Kempen conference Amsterdam 30 May 2013 Company snapshot Portfolio - - PowerPoint PPT Presentation

Kempen conference

Amsterdam 30 May 2013

• Dutch REIT:

NSI is a real estate asset management company and qualifies as fiscal investment institution under Dutch law (REIT)

• Full service in house management

The company is engaged in asset management, letting, marketing, development, business development and technical building management

• High Yield Real Estate portfolio with Benelux focus:
• Offices and Retail investments in the Netherlands
• Majority interest (54.8%) in Intervest Offices & Warehouses

(listed on Euronext Brussels)

• NSI, founded in 1993, is publicly listed on Euronext Amsterdam

since 1998 and has 66 employees at year-end 2012

• In 2011, NSI and VastNed Offices (VNOI) completed a merger
• NSI divested the majority of its Swiss portfolio in April 2013

Company snapshot

Description Portfolio

Asset classes Netherlands (market value2) Asset classes Belgium (market value2)

• 1. Unless stated otherwise; 2. Based on Q1 2013; 3 Consists of Industrial and Residential

Offices 55.0% Retail 38.6% Other3 6.4% Offices 60.5% Logistics 39.5% Netherlands 69.4% Belgium 28.9% Switzerland 1.7% Geographic breakdown (market value2)

2 Key financials

(EUR million1) 2012 Gross rental income 161 Direct investment result 63 Indirect investment result (167) Real estate investments 2,106 Occupancy rate (year-end) 81.1% Loan to Value (year-end) 58.2% Direct investment result per share (EUR) 0.99 Dividend per share (EUR) 0.86 Netherlands 2012 Offices 10.7% Retail 7.7% Belgium Offices 9.5% Logistics 8.4%

Gross initial yield

Offices Retail Logistics

Strategy

• Balanced mixture of Offices & Retail, consistent with development of the asset cycle in both markets
• Offices focus: high-yield locations
• Retail focus: local shopping centres
• Aim to be one of the leading players in each asset class

Portfolio optimisation focusing on high-yielding Office and Retail assets 1.

• Full spectrum of in house capabilities created excellent letting platform
• Use local knowledge and integrated teams to quickly respond to clients’ needs
• Redevelopment and rebranding of existing assets
• Introducing new concepts to improve occupancy and rental income
• Unique combination of integral management and tenant focus to increase both portfolio value and cash flow generation

Increase value through active management 2.

• Highly committed to loan-to-value (LtV) < 55% ion the short term, <50% on the long term
• Diversification of funding
• Interest fixing of at least 80%

Solid balance sheet 3.

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Highlights Q1 2013

 Occupancy total portfolio improved to 81.3% as per 31 March 2013 from 81.1% as per year end 2012  Direct investment result of €13.4 million in Q1 2013, €0.20 per share  Total investment result amounted to -€21.2 million in Q1 2013, consisting of €13.4million direct investment result and

• €34.6 million indirect investment result.

 Revaluations of the real estate portfolio amounted to -€42.4 million.  LtV slightly decreased to 58.0% on 31 March 2013 from 58.2% as per year end 2012  Swiss retail center HertiZentrum sold at book value, industrial Belgian asset Kortenberg 15% above book value (transfer both assets end May)  New dividend policy adopted by AGM, aimed at retaining cash to fund regular capex

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EUR million 1Q ’13 Gross rental income 37.1 Direct investment result 13.4 Indirect investment result (34.6) Real estate investments 2,040 Occupancy rate (end Q1) 81.3% Loan to Value (end Q1) 58.0% Direct investment result per share (EUR) 0.20 Interim dividend per share (EUR) 0.10

Highlights Q1

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Retail NL 27% of portfolio

• Occupancy rate at a solid 92.0%, a decrease from 92.5% (year-end

2012), partly due to the sale of two of (nearly) fully let shopping centres

• Strong retail mix with a approx. 22% share of supermarkets
• Stable retention rate at 76%.

Offices NL 38% of portfolio

• 2nd consecutive quarter of occupancy improvement

in Dutch offices portfolio from 71.3% as per year-end 2012 to 72.1% as per 31 March 2013. Improving trend is expected to continue over 2013.

• NSI realised 3% of the total take up in the Dutch
• ffices market, while NSI's portfolio represents 1.3% of

the total Dutch offices market

• NSI ranked fourth in the Dutch market in total leasing

transaction volume in 2012

• Transformation of HNK Hoofddorp and Utrecht

commenced and expected to be finalised in the autumn

• f 2013
• The retention rate (78%) increased significantly

compared with 2012 (47%)

Belgium 29% of portfolio

• Occupancy decreased to 85% due to sale of semi-industrial asset
• Sale of semi-industrial asset in Kortenberg 15% above book value
• Increase in leasing transactions in first quarter compared with first quarter
• f 2012

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, another €75 million

announced (and partly yet delivered) in 2013

• Approx. €100 million used to redeem debt in 2012, €46 million in

Q1 2013

 Operational

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

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Changed dividend policy

 Pay out ratio is geared at funding regular capital requirements

– Average capital expenditure requirements in general 10-15% of direct result

 Financial prudency to secure future investments

– Aligning dividend policy with exceptional market circumstances by linking dividend policy to LtV performance

 Possibility to offer stock dividend in case the circumstances are supportive  Meeting REIT criteria for profit distribution

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LtV Pay out of direct result < 55% 85-100% 55%> LtV < 60% 50% in cash > 60% 50% in stock

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HNK – servicing a growing market with higher earnings potential

 HNK anticipates – a growing demand for full service and flexible leasing in Dutch market; – changing housing needs of corporates due to changes in way

• f working

 Positioning perfectly fits the growing SME segment and growing number of freelancers  Lower risk due to spread of contract expiries  Utilizing office spaces that are difficult to rent out in traditional leases  Results in higher rental fees per sqm compared to traditional model, while tenant is able to optimize their costs

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 – Average rent level ‘managed offices' at €287 per sqm

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rental income x €1,000

Expiration of Leases

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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

11% 7% 19% 21% 13%

Retail Offices Industrial

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 disposal of 2 (nearly) fully let shopping centers

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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

*) The rent level of new leases in Q1 2013 was impacted by relatively large leases in outer regions

Property values

 NSI wrote down €270 million since 2008 in Dutch office portfolio, €377 including pro forma VNOI revaluations over that period (approx. 38%)  Revaluations primarily driven by yield shifts  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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Active acquisition & disposal strategy

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Portfolio Philips Pensioenfonds and Swiss assets Excluding acquisition VNOI (€971 million)

 € 415 million  € 250 million

Consolidated direct and indirect investment result

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(x €1,000) Q1 2012 Q4 2012 Q1 2013 Gross rental income (GRI) 41,499 40,317 37,075 Service costs not recharged to tenants

• 1,482
• 1,141
• 1,136

Operating costs

• 4,938
• 4,884
• 4,247

Net rental income 35,079 34,292 31,692 Administrative costs

• 1,816
• 1,930
• 1,525

Financing costs

• 14,007 - 14,464 - 13,859

Direct investment result before tax 19,284 17,898 16,308 Corporate income tax

• 80
• 96
• 17

Direct investment result attributable to non- controlling interests

• 3,023
• 2,844
• 2,876

Indirect investment result 16,181 14,958 13,415 Indirect result

• 33,302 - 42,126 - 34,573

Total result

• 17,121 -27,268 -21,158
• Gross rental income in Q1 2013 decreased to

€37.1 million (Q4 2012: €40.3 million) as a result

• f disposals and €2.0 million exceptionals in Q4

2012

• NSI continued its focus on strict cost discipline;
• perating costs (11.5%) and administrative costs

(4%) reflect efficient ratios

• Financing costs decreased in Q1 2013 to €14.0

million (Q4 2012: €14.5 million). Higher margins and financing costs were offset by lower Euribor rates and hedging costs and a reduction in

• utstanding loans (€43 million).
• Downward revaluations of €42.4 million mainly

related to Dutch offices portfolio (€33.3 million)

• LtV slightly decreased from 58.2% at year end

2012 to 58.0%

• ICR at 2.3 (year end 2012: 2.5)

Key observations

Financial Highlights

Balance sheet

Loan to value (%) 57.3 58.2 58.0 Average interest rate (%) 4.3 4.8 5.0 Average maturity loans (years) 2.3 2.3 2.1 Fixed interest debt (%) 91.6 88.5 88.8 Interest coverage ratio 2.5 2.5 2.3 NAV 12.68 9.78 9.47 EPRA NAV 13.83 10.95 10.52 x €1,000 31-03-2012 31-12-2012 31-03-2013 Real estate investments 2,294,260 2,106,091 1,981,787 Shareholders’ equity 895,404 789,788 771,779 Shareholders’ equity NSI 763,647 666,850 645,679 Debts to credit institutions (excluding derivatives) 1,315,693 1,226,432 1,183,219

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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 – NSIs largest syndicated loan facility (€243 million outstanding debt), maturing in 2013 and 2014 and reflecting the majority of the debt maturing in 2013, is in an advanced stage of negotiation. – Approx. 60% of Dutch outstanding debt (€507 million) successfully refinanced in 2012 – Average maturity 2.1 years  Managing interest costs – Rising margins vs low swap/euribor rates – Lowering hedging costs through expiring swaps – Reduction outstanding debt

• Average cost of funding expected to rise

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Loan Duration

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capital sum until

durations loans

x € 1.000

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

X €1,000 Fixed Floating Total Working capital Hedged % Fixed Maturity Interest % NL 179,786 626,182 805,968 80,000 694,290 98.6% 2.0 5.4% CH 25,781 25,781 0.0% 0.1 2.8% BE 75,000 195,985 270,985 21,179 120,000 66.7% 2.6 4.0% Total 254,786 847,948 1,102,734 101,179 814,290 88.8% 2.1 5.0%

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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