TIDMDLD
RNS Number : 7970T
Deutsche Land Plc
12 June 2009
Deutsche Land Plc
("The Group")
Preliminary announcement of the unaudited results for the year ended 31 December
2008
12 June 2009
Deutsche Land plc (AIM: DLD), the investor in German property, reports its
results for the year ended 31 December 2008.
Strategic developments
* The Group has separately announced today a placing of and subscription
for 119.3 million new shares in the Company (at 12 pence per share) with new and
existing shareholders, raising in aggregate GBP14.3 million (approximately EUR16.4
million) before expenses.
* Proceeds of the placing are to be used to reduce the Group's net gearing,
improve its liquidity and help fund further development projects.
Financial highlights
* Profit before tax, IFRS fair value adjustments and goodwill impairment, of EUR3.0m
(compared with a loss of EUR2.7m for the 11 months to 31 December 2007).
* Group generates sufficient cash-flow to allow it to meet all interest and
amortisation obligations on its loans.
* Property portfolio at 31 December 2008 valued at EUR560.1m (31 December 2007:
EUR601.6m), reflecting an 8.9 per cent reduction from the previous year end
(excluding the impact of properties acquired in the Rücker acquisition).
* Net asset value at 31 December 2008 of 54.8 pence or 56.3 Euro cents per share,
a reduction of 19% and 39% respectively from 31 December 2007.
* Gross rental income for the period of EUR40.1m (compared with EUR24.3m for the 11
months to 31 December 2007).
* Net service charge expenses of EUR5.0m representing 12.5% of gross rental income
(compared with EUR4.2m representing 17.1% for the 11 months to 31 December 2007).
* IFRS net loss for the year to 31 December 2008 of EUR69.0m (compared with an IFRS
net loss for the 11 months to 31 December 2007 of EUR12.2m).
* Basic EPS loss of 34.7 Euro cents or 33.8 pence (11 months to 31 December 2007:
loss of 6.3 Euro cents or 4.6 pence).
Operational highlights
* Agreement reached with Manager on the terms of the internalisation of the
management company - contracts expected to be signed by the end of July 2009.
* 58.2% stake acquired in Rücker Immobilien Portfolio AG, a company specialising
in investing in residential property, at a cost of EUR2.9m.
* Occupancy rate for commercial properties increased to 92 per cent at 31 December
2008 from 87 per cent as at 31 December 2007 due mainly to additional lettings
at MAC.
* At 31 December 2008 Group rent roll had increased to EUR39.8m from EUR36.8m at 31
December 2007.
* Realisation of some of the incremental development potential in the portfolio
through successful development projects at Wolfsburg and Castrop Rauxel.
David Maxwell, Chief Executive of Deutsche Land plc, commented today:
"After a difficult period for the Group, which included an unsolicited bid for
the Company, Deutsche Land has today presented solid results in a very
challenging financial climate. The Group's property portfolio continues to
perform well and costs remain tightly controlled, allowing the Group to generate
operating profits and cash flow sufficient to service its loans. This, together
with the placing announced today, places the Group in a stable financial
position from which it can expect to benefit from any opportunities that may
arise from the turbulent market environment."
For further details please contact:
+-------------------------------------+------------------------+
| Deutsche Land plc | |
+-------------------------------------+------------------------+
| Stephen Dickinson (Chairman) | +44 (0) 20 7647 9670 |
| David Maxwell (Chief Executive) | |
| | |
+-------------------------------------+------------------------+
| | |
+-------------------------------------+------------------------+
| SP Angel Corporate Finance LLP | |
+-------------------------------------+------------------------+
| John Mackay | +44 (0) 20 7646 9650 |
+-------------------------------------+------------------------+
| | |
+-------------------------------------+------------------------+
| Matrix Corporate Capital LLP | |
+-------------------------------------+------------------------+
| Stephen Mischler | +44 (0) 20 3206 7203 |
+-------------------------------------+------------------------+
| | |
+-------------------------------------+------------------------+
| Citigate Dewe Rogerson | |
+-------------------------------------+------------------------+
| George Cazenove | +44 (0) 20 7638 9571 |
| Hannah Seward | |
+-------------------------------------+------------------------+
Chairman's Statement
Deutsche Land has, in common with other European property companies, been
affected by the turmoil in the world's financial markets and by the onset of
recession in Germany and the rest of the world's major economies, but its
underlying business of investing in and managing properties in Germany has
continued to perform satisfactorily. The Group generates positive cash flow
after meeting all costs, including loan interest and amortisation obligations,
and continues to invest in its property portfolio in order to maintain and
enhance its potential.
However, external influences have impacted significantly on the Group's
strategic developments, its financial results and its liquidity as explained
further below.
Strategic developments
I am pleased to report that the Group has announced today a placing of and
subscription for 119,291,009 new shares in the Company (the "Placing") raising
in aggregate GBP14.3 million (approximately EUR16.4 million) before expenses. The
shares are being placed with, or subscribed by, new and existing shareholders at
a price of 12 pence per share which is in-line with the current market price.
The proceeds of the Placing will reduce the Group's net gearing, improve its
liquidity and help fund further development projects for properties within its
existing portfolio.
The Placing is the conclusion of the strategic review announced by the Company
on 27 March 2009. As we reported to shareholders earlier this year, the Company
received in November 2008 an unsolicited bid approach. The approach included an
indicative cash offer at 10 pence per share, conditional amongst other things on
due diligence, which the Board did not feel able to recommend to shareholders.
However, with a view to maximising shareholder value, the Board took the
decision to conduct the strategic review. On 3 June 2009 the Company announced
that it was no longer in discussion with any party in relation to a possible
offer and that the Board was no longer considering a sale of the Company.
The last 18 months have seen dramatic movements in the Company's share price
from a level of 48 pence per share at the beginning of 2008 to a low of 4 pence
in January 2009 before recovering to the current level of around 12 pence per
share. Over the same period, the net asset value ("NAV") of the Company has also
fallen, albeit very much less dramatically, from 68.0 pence per share as at 31
December 2007 to 54.8 pence per share as at 31 December 2008. The directors
believe that part of this increased discount of share price to NAV reflects the
market's perception of the Group's financing risk.
After the Placing, the Group's NAV, based on 31 December 2008 balance sheet
valuations and current exchange rates, would be approximately 40.1 Euro cents or
34.9 pence per share. The directors believe that the Placing will increase the
Group's financial stability and that this should act to improve the market's
perception of the Group's financing risk.
Financial results and dividend
The Group's underlying operations, calculated before the impact of certain
non-cash, fair value adjustments and goodwill impairment, as required under
IFRS, were profitable in 2008, showing a pre tax profit of EUR3.0 million compared
to a loss of EUR2.7 million in 2007. This reflects the first year of the Group's
operations after having reached full investment at the end of 2007, together
with continued improvements in the control of operating costs and administrative
expenses.
The IFRS result for the year to 31 December 2008 shows a pre tax loss of EUR82.5
million compared to a loss of EUR15.0 million for the 11 months to 31 December
2007. The IFRS result includes pre-tax accounting charges of EUR58.4 million on
the revaluation of the property portfolio (2007: EUR17.1 million), EUR19.1 million
on the revaluation of derivative financial instruments (2007: profit of EUR4.8
million), EUR6.6 million on the impairment of value of available-for-sale
investments (which includes a EUR1.8 million charge which had been taken through
reserves in prior years) and EUR1.4 million (2007: nil) on the impairment of
goodwill.
The net IFRS loss for the year, after a tax credit of EUR13.5 million, was EUR69.0
million compared to EUR12.2 million in 2007.
At 31 December 2008, the Group's NAV was 54.8 pence or 56.3 Euro cents per share
- a decline of 19.4 and 38.9 per cent respectively from 31 December 2007. The
fall in Euro NAV reflects the decline in the fair values of the property
portfolio and the interest rate hedging contracts associated with the Group's
borrowings whilst the strength of the Euro against Sterling has restricted the
Sterling NAV fall.
In order to preserve the Group's cash resources, the Board does not recommend a
dividend for 2008.
Property portfolio
The Group's property portfolio as at 31 December 2008 consisted of 54 commercial
properties and 15 residential assets with a strong combination of stable
income-generating assets and assets with upside potential to be realised through
either the letting of vacant space or incremental development.
During 2008, the Group acquired, for a total cost of EUR2.9 million, a controlling
equity stake in Rücker Immobilien Portfolio AG ("Rücker"), a company which
specialises in investing in residential property. Following its acquisition by
the Group, Rücker itself made a number of small acquisitions and disposals of
residential units. Other than this, the Group has made no property acquisitions
or disposals in the year.
Excluding the Rücker portfolio of properties, which was valued at EUR12.3 million
at the year end, the Group's property portfolio was valued at EUR547.8 million as
at 31 December 2008 - an 8.9 per cent fall compared to its value of EUR601.6
million at 31 December 2007. This decline in value was significantly less than
the general fall in property prices in Germany, reflecting both the inherent
quality of the property portfolio and the realisation of some of the development
potential within it.
As at 31 December 2008, the Group's annualised rent roll, including the expected
parking income at Main Airport Center ("MAC"), had increased by EUR3.1 million to
EUR39.8 million (2007: EUR36.8 million) reflecting increased lettings at MAC and the
addition of the Rücker properties.
As at the year end, the portfolio had an occupancy rate of 92 per cent (2007: 87
per cent) with 388 commercial leases with an overall weighted average lease
length to expiry of 5.4 years (2007: 6.0 years). If the vacant space were to be
let at the estimated rental value ("ERV") provided by the Group's independent
valuers, Cushman & Wakefield LLP ("C&W") in their valuation of the portfolio at
the year end, the gross annual rental income would increase by EUR4.2 million.
At the Group's largest asset, the Main Airport Center, located near Frankfurt
Airport, the Group achieved over 4,900 square metres of new lettings during the
year, increasing the building's occupancy rate, net of lease surrenders, by 5
per cent, to 74 per cent, and the gross annualised rent roll by EUR1.2 million.
These new lettings took place at rental levels in excess of the EUR17.50 per
square metre per month envisaged at the time of acquisition in December 2006 and
in line with ERVs indicated by C&W in their valuation of MAC at the year end.
Incremental development potential continues to be realised elsewhere within the
portfolio, with properties in Castrop Rauxel and Wolfsburg having undergone
significant developments during the period. Further information about these
properties and other properties in the portfolio can be found in the Chief
Executive Officer's statement.
Borrowings and liquidity
The Group has financed its investment in properties by way of a number of loan
facilities as set out in note 19 to the financial information.
The majority of the Group's loan facility agreements contain certain financial
covenants with which the Group must comply, including Loan to Value ("LTV")
covenants and Interest Cover ("IC") covenants.
The properties within each facility have generated, and are expected to continue
to generate, sufficient cash flow to allow the Group to comply with IC covenants
and to meet interest and amortisation obligations on the loans as they fall due.
The fall in the fair value of the Group's investment properties, however, has
impacted significantly on the current LTV ratios as described more fully in note
19 to the financial information. Based on the portfolio valuation as at 31
December 2008, loans totalling EUR68.3 million, or 14.1% of the Group's total
outstanding loan balance of EUR482.8 million, were outside their LTV covenants. To
bring these loans back within covenant would require the Group to repay a total
of EUR4.5 million. In respect of these loans, one lender has instructed its own
valuation of the asset on which its loan for EUR12.0 million is secured. On the
basis of the Group's year end valuation, this loan would require a payment of
EUR0.3 million to bring it back within covenant. For another loan of EUR50.3 million
the lender has confirmed to the Group in writing that it does not require
updated valuation reports for the properties on which the loan is secured at
this time and thus the Group has no current obligation to bring this loan back
within covenant.
The Group remains exposed to the risk of further falls in property values
which would impact on the LTV ratios of its loans. There is a possibility that
one or more lender may call for a valuation of the properties on which its loan
is secured which, if the Group does not repay the necessary amount of the loan,
may demonstrate a breach of covenant which the lender is not prepared to waive.
In such circumstances the lender is entitled to call for repayment of the loan
in full or, if not repaid, to call on the security underlying the loan, being
the properties on which it is secured. The Group's loans are not cross
collateralised and so the lender will have access only to the assets on which
that particular loan is secured and not to the rest of the Group's assets.
However, there is clear evidence that, in current market conditions, lenders are
focusing more on a borrower's ability to service the debt rather than on
technical breaches or potential breaches of LTV covenants. The Group maintains
strong relationships with its lenders and is in active dialogue with them to
discuss and review the current position and future expectations. The directors
are confident that the Group's positive cash flow and ability to service its
loan facilities, together with its current cash resources, which will be
strengthened by the proceeds of the Placing, will ensure that, where necessary,
satisfactory arrangements will be reached with its lenders to ensure that
funding continues to be available to the Group on reasonable terms.
Internalisation of the management company
The Board has announced previously its intention to internalise the management
company, Deutsche Land Management LLP (the "Manager"), so as to align better the
interests of the Manager and shareholders. I am pleased to announce that we have
reached agreement on the terms for the completion of this process.
The first step towards internalisation was taken in January 2009 when the Group
acquired a 31 per cent stake in the Manager from one of its founders following
his departure from the Manager in 2008. The second and final step will involve
the acquisition by the Group of the business and assets of the Manager. The
consideration payable will result in David Maxwell, the other founder of the
Manager and the Group's Chief Executive Officer, receiving 15 million shares in
the Company, representing approximately 4.7 per cent of the Company's enlarged
share capital after the Placing, plus a cash payment equal to the tax payable on
the share component which, based on the current share price, will be
approximately EUR0.4 million. It is anticipated that the internalisation process
will be completed by the end of July 2009.
Following internalisation, the Board will establish a Long Term Incentive Plan
for senior members of the executive team. The key terms of this scheme will be
announced in due course.
Going concern
As an important element of the preparation of the Group's financial results for
the year to 31 December 2008, the Board has had to consider carefully the
appropriateness of preparing these on a going concern basis.
Given the dramatic fall in the general availability of both short and long term
liquidity, the Board has focussed on the cash solvency position of the Group. As
already stated, the portfolio continues to produce strong cash flows which are
more than sufficient to service the interest and amortisation obligations of the
Group's loans. In addition, the Group's cash resources will be strengthened by
the Placing referred to above.
However, there is a risk that property values continue to fall further during
2009 which may put LTV covenants on the Group's loans under greater pressure and
potentially require prepayments to keep the loans within covenant or as part of
an arrangement made with the lender. Any such accelerated amortisation of loans
would put increased pressure on the Group's cash resources, particularly in the
context of the current financial market and the level of refinancing risk.
For one loan in particular, for EUR326.7 million, which was close to its LTV
covenant based on the year end valuations, there is a risk that, if the lender
were to call for a valuation and property prices had fallen further, this might
trigger a sequence of events that could potentially result in the lender taking
control of the properties on which it is secured. These properties were valued
at the year end at EUR365.3 million. The Group's loans are not cross
collateralised and so the lender would have recourse only to those assets on
which this loan is secured and not to the other assets of the Group.
The Board has undertaken an exercise to review the expected cash flows of the
Group for the next two years under a number of different scenarios including
some that include the possibility of the Group losing control of a significant
proportion of the Group's assets as described above. This exercise has been
reviewed by the Group's auditors. The Board has concluded that the Group as a
whole, on the balance of probabilities, has no foreseeable liquidity problems
under any of the scenarios considered and, accordingly, that it remains
appropriate to prepare the Group's financial information on a going concern
basis.
Outlook
The Group is in a stable financial position. It is generating cash at an
operating level, is under no immediate pressure from its principal lenders and
its cash resources will be further strengthened by the proceeds of the Placing.
The Board believes strongly that the Group's underlying property portfolio will
continue to perform well, even in current markets, and has upside potential in
the medium term. The Board believes that the current environment will create
significant opportunities within the German property sector and that the Group
is well positioned to participate in and benefit from such opportunities.
Stephen Dickinson
Chairman
Chief Executive Officer's statement
The year ended 31 December 2008 was a period in which Deutsche Land sought to
concentrate on the Group's core business of real estate investment in Germany
and it has continued to make good progress. As described in more detail below,
additional lettings have been secured at the Main Airport Center ("MAC") and
some of the incremental development potential in the portfolio has been
realised.
Additionally, the Group has focused on securing its liquidity position involving
proactive management of its borrowings through the strong relationships with its
principal lenders, whilst seeking to control tightly its working capital
resources and operating costs.
Investments
Following the acquisition of the South West Portfolio of 16 properties in
December 2007, the Group was fully invested and during 2008 did not make further
property acquisitions.
However, during the year, the Group did make an investment in Rücker Immobilien
Portfolio AG ("Rücker"), a company specialising in investing in residential
property, based in Remscheid (North Rhine Westphalia). In two separate
transactions the Group acquired a stake of 58.2 per cent for a total cost of
EUR2.9 million and the operations of Rücker have been consolidated in the Group's
results from the date of the initial acquisition in February 2008. As at 31
December 2008, Rücker accounted for EUR12.3 million of the value of the Group's
property portfolio.
The acquisition of Rücker has been accounted for as a business combination in
accordance with IFRS 3 and the Group has calculated goodwill arising on the
transactions based on the difference between the consideration and its
determination of its share of the fair value of assets and liabilities
acquired. Total goodwill arising on the Rücker acquisitions was EUR1.4 million. In
accordance with its accounting policy for goodwill, the Group has performed an
impairment test on the goodwill as at 31 December 2008, as a result of which the
full amount has been written off through the income statement within
administrative expenses.
Financial results
The Group made an IFRS net loss for the year to 31 December 2008 of EUR69.0
million compared to a net loss for the 11 months to 31 December 2007 of EUR12.2
million.
Rental income
Gross rental income for the year increased to EUR40.1 million compared to EUR24.3
million in the previous period, reflecting the impact of the first year of full
investment. The 2008 figure also includes EUR1.4 million relating to a lease
surrender premium from the major tenant at the Group's property in Wolfsburg as
well as the rental income from the Rücker properties.
Net service charge expense was EUR5.0 million or 12.5 per cent of gross rental
income, compared to EUR4.2 million or 17.1 per cent in 2007. The Group expects to
continue to reduce net service charge expense as a percentage of the rent roll
as further space is let at MAC and costs throughout the portfolio continue to be
carefully controlled.
Administrative expenses
Administrative expenses of EUR9.3 million for 2008 (2007: EUR7.4 million) included a
charge of EUR1.4 million relating to the write off of goodwill arising from the
acquisition of Rücker. Excluding this, administrative expenses at EUR7.9 million
were slightly lower on a pro rata basis than for the 11 months to 31 December
2007. However, as a percentage of gross rental income, administrative expenses,
excluding goodwill, fell to 19.7 per cent of gross rental income compared to
30.4 per cent in 2007, reflecting the benefit to the Group of having a
management fee which is based on costs incurred rather than the value of assets
managed. We will continue our efforts to further reduce administrative expenses
in the current year, which will be assisted by the completion of the
internalisation of the Manager referred to by the Chairman in his statement.
Fair value adjustments
The Group's results for the year have been significantly affected by four fair
value adjustments in addition to the EUR1.4 million goodwill impairment charge in
respect of Rücker:
* Revaluation of investment properties - loss of EUR58.4 million (2007: loss of
EUR17.1 million)The Group recorded a loss on revaluation of its investment
properties of EUR58.4 million for the year. The reduction is due principally to an
increase in capitalisation rates partly offset by increased lettings and
improved estimated rent values.
* Revaluation of interest rate swaps and caps - loss of EUR17.9 million (2007: gain
of EUR5.2 million) Approximately 82 per cent of the Group's loans are hedged
through interest rate swaps. At the end of 2007, the European Central Bank
("ECB") refinancing rate was at 4.0 per cent compared to the Group's swap rates
of between 3.82 and 3.85 per cent. Accordingly, the swaps were valued in the
Group's balance sheet at 31 December 2007 as an asset of EUR8.4 million. By 31
December 2008, the ECB rate had fallen to 2.5 per cent and the swaps were valued
as a liability of EUR9.5 million, resulting in a EUR17.9 million pre-tax charge to
the income statement in 2008.
* Revaluation of available-for-sale investments EUR6.6 million (2007: nil through
the income statement) The Group's available-for-sale investments comprise
strategic investments in two companies, GWB Immobilien AG ("GWB") and Rücker
Immobilien AG (which is the other major shareholder alongside the Group in
Rücker). These two companies are traded on the Frankfurt Stock Exchange and at
each period end the investments have been revalued to their fair value based on
the last traded price in the period. In previous periods the fair value
impairment charge has been taken directly to reserves as required by IFRS rather
than through the income statement. In the year ended 31 December 2008, the
impairment of value has become sufficiently significant and prolonged that IFRS
requires the current year impairment charge (pre tax charge of EUR4.8 million)
plus the cumulative impairment charges from previous periods (pre tax charge of
EUR1.8 million giving a total charge of EUR6.6 million) to be recognised in the
income statement.
* Loss on GWB option - EUR1.2 million (2007: EUR0.4 million) As described in note 12,
at the same time as the Group acquired its strategic stake in GWB, it entered
into a put option giving certain shareholders of GWB the right to sell further
shares to the Group at a predetermined share price. The option is recorded in
the Group's financial information at its fair value. With the fall in GWB's
share price below the option's strike price, the fair value of the option has
decreased resulting in a charge to the Group in 2008 of EUR1.2 million (2007: EUR0.4
million) which is included within the net change in value of derivative
financial instruments in the income statement.
Loss before tax
The loss before tax for 2008 was EUR82.5 million compared to EUR15.0 million in
2007. However, excluding the impact of the fair value adjustments and the
goodwill impairment charge discussed above, the Group made a pre-tax profit of
EUR3.0 million in 2008 (2007: loss of EUR2.7 million) which the directors believe is
a better indication of the underlying operating performance of the Group.
Finance expense
The Group's finance expense for 2008 was EUR24.9 million compared to EUR18.0 million
in 2007, the large majority of which relates to interest costs on the Group's
borrowings and associated interest rate swaps and caps. The Group's average
effective interest rate for the year was 5.0 per cent on the average outstanding
loan amount compared to 4.6 per cent in 2007. The significant falls in ECB
interest rates since September 2008 from 4.0 per cent to the current level of
1.0 per cent occurred too late in the year to have an impact on 2008 but will
result in lower interest rate costs in the current year on the approximately 11
per cent of the Group's borrowings which are not fixed or swapped.
Taxation
The Group recorded a net tax credit in 2008 of EUR13.5 million (2007: EUR2.8
million) comprising a deferred tax credit of EUR15.1 million (relating principally
to the fair value adjustments to property, derivative financial instruments and
available-for-sale investments) (2007: EUR2.8 million) and a current tax charge of
EUR1.6 million (2007: EURnil). The current tax charge has arisen as a result of the
new earnings stripping rules in Germany which came into effect in 2008. These
rules will give rise to a charge in 2009 although the Group expects it to be
somewhat lower as more of the Group's operations should fall within the
available exemptions.
Net asset value
At 31 December 2008, the Group's NAV was 56.3 Euro cents per share, a decline of
38.9 per cent from the end of 2007. The fall in the Euro NAV is attributable
primarily to the impact of the fair value adjustments on property values,
derivative financial instruments and available-for-sale investments. The
strengthening of the Euro against Sterling, however, from 1.36 as at 31 December
2007 to 1.03 as at 31 December 2008 has resulted in the Sterling NAV falling
only 19.4 per cent to 54.8 pence per share. At current exchange rates, the year
end Sterling NAV would be approximately 49 pence per share.
German economic overview and property investment market
Despite the prevailing depressed state of the global economy in 2008, the German
economy showed some resilience to a severe economic downturn. GDP grew by 1.3
per cent for the period and consumer spending also increased by 1.1 per cent.
The Consumer Price Index, a measure of inflation against which a significant
part of the Group's leases are indexed, increased by 1.1 per cent for the year.
However, the recently published data for the first quarter of 2009 indicated a
fall in German GDP of 3.8 per cent which was a significantly greater fall than
had been expected.
The property market in Germany has been negatively affected by the economic
situation and also by the lack of financing available for purchasing property
due to the turmoil in the financial markets. During 2008, these factors combined
to reduce significantly the demand for German real estate, as reflected in
transaction volumes as reported by Jones Lang LaSalle. Transactions with a value
of just under EUR20 billion were recorded in Germany for 2008, less than half the
value recorded in 2007 (EUR55 billion), with a considerable tailing off in volumes
in the final quarter of 2008 and the first quarter of 2009, in which only EUR3.2
billion and EUR1.8 billion were transacted respectively.
This lack of demand, in conjunction with a weakening economic climate, has
resulted in a rise in required investment yields across all sectors of
commercial real estate in Germany. The resulting changes in capitalisation rates
reflect not only this but also a weakened perception of tenant covenant strength
and a lower expectation of lease renewals upon lease expiry. Additionally, this
reduced level of transactional evidence has made the measurement of the fall in
the value of commercial property more difficult to assess, particularly when
considering how the German property investment market is performing in 2009.
Portfolio analysis & performance
Apart from the impact of the investment in Rücker, the Group made no
other property disposals or acquisitions during the period. Consequently, as at
the year end, the Group's property portfolio comprised the commercial property
portfolio of 54 properties located throughout the former West Germany, unchanged
from the previous period end and representing 97.8 per cent of the total
portfolio, together with Rücker's 15 residential assets representing 2.2 per
cent of the portfolio. Overall, when analysed by value, the portfolio comprises
60 per cent office, 32 per cent retail, 6 per cent hotel and 2 per cent
residential. The weighted average lease length to expiry as at 31 December 2008
was 5.4 years (2007: 6.0 years).
Excluding the Rücker properties, the value of the Group's property portfolio has
fallen by EUR53.8 million from EUR601.6 million as at 31 December 2007 to EUR547.8
million as at 31 December 2008, a fall of 8.9 per cent. The majority of this
valuation fall arises from an average increase of 65 basis points, to 6.51 per
cent, in the capitalisation rates applied to the properties partially offset by
slightly improved estimated rental values.
The occupancy rate for the commercial properties during the period increased
from 87 per cent to 92 per cent. During the year, 48 new leases for over 20,000
square metres were signed or started, of which 12,000 square metres related to
vacant space, resulting in an additional EUR3.1 million and EUR1.7 million
respectively of annualised rental income. In addition, 23 lease extensions on
12,500 square metres took place, representing EUR1.7 million of annualised rental
income. As at the period end, there were 388 individual tenants in the
commercial portfolio, where the top five tenants accounted for approximately 30
per cent of the rent roll. During 2008, 15 per cent of the tenant's leases
underwent rent reviews in line with their rental indexation and turnover
clauses, resulting in an overall net increase to the annualised rent roll of
EUR0.3 million.
As at 31 December 2008, the Group rent roll, including the expected parking
income at MAC, had increased to EUR39.8 million (2007: EUR36.8 million).
Generally the tenant quality throughout the portfolio remains strong and the
Group has not experienced problems in collecting rents and service charges as
they fall due. However, there is a dispute with one tenant which dates back to
rents due in the period, from December 2007 to March 2008 totalling EUR2.3
million. On the basis of the Group's analysis of the circumstances surrounding
this outstanding amount, the Group is confident of recovering this amount in
full and, accordingly, has made no provision against this receivable.
In addition, a tenant which accounts for EUR1.6 million of the rent roll entered
administration in January 2009 as a result of its international parent company
filing for creditor protection. The Group's tenant is continuing to trade whilst
in administration and, to date, has continued to meet its rental obligations as
they fall due.
Development potential in the Portfolio
Main Airport Center
MAC, located near Frankfurt Airport, is the largest asset in the Group's
portfolio comprising a 54,600 square metre Grade A office building and a covered
1,460 capacity parking garage with an integrated service station. The Group
secured additional lettings during the period increasing MAC's annualised rent
roll by EUR1.2 million and raising its occupancy to 74 per cent. The Group
continues to receive significant levels of interest in the vacant space.
Business Premises, Wolfsburg
This office building on one of the main streets in Wolfsburg has seen the most
significant and successful change within the portfolio during the period.
Following the retail anchor tenant surrendering its lease in early 2008,
the Group has successfully sourced a major insurance company as an alternative
anchor tenant to occupy the vacated 4,000 square metre space. A major
refurbishment took place during the period, part-funded by the lease surrender
payment, to convert the vacant area into office space and to improve the
condition of the existing areas. The new anchor tenant took occupancy in early
2009 and a majority of the existing tenants have signed new leases, improving
the weighted average lease length of the property.
Widumer Platz, Castrop Rauxel
This shopping centre, located in the centre of Castrop Rauxel, has under-gone
significant developments during the period to increase the net lettable area. A
new ten year lease with an international retailer has been signed in respect of
the new area for a 1,500 square metre store in early 2008 at EUR14.50 per square
metre per month, a rental level that is approximately 50 per cent greater than
previously seen at the shopping centre. The redevelopment program is currently
underway for occupancy to start in August 2009.
Mainz
The property at Mainz comprises two adjacent areas located on a site to the
south-west of the town centre that, since 1966, has been developed and expanded
by a major, global technology company.
On the larger main site, the refurbishment of one of the vacant office buildings
was completed and the tenant, a local government organisation, took occupancy on
a ten year lease early in 2008. Plans are close to being finalised for the
adjacent vacant office building's conversion into a data storage centre. A lease
for this purpose was signed during the year and occupancy is due to take place
at the start of 2010. This will create the opportunity to extend the data
storage use on the site, utilising common infrastructure, which could result in
increased rental income on this property.
Outlook
These remain challenging and uncertain times for the Group. I believe that the
Group has assembled a property portfolio that is well placed to weather the
storm in the global economy and we are working hard to counter the risks to the
Group arising from the depressed state of the property market and the turmoil in
the financial markets. The Placing referred to in the Chairman's statement is an
important step forward by the Group in this regard and will provide it with
improved financial strength and stability. We look forward to continuing to meet
and overcome these challenges in the year ahead.
David Maxwell
Chief Executive Officer
Deutsche Land Plc consolidated financial information 31 December 2008
+-----------------------------------------------+-------+--------------+--------------+
| Consolidated income statement |
+-------------------------------------------------------------------------------------+
| For the year ended 31 December 2008 |
+-------------------------------------------------------------------------------------+
| | | Group | Group |
+-----------------------------------------------+-------+--------------+--------------+
| | | For the year | For the 11 |
| | | ended | month |
| | | 31 December | period ended |
| | | 2008 | 31 December |
| | | (unaudited) | 2007 |
| | | | (audited) |
+-----------------------------------------------+-------+--------------+--------------+
| |Notes | EUR 000 | EUR 000 |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Gross rental income | 4 | 40,100 | 24,266 |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Service charge income | | 7,884 | 5,006 |
+-----------------------------------------------+-------+--------------+--------------+
| Service charge expenses | | (12,882) | (9,164) |
+-----------------------------------------------+-------+--------------+--------------+
| Net service charge expense | | (4,998) | (4,158) |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Net rental income | | 35,102 | 20,108 |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Loss on revaluation of investment properties | 10 | (58,442) | (17,132) |
+-----------------------------------------------+-------+--------------+--------------+
| Administrative expenses | 5 | (9,259) | (7,387) |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Operating loss | | (32,599) | (4,411) |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Finance income | 6 | 758 | 2,655 |
+-----------------------------------------------+-------+--------------+--------------+
| Finance expense | 6 | (24,926) | (18,032) |
+-----------------------------------------------+-------+--------------+--------------+
| Net change in fair value of derivative | 6 | (19,097) | 4,789 |
| financial instruments | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Loss on change in fair value of | 12 | (6,645) | - |
| available-for-sale investments | | | |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Loss before tax | | (82,509) | (14,999) |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Tax credit | 7 | 13,523 | 2,785 |
+-----------------------------------------------+-------+--------------+--------------+
| Loss for the period | | (68,986) | (12,214) |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Attributable to: | | | |
+-----------------------------------------------+-------+--------------+--------------+
| equity holders of the Company | | (68,715) | (12,214) |
+-----------------------------------------------+-------+--------------+--------------+
| minority interests | | (271) | - |
+-----------------------------------------------+-------+--------------+--------------+
| | | (68,986) | (12,214) |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Basic and diluted loss per share (Euro cents) | 8 | (34.7) | (6.3) |
+-----------------------------------------------+-------+--------------+--------------+
In accordance with Section 3(5) (b) (ii) of the Companies Act 1982, the Company
is exempt from the requirement to present its own income statement.
Included in the consolidated income statement is a loss of EUR78,758,000 (the
period to 31 December 2007: profit of EUR967,000) which has been treated through
the individual accounts of the Company.
Deutsche Land Plc consolidated financial information 31 December 2008
Consolidated statement of changes in equity
For the year ended 31 December 2008 (unaudited)
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | Share | Share | Available-for-sale | Distributable | Retained | Total | Minority | Total |
| | | capital | premium | investments | reserve | earnings | | interest | equity |
| | | | reserve | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| |Notes | EUR 000 | EUR 000 | EUR 000 | EUR 000 | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Balance at 1 | | 1,076 | 472 | (46) | 95,879 | 6,377 | 103,758 | 2,131 | 105,889 |
| February 2007 | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Available-for-sale | | | | | | | | | |
| investments: | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| valuation losses | 12 | - | - | (1,736) | - | - | (1,736) | - | (1,736) |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| deferred tax | | - | - | 262 | - | - | 262 | - | 262 |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Net expense | | - | - | (1,474) | - | - | (1,474) | - | (1,474) |
| recognised directly | | | | | | | | | |
| in equity | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Loss for the period | | - | - | - | - | (12,214) | (12,214) | - | (12,214) |
| ended | | | | | | | | | |
| 31 December 2007 | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Total recognised | | - | - | - | - | (12,214) | (12,214) | - | (12,214) |
| income and expense | | | | | | | | | |
| for the period | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Issue of share | 22 | 917 | 98,643 | - | - | - | 99,560 | - | 99,560 |
| capital | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Purchase of own | 22 | (11) | (718) | - | - | - | (729) | - | (729) |
| shares for | | | | | | | | | |
| cancellation | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Minority interests | | - | - | - | - | - | - | 478 | 478 |
| in | | | | | | | | | |
| companies acquired | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Dividends | 24 | - | - | - | (6,137) | - | (6,137) | - | (6,137) |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | 906 | 97,925 | - | (6,137) | - | 92,694 | 478 | 93,172 |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Balance at 31 | | 1,982 | 98,397 | (1,520) | 89,742 | (5,837) | 182,764 | 2,609 | 185,373 |
| December 2007 | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Impairment of | | - | - | 1,520 | - | - | 1,520 | - | 1,520 |
| available-for-sale | | | | | | | | | |
| Investments to be | | | | | | | | | |
| reported through | | | | | | | | | |
| the Income | | | | | | | | | |
| statement | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Loss for the year | | - | - | - | - | ( 68,715) | (68,715) | (271) | (68,986) |
| ended 31 | | | | | | | | | |
| December 2008 | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Total recognised | | - | - | 1,520 | - | (68,715) | (67,195) | (271) | (67,466) |
| income and expense | | | | | | | | | |
| for the period | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Minority interests | | - | - | - | - | - | - | 1,715 | 1,715 |
| in | | | | | | | | | |
| companies acquired | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Dividends | 24 | - | - | - | (3,964) | - | (3,964) | - | (3,964) |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | - | - | - | (3,964) | - | (3,964) | 1,715 | (2,249) |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
| Balance at 31 | | 1,982 | 98,397 | - | 85,778 | (74,552) | 111,605 | 4,053 | 115,658 |
| December 2008 | | | | | | | | | |
+---------------------+-------+----------+---------+--------------------+---------------+-----------+----------+----------+----------+
Deutsche Land Plc consolidated financial information 31 December 2008
The Company - statement of changes in equity
For the year ended 31 December 2008 (unaudited)
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | Share | Share | Distributable | Retained | Total |
| | | capital | premium | reserve | earnings | equity |
| | | | reserve | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| |Notes | EUR 000 | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Balance at 1 | | 1,076 | 472 | 95,879 | 3,239 | 100,666 |
| February 2007 | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Profit for the | | - | - | - | 967 | 967 |
| period ended | | | | | | |
| 31 December 2007 | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Total recognised | | - | - | - | 967 | 967 |
| income and expense | | | | | | |
| for the period | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Issue of share | 22 | 917 | 98,643 | - | - | 99,560 |
| capital | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Purchase of own | 22 | (11) | (718) | - | - | (729) |
| shares for | | | | | | |
| cancellation | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Dividends | 24 | - | - | (6,137) | - | (6,137) |
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | 906 | 97,925 | (6,137) | - | 92,694 |
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Balance at 31 | | 1,982 | 98,397 | 89,742 | 4,206 | 194,327 |
| December 2007 | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Loss for the period | | - | - | - | (78,758) | (78,758) |
| ended | | | | | | |
| 31 December 2008 | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Total recognised | | - | - | - | (78,758) | (78,758) |
| income and expense | | | | | | |
| for the period | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Dividends | | - | - | (3,964) | - | (3,964) |
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | - | - | (3,964) | - | (3,964) |
+----------------------+-------+----------+---------+---------------+----------+----------+
| | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
| Balance at 31 | | 1,982 | 98,397 | 85,778 | (74,552) | 111,605 |
| December 2008 | | | | | | |
+----------------------+-------+----------+---------+---------------+----------+----------+
Deutsche Land plc consolidated financial information 31 December 2008
Balance sheets
As at 31 December 2008
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | Group | Company |
+--------------------------+-------+-------------------------+-------------------------+
| | | 31 | 31 | 31 | 31 |
| | | December | December | December | December |
| | | 2008 | 2007 | 2008 | 2007 |
| | |(unaudited) |(audited) |(unaudited) |(audited) |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| |Notes | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| ASSETS | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Non-current assets | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Investment properties | 10 | 560,110 | 601,601 | - | - |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Plant and equipment | 11 | 387 | 382 | - | - |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Deferred tax assets | 7 | 15,733 | 7,730 | - | - |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Available-for-sale | 12 | 1,729 | 6,560 | - | - |
| investments | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Derivative financial | 13 | - | 8,380 | - | - |
| instruments | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Other investments | 14 | 2,247 | 2,182 | 2,247 | 2,182 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Investments in | 15 | - | - | 31,159 | 115,209 |
| subsidiaries | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | 580,206 | 626,835 | 33,406 | 117,391 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Current assets | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Trade and other | 17 | 9,972 | 8,272 | 3,437 | 316 |
| receivables | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Amounts due from | 16 | - | - | 68,862 | 74,429 |
| subsidiaries | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Cash and cash | 21 | 35,826 | 34,946 | 7,749 | 3,357 |
| equivalents | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | 45,798 | 43,218 | 80,048 | 78,102 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| TOTAL ASSETS | | 626,004 | 670,053 | 113,454 | 195,493 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| LIABILITIES | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Non-current liabilities | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Loans and borrowings | 19 | 465,665 | 452,907 | - | - |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Derivative financial | 13 | 9,536 | - | - | - |
| instruments | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Deferred tax liabilities | 7 | 2,935 | 9,525 | - | - |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | 478,136 | 462,432 | - | - |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Current liabilities | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Trade and other payables | 18 | 18,398 | 22,248 | 1,849 | 1,166 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Loans and | 19 | 13,812 | - | - | - |
| borrowings-current | | | | | |
| maturities | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | 32,210 | 22,248 | 1,849 | 1,166 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| TOTAL LIABILITIES | | 510,346 | 484,680 | 1,849 | 1,166 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| NET ASSETS | | 115,658 | 185,373 | 111,605 | 194,327 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| EQUITY | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Capital and reserves | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Share capital | 22 | 1,982 | 1,982 | 1,982 | 1,982 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Share premium reserve | 22 | 98,397 | 98,397 | 98,397 | 98,397 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Available-for-sale | 22 | - | (1,520) | - | - |
| investments reserve | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Distributable reserve | 22 | 85,778 | 89,742 | 85,778 | 89,742 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Retained earnings | | (74,552) | (5,837) | (74,552) | 4,206 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Shareholders' equity | | 111,605 | 182,764 | 111,605 | 194,327 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| Minority interest | | 4,053 | 2,609 | - | - |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| | | | | | |
+--------------------------+-------+-------------+-----------+-------------+-----------+
| TOTAL EQUITY | | 115,658 | 185,373 | 111,605 | 194,327 |
+--------------------------+-------+-------------+-----------+-------------+-----------+
Deutsche Land plc consolidated financial information 31 December 2008
Cash flow statements
For the year ended 31 December 2008
+-------------------------------------+-------------+-----------+-------------+-----------+
| | Group | Company |
+-------------------------------------+-------------------------+-------------------------+
| | For the | For the | For the | For the |
| | year | 11 month | year | 11 month |
| | ended | period | ended | period |
| | 31 | ended | 31 | ended |
| | December | 31 | December | 31 |
| | 2008 | December | 2008 | December |
| |(unaudited) | 2007 | (unaudited) | 2007 |
| | |(audited) | |(audited) |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Cash flows from operating | | | | |
| activities | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| (Loss) / profit for the period | (68,986) | (12,214) | (78,758) | 967 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Finance income | (758) | (2,655) | (4,190) | (1,542) |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Finance expense | 26,107 | 18,032 | 1,264 | 1,274 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | (43,637) | 3,163 | (81,684) | 699 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Adjustments for: | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| depreciation on plant and equipment | 54 | 46 | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Capital gains on sales of | (227) | - | - | - |
| investment properties | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| amortisation of deferred finance | 1,084 | 683 | - | - |
| costs | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| change in value of derivative | 17,916 | (4,789) | - | (1,345) |
| financial instruments | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| change in value of | 6,645 | - | - | - |
| available-for-sale investments | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| change in value of investment | 58,442 | 17,132 | - | - |
| properties | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| impairment of goodwill | 1,368 | - | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| impairment of investments in | - | - | 84,031 | - |
| subsidiaries | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| tax credit | (13,523) | (2,785) | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| other changes in deferred taxes | - | 698 | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Cash flows from operating | | | | |
| activities before changes in | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| working capital and finance costs | 28,122 | 14,148 | 2,347 | (646) |
+-------------------------------------+-------------+-----------+-------------+-----------+
| change in trade and other | (1,700) | (5,842) | 6,433 | 139 |
| receivables | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| change in trade and other payables | 231 | 11,046 | (498) | 513 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Cash generated from operations | 26,653 | 19,352 | 8,282 | 6 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Interest paid | (24,730) | (12,543) | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Net cash flows from operating | 1,923 | 6,809 | 8,282 | 6 |
| activities | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Cash flows from investing | | | | |
| activities | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Investment in investment properties | (13,291) | (330,827) | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Proceeds from sale of investment | 1,145 | - | - | - |
| properties | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Acquisition of subsidiary, net of | (2,780) | - | - | - |
| cash acquired | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Purchase of plant and equipment | (59) | (86) | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Purchase of available-for-sale | - | (756) | - | - |
| financial investments | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Investment in subsidiary | - | - | - | (9,387) |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Loans to subsidiary | - | - | 19 | (88,638) |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Interest received | 693 | 2,655 | 138 | 1,542 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Net cash used in investing | (14,292) | (329,014) | 157 | (96,483) |
| activities | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Cash flows from financing | | | | |
| activities | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Issue of ordinary shares | - | 99,560 | - | 99,560 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Purchase of own shares for | - | (729) | - | (729) |
| cancellation | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Net proceeds from bank borrowings | 17,917 | 215,051 | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Repayments of bank borrowings | (508) | - | - | - |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Proceeds from sale of derivative | - | 1,348 | - | 1,348 |
| financial instruments | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Purchase of derivative financial | - | (589) | - | - |
| instruments | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Dividend paid to the equity holders | (3,964) | (6,137) | (3,964) | (6,137) |
| of the Company | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Net cash flows from financing | 13,445 | 308,504 | (3,964) | 94,042 |
| activities | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Net increase /(decrease) in cash | 1,076 | (13,701) | 4,475 | (2,435) |
| and cash equivalents | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Cash balances at beginning of | 34,946 | 49,947 | 3,357 | 7,066 |
| period | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | 36,022 | 36,246 | 7,832 | 4,631 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Exchange losses on cash balances | (196) | (1,300) | (83) | (1,274) |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Cash balances at end of period | 35,826 | 34,946 | 7,749 | 3,357 |
+-------------------------------------+-------------+-----------+-------------+-----------+
Deutsche Land Plc consolidated financial information 31 December 2008
Notes to the annual financial information
1.ACCOUNTING POLICIES
Basis of preparation
This unaudited preliminary announcement for the year ended 31 December 2008
relates to the Company and its subsidiaries (together referred to as the
"Group").
The financial information within this unaudited preliminary announcement does
not constitute the Group's or Company's statutory financial statements for the
year ended 31 December 2008. The financial statements, on which the auditors
will issue their audit opinion, will be available on the Company's website,
www.deutscheland.co.im, and from its registered office in due course. We
understand that the auditors intend to issue an unqualified audit report with an
emphasis of matter drawing attention to the material risks identified by the
Directors as disclosed in note 2(a) relating to the going concern of a
proportion of the Group's operations.
The comparative information contained in this preliminary announcement does not
constitute the Group's statutory financial statements for the period ended 31
December 2007. The figures for the period ended 31 December 2007 are extracted
from the audited Group financial statements (the "Financial Statements"). A copy
of the Financial Statements, on which the auditors have issued an unqualified
report (and did not include reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report) are available on
the Company's website. The results for the period ended 31 December 2007 have
been prepared on the basis of the accounting policies set out in the Financial
Statements.
The consolidated financial information incorporate the financial information of
the Company and the subsidiaries controlled by the Company, made up to 31
December 2008 and 2007. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefit from its activities.
The principal accounting policies adopted in the preparation of the financial
information are set out below. The policies have been consistently applied to
all periods presented, unless otherwise stated. This financial information
has been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations (collectively
"IFRS") issued by the International Accounting Standards Board ("IASB") and as
adopted by the European Union.
The financial information of the Company and the Group present the results as at
and for the year ended 31 December 2008. In the previous period, the Company and
the Group changed their accounting reference dates to 31 December and
accordingly the comparative figures are for the eleven month period ended 31
December 2007.
The preparation of financial information in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the accounting policies. The
areas involving a high degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial information are
disclosed in note 2.
Changes in accounting policies
(a) New standards, amendments to published standards and interpretations to
existing standards effective in 2008 adopted by the Group and which have had no
effect on the Group's results:
+-------------------+---+------------------------------------------------------------------------+
| IFRIC 11 | | IFRS 2 Group and Treasury Share Transactions |
+-------------------+---+------------------------------------------------------------------------+
| IFRIC 12 | | Service concession arrangements |
+-------------------+---+------------------------------------------------------------------------+
| IFRIC 13 | | Customer loyalty programmes |
+-------------------+---+------------------------------------------------------------------------+
| IFRIC 14 | | IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding |
| | | Requirements and their Interaction |
+-------------------+---+------------------------------------------------------------------------+
(b) Standards, amendments and interpretations to published standards not yet
effective
The IFRS financial information has been drawn up on the basis of accounting
standards, interpretations and amendments effective at the beginning of the
reporting period being 1 January 2008.
The IASB has issued the following standards and interpretations which are
effective for later reporting periods beginning after the end of this financial
period:
+-------------------+---+------------------------------------------------------------------------+
| IFRS 1 (amended) | | Cost of an Investment in a Subsidiary, Jointly-Controlled Entity or |
| | | Associate |
+-------------------+---+------------------------------------------------------------------------+
| IFRS 1 (amended) | | Share-based Payment - Vesting Conditions and Cancellations |
+-------------------+---+------------------------------------------------------------------------+
| IFRS 3 (revised | | Business Combinations |
| 2008) | | |
+-------------------+---+------------------------------------------------------------------------+
| IFRS 8 | | Operating Segments |
+-------------------+---+------------------------------------------------------------------------+
| IAS 1 (revised | | Presentation of Financial Statements |
| 2007) | | |
+-------------------+---+------------------------------------------------------------------------+
| IAS 23 (revised | | Borrowing Costs |
| 2007) | | |
+-------------------+---+------------------------------------------------------------------------+
| IAS 27 (revised | | Consolidated and Separate Financial Statements |
| 2008) | | |
+-------------------+---+------------------------------------------------------------------------+
| IAS 32 (amended) | | Financial instruments: Presentation |
+-------------------+---+------------------------------------------------------------------------+
| IAS 39 (amended) | | Reclassification of Financial Instruments/Reclassification of |
| | | Financial Assets: |
+-------------------+---+------------------------------------------------------------------------+
| IFRS 7 (amended) | | Effective Date and Transition |
+-------------------+---+------------------------------------------------------------------------+
| IAS 39 (amended) | | Financial Instruments: Recognition and Measurement - Eligible Hedged |
| | | Items |
+-------------------+---+------------------------------------------------------------------------+
| IFRIC 15 | | Agreements for the Construction of Real Estate |
+-------------------+---+------------------------------------------------------------------------+
| IFRIC 16 | | Hedges of a Net Investment in a Foreign Operation |
+-------------------+---+------------------------------------------------------------------------+
| IFRIC 17 | | Distributions of Non-cash assets to Owners |
+-------------------+---+------------------------------------------------------------------------+
| IFRIC 18 | | Transfer of Assets from Customers |
+-------------------+---+------------------------------------------------------------------------+
The adoption of these standards, interpretations and amendments will not
significantly affect the Group's and Company's reported results of operations or
financial position although IAS 1, IFRS 8 and IAS 39 will affect how the
financial information is presented.
Basis of consolidation
Certain of the Group's investment properties have been acquired through the
acquisition of special purpose companies which in turn own the underlying
properties. In the opinion of the Directors, these transactions did not meet the
definition of a business combination as set out in IFRS 3 ("Business
Combinations"). Accordingly the transactions have not been accounted for as
business acquisitions and instead the financial information reflects the
substance of the transactions, which is considered to be the purchase of
investment properties.
The results of subsidiaries acquired during the period are included in the
consolidated income statement from the effective date of acquisition. Where
necessary, adjustments are made to the financial information of entities
acquired to bring the accounting policies used into line with those used by the
Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
The accounting policies are applied consistently throughout the Group.
Revenue recognition
Rental income from operating leases is recognised on a straight-line basis over
the term of the relevant lease. Where acquisitions have been made of shares in a
company owning property, and lease incentives have been granted to tenants, but
the straight-line basis for recognising rental income has not been adopted
previously, the straight-line basis is applied from the date of acquisition.
Service charges that are recoverable are billed to the tenants on a monthly
basis. In some instances an estimate is made for the year and billed monthly,
based on the estimate, and adjusted at the end of the year when the actual costs
are known.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable.
Lease incentives granted are recognised in the income statement over the period
of the lease. The fair values of investment properties in the balance sheet
reflect the impact of lease incentives granted.
Goodwill
Goodwill arising on consolidation represents, for those acquisitions which meet
the definition of a business combination as set out in IFRS 3 ("Business
Combinations"), the excess of the costs of acquisition over the Group's
interests in the fair value of the assets and liabilities of the entity acquired
as at the date of acquisition. Goodwill is initially recognised as an asset at
cost and is subsequently measured at cost less any accumulated impairment
losses. Goodwill which is recognised as an asset is reviewed for impairment
annually. Any impairment is recognised immediately through the income statement
and is not subsequently reversed.
Goodwill is tested for impairment annually, or more frequently when there is an
indication that significant impairment has occurred. Impairment is assessed on
the basis of discounted cash flows expected to be generated by the assets and
liabilities of the entity acquired.
On disposal of a subsidiary or associate, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal.
Leasing
All of the Group's properties are leased out under operating leases and are
included in investment properties in the balance sheet.
Foreign currency translation
a) Functional and presentation currency
Since the Group's operations are primarily carried out in the Euro zone, the
books and records are maintained in Euros as the functional currency and the
consolidated financial information is presented in Euros. The Company's shares
are denominated in Euros.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at the year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement.
Current taxation
The Company is taxed on its income at a rate of 0%.
The Group is liable to German tax arising on the activities of its German
operations.
The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income and expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
information and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the
accounting profit. The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the
asset to be recovered.
Deferred tax is measured using tax rates that have been enacted or substantively
enacted by the balance sheet date and are expected to apply when the related
deferred tax asset is realised or deferred tax liability is settled. Deferred
tax is charged or credited in the income statement, except when it relates to
items charged or credited directly to equity, in which case the deferred tax is
also dealt with in equity.
Financial assets
The Group's financial assets fall into the categories discussed below, with the
allocation depending to an extent on the purpose for which the asset was
acquired. Although the Group uses derivative financial instruments in economic
hedges of interest rate risk, it does not hedge account for these transactions.
The Group has not classified any of its financial assets as held to maturity.
Unless otherwise indicated, the carrying amounts of the Group's financial assets
are a reasonable approximation of their fair values.
(a) Loans and receivables
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally through
the provision of goods and services to customers (for example, trade
receivables), but also incorporate other types of contractual monetary asset.
They are initially recognised at fair value plus transaction costs that are
directly attributable to the acquisition or issue and subsequently carried at
amortised cost using the effective interest rate method, less provision for
impairment. The effect of discounting on these financial instruments is not
considered to be material.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default or
significant delay in payment) that the Group will be unable to collect all of
the amounts due under the terms receivable, the amount of such a provision being
the difference between the net carrying amount and the present value of the
future expected cash flows associated with the impaired receivable. For trade
receivables, such provisions are recorded in a separate allowance account with
the loss being recognised within administrative expenses in the income
statement. On confirmation that the trade receivable will not be collectable,
the gross carrying value of the asset is written off against the associated
provision. From time to time, the Group elects to renegotiate the terms of trade
receivables due from customers with which it has previously had a good trading
history. Such renegotiations will lead to changes in the timing of payments
rather than changes to the amounts owed and are not, in the view of the
Directors, sufficient to require the derecognition of the original instrument.
These assets include cash and cash equivalents which comprise cash in hand and
demand deposits and short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
(b) Fair value through profit or loss
This category comprises of only 'in the money' derivative financial instruments,
principally interest rate instruments. They are carried in the balance sheet at
fair value with changes in fair value recognised in the income statement. Other
than these derivative financial instruments, the Group does not have any assets
held for trading nor has it designated any financial assets as being at fair
value through profit or loss.
The fair value of the Group's interest rate derivatives is based on
confirmations received from banks which form the other party to these swap
agreements.
(c) Available-for-sale
Non-derivative financial assets not included in the above categories are
classified as available-for-sale and comprise the Group's investments in quoted
shares. They are carried at fair value with changes in fair value recognised
directly in the available-for-sale reserve. Where there is a significant or
prolonged decline in the fair value of an available-for-sale financial asset
(which constitutes objective evidence of impairment), the full amount of the
impairment, including any amount previously charged to equity, is recognised in
the income statement. Purchases and sales of available-for-sale financial assets
are recognised on settlement date with any change in fair value between trade
date and settlement date being recognised in the available-for-sale reserve. On
sale, the amount held in the available-for-sale reserve associated with that
asset is removed from equity and recognised in the income statement. The Group
could have elected to designate its investments in quoted shares as fair value
through profit or loss as its performance is evaluated, and monitored by the
Directors, on a fair value basis in accordance with the Group's investment
strategy. However, in its judgment, the Board did not consider this the most
appropriate treatment as the quoted shares do not form part of the Group's core
operations and, in consequence, it was considered that fair value movements
(other than impairments) should instead be recorded directly in equity. The fair
value of the Group's investments in listed shares is their market bid price.
Financial liabilities
The Group classifies its financial liabilities into one of two categories,
depending on the purpose for which the asset was acquired. Although the Group
uses derivative financial instruments in economic hedges of interest rate risk,
it does not hedge account for these transactions. Unless otherwise indicated,
the carrying amounts of the Groups financial liabilities are a reasonable
approximation of their fair values.
(a) Fair value through profit or loss
This category comprises of only 'out of-the-money' derivative financial
instruments (see above for 'in the money' derivative financial instruments).
They are carried in the balance sheet at fair value with changes in fair value
recognised in the income statement. Other than these derivative financial
instruments, the Group does not have any liabilities held for trading nor has it
designated any financial liabilities as being at fair value through profit or
loss.
The methods used for calculating the fair value of the Group's interest rate
derivatives have been described in financial assets above.
(b) Financial liabilities measured at amortised cost
Other financial liabilities include the following items:
* trade payables and other short-term monetary liabilities, which are initially
recognised at fair value and subsequently carried at amortised cost using the
effective interest method;
* bank borrowings are initially recognised at fair value net of any transaction
costs directly attributable to the issue of the instrument. Such interest
bearing liabilities are subsequently measured at amortised cost using the
effective interest rate method, which ensures that any interest expense over the
period to repayment is at a constant rate on the balance of the liability
carried in the balance sheet. Interest expense in this context includes initial
transaction costs and premia payable on redemption, as well as any interest or
coupon payable while the liability is outstanding.
Investment property
Property held to earn rentals and/or for capital appreciation is classified as
investment property. Investment property comprises freehold land and freehold
buildings. Investment property is measured initially at its cost, including
related transaction costs. After initial recognition, investment property is
carried at fair value.
The Group has appointed Cushman & Wakefield as property valuers to prepare
valuations on an annual basis for the large majority by value of the Group's
investment properties. Such valuations will be undertaken in accordance with the
appropriate sections of the current Practice Statements contained in the Royal
Institution of Chartered Surveyors Appraisal and Valuation Standards, 5th
Edition (the "Red Book"). This is an internationally accepted basis of
valuation. Gains or losses arising from changes in the fair value of investment
property are included in the income statement in the period in which they arise.
Where the cost of obtaining an external valuation is considered by the directors
to be disproportionate to the value of the properties concerned and provided
that the aggregate value of such properties is not considered to be material,
such properties may be valued by the directors on the basis of their assessment
of the properties' open market value.
The acquisition of a corporate vehicle, whose only activity is that of holding
the targeted investment property, is accounted for based on the substance of the
transaction. The Directors consider the substance of such transactions to be
property acquisitions as opposed to a business combination under IFRS 3.
Deferred finance costs
Finance costs, such as bank charges and other related fees, that are directly
attributable to receiving the bank loans which were used for the acquisition of
investment properties are considered as deferred costs and are amortised over
the period of the relevant bank loans.
Expenses
Expenses are accounted for on an accruals basis. Transaction costs directly
attributable to the purchase of investment properties are included within the
cost of the property. All other administration expenses are charged through the
income statement.
Dividends
Dividends to the Company's shareholders are recognised when they become legally
payable. In the case of interim dividends, this is when declared by the
Directors. In the case of final dividends, this is when approved by the
shareholders at an Annual General Meeting.
Investment in subsidiary
Investment in subsidiary undertakings are stated at cost less, where
appropriate, provisions for impairment.
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Directors are required to make certain judgements when applying the Group's
accounting policies. The judgements that have a significant risk of causing a
material impact to the carrying amounts of assets and liabilities within the
financial information are outlined below.
a) Going Concern
The ability of the Directors to report this financial information on a going
concern basis is of fundamental importance in the current environment and an
exercise in excess of the Group's usual forecasting and business planning
processes has been undertaken in this regard.
This exercise has confirmed that the level of underlying cashflow within the
Group is expected to remain strong and the Group's ability to service its
ongoing operations is not, therefore, considered to be in doubt.
The management of the Group's financing arrangements with its banks is
constantly under review, with close and frequent dialogue taking place between
the Group and its lenders, during which the lenders have been supportive.
The Group's loan facilities contain a number of covenants which are tested at
varying intervals in line with the individual facility agreement. The main
financial covenants in these facilities consist of Interest Cover ("IC")
Covenants and Loan to Value ("LTV") Covenants. As stated above the Group's
underlying operational cashflow remains strong and therefore the IC covenants,
which range between 115% and 140% have been met and, except in very exceptional
circumstances (the probability of which is considered to be remote), are
expected to continue to be met.
LTV covenants in the Group's loan facilities have been put under considerable
pressure due to the significant drop in property valuations that have been seen
in Germany and throughout Europe. The LTV covenants that the Group must remain
within, range between 60% and 92.5% with the majority (by outstanding debt)
being at the 90%-92.5% level. Note 19 to the financial information sets out more
fully the terms of the facilities. As at the reporting date, the Group is
outside of its LTV covenants on three of its six loans; these loans only
represent 14.1% of total drawn debt and on all of these loans, to the extent
that the Group is outside its covenant it could be required to part pay the loan
to a level which brings it within covenant again. The Group would be obliged to
cure the LTV covenant upon receiving formal notice to do so by the lender.
Subsequent to the balance sheet date only one lender has contacted the Group
requesting that the LTV covenant be put back to the appropriate level. This
lender has instructed its own valuation, the results of which are awaited, to
establish the level of repayment required. As this loan is one that matured in
May 2009 the Group is currently in discussions with the lender as to the options
for extending or refinancing this facility.
As disclosed in note 19 the Group has a loan facility of EUR326.7 million which
requires the loan to value ("LTV") covenant not to exceed 90%. Based on the year
end valuations the LTV on this loan was 89.4%. It is possible that the value of
the properties against which the loan is secured could fall further. If the
lender called for a valuation and, if the Group has not repaid the necessary
amount of the loan, that valuation may demonstrate that the loan is in excess of
90% of the value of the properties on which it is secured, in which case a
breach would occur which, if not waived by or remedied by other agreement with,
the lender, would require repayment of the loan.
The loan is non-recourse to the wider Group and therefore if the loan were
unable to be repaid the lender would be entitled to enforce its security over
only those assets on which its loan is secured. This would result in a loss of
control of a material proportion of the Group's assets which would be a material
curtailment of the Group's operations. Such a sequence of events represents a
material risk that casts significant doubt over the ability of that proportion
of the Group's operations to continue as a going concern. As at 31 December
2008, such operations comprise investment property valued at EUR365.3 million
against which loans with a value of EUR326.7 million are secured.
The financial statements do not include the adjustments that would be necessary
should such a curtailment of operations occur. These adjustments would include
writing down assets to their recoverable amount which might be materially lower
than their carrying value in the financial statements as at 31 December 2008.
The Directors believe that it is unlikely that the sequence of events described
above that would lead to the material curtailment will occur.
The Directors, however, have reviewed the forecast solvency of the Group with
the Manager under a number of different scenarios including some that include
the sequence of events described above. This analysis also took into account the
possible requirement to prepay the appropriate amounts of the loans which are
outside their LTV covenants based on year end 2008 valuations. The Directors
have also considered and measured the effect on the cash flow of the Group as a
whole of:
- a further fall in property values and the impact on the Groups LTV
covenants;
- a reduction in rental income assuming a level of tenant default; and
- other variables which could have both a positive and negative impact on
cash flow.
The conclusion of the Directors after considering the underlying cash flows of
the whole Group, together with the continuing dialogue with its lenders and also
other potential sources of finance available to it, is that it is appropriate to
prepare the financial information of the Group as a whole on a going concern
basis.
b) Estimate of fair value of investment properties
For valuing the large majority, by value, of its investment properties the Group
engages external, professional advisors to carry out third party valuations of
its properties. These valuations are completed in accordance with the
appropriate sections of the current Practice Statements contained in the Royal
Institution of Chartered Surveyors Appraisal and Valuation Standards, 5th
Edition (the "Red Book"). This is an internationally accepted basis of
valuation. The valuers have needed to exercise a greater degree of judgement
than previously due to the reduced transactional evidence from the German
property investment market.
The remaining properties are valued internally on the basis of the directors'
assessment of the properties' open market valuation.
In completing these valuations the following criteria have been considered:
(i) discounted cash flow projections based on reliable estimates of future cash
flows, derived from the terms of any existing lease and other contracts and
(where possible) from external evidence such as current market rents for similar
properties in the same location and condition, and using discount rates that
reflect current market assessments of the uncertainty in the amount and timing
of the cash flows;
(ii) current prices in an active market for properties of a different nature,
condition or location (or subject to different lease or other contracts),
adjusted to reflect those differences; and
(iii) recent prices of similar properties in less active markets, with
adjustments to reflect any changes in economic conditions since the date of the
transactions that occurred at those prices.
c) Income taxes and VAT
The Group is subject to income taxes and VAT in different jurisdictions.
Estimates are required in determining the worldwide provision for these taxes.
There are some transactions and calculations for which the ultimate tax
determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the income tax, deferred tax provisions
and recoverable VAT balances in the period in which such determination is made.
d) Acquisitions
For each acquisition of a company, the Directors need to judge whether the
acquisition is, in substance, the acquisition of a business or the acquisition
of an asset and account for it accordingly.
The consideration payable in respect of each acquisition is dependant upon
certain future events. In considering each acquisition the Directors have
assessed the most probable outcome as at the balance sheet date. The Directors
will reconsider the consideration payable at each year end and adjust
accordingly.
e) Estimate of fair value of financial instruments
In accordance with the stated accounting policy, the Group is required to
determine the fair value of the financial instruments it employs, being interest
rate derivative contracts. The interest rate derivative contracts are valued at
Marked-to-Market values based on confirmations received from the banks which
form the other party to the interest rate derivative contracts. Changes in the
fair value of the interest rate derivative contracts are recorded in the income
statement.
f) Estimate of fair value of available-for-sale investments
Available-for-sale investments comprise shares in companies traded on the
Frankfurt Stock Exchange ("FSE").
Their fair value has been estimated based on the market bid price on the last
trading day in the period as published by the FSE. Changes in the fair value of
the available-for-sale investments are recorded directly in equity.
g) Impairment of goodwill
Goodwill is subject to an impairment test to assess whether the discounted cash
flows arising from the assets and liabilities of the entity on which the
goodwill arose support the carrying value of goodwill in the balance sheet. The
cash flows are based on the budget for the next two years and do not include
restructuring activities or future investments to which the Group is not yet
committed. The budget may reflect future disposals where such disposals and
their proceeds may be reasonably foreseen. The discounted cash flow calculation
is most sensitive to the discount rate applied and to estimations and timings of
future disposal proceeds.
3. SEGMENTAL ANALYSIS
The Group has only one business segment and one geographic segment, being the
investment in, and management of, investment properties in Germany. Therefore
the Directors do not consider it appropriate to prepare a segmental analysis.
4. REVENUE
The Group's business is the purchase of investment properties for the generation
of rental income and capital gains.
+----------------------------------+------------------+----------------------+
| | Group | Group |
| | For the year | For the 11 month |
| | ended | period |
| | 31 December | ended |
| | 2008 | 31 December 2007 |
+----------------------------------+------------------+----------------------+
| | EUR 000 | EUR 000 |
+----------------------------------+------------------+----------------------+
| Rental revenue from investment | 40,100 | 24,266 |
| properties | | |
+----------------------------------+------------------+----------------------+
Realised capital gains from investment properties in the period amount to
EUR227,000 (the period to 31 December 2007 - EURnil).
5. ADMINISTRATIVE EXPENSES
+---------------------------------------------+---------------------+---------------------+
| | Group | Group |
| | For the year | For the 11 month |
| | ended | period ended |
| | 31 December 2008 | 31 December 2007 |
+---------------------------------------------+---------------------+---------------------+
| | EUR 000 | EUR 000 |
+---------------------------------------------+---------------------+---------------------+
| Management fee payable to the Manager (Note | (2,468) | (2,466) |
| 23) | | |
+---------------------------------------------+---------------------+---------------------+
| Legal, tax advisory and other professional | (2,759) | (2,834) |
| fees | | |
+---------------------------------------------+---------------------+---------------------+
| Directors' fees and expenses | (331) | (348) |
+---------------------------------------------+---------------------+---------------------+
| Staff costs (1) | (379) | (289) |
+---------------------------------------------+---------------------+---------------------+
| Audit fees | (81) | (157) |
+---------------------------------------------+---------------------+---------------------+
| Depreciation of office equipment and | (54) | (46) |
| computers | | |
+---------------------------------------------+---------------------+---------------------+
| Impairment of goodwill (Note 25) | (1,368) | - |
+---------------------------------------------+---------------------+---------------------+
| Other corporate and administrative expenses | (1,819) | (1,247) |
+---------------------------------------------+---------------------+---------------------+
| | (9,259) | (7,387) |
+---------------------------------------------+---------------------+---------------------+
1. Staff costs are comprised of salaries amounting to EUR328,000 (the period to 31
December 2007: EUR189,000) and employer's social security premiums and other
related taxes and personnel costs amounting to EUR51,000 (the period to 31
December 2007: EUR 100,000).
6. FINANCE INCOME AND EXPENSE
+---------------------------------------------------+---------------------+--------------------+
| | Group | Group |
| | For the year | For the 11 month |
| | ended | period ended |
| | 31 December 2008 | 31 December 2007 |
+---------------------------------------------------+---------------------+--------------------+
| | EUR 000 | EUR 000 |
+---------------------------------------------------+---------------------+--------------------+
| Finance income | | |
+---------------------------------------------------+---------------------+--------------------+
| Interest received on bank deposits | 758 | 2,655 |
+---------------------------------------------------+---------------------+--------------------+
| | 758 | 2,655 |
+---------------------------------------------------+---------------------+--------------------+
| | | |
+---------------------------------------------------+---------------------+--------------------+
| Finance expense | | |
+---------------------------------------------------+---------------------+--------------------+
| Interest expense on financial liabilities | (24,730) | (16,732) |
| measured at amortised cost | | |
+---------------------------------------------------+---------------------+--------------------+
| Net foreign exchange loss | (196) | (1,300) |
+---------------------------------------------------+---------------------+--------------------+
| | (24,926) | (18,032) |
+---------------------------------------------------+---------------------+--------------------+
| | | |
+---------------------------------------------------+---------------------+--------------------+
| Net change in value of derivative financial | | |
| instruments | | |
+---------------------------------------------------+---------------------+--------------------+
| (Loss) / profit on interest rate swaps and caps | (17,916) | 5,235 |
+---------------------------------------------------+---------------------+--------------------+
| Loss on GWB option (Note12) | (1,181) | (446) |
+---------------------------------------------------+---------------------+--------------------+
| | (19,097) | 4,789 |
+---------------------------------------------------+---------------------+--------------------+
7. TAX CREDIT
+----------------------------------------------------+--------------------+--------------------+
| | Group | Group |
| | For the year | For the 11 month |
| | ended | period ended |
| | 31 December 2008 | 31 December 2007 |
+----------------------------------------------------+--------------------+--------------------+
| | EUR 000 | EUR 000 |
+----------------------------------------------------+--------------------+--------------------+
| Current tax expense | | |
+----------------------------------------------------+--------------------+--------------------+
| Current income tax charge | (1,643) | (11) |
+----------------------------------------------------+--------------------+--------------------+
| | | |
+----------------------------------------------------+--------------------+--------------------+
| Deferred tax credit / (expense) | | |
+----------------------------------------------------+--------------------+--------------------+
| Deferred tax charge relating to origination and | | |
| reversal of temporary differences: | | |
+----------------------------------------------------+--------------------+--------------------+
| Revaluation of investment properties | 9,411 | 546 |
+----------------------------------------------------+--------------------+--------------------+
| Assessed losses | 594 | 3,858 |
+----------------------------------------------------+--------------------+--------------------+
| Deferred finance costs | 134 | (228) |
+----------------------------------------------------+--------------------+--------------------+
| Fair value adjustments to derivative financial | 3,969 | (1,624) |
| instruments | | |
+----------------------------------------------------+--------------------+--------------------+
| Fair value adjustments to available-for-sale | 1,058 | - |
| investments | | |
+----------------------------------------------------+--------------------+--------------------+
| Changes in tax rates | - | (467) |
+----------------------------------------------------+--------------------+--------------------+
| Other | - | 711 |
+----------------------------------------------------+--------------------+--------------------+
| Total income tax credit | 13,523 | 2,785 |
+----------------------------------------------------+--------------------+--------------------+
The tax rate applicable to the Company in the Isle of Man is nil. The current
tax charge and deferred tax calculations represent corporate income tax on Group
income arising in Germany that is subject to Corporate Tax at 15.825% (31
December 2007: 15.825%) and in some instances Trade Tax at an effective rate of
17.00% (31 December 2007: 17.00%).
Factors affecting tax charge for period
+---------------------------------------------------+------------------+------------------+
| | Group | Group |
| | For the year |For the 11 month |
| | ended | period ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
+---------------------------------------------------+------------------+------------------+
| | EUR 000 | EUR 000 |
+---------------------------------------------------+------------------+------------------+
| | | |
+---------------------------------------------------+------------------+------------------+
| Net loss before tax | (82,509) | (14,999) |
+---------------------------------------------------+------------------+------------------+
| | | |
+---------------------------------------------------+------------------+------------------+
| Net loss multiplied by rate of Isle of Man income | - | - |
| tax of 0% | | |
+---------------------------------------------------+------------------+------------------+
| | | |
+---------------------------------------------------+------------------+------------------+
| Effects of: | | |
+---------------------------------------------------+------------------+------------------+
| taxation of income in other jurisdictions | (1,643) | (11) |
+---------------------------------------------------+------------------+------------------+
| deferred taxation arising from temporary | 15,166 | 3,263 |
| differences in the period | | |
+---------------------------------------------------+------------------+------------------+
| changes in deferred tax balances arising from | - | (467) |
| changes in tax rates | | |
+---------------------------------------------------+------------------+------------------+
| | 13,523 | 2,785 |
+---------------------------------------------------+------------------+------------------+
There are no income tax consequences for the Company attaching to the payment of
dividends by the Company to its shareholders.
Deferred tax assets and liabilities
Deferred tax is calculated in full on temporary differences under the liability
method.
Deferred tax assets arise on revaluation losses on investment properties, and on
tax losses in Group companies. The Group recognises the deferred tax assets on
the basis that the companies to which the losses relate will be able to utilise
such losses in the foreseeable future.
Deferred tax liabilities relate to German Corporate Tax and Trade Tax calculated
in respect of the revaluation uplifts on investment properties, fair value
adjustments to interest rate swaps, and timing differences in the deduction for
tax of transaction costs associated with the Group's loans.
+--------------------------+----------------+--------------+---------------+---------------+
| | Group | Group |
+--------------------------+-------------------------------+-------------------------------+
| | 31 December | 31 December | 31 December | 31 December |
| | 2008 | 2008 | 2007 | 2007 |
+--------------------------+----------------+--------------+---------------+---------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+--------------------------+----------------+--------------+---------------+---------------+
| | Assets | Liabilities | Assets | Liabilities |
+--------------------------+----------------+--------------+---------------+---------------+
| Reported through income | | | | |
| statement | | | | |
+--------------------------+----------------+--------------+---------------+---------------+
| Investment property | 7,346 | (2,274) | 2,887 | (6,947) |
| revaluation | | | | |
+--------------------------+----------------+--------------+---------------+---------------+
| Derivative financial | 2,186 | - | - | (1,783) |
| instruments | | | | |
+--------------------------+----------------+--------------+---------------+---------------+
| Available-for-sale | 1,058 | - | 294 | - |
| financial investments | | | | |
+--------------------------+----------------+--------------+---------------+---------------+
| Deferred finance costs | - | (661) | - | (795) |
+--------------------------+----------------+--------------+---------------+---------------+
| Assessed losses | 5,143 | - | 4,549 | - |
+--------------------------+----------------+--------------+---------------+---------------+
| | 15,733 | (2,935) | 7,730 | (9,525) |
+--------------------------+----------------+--------------+---------------+---------------+
8. LOSS PER SHARE
Basic and diluted loss per share for the period ended 31 December 2007 is based
on the loss attributable to equity holders of the Company and the weighted
average number of ordinary shares outstanding during the period.
+----------------------------------------+--------------------+--------------------+
| Basic and diluted earnings per share | Group | Group |
| | For the year | For the 11 month |
| | ended | period ended |
| | 31 December 2008 | 31 December 2007 |
+----------------------------------------+--------------------+--------------------+
| | EUR 000 | EUR 000 |
+----------------------------------------+--------------------+--------------------+
| | | |
+----------------------------------------+--------------------+--------------------+
| Loss attributable to equity holders of | (68,715) | (12,214) |
| the Company | | |
+----------------------------------------+--------------------+--------------------+
| | | |
+----------------------------------------+--------------------+--------------------+
| Weighted average number of ordinary | 198,215,502 | 193,646,096 |
| shares | | |
+----------------------------------------+--------------------+--------------------+
| Basic and diluted loss per share: | | |
+----------------------------------------+--------------------+--------------------+
| Euro cents per share | (34.7)c | (6.3)c |
+----------------------------------------+--------------------+--------------------+
| UK pence per share (calculated at year | (33.8)p | (4.6)p |
| end exchange rates) | | |
+----------------------------------------+--------------------+--------------------+
9.NET ASSET VALUE PER SHARE
Net asset value per share is calculated by dividing the net assets attributable
to the equity holders of the Company by the number of ordinary shares in issue
as at the balance sheet date.
+---------------------------------------------------+-+----------------+--------------+
| | Group | Group |
+---------------------------------------------------+------------------+--------------+
| |31 December 2008 | 31 December |
| | | 2007 |
+---------------------------------------------------+------------------+--------------+
| | EUR 000 | EUR 000 |
+---------------------------------------------------+------------------+--------------+
| Net assets for the purposes of net asset value | | |
| per share: | | |
+---------------------------------------------------+------------------+--------------+
| Basic net assets attributable to equity holders | 111,605 | 182,764 |
| of the Company | | |
+---------------------------------------------------+------------------+--------------+
| Adjustments for the purposes of adjusted net | | |
| asset value per share: | | |
+---------------------------------------------------+------------------+--------------+
| Deferred tax arising on revaluation | (5,072) | 4,060 |
| (losses)/surpluses | | |
+---------------------------------------------------+------------------+--------------+
| Fair value adjustment on interest rate swaps (net | 7,350 | (6,597) |
| of deferred tax) | | |
+---------------------------------------------------+------------------+--------------+
| Adjusted net assets attributable to equity | 113,883 | 180,227 |
| holders of the Company | | |
+---------------------------------------------------+------------------+--------------+
| Number of ordinary shares at balance sheet date | 198,215,502 | 198,215,502 |
+-----------------------------------------------------+----------------+--------------+
| | | |
+-----------------------------------------------------+----------------+--------------+
| Basic net asset value per share | | |
+-----------------------------------------------------+----------------+--------------+
| Euro cents per share | 56.3c | 92.2c |
+-----------------------------------------------------+----------------+--------------+
| UK pence per share | 54.8p | 68.0p |
+-----------------------------------------------------+----------------+--------------+
| | | |
+-----------------------------------------------------+----------------+--------------+
| Adjusted net asset value per share | | |
+-----------------------------------------------------+----------------+--------------+
| Euro cents per share | 57.4c | 90.9c |
+-----------------------------------------------------+----------------+--------------+
| UK pence per share | 55.9p | 67.1p |
+-----------------------------------------------------+----------------+--------------+
| | | |
+---------------------------------------------------+-+----------------+--------------+
10. INVESTMENT PROPERTIES
+---------------------------------------------------+----------------+--------------+
| | Group | Group |
+---------------------------------------------------+----------------+--------------+
| | 31 December | 31 December |
| | 2008 | 2007 |
+---------------------------------------------------+----------------+--------------+
| | EUR 000 | EUR 000 |
+---------------------------------------------------+----------------+--------------+
| Balance at beginning of period | 601,601 | 399,060 |
+---------------------------------------------------+----------------+--------------+
| Investment properties of subsidiary acquired | 11,680 | - |
+---------------------------------------------------+----------------+--------------+
| Other additions/purchases | 6,131 | 219,673 |
+---------------------------------------------------+----------------+--------------+
| Disposals | (860) | - |
+---------------------------------------------------+----------------+--------------+
| Deficit on revaluation | (58,442) | (17,132) |
+---------------------------------------------------+----------------+--------------+
| Balance at end of period | 560,110 | 601,601 |
+---------------------------------------------------+----------------+--------------+
The fair value of the Group's investment properties at 31 December 2008 and 2007
represents an estimate of open market value. As at 31 December 2008, properties
with fair value of EUR547,800,000 (31 December 2007: EUR533,870,000) were valued by
Cushman & Wakefield while properties with fair value of EUR nil (31 December 2007:
EUR67,731,000) were valued by King Sturge.
Cushman & Wakefield and King Sturge are independent firms of Chartered Surveyors
who are members of the Royal Institution of Chartered Surveyors, both of whom
have had detailed experience in valuing the types of property acquired by the
Group in similar locations.
The values of each of the properties assessed have been made in accordance with
the Appraisal Valuation Standards of the Royal Institution of Chartered
Surveyors on the basis of market value. The definition of market value is the
estimated amount for which an asset should exchange on the date of valuation
between a willing buyer and a willing seller in an arm's length transaction
after proper marketing wherein parties have each acted knowledgeably, prudently
and without compulsion. The basis of information for deriving market value has
been based upon market evidence of contractual rents and transactions for
similar properties. All the properties within the portfolio, except for one
which is a Heritable Building Right (which is the equivalent of a long
leasehold), are freehold.
As at 31 December 2008, properties with fair value of EUR12,310,000 (31 December
2007: EUR nil) were valued by the directors on the basis of their assessment of
the properties' open market value.
11. PLANT AND EQUIPMENT
+---------------------------------------+-------------------+---------------+--------------+
| | | | Group |
+---------------------------------------+-------------------+---------------+--------------+
| | Plant and office | Furniture and | Total |
| | equipment | fittings | |
+---------------------------------------+-------------------+---------------+--------------+
| | EUR 000 | EUR 000 | EUR 000 |
+---------------------------------------+-------------------+---------------+--------------+
| Cost | | | |
+---------------------------------------+-------------------+---------------+--------------+
| Balance at 1 February 2007 | 359 | 11 | 370 |
+---------------------------------------+-------------------+---------------+--------------+
| Additions / purchases in period | 58 | 28 | 86 |
+---------------------------------------+-------------------+---------------+--------------+
| Balance at 31 December 2007 | 417 | 39 | 456 |
+---------------------------------------+-------------------+---------------+--------------+
| Additions / purchases in period | 49 | 10 | 59 |
+---------------------------------------+-------------------+---------------+--------------+
| Balance at 31 December 2008 | 466 | 49 | 515 |
+---------------------------------------+-------------------+---------------+--------------+
| | | | |
+---------------------------------------+-------------------+---------------+--------------+
| Accumulated depreciation | | | |
+---------------------------------------+-------------------+---------------+--------------+
| Balance at 1 February 2007 | (26) | (2) | (28) |
+---------------------------------------+-------------------+---------------+--------------+
| Charge for period | (37) | (9) | (46) |
+---------------------------------------+-------------------+---------------+--------------+
| Balance at 31 December 2007 | (63) | (11) | (74) |
+---------------------------------------+-------------------+---------------+--------------+
| Charge for period | (40) | (14) | (54) |
+---------------------------------------+-------------------+---------------+--------------+
| Balance at 31 December 2008 | (103) | (25) | (128) |
+---------------------------------------+-------------------+---------------+--------------+
| | | | |
+---------------------------------------+-------------------+---------------+--------------+
| Net book value at 1 February 2007 | 333 | 9 | 342 |
+---------------------------------------+-------------------+---------------+--------------+
| Net book value at 31 December 2007 | 354 | 28 | 382 |
+---------------------------------------+-------------------+---------------+--------------+
| Net book value at 31 December 2008 | 363 | 24 | 387 |
+---------------------------------------+-------------------+---------------+--------------+
12. AVAILABLE-FOR-SALE INVESTMENTS
+-------------------------------------+--------------+-------------+--------------+-------------+
| | Group | Company |
+-------------------------------------+----------------------------+----------------------------+
| | 31 December | 31 | 31 December | 31 |
| | 2008 | December | 2008 | December |
| | | 2007 | | 2007 |
+-------------------------------------+--------------+-------------+--------------+-------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+-------------------------------------+--------------+-------------+--------------+-------------+
| Investment in quoted shares | | | | |
+-------------------------------------+--------------+-------------+--------------+-------------+
| Value at start of period | 6,560 | 7,540 | - | - |
+-------------------------------------+--------------+-------------+--------------+-------------+
| Additions at cost | - | 756 | - | - |
+-------------------------------------+--------------+-------------+--------------+-------------+
| Fair value adjustment at period end | (4,831) | (1,736) | - | - |
+-------------------------------------+--------------+-------------+--------------+-------------+
| | 1,729 | 6,560 | - | - |
+-------------------------------------+--------------+-------------+--------------+-------------+
The Group's available-for-sale investments comprise of shares in companies
listed and traded on the Frankfurt Stock Exchange being:
* 610,000 shares (2007: 610,000 shares) in GWB Immobilien AG ("GWB"), which
represent 12.45% of its issued share capital; and
* 280,350 shares (2007: 254,864 shares) in Rücker Immobilien AG, which represent
7.14% of its issued share capital.
These investments are held for strategic purposes to assist the Group in the
development of new business opportunities in Germany. The shares are denominated
in Euros and re-valued to their fair value at the balance sheet date by using
the market bid price on the last trading day in the period as published by the
Frankfurt Stock Exchange.
Due to the prolonged and significant fall in value between 2006 and 2008 the
full amount of the cumulative impairment of EUR6,645,000 at the year-end and the
cumulative related deferred tax of EUR1,058,000 (out of which an amount of
EUR294,000 is in respect of previous periods) are recognised through the Income
Statement in the current period.
In the previous period, the Group entered into a put option exercisable in
October 2008 giving certain shareholders of GWB the right to sell to the Group
160,000 shares in GWB at EUR12.50 per share. This put option was exercised and in
February 2009 the Group acquired 160,000 shares for a total cost including
expenses of EUR2,120,000 bringing its shareholding in GWB to 15.72%. Based on the
year-end market price of GWB shares of EUR2.33 per share (31 December 2007:EUR9.71),
the Group has calculated a fair value loss of EUR1,180,800 (31 December
2007:EUR446,400) relating to the put option which has been recognised in the
income statement within net change in fair value of derivative financial
instruments.
In July 2008, due to a share-split in the ratio of 1:10, the Group received
additional 25,486 shares of Rücker Immobilien AG at no cost.
13. DERIVATIVE FINANCIAL INSTRUMENTS
+--------------------------------------+-------------+------------+--------------+-------------+
| | Group | Company |
+--------------------------------------+--------------------------+----------------------------+
| | 31 | 31 | 31 December | 31 |
| | December | December | 2008 | December |
| | 2008 | 2007 | | 2007 |
+--------------------------------------+-------------+------------+--------------+-------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+--------------------------------------+-------------+------------+--------------+-------------+
| Derivatives not designated as | | | | |
| hedging instruments | | | | |
+--------------------------------------+-------------+------------+--------------+-------------+
| Interest rate swaps and caps | (9,536) | 8,380 | - | - |
+--------------------------------------+-------------+------------+--------------+-------------+
The Group manages its cashflow interest rate risk by using floating-to-fixed
interest rate swaps and caps. Normally the Group raises long-term borrowings at
floating rates and swaps them into fixed rates by entering into such swap
contracts.
+----------------+----------------+----------+---------------+----------+--------------+
| | Group | Group | |
+----------------+---------------------------+--------------------------+--------------+
| | 31 December 2008 | 31 December 2007 | |
+----------------+---------------------------+--------------------------+--------------+
| | Principal | Fair | Principal | Fair | Maturities |
| | amount | value | amount | value | |
+----------------+----------------+----------+---------------+----------+--------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 | |
+----------------+----------------+----------+---------------+----------+--------------+
| | | | | | |
+----------------+----------------+----------+---------------+----------+--------------+
| Interest rate | 394,725 | (9,619) | 394,725 | 8,228 | 2011-2012 |
| swaps | | | | | |
+----------------+----------------+----------+---------------+----------+--------------+
| Interest rate | 39,858 | 83 | 39,858 | 152 | 2011-2012 |
| caps | | | | | |
+----------------+----------------+----------+---------------+----------+--------------+
| | 434,583 | (9,536) | 434,583 | 8,380 | |
+----------------+----------------+----------+---------------+----------+--------------+
The interest rate swaps are shown at their Marked-to-Market values at balance
sheet date based on confirmations received from the banks which form the other
party to the swap contracts. Changes in the fair value of the swap contracts are
recorded in the income statement as described in note 2e. The maximum exposure
to credit risk at balance sheet date is the fair value of the derivative assets
as shown in the balance sheet.
14. OTHER INVESTMENTS
+--------------+--------------------+----------------+------------------+-----------------+
| | Group | Company |
+--------------+-------------------------------------+------------------------------------+
| | 31 December 2008 | 31 December | 31 December | 31 December |
| | | 2007 | 2008 | 2007 |
+--------------+--------------------+----------------+------------------+-----------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+--------------+--------------------+----------------+------------------+-----------------+
| Bond due | 2,247 | 2,182 | 2,247 | 2,182 |
| 2011 | | | | |
+--------------+--------------------+----------------+------------------+-----------------+
The Bond was issued to the Group by a company owned by members of the Manager,
and relates to the funding of a 6% minority interest in the acquisition of one
of the Group's subsidiaries. The Bond earns interest at 3% per annum which
amount is rolled up and paid on redemption. It has a provision whereby 75% of
any profit made by the issuing company on the sale of its shares in the
subsidiary will be returned to the Group as part of the capital profit on the
sale of the subsidiary in which the shares are held.
15. INVESTMENTS IN SUBSIDIARIES
In the separate accounts of the Company, Investments in subsidiaries are
included as follows:
+-----------------------------------+------------------+----------------+
| | Company |
+-----------------------------------+-----------------------------------+
| | 31 December | 31 December |
| | 2008 | 2007 |
+-----------------------------------+------------------+----------------+
| | EUR 000 | EUR 000 |
+-----------------------------------+------------------+----------------+
| Equity investments in | 54,217 | 52,398 |
| subsidiaries (1) | | |
+-----------------------------------+------------------+----------------+
| Loans to subsidiary (2) | 60,973 | 62,811 |
+-----------------------------------+------------------+----------------+
| | 115,190 | 115,209 |
+-----------------------------------+------------------+----------------+
| Impairment (3) | (84,031) | - |
+-----------------------------------+------------------+----------------+
| | 31,159 | 115,209 |
+-----------------------------------+------------------+----------------+
(1) The equity investments in subsidiaries relates to the Company's capital
contribution to Deutsche Land Coöperatief U.A.
(100%) and to its shareholdings in D.L. Limited (100%) and Deutsche Land
Management Limited (100%).
The equity investments in subsidiaries are held at cost.
(2) The loans to subsidiary relate to loan funding provided by the Company to
Deutsche Land Coöperatief U.A. and thence on to finance part of the Group's
acquisitions of investment properties. The funding is in the form of fixed
interest loans denominated in Euros, carrying an interest rate of 6.75% per
annum. The loans are for a maximum period of seven years, with the borrower
having the option to prepay the loan or any part of it earlier, without penalty.
The Directors are of the opinion that given the terms of the loans, the interest
rate which was fixed for those loans was the market interest rate at the time of
which they were taken out.
(3) A review for impairment of the investment in subsidiaries was carried out in
accordance with IAS36. The Company's accounting policy is to carry the
investment in subsidiaries at the lower of cost and net realisable value and to
recognise any impairment in the Income Statement. In the opinion of the
directors, the most appropriate estimate of the recoverable amount is the net
asset value of the subsidiaries. In view of the fall in the value of the
investment properties and adverse movements on financial derivatives, there has
been a related reduction in the net asset value of the subsidiaries which has
been reflected as an impairment in the Company's Income Statement. The full
amount of the equity investment has been provided for and the remaining
EUR29,814,000 of the provision has been made against the loans to the subsidiary.
16. AMOUNTS DUE FROM SUBSIDIARIES
The current amounts due from subsidiaries primarily relate to temporary loan
funding provided by the Company to Deutsche Land Coöperatief U.A. and thence on
to finance part of the purchase of investment properties. The funding is in the
form of short term interest free loans denominated in Euros. The loans are
repayable on demand and are intended to be replaced by long term senior debt
under existing credit arrangements between the Group and its bankers.
17. TRADE AND OTHER RECEIVABLES
+---------------------------------+--------------+--------------+---------------+---------------+
| | Group | Company |
+---------------------------------+-----------------------------+-------------------------------+
| | 31 December | 31 December | 31 December | 31 December |
| | 2008 | 2007 | 2008 | 2007 |
+---------------------------------+--------------+--------------+---------------+---------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+---------------------------------+--------------+--------------+---------------+---------------+
| Trade receivables | 9,117 | 7,874 | 3,437 | 316 |
+---------------------------------+--------------+--------------+---------------+---------------+
| Amounts due from the Manager | 706 | 312 | - | - |
+---------------------------------+--------------+--------------+---------------+---------------+
| Amounts due from a company | 149 | 86 | - | - |
| owned by members of the Manager | | | | |
+---------------------------------+--------------+--------------+---------------+---------------+
| | 9,972 | 8,272 | 3,437 | 316 |
+---------------------------------+--------------+--------------+---------------+---------------+
The aging of trade receivables is as follows:
+---------------------+--------------+--------------+--------------+--------------+--------------+
| | Total | <30 days | 30-60 days | 60-90 days | >90 days |
+---------------------+--------------+--------------+--------------+--------------+--------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+---------------------+--------------+--------------+--------------+--------------+--------------+
| Group | | | | | |
+---------------------+--------------+--------------+--------------+--------------+--------------+
| 31 December 2008 | 9,117 | 5,621 | 190 | 113 | 3,193 |
+---------------------+--------------+--------------+--------------+--------------+--------------+
| 31 December 2007 | 7,874 | 2,454 | 1,558 | 1,526 | 2,337 |
+---------------------+--------------+--------------+--------------+--------------+--------------+
| Company | | | | | |
+---------------------+--------------+--------------+--------------+--------------+--------------+
| 31 December 2008 | 3,437 | - | - | - | - |
+---------------------+--------------+--------------+--------------+--------------+--------------+
| 31 December 2007 | 316 | - | - | - | - |
+---------------------+--------------+--------------+--------------+--------------+--------------+
Trade receivables relate principally to rentals and service charges receivable
under leases in investment properties and are shown on an amortised cost basis.
Included within the trade receivables is an amount of EUR2,229,000 which
represents outstanding rent for the period December 2007 to March 2008. The
Group has been in discussion with the tenant and since the balance sheet date
has taken steps to recover the amount. Based on its analysis of the
circumstances surrounding this outstanding amount the Group is very confident of
full recovery in 2009 and has therefore made no provision against this
receivable. The Directors are of the opinion that there is no difference between
the carrying value and the fair value of the trade and other receivables. The
maximum exposure to credit risk at the balance sheet date is the value of each
class of receivables as set out above.
18. TRADE AND OTHER PAYABLES
+----------------------------+---------------+---------------+---------------+---------------+
| | Group | Company |
+----------------------------+-------------------------------+-------------------------------+
| | 31 December | 31 December | 31 December | 31 December |
| | 2008 | 2007 | 2008 | 2007 |
+----------------------------+---------------+---------------+---------------+---------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+----------------------------+---------------+---------------+---------------+---------------+
| Trade and other payables | 6,031 | 2,757 | - | - |
+----------------------------+---------------+---------------+---------------+---------------+
| Accrued purchase prices | - | 10,877 | - | - |
| and acquisition costs | | | | |
+----------------------------+---------------+---------------+---------------+---------------+
| Accrued operating expenses | 5,161 | 3,893 | 222 | 720 |
+----------------------------+---------------+---------------+---------------+---------------+
| Accrued interest and other | 7,206 | 4,721 | 1,627 | 446 |
| expenses on borrowings and | | | | |
| hedging instruments | | | | |
+----------------------------+---------------+---------------+---------------+---------------+
| | 18,398 | 22,248 | 1,849 | 1,166 |
+----------------------------+---------------+---------------+---------------+---------------+
Trade payables relate mainly to suppliers and service providers. All items above
are due within a period not exceeding twelve months subsequent to the balance
sheet date and are shown on an amortised cost basis. The management is of the
opinion that there is no difference between the carrying value and the fair
value of the above items.
19.LOANS AND BORROWINGS
+----------------------------------------------------+------------+--------------+----------------+
| | | Group | Group |
+----------------------------------------------------+------------+--------------+----------------+
| | | 31 December | 31 December |
| | | 2008 | 2007 |
+----------------------------------------------------+------------+--------------+----------------+
| Bank loans | Maturity | EUR 000 | EUR 000 |
+----------------------------------------------------+------------+--------------+----------------+
| | | | |
+----------------------------------------------------+------------+--------------+----------------+
| ABN Amro / RBS - loan 1 | July 2011 | 326,688 | 326,688 |
+----------------------------------------------------+------------+--------------+----------------+
| ABN Amro / RBS- loan 2 | July 2012 | 71,895 | 71,895 |
+----------------------------------------------------+------------+--------------+----------------+
| HBOS | December | 50,290 | 45,766 |
| | 2010 | | |
+----------------------------------------------------+------------+--------------+----------------+
| Westdeutsche Immobilien Bank - loan 1 | May 2009 | 12,000 | 12,000 |
+----------------------------------------------------+------------+--------------+----------------+
| Westdeutsche Immobilien Bank - loan 2 | January | 6,000 | - |
| | 2011 | | |
+----------------------------------------------------+------------+--------------+----------------+
| Westfälische Landschaft Bank | December | 7,000 | - |
| | 2013 | | |
+----------------------------------------------------+------------+--------------+----------------+
| Other (see below) |March 2015 | 8,933 | - |
| | - October | | |
| | 2026 | | |
+----------------------------------------------------+------------+--------------+----------------+
| Total bank loans | | 482,806 | 456,349 |
+----------------------------------------------------+------------+--------------+----------------+
| less - deferred finance costs (non-current | | (3,329) | (3,442) |
| portion) | | | |
+----------------------------------------------------+------------+--------------+----------------+
| | | 479,477 | 452,907 |
+----------------------------------------------------+------------+--------------+----------------+
| less - current maturities | | (13,812) | - |
+----------------------------------------------------+------------+--------------+----------------+
| | | 465,665 | 452,907 |
+----------------------------------------------------+------------+--------------+----------------+
| The bank loans are all denominated in Euros, bear interest at floating rate and are secured by |
| fixed charges over certain of the Group's freehold properties. |
+-------------------------------------------------------------------------------------------------+
| The bank loans are repayable as follows: | | | |
+----------------------------------------------------+------------+--------------+----------------+
| | | | |
+----------------------------------------------------+------------+--------------+----------------+
| In less than one year - current maturities | | 13,812 | - |
+----------------------------------------------------+------------+--------------+----------------+
| | | | |
+----------------------------------------------------+------------+--------------+----------------+
| In more than one year but no more than two years | | 53,392 | 694 |
+----------------------------------------------------+------------+--------------+----------------+
| In more than two years but no more than three | | 75,605 | 4,259 |
| years | | | |
+----------------------------------------------------+------------+--------------+----------------+
| In more than three years but no more than four | | 325,044 | 134,540 |
| years | | | |
+----------------------------------------------------+------------+--------------+----------------+
| In more than four years but no more than five | | 14,953 | 316,856 |
| years | | | |
+----------------------------------------------------+------------+--------------+----------------+
| | | 468,994 | 456,349 |
+----------------------------------------------------+------------+--------------+----------------+
| Total | | 482,806 | 456,349 |
+----------------------------------------------------+------------+--------------+----------------+
The fair value of the bank loans as at 31 December 2008 is EUR482,806,000 (31
December 2007: EUR456,349,000) which is the same as their carrying value.
ABN Amro Bank (which has been acquired by and is now part of RBS Banking Group)
The Group has drawn down two loans from ABN Amro Bank, now part of RBS Banking
Group. The two loans are not cross collateralised.
The first loan is for EUR326,688,000 (31 December 2007: EUR326,688,000) and bears
floating rate interest which is based on the three-months Euribor rate. This
loan has been hedged by way of entering into interest rate swaps to give an
effective fixed rate of 4.73% (31 December 2007: 4.73%) on 90% of the loan and
by entering into floating rate caps to give an effective fixed rate of 5.90% (31
December 2007: 5.90%) on the remaining 10% of the loan. The loan matures in July
2011 with principal repayments at 1.25 per cent per annum starting in October
2009. The loan is secured by way of a fixed charge against certain of the
Group's properties with a current value of EUR365,300,000 (31 December 2007:
EUR398,540,000).
The second loan is for EUR71,895,000 (31 December 2007: EUR71,895,000) and bears
floating rate interest which is based on the three-months Euribor rate. This
loan has been hedged by way of entering into interest rate swaps to give an
effective fixed rate of 4.65% (31 December 2007: 4.65%) on 90% of the loan and
by entering into floating rate caps to give an effective fixed rate of 5.80% (31
December 2007: 5.80%) on the remaining 10% of the loan. The loan matures in July
2012 with principal repayments at 1.00 per cent per annum starting in July 2010.
The loan is secured by way of a fixed charge against certain of the Group's
properties with a value as at 31 December 2008 of EUR88,270,000 (31 December 2007:
EUR97,760,000).
As at 31 December 2008 and 2007 there were no undrawn amounts available under
the credit facility.
HBOS
The Group has a loan from HBOS for a total amount of EUR50,290,000 (31 December
2007: EUR45,766,000). The loan bears floating rate interest which is based on the
three-months Euribor rate and has been hedged by way of entering into an
interest rate swap agreement to give an effective fixed rate of 5.318% (31
December 2007: 5.318%) on 71% (31 December 2007: 79%) of the loan with the
balance being unhedged. The loan matures in December 2010 and principal
repayments at 1.00 per cent per annum commenced in December 2008. The loan is
secured by way of a fixed charge on properties with a valuation as at 31
December 2008 of EUR58,800,000 (31 December 2007: EUR67,731,000).
Westdeutsche Immobilien Bank ("WIB")
The Group has drawn down a loan from WIB for an amount of EUR12,000,000 (31
January 2007: EUR12,000,000) which is secured on a single property within the
portfolio. The term of the loan was for two years maturing in May 2009 but with
an extension at the Group's option, subject to certain conditions, for a further
2 years. During the first two years, the loan bore fixed interest of 5.78% per
annum payable quarterly and during the extension period would be expected to
bear floating rate interest which is based on the three-months Euribor plus a
fixed margin of 1.40%. There are no principal repayments associated with this
loan until the final maturity date. The loan is secured by way of a fixed charge
against a single property which has a value as at 31 December 2008 of
EUR16,730,000 (31 December 2007: EUR17,070,000).
In January 2008 the Group has drawn down a loan from WIB for an amount of
EUR6,000,000 which is secured on a single property within the portfolio. The
initial term of the loan is three years. The loan bears fixed interest of 5.33%
per annum payable quarterly. The loan matures in January 2011 and there are no
principal repayments associated with this loan until the final maturity date.
The loan might be renewed for further periods but then bearing floating rate
interest which is based on the three-months Euribor. The loan is secured by way
of a fixed charge against a single property which has a value as at 31 December
2008 of EUR9,320,000.
Westfälische Landschaft Bodenkreditbank ("WLB")
In November 2008 the Group has drawn down a loan from WLB for an amount of
EUR7,000,000 which is secured on a single property within the portfolio. The term
of the loan is five years. The loan bears fixed interest of 5.648% per annum
payable quarterly. The loan matures in October 2013 and with principal
repayments commencing in the fourth year at the rate of 2.0% per annum. The loan
is secured by way of a fixed charge against a single property which has a value
as at 31 December 2008 of EUR9,380,000.
Other
During 2008, the Group has acquired a controlling stake in a new subsidiary.
Consequently, bank loans which have been granted to the subsidiary are included
in this consolidated financial information.
These bank loans comprise as follows:
+--------------------+---------------+----------------+----------------+
| | Loan | Interest rate | |
| | principal | | |
+--------------------+---------------+----------------+----------------+
| | 31 December | (per annum) | |
| | 2008 | | |
+--------------------+---------------+----------------+----------------+
| Lender | EUR 000 | % | Maturity date |
+--------------------+---------------+----------------+----------------+
| Stadtsparkasse | 3,951 | 5.00 - 5.70 | 2009 - 2026 |
| Wuppertal | | | |
+--------------------+---------------+----------------+----------------+
| Stadtsparkasse | 760 | 5.50 | 2017 |
| Remscheid | | | |
+--------------------+---------------+----------------+----------------+
| Sparkasse | 857 | 4.81 - 5.03 | 2015 |
| Köln-Bonn | | | |
+--------------------+---------------+----------------+----------------+
| Volksbank | 2,425 | 4.75 - 5.75 | 2016 - 2018 |
| Remscheid | | | |
+--------------------+---------------+----------------+----------------+
| Münchener | 940 | 4.75 | 2016 |
| Hypothekenbank | | | |
+--------------------+---------------+----------------+----------------+
| | 8,933 | | |
+--------------------+---------------+----------------+----------------+
These loans are cross collateralised and are secured on properties with an
aggregate fair value at 31 December 2008 of EUR12,310,000.
The majority of the Group's loan facility agreements contain certain financial
covenants with which the Group must comply, including Loan to Value ("LTV")
covenants and Interest Cover ("IC") covenants.
The properties within each facility have generated and are expected to continue
to generate sufficient cash flow to allow the Group to comply with IC covenants
and to meet interest and amortisation obligations on the loans as they fall due.
The fall in the fair value of the Group's investment properties, however, has
impacted significantly on the current LTV ratios as set out below:
+-----------------------------------+--------------------+--------------+--------------------+
| Loan | Amount as at | LTV covenant | LTV as at |
| | 31 December 2008 | % | 31 December 2008 |
| | EUR000 | | % |
+-----------------------------------+--------------------+--------------+--------------------+
| ABN Amro / RBS - Loan 1 | 326,688 | 90.0 | 89.4 |
+-----------------------------------+--------------------+--------------+--------------------+
| ABN Amro / RBS- Loan 2 | 71,895 | 92.5 | 81.5 |
+-----------------------------------+--------------------+--------------+--------------------+
| HBOS | 50,290 | 79.0 | 85.5 |
+-----------------------------------+--------------------+--------------+--------------------+
| Westdeutsche Immobilien Bank WIB | 12,000 | 70.0 | 71.7 |
| - Loan 2 | | | |
+-----------------------------------+--------------------+--------------+--------------------+
| Westdeutsche Immobilien Bank WIB | 6,000 | 60.0 | 64.4 |
| - Loan 2 | | | |
+-----------------------------------+--------------------+--------------+--------------------+
As at 31 December 2008, the Group was outside its LTV covenant on the HBOS loan.
The lender has confirmed to the Company that it does not require updated
valuation reports for the properties on which the loan is secured at this time.
Under the terms of the loan facility, if HBOS were to call for a valuation and
formally notify the Group of a breach, the Group would need to take actions to
cure the breach or reach another arrangement with the lender under which it
agrees to waive the breach. To bring the loan within its LTV covenant, based on
year end valuations, would require the Group to repay EUR3,838,000.
The Group is in discussion with WIB in connection with the extension of the Loan
1. The initial term of the loan was for two years maturing in May 2009 but with
an extension for a further two years at the Group's option, subject to certain
conditions. The lender has sought clarification of certain matters and has to
date extended the loan only on a short term basis and has instructed its own
valuation of the asset on which its loan is secured. The Group has been in
discussion with the lender and is hopeful of reaching a satisfactory agreement
with it. Based on the year end valuations, the Group would need to prepay
EUR289,000 of this loan to bring it back within its LTV covenant and it is likely
that any agreement with the lender would involve prepaying at least this amount
of the loan. Based on the current maturity and status of this loan, the full
amount of the loan has been classified as a current liability as at 31 December
2008.
In addition, based on valuations as at 31 December 2008, the Group was also
outside of its LTV covenant on WIB Loan 2. To bring the loan back within the LTV
covenant would require the Group to prepay a total of EUR408,000.
The Group remains exposed to the risk of further falls in property values which
would impact on the LTV ratios of its loans. There is a possibility that one or
more lenders may call for a valuation of the properties on which its loan is
secured which, if the Group does not repay the necessary amount of the loan, may
demonstrate a covenant breach which the lender is not prepared to waive. In such
circumstances, the lender is entitled to repayment of the loan in full or, if
not repaid, to call on the security underlying the loan being the properties on
which it is secured. The Group's loans are not cross collateralised and so the
lender will have access only to the assets on which that particular loan is
secured and not to the rest of the Group's assets.
However, there is clear evidence that, in the current market conditions, lenders
are focusing more on a borrower's ability to service the debt rather than on
technical breaches or potential breaches of LTV covenants. The Group maintains
strong relationships with its lenders and is in active dialogue with them to
discuss and review the current position and future expectations. The directors
are confident that the Group's positive cash flow and ability to service all the
loan facilities together with the strength of its relationships will ensure
that, where necessary, satisfactory arrangements will be reached with the
lenders to ensure that funding continues to be available to the Group on
reasonable terms.
20. FINANCIAL INSTRUMENTS: RISK MANAGEMENT
Classification of Financial instruments
+-----------------------+----------+-----------+----------+----------+----------+----------+
| | Loans and | Available for sale | Derivative |
| | receivables | financial assets | financial |
| | | | instruments |
+-----------------------+----------------------+---------------------+---------------------+
| Group | 31 | 31 | 31 | 31 | 31 | 31 |
| |December | December |December |December |December |December |
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Non-current assets | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Investments in quoted | - | - | 1,729 | 6,560 | - | - |
| shares | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Swaps and caps | - | - | - | - | | 8,380 |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Other investments | 2,247 | 2,182 | - | - | - | - |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Current assets | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Trade and other | 9,972 | 8,272 | - | - | - | - |
| receivables | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Cash and cash | 35,826 | 34,946 | - | - | - | - |
| equivalents | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Company | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Non-current assets | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Loans to subsidiaries | 31,159 | 62,811 | - | - | - | - |
| | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Other investments | 2,247 | 2,182 | - | - | - | - |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Current assets | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Trade and other | 3,437 | 316 | - | - | - | - |
| receivables | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Amounts due from | 68,862 | 74,429 | - | - | - | - |
| subsidiaries | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
| Cash and cash | 7,749 | 3,357 | - | - | - | - |
| equivalents | | | | | | |
+-----------------------+----------+-----------+----------+----------+----------+----------+
+-----------------------------------+------------+----------+
| |Financial liabilities |
| |measured at amortised |
| | cost |
+-----------------------------------+-----------------------+
| Group | 31 | 31 |
| | December |December |
| | 2008 | 2007 |
+-----------------------------------+------------+----------+
| | EUR 000 | EUR 000 |
+-----------------------------------+------------+----------+
| Non-current liabilities | | |
+-----------------------------------+------------+----------+
| Loans and borrowings | 465,665 | 452,907 |
+-----------------------------------+------------+----------+
| | | |
+-----------------------------------+------------+----------+
| Current liabilities | | |
+-----------------------------------+------------+----------+
| Trade and other payables | 18,398 | 22,248 |
+-----------------------------------+------------+----------+
| Loans and borrowings-current | 13,812 | - |
| maturities | | |
+-----------------------------------+------------+----------+
| | | |
+-----------------------------------+------------+----------+
| Company | | |
+-----------------------------------+------------+----------+
| | | |
+-----------------------------------+------------+----------+
| Current liabilities | | |
+-----------------------------------+------------+----------+
| Trade and other payables | 1,849 | 1,166 |
+-----------------------------------+------------+----------+
Risk Management
The Directors consider the objectives of their risk management policies to be
the maximisation of shareholder value. The relevant accounting policies are set
out in note 1.
The Group as well as the Company are exposed through their operations to one or
more of the following financial risks:
* fair value and cash flow interest rate risk;
* foreign currency risk;
* liquidity risk;
* market price risk; and
* credit risk.
The policy for managing each of these risks is set by the Board and is described
in more detail below:
Fair value and cash flow interest rate risk
It is currently Group policy that all external borrowings are substantially
hedged against interest rate risk. Where loans are subject to floating interest
rates, it is Group policy to make use of interest rate swaps and caps to achieve
the desired interest rate profile.
An interest rate sensitivity analysis assuming an increase and decrease of 1 per
cent in interest rates would increase or decrease the finance expenses in the
Income Statement by approximately EUR541,000.
Foreign currency risk
The Group's operations are principally carried out in the Euro zone and its
revenues, borrowings and the majority of its expenses are all denominated in
Euros. Certain expenses, however, are denominated in Pounds sterling and the
Group is exposed to currency risk for these expenses. In order to reduce the
exposure to variations in movements between the Euro and Pounds sterling, the
Company maintains a bank balance in Pounds sterling to cover these expenses.
As at the balance sheet date, the Group held total Pounds sterling cash balances
of only GBP81,000 and therefore the Directors are of the opinion that the
exposure of the Group to any foreign currency risk is minimal.
Liquidity risk
Liquidity risk arises from the Group's management of its bank borrowings, cash
resources and working capital. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
The liquidity risk of the Group is managed centrally by the Group treasury
function. It seeks to ensure that the maturity profile of the Group's borrowings
is appropriate taking account of the Group's cash resources.
Each investment property generates its own cash flow which is intended to cover
its operating expenses, interest and loan obligations. Where a property has not
been fully let, the Company provides its own cash and/or security deposits to
the lender to enable it to meet its obligations. The Group aims to hold all
surplus cash centrally to maximise returns on deposits through economies of
scale and to ensure that they are held in the most tax efficient manner.
Market price risk
The Group's investment properties are subject to market risk. This is the risk
that the fair value of, or future cash flows from, each property will fluctuate
depending on the terms of existing and future lease contracts, the levels of
inflation, current and future demand for each property and the general economic
health of Germany.
The Group balance sheet is exposed to other market risk to a limited extent,
arising from its investments in shares of companies quoted on the Frankfurt
Stock Exchange. The Directors believe that the exposure to market price risk
from this investment is acceptable in the Group's circumstances.
Credit risk
Credit risk is the risk of financial loss due to counterparty's failure to honor
its obligations. The Group's principal financial assets include its financial
interest in property assets, bank balances and cash, trade and other receivables
and financial derivatives. The carrying amount of financial assets recorded in
the financial information represents the Group's maximum exposure to credit
risk without taking account of the value of any collateral obtained.
The Group's principal credit risk relates to trade receivables which arise
principally from tenant rental obligations. Where it is identified that recovery
is doubtful a provision is made. Rent deposits and other guarantees are held in
respect of some counterparties. Taking these factors into account the risk to
the Group of individual tenant default and the credit risk of trade receivables
is considered low but is closely monitored,
The credit risk on liquid funds and derivative financial instruments is managed
through the Group's policies of monitoring counterparty exposure, and through
the use of multiple counterparties and the use of counterparties of good
financial standing. Deposits are generally placed with financial institutions
with suitable credit ratings.
Fair values
The book value and fair value of financial assets and liabilities are as
follows:
+--------------------+---------+---------+------------+----------+
| | Group | Group |
| | 31 December | 31 December |
| | 2008 | 2007 |
| | | |
+--------------------+-------------------+-----------------------+
| | Book | Fair | Book | Fair |
| | value | value | value | value |
+--------------------+---------+---------+------------+----------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+--------------------+---------+---------+------------+----------+
| Available-for-sale | 1,729 | 1,729 | 6,560 | 6,560 |
| investments | | | | |
+--------------------+---------+---------+------------+----------+
| Derivative | (9,536) | (9,536) | 8,380 | 8,380 |
| financial | | | | |
| instruments | | | | |
+--------------------+---------+---------+------------+----------+
| Other | 2,247 | 2,247 | 2,182 | 2,182 |
| investments | | | | |
+--------------------+---------+---------+------------+----------+
| Loans | 479,477 | 479,477 | 452,907 | 452,907 |
| and | | | | |
| borrowings | | | | |
+--------------------+---------+---------+------------+----------+
Fair values of available-for-sale investments (being quoted shares) are based on
market prices.
Fair values of derivative financial instruments (being interest rate swaps and
caps) are based on their Marked-to-market values at balance sheet date as per
confirmations received from the banks which form the other party to the swap
contracts.
Where loans and borrowings are floating rate loans, their fair value is equal to
their book value. There are a number of fixed rate loans and it is the view of
the Directors, after consideration of the level of these fixed rates, that the
fair value of these loans is equal to their book value.
The fair value of interest rate swaps and caps as at 31 December 2008 amounts to
a liability of EUR 9,536,000 (31 December 2007: an asset of EUR8,380,000).
The Company
As set out in notes 15 and 16, the parent company has both non-current and
current inter-company loans that are classified as "loans and receivables at
amortised cost".
The non-current loans of EUR60,973,000 (31 December 2007 - EUR62,811,000) are for
seven years and carry a market rate of interest of 6.75%. A provision of
EUR29,814,000 has been made against these loans in the year resulting in a
carrying amount of EUR31,159,000 at the year end. The current loans of EUR68,862,000
(31 December 2007 - EUR74,429,000) are interest free, but are repayable on demand.
The carrying amounts represent the maximum exposure to credit risk and also are
not significantly different from their fair values.
The Company also holds the Group's other investments of EUR2,247,000 (31 December
2007 - EUR2,182,000).
The Company's trade receivables are analysed in Note 17, trade payables in Note
18 and cash balances Note 21. The Company's policies and procedures for managing
its financial instruments and capital are the same for the Company as for the
Group.
21. CASH AND CASH EQUIVALENTS
+----------------------+--------------+--------------+-----------------+----------------+
| | Group | Group | Company | Company |
+----------------------+--------------+--------------+-----------------+----------------+
| | 31 December | 31 December | 31 December | 31 December |
| | 2008 | 2007 | 2008 | 2007 |
+----------------------+--------------+--------------+-----------------+----------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+----------------------+--------------+--------------+-----------------+----------------+
| | | | | |
+----------------------+--------------+--------------+-----------------+----------------+
| Cash at bank and on | 13,285 | 11,226 | 370 | 1,317 |
| hand | | | | |
+----------------------+--------------+--------------+-----------------+----------------+
| Short-term bank | 7,534 | 276 | 7,379 | 276 |
| deposits | | | | |
+----------------------+--------------+--------------+-----------------+----------------+
| | 20,819 | 11,502 | 7,749 | 1,593 |
+----------------------+--------------+--------------+-----------------+----------------+
| Restricted cash held | 15,007 | 23,444 | - | 1,764 |
| as collateral | | | | |
| security | | | | |
+----------------------+--------------+--------------+-----------------+----------------+
| | 35,826 | 34,946 | 7,749 | 3,357 |
+----------------------+--------------+--------------+-----------------+----------------+
Cash and short-term deposits comprise cash at bank and on-call deposits with
original maturities of three months or less.
The restricted cash is held as collateral security in respect of the Group's
banking arrangements, interest rate swaps arrangements and to secure fulfilment
of the Group's contractual obligations under certain purchase agreements.
22. SHARE CAPITAL AND RESERVES
Share capital
Share capital represents the nominal value of shares in issue as at each balance
sheet date. The nominal value of the Company's shares is EUR0.01 each (31 December
2007 - EUR0.01). During the year, there were no movements in issued share capital
(the period to 31 December 2007: 91,700,000 shares issued and 1,048,500 shares
cancelled). The proceeds from the issue of shares have been used primarily to
purchase investment properties.
The total authorised number of ordinary shares as at 31 December 2008 is 500
million shares (31 December 2007: 500 million shares).
Reserves
The share premium reserve represents amounts subscribed for share capital in
excess of its nominal value. During the year, there were no issues of shares
(the period to 31 December 2007: EUR98,643,000) nor any purchases of own shares
for cancellation (the period to 31 December 2007: EUR718,000).
Costs which are related to the issue of share capital are charged against the
share premium.
The available-for-sale investments reserve represents gains or losses arising on
revaluation of the Group's financial assets which are classified as
available-for-sale investments and include any associated deferred tax. An
adjustment for deferred tax on any losses is made on the basis that these losses
could be offset against profits arising from the sale of other assets.
At period end the Directors have noticed that the fall in value of the
available-for-sale investments is rather significant and prolonged (the fall in
value has increased over the past 12 month period) hence it has been decided
that all losses from fair value adjustment of the available-for-sale investments
been recognised directly through equity should be taken and reported through the
Income statement.
In accordance with a special resolution of the Company passed on 18 May 2006 and
the provisions of Section 56 of the Isle of Man Companies Act 1931, the High
Court of Justice of the Isle of Man Chancery Division approved, on 31 August
2006, the Company's application to re-designate an amount of EUR98,030,000
standing to the credit of the Company's share premium as a distributable reserve
which can be used for all purposes permitted under the Isle of Man Companies Act
1931 including the buy back of shares and the payment of dividends.
The retained earnings/(loss) represent the cumulative earnings/(loss) retained
after the payment of dividends and may be used for all purposes permitted under
the Isle of Man Companies Act 1931 including the buy back of shares and the
payment of dividends.
23. RELATED PARTIES
The Group is managed by its Board of Directors whose details appear in the
Directors' report. The Directors of the Company are the Key Management Personnel
of the Group. However, the Company has entered into a management agreement with
the Deutsche Land Management LLP (the "Manager") to provide property investment
advice and property management services to the Group which include:
* Providing strategic advice to the Company on the Group's property portfolio,
business plan and analysis of investments;
* identifying and analysing suitable property investment and divestment
opportunities;
* executing approved investments and divestments;
* managing the properties within the portfolio including arranging and negotiating
new leases and lease extensions; and
* arranging and negotiating the Group's bank borrowings and associated hedging
transactions.
During the period the Group paid the Manager a management fee of EUR2,468,000 (the
period to 31 December 2007: EUR2,466,000). In addition, under the management
agreement referred to above and upon fulfilment of certain performance criteria
the Manager is entitled to a performance fee equal to 20% of the excess of a
Total Shareholder Return over 10% in any one year, subject to a high water mark.
The performance fee for the reporting period is EURnil (the period to 31 December
2007: EURnil).
In addition, during the period the Group has entered into property management
agreements with a subsidiary of the Manager under which the Manager provides day
to day property management services in respect of certain of the Group's
properties. Total fees payable in respect of these services during the period
amounted to EUR1,091,000 (the period to 31 December 2007: EUR334,000) and are
included in the Income Statement under Service charge expenses.
24. DIVIDENDS
+------------------------------------------+------------+----------+--------------+--------------+
| | | | Group and Company |
+------------------------------------------+------------+----------+-----------------------------+
| Ordinary dividends paid | Record | Payment |For the year | For the 11 |
| | date | Date | ended |month period |
| | | | 31 December | ended |
| | | | 2008 | 31 December |
| | | | | 2007 |
| | | | | |
+------------------------------------------+------------+----------+--------------+--------------+
| | | | EUR 000 | EUR 000 |
+------------------------------------------+------------+----------+--------------+--------------+
| In respect of the period from 21 | | | | |
| February 2006 to 31 January 2007: | | | | |
+------------------------------------------+------------+----------+--------------+--------------+
| Second interim dividend (2.0 cents or | 2 | 2 March | - | 2,151 |
| 1.33 pence per share) | February | 2007 | | |
| | 2007 | | | |
+------------------------------------------+------------+----------+--------------+--------------+
| In respect of the 11 month period ended | | | | |
| 31 December 2007: | | | | |
+------------------------------------------+------------+----------+--------------+--------------+
| Interim dividend (2.0 cents or 1.39 | 2 November | 30 | - | 3,986 |
| pence per share) | 2007 | November | | |
| | | 2007 | | |
+------------------------------------------+------------+----------+--------------+--------------+
| Final dividend (2.0 cents or 1.58 pence | 11 | 14 | 3,964 | - |
| per share) | August | August | | |
| | 2008 | 2008 | | |
+------------------------------------------+------------+----------+--------------+--------------+
| | | | 3,964 | 6,137 |
+------------------------------------------+------------+----------+--------------+--------------+
25.Investment in Rücker Immobilien Portfolio AG
In February 2008, the Group made an investment in Rucker Immobilien Portfolio AG
("Rücker"), a company specialising in investing in Residential property based in
Remscheid (North Rhine Westphalia), Germany for EUR1,860,000 (including
acquisition expenses) in cash representing 43.3 per cent of the outstanding
share capital of Rücker.
In August 2008, the Group subscribed for additional shares of Rücker for a total
cost of EUR1,060,000 (including acquisition expenses), bringing its investment to
58.2 per cent of the outstanding share capital.
The Group entered into a joint venture agreement with Rucker Immobilien AG, the
other major shareholder of Rücker which gives the Group effective control of
Rücker. Rücker shares are traded on the open market of the Frankfurt Stock
Exchange.
These acquisitions have been accounted for as a business combination. As at the
date of each acquisition, the Group has calculated any goodwill arising based on
its determination of its share of the fair value of assets and liabilities
acquired.
+--------------------------------+--------------+--------------+------------+------------+
| | | | | |
+--------------------------------+--------------+--------------+------------+------------+
| | February | February | August | August |
| | 2008 | 2008 | 2008 | 2008 |
+--------------------------------+--------------+--------------+------------+------------+
| | Book value | Fair value | Book value | Fair value |
+--------------------------------+--------------+--------------+------------+------------+
| | EUR 000 | EUR 000 | EUR 000 | EUR 000 |
+--------------------------------+--------------+--------------+------------+------------+
| | | | | |
+--------------------------------+--------------+--------------+------------+------------+
| Cost of acquisition | | 1,860 | | 1,060 |
+--------------------------------+--------------+--------------+------------+------------+
| | | | | |
+--------------------------------+--------------+--------------+------------+------------+
| Assets and liabilities: | | | | |
+--------------------------------+--------------+--------------+------------+------------+
| Investment properties | 8,368 | 10,131 | 10,548 | 11,680 |
+--------------------------------+--------------+--------------+------------+------------+
| Other assets | 155 | 155 | 142 | 142 |
+--------------------------------+--------------+--------------+------------+------------+
| Bank borrowings | (6,479) | (6,479) | (8,077) | (8,077) |
+--------------------------------+--------------+--------------+------------+------------+
| Deferred tax liability | - | (529) | - | (340) |
+--------------------------------+--------------+--------------+------------+------------+
| Other liabilities | (490) | (490) | (1,089) | (1,089) |
+--------------------------------+--------------+--------------+------------+------------+
| Net assets | 1,554 | 2,788 | 1,524 | 2,316 |
+--------------------------------+--------------+--------------+------------+------------+
| Groups' share of net assets | | 43.3% | | 14.9% |
| acquired | | | | |
+--------------------------------+--------------+--------------+------------+------------+
| | | 1,208 | | 344 |
+--------------------------------+--------------+--------------+------------+------------+
| | | | | |
+--------------------------------+--------------+--------------+------------+------------+
| Goodwill on acquisition | | 652 | | 716 |
+--------------------------------+--------------+--------------+------------+------------+
| | | | | |
+--------------------------------+--------------+--------------+------------+------------+
Total goodwill arising on the Rücker acquisitions was EUR1,368,000. In accordance
with its accounting policy for goodwill, the Group has performed an impairment
test on the goodwill as at 31 December 2008.
In the impairment test the Group has treated the Rücker portfolio as a single
income generating unit. The impairment test has involved estimating the post tax
cash flows, including those arising from expected disposals, generated by the
Rücker portfolio over the next two years, which is the current estimated maximum
holding time for most of the assets within the portfolio. A discount rate of 10
per cent has been applied to the resulting cash flows.
As a result of this test, the full amount of the goodwill has been written off
through the Income Statement in the current period.
26. GROUP ENTITIES
+----------------------------------------------+---------------+--------------+-----------+----------+
| | Country of | Field of |Ownership | Type |
| |incorporation | activity | interest | of |
| | | | | shares |
| | | | | held |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Held by the Company | | | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. Limited | Isle of Man | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Management Limited | United | Management | 100% |Ordinary |
| | Kingdom | | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Coöperatief U.A. | Netherlands | Holding and | 100% | n/a |
| | | management | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Held by Deutsche Land Coöperatief U.A. directly or through legal partnerships: |
+----------------------------------------------------------------------------------------------------+
| Deutsche Land (Aachen) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Asset Management GmbH | Germany | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Bad Hersfeld) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Baden-Baden) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Bonn MCB) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Bremen Jan Reiners) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Burscheid Linden Passage) | Netherlands | Property | 100% |Ordinary |
| B.V. | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Castrop Rauxel) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Cologne) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Dorsten) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Hannover Langenhagen) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Holdings 2 B.V. | Netherlands | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Holdings 3 B.V. | Netherlands | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Holdings 4 B.V. | Netherlands | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Holdings B.V. | Netherlands | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Holdings V.O.F. | Netherlands | Holding | 100% | n/a |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Holding GmbH | Germany | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. Investments 1 C.V. | Netherlands | Holding | 100% | n/a |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. Investments 2 C.V. | Netherlands | Holding | 100% | n/a |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. Investments 3 C.V. | Netherlands | Holding | 100% | n/a |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Lehrte) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Mainz) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Mainz Development) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Munich Sturm Plaza) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Oldenburg) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Ruhrgebiet Portfolio) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Stuttgart) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Wolfsburg) B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Wuppertal Langerfeld) B.V. | Netherlands | Dormant | 100% |Ordinary |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land Acquistions B.V. | Netherlands | Property | 100% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Mainz 67) B.V. | Netherlands | Dormant | 100% |Ordinary |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Rücker Immobillien Portfolio AG | Germany | Property | 58.2% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| | | | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Held by Deutsche Land Holding GmbH directly or in partnership with Deutsche Land Cooperatief |
| U.A. |
+----------------------------------------------------------------------------------------------------+
| Grundstuckgesellschaft Burogebaude | Germany | Property | 94% |Ordinary |
| Unterschweinstiege Frankfurt Flughafen GmbH | | investment | | |
| (MAC GBU) | | | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land MAC GmbH & Co. KG | Germany | Property | 94% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| MAC Parkhaus Betriebsgesellschaft GmbH | Germany | Trading and | 100% |Ordinary |
| | | service | | |
| | | providing | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. Administration GmbH | Germany | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. Operations GmbH | Germany | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| Deutsche Land (Oriel) GmbH | Germany | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. (Group) GmbH & Co. KG | Germany | Holding | 100% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. (Real Estate) GmbH & Co. KG | Germany | Holding | 94% |Ordinary |
| | | company | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
| D.L. (M Portfolio) GmbH | Germany | Property | 99.64% |Ordinary |
| | | investment | | |
+----------------------------------------------+---------------+--------------+-----------+----------+
27. CONTINGENT LIABILITIES
As at the balance sheet date, the Group has capital expenditure commitments to
be incurred during subsequent periods of EUR3,600,000.
28. POST BALANCE SHEET EVENTS
In January 2009 the Group completed the acquisition of a 31% stake in the
Manager as the first stage in the internalisation of the management company as
discussed further in the Chairman's statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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