2011 in review. shopping experiences. Creating value from unique. Economic, Environmental and Social Performance

Transcription

1 in review Economic, Environmental and Social erformance Creating value from unique shopping experiences

2 sonae sierra contents Who We are 01 how We create value 02 our company 04 ceo s statement 05 The year at a glance 06 economic erformance 08 environmental erformance 10 social erformance 12 our artnerships & clients 13 awards & acknowledgements Who We are Sonae Sierra is a specialist at the cutting edge of shopping centre development, ownership, management and the delivery of services to third parties in markets as diverse as Europe, South America and north Africa. assionate about Bringing innovation and excitement To The shoing industry since 1989, sonae sierra has Been interreting Trends and searheading a movement ThaT has defined The shoing centres of The FuTure. Our MiSSiOn And VAluES The company s mission is to offer its customers a unique shopping experience that creates superior value for its shareholders, investors, tenants, communities and employees whilst simultaneously making a positive contribution to sustainable development. as a pioneer in the creation of themed and customised shopping centres, sonae sierra remains a leader in the creation of unique concepts for exceptional shopping centres that offer great experiences and turn customers into fans. We believe, more and more, that a shopping centre is a venue where people s needs, aspirations, desires and expectations come together. For us, each one of our centres is more than a building. everyone is a continuously evolving, living space. This report includes a summary overview of sonae sierra s economic, environmental and social strategy and the company s performance in. We have also published an integrated economic, environmental and social report, available on our website, which provides our stakeholders with a more robust and engaging account of our current strategy and our performance in, and demonstrates how we encompass all three dimensions of performance into our day-to-day business activities.

3 in review 01 how We create Value With over two decades of experience, sonae sierra creates value for stakeholders throughout the entire lifecycle of each asset. The combination of our experience, our commitment to innovation and our long-term approach to business have created an integrated strategy that today embraces shopping centre development, ownership and management, as well as knowledge provision to our clients. Through this strategy we have developed a unique understanding of the business and markets we operate in, as they apply to our own shopping centres as well as those owned by third parties. WE Fund We provide effective investment solutions that utilise capital while maximising returns. WE ACQuirE We acquire the completed assets, many of which we co-own through investment funds, offering international investors sustainable financial rewards from dynamic, high quality retail assets. RE DEVELOMENT WE Find With extensive knowledge of the shopping centre business, we perform market, cost, community and environmental studies to identify sustainable retail opportunities. WE design We create innovative schemes to offer exceptional retail experiences and bring vibrancy to the local area whilst sustaining environmental resources. ASSET MANAGEMENT INTEGRATED AROACH DEVELOMENT WE MAnAGE We manage our assets in a way that maximises returns for our clients, tenants and investors whilst also delivering value for communities and visitors and ensuring efficient use of natural resources. ROERTY MANAGEMENT WE develo combining know-how and experience, we bring together exceptional construction and marketing support to develop and commercialise sustainable buildings. algarveshopping, ortugal manauara shopping, Brazil Loop5, germany

4 sonae sierra 02 our company incorporated in portugal in 1989, sonae sierra is owned by sonae, sgps (portugal) with 50% and grosvenor (united Kingdom) with 50%. We have an integrated business which encompasses owning, developing and managing shopping centres as well as the provision of services to third parties in markets as diverse as europe, south america and north africa. on 31 december we were operating in ortugal, spain, italy, germany, greece, romania, morocco, algeria, colombia and Brazil. We were also providing services to third parties in croatia. We owned 49 shopping centres with a total gross lettable area (gla) of 1,924,117m 2. We had five projects under construction with a combined total gla of 237,800m 2, and six new projects in different phases of development in ortugal, italy, germany, greece, romania and Brazil. We also managed and/or lease a further 22 shopping centres and 2 new projects on behalf of others. in our total portfolio under management including shopping centres owned by third parties welcomed more than 428 million visits. OrGAniSAtiOnAl StruCturE sonae sierra is a holding company for four separate sonae sierra businesses: sierra investments, sierra developments, sierra management, and sonae sierra Brasil. our business divisions, with the exception of sonae sierra Brasil, also act as knowledge and service providers to third parties. Loop5, germany sierra investments sierra developments sierra management sonae sierra BRasiL sierra investments owns the company s shopping centres and is responsible for our investment activity. also holds 50.1% of the sierra Fund and 47.5% of the sierra ortugal Fund, and acts as asset manager for both. sierra developments constantly seeks opportunities to develop new and innovative shopping centres that are adapted to local communities needs, are respectful of local values and culture and create value based on a sustainable and long-term approach. sierra management is responsible for managing and leasing shopping centres with a focus on maximising their long-term value. sonae sierra Brasil operates autonomously and is focused on investing in, developing and managing a growing number of shopping centres in Brazil.

5 in review Back to main contents 03 plaza mayor, spain Operations in three continents and 11 countries 49 owned shopping centres in operation alexa, germany freccia Rossa, italy 1,090 direct employees worldwide centro colombo, ortugal

6 sonae sierra 04 ceo s statement Q: how has sonae sierra s business fared overall during the past 12 months and has the year turned out as you expected? a: i m really proud of the results we are able to report for the past 12 months, in spite of the challenging market conditions. We have maintained our overall ebitda in, and improved our margin by successfully sustaining income streams and reducing costs. overall, global tenant sales and rents are up on a like-for-like basis, and our occupancy levels remained above 96% throughout the year a significant achievement in some markets where tenant sales were affected by lower consumer purchasing power. We have also mitigated some of the market risks outside our direct control such as rising yields and capital constraints, so i would say we have emerged from a tough year relatively intact. Q: What does 2012 look like for sonae sierra? are business prospects likely to get worse before they can return to growth? a: The last couple of years have required us to focus on maintaining our financial stability, increasing operational efficiencies, controlling costs and retaining our core competencies. as a business, we have proven extremely resilient and we should emerge from the current financial crisis in a strong position to return to growth in the context of a new world reality will be a year of recession, decisive for the european union. There is no doubt that the economic conditions with particular impact in ortugal, greece and, to a lesser extent, spain and italy, will inevitably affect our operational performance in europe. however, we are confident that we will continue to show positive results, thanks in part to our geographical spread, which enables us to be present in countries where economic growth is a reality. For instance in Brazil, we have two inaugurations scheduled for 2012: uberlândia shopping and Boulevard londrina shopping. Q: can you comment on sonae sierra s overall environmental and social performance over the past year? What have been the key highlights and challenges, and how has cr contributed to your wider business objectives? a: We are already reaping financial benefits from increased ecoefficiency across our portfolio for example, we have calculated that in we avoided costs of 7.3 million as a result of the energy efficiency measures we have implemented since With regards to social aspects we have also maintained a strong performance, sustaining levels of tenant and visitor satisfaction, our investment in local communities and reducing accidents among our workforce. For sonae sierra, sustainability means the continuous evaluation of our economic, social and environmental performance, seeking to achieve a harmonious balance between all three areas. We continue to be viewed as an international benchmark of sustainability excellence in the shopping centre sector, as proven most recently by our funds being ranked as the most sustainable in europe according to the global real estate sustainability Benchmark. We believe that sustainability will increasingly become a decisive factor in our relationship with our stakeholders. society is becoming more and more aware of environmental and social questions and is rewarding those companies that have responsible and resilient business strategies. legislation reflects this trend, and is progressively more demanding. Finally, through careful cost benefit analysis, we are able to prove that sustainability principles incorporated in all business areas can result in lower operational costs, which in turn lower our service charges for tenants and contribute to higher occupancy and satisfaction levels. in mature markets, we will maintain our efforts to improve operational efficiency, and we will continue to search for new investment opportunities, with a focus on germany and italy, where this year we will inaugurate le Terrazze in la spezia. i am privileged to lead an organisation which is highly regarded by our customers, partners, banks and suppliers, an organisation that acts responsibly towards local communities and the environment, that is driven by dedicated employees who are always looking for better ways of doing business. This is why i am confident that we will maintain a good position in 2012 and continue to grow in the years ahead. WE ArE COnFidEnt that WE Will COntinuE to ShOW OSitiVE results, thanks in Art to Our GEOGrAhiCAl SrEAd, WhiCh EnAblES us to be resent in COuntriES WhErE ECOnOMiC GrOWth is A reality. fernando guedes oliveira chief executive officer see full ceo statement at the integrated economic, environmental and social report, available on our website.

7 in review Back to main contents 05 the year at a glance successful initial ublic offering (io) of sonae sierra Brazil sale of laza éboli and el rosal shopping centres in spain to doughty hanson for 120 million acquired laza mayor shopping in spain on behalf of the sierra Fund completed the expansion and refurbishment of shopping metrópole and the expansion of shopping campo limpo (both in Brazil) commenced construction of two new projects, asseio das Águas shopping, in goiânia, Brazil and solingen shopping in solingen, germany entered the final stage of construction of le Terrazze in italy and uberlândia shopping in Brazil, both to inaugurate in march 2012 entry into the moroccan market with a contract to provide development services for a shopping centre project in casablanca entered the algerian market through a Joint venture agreement with cévital group to provide development, property management and leasing services for shopping centres in this country development management service agreement for a new shopping centre in Zagreb, croatia signed property management and/or leasing contracts with third parties for a further nine shopping centres in europe iso certifications achieved for a further three shopping centres and two construction works. le Terrazze in italy was the first shopping centre in the world to simultaneously achieve iso and ohsas certifications for the safety, health and environment management system of its construction works ohsas certifications achieved for a further five shopping centres and two construction works (including le Terrazze, highlighted above) 6,320m omv of assets under management ( million) 9.7m consolidated net rofit ias ( million) 112.8m ebitda ias ( million) 6, , , , % average occupancy index (% by gla, across our owned portfolio) 1,924 gla owned in operating centres (000m 2 ) 1,173m real estate nav as of 31 dec ( million) ,924 1, ,017 1, ,059 1, ,963 1,416

8 sonae sierra 06 economic performance The businesses we are involved in namely the development, investment and management of shopping centres inherently face a number of financial, operational and market risks. last year many of these risks were aggravated by continued repercussions from the global financial crisis in, and more recently by the sovereign debt crisis in europe, especially since. Fortunately, the outstanding quality of our portfolio and our international presence demonstrated strong resilience against such factors, but the conditions nevertheless made for a challenging growth environment. a macro-economic tale of two regions When reflecting on the challenges we faced in, it is essential to differentiate between europe and Brazil. in Brazil, despite a reduction in the gd growth rate compared to, we are still operating in one of the fastest growing emerging economies in the world and we have enjoyed substantial growth in both sales and rents on a like-for-like basis and in reais: sales grew by 12% in comparison with and rents were up by over 15.1%. These results are influenced by a very dynamic retail environment and the sustained increase in the average net income of the population which has a growing middle class segment. demand for retail space is on the rise in this vibrant market, and occupancy rates have reached an all-time high in the country. Following the historic milestone of becoming a publicly listed company as a result of the io in February, sonae sierra Brasil presented the second highest ebitda figures in the listed sector market, and the highest Funds From operations margin of all our listed peers in the industry. so as a result of the quality of our assets and the attentiveness of our management regime, we have successfully maintained high levels of occupancy throughout our centres in europe. This has undoubtedly buffered the potential impact that tenant difficulties could have had on our rents, and these have remained relatively stable on a like-for-like basis over the 12 month period to december. investment market fundamentals during, yields increased in many of our key markets, most notably in ortugal and greece. Fortunately this was not the case in all markets; for instance towards the end of, yields in prime shopping centres in germany reached a five-year low caused by very high investment demand and limited supply of stock. yields in italy also remained virtually flat in. in spain, yield adjustments have been less homogeneous where prime properties actually saw some compression, whilst secondary properties and those facing more competition have witnessed yields moving out. as a counter-measure to try to minimise the negative effect of yield expansions, we have increased the efficiency of the centres we manage and we have found that we can deliver an acceptable quality of services with lower costs. This has enabled sonae sierra to achieve performance gains that have minimised expansion of yields, especially in ortugal. in Brazil, on the other hand, property values continued to rise in mostly fuelled by the operational performance of our centres. at least for the moment, no significant compression of yields have occurred which translates into a very conservative approach to future value in spite of a very busy merger & acquisition market. in europe on the other hand, and particularly southern europe, many of our key markets have been significantly affected by the austerity measures imposed as a result of the global financial crisis. sales declined in all european markets, particularly in the last quarter of, with as the exception of germany and italy. nevertheless, even in some of our worst hit markets such as ortugal and spain, the decrease in tenant sales in our centres has been slower than the decline rate of wider industry benchmarks. portfolio under management gla (000 m 2 ) no. of contracts open market Value of centres in operation Total value sonae sierra control omv in million 6,320 3,328 6,481 3,504 6,340 3,595 6,166 2,234 / 8,495 3,598 2,220 / 8, ,147 2,284 / 8,924 3,786 2,163 / 8, , ,183 / 8,162 2, ,001 / 7, , ,455 / 7,189 2,498

9 in review Back to main contents 07 Rents fixed Rents Variable Rents total Rents % 11/10 Rents total like-for-like ortugal % -2.0% spain % 2.2% italy % 4.2% germany % 10.9% greece % -24.3% romania % -21.8% europe % 0.7% Brazil ( ) % 15.3% Brazil (r$) % 15.1% total sierra % 3.8% rents in million sales Visits % 11/10 total like-for-like ortugal 2, , % -9.7% spain % -2.8% italy % 1.1% germany % 1.1% greece % -8.7% romania % -1.0% europe 3, , % -6.0% Brazil ( ) 1, , % 12.2% Brazil (r$) 3, , % 12.0% total sierra 5, , % -1.0% sales in million % 11/10 total like-for-like ortugal % -5.3% spain % -2.5% italy % 0.5% germany % 2.6% greece % 2.2% romania % 12.7% europe % -3.2% Brazil % 1.6% total sierra % -2.1% visits in million parque d. pedro shopping, Brazil AS A result OF the QuAlity OF Our ASSEtS And the AttEntiVEnESS OF Our MAnAGEMEnt regime, WE have SuCCESSFully MAintAinEd high levels OF OCCuAnCy throughout Our CEntrES in EurOE. in brazil WE have EnjOyEd SubStAntiAl GrOWth in both SAlES And rents. freccia Rossa, italy norteshopping, ortugal

10 sonae sierra 08 environmental performance sonae sierra is a pioneer in environmental management in the shopping centre sector. as early as 1998 we had developed our ambitious environmental policy and our environmental management system. our shopping centres were among the first in their countries to pilot environmental practices and technologies and our company has received numerous international awards for demonstrable improvements in environmental performance. improving our environmental performance across all our activities has benefitted our business in several ways. We have saved costs by making our operations more eco-efficient; enhanced our reputation, and begun to future-proof our assets against natural resource shortages. in, we reduced the ghg emissions per m 2 of our owned portfolio and corporate offices by 18% in comparison with, meaning that we have almost accomplished our long-term objective to achieve a 70% reduction in ghg emissions per m 2 of gla, by 2020, compared to the 2005 level. We have saved costs by making our operations more eco-efficient; enhanced our reputation, and begun to future-proof our assets against natural resource shortages We maintained the electricity efficiency of our owned portfolio and improved our performance on a like-for-like basis. EnErGy And CliMAtE alexa, germany greenhouse gas (ghg) emissions of our owned portfolio and corporate offices (tco 2 e/m 2 GlA) electricity efficiency (excluding tenants) of our owned portfolio (kwh/m 2 mall and toilet area) manauara shopping, Brazil

11 in review Back to main contents 09 arrábidashopping, ortugal AS A result OF the ElECtriCity And WAtEr EFFiCiEnCy MEASurES WhiCh WE have introduced in Our CEntrES SinCE 2002 And 2003 resectively, WE WErE AblE to AVOid utilities COStS OF OVEr 8.1 MilliOn in. AS A result OF the 179% increase in the roortion OF WAStE recycled SinCE 2002, WE AVOidEd COStS OF 0.6 MilliOn in. plaza mayor, spain We also maintained the water efficiency of our owned portfolio and increased the proportion of water that is recycled or reused on our sites. our shopping centres achieved a global recycling rate of 53%, meaning that we are on track to meet our 2020 objective. We completed 100% of new development on previously developed land and continued to promote the protection of biodiversity in our existing shopping centres. WAtEr WAStE Water efficiency (excluding tenants) of our owned portfolio (litres/visit) total waste recycled as a proportion of waste produced (% by weight, across our owned portfolio)

12 sonae sierra 10 social performance our approach to social issues focuses on the stakeholder groups most affected by our operations: our suppliers; tenants; visitors, employees and the communities close to our shopping centres and new projects. it is part of our day-to-day operations to make sure that our tenants and our shopping centres visitors are satisfied with the quality of service they receive from our company. in, in spite of challenging economic conditions, we maintained high levels of satisfaction among our tenants and visitors and increased our average occupancy index. in a total of 1,483,638 was invested to support local communities (a 22% increase in comparison with ); supported 766 charitable organisations and dedicated 3,059 hours of staff time to community volunteering. We maintained 29 community advisory anels across our sites as a forum to engage with local community members. We continued to engage with our shopping centre visitors on sustainability issues, holding a total of 684 actions, events and campaigns with an environmental or social theme. tenants tenant satisfaction index (scale of 1 ( not satisfied ) to 6 ( very satisfied )) COMMunitiES And ViSitOrS marketing investments in cr and other community contributions ( ) 1,483,638 1,218,806 1,142,628 2,380,490 A total of 1,483,638 was invested to support local communities; supported 766 charitable organisations and dedicated 3,059 hours of staff time to community volunteering centro colombo, ortugal

13 in review Back to main contents 11 community day, ortugal click2, innovation training We are committed to conducting our activities so that risks towards people and assets are minimised, and to achieving excellent levels of social responsibility We are committed to conducting our activities so that risks towards people and assets are minimised, and to achieving excellent levels of social responsibility. We formalised this commitment in 2004 with the introduction of our safety and health olicy, and in our safety and health management system became the first in the shopping centre sector to achieve certification in accordance with the ohsas standard. as a part of our commitment to responsible procurement, we engaged with our critical suppliers on safety, health and environment issues and investigated options available to procure more sustainable materials. We delivered an average 48.9 hours of training per employee (an increase of 28% in comparison with ) and held healthy month for the third time across our offices in europe with activities to promote employees health and well-being. We reduced the rate and severity of work accidents in our workforce in comparison with, and delivered a total 10,795 hours of safety, health and environment reventive observation across our sites. gli orsi, italy SAFEty And health EMlOyEES number of non-conformities per hour of spo investment in staff training and development ( per capita) average hours of training per employee ,

14 sonae sierra 12 our partnerships & clients past and present When it comes to shopping centres, we re the partner of choice. our business, quite simply, would not be what it is today without our partners ( ) and services clients ( C ). With their backing, we can ensure we have financial strength, and also the ability to quickly gain an in-depth knowledge of markets, and create new opportunities. We aim to create more long-term relationships with like-minded organisations who see us as their shopping centre partner of choice in return, we offer our partners and services clients the chance to benefit from our many years of experience in this field, to capitalise on exciting retail markets and, ultimately to enjoy strong returns. portugal estevão neves Bensaude group sonae distribuição estação shopping cgd the netherlands ing real estate ing developments ag investments mab development greece france cn assurance cdc Foncière euris morocco C germany C C deka union investment commerzbank Balsa C C coimpredil algeria marjane Fonciere chellah (cdg group) auda agence d urbanisation et de developpement d auda BRaziL italy charagionis group lamda development multiplan Tivoli e enplanta engenharia marco Zero credit suisse hg cévital group usa united Kingdom C grosvenor Fund management miller developments rockspring castle city schroders investment management aberdeen roperty investors scottish Widows aig Tiaa-creF ddr finland keva ilmarinen colombia spain C lar group mall group iberdrola eroski group Banco santander central control greece / croatia C Bluehouse capital

15 in review Back to main contents 13 awards & acknowledgements sonae sierra has built up an international reputation for the development and management of innovative products. We received some notable awards and acknowledgements during, as shown below. distinguished as the Best developer overall and; Best retail developer in ortugal; Best retail developer in Brazil and Best retail developer in latin america in the seventh edition of the euromoney magazine real estate awards. acknowledged as the Best real estate developer for the fourth consecutive year by the construir awards in ortugal. sonae sierra ranked as the leader of the corporate climate responsibility index published by acge in ortugal for the sixth time. distinguished at the strategicrisk european risk management awards in the most innovative use of it or other Technology category for our safety and health inspections system. centro colombo was elected Best shopping centre in ortugal for the second time in a row at the hipersuper award and was distinguished with the revista imobiliária special magazine award in the national real estate awards in ortugal for its refurbishment project. this distinction COnFirMS the reutation the COMAny has EArnEd On An international level, And is the ACknOWlEdGMEnt OF Our ACtiVity in OrtuGAl And SOuth AMEriCA. fernando guedes oliveira chief executive officer leiriashopping in ortugal was honoured with the revista imobiliária eurohypo real estate oscar award and the eurohypo award in the national real estate awards in ortugal. loop5 in germany was commended in the international council of shopping centres (icsc) european shopping centre awards in the category new developments: large. sonae sierra property funds ranked as the most sustainable in europe and third worldwide by the global real estate sustainability Benchmark (gresb). norteshopping in ortugal won the icsc Jean louis solal marketing award for cause related marketing for the campaign cycle and switch on our christmas tree which was intended to increase environmental awareness among the local community. We were shortlisted for the edie awards for environmental excellence in the category green corporate initiative. sonae sierra was shortlisted for the duont safety award for our innovative approach to creating safer shopping centres for children. We were shortlisted for the digital communication award for outstanding accomplishment in the field of digital communications and r for corporate social responsibility report. in spain, we were a finalist in the remios corresponsables (corresponsables award) for the guio project to help blind people and those with visual impairment to use our shopping centres. the recognition that Our roerty FundS ArE the MOSt SuStAinAblE in EurOE roves that Our COMMitMEnt to COrOrAtE resonsibility AllOW us to take the lead in An ArEA that Will be increasingly MOrE imortant to roerty investors. WE ArE COnFidEnt that WE Will be AblE to COntinuE to CrEAtE VAluE in Our OrtFOliO through this ArOACh. pedro caupers Board director, investment and asset management AWArdS to date designed and produced by magee rinted by Boss rint ltd The paper in this report contains material sourced from responsibly managed forests, certified in accordance with the Fsc (Forest stewardship council) and is totally recyclable and acid-free.

16 portugal LisBoa rua amílcar cabral, lisboa Telehone: Fax: porto lugar do esido,via norte maia Telehone: Fax: algeria KouBa ilot d n 6 Zhun, garidi ii, kouba alger Telehone: +213 (0) Fax: +213 (0) BRaziL são paulo av. dr. cardoso de melo, ,13,14 Floors vila olímia, são aulo s ce: Telehone: Fax: colombia cali carrera 98 nro oficina de administración - cali valle- colombia Telehone: Fax: (ext. 107) germany düsseldorf eter-müller-str düsseldorf Telehone: Fax: greece athens chatziyianni mexi, athens Telehone: Fax: italy milan corso garibaldi milan Telehone: Fax: /1 LuxemBouRg LuxemBouRg av. John. F. kennedy, 46 a 1855 luxembourg Telehone: Fax: morocco casablanca ZéniTh millénium immeuble 1 lotissement attaoufik 4éme étage sidi maârouf casablanca Telehone: +212 (0) Fax: +212(0) the netherlands hoofddorp olarisavenue, Jh hoofddor Telehone: Fax: Romania BuchaRest Baneasa Business & Technology ark Building B, Third Floor, Wing 1, BucuresTi loiesti, sector BucuresTi romania Telehone: Fax: spain madrid c/ conde de aranda, 24, madrid Telehone: Fax: