Dawnay, Day Treveria PLC Preliminary Results to 31 December 2007 Investors Presentation

Transcription

1 Dawnay, Day Treveria PLC Preliminary Results to 31 December 2007 Investors Presentation

2 Presentation Team Damian Wisniewski COO/CFO Dawnay, Day Treveria Real Estate Asset Management Limited D: Chris Kingham Property Director Dawnay, Day Treveria Real Estate Asset Management Limited D: Chris Hancock Director Dawnay, Day Treveria Real Estate Asset Management Limited D: Page 1 KC Wong - Director Dawnay, Day Treveria Real Estate Asset Management Limited D: kc.wong@dawnayday.com

3 Highlights Adjusted profits after tax of 36.4 million (2006 : 21.2 million) Adjusted EPS for the period of 5.3c* (2006 : 5.2c) and adding back the surrender premiums and related tax, adjusted EPS was 6.1c (2006: 5.2c) Proposed final dividend of 2.55c per share (2006 : 2.50c) giving a total of 5.10c for the year (2006: 4.50c), an uplift of 13% Property assets of 2,333 million (2006 : 1,715 million), after revaluation, as at 31 December 2007 Adjusted NAV per share* increased to 112.9c from 111.9c as at 31 December 2006, an increase of 0.9 per cent Investment phase of strategy now largely completed; now focused on asset management and recycling of capital *Adjusted NAV excludes deferred tax; adjusted EPS excludes revaluation surplus, deferred tax, surrender premiums and derivative fair value movements Page 2

4 German economy remains robust Forecast GDP growth of 1.5% for 2008, which is above the Euroland average of 1.3% Real disposable income expected to grow 1.6% in 2008 Unemployment down to 7.8% in March 2008, the lowest level since 1992 No.1 exporter in the world for 5 th consecutive year with 6.5% growth in 2007 Balanced budget achieved in 2007 for the first time since German reunification (1990) 3.0% 2.7% 2.6% % % 1.5% 1.6% 1.5% 1.8% % 0.9% % 0.0% -0.5% 0.1% -0.2% F 2009F Unemployment rate (%) Year on year real GDP grow th Source: Deutsche Bundesbank, Federal Ministry of Economics, IFO Source: Deutsche Bundesbank, Federal Labour Ministry Page 3

5 Retail Market in Germany In a survey of 185 cities carried out by Kemper s: 36% reported rising rents 60% stable 4% lower rents On average, German retail rents advanced by 2.5% in 2007 Cities in Eastern Germany continue to have rents increasing above average The Ladenschlussgesetz ( shop closing law ) had been abolished and regulation transferred to federal states. 14 of the 16 states have liberalised opening hours, Bavaria and Saarland remain unchanged Retailing trends: Banks looking for stores in prime locations again Retails chains looking at small to medium sized cities (20,000 to 100,000 inhabitants) Mobile phone shops & discounters moving into main pedestrian areas New store formats e.g. H&M s Collection of Style, C&A s Avanti, Peek & Cloppenburg s McNeal etc. Source: Kemper s, DTZ Page 4

6 German Retail Property Investment Market (1) Transaction volume , m 19,707 Breakdown by Retail Property Type 2006* ,714 Type b % b % 3,070 5,343 8,413 7,822 4,500 7,385 6,367 7,347 High Street Shops / Department Stores Shopping Centres Supermarkets DIY / Retail Warehouse Retail Portfolios KarstadtQuelle Portfolio Retail Individual Properties Retail parks TOTAL Source: Atisreal * Excludes Karstadt Quelle transaction German purchasers increased from 12% in 2006 to 18.9% in 2007 German investors put in 1.4 billion into property open ended funds in January 2008 whilst the outflow from equities was 3.1 billion Source: JLL/CBRE Page 5

7 German Retail Property Investment Market (2) Property Description Price Net Yield Mixed portfolio 12 retail and offices in Gera and Berhn 250m 5.4 % Heilbronn City Center Shopping Centre 98m 5.2% Rostock City Center Shopping Centre 83m 4.9% Landshut City Center Shopping Centre 72m 5.3% Berlin Suburban Shopping Centre 71m 5.3% A10 Centre Shopping centre in Wildenan 245m 5.4 % Messenhaus and Market Shopping centre in Leipzig 120m 4.8 % Straubing City Center Shopping Centre 70m 5.3 % Hoover 49 supermarkets & retail warehouses 130m 5.9 % Riverside 39 retail boxes / warehouses 122m 5.6 % Project Gemini 16 department stores, 35 DIY stores 684m 5.2 % Project David DIY stores, Hypermarkets and Supermarkets 500m 5.7 % Portfolio Cumulative Acquisition Profile (Based on Purchase Price and Notarisation Date) 2,500 2,000 1,500 1, Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Millions Page 6

8 German Retail Property Investment Market (3) Prime Retail Yields December 2007 Location Yield % 10 Year Record Current Last Quarter Last Year High Low Trend Berlin 4.75 % 4.75 % 5.00 % 5.25 % 4.75 % Stable Frankfurt 4.65 % 4.65 % 5.00 % 5.00 % 4.50 % Stable Hamburg 4.50 % 4.50 % 4.75 % 5.00 % 4.50 % Stable Munich 4.00 % 3.85 % 4.00 % 5.00 % 3.85 % Stable Düsseldorf 4.50 % 4.50 % 4.75 % 5.00 % 4.50 % Stable Stuttgart 4.75 % 4.75 % 5.00 % 5.00 % 4.75 % Stable Cologne 4.55 % 4.55 % 5.00 % 5.00 % 4.55 % Stable Essen 5.00 % 5.00 % 6.25 % 6.25 % 5.75 % Stable Leipzig 5.25 % 5.25 % 6.25 % 6.50 % 5.25 % Stable Dresden 5.55 % 5.55 % 6.25 % 6.50 % 5.55 % Stable Prime Rents and Rental Growth December 2007 Source: Cushman Wakefield Page 7 Location Rent % Growth (pa compound) (pm²/pm) 1 Year 5 Years Trend Berlin % 1.4 % Stable Frankfurt % 0.9 % Stable Hamburg % 0.7 % Stable Munich % 2.0 % Stable Düsseldorf % 2.7 % Stable Stuttgart % 1.6 % Stable Cologne % 1.5 % Stable Essen % -3.6 % Stable Leipzig % 1.8 % Stable Dresden % -0.4 % Stable

9 German Retail Property Investment Market (4) 5.00% Average Rental Growth Across Germany s 254 Largest Cities 2.50% 0.00% % m² m² m² 1,200-1,500 m² Average Source: Lührmann Holding GmbH & Co. KG Page 8

10 Property Portfolio Breakdown by Historic Political Borders Former West German 81.4% Former East Germany 11.3% Berlin 7.3% Investment Criteria Focus primarily on High Street retail Asset management opportunities Yield arbitrage opportunities Sustainable locations Good tenant mix No speculative development No single asset > 10% of target portfolio Page 9

11 Portfolio Analysis (1) Yields calculated post deduction of non-recoverable costs, ground rents, purchaser costs and capital expenditure Category Properties Area Valuation (31-Dec-07) % of Portfolio Gross Yield % Net Yield % Fully Let Yield % High Street ,000 m² 998 m 42.80% 6.57% 5.87% 6.38% Shopping Centre ,000 m² 572 m 24.53% 7.09% 6.37% 6.75% Retail Warehouse ,000 m² 628 m 26.92% 7.09% 6.55% 6.71% Total Retail 431 1,488,000 m² 2,198 m 94.24% 6.85% 6.19% 6.57% Mixed Commercial ,000 m² 134 m 5.76% 7.02% 6.72% 7.11% Total Portfolio 441 1,643,000 m² 2,333 m % 6.86% 6.22% 6.60% Average lot size of Portfolio 5.3 million Page 10

12 Portfolio Analysis (2) Weighted average lease length of portfolio of 5.4 years Page 11

13 Portfolio Analysis (3) Top 10 tenants make up 33.50% of portfolio rent roll 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% C & A Metr o Gr oup Real Kauf hof REWE Kauf l and Rol l er Si nn Lef f er s T r i nkgut Her ti e Page 12

14 Portfolio Analysis (4) Annualised Gross Passing Rent as at 31 December 2007 = 160.1m ERV = 173.8m including ERV of vacant space of 8.8m Effects of Indexation Inflation Rate Portfolio Rent Growth 2.0% % 3.0% % Assumption : No expiry of current leases throughout period; current vacant space not re-let Page 13

15 Asset Management - Leasing Activities ERV of vacant space as at 31 December 2007 : 5.50% of rent roll Activity Leases Signed Annual Rent New Lease Signed - Previously Let Space m New Lease Signed - Previously Vacant Space m Total New Leases m Indexation Uplift in m Page 14

16 Asset Management Case Study (1) Gelsenkirchen - Bahnhofstraße Vacant store acquired in portfolio for apportioned price of 860,000 Basement space converted to retail use, new 10 year lease signed to C & A s new retail format Avanti 4.4m landlord spend required to completely renovate building and provide escalators to basement and first floors New lease signed at rent of 788,000 p.a. subject to a 10% / 70% indexation provision Result: Uplift in valuation Page 15

17 Asset Management Case Study (2) Frechen - Hauptstraße Store acquired with regional tenant under occupational lease expiring December 2007 (no renewal right) New 3 year lease request from existing tenant rejected, instead new 10 year lease signed to C & A Capital expenditure of 600,000 on tenant fit out / fire protection measures / new façade Uplift in passing rent from 120,000 p.a. to 240,000 p.a. Result: Uplift in valuation Page 16

18 Asset Management Case Study (3) Ratingen - Oberstraße Shop let to Lindex until June 2010 at a rent of 229,000 p.a. subject to indexation on a 10% / 66% basis Surrender premium agreed with Lindex, landlord received 305,000 Approval of City to convert basement into retail use, costs of 975,000 borne by landlord New Lease: Shop let to H & M until December 2018 at a rent of 408,000 p.a. subject to indexation on a 10% / 80% basis Result: Uplift in valuation Page 17

19 Asset Management Case Study (4) Karlsruhe - Kaiserstraße 121 High Street property with residential and office in upper parts Store let to Hallhuber at rent of 407,000 p.a. with lease expiry in March 2010 Back-to-back surrender and new letting agreed, landlord received 300,000 surrender premium Landlord contribution of 300,000 towards full fit out of retail bank premises New lease: Tenant Citibank at a rent of 396,000 p.a. with lease expiry in July 2017 Page 18

20 Asset Management Case Study (5) Berlin Gloria Galerie Store acquired with tenant Lush under occupational lease expiring October 2014 Negotiations by asset managers allowed landlord to get the unit back without paying a premium to the outgoing tenant New lease signed to Binda (fashion jewellery retailer) Uplift in passing rent from 146,046 p.a. to 175,254 p.a. resulting in uplift in valuation Costs for refurbishment and fit out entirely paid by the tenant Page 19

21 Asset Management Case Study (6) Westerland Friedrichstr. 13 Store acquired with tenant Golfino under occupational lease expiring January 2009 with no renewal options Lease extension until December 2019 for further 10 years Rent increased from passing level of 108,000 p.a. to 150,000 p.a. Tenant completed entire refurbishment at their own cost Page 20

22 Sales Programme (1) Properties where the asset manager has instructed Jones Lang LaSalle GmbH to seek suitable offers Koblenz, Am Plan 28 Quality high street store let on a medium length good quality lease to Sinn Leffers AG. Store is located in close proximity to pedestrianised retail pitch in West German town of 107,000 people Fürth, Gerhardstraße Well established hypermarket located in prosperous German City, store benefits from 725 car parks and let on a single lease at a potentially reversionary rent to Marktkauf. Berlin, Kurfürstendamm Trophy retail building located on Berlin s most famous shopping street let to international retailers with hotel and residential accommodation in the upper parts. Page 21

23 Sales Programme (2) Selection of properties where the asset manager is currently negotiating with potential purchasers Pforzheim Leopoldstraße 6 Aachen Adalbertstraße 62 Amberg Georgenstraße 21 Verden Ritterstraße 6 Offer at above valuation rejected as the asset manager believes the property has substantial further asset management upside Purchase price agreed by asset manager, heads of terms out for signing with the purchaser Negotiations underway at premium to valuation; counter offer put forward to potential purchaser Significant interest in property at above book value; offers rejected as asset manager is working on substantial value enhancing asset management initiative Page 22

24 Financials Adjusted income statement For 12 months to 31 December 07 '000 Rent 129,951 Direct costs (20,094) Gross profit 109,857 Administrative expenses (4,426) Other expenses (1,804) Adjusted* operating profit 103,627 For the period to December 2006 '000 70,758 (10,882) 59,876 (3,208) (1,009) 55,659 Net financial costs (65,089) Adjusted* profit before tax 38,538 Current tax (2,533) (33,203) 22,456 (978) Adjusted Profit after tax 36,005 Adjusted Minority interests ,388 21,478 (317) 21,161 Adjusted* EPS 5.3c 5.2c * Adjusted excludes revaluation surplus, deferred tax and surrender premiums. The weighted average number of shares used for Adjusted EPS calculations is m Page 23

25 Analysis of rental income and service charge Gross rental income 131,978 72,143 Less: bad debts (2,027) (1,385) 129,951 70,758 Service charge income 22,155 8,634 Service charge expenditure (26,003) (11,083) Ground rents and lease payments (3,114) (470) Repairs and maintenance (1,188) (641) Asset management fee (8,394) (4,334) Property management fee (3,550) (2,988) (20,094) (10,882) 109,857 59,876 Recoverable costs in 2007 Total Recoverable Net Service charge expenditure (26,003) 19,016 (6,987) Ground rents and lease payments (3,114) 853 (2,261) Repairs and maintenance (1,188) 42 (1,146) Asset management fee (8,394) 0 (8,394) Property management fee (3,550) 2,244 (1,306) (42,249) 22,155 (20,094) Page 24

26 Analysis of administrative and other expenses ADMINISTRATIVE EXPENSES Audit fee Consultants' fees Transaction costs re AIM listing Tax fees Compliance and filing fees 1, Valuation fees Other fees ,426 3,208 OTHER EXPENSES Directors' fees Directors' expenses 4 15 Bank fees Foreign exchange loss Insurance Annual report Other property company expenses ,804 1,009 Page 25

27 Analysis of net financial costs and tax charge NET FINANCIAL COSTS Interest receivable 7,985 6,061 Interest payable (70,460) (37,682) Amortisation of finance costs (2,614) (1,582) (65,089) (33,203) CURRENT TAX Of the 2.5 million current tax charge, 822,000 was due to thin cap rules arising out of a portfolio acquisition which was refinanced 7 months later and there was a corresponding offset against funding costs. Another 165,000 arose from trade tax issues which we are rectifying. DEFERRED TAX The deferred tax charge is affected by a one-off credit for Euro 12.2 million due to the reduction in rates of German corporation tax effective from 1 January The rate fell from per cent to per cent. Page 26

28 Financials Balance sheet As at 31 December 07 As at 31 December 06 Investment properties 2,333 1,715 Current assets Cash Others Current liabilities (51) (38) Total assets less current liabilities 2,490 2,028 Bank loans (1,774) (1,224) Deferred tax (26) (31) Net Assets Adjusted NAV per share, c Page 27

29 Banking Bank borrowings as at 31 December 2007: 1,789 million with weighted interest rate of 4.9% (2006 : 4.7%) Loan to value ratio as at 31 December 2007: 77% (gross), 69% (net of cash) Market value of swaps and caps (as at 31 December 2007): million, equivalent to 4.5c per share, which is not included in adjusted NAV German domestic banks and certain UK banks still lending to purchasers of German properties Loans now kept on balance sheet or syndicated out; CMBS market dead Typical terms : 70% LTV, bps margin or market flex, 1-2% amortisation p.a. 5 Year Euro Swap Rate 5.0% 4.8% 4.6% 4.4% 4.2% 4.0% 3.8% 3.6% 01-Jan Mar May Jul Sep Nov Jan Mar-08 Page 28

30 Summary German economy remains robust Good quality property portfolio assembled with numerous asset management opportunities Management team strengthened Moving to next phase of strategy - recycling of capital - continued opportunistic share buybacks and selective acquisitions Page 29

31 Appendix: Dawnay, Day Group overview Active in current form since early 1980s specialising in commercial property and financial services In 2002, diversified into property fund management Launched Puma Property (DD) Fund LP in 2002 peak gross assets in excess of 100 million liquidated in 2006 achieving 39.5% IRR after all costs and performance fees Launched Dawnay, Shore Hotels PLC in 2003 which today has a 556m portfolio of 4-star hotels under the Barcelo brand Launched Dawnay, Day Carpathian PLC, a Central and Eastern European retail property focused fund which listed on AIM in July 2005 raising 140 million and a secondary placing in April 2007 raising 100 million Acquired 74 Karstadt Kompact department stores in Germany from KarstadtQuelle in 2005 now renamed Hertie Launched Dawnay, Day Treveria PLC, a German retail property focused investment company which listed on AIM in December 2005 raising 444 million with a subsequent placing in November 2006 raising 300 million Launched Dawnay, Day Sirius PLC, a German industrial/office flexible workspace company which listed on AIM in May 2007 raising 327 million Page 30

32 Appendix: Dawnay, Day Treveria PLC (AIM:DTR) Shares in issue 628,844,061 as at 31 December ,418,809 as at 8 April 2008 Admission to AIM 14 December 2005 Board of Directors Ian Henderson, Chairman Peter Klimt (Dawnay, Day) Martin Bruehl Chris Lovell David Parnell Manfred Maus Major shareholders Dawnay, Day management/connected (33,897,000 shares and 17,714,038 long CFDs) Major institutional shareholders include BlackRock, QVT, Henderson, Aberdeen and RMB Asset manager Dawnay, Day Treveria Real Estate Asset Management Limited Page 31

33 Appendix: Typical lease structure in Germany Lease terms Break options Security of tenure Service charges Structural repairs Review/indexation 10 years with options. Five + five years negotiable Unusual None, unless option is agreed All service charges usually borne by the tenant but must be explicitly defined in the lease terms Usually responsibility of the landlord Indexation clauses in lease of 10 years or more (including prolongation options) include automatic adjustments on a given date or whenever cost of living index exceeds an agreed hurdle rate Page 32

34 Appendix: Portfolio Analysis German Federal State % Rent Roll 2007 GDP Northrhine Westphalia 29.00% 2.60% Lower Saxony 13.90% 1.80% Bavaria 10.70% 2.90% Schleswig Holstein 7.50% 1.40% Baden-Wurttemberg 6.70% 2.70% Berlin 6.20% 1.80% Hesse 5.90% 2.20% Saxony 5.80% 2.70% Rhineland-Palatinate 4.70% 2.70% Brandenburg 2.40% 2.20% Saarland 2.00% 2.30% Thuringia 1.90% 1.90% Hamburg 1.10% 2.80% Mecklenburg-Vorpommern 0.90% 2.50% Bremen 0.80% 2.00% Saxony-Anhalt 0.50% 2.40% Page 33