Eurocommercial Properties (ECP) is now effectively a pure retail property company following the sale of its last office building.
Rental growth continued in ECP's French, Italian and Swedish shopping centres and other retail properties, averaging 4.9% on a like for like basis and 6.0% in total, taking into account increased floor space as a result of completed extensions.
There have been no significant increases in vacancies or rental arrears.
Direct investment result
ECP's direct investment result (net property income less net interest expenses, company expenses and corporate income taxes) for the nine months to March 31, 2009 rose 6.0% to 49.0 million from 46.3 million for the previous corresponding period ended March 31, 2008.
The direct investment result per depositary receipt, which includes the depositary receipts that were issued as stock dividend in November 2008, increased by 5.4% to 1.37 per depositary receipt compared with 1.30 for the same period in 2008.
Adjusted and IFRS net asset value
Property valuations were not undertaken at the end of the nine month period in accordance with the Company's policy to only commission independent revaluations at the half year and year ends. The adjusted net asset value per depositary receipt therefore changed minimally since December 2008, reflecting only accrued income and currency movements.
The adjusted net asset value figure for March 31, 2009 was 35.40 per depositary receipt compared with 34.94 at December 31, 2008 and 40.16 at March 31, 2008, reflecting decreased property values over the twelve month period. Adjusted net asset values do not take into account contingent capital gains tax liabilities if all the properties were to be sold simultaneously nor do they take into account the fair value of financial derivatives (interest rate swaps) which are used to stabilise interest costs.
The IFRS net asset value at March 31, 2009, after allowing for contingent capital gains tax liabilities if all properties were to be sold simultaneously and the fair value of the interest rate swap contracts, was 30.45 per depositary receipt compared with 30.48 at December 31, 2008 and 35.97 at March 31, 2008.
The proceeds from the sale of the Company's last office building at Kingsfordweg 1 in Amsterdam, which were received at the balance date, have since been used to reduce short-term debt. Taking this reduction into account, total debt stands at 909 million, 6% of which is short term (less than one year). The Company's debt to adjusted equity ratio is accordingly 72% and the loan to property value is 41%.
At March 31, 2009 the interest cover was 2.6x and the maturity of the loan portfolio was more than eight years. Interest payments have been fixed, through swap contracts, for an average term of over six years and an overall rate of 4.5% including margins. The "mark to market" negative value of the swaps on the balance sheet reflects current low base interest rates but not the Company's very low average bank margins of 47bps, giving a total average all up interest rate of 4.5%.
Shopping center performance
All shopping center performance figures exclude those centres where extensions during the period make comparisons with previous periods invalid Carosello in Milano, Elins Esplanad in Skövde and Ingelsta Shopping in Norrköping.
Once again there was a disparity between sales turnover results for boutiques (shops under 300 m²), which were generally flat, and large stores (over 300 m²), particularly electrical and home goods, which were mostly negative. However in Sweden, where ECP owns five hypermarkets, the larger stores outperformed the smaller ones.
Overall rental growth for the total portfolio was 6.0%. This figure allows for higher rental levels on the increased floor area of certain shopping centers.
Like-for-like (same floor area) rental growth in the Company's retail properties for the 12 months remained solid, averaging 4.9% for