Although the European economy showed signs of a slowdown in the 1st quarter of 2005, revenues from KlÃ©pierreâs shopping mall holdings increased by 1.1% over the first two months of the year.
Revenues from Spanish properties rose by 3.8%, compared with 0.8% growth in France and no change in Italy. Revenue growth was significant in France in March (+5.1%), bringing growth for the 1st quarter to 2.3%. Inter-communal shopping centers drove this performance (+2.9%). Revenues from the Health/Beauty segment continued to lead (+2.7%), followed by Personal Products (+2.5%).
Sustained contribution from acquisitions
The Group once again reported a strong 14.5% rise in business for the 1st quarter of 2005, reflecting the pursuit of its acquisition program in 2004. Hungary, where the Group acquired 12 shopping centers in the first half of 2004, contributed 7.1 million euros to the total. In France, where two malls in the Toulouse region anchored by Leclerc hypermarkets were acquired in December 2004, generated 2.6 million euros in additional income.
Sustained organic growth
Shopping center lease income rose by 5.1% on a constant portfolio basis, reflecting:
- The significant impact of index-linked adjustments, which generated an average global increase of 3.9% in shopping center rents. In France, where 70% of KlÃ©pierreâs leases are pegged to the 2Q2004 ICC Construction Index (+5.41%), the rise was 4.8%.
- The pursuit of rental reversion. Management teams renewed a total 67 leases and concluded 101 new tenant lease-ups in all of the countries in which the Group has an operating presence, for an average increase of 13.2% and 22.3%, respectively.
Contributions from across Continental Europe
Rents generated by shopping centers outside France increased by 33% during the quarter. These properties now account for 39% of total lease income (â¬41.4 million) and 44.8% of total shopping center rents. Hungary now generates 7.7% of the shopping center total. France still contributes just over half of the total (55.2%), followed by Spain (15.1%) and Italy (14.1%).
The financial occupancy rate remains stable at 98.4%.
Office property rents fell by 17.2%, to 13.8 million euros, due to divestitures made in 2004, the sale of 43-45 KlÃ©ber in January 2005, and the cancellation of intra-group income following the relocation of KlÃ©pierre and SÃ©gÃ©cÃ© in April 2004 to two buildings owned by the Group. This performance also reflects a decrease in the financial occupancy rate (92.1% on March 31, 2005 versus 93.5% one year prior and 93.4% on December 31, 2004), in a market that has not yet shown tangible signs of recovery.
On a constant portfolio basis, vacancies resulted in a loss of approximately 1.5 million euros (-10.7%) in lease income. Seven leases, covering a total 8,087 square meters, were renegotiated during the quarter, generating an average increase of 8.7% and a rental capital gain of 0.2 million euros. On a constant portfolio basis, office property rents fell by 1.3%, to 13.7 million euros. The impact of renegotiations completed in 2004 (+6.5%) and index-linked rent adjustments (+2.9%) did not completely offset the impact of vacancies.
Two disposals were completed in the first quarter of 2005, covering 6,486 square meters, for a total of 24 million euros, in line with the appraised values at December 31, 2004. KlÃ©pierre maintains its disposal target for 2005 at around â¬100 million euros.
Fees from third-party property management business and from development, provided by SÃ©gÃ©cÃ© and its subsidiaries, increased by 4.6% (total share) to 8.4 million euros. The increase is primarily attributable to SÃ©gÃ©cÃ©âs acquisition of the remaining 50% equity interest in Centros Shopping Gestion in September 2004.