ProLogis European Properties : Results for the quarter and half year ended 30 June 2012
ProLogis European Properties : Results for the quarter and half year ended 30 June 2012
Results for the quarter and half year ended 30 June 2012
PEPR liquidation in progress
EPRA NAV at â‚¬6.43 per ordinary unit
Luxembourg - 26 July 2012 - ProLogis European Properties (Euronext: PEPR), one
of Europe's largest owners of modern distribution facilities, today reports
results for the quarter and half year ended 30 June 2012.
* Commenced 60-day wind-up of PEPR, as approved by the Commission de
Surveillance du Secteur Financier and ratified by all Unitholders at the
* 19 lease transactions completed covering 166,000m(2), including 38,100m(2)
of new or expanded leases (HY 2012: 60 leases transactions, totalling
* 93.2% portfolio occupancy (Q1 2012: 93.6%), in line with expectation
Quarter to 30 June 2012 Half year to 30 June 2012
* Adjusted EPRA earnings of â‚¬0.11 * Adjusted EPRA earnings ofÂ â‚¬0.22
per ordinary unit (Q2 2011: â‚¬0.09) per ordinary unit (HY 2011: â‚¬0.19)
* IFRS loss â‚¬0.04 of per ordinary * IFRS loss â‚¬0.15 per ordinary unit
unit (Q2 2011: â‚¬0.04 loss) (HY 2011: â‚¬0.02 earnings)
* Generated distributable cash flow * Generated distributable cash flow
per ordinary unit of â‚¬0.11 (Q2 per ordinary unit of â‚¬0.22 (HY
2011: â‚¬0.08) 2011: â‚¬0.18)
* EPRA net asset value at â‚¬6.43 per * EPRA net asset value at â‚¬6.43 per
ordinary unit (Q1 2012: â‚¬6.46) ordinary unit (YE 2011: â‚¬6.50)
* IFRS net asset value at â‚¬5.76 per * IFRS net asset value at â‚¬5.76 per
ordinary unit (Q1 2012: â‚¬5.77) ordinary unit (YE 2011: â‚¬5.77)
Commenting on the results, Peter Cassells, chief executive officer of PEPR,
said: "We continue to report improving financial results during the second
quarter and half year, with an increase in both adjusted EPRA earnings and
distributable cash flow as a result of sustained operating performance, despite
continued macro-economic uncertainty.
"The overall pan-European market outlook continues to hold relatively firm, with
property yields, rents and lease incentives in most markets remaining stable.
However, the ongoing economic uncertainty has led to a further decrease in our
portfolio value which has contributed to the decline in EPRA NAV over the
quarter and half year to â‚¬6.43 per ordinary unit.
"Following the approval to wind-up PEPR, the management company is currently
well-advanced with the liquidation. As such, on 27 August 2012, all preferred
units will be redeemed at par plus accrued dividends and ordinary unitholders
will receive a distribution equivalent to EPRA NAV less costs associated with
the wind-up. The preferred units will be cancelled and the ordinary units will
subsequently be delisted from the Euronext Amsterdam and Luxembourg stock
"As a result of the process we are following to liquidate PEPR, we are pleased
to be able to deliver a substantial value uplift of some 33% for our investors
since the end of 2010 compared to the EPRA/NAREIT Europe Index which remained
broadly flat over the same period. This is testament to the quality of our
portfolio and the determination of the management company and PEPR Board to
optimise value for all investors."
Wind-up of PEPR
PEPR held its Annual General Meeting ("AGM") for Unitholders on 27 June 2012. At
this meeting, a resolution to wind-up PEPR and to appoint its Management Company
as liquidator was proposed. This proposal was approved by the Commission de
Surveillance du Secteur Financier and passed by 100% of unitholders present or
represented at the AGM.
The liquidation process commenced on 27 June 2012, full details are available on
the PEPR website (www.prologis-ep.com).
On 27 August 2012, Ordinary Unitholders will receive distributions equal to EPRA
NAV per ordinary unit as at that date less a provision for estimated wind-up
costs ("Residual EPRA NAV"). The ex-distribution date is 22 August 2012 and the
record date is 24 August 2012.
Using 30 June 2012 EPRA NAV of â‚¬6.43 per ordinary unit for illustrative purposes
and assuming costs associated with the winding-up process amount to â‚¬2.0
million, Residual EPRA NAV is estimated to be â‚¬6.42 per ordinary unit. The
Residual EPRA NAV distributed on 27 August 2012 may be different from that
estimated as at 30 June 2012. The 30 June 2012 financial statements and the 27
August 2012 Residual EPRA NAV will be independently audited.
The distribution of any remaining value in PEPR (expected to be less than â‚¬0.01
per ordinary unit) will be made to ordinary unitholders as soon as practicable
after the 27 August 2012, but no later than 15 November 2014.
Preferred units will be redeemed at par (â‚¬5.93 per unit) plus accrued dividends
on 27 August 2012. The ex-dividend date is 22 August 2012 and the record date is
24 August 2012. The preferred units will then be cancelled.
The entire portfolio was independently revalued at 30 June 2012, with market
value decreasing by 1.3%, excluding foreign exchange adjustments, from the
valuation carried out at 31 March 2012. The overall portfolio value, taking into
account the positive impact of foreign exchange movements, decreased by 0.9% to
â‚¬2,461.6 million compared to â‚¬2,483.1 million at 31 March 2012.
The net initial yield(()())of the portfolio at 30 June 2012 increased to
7.8% compared to 7.6% at 31 March 2012.
For the half year 2012, PEPR's portfolio market value decreased by 2.4%,
excluding foreign exchange adjustments and disposals (completed and held for
For the twelve months to 30 June 2012, PEPR's portfolio market value decreased
by 2.6%, excluding foreign exchange adjustments and disposals (completed and
held for sale).
Total leasing activity slowed during the second quarter, 19 lease transactions
covering 166,000 square metres were completed.
Within this number, customer demand for new or additional space remained stable
compared to the first quarter, with three new leases, totalling 33,000 square
metres, and four lease expansions (adding 5,100 square metres to existing
customers' operations) completed. The retention rate for the quarter was 70%
with 12 lease renewals, covering 127,900 square metres, signed with customers
including L'Oreal in Czech Republic, DHL in France and Samsung in Poland.
Despite this activity, portfolio occupancy decreased by the end of the quarter
to 93.2% from 93.6%, primarily due to the anticipated move-out of three large
customers in France, Poland and the UK, totalling 53,500 square metres or 1.2%
of the portfolio.
Second quarter leasing transactions were concluded with an average of 2.2 years
to lease break or 2.5 years to lease expiry and resulted in a weighted average
rental decline of 2.7% over the previous rental levels for this space. The
majority of leasing transactions resulted in negative rental growth,
particularly in Central Europe, however PEPR has generated rental growth on
leases completed in supply constrained markets such Barcelona in Spain, Hanover
in Germany and Prague in Czech Republic.
Two assets in Poland remain on track to be sold to Hines Global REIT before the
end of the year in a second phase of the sales transaction completed in the
first quarter. These assets are shown as "assets held for sale".
At 30 June 2012, the portfolio excluding assets held for sale comprised 210
distribution facilities covering 4.5 million square metres across 11 European
countries with a market value of â‚¬2.5 billion. The portfolio risk profile
remains attractive, with above market average occupancy of 93.2% and a
diversified customer base. On average the portfolio has 3.1 years to lease break
or 5.1 years to lease expiry. An overview of the portfolio is shown on page 14.
PEPR recorded an IFRS loss for Q2 2012 of â‚¬6.4 million (Q2 2011: â‚¬4.8 million
loss). The difference is primarily due to â‚¬14.0 million higher valuation
declines recorded in Q2 2012, â‚¬5.2 million lower rental income and a provision
of â‚¬1.3 million for costs associated with the PEPR wind-up. These factors were
offset by â‚¬7.6 million lower finance costs, a â‚¬4.6 million decrease in the
charge for taxation and a â‚¬2.1 million profit on disposal. In addition Q2 2011
included â‚¬2.9 million of professional advisory fees related to the Prologis
Adjusted EPRA earnings for ordinary unitholders, which provide a better guide to
underlying business performance, increased to â‚¬22.6 million in Q2 2012 (Q2
2011: â‚¬16.6 million). The improvement is mainly related to lower financing and
operating costs offset by a reduction in rental income.
For HY 2012, PEPR recorded an IFRS loss of â‚¬27.7 million (HY 2011: â‚¬7.6 million
earnings), primarily due to a â‚¬42.5 million higher decline in portfolio value, a
â‚¬15.3 million loss on property disposals, a â‚¬9.1 million reduction in rental
income and a â‚¬1.5 million provision for wind-up costs. These factors were offset
by a â‚¬9.9 million deferred income tax benefit compared to a â‚¬6.4 million
deferred income tax charge and a â‚¬15.3 million reduction in operating and
finance expenses, including the advisory fees mentioned above.
Adjusted EPRA earnings for ordinary unitholders for HY 2012 increased to â‚¬44.5
million (HY 2011: â‚¬36.1 million) mainly due to a â‚¬13.9 million reduction in
operating and finance expenses and a â‚¬2.8 million lower tax charge, offset by
â‚¬9.1 million lower total revenue.
A reconciliation between IFRS and EPRA earnings is shown on page 10.
Q2 2012 rental and other property income fell to â‚¬53.6 million (Q2 2010: â‚¬58.8
million), given the loss of â‚¬5.8 million of rental income related to asset
sales, partially offset by a â‚¬0.9 million increase in UK and Swedish income when
measured in euro.
HY 2012 rental and other property income decreased to â‚¬110.2 million (HY 2011:
â‚¬119.3 million), primarily as a result of â‚¬8.6 million of lost rental income
from disposals, partially offset by a â‚¬1.1 million increase in UK and Swedish
sourced income when measured in euro.
The cost of rental activities decreased to â‚¬5.5 million in Q2 2012 (Q2 2011:
â‚¬6.5 million) given a â‚¬0.7 million decline in property related costs. Â In
addition, property management fees fell by â‚¬0.4 million in as these fees are
correlated to the gross market value of the portfolio.
For HY 2012, cost of rental activities decreased to â‚¬10.9 million (HY 2011:
â‚¬13.1 million) given a â‚¬1.0 million saving of UK property tax related to empty
buildings and maintenance costs, a â‚¬0.5 million lower bad debt expense and a
â‚¬0.5 million decline in property management fees.
Fund expenses fell in Q2 2012 to â‚¬2.9 million (Q2 2011: â‚¬5.0 million), primarily
as a result of â‚¬2.9 million of professional advisory fees incurred in 2011 in
responding to the Prologis tender offer. In addition, professional and fund
management fees declined by â‚¬0.4 million and â‚¬0.1 million respectively for the
quarter. These factors were offset by a â‚¬1.3 million provision for costs
associated with the wind-up.
Fund expenses for HY 2012 decreased to â‚¬5.2 million (HY 2011: â‚¬7.6 million),
primarily due to the advisory fees mentioned above, a â‚¬0.8 million saving in
professional fees and a â‚¬0.2 million decline in fund management fees, offset by
â‚¬1.5 million of PEPR wind-up costs.
Loss on disposal of investment property
The â‚¬2.1 million gain on disposal of investment property in Q2 2012, relates to
final adjustments to the sale of 18 assets in three portfolio transactions for a
total of â‚¬253.0 million agreed towards the end of Q1 2012.
The â‚¬15.3 million net loss on disposal of investment property in HY 2012 relates
to disposals in Q1 2012. All transactions were completed in line with 31
December 2011 external valuations, however the loss on disposal includes a â‚¬19.6
million allocation from equity of unrealised historical currency translation
adjustments associated with the UK portion of the disposals.
Debt structure and finance cost
Total outstanding debt as at 30 June 2012 is â‚¬1,162.6 million, a â‚¬3.2 million
increase since 31 March 2012 (â‚¬1,159.4 million) as the contractual amortisation
on the Landesbank Berlin bank loan and the syndicated bank loan was offset by
the strengthening of sterling over the quarter. Loan-to-value ratio remains
conservative at 44.5% (Q1 2012: 44.1%). PEPR has no outstanding debt maturities
The weighted average interest rate for HY 2012 decreased to 5.3% (HY
2011: 5.4%) given the 1.75% reduction in the rate payable on the â‚¬500 million
Eurobond on 23 October 2011 following PEPR's return to an investment grade
credit rating, offset by the repayment of PEPR's floating rate debt. At 30 June
2012, 100% of debt was at fixed rates of interest with only the undrawn â‚¬50
million revolving credit facility at floating rates of interest, currently at
225 basis points over Euribor or Libor.
Net finance expense for HY 2012 decreased to â‚¬39.2 million (HY 2011: â‚¬49.6
million), primarily due to an â‚¬11.1 million saving in interest expense related
to the lower Eurobond interest mentioned above, the â‚¬334.1 million reduction in
debt between both periods and a lower weighted average interest rate. In
addition, PEPR recorded a â‚¬0.7 million foreign currency gain in HY 2012 (HY
2011: â‚¬0.7 million loss). These factors were offset by a â‚¬2.1 million increase
in amortisation charges given the early repayment of debt between both periods.
At 30 June 2012, PEPR was in compliance with all financial debt covenants within
its credit facilities.
For HY 2012, PEPR recorded a â‚¬1.3 million overall tax benefit (HY 2011: â‚¬15.0
million tax charge), given a â‚¬9.9 million deferred income tax benefit. The
deferred income tax benefit is a result of the decline in portfolio value. The
current income tax expense remained at â‚¬8.6 million (HY 2011: â‚¬8.6 million),
representing an effective tax rate of 15.1% (HY 2011: 16.9%), using EPRA
earnings before taxation as a proxy for taxable income.
Distributable cash flow and distributions
For HY 2012, PEPR generated â‚¬44.7 million, or â‚¬0.22 per unit of distributable
cash flow for ordinary unitholders (HY 2011: â‚¬33.6 million or â‚¬0.18 per unit).
PEPR will continue to retain distributable cash flow.
PEPR will pay a preferred dividend distribution to holders of its Class A(1)
convertible preferred units on 3 August 2012. The â‚¬0.157392 per unit
distribution relates to the period from 1 April 2012 to 30 June 2012. The ex-
dividend date is 30 July 2012 and the record date is 1 August 2012.
Net asset value
IFRS NAV per ordinary unit decreased to â‚¬5.76 at 30 June compared to â‚¬5.77 at
both 31 March 2012 and at 31 December 2011. The â‚¬0.17 per ordinary unit impact
of the portfolio devaluation and the preferred dividend of â‚¬0.01 per ordinary
unit were offset by â‚¬0.12 per unit of earnings (including a deferred income tax
benefit of â‚¬0.01 per unit), a â‚¬0.02 positive movement in the fair value of
interest rate hedges and a gain on disposals of â‚¬0.01 per unit.
EPRA NAV per ordinary unit, which makes adjustments for deferred income tax and
the fair value of financial instruments, decreased to â‚¬6.43 at 30 June compared
to â‚¬6.46 at 31 March 2012 and â‚¬6.50 at 31 December 2011.
A reconciliation between IFRS and EPRA NAV is shown on page 11.
Number of units in issue
During Q2 2012, 1,650 preferred units were converted into ordinary units. As at
30 June, there are 10,296,860 preferred units and 206,249,090 ordinary units in
For further information, please contact:
Investor relations Media
ProLogis European Properties M:Communications
Jennifer Crooke Charlotte McMullen
+44 207 518 8708 +44 207 920 2349
Financial statements and portfolio information
The audited interim condensed consolidated financial statements for the six
months ended 30 June 2012 will be available on the PEPR website, www.prologis-
ep.com, on or before 29 August 2012.
The financial statements have been produced in accordance with International
Financial Reporting Standards, using the liquidation basis. There has been no
significant impact on the valuation of assets or liabilities.
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