Corio posts lower direct result as rental income drops

Dutch listed retail specialist Corio reported a lower direct result and sharp drop in the value of its non-core shopping centre portfolio over 2013 in what it described as ‘a very difficult year’.

The company booked a direct result of €262.1 mln, down 1% on the year-earlier period as like-for-like rental income from its core shopping centres fell 2.2%.

The value of Corio’s non-core centres slumped 21.7% (€286.7 mln), while the core assets - or Favourite Meeting Places - fell 1% (€53.3 mln) in value. The total portfolio was valued at €7 bn at end-2013.

The devaluations helped push the company to a net loss of €253.9 mln compared with a profit of €15.7 mln in 2012.

The occupancy rate of the Favourite Meeting Places averaged 96.4% in 2013, while footfall fell 0.3% and tenant turnover slipped 0.6%.

Corio said that the disposal programme for its non-core assets is ahead of schedule and already more than 50% completed. Last week, the company sold 10 Dutch shopping centres to a joint venture led by US investor Mount Kellet Capital Management at a discount approaching 30%.

‘We took tough decisions on the pricing of the disposals, now benefitting from the €582 mln cash proceeds, available to recycle into our best assets. This enables us to become even more focused on our core portfolio of high quality retail assets, that now reflects 91% of the total portfolio,’ the company said in a statement.

Commenting on last year's results, it noted: ‘Clearly we are dissatisfied with the operational performance. Nevertheless we have laid the foundation for improvements in the years to come.’

It continued: ‘While the macro-economic environment will remain difficult, we see the trend changing. We see the first signs that conditions are slowly improving. Recognising this, Corio is implementing short-term action plans to ensure that the FMP portfolio is best positioned to benefit from these improvements.’

Market experts believe the company should accelerate the repositioning process to keep up with its peers. 'Corio will clearly have to accelerate its repositioning as otherwise the gap to its peers will continue to widen,' said Berenberg Bank's analyst Kai Klose.

With the retail sector as a whole expected to see lower growth rates this year, experts maintain a 'cautious view' on Corio's business. 'We expect the portfolio to continue to underperform,' said Klose in a note, adding that it is 'particularly important' that Corio arrests the trend of negative retail sales.

The company’s share price has been trading at a discount of around 15% to its net asset value which stood at €37.65 per share at end-2013. Its LTV ratio at year-end was 43.7% but this has improved to 41% following the asset disposals since the start of this year.