Analyst meeting Full year results Rotterdam 15 February 2013 - - PowerPoint PPT Presentation

Analyst meeting Full year results

Rotterdam 15 February 2013

Portfolio & Strategy

• Focus on Netherlands and Belgium
• Exit strategy Switzerland; 70% assets sold; sale of 2 remaining assets ongoing
• High Yield fund
• Two asset classes: Offices & Retail
• Anti-cyclical asset management
• Active asset management
• VNOI merger
• Balancing portfolio over the cycle
• High Yield with office portfolio
• Stable cash flow from retail is backbone to optimize total return
• Netherlands:
• € 1.5 billion
• GIY: 9.6%

Office:

• € 0.9 billion
• Focus on Randstad

Retail:

• € 0.5 billion
• Nationwide regional

focus Belgium:

• € 0.6 billion
• GIY: 9.0%
• 55% stake in listed fund

(Intervest Offices) Office:

• € 0.4 billion
• 17 properties (233k sqm)
• Focus on Antwerpen-

Brussels Logistics:

• € 0.2 billion
• 21 properties (395k sqm)
• Strategic axes:

Antwerpen- Mechelen & Antwerpen – Luik

• Nr 2 position

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Asset focus

Offices & Retail; 50/50 over the asset cycle High yield profile Benelux focused

Our long term decisions

Inhouse Property & Asset Management

Letting teams Technical management Property development and management

Scale

Utilizing inhouse property management Diversified and innovative leasing concepts Branding

Funding

Reduction LTV; < 55% Interest fixing of at least 80% Diversification of funding Integrally managed and tenant focused Marketing & business development

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Highlights 2012

• Increase of 13% in direct investment result to €63.4 million (2011: €56.0

million) as result of merger VNOI;

• Direct result per share €0.99 compared to €1.19 in 2011, partly due to a

significant increase (13%) in number of shares outstanding

• Integration VNOI; significant contribution to direct result per share
• Occupancy total portfolio improved to 81.0% from 80.5% as per Q3 2012

– Occupancy of Dutch office portfolio improved to 71.3% from 70% as per Q3 2012

• In 2012 NSI refinanced in total over 60% (€507 million) of total Dutch
• utstanding debt

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Highlights 2012

• NSI delivered on its Dutch asset disposal target

– €47.9 million of assets, partially delivered in 2012, – In total €100.9 million of assets sold in 2012

• Total investment result -€103.1million; revaluations of the real estate portfolio
• € 146.2 million in 2012
• LtV increased to 58.2% (2011: 57.2%), €35,4 million asset sales announced

in January 2013, stand alone impact: LtV reduction of 0.8%

• NSI will propose a change in dividend policy towards a sustainable dividend

to support its strategy, of which the main elements are: – Pay out ratio 85-100% – Dividend will be linked to LtV performance

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Towards sustainable dividend

• Ability to move forward with execution of strategy is crucial and requires

investments;

– Regular investments in quality of assets – New concepts/ redevelopments

• Proposed dividend policy: pay out ratio is geared at funding regular capital

requirements

– Average capital expenditure requirements in general 10-15% of direct result, resulting in pay out 85%-100% – These investments are meant to yield into sustainable future dividends.

• Financial prudency to secure future investments

– Aligning dividend policy with exceptional market circumstances by linking dividend policy to LtV performance; – 55% > LtV < 60%; pay-out ratio 50% of direct result in cash – LtV > 60%: pay-out ratio 50% of direct result as stock dividend

• Possibility to offer stock dividend in case the circumstances are supportive
• Conditional upon approval in AGM on 26 April 2013; final dividend €0.11 per share

(50% of direct result per share), totalling the 2012 dividend to €0.86 per share

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Our key priorities

Reducing LtV

– NSI is highly committed to reduce LtV to below 55% – Continue disposal strategy

• In 2012 €100.9 million of assets sold
• An additional €35.4 announced in January 2013
• Approx. €100 million used to redeem debt

Operational

– Building on operational strength – Increasing occupancy levels – Roll our HNK concept – Further improving effectiveness and efficiency – Continued cost control and driving efficiencies – Optimise value per property and sell

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Operational highlights - Retail

Solid occupancy at 92,5%

– Decrease from 94.5% in Q3 due to expiring rental guarantee; no remaining guarantees

C&A signed new contract for ‘t Loon, accelerating rebuilding activities NSI benefiting from strategic choices to target food, in particular supermarkets and daily goods in general Retail environment increasingly challenging, in particular large retail Recently sold properties demonstrate active asset (cycle) management Target for 2013 is to keep occupancy stable

Development occupancy in sqm:

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Total area 1/1/12 Leased 1/1/12 Leased in period Vacated in period Total area 31/12/12 Leased 31/12/ 2012 Area Area % Area Area Area Area % 292,913 275,723 94.1 16,036 16,963 272,018 274,878 92.9

Operational highlights - Offices

• Turning point in occupancy; improved from 70% Q3 to 71.3%

– Further improvement throughout 2013 is expected – Continued outperformance market in take up levels; NSI realized 4% of the total market take up, while portfolio represents 1.3% – Continued early renewals; actively creating negotiation momentum and managing expiration calendar;

• Further improvement supported by expiration calendar; 13% of

contracts will expire in 2013 (2012: 23%)

• Trend of growing demand for flexible and full office concepts continues;

– Roll out HNK progressing – HNK Rotterdam opened mid October; – Further roll out in portfolio progressing

• “De Rode Olifant” delivered to Spaces, contract effective since mid December

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Total area 1 /1/12 Leased 1/1/2012 Leased in period Vacated in period Total area 31/12/12 Leased 31/12/12 Area Area sqm% Area Area Area Area sqm% 644,590 488,540 75.8 79,046 108,796 609,881 433,056 71%

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De Rode Olifant, delivered to Spaces in December 2013

HNK- distinctive strength

A place to be - inspiring meeting place to work and to meet

– Highly accessible;

• Free entrance ‘social heart’
• Memberships
• Managed offices
• Traditional offices

– Offering exactly what tenant needs

• Services
• Space
• Flexibility

– Translates into a well priced solution, benefiting both tenant and NSI

• Lower total costs for tenants
• Higher rent per sqm for NSI
• HNK Rotterdam

– Occupancy 30% (total property; 18,000 sqm) – Investments in HNK €2.8 million – Annualized HNK rent level €307,000 – HNK: 1,520 sqm leased at €287 per sqm

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Operational Highlights- Belgium

• Focus on renewals paid off

– Offices:

• New lettings 3,200 sqm
• Renewals: 45,751 sqm
• Occupancy improved to 85% (84%)

– Logistics

• New lettings: 16,552 sqm
• Renewals: 82,487 sqm
• Occupancy decreased to 89% (91%)
• Revaluations impacted by:

– Renewal contract with PwC until 2021, lower rent level (€1.4 million per annum) – Deloitte leaving Diegem office (21,302 sqm) in 2016; alternative leasing strategies being developed – Total revaluation -€13,5 million

• Investments in strong performing logistics portfolio

– Second distribution centre at logistics site in Oevel

• Investment €7,9 million, NRI: €0.7 million

– Expansion logistics site Oevel

• Investment: €3.3-3.8 million, NRI €0,3 million

– Redevelopment Herenthals Logistics 1, Neerland 1 in Wilrijk and Oevel.

• Investment €3.3 million, NRI 0.6 million

– Revaluation € 18,0 million positive

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rental income x €1,000

Expiration of Leases

31 December 2012 (NL)

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• We actively manage and anticipate expiration calendar; smoothening the future

expiration levels

• In both the office and retail portfolio; the 2013 expiration calendar is below
• average. The office portfolio is significantly below 2012 level (23%)
• Expirations in 2013 involve a smaller number large single tenant contracts

compared with 2012:

(number of contract expiries) 2012 2013 > 10,000 1 5,000-10,000 5 3,000-5,000 3 3 1,000-3,000 9 6 Representing total m2: 64,269 25,024

Vacancy development

• Occupancy expected to improve further improvement in 2013
• Expiration calendar in 2013 and 2014 below average with limited expiries of

large single tenant contracts

• Increase in vacancy Retail portfolio, for a large part due to an expiry of a rental

guarantee (Zuiderterras), no rental guarantees left in portfolio

• Redevelopment of properties to new concepts impact vacancy until completion

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Date of merger VNOI

Portfolio Rent Development

Average effective rent/sqm (NL)

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• Effective rent levels are adjusted for incentives remains in line with benchmark

Dutch market

• NSI delivered in 2012 on target to stay above €120/sqm effective rent
• Alternative strategies in place to increase income per sqm

Property values

• NSI wrote down approx. 34% in Dutch office portfolio (€342 million) since 2008,

revaluation Q4 slowed down compared to preceding quarters, to Q1 2012 level

• Revaluations primarily driven by vacancy and market rent adjustments
• Lack of reference due to lackluster market; increased influence of assumptions
• Development activity and pipeline all time low
• Valuation level below replacement costs

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Financial highlights

• Increase of 13% in direct investment result to €63.4 million in 2012 compared

with €56.0 million in 2011 as result of merger with VNOI

• Direct result per share of €0.99 in 2012, compared to €1.19 in 2011
• NSI delivered on its Dutch asset disposal target;

– €47.9 million of assets, partially delivered in 2012 – In total €100.9 million of assets (incl Switzerland and Belgium) sold in 2012

• Q4 2012 direct investment result (€15.0 million) decreased 5.6% vs Q3 2012

(€15.9 million), due to a combination of – Loss of gross rental income of disposed assets – Higher financing and administrative costs – Offset by exceptional items of €2.2 million

• €0.7 million penalty payments
• €1.5 million provisioned insurance income
• Revaluations of the real estate portfolio - € 146.2 million in 2012
• LtV increased to 58.2% from 57.2% as per year end 2011 (57.6% as per 30

September 2012).

• NSI will propose a change in dividend policy towards a sustainable dividend

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x €1,000 FY 2012 FY 2011 Q4 2012 Q3 2012 Gross rental income 160,545 119,964 40,317 38,879 Service costs not recharged to tenants

• 4,754
• 2,751
• 1,141
• 1,026

Operating costs

• 18,457
• 15,716
• 4,884
• 4,312

Net rental income 137,334 101,497 34,292 33,541 Administrative costs

• 6,469
• 4,180
• 1,930
• 1,386

Financing costs

• 56,011
• 38,514
• 14,464
• 13,679

Direct investment result before tax 75,019 58,803 17,898 18,508 Corporate income tax

• 327
• 165
• 96
• 5

Direct investment result attributable to non-controlling interests

• 11,287
• 2,608
• 2,844
• 2,626

Direct investment result 63,405 56,030 14,958 15,877

Financial Highlights

Result

Indirect result

• 166,522

6,675

• 42,126
• 45,991

Total result

• 103,117

62,705

• 27,268
• 30,114

Operating costs

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2012 2011

Q4 2012 Q3 2012

Municipal taxes 4,600 3,991 1,117 1,001 Insurance premiums 764 728 159 238 Maintenance costs 3,927 3,366 1,061 892 Contribution to owner’s associations 476 604 106 84 Property management (including attributed administrative expenses) 4,816 3,599 1,210 1,166 Letting costs 2,167 2,218 859 567 Other expenses 1,707 1,210 373 362 Total 18,457 15,716 4,884 4,311

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Actuals Q3-Q4 2012

*) Including €2.0 million one offs

x €1,000

Financial Highlights

Balance sheet

Loan to value (%) 58.2 57.6 57.2 Average interest rate (%) 4.8 4.7 4.2 Average maturity loans (years) 2.3 2.2 2.1 Fixed interest debt (%) 88.5 91.6 84.4 Interest coverage ratio 2.5 2.5 2.4 NAV 9.78 10.50 12.96 EPRA NAV 10.96 11.73 14.02 x €1,000 31-12-2012 30-09-2012 31-12-2011 Real estate investments 2,106,091 2,154,754 2,321,813 Shareholders’ equity 789,788 828,575 909,620 Shareholders’ equity NSI 666,850 702,304 781,218 Debts to credit institutions (excluding derivatives) 1,226,432 1,241,966 1,329,166

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Financing

• Extending average duration of loan portfolio and addressing

upcoming maturities well before expiration is key priority – Timely addressing €186.3 million maturing debt in 2013, €258.5 million (55%) of debt, initially maturing in 2013, already covered in 2012 refinancing arrangements – Approx. 60% of Dutch outstanding debt (€507 million) successfully refinanced in 2012 – Average maturity increased to 2.3 years

• Managing interest costs

– Rising margins vs low swap/euribor rates – Lowering hedging costs through expiring swaps – Reduction outstanding debt (€103.5 million) Average cost of funding expected to rise

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Loan Duration

x € 1,000

capital sum until

x € 1.000

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Fixed Float Total Working capital Hedged % Fixed Maturity Interest % NL 183.4 662.2 845.6 80.0 704.3 95.9% 2.3 5.2% CH 26.0

• 26.0

0.0 0.0 100.0% 0.2 2.8% BE 75.0 203.5 278.5 22.5 120.0 64.8% 2.7 4.0% Total 284.5 865.7 1,150.3 102.5 824.3 88.5% 2.3 4.8%

• Hedge portfolio of swaps: No overhedged positions
• Swaps reviewed for potential redemption or extention

Debt by Country

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Prospects

Operational

• Further improvement occupancy in Dutch office portfolio throughout

2013

• Further roll out HNK concept to anticipate growing demand for flexible

and full service office solutions

• Continue to actively pursue favorable mix in retail portfolio

Financing

• Further reducing LTV by selling non strategic assets, including sale of

remaining assets Switzerland

• Revised dividend policy
• Average costs of funding expected to rise
• Further extending debt maturities
• Direct result FY 2013 expected to develop in range €50 to € 56 million;

expected to improve in 2014.

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Q & A

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