Earnings Release • May 17, 2019
Earnings Release
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Periodic statement - regulated information Ternat, 17 May 2019
The retail properties that were let in Genk and Maasmechelen represent a rental income of EUR 0.66 million and were purchased on the basis of an investment value of EUR 9.75 million and a fair value of EUR 9.51 million. These values correspond to the values determined by the real estate expert CBRE.
The properties in Genk and Maasmechelen are owned by a real estate company that was acquired by Retail Estates. This transaction was funded by taking out bank loans and by the non-monetary contribution in kind of a receivable for an amount of EUR 2.31 million.
In December 2018, three retail parks, situated in Mons (Belgium, province of Hainaut), Arlon (Belgium, province of Luxembourg) and Hasselt (Belgium, province of Limburg) respectively, were acquired.
The retail park at Mons is part of the site "Les Grands Prés - Shopping de Wallonie", consisting of a shopping mall, a Carrefour hypermarket and an IKEA store. The entire property represents a total of approximately 101,000 m2. The retail park part of this site covers an area of 11,779 m2 and consists of 7 retail units, which have all been let to retail chains such as AS Adventure, Maisons du Monde, Krëfel and Heytens.
The retail park in Arlon (Belgium, province of Luxembourg) is located on the Belgian side of the border between Belgium and the Grand Duchy of Luxembourg in the "Sterpenich" shopping zone. IKEA and Decathlon provide this zone with a strong regional appeal. The retail park consists of a retail area of 11,123 m3 featuring six retail units. The tenants are retail chains active in the home decoration sector, such as Maisons du Monde, Light Gallery, Extra. One retail unit of 1,812 m2 has not yet been let.
The retail park in Hasselt (province of Limburg) is on the edge of the site where IKEA recently constructed a branch near the Hasselt Zuid exit of the E311 motorway to Liège. It has a surface area of 5,761 m2 and consists of four units. All tenants are active in the home decoration sector. The tenants are the retail chains Mediamarkt, X2O, Kwantum and Maisons du Monde. All retail units are let.
The acquisition of these retail parks resulted from the acquisition of exclusive control of three real estate companies. The investment in this transaction amounts to EUR 60.00 million. For the vacant retail unit, an additional investment of maximally EUR 3.00 million will be made after the unit will have been let. The retail units that have been let generate a rental income of EUR 3.67 million and represent a fair value of EUR 58.43 million. The acquisitions were funded by taking out bank loans.
Also in December 2018, the retail park "Shop in Stock" in Fosses-la-Ville (Belgium, province of Namur) was acquired: this retail park is situated to the northwest of Namur (between Namur and Charleroi). It has a strong regional appeal in a customer zone of approx. 20 km between Namur, Dinant, Charleroi and Gembloux. The retail park has
Completion of this project is expected 12 months after the permit is obtained.
Furthermore, the company is investing in the renovation of its retail park at Roosendaal. The permits for this renovation were obtained and the commercialisation was started. The additional investment is expected to amount to approximately EUR 4.70 million. Completion is expected by December 2020.
Furthermore, the company intends to invest in the expansion of its retail cluster at Namen-Zuid for its own account on behalf of a DIY store in Jambes. The additional expected investment is estimated at EUR 12.6 million (total investment EUR 14.72 million) and will consist of the creation of a retail property of approximately 8,000 m2. Completion is expected by May 2021, provided that an agreement with the prospective tenant can be reached soon.
After a successful repositioning of the retail park at Braine l'Alleud, Retail Estates started the restructuring of the Kruger retail park at Eeklo in March. The expected investment amounts to EUR 1.30 million. Completion of these works is expected by November 2019.
In Halle, a project has been started to double the sales area of Brantano. This extension was necessary due to the changes in the retail concept of Brantano. The expected investment amounts to EUR 1.88 million and completion is expected by late 2020.
Due to a concept change at Aldi, an extension of the retail unit in Sint-Niklaas is necessary. The expected investment amounts to EUR 1.05 million. Completion of this extension is expected in September 2020.
Finally, a number of smaller projects are still ongoing, for which the investment is expected to amount to EUR 0.14 million in the course of the new financial year.
There are currently no major projects in this stage of development.
In Frameries the extension of an existing retail park by 9,500 $m2$ was completed. The existing retail park is a recently constructed complex, which was developed into a strong pole of attraction in a densely populated area between Mons and the French border. This retail park, comprising eight retail units and a retail area of approximately 10,000 m2, was extended by six retail units with a retail area of 7,210 m2 and a fair value of EUR 10.19 million. The total investment amounted to EUR 10.45 million.
The occupancy rate of the Retail Estates ny real estate portfolio is 98.28%.
Obviously, the occupancy rate must be seen as a snapshot taken of a series of mutations in the previous financial year. It does not imply a guarantee for the future, as the legislation on commercial lease is mandatory and allows for cancellation every three years by all tenants.
Eight smaller SME tenants (six in Belgium and two in the Netherlands) filed for bankruptcy in the past financial year. The necessary provisions were created for the irrecoverable debts.
At the end of this financial year, outstanding trade receivables amount to EUR 2.63 million. An amount of EUR 0.43 million relates to the revolving fund and the reserve fund. Taking into account the guarantees obtained – both rental guarantees and the requested bank guarantees - and the receivables not yet due, the credit risk on trade receivables is limited to approximately 9.86% (EUR 0.26 million) of the outstanding amount on 31 March 2019.
Two properties were damaged by fire in the past financial year. The insurance company paid a compensation. Unfortunately, vandalism is a recurring problem for retail units located at the outskirts of large urban agglomerations.
Retail Estates combines bilateral credits with different banking partners and private placements of bonds for institutional investors. The average maturity of the credit portfolio is 4.83 years. Within the context of the financing of its activities, Retail Estates has a commercial paper programme of (up to) EUR 100 million since September 2017 (and extended in October 2018). The commercial papers are fully covered by back-up lines and unused credit lines that serve as a guarantee for refinancing should the placement or renewal of the commercial papers prove to be impossible or only partially possible.
As of 31 March 2019, an amount of EUR 60.5 million of this commercial paper programme has been used.
The average interest rate on 31 March 2019 is 2.31% compared to 2.62% on 31 March 2018.
For more information with regard to the financing, please refer to note 34 et seq. to the annual report 2018-2019.
These non-monetary contributions have taken place pursuant to two agreements entered into on 20 December 2018 with regard to the acquisition of all shares of ny Textiel d'Eer and all shares of ny Viafobel respectively. Within the scope of both transactions, part of the sales price was not paid at the time. The receivables relating to the unpaid part of the sales price have now been contributed. The closing price on the date on which the agreements were signed amounted to EUR 74.70. As a result of the subsequent price increase, the issue price represents a 19.95% discount on the closing price on 29 March 2019.
Retail Estates intends to distribute the dividend for the 2018/2019 financial year to the shareholders by means of an interim dividend, whereby an optional dividend is offered at an issue price of EUR 68,425. This issue price is in line with the issue price applied by the company in recent public and private transactions and takes into account the fact that the new shares would be entitled to a dividend as from 1 April 2019. This interim dividend in the form of an optional dividend is still subject to the approval of the supervisory authority under the BE-REIT Act and a final decision of the company's board of directors.
On 16 November 2018 the merger by acquisition of the company Libraiem byba by Retail Estates nv was adopted by the boards of directors of the respective companies, effective as of 30 November 2018.
On 16 November 2018 the merger by acquisition of the company Heerzele ny by Retail Estates ny was adopted by the boards of directors of the respective companies, effective as of 31 December 2018.
Mergers of subsidiaries simplify administrative management and reduce the taxable income of the subsidiaries of Retail Estates nv.
The net rental income increased by EUR 17.13 million, mainly due to the acquisition of additional properties (EUR 5.18 million) and the completion of projects in the 2018-2019 financial year (EUR 0.28 million), and the acquisition of the properties and the completion of the projects in the previous financial year that yielded a full year's rent for the first time this year (EUR 11.92) million). The sale of properties resulted in a decrease in net rental income of EUR 1.41 million. The sale of properties during the previous financial year resulted in a decrease in this year's net rental income by EUR 0.25 million. The impact of contract renewals is EUR 0.45 million.
| Publication of the annual report 2018-2019 | 14 June 2019 |
|---|---|
| General meeting | 22 July 2019 |
| Ex-coupon date | 31 May 2019 |
| Announcement of half-yearly results | 15 November 2019 |
| Rental income | 95,411 | 78,046 |
|---|---|---|
| Rental-related expenses | $-430$ | $-198$ |
| Net rental income | 94,981 | 77,848 |
| Recovery of property expenses | ||
| Recovery of rental charges and taxes normally payable by the tenants on let properties | 10,403 | 7,567 |
| Rental charges and taxes normally payable by the tenants on let properties | $-11,786$ | $-8,498$ |
| Other rental related income and expenses | $-58$ | $-41$ |
| Property result | 93,539 | 76,876 |
| Technical costs | $-3,829$ | $-2,948$ |
| Commercial costs | $-870$ | $-618$ |
| Charges and taxes on unlet properties | $-306$ | $-408$ |
| Property management costs | $-2,562$ | $-2,158$ |
| Other property costs | $-18$ | 8 |
| Property costs | $-7,586$ | $-6,124$ |
| Operating property result | 85,954 | 70,752 |
| Operating corporate costs | $-5,147$ | $-4,518$ |
| Other current operating income and expenses | ||
| Operating result before result on portfolio | 80,807 | 66,234 |
| Result on disposals of investment properties | 654 | 92 |
| Result on sales of other non-financial assets | ||
| Changes in fair value of investment properties | 7,361 | $-2,505$ |
| Other result on portfolio | $-1,058$ | 1,106 |
| Operating result | 87,764 | 64,927 |
| Financial income | 93 | 70 |
| Net interest charges | $-18,479$ | $-17,379$ |
| Authorised hedging instruments' costs | $-13, 374$ | 101 |
| Other financial charges | $-67$ | $-60$ |
| Financial result | $-31,826$ | $-17,268$ |
|---|---|---|
| Result before taxes | 55,938 | 47,659 |
| Taxes | -1.458 | -964 |
| Net result | 54,479 | 46,695 |
| Attributable to: Shareholders of the Group Minority interests |
54,479 | 46,695 |
| Note: EPRA result (Group share) 1 Result on portfolio Variations in fair value of financial assets and liabilities |
60,896 6,958 $-13,374$ |
47,901 $-1,307$ 101 |
| RESULT PER SHARE | ||
| Number of ordinary shares in circulation Weighted average number of shares Net profit per ordinary share (in $\epsilon$ ) 2 Diluted net profit per share (in $\epsilon$ ) EPRA result per share (in $\epsilon$ ) 3 |
11,422,593 11,265,034 4.84 4.84 5.41 |
9,489,661 9,331,494 5.00 5.00 5.13 |
| I. STATEMENT OF OTHER COMPREHENSIVE INCOME (in € 000) | ||
| Net result Other components of other comprehensive income, recyclable in income statements: Impact on the fair value of estimated transaction rights and costs resulting from |
31.03.19 54,479 |
31.03.18 46,695 |
| the hypothetical disposal of investment properties Changes in the fair value of authorised hedging instruments qualifying for hedge |
$\overline{O}$ | 0 |
| accounting as defined by IFRS | 3,183 | 5,365 |
| COMPREHENSIVE INCOME | 57,662 | 52,060 |
| 31.03.19 | 31.03.18 | |
|---|---|---|
| Non-current assets | 1,535,431 | 1,354,397 |
| Goodwill | ||
| Intangible non-current assets | 142 | 115 |
| Investment properties 4 | 1,529,629 | 1,349,367 |
| Other tangible non-current assets Financial non-current assets |
2,812 | 2,119 |
| Financial lease receivables | 186 | |
| Trade receivables and other non-current assets | 1,030 | 1,030 |
| Deferred taxes | 1,632 | 1,767 |
| Other | 1,113 | 1,249 |
| 519 | 518 | |
| Current assets | 28,461 | 39,776 |
| Non-current assets or groups of non-current assets held for sale | 17,406 | 29,201 |
| Trade receivables | 4,051 | 3,533 |
| Tax receivables and other current assets | 2,342 | 2,281 |
| Cash and cash equivalents | 3,163 | 3,389 |
| Deferred charges and accrued income | 1,500 | 1,371 |
| TOTAL ASSETS | 1,563,892 | 1,394,173 |
| HAREHOLDERS' EQUITY AND LIABILITIES (in € 000) | 31.03.19 | 31.03.18 |
| Shareholders' equity | 707.926 | 568.332 |
| Shareholders' equity attributable to the shareholders of the parent | ||
| company | 707,926 | 568,332 |
| Capital | 248,939 | 208,205 |
| Issue premiums | 260,174 | 177,990 |
| Reserves | 144,335 | 135,442 |
| Net result of the financial year | 54,479 | 46,695 |
| Minority interests | ||
| Liabilities | 855,966 | 825,841 |
| Non-current liabilities | 733,220 | 766,518 |
| Provisions | ||
| Non-current financial debts | 706,793 | 746,000 |
| Credit institutions | 622,200 | 661,494 |
| Long-term financial lease | ||
| Bonds | 84,593 | 84,506 |
| Other non-current financial liabilities | 26,427 | 20,518 |
| pder construction developments according to the adjusted IAS 40 standard |
| - - - - |
|
|---|---|
| (in € 000) | 31.03.19 | 31.03.18 |
|---|---|---|
| Operating result before result on portfolio (A) | 80,807 | 66,234 |
| Net rental income (B) | 94,981 | 77,848 |
| Operating margin (A/B) | 85.08% | 85.08% |
| Financial result (excluding variations in fair value of financial assets and liabilities). |
||
| (in € 000) | 31.03.19 | 31.03.18 |
| Financial result (A) | $-31,826$ | $-17,268$ |
| Variations in fair value of financial assets and liabilities (B) | $-13,374$ | 101 |
| Financial result (excluding variations in fair value of financial assets and liabilities) (A-B) |
$-18,452$ | $-17,369$ |
| Result on portfolio | ||
| (in € 000) | 31.03.19 | 31.03.18 |
| Result on disposals of investment properties (A) | 654 | 92 |
| Result on sales of other non-financial assets (B) | ||
| Changes in fair value of investment properties (C) | 7,361 | $-2,505$ |
| Other result on portfolio (D) | $-1,058$ | 1,106 |
| Result on portfolio (A+B+C+D) | 6,958 | $-1,307$ |
| Weighted average interest rate | ||
| (in € 000) | 31.03.19 | 31.03.18 |
| Interest charges (including the credit margin and the cost of hedging instruments) (A) | 17,261 | 16,583 |
| Weighted average financial debt of the period (B) | 747,040 | 632,052 |
| Weighted average interest charge (A/B) | 2.31% | 2.62% |
| Net asset value per share (investment value) excluding dividend excluding the fair value of authorised hedging instruments |
||
| (in € 000) | 31.03.19 | 31.03.18 |
| Shareholders' equity attributable to the shareholders of the parent company (A) | ||
| Impact on the fair value of estimated transaction rights and costs resulting from the hypothetical disposal of investment properties (B) |
707,926 | 568,332 |
| $-51,030$ | $-44,780$ | |
| The fair value of authorised hedging instruments qualifying for hedge accounting (C) Proposed gross dividend (D) |
$-23,879$ 48,546 |
$-13,688$ 40,995 |
| Number of ordinary shares in circulation (E) | 11,422,593 | 9,489,661 |
| 31.03.19 | 31.03.18 | |
|---|---|---|
| EPRA earnings | EUR/1000 | EUR/1000 |
| IFRS Net Result (group share) | 54,479 | 46,695 |
| Adjustments to calculate EPRA earnings | ||
| Excluding: | ||
| Variations in the fair value of investment properties of assets held for sale (IAS40) |
7.361 | $-2,505$ |
| Other result on portfrolio | $-1.058$ | 1.106 |
| Result on disposal of investment properties | 654 | 92 |
| Variations in fair value of financial assets and liabilities | $-13,374$ | 101 |
| Adaptations to minority interests | ||
| EPRA earnings (group share) | 60,895 | 47,900 |
| EPRA earnings (EUR/share) (group share) | 5.41 | 5.13 |
| EPRA Net Asset Value (NAV) | EUR/1000 | EUR/1000 |
| Net Asset Value (group share) according to the financial | ||
| statements | 707,926 | 568.332 |
| Net Assets (EUR/share) (group share) Effect of exercise of options, convertible debts and other |
61.98 | 59,89 |
| equity interests | ||
| Diluted net asset value after effect of exercise of options, | ||
| convertible debts and other equity interests | 707,926 | 568,332 |
| Excluding: | ||
| Fair value of the financial instruments | $-23,879$ | $-13,688$ |
| EPRA NAV (group share) | 731,805 | 582,020 |
| EPRA NAV (EUR/share) (group share) | 64.07 | 61.33 |
| EPRA Triple Net Asset Value (group share) | EUR/1000 | EUR/1000 |
| EPRA NAV (group share) | 731,805 | 582,020 |
| Including: | ||
| Fair value of the financial instruments Difference between fair value and nominal value of the |
$-23,879$ | $-13,688$ |
| financial debts | 9.652 | 0 |
| EPRA Triple Net Asset Value (group share) | 717,578 | 568,332 |
| EPRA NNNAV (EUR/share) (group share) For the definitions of the EPRA key performance indicators, please refer to the annual report 2018-2019. Source: EPRA Best Practices |
61.98 | 59.89 |
| 31.03.19 | 31.03.18 | ||
|---|---|---|---|
| EPRA Net Initial Yield | EUR/1000 | EUR/1000 | |
| Investment properties (excluding assets held for sale) fair value |
1,529,629 | 1,349,367 | |
| Transaction costs | 49,663 | 43,060 | |
| Investment value | 1,579,292 | 1,392,427 | |
| Project developments | 12,119 | 24,981 | |
| Investment value of the properties available | B | ||
| for rent | 1,567,174 | 1,367,446 | |
| Annualised gross rental income | 104,872 | 93,345 | |
| Property costs | |||
| Rent payable on rented assets and lease costs |
$-1,917$ | $-1,550$ | |
| Recovery of rental charges and taxes | $-228$ | $-211$ | |
| payable by the tenants on let | 10,403 | 7,567 | |
| properties | $-11,786$ | $-8,498$ | |
| Charges and taxes on unlet | $-306$ | $-408$ | |
| properties Annualised net rental income |
A | ||
| Notional amount upon expiration of rent- | 102,954 | 91,795 | |
| free period or other lease incentives | |||
| Topped-up annualised net rental income | C | 102,954 | 91,795 |
| EPRA Net Initial Yield (NIY) | A/B | 6.57% | 6.71% |
| EPRA Topped-up Net Initial Yield | C/B | ||
| (topped-up NIY) | 6.57% | 6.71% | |
| EPRA Vacancy Rate | EUR/1000 | EUR/1000 | |
| Estimated rental value of the vacant surfaces | |||
| Estimated rental value of total portfolio | 1,369 | 1,129 | |
| EPRA Vacancy Rate | 104,872 | 93,345 | |
| 1.31% | 1.21% | ||
| EPRA Cost Ratio | EUR/1000 | EUR/1000 | |
| Operating corporate costs | 5,147 | 4,518 | |
| Impairments on trade receivables | 202 | $-13$ | |
| Land rent costs | 228 | 211 | |
| Property costs | 7,586 | 6,124 | |
| Less: | |||
| Land rent costs | $-228$ | -211 | |
| EPRA costs (incl. vacancy costs) | 12,934 | 10,629 | |
| Vacancy costs | $-117$ | $-239$ | |
| EPRA costs (excl. vacancy costs) | 12,817 | 10,390 |
| Rental income less land rent costs | 95.182 | 77.835 |
|---|---|---|
| EPRA Cost Ratio (incl. vacancy costs) | 1359% | 13.66% |
| EPRA Cost Ratio (excl. vacancy costs) | 13 47% | 13.35% |
Retail Estates ny is a public regulated real estate company and more specifically a niche company that specialises in investing in out-of-town retail properties which are located on the periphery of residential areas or along main access roads into urban centres. Real Estates NV acquires these real properties from third parties or builds and commercialises retail buildings for its own account. The buildings have useful areas ranging between 500m2 and 3,000m2. A typical retail property has an average area of 1,000 m2.
As of 31 March 2019, Retail Estates nv has 906 premises in its portfolio with a total retail area of 1,049,101 m2. The occupancy rate of the portfolio was 98.28% on 31 March 2019, compared to 98.11% on 31 March 2018.
The fair value of the consolidated real estate portfolio of Retail Estates NV as at 31 March 2019 is estimated at EUR 1,529,629 million by independent real estate experts.
Retail Estates NV is listed on Euronext Brussels and Euronext Amsterdam and is registered as a public regulated real estate company. As at 31 March 2019, the stock market capitalisation of the shares amounts to EUR 927.52 million.
This press release contains a number of forward-looking statements. Such statements are subject to risks and uncertainties which may lead to actual results being materially different from the results which might be assumed in this press release on the basis of such forward-looking statements. Major factors that may influence these results include changes in the economic situation, commercial, tax-related and environmental factors.
Ternat, 17 May 2019
Jan De Nys, CEO of Retail Estates nv
For more information, please contact:
Retail Estates nv, Jan De Nys - CEO, tel. +32 2/568 10 20 - +32 475/27 84 12 Retail Estates ny. Kara De Smet – CFO, tel. +32 2/568 10 20 – +32 496/57 83 58
Openbare GVV naar Belgisch recht Industrielaan 6 - B-1740 Ternat RPR Brussel BTW BE 0434.797.847 $T: +3225681020$ [email protected] www.retailestates.com
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