Results of operations

Retail sales (in the narrower sense) rose by a nominal 1.8% in Germany during the year under review. In contrast, the tenants of our shopping centers saw their sales stagnate. This result can be attributed to two locations in particular. Two new competitors opened in Dresden, leading to falls in revenue at the Altmarkt-Galerie, and the limited parking available at the Main-Taunus-Zentrum due to building works also had a negative impact on sales trends. At our other shopping centers, however, retail sales rose by 2.6% (adjusted for space), outperforming the market as a whole. At our foreign properties, retail sales increased by 1.2%.

Consolidated revenue up 13%

Consolidated revenue was up 13% from €127.6 million to €144.2 million in the financial year. The A 10 Center, which was acquired on 1 February 2010, contributed significantly to this revenue growth. Our increased stake in the Altmarkt-Galerie Dresden on 1 July 2010, and the Allee-Center in Hamm and City-Point in Kassel, both of which experienced vacancies in 2009 due to renovation works, also contributed to the strong growth in our revenue.

Revenue
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At eight properties, the rise in revenue was primarily due to indexrelated rental increases. Four properties also saw slight falls in revenue which were mainly due to renovation works. Total revenue rose by 1.1% on a like-for-like basis.

Revenue
in € thousand 2010 2009 Difference in %
* = proportionally consolidated
Rhein-Neckar-Zentrum, Viernheim 17,137 16,988 149 0.90
A 10 Center, Wildau 12,899 0 12,899  
Main-Taunus-Zentrum, Sulzbach 10,230 10,286 -56 -0.50
Allee-Center, Hamm 9,763 9,010 753 8.40
Stadt-Galerie, Passau 8,823 8,588 235 2.70
City-Arkaden, Wuppertal 8,788 8,655 133 1.50
City-Galerie, Wolfsburg 8,588 8,522 66 0.80
Forum, Wetzlar 8,583 8,498 85 1.00
Rathaus-Center, Dessau 8,080 8,195 -115 -1.40
City-Point, Kassel 7,998 7,285 713 9.80
Altmarkt-Galerie, Dresden* 7,827 6,673 1,154 17.30
Stadt-Galerie, Hameln 6,687 6,546 141 2.20
Phoenix-Center, Hamburg 5,928 5,757 171 3.00
Total Germany 121,330 105,003 16,327 15.50
Galeria Baltycka, Gdansk 13,411 13,150 261 2.00
City Arkaden, Klagenfurt* 5,409 5,328 81 1.50
Arkad, Pecs* 3,651 3,736 -85 -2.30
Other 388 345 43 12.50
Total abroad 22,859 22,560 299 1.30

Vacancy rate stable at under 1%

As in previous years, the vacancy rate remained stable at under 1%. At €0.6 million (2009: €0.6 million) or 0.4% (2009: 0.4 %), the need for write-downs for rent losses remained at a very low level.

Operating and administrative costs for property unchanged

Property operating costs were €1.5 million higher than the previous year at €7.3 million (2009: €5.8 million) and property administrative costs were up by €0.7 million to €7.9 million (2009: €7.2 million). The increase is solely due to the acquisition of the A 10 Center, which alone caused a rise of €2.4 million in operating and administrative costs for property. However, at our other centers the same costs were down by €0.2 million in comparison with the previous year. Overall, the cost ratio came in at 10.5% of revenue, which is slightly up on the previous year (10.2%).

Other operating income and expenses

Other operating income remained unchanged at €0.9 million, while other operating expenses rose by €1.2 million to €5.9 million (2009: €4.7 million). This increase resulted from significantly higher ancillary financing costs in connection with the raising and / or extension of loans, on the one hand, and from higher personnel costs on the other.

Net finance costs rise

Net finance costs were up €4.3 million to €60.2 million (2009: €55.9 million). This is as a result of additional interest expense incurred in connection with the financing of the acquisition of the A 10 Center and the expansion measures in Dresden (+ €5.8 million). This interest expense is offset by interest savings made through refinancing and repayment of existing loans in the amount of €1.4 million, and thus the net interest expense only increased by €4.4 million.

Although income from investments remained stable at the previous year’s level, interest income rose by just under €0.4 million. This is in contrast to losses from equity-accounted shareholdings which rose by €0.54 million and the lower profit share for third-party shareholders which, at €7.9 million, was down by €0.2 million on the previous year.

Positive result for measurement gains

After the €14.8 million in measurement losses reported in 2009, measurement gains of €33.1 million were achieved in the year under review, representing an increase of €47.9 million over the previous year. Measurement of the portfolio properties led to measurement gains of €25.4 million. On average the portfolio properties increased in value by 1.3% and, with one exception (which showed a depreciation of 0.7%), market values were between 0.3% and 3.7% higher than the previous year.

The revaluation of the A 10 Center resulted in a measurement gain of €14.7 million which was offset by ancillary acquisition costs of €8.6 million.

Moreover, the acquisition of additional shareholdings in City-Point Kassel, City-Arkaden Wuppertal and indirect holdings in the Main- Taunus-Zentrum resulted in measurement gains of €4.7 million, as the stakes in the Main-Taunus-Zentrum in particular were acquired at below market value.

The share of measurement gains attributable to third-party shareholders was around €3.0 million.

Tax item almost exclusively comprises deferred income taxes

The tax burden in the year under review amounted to €15.2 million. €14.9 million of this was attributable to deferred income taxes, and €0.3 million to income tax paid.

EBIT
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Consolidated profit more than doubled

Earnings before interest and taxes (EBIT) climbed 12% from €110.7 million to €124.0 million in the year under review. At €97.0 million, pre-tax profit (EBT) was 142% higher than in the previous year (€40.1 million). Consolidated profit rose by 138%, totalling €81.8 million (2009: €34.4 million).

Earnings per share
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Earnings per share

Earnings per share amounted to €1.80 compared with €0.88 in the previous year. Of this amount, €1.19 was attributable to operations (2009: €1.18) and €0.61 to measurement gains / losses (2009: €-0.30). The number of shares for the previous year upon which this is based was adjusted in accordance with IAS 33.

Funds from operations (FFO)

FFO is used to finance ongoing investments in portfolio properties, scheduled payments on our long-term bank loans and the distribution of dividends. During the year under review, FFO of €63.6 million was generated, a rise of 16% over the previous year (2009: €54.8 million). FFO per share remained constant at €1.40, although the number of shares for the previous year upon which this is based was adjusted in accordance with IAS 33.

in € thousand 31.12.2010 31.12.2009
Consolidated profit 81,817 34,367
Measurement gains / losses -33,129 14,772
Deferred taxes 14,864 5,664
FFO 63,552 54,803
Weighted number of shares 45,545 39,066
FFO per share 1.40 € 1.40 €

Dividend proposal: €1.10 per share

In view of the successful financial year, the Executive Board and Supervisory Board will propose to the shareholders at the Annual General Meeting on 16 June 2011 in Hamburg that an increased dividend of €1.10 per share be distributed for the 2010 financial year.

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