ProLogis European Properties, one of Europe's largest owners of modern distribution facilities, yesterday (July 22, 2010) reported results for the second quarter and six months ended June 30, 2010.
- 0.3% increase in the portfolio value since December 31, 2009 resulting from a valuation decrease of 1.1% more than offset by an improvement in foreign exchange rates
- EPRA1 net asset value per ordinary unit up by 2.0% to 6.27 since end 2009, reflecting stabilizing portfolio values and a further quarter of retained earnings; IFRS net asset value per ordinary unit up to 5.99 from 5.97 at end 2009 �� Maintained high level of portfolio occupancy at 93.7%, comfortably above the market average
- Further progress on refinancing and deleveraging initiatives:
all Commercial Mortgage-Backed Securities ("CMBS") fully repaid
no significant debt maturities until December 2012
in advanced discussions on new revolving credit facility
- Continued improvement of loan-to-value ratio: to 53.3% from 53.7% in March and 55.0% at end 2009
- Revised guidance: EPRA earnings and distributable cash flow per ordinary unit in the range of 0.40 to 0.44 due to slower forecasted growth in occupier demand than previously anticipated.
Commenting on the results, Peter Cassells, Chief Executive Officer of PEPR, said: "We have delivered solid operating performance and financial results during what continues to be a challenging market environment. These results are testament to the quality of PEPR's pan-European portfolio, established customer relationships and the expertise of its management teams.
"The first half of the year was dominated by significant leasing activity as we continue to prioritize for portfolio occupancy as a key objective. As a result of this activity, we have maintained our occupancy levels at a high 93.7%, well above the industry average, while at the same time removing some of the risks surrounding future lease expiries, especially in weaker markets."
Chief Executive's review
Continued uncertainty over the pace and scale of economic recovery in Europe as well as the introduction of austerity measures in a number of EU member countries has hindered improvements in occupier market conditions and as a result the rental markets remain soft. We believe that a patchy economic recovery will lead to a gradual absorption of existing vacancy; this has been borne out by the volume of leasing transactions witnessed in the UK over the last six months as it begins to emerge from the recent economic crises. However, we now do not anticipate any material improvement in market conditions across the greater region until 2011.
Despite these challenges, we are pleased to report an increase in net asset value per ordinary unit due to the stabilization of property values across the majority of markets, combined with the strengthening of sterling in the first half of the year and the continued retention of earnings. Interestingly, property values within all our markets moved within a tight band of plus or minus 2% since year-end 2009, potentially signaling the trough of European portfolio values.
Our reported earnings for the second quarter and half year are broadly in line with our expectations. However, we expect the slowdown in the pace of recovery in Europe generally will impact our second half portfolio performance more than previously anticipated, accordingly we are revising our full-year guidance for both EPRA earnings and distributable cash flow to between 0.40 and 0.44 per ordinary unit from between 0.45 and 0.50 per ordinary unit.
During the second half of 2010, we will strive to improve further our financial metrics, continuing to reduce leverage and seeking a return to an investment grade credit rating over time. In addition, we will ensure that we remain well placed to capture the benefits of any improvements in occupier demand, maintaining high portfolio occupancy through consistently strong leasing performance and driving cash flow from t