Rodamco Europe is reporting good results for the first quarter of 2005. Based on the new International Financial Reporting Standards (IFRS), direct result after tax is up 6.2% over the year and Triple NAV per share grew to 51.16. Rodamco Europe is focusing on these two items in evaluating its performance under IFRS: direct result after tax for its operational performance and Triple NAV for the intrinsic value, where assets as well as liabilities have been adjusted to market values where not already the case under the requirements of IFRS. Triple NAV growth was supported by the strong valuation result, which was also the main contributor to the 97.1% growth of net shareholders profit in Q1 2005.
CEO Maarten Hulshoff: "Rodamco Europe's strategy to focus on top quality retail in dominant locations in its key markets, whilst further emphasizing the management of our retail properties, continues to contribute to solid and positive results. The rental income stream from our retail investment portfolio has grown well over inflation in the first quarter 2005 and has a further rental growth potential of 20% (standing investment portfolio and committed pipeline projects), which in combination with the local know-how of our management teams in Europe, gives us a strong competitive position and a stable platform for further growth. The high quality of our shopping center portfolio has resulted in one of the highest occupancy rates in the sector. This coupled with a strong investor demand in retail property, has led to further upward revisions in valuations. Rodamco Europe further stands to benefit from 1.8 billion in total pipeline projects of which committed pipeline projects amount to 1 billion, the latter largely coming into operation during 2005-2006."
Net rental income under IFRS increased 8.0% 121.1 mln, compared to 112.1 mln in the first three months of 2004. Gross rental income increased 7.5% to 142.5 mln (Q1 2004: 132.6 mln). The gross rental income increase is primarily a result of rent generated from acquisitions during the later part of 2004 (2.1 mln; Väsby and Croix Dampierre), from properties coming into operation in 2004 (3.0 mln, mainly the shopping centers Piazza, Carnisse Veste and Woensel in the Netherlands), rent increases amounting to 3.5 mln and decreased doubtful debtors of 2.2 mln. This was partially offset by the effect of office disposals in the last year with a total negative effect of 1.1 mln on rental income in the first three months of 2005. Overall occupancy stabilized in March 2005 at 96.8% with retail occupancy remaining stable at 98.2%.
Like-for-like growth in net rental income was 5.8%. When excluding some smaller one-off effects in this comparison, like-for-like growth is 3.9%, which was well above the weighted average inflation rate. Especially Spain and France showed strong like-for-like growth.
Operating expenses (including net service charges and property operating expenses) were 4.4% higher at 21.4 mln for the first three months of 2005 (Q1 2004: 20.5 mln). The growth in operating expenses is influenced by incidental high service charge expenses in Q1 2004 and relatively low maintenance expenses in Q1, expected to increase in the remainder of 2005.
Valuation result and result on disposals
Under IFRS, property assets consist of investment property (booked at fair value), renovation projects (booked at fair value) and pipeline projects (booked at cost less impairments), the latter previously under Dutch GAAP recorded at fair value. Positive results on the valuation of Rodamco Europe's property assets accelerated in Q1 2005 to a total 72.1 mln. This amount can be split into approximately 40 mln as a result of yield shifts and 33 million due to increased rental income.
Furthermore a small impairment on the value of pipeline projects (minus 0.9 mln) is recorded. The valuation result of property assets was minus 2.6 mln during the same period 2004. The strong valuation result is driven by Rodamco Europe's focus on high quality ret