Eurocommercial Properties N.V. (the Company) announced its December 2003 half year results today, showing net income up 11% on the previous corresponding period.
Net income for the six months to 31 December 2003 was € 22.1 million compared to € 20.0 million for the same period in 2002. The net earnings per depositary receipt increased to € 0.75 compared to € 0.70 for the same period in 2002. Under current circumstances the Board expects that the annual dividend per depositary receipt for 2004 will be at least equal to the dividend for 2003.
The net asset value per depositary receipt at 31 December 2003 was € 21.82 which compares with € 21.35 at 31 December 2002. The net asset value at the full year end at 30 June 2003 was € 22.53 but this figure included the annual dividend of € 1.43 per depositary receipt. All properties will be valued at the year end, in accordance with the Company´s normal procedures.
The Company increased its share capital by 3.3% in November 2003 mainly by issuing bonus depositary receipts for a total amount of € 19.8 million. The 6.67% stock dividend option (1 for every 15 held) was taken up by 47% of holders of depositary receipts. Shareholders’ equity at 31 December 2003 was € 660 million.
During the period the Company acquired properties for € 140 million and an average net yield of 7.25%.
Four hypermarkets and associated shops were purchased in Sweden; three anchored by ICA and one by Coop Forum. The cost of the centres was € 86 million, with an overall net yield of 7.5% bringing the Company’s investment in Sweden to € 161 million in six centres.
In Italy the gallery of a Coop hypermarket anchored shopping centre in Bologna was purchased for € 26.8 million at a net yield of 6.35%.
The 16 screen cinema in the car park at the Company’s existing shopping centre, I Gigli, near Florence was completed and acquired at a price of € 23.6 million and a net yield of 7.4%. It is operated by Pathé in partnership with an Italian group.
Little has changed in the last six months with strong demand for good retail investment properties and very little supply in the main western European markets.
The Italian market is seeing an increase in supply of new shopping centres, particularly in the centre and south of the country, but this is merely redressing the previous massive undersupply of modern retail space and overall shopping centre density levels remain, on average, below those in other major European countries. Investor interest has grown significantly so that if anything there is upward pressure on prices with yields hardening slightly.
Yields in Sweden are on average about 1% higher than in France or Italy which partly reflects the currency risk of the Kroner against the Euro and partly less restrictive planning policies. Current yields, nevertheless represent good value in our view given low rent levels and undemanding rent to turnover ratios.
Retail sales in the Company’s centres have shown a like for like average increase of close to 2% for the year to December 2003 compared with 2002. This is hardly exciting, but unsurprisingly reflects subdued economic growth over the period.
Office leasing markets are generally weak, particularly so in The Netherlands where vacancies remain at high levels.
The warehouse sector in France and The Netherlands has seen subdued tenant demand, but investor interest remains sound for properties in better locations.
Investment strategy and outlook
The Company will continue to concentrate on the retail sector in its core markets taking opportunities to expand and improve centres where it can do so. Consideration may be given to Spain and Belgium, if suitable opportunities arise.
The recently acquired Swedish properties increase the portfolio there to six centers and offer expansion and remerchandising possibilities which should lead to good rental growth. Further acquisitions are under consideration in Swe