The stability of KlÃ©pierreâs business model, based on its European growth strategy, was reflected in the 19.4% rise in shopping center rents for 2004. This excellent performance is attributable to the geographic diversity of KlÃ©pierreâs operations - 43% of its shopping center rents are now generated outside France â" as well as to a dynamic mix of organic growth and sustained external growth.
KlÃ©pierre took advantage of historically low long-term interest rates last December to improve its interest-rate hedging profile.
Significant increase in shopping center lease income: + 19.4%
Shopping center rents increased by 19.4% in 2004, to 333.1 million euros. Properties outside France now generate 43% of total shopping center lease income (compared with 35.8% in 2003) and 36% of total rents (versus 28.2% in 2003). Spain remains the leading contributor, followed by Italy, with 15.4% and 14.7% of total shopping center rents, respectively. Consolidated over six months of operation, Hungary generated 4.2% of the total, becoming the third largest contributor.
Dynamic mix of external and organic growth
The 19.4% increase in shopping center rents reflects external growth (15% or 44.1 million euros). France accounted for 5 million euros of the total, with three acquisitions in 2003 and three in 2004. Acquisitions in foreign markets accounted for 88.6% of the total, itemized below:
- Hungary: 14.1 million euros, with the July 2004 acquisition of a portfolio of 12 downtown shopping malls.
- Spain: 10.1 million euros, with the acquisition of 10 malls in 2003, followed by Santander in late July of last year.
- Portugal: 7.3 million euros, with three centers acquired in 2003, of which Porto-Gondomar (3.5 million euros) is the largest.
- Italy: 5.6 million euros, with four centers acquired in 2003 and one in 2004, plus the recent purchase of an additional 10% interest in IGC last November.
Shopping center rents rose by 4.4% on a constant portfolio basis, mainly attributable to the following factors:
- 3% on average due to indexed-linked rent adjustments, of which 3.4% in France and 2.4% in Spain and Italy.
- Active efforts to capitalize on upside rental potential: for all countries combined, 525 leases were renewed and 381 leases were contracted with new tenants over the period, resulting in average reversion of 22% and 17.8%, respectively.
Variable rents accounted for 11.1 million euros of the total, equal to 3.3% of total shopping center lease income, versus 4.2% for the year ended December 31, 2003. France accounts for most of this relative and absolute decline (-1.5 million euros. The financial occupancy rate remains high (98.4% in 2004, versus 97.9% one year earlier).
KlÃ©pierre confirms low cycle sensitivity
The Groupâs stable growth should be examined in light of fluctuations in consumption over the last 12 months, which did not impact KlÃ©pierreâs revenues in 2004. In France, 2004 ended with a three-month rise in consumer spending, with November and December being particularly strong months. This trend was observed in both shopping malls and hypermarkets. For the first 11 months in 2004 and throughout Continental Europe, shopping mall revenues rose by 3.1% (2.6% in Italy and 6.8% in Spain).
For KlÃ©pierreâs retail anchors in France, sales rose by 2.9% in 2004, showing strength in the fourth quarter of the year (+5.0%), while global retail business (source: Banque de France) rose by 1.4% in 2004. Downtown shopping malls turned in the best performance (+5.0%), outpacing regional and inter-communal centers (+2.0% and +2.6%, respectively). Beauty/Health and Culture/Entertainment retailers reported the highest gains (+6.1% and +3.4%, respectively). The positive trend observed over the last three months can only have a favorable impact on future performance.
KlÃ©pierre: confident in 2005
âWhat is striking about 2004 is that the performances generated are so consistent with our business and growth model,â noted KlÃ©pierre Executive Board Chairman Michel