Rodamco boosts development activities ahead of FBI changes

Rodamco Europe plans to strengthen its development activities in the countries in which it is active in Europe. 'This will lead to more income, higher margins and a better-quality portfolio', ceo Maarten Hulshoff said at the presentation of the annual results Monday.

The move comes in response to proposed legislative changes in the Netherlands for tax-efficient FBIs, the Dutch equivalent of real estate investment trusts (REITs), which will enable listed property companies to become active as developers. Rodamco Europe is listed on the Amsterdam Stock Exchange as an FBI.

The heavier focus on development comes in the wake of rising prices for shopping centres and a sharp decline in yields, Hulshoff explained. 'The competition is very stiff. Everybody's falling over each other to buy retail products. Mediocre products are being sold off for the same price as top-quality centres. That's why we have sold off some of the assets in our portfolio. We have fetched the same yields for mediocre products that we are paying for premium locations. That has enabled us to improve the quality of our portfolio.'

In total Rodamco Europe divested EUR 384 mln worth of assets in 2006. Hulshoff did not rule out the possibility of making acquisitions to boost its development activities, but said that growth would be largely autonomous. The company currently has 100 million m² valued at EUR 2.6 bn in its development pipeline. This is about a third of the existing portfolio which comprises 70 shopping centres with a total value of EUR 10.6 bn.

Hulshoff said it was unlikely that Rodamco Europe itself was a takeover candidate, given the company's high share price. Rodamco Europe shares are currently trading 30% above net asset value.

In 2006 Rodamco Europe saw direct result after tax (rental income minus costs) grow 8.3% to EUR 369.1 mln. Appreciation of the portfolio pushed the indirect result after tax 22% higher to EUR 1.2 bn. Net rental income increased 11.8% to EUR 563.1 mln. Some 98.9% of the existing portfolio now comprises retail which had an occupancy rate of 99.1% in 2006. The occupancy rate for offices/industrial totalled 92.9%.