Q4 2016, 49% at Q4 2015 and 33% at Q4 2014.
The exposure to Amsterdam has increased to 47% (vs 43% at Q4 2016). The weighting to the target cities of Amsterdam, Den Bosch, Eindhoven, Leiden, The Hague, Rotterdam and Utrecht is now 73%.
| Jun 16 | Dec 16 | Jun 17 | |
|---|---|---|---|
| Number of properties | 112 | 108 | 107 |
| Market value (€m) | 562 | 617 | 721 |
| Annual contracted rent (€m) | 49 | 53 | 57 |
| ERV (€m) | 45 | 61 | 70 |
| Lettable area (k sqm) | 438 | 457 | 477 |
| EPRA Vacancy | 23.2% | 21.3% | 20.5% |
| WAULT (years) | 4.9 | 5.3 | 5.2 |
| Average rent/sqm (€/p.a.) | 154 | 156 | 164 |
| EPRA net initial yield | 6.5% | 6.0% | 5.9% |
NSI continues to explore investment deals in the G4 and other target cities, focussing on larger, more efficient office assets. The average asset size has increased from €5m in June 2016 to €6.7m in June 2017, a 35% increase. This shift is set to continue, as a result of the further disposal of smaller assets.
The vacancy rate in the G4 is about market average at 8.6%. The challenge for NSI is in Other Randstad and Other Netherlands, with average vacancies in excess of 25%. The vacancy rate for assets with plans for transformation is arguably less relevant, as these assets ultimately need to become vacant to be able to execute the transformation.
| G4 | Randstad Other |
Other NL |
formation Trans- |
|||
|---|---|---|---|---|---|---|
| Assets | (#) | 30 | 25 | 43 | 9 | |
| Lettable area | (k sqm) | 184 | 94 | 165 | 34 | |
| Market value | (€m) | 457 | 90 | 133 | 41 | |
| Value | (€/sqm) | 2,489 | 957 | 806 | 1,206 | |
| WAULT | (years) | 6.2 | 4.6 | 3.8 | 2.2 | |
| Contracted rent | (€m) | 32 | 9 | 13 | 3 | |
| ERV | (€m) | 36 | 11 | 18 | 5 | |
| Reversion | (%) | 1.8% | -6.4% | -11.4% | -11.0% | |
| Avg. rent let space | (€/sqm) | 198 | 135 | 128 | 152 | |
| EPRA Vacancy | (%) | 8.6% | 28.5% | 37.0% | 30.7% | |
| EPRA net initial yield | (%) | 5.1% | 6.6% | 7.1% | 6.3% |
For the second half of 2017 the focus for the Office portfolio is on improving occupancy and selling smaller assets.
The strength of the G4 markets is noticeable, showing good ERV growth, good like-for-like rental growth and a positive revaluation. The Other Randstad office market is picking up as well, with Other Netherlands still lagging.
| Total | -1.9% | 0.0% | 1.3% |
|---|---|---|---|
| Transformation | 21.0% | -2.2% | 2.2% |
| Other Netherlands | -22.3% | -8.8% | -1.6% |
| Other Randstad | 12.2% | 0.1% | 1.2% |
| G4 | 3.5% | 5.2% | 3.4% |
| % | % | % | |
| NRI growth | Revaluation | ERV growth |
The reversion in the Offices portfolio has significantly improved from -8.3% at Q4 2016 to -3.2% at Q2 2017. The reversionary potential in the G4 has turned positive (1.8%), partly due to asset rotation and because of a 3.4% rise in ERVs in H1 2017.
The over-renting for Other Netherlands has improved as well, from -17.7% at the end of last year to -11.4% at the end of June. This reflects the expiry of several sizeable and highly over-rented lease contracts. This is the only part of the portfolio that has seen a small negative ERV change (-1.6%).
For NSI the sustainability of its office portfolio is a way to preserve the build environment and to drive long term investment returns, not a cost to run the business.
Sustainability is being anchored in all our processes and in 2017 we have taken the first steps to become a member of GRESB. Energy consumption in our buildings is CO2 neutral, waste is being separated, solar panels are being installed on several of our buildings and electricity and gas are both durably purchased.
By value 78% of our office portfolio has at least a C energy label, with 87% for the HNK assets, 86% for the G4 and on average 60% for our Other Randstad and Other Netherlands offices.
14 NRI like-for-like H1 2017 compared to H1 2016, only assets in portfolio for whole H1 2016 and H1 2017. Revaluation and ERV growth for assets in portfolio on 31 December 2016 and 30 June 2017.
The demand for office space and for flex offices in particular is growing, which is benefitting our HNK business. The vacancy rate has fallen by 3.9% to 33.2% in H1 2017. For 5 of the 13 HNKs that are currently in operation the occupancy rates are above 85%, at which point it is possible to push rental growth.
No new openings are scheduled for 2017, with the opening of Amsterdam Schinkel now set for Q2/Q3 2018. The opportunities to open two further HNK's in Amsterdam and Rotterdam in existing NSI-owned offices are still being explored, whilst new acquisitions are also being considered.
The focus in H1 2017 has been on improving the profitability of HNK, with a special focus on occupancy levels, meeting room revenues and cost controls. A new cost efficient booking tool for meeting rooms should be operational in H2 2017.
| Jun 16 | Dec 16 | Jun 17 | |
|---|---|---|---|
| Number of properties | 14 | 13 | 13 |
| Market value (€m) | 161 | 149 | 157 |
| Annual contracted rent (€m) | 13 | 12 | 13 |
| ERV (€m) | 10 | 20 | 20 |
| Lettable area (k sqm) | 134 | 125 | 122 |
| EPRA Vacancy | 43.7% | 37.1% | 33.2% |
| WAULT (years) | 3.1 | 3.1 | 3.1 |
| Average rent/sqm (€/p.a.) | 174 | 167 | 171 |
| EPRA net initial yield | 4.6% | 4.3% | 4.4% |
The net initial yield for HNK is 4.3% at H1 2017. A reallocation of costs from the NSI holding level to HNK is negatively impacting the operating margin. The margin is up to circa 55% (from 45%) nonetheless, because of the improvement in the occupancy rate and of better cost controls.
The margin should continue to improve in the period ahead as we work hard to progressively lease up the remaining vacancy and as our legacy traditional leases are replaced by HNK contracts with a service charge level appropriate for the HNK offering.
The HNK assets have been revalued in H1 2017 by circa €5m. HNKs in Utrecht and Amsterdam explain the uplift, whereas HNKs in Rotterdam and Den Bosch have been marked down in H1.
We are planning for one new opening, at Amsterdam Schinkel. This is a 5,000m2+ building, a size level that we now regard as a minimum to be able to run profitably longer term. We are also expanding at Ede and are investing in several other locations. Meanwhile, we continue to look for opportunities to acquire assets to expand our footprint. In our expansion plans we focus on profitability over growth.
Following significant disposals in H1 2017 NSI has €164m of retail assets left, excluding Keizerslanden in Deventer. The interests in Zuidplein, Rijswijk, Heerlen and Ridderkerk combined now make up over 66% of the remaining retail exposure15 by value.
For the remaining retail portfolio ERVs, yields and capital values have been largely stable in H1 2017. The vacancy rate is up to 16.1%, mostly because the Large Scale Retail assets that have been sold had a lower vacancy rate.
| Jun 16 | Dec 16 | Jun 17 | |
|---|---|---|---|
| Number of properties | 41 | 41 | 19 |
| Market value (€m) | 425 | 382 | 186 |
| Annual contracted rent (€m) | 32 | 31 | 15 |
| ERV (€m) | 32 | 34 | 16 |
| Lettable area (k sqm) | 272 | 273 | 106 |
| EPRA Vacancy | 13.7% | 12.5% | 16.1% |
| WAULT (years) | 4.4 | 4.3 | 5.0 |
| Average rent/sqm (€/p.a.) | 140 | 137 | 185 |
| EPRA net initial yield | 5.8% | 6.4% | 6.1% |
The upgrade and extension of the Keizerslanden shopping centre in Deventer is progressing according to plan, with delivery and transfer foreseen for Q2 2018.
15 Excluding Keizerslanden in Deventer
Retail and Belgium are being reported as discontinued operations in the H1 2017 balance sheet. Several of our office assets are classified as held for sale.
The EPRA NAV at H1 2017 is €636.6m (€619.6m at YE 2016). On a per share basis the EPRA NAV is now €35.44 per share (€34.61 at YE 2016). The change in NAV is explained in the below bridge.
EPRA NAV per share bridge (€)
The gap between the €35.44 EPRA NAV and the €34.89 EPRA NNNAV reflects the two remaining legacy swaps, which are due to expire in 2020 and 2022, and the amortised cost of loans.
In H1 2017 NSI has been a net seller of assets. Surplus cash has been used to reduce debt outstanding. In the beginning of June NSI paid off €20m of the secured EUPP facility, expiring in 2022, and late June a total of €80m was paid down on the RCFs.
Net debt at June 2017 stands at €410.2m, a reduction of €102.1m compared to December 2016. This is driven by positive cash flow from operations, the net effect of asset disposals and acquisitions, payment of the final dividend and swap breakage costs.
The cost of debt is stable at 2.8% at the end of June 2017. A 2022 swap with 2.77% coupon has been cancelled at a cost of €5m to rebalance our hedging position following the repayment of €98m of debt during the period. The positive effect of the swap cancellation on the cost of debt has been entirely offset by the repayment on the RCFs on much lower average margins.
| (€m) | Jun 17 | Dec 16 | Change (€) |
|---|---|---|---|
| Debt outstanding | 415.5 | 513.8 | (98.3) |
| Amortisation costs | (2.5) | (2.8) | 0.4 |
| Book value debt | 413.0 | 510.9 | (97.9) |
| Debt to credit institutions | 7.3 | 3.4 | 3.8 |
| Cash | (10.1) | (2.1) | (8.0) |
| Net debt | 410.2 | 512.3 | (102.1) |
In H1 2017 no changes were made to the composition of the loan portfolio, except for repayments. With the first debt due to expire in November 2019, with the business still in transition and with the property portfolio and risk profile still improving, there is plenty of time to start reviewing the loan portfolio. At June 2017 73.6% of the debt is unsecured and 71.2% of the assets are unencumbered.
NSI has undrawn credit facilities of €199m and uncommitted bank facilities of €50m at the end of June 2017.
The LTV has decreased to 38.1% at June 2017 (versus 44.1% at December 2016), reflecting predominantly the asset disposals in Q2 as well as a positive revaluation of the investment portfolio. This is marginally below NSI's new target range of 40-45%.
The average loan maturity is 3.6 years (December 2016: 4.2 years). The maturity of derivatives is 3.7 years (December 2016: 4.3 years), the maturity hedge16 is 101% (target range: 70-120%).
The notional amount of swaps outstanding at the end of June was €360.0m. The volume hedge17 was 87% (target range 70-100%), slightly higher than in previous quarters.
| Covenant | Dec 15 | Jun 16 | Dec 16 | Jun 17 | |
|---|---|---|---|---|---|
| LTV | ≤60% | 43.3% | 39.1% | 44.1% | 38.1% |
| ICR | ≥ 2.0x | 3.2x | 3.4x | 3.8x | 4.7x |
16 Maturity hedge is average maturity of swaps as % of average maturity of loans
17 Volume hedge is amount hedged as % of total drawn debt facilities
| (€ '000) | Notes | H1 2017 | H1 2016 | ||
|---|---|---|---|---|---|
| Gross rental income | 32,400 | 30,122 | |||
| Service costs recharged to tenants | 5,084 | 4,886 | |||
| Service costs | -6,102 | -6,825 | |||
| Service costs not recharged | -1,018 | -1,938 | |||
| Operating costs | 5 | -6,110 | -6,344 | ||
| Net rental income | 25,273 | 21,839 | |||
| Revaluation of investments | 6 | 9,372 | 639 | ||
| Net result on sale of investments | 7 | 216 | -6,571 | ||
| Net result from investments | 34,860 | 15,907 | |||
| Administrative costs | 8 | -4,190 | -4,532 | ||
| Other costs and income | -16 | ||||
| Financing income | 3 | 6 | |||
| Financing costs | -7,841 | -10,102 | |||
| Movement in market value of financial derivatives | 3,374 | -4,625 | |||
| Net financing result | -4,464 | -14,721 | |||
| Result before tax | 26,191 | -3,346 | |||
| Corporate income tax | -105 | -3 | |||
| Result after tax from continuing operations | 26,086 | -3,349 | |||
| Result from discontinued operations after tax | 9 | 11,460 | 14,140 | ||
| Total realised result | 37,547 | 10,792 | |||
| Exchange rate differences on foreign participations | 0 | - | |||
| Total non-realised result | 0 | - | |||
| Total realised and non-realised result | 37,546 | 10,792 | |||
| Total realised and non-realised result attributable to: | |||||
| Shareholders | 37,546 | 10,792 | |||
| Non-controlling interest | |||||
| Total realised and non-realised result | 37,546 | 10,792 | |||
| Data per average outstanding share: | |||||
| Diluted as well as non-diluted result after tax - continuing operations | 1.45 | -0.19 | |||
| Diluted as well as non-diluted result after tax - discontinued operations | 0.64 | 0.79 | |||
| Diluted as well as non-diluted result after tax | 2.09 | 0.60 |
| (€ '000) | Notes | 30 June 2017 | 31 December 2016 |
|---|---|---|---|
| Assets | |||
| Real estate investments | 10 | 879,323 | 770,434 |
| Derivative financial instruments | 15 | 1,321 | - |
| Tangible fixed assets | 820 | 1,516 | |
| Intangible fixed assets | 416 | 193 | |
| Non-current assets | 881,879 | 772,143 | |
| Debtors and other accounts receivable | 12 | 3,047 | 2,330 |
| Cash and cash equivalents | 10,093 | 2,066 | |
| Assets held for sale | 9, 11 | 195,899 | 389,923 |
| Current assets | 209,038 | 394,319 | |
| Total assets | 1,090,918 | 1,166,462 | |
| Shareholders' equity | |||
| Issued share capital | 13 | 66,744 | 65,873 |
| Share premium reserve | 13 | 922,559 | 923,435 |
| Other reserves | 13 | -397,409 | -367,221 |
| Result for the year | 37,547 | -17,833 | |
| Shareholders' equity attributable to shareholders | 629,441 | 604,254 | |
| Non-controlling interest | |||
| Shareholders' equity | 629,441 | 604,254 | |
| Liabilities | |||
| Interest bearing loans | 14 | 412,512 | 510,404 |
| Derivative financial instruments | 15 | 8,450 | 15,297 |
| Non-current liabilities | 420,961 | 525,701 | |
| Redemption requirement interest bearing loans | 14 | 500 | 500 |
| Creditors and other accounts payable | 31,035 | 29,933 | |
| Debts to credit institutions | 7,257 | 3,429 | |
| Liabilities directly associated with assets held for sale | 9 | 1,724 | 2,645 |
| Current liabilities | 40,516 | 36,507 | |
| Total liabilities | 461,477 | 562,208 | |
| Total shareholders' equity and liabilities | 1,090,918 | 1,166,462 |
| (€ '000) | Notes | H1 2017 | H1 2016 | ||
|---|---|---|---|---|---|
| Result from operations after tax | 26,086 | -3,349 | |||
| Adjusted for: | |||||
| Revaluation of investments | 6 | -9,399 | -1,253 | ||
| Net result on sale of investments | 7 | -216 | 6,571 | ||
| Net financing result | 4,464 | 14,721 | |||
| Corporate income tax | 105 | 3 | |||
| Depreciation | 66 | 103 | |||
| -4,980 | 20,145 | ||||
| Movements in working capital: | |||||
| Debtors and other accounts receivable | -896 | -314 | |||
| Creditors and other accounts payable | -862 | 11,057 | |||
| -1,757 | 10,744 | ||||
| Cash flow from operating activities | 19,348 | 27,540 | |||
| Financing income received | 4 | 6 | |||
| Financing costs paid | -7,791 | -11,017 | |||
| Tax paid | -76 | -113 | |||
| Cash flow from continuing operations | 11,486 | 16,416 | |||
| Cash flow from discontinued operations | 12,441 | -2,380 | |||
| Cash flow from operations | 23,927 | 14,036 | |||
| Purchases of real estate and investments in existing properties | 10 | -110,902 | -6,394 | ||
| Proceeds on sale of real estate investments | 8,683 | 53,507 | |||
| Investments in tangible fixed assets | -76 | - | |||
| Divestments in tangible fixed assets | 15 | - | |||
| Investments in intangible fixed assets | -258 | -25 | |||
| Divestments in intangible fixed assets | 12 | - | |||
| Cash flow from continuing investment activities | -102,526 | 47,088 | |||
| Cash flow from discontinued investment activities | 198,203 | 54,022 | |||
| Cash flow from investment activities | 95,676 | 101,110 | |||
| Dividend paid | -12,360 | -20,048 | |||
| Proceeds from interest bearing loans | 14 | 22,500 | 76,500 | ||
| Transaction costs interest bearing loans paid | -382 | ||||
| Repayment of interest bearing loans | 14 | -120,750 | -181,230 | ||
| Settlement of derivatives | -4,795 | -1,908 | |||
| Cash flow from continuing financing activities | -115,404 | -127,068 | |||
| Cash flow from financing activities | -115,404 | -127,068 | |||
| Net cash flow from continuing operations | -206,445 | -63,564 | |||
| Net cash flow from discontinued operations | 210,644 | 51,642 | |||
| Net cash flow | 4,199 | -11,922 | |||
| Cash and cash equivalents and debts to credit institutions - | -1,363 | 22,285 | |||
| balance as per 1 January | |||||
| Exchange rate differences | 0 | 3 | |||
| Cash and cash equivalents and debts to credit institutions - | 2,835 | 10,367 | |||
| balance as per 30 June 2017 / 31 December 2016 |
| H1 2017 | |||||||
|---|---|---|---|---|---|---|---|
| (€ '000) | Issued share capital |
Share premium reserve |
Other reserves |
Result for the year |
Shareholders' equity attributable to shareholders |
Non controlling interest |
Shareholders' equity |
| Balance as per 1 January 2017 | 65,873 | 923,435 | -367,221 | -17,833 | 604,254 | 604,254 | |
| Result after tax - 2017 | 37,547 | 37,547 | 37,547 | ||||
| Exchange rate differences | 0 | 0 | 0 | ||||
| Total realised and non-realised result - H1 2017 | 0 | 37,547 | 37,546 | 37,546 | |||
| Profit appropriation - 2016 | -17,833 | 17,833 | |||||
| Distribution final dividend - 2016 | 872 | -877 | -12,355 | -12,360 | -12,360 | ||
| Contributions from and to shareholders | 872 | -877 | -30,188 | 17,833 | -12,360 | -12,360 | |
| Balance as per 30 June 2017 | 66,744 | 922,559 | -397,409 | 37,547 | 629,441 | 629,441 |
| (€ '000) | Issued share | Share | Other | Result for | Shareholders' | Non | Shareholders' |
|---|---|---|---|---|---|---|---|
| capital | premium | reserves | the year | equity | controlling | equity | |
| reserve | attributable to | interest | |||||
| shareholders | |||||||
| Balance as per 1 January 2016 | 65,873 | 923,435 | -392,354 | 63,794 | 660,748 | -28 | 660,720 |
| Result after tax - 2016 | 10,792 | 10,792 | 10,792 | ||||
| Exchange rate differences | 3 | 3 | 3 | ||||
| Total realised and non-realised result - H1 2016 | 3 | 10,792 | 10,795 | 10,792 | |||
| Profit appropriation - 2015 | 63,794 | -63,794 | |||||
| Distribution final dividend - 2015 | -20,045 | -20,045 | -20,045 | ||||
| Contributions from and to shareholders | 43,749 | -63,794 | -20,045 | -20,045 | |||
| Balance as per 30 June 2016 | 65,873 | 923,435 | -348,605 | 1,063 | 651,498 | -28 | 651,467 |
NSI N.V. is a company domiciled in The Netherlands (headquartered Antareslaan 69 in Hoofddorp, statutory seat in Amsterdam, Chamber of Commerce number 36040044). These condensed consolidated interim financial information ('interim financial information) as at and for the six months ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the 'Group').
The interim financial information has been prepared in accordance with IAS 34 Interim Financial Reporting. This does not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to understand the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2016.
The interim financial information was authorised for issue by the Company's Management and Supervisory Board on 24 July 2017. The interim financial information has been reviewed by the auditor and is unaudited.
In preparing these interim financial statements, management makes judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2016.
The consolidated financial statements have been prepared on the basis of historical cost except for investment property, investment property under development, financial assets at fair value through profit or loss and derivatives, which are recognised at fair value. Unless otherwise stated, the figures are presented in thousands of euros. Figures may not add up exactly, due to rounding. The interim financial information has been prepared on a going concern basis.
The accounting policies adopted in the preparation of the interim financial information are consistent with those followed in the preparation of the Group's annual consolidated financial statements 2016.
In connection with the intended sale of the retail segment of NSI, in 2016 it was decided to present this segment in the annual accounts of 2016 as discontinued operations in line with IFRS 5. In the first half year of 2016 the remaining shares in Intervest Offices & Warehouses N.V. were also reported under discontinued operations.
Below, a summary of the results of each of the reporting segments is included:
| (€ '000) | Continuing operations | Discontinued operations | TOTAL | |||||
|---|---|---|---|---|---|---|---|---|
| Offices | HNK | Other | TOTAL | Belgium | Retail | TOTAL | ||
| Gross rental income | 25,588 | 6,422 | 389 | 32,400 | 42 | 13,198 | 13,240 | 45,640 |
| Service costs not recharged | -622 | -496 | 101 | -1,018 | -9 | -210 | -219 | -1,237 |
| Operating costs | -3,752 | -2,367 | 10 | -6,110 | -5 | -1,843 | -1,848 | -7,958 |
| Net rental income | 21,214 | 3,559 | 500 | 25,273 | 28 | 11,145 | 11,173 | 36,446 |
| Revaluation of investments | 4,035 | 4,705 | 631 | 9,372 | -970 | -1,479 | -2,449 | 6,922 |
| Net result on sale of investments | 216 | 0 | 216 | 2,974 | 2,974 | 3,190 | ||
| Net result from investment | 25,465 | 8,264 | 1,131 | 34,860 | -942 | 12,640 | 11,698 | 46,558 |
| Administrative costs | -503 | -134 | -3,552 | -4,190 | -1 | -234 | -235 | -4,425 |
| Other costs and income | -30 | 14 | -16 | -3 | -3 | -19 | ||
| Net financing result | -3 | 0 | -4,461 | -4,464 | -1 | 4 | 4 | -4,460 |
| Result before tax | 24,929 | 8,143 | -6,881 | 26,191 | -944 | 12,408 | 11,463 | 37,654 |
| Corporate income tax | -2 | -103 | -105 | -3 | -3 | -108 | ||
| Total realised result | 24,929 | 8,142 | -6,984 | 26,086 | -947 | 12,408 | 11,460 | 37,547 |
| Attributable to shareholders | 24,929 | 8,142 | -6,984 | 26,086 | -947 | 12,408 | 11,460 | 37,547 |
| (€ '000) | Continuing operations | Discontinued operations | TOTAL | |||||
|---|---|---|---|---|---|---|---|---|
| Offices | HNK | Other | TOTAL | Belgium | Retail | TOTAL | ||
| Gross rental income | 22,869 | 5,606 | 1,647 | 30,122 | 21 | 15,644 | 15,666 | 45,787 |
| Service costs not recharged | -846 | -986 | -107 | -1,938 | 31 | -370 | -339 | -2,277 |
| Operating costs | -3,844 | -2,000 | -501 | -6,344 | -23 | -3,233 | -3,257 | -9,601 |
| Net rental income | 18,179 | 2,620 | 1,040 | 21,839 | 29 | 12,041 | 12,071 | 33,910 |
| Revaluation of investments | -2,960 | 3,747 | -148 | 639 | 16 | -1,068 | -1,052 | -412 |
| Net result on sale of investments | -507 | -6,065 | -6,571 | 1,513 | 1,513 | -5,058 | ||
| Net result from investment | 14,712 | 6,368 | -5,173 | 15,907 | 1,559 | 10,973 | 12,532 | 28,439 |
| Administrative costs | -156 | -452 | -3,923 | -4,532 | -20 | -36 | -56 | -4,588 |
| Investment result from participations | 565 | 565 | 565 | |||||
| Other costs and income | 1,050 | 1,050 | 1,050 | |||||
| Net financing result | -4 | 4 | -14,721 | -14,721 | 47 | 4 | 52 | -14,670 |
| Result before tax | 14,552 | 5,919 | -23,817 | -3,346 | 3,200 | 14,142 | 10,797 | |
| Corporate income tax | -2 | -2 | -3 | -2 | -2 | -5 | ||
| Total realised result | 14,552 | 5,917 | -23,819 | -3,349 | 3,198 | 10,942 | 14,140 | 10,792 |
| Attributable to shareholders | 14,552 | 5,917 | -23,819 | -3,349 | 3,198 | 10,942 | 14,140 | 10,792 |
| Operating costs | -6,110 | -6,344 |
|---|---|---|
| Other operating costs | -10 | -65 |
| Doubtful debt costs | -64 | 84 |
| Contribution to owner association | -150 | -100 |
| Letting costs | -819 | -892 |
| Property management costs | -1,833 | -1,246 |
| Maintenance costs | -835 | -1,163 |
| Insurance premiums | -243 | -281 |
| Municipal taxes | -1,956 | -2,446 |
| Leasehold | -199 | -235 |
| (€ '000) | H1 2017 | H1 2016 |
| (€ '000) | H1 2017 | H1 2016 | |||||
|---|---|---|---|---|---|---|---|
| Positive | Negative | Total | Positive | Negative | Total | ||
| Investment property in operation | 34,467 | -25,068 | 9,399 | 16,531 | -15,279 | 1,253 | |
| Investment property under development | |||||||
| Revaluation | 34,467 | -25,068 | 9,399 | 16,531 | -15,279 | 1,253 | |
| Movement in lease incentives | -27 | -613 | |||||
| Revaluation | 9,372 | 639 |
| (€ '000) | H1 2017 | H1 2016 |
|---|---|---|
| Proceeds on sale of real estate investments | 8,717 | 54,557 |
| Transaction costs on sale of real estate investments | -35 | -1,050 |
| Sale of real estate investments | 8,683 | 53,507 |
| Book value at the time of sale | -8,467 | -60,078 |
| Net result on sale of real estate investments | 216 | -6,571 |
The transaction costs are including broker costs and legal costs.
The administrative costs can be specified as follows:
| (€ '000) | H1 2017 | H1 2016 |
|---|---|---|
| Staff costs | -4,527 | -4,888 |
| Compensation supervisory board | -138 | -131 |
| Office costs | -596 | -505 |
| Audit, consultancy and valuation costs | -736 | -497 |
| Other administrative costs | -788 | -704 |
| Administrative costs | -6,785 | -6,725 |
| Allocated administrative costs | 2,596 | 2,193 |
| Administrative costs | -4,190 | -4,532 |
| (€ '000) | H1 2017 | H1 2016 |
|---|---|---|
| Gross rental income | 13,240 | 15,666 |
| Service costs not recharged | -219 | -339 |
| Operating costs | -1,848 | -3,257 |
| Net rental income | 11,173 | 12,071 |
| Revaluation of investments | -2,449 | -1,052 |
| Net result on sale of investments | 2,974 | 1,513 |
| Net result from investments | 11,698 | 12,532 |
| Administrative costs | -235 | -56 |
| Investment result from participations | 565 | |
| Other costs and income | -3 | 1,050 |
| Financing costs | -1 | 42 |
| Financing income | 4 | 10 |
| Net financing result | 4 | 52 |
| Result before tax | 11,463 | 14,142 |
| Corporate income tax | -3 | -2 |
| Result from discontinued operations after tax | 11,460 | 14,140 |
| Total result from discontinued operations after tax attributable to: | ||
| Shareholders | 11,460 | 14,140 |
| Non-controlling interest | ||
| Result from discontinued operations after tax | 11,460 | 14,140 |
| Statement of financial position | 30 June 2017 | 31 December 2016 |
| Assets held for sale | 187,164 | 384,848 |
| Liabilities directly associated with assets classified as held for sale | 1,724 | 2,647 |
| Statement of cash flows | H1 2017 | H1 2016 |
| Cash flow from operations | 12,441 | -2,380 |
| Cash flow from investment activities | 198,203 | 54,022 |
| Cash flow from financing activities | ||
| Net cash flow | 210,644 | 51,642 |
The breakdown of the investment properties in operation and under development was as follows:
| (€ '000) | 30 June 2017 | 31 December 2016 |
|---|---|---|
| Investment property in operation | 878,523 | 769,634 |
| Investment property under development | 800 | 800 |
| Real estate investments | 879,323 | 770,434 |
Real estate investments in operation and real estate investments under development are accounted for at fair value.
As per 30 June 2017 and per 31 December 2016 all investment properties in operation have been externally appraised by external independent certified appraisers. The fair value is based on market value (purchasing costs payable by purchaser, thus adjusted for acquisition costs like real estate transfer tax), which is the estimated amount for which a real estate investment can be traded on the valuation date between a buyer willing to enter into a transaction and a seller in an at arms' length transaction preceded by sound negotiations in which the parties were properly informed and were willing to enter into the transaction.
The development of the investment property in operation was as follows:
| (€ '000) | Offices | HNK | Retail Other |
TOTAL |
|---|---|---|---|---|
| Balance as per 1 January 2017 | 611,826 | 148,870 | 8,938 | 769,634 |
| Lease incentives included in balance as per 1 January 2017 | 5,020 | 801 | 5,821 | |
| Acquisitions | 105,984 | 105,984 | ||
| Investments | 2,104 | 2,829 | -14 | 4,918 |
| Revaluation | 4,031 | 4,736 | 631 | 9,399 |
| Transfer from / to assets held for sale | -8,735 | -8,735 | ||
| Transfer from / to real estate in own use | 715 | 715 | ||
| Disposals | -3,392 | -3,392 | ||
| Balance as per 30 June 2017 | 711,818 | 157,150 | 9,555 | 878,523 |
| Lease incentives included in balance as per 30 June 2017 | 5,016 | 832 | 5,848 |
| (€ '000) | Offices | HNK | Retail | Other | TOTAL |
|---|---|---|---|---|---|
| Balance as per 1 January 2016 | 585,242 | 123,200 | 425,174 | 1,133,617 | |
| Lease incentives included in balance as per 1 January 2016 | 4,590 | 781 | 462 | 5,834 | |
| Acquisitions | 60,725 | 60,725 | |||
| Investments | 4,498 | 8,959 | 6,971 | 20,428 | |
| Revaluation | 2,971 | -5,844 | -49,987 | -52,860 | |
| Transfer between segments | -29,155 | 29,155 | |||
| Transfer from / to assets held for sale | -5,935 | -382,158 | 8,938 | -379,155 | |
| Disposals | -6,520 | -6,600 | -13,120 | ||
| Balance as per 31 December 2016 | 611,826 | 148,870 | 8,938 | 769,634 | |
| Lease incentives included in balance as per 31 December 2016 | 5,020 | 801 | 5,821 |
On 30 June 2017, properties with a book value of €311.0m (31 December 2016: €314.3m) were mortgaged as security for loans taken out and credit facilities at banks amounting to €109.5m (31 December 2016: €129.8m). It is possible to vary the level of securitisation within the banking arrangements, enabling NSI to create additional loan capacity within the existing facilities or allocate the securities partly to a different facility.
The value of the investment properties implies an average net theoretical yield of 8.15%. If the yields applied in the calculation to determine the valuation of real estate investments as per 30 June 2017 would be 100 basis points lower than those currently used, the value of the real estate investments would increase by 14.0% (31 December 2016: 13.6%). NSI's equity would in this case increase by €123m (31 December 2016: €157m). The loan-to-value would in that case decrease from 38.1% to 34.1%.
If on 30 June 2017 the yields that were used in the creation of the valuations of investment properties would have been 100 bps higher then used now, the value of the investment would decrease by 10.9% (31 December 2016: 10.4%). NSI's equity would in that situation be €96m (31 December 2016: €125m) lower. The loan-to-value would increase in that case from 38.1% to 41.7%.
Investment property under development contains one land position, valued internally as per 30 June 2017. The value of this land position was externally appraised per 31 December 2016 at € 0.8m.
| (€ '000) | Offices | HNK | Retail | Other | TOTAL |
|---|---|---|---|---|---|
| Balance as per 1 January 2017 | 5,075 | 382,158 | 2,690 | 389,923 | |
| Lease incentives included in balance as per 1 January 2017 | 556 | 556 | |||
| Investments | 2,755 | 2,755 | |||
| Revaluation | -1,486 | -970 | -2,456 | ||
| Transfer from / to investment property under development | 8,735 | 8,735 | |||
| Disposals | -5,075 | -197,983 | -203,058 | ||
| Balance as per 30 June 2017 | 8,735 | 185,444 | 1,720 | 195,899 | |
| Lease incentives included in balance as per 30 June 2017 | 291 | 291 | |||
| (€ '000) | Offices | HNK | Retail | Other | TOTAL |
| Balance as per 1 January 2016 | 4,310 | 64,538 | 68,848 | ||
| Lease incentives included in balance as per 1 January 2016 | |||||
| Investments | 270 | 270 | |||
| Revaluation | -1,742 | -1,742 | |||
| Transfer from / to investment property in operation | 5,935 | 382,158 | -8,938 | 379,155 | |
| Disposals | -5,170 | -51,438 | -56,608 | ||
| Balance as per 31 December 2016 | 5,075 | 382,158 | 2,690 | 389,923 | |
| Lease incentives included in balance as per 31 December 2016 |
556 | 556 |
The largest items recognized under the debtors and other accounts receivable concern debtors (€1.0m) and a receivable from the escrow account of the notary relating to the sale of an office building in Elst (€1.0m).
At 31 December 2016 143,342,678 ordinary shares with a nominal value of €0.46 were placed and fully paid up, of which 140,837 shares were held as treasury shares. In May 2017 1,753,994 shares and all treasury shares were placed as stock dividend after the final distribution of dividend over 2016. After the extraordinary general meeting of 16 June 2017, in which the articles of association of NSI were changed, a stock consolidation was executed, in which for each 8 ordinary shares, 1 ordinary share with a nominal value of €3.68 was issued. As per 20 June 2017 the number of placed and fully paid up ordinary shares is 18,137,084.
The development of the loans in the reporting period was as follows:
| (€ '000) | 30 June 2017 | 31 December 2016 |
|---|---|---|
| Balance as per 1 January | 510,904 | 564,618 |
| Drawn interest bearing loans | 22,500 | 232,000 |
| Amortisation transaction costs | 358 | -33 |
| Adjustments to market value | 0 | -174 |
| Repayment of interest bearing loans | -120,750 | -285,507 |
| Balance as per 30 June 2017 / 31 December 2016 | 413,012 | 510,904 |
| Redemption requirement interest bearing loans | 500 | 500 |
| Balance as per 30 June 2017 / 31 December 2016 | 412,512 | 510,404 |
Remaining maturities of the loans at 30 June 2017 were as follows:
| (€ '000) | 30 June 2017 | 31 December 2016 |
|---|---|---|
| Up to 1 year | 500 | 500 |
| From 1 to 2 years | 500 | 500 |
| From 2 to 5 years | 305,730 | 383,458 |
| From 5 to 10 years | 106,281 | 126,446 |
| More than 10 years | 0 | 0 |
| Total | 413,012 | 510,904 |
The interest-bearing debts comprise loans from banks and other financial institutions. The agreed maturities amount to an average of 3.6 years. The average interest for the outstanding loans and interest swaps as per 30 June 2016 is 2.8% per annum, including margin. This is the result of the decreased interest margins per end of the quarter, following the cancelation of a swap contract and a higher average margin on the loans following the repayment of the RCFs with on average lower margins. The interest coverage ratio amounted to 4.7 x as at 30 June 2017 (3.8 x at 31 December 2016).
The table below summarizes the book values and fair values of financial assets and liabilities, including the applicable level within the fair value hierarchy. The table does include the fair value of financial assets and other liabilities if the book value is a reasonable reflection of the fair value.
| (€ '000) | 30 June 2017 | 31 December 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Fair value level |
Amortised cost price Fair value |
Fair value level |
Amortised | cost price Fair value | ||||
| Financial assets valued at fair value through profit or loss | ||||||||
| Derivative financial instruments | 2 | 1,321 | ||||||
| Financial assets valued at amortised cost price | ||||||||
| Debtors and other accounts receivable | 2 | 3,047 | 2 | 2,330 | ||||
| Cash and cash equivalents | 1 | 10,093 | 1 | 2,066 | ||||
| Financial liabilities valued at fair value through profit or loss | ||||||||
| Derivative financial instruments | 2 | 8,450 | 2 | 15,297 | ||||
| Financial liabilities valued at amortised cost price | ||||||||
| Interest bearing loans | 2 | 413,012 | 2 | 510,904 | ||||
| Creditors and other accounts payable | 2 | 25,421 | 2 | 27,344 | ||||
| Debts to credit institutions | 2 | 7,257 | 2 | 3,429 |
Fair value hierarchy
The table below shows recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorized into different levels in the fair values hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows:
Level 1: valuation on the basis of quoted prices in active markets;
Level 2: values based on (external) observable information;
Level 3: values based wholly or partially on not (external) observable information.
Level 2 applies to all derivative financial instruments; the model in which fair value is determined on the basis of direct or indirect observable market data.
Level 2 fair values for simple over-the-counter derivative financial instruments are based on broker quotes. These quotes are periodically tested for reasonableness by discounting expected future cash flows using a market interest rate for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of NSI and counterparty when appropriate.
The derivative financial instruments have the following maturities:
| (€ '000) | Jun-17 | Dec-16 | ||||||
|---|---|---|---|---|---|---|---|---|
| Number of | nominal | Fair value | Fair value | Number of | nominal | Fair value | Fair value | |
| contracts | assets | liabilities | contracts | assets | liabilities | |||
| Up to 1 year | - | - | - | - | - | - | - | - |
| From 1 to 5 years | 17 | 310,000 | (181) | 8,450 | 15 | 265,000 | - | 2.831 |
| From 5 to 10 years | 5 | 50,000 | (1,140) | - | 8 | 129,300 | - | 12.466 |
| Total swaps | 22 | 360,000 | (1,321) | 8,450 | 23 | 394,300 | - | 15.297 |
NSI limits its interest-rate risk by swapping the majority of the variable interest it pays on its loans into a fixed interest rate, by means of contracts with fixed interest rates varying from -0.188% to 3.385% and with maturity dates between 2019 and 2023. The market value of the financial derivatives amounted to -€7.8m as at 30 June 2017.
The weighted average remaining maturity of the financial derivatives is 3.7 years. NSI is hedged at a weighted interest rate of 0.7%, excluding margin. 13.4% of the current loans and credit facilities are subject to variable interest and are therefore not hedged.
The largest items recognized under the other payables and accrued liabilities concern deferred income and accruals (€21.9m), payable interest (€3.0m) and creditors (€3.3m).
The company has entered into investment commitments for an amount of €5.0m (31 December 2016: €4.2m) relating to investment properties. The obligations relating to lease cars amount to €0.6m (31 December 2016: €0.6m). Moreover, the company has unused credit facilities amounting to €199m (31 December 2016: €121m).
In June 2017, a purchase agreement was concluded for the purchase of an office building in Leiden. Delivery will take place at the end of July 2017. The purchase price amounts to €17.5m (excluding acquisition costs).
Vastned Offices Benelux Holding B.V. revised claim in appeal amounts to €4.9m excluding legal interest. The legal interest has accrued to €2.1m therefore the total claim amounts to €7.0m. The case was on the cause list of the Court of Appeal of Amsterdam, which has rendered its judgement on the 18th of July 2017 (see below).
The claim of the Owner's Association ("VvE") against the insurance companies amounts to repair costs of €9.3m, loss of rental income of €1.7m and costs of expertise of €0.1m, all excluding legal interest. The insurance companies may submit a statement of defence on 27 July 2017 after which the District Court will render an interlocutory judgement whether the insurance companies have to cover the damages lost by the Owner's Association.
NSI Winkels B.V. also claims an amount of repair costs of €11.3m against its own insurance company (this part of the claim is conditional and becomes effective only if and in so far the claim of the Owner's Association against its insurers is denied), loss of rental income of €0.9m and some smaller (partly non-budgeted) receivables, all excluding legal interest. The insurance company may submit a statement of defence on 27 July 2017 after which the District Court will render an interlocutory judgement whether the insurance companies have to cover the damages lost by NSI Winkels B.V.
Reference is made to note 26 in the annual accounts of 2016 for further information about these procedures.
In July 2017 2 office buildings (in Maarssen and Gouda) were sold for a total amount of €2.5m.
The Court of Appeal has rendered its judgement on 18 July 2017. Swiss Partners Investment Network AG must pay NSI's subsidiary Vastned Offices Benelux B.V. an amount of € 4.9m excluding legal interest. Swiss Partners may appeal the judgement at the Dutch Supreme Court ("Hoge Raad"). Pending a possible appeal, Vastned Offices Benelux B.V. will meanwhile take measures to enforce the judgement in Switzerland.
On 19 July 2017 the District Court of Amsterdam has dismissed the claim of € 1.6m of the insurance company of one of the tenants in 't Loon Heerlen. The decision of the District Court of Amsterdam is subject to appeal until 19 October 2017.
The Management Board states that, to the best of their knowledge:
NSI considers the credit risk, liquidity risk, interest risk and currency risks as financial risks. In addition, market risks include changes in the economic environment and availability of funding in the credit markets, which may affect both the letting prospects as well as the market value of the properties. Reference is made to the annual report 2016 with regards to existing risks.
Hoofddorp, 24 July 2017
Management Board
B.A. Stahli, CEO A. de Jong, CIO
To: the management board of NSI N.V.
We have reviewed the accompanying condensed consolidated interim financial information for the six-month period ended 30 June 2017 of NSI N.V., Hoofddorp, which comprises the condensed consolidated statement of financial position as at 30 June 2017, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of movements in shareholders' equity, the condensed consolidated statement of cash flows for the period then ended and the selected explanatory notes. The management board is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.
We conducted our review in accordance with Dutch law including standard 2410, Review of Interim Financial Information Performed by the Independent Auditor of the company. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information for the six-month period ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union.
Rotterdam, 24 July 2017 PricewaterhouseCoopers Accountants N.V.
Original has been signed by F.J. van Groenestein RA
T: +31 (0) 88 792 00 10, F: +31 (0) 88 792 95 33, www.pwc.nl
Ref.: e0406511
PricewaterhouseCoopers Accountants N.V., Fascinatio Boulevard 350, 3065 WB Rotterdam, P.O. Box 8800, 3009 AV Rotterdam, The Netherlands T: +31 (0) 88 792 00 10, F: +31 (0) 88 792 95 33, www.pwc.nl
'PwC' is the brand under which PricewaterhouseCoopers Accountants N.V. (Chamber of Commerce 34180285), PricewaterhouseCoopers Belastingadviseurs N.V. (Chamber of Commerce 34180284), PricewaterhouseCoopers Advisory N.V. (Chamber of Commerce 34180287), PricewaterhouseCoopers Compliance Services B.V. (Chamber of Commerce 51414406), PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V. (Chamber of Commerce 54226368), PricewaterhouseCoopers B.V. (Chamber of Commerce 34180289) and other companies operate and provide services. These services are governed by General Terms and Conditions ('algemene voorwaarden'), which include provisions regarding our liability. Purchases by these companies are governed by General Terms and Conditions of Purchase ('algemene inkoopvoorwaarden'). At www.pwc.nl more detailed information on these companies is available, including these General Terms and Conditions and the General Terms and Conditions of Purchase, which have also been filed at the Amsterdam Chamber of Commerce.
| (€ '000) | H1 2017 | H1 2016 |
|---|---|---|
| Gross rental income | 45,640 | 45,787 |
| Service costs not recharged | -1,237 | -2,277 |
| Operating costs | -7,958 | -9,601 |
| Net rental income | 36,446 | 33,910 |
| Administrative costs | -4,425 | -4,588 |
| Direct investment result from participations | 565 | |
| Net financing result | -7,834 | -10,040 |
| Direct investment result before tax | 24,187 | 19,847 |
| Corporate income tax | -12 | -5 |
| EPRA earnings | 24,175 | 19,842 |
| EPRA earnings per share | 1.35 | 1.11 |
| (€ '000) | 30 June 2017 | 31 December 2016 | ||
|---|---|---|---|---|
| (€ k) | ( € per share ) | ( € per share ) | ||
| Equity attributable to shareholders | 629,441 | 35.04 | 604,254 | 33.76 |
| Fair value of derivative financial instruments | 7,128 | 0.40 | 15,297 | 0.85 |
| EPRA NAV | 636,569 | 35.44 | 619,551 | 34.61 |
| Fair value of derivative financial instruments | -7,399 | -0.41 | -15,906 | -0.89 |
| Fair value of debt | -2,488 | -0.14 | -2,846 | -0.16 |
| EPRA NNNAV | 626,682 | 34.89 | 600,799 | 33.56 |
| (€ '000) | Jun 2017 | Dec 2016 |
|---|---|---|
| Investment property including assets held for sale | 1,076,522 | 1,162,937 |
| Developments | -800 | -800 |
| Property investments | 1,075,722 | 1,162,137 |
| Allowance for estimated purchasers' costs | 75,266 | 81,350 |
| Gross up completed property portfolio valuation | 1,150,487 | 1,243,487 |
| Annualised cash passing rental income | 80,408 | 92,964 |
| Annualised property outgoings | -15,639 | -18,450 |
| Annualised net rent | 64,769 | 74,514 |
| Notional rent expiration of rent free periods or other lease incentives | 6,138 | 4,947 |
| Topped-up annualised net rent | 70,907 | 79,461 |
| EPRA net initial yield | 5.6% | 6.0% |
| EPRA topped-up net initial yield | 6.2% | 6.4% |
18 The EPRA performance indicators are calculated on the basis of the definitions published by the EPRA
19 For the yield calculation HNK Hoofddorp (NSI's HQ) is included for 100%
| (€ '000) | 30 June 2017 | 31 December 2016 |
|---|---|---|
| Estimated rental value of vacant space | 23,778 | 24,853 |
| Estimated rental value of the whole portfolio | 107,254 | 116,230 |
| EPRA vacancy | 22.2% | 21.4% |
| (€ '000) | H1 2017 | H1 2016 |
|---|---|---|
| Administrative costs | 4,425 | 4,588 |
| Service costs not recharged | 1,237 | 2,277 |
| Operating costs (adjusted for municipality taxes) | 6,614 | 7,717 |
| Leasehold | -219 | -255 |
| EPRA costs (including direct vacancy costs) | 12,056 | 14,326 |
| Direct vacancy costs | -1,169 | -2,109 |
| EPRA costs (excluding direct vacancy costs) | 10,887 | 12,218 |
| EPRA gross rental income | 45,640 | 45,787 |
| EPRA cost ratio A (incl. direct vacancy costs) | 26.4% | 31.3% |
| EPRA cost ratio B (excl. direct vacancy costs) | 23.9% | 26.7% |
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