Preliminary Full year 2014 results 1 2014: STRATEGY IN PROGRESS 2 - - PowerPoint PPT Presentation

Preliminary Full year 2014 results

2014: STRATEGY IN PROGRESS

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• Executing our asset rotation strategy

− Full non core office portfolio sold

• 52,619 sqm with over 80% vacancy; €1.0 GRI > negative NOI

− 4% office space (22,705 sqm) transformed for alternative use − Value add properties (12,216 sqm) optimised and sold − In total €28.5 million of assets sold − €25.7 mio invested in portfolio to improve quality and add value

• Operational performance

− Take-up Offices NSI two times higher than market − Upward trend effective rent level new leases offices − HNK roll out; 4 HNK’s opened in 2014, 7 HNK’s in operation

• l-f-l growth of 33.7%, Q4 vs Q3 2014: 13.6%

− Successful redevelopments in retail

• Refinancing facility of €550 mio fundament for new funding strategy

− Diversification − Extended maturities − Lowering funding costs

• Improving the direct result to €48.5 million (2013: €46.5 million) by 4.7%

2014: strategy in progress

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NSI’s clear portfolio vision and strategy

Asset management Client focus Investment Asset rotation Maximise total return Segmentation Improve portfolio quality Core Value-add Non-core Improve operational performance Optimise performance or sell Keep or sell Reduce

Progressing towards 2016 targets - offices

3% 56% 48% 30% 41% 52% 70%

1-1-2014 1-1-2015 Target 2016

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Dutch office portfolio

Occupancy # HNK 72.1% 3 >80% 20 71.2% 7

Dutch Office Portfolio 2014: Overview

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Core Value-add Non-core Label Portfolio NSI In # 42 Total 39 90 ‘13 95 15 149 132 ‘14 Occupancy rate Financial occupancy 71.9% 77.8% 70.6% ‘13 69.6% 17.1% 72.1% 71.2% ‘14 Value In € per sqm 1,230 1,503 815 ‘13 1,013 377 1,104 988 ‘14 Area In sqm. 233,909 184,451 326,774 ‘13 376,050 54,866 615,367 560,683 ‘14 Passing rent In €m p.y. 24.5 23.3 28.3 ‘13 35

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59.3 52.8 ‘14

48%

Total book value ’13 = €679.2 m Total book value ’14 = €559.7 m

52% 56% 41% 3%

Progressing towards 2016 targets - retail

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8% 7% 50% 49% 46% 42% 44% 46%

1-1-2014 1-1-2015 Target 2016

8%

Nederlandse winkelportefeuille

Occupancy 87.2% >90% 87.7%

Dutch Retail Portfolio 2014: Overview

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Core Value-add Non-core Label Portfolio NSI In # 16 Total

33%

16 20 6 ‘13 20 6 42 42 ‘14 Occupancy rate in % Financial occupancy 93.9 89.8 85.8 71.3 ‘13 84.3 83.9 87.2 87.7 ‘14 Value In € per sqm 2,248 2,383 1,472 699 ‘13 1,628 924 1,752 1,594 ‘14 Area In sqm. 84,249 83,681 144,174 42,058 ‘13 144,714 42,058 270,453 270,481 ‘14 Passing rent In €m p.y. 14.9 14.2 16.6 2.6 ‘13 17.2

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34.9 34.1 ‘14

41% 56%

50% 42% 8% Core Value-add Non-core 44% 7% 49%

Total book value ’13 = €474,0 m Total book value ’14 = €431.1 m (Including large scale retail)

FINANCIAL

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NSI signs a Euro 550 million Credit facility

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• NSI reached agreement on the refinancing of 80% of its Dutch credit facilities, 55% of total NSI facilities

−Before 31-12-14 NSI received initial commitment from a strong supporting banking group on Head of Terms −This week, an agreement was reached on the Extended/full Term Sheet. Signed commitments were received on allocated loan amounts from all participating finance parties −Subject to full LMA documentation to be completed within next quarter

• The credit facility is a combination of a EUR 450m bank facility and a EUR 100m European Private Placement

−Facility amalgates all previous syndicate facilities and non-Pfandbriefe bilateral facilities and harmonizes contracts

• Possibility to transfer from secured to unsecured funding

−The facility is secured by a joined asset pool −New structure contains triggers which allow for release of security in the future −Unsecuring the majority of funding enables further flexibility for diversification into other funding instruments

• Euro 100 mln /year can be refinanced by other non-bank related funding without penalties

Existing syndicated facilities and bilateral facilities will be restructured into one large pooled facility containing a EUPP, a Term Loan, and two RCFs

11 50.0 55.0 70.0 185.0 215.0 703.8 25.0 103.8

Overview of Dutch credit facilities before and after refinancing (committed amounts)

Term Loan - 5 yrs RCF B - 5 yrs RCF A - 3 yrs EUPP - 7 yrs 703.8 103.8 125.0 125.0 200.0 100.0 RCF B - Accordion option 50.0 Syndicated loan TL & RCFs 31 Dec 2015 Bilateral TL & WC facility 1 July 2016 Syndicated loan TLs, RCFs & WC facilities 1 July 2017 Bilateral 15 January / 15 October 2016 Bilateral 1 April / 30 September 2015

2014 H1

Bilateral – Uncommitted working capital facilities Secured financing remaining in place

2015 Q2*

* Assuming refinancing effective as per 2015 Q2 Remaining maturities

NSI Group maturity increases from 1.9 to 4.0 years, Dutch maturities increase to 4.7 years

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NSI Netherlands (excl. Belgium) NSI Group (incl. Belgium)

7 4 35 10 66 61 172 185 290 2020 2019 2017 2018 2023 2016 2022 2024 2015 2021

Average maturity: 1.9yr 100% = €837m

7 104 35 280 66 131 46 68 112 2020 2019 2017 2018 2023 2016 2022 2024 2015 2021

Average maturity: 4.0yr 100% = €848m

4 34 145 141 200 2020 2019 2017 2018 2023 2016 2022 2024 2015 2021

Average maturity: 1.4yr 100% = €524m

100 270 4 104 19 23 22 2020 2019 2017 2018 2023 2016 2022 2024 2015 2021

Average maturity: 4.7yr 100% = €542m

The refinancing further improves NSI’s cost of debt

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Average cost of debt

• 17%

2015 Q2* 2013 Q4 (post recapitalization) 4,8% 4,4% 5,3% 4,6% 2013 Q3 (pre recapitalization) 2014 Q4 * Assuming refinancing effective as per 2015 Q2

Remarks

• NSI has a relatively high Cost of Debt because of:

−Margins/contracts agreed upon before recapitalization −Relatively high hedge position (90%) due to repayment of 35% of outstanding debt in previous years −Expensive remaining hedge contracts (+3% on average).

• Ever since the recapitalization in November 2013, NSI has

been focussed on further reducing its cost of debt −Reduced from 5,3% to 4,6% EoY 2014 −New facility @ average margin of 2% at LTV<50% −Following the refinancing, the average cost of debt will be

• approx. 4.4% per mid Q2-15

−Expected to reduce to 4% @ start of 2016 due to Belgium bond refinancing(30/6), maturing swaps (Q4/15/Q1/16) and reducing margins

2015 2016 2017 2018 2019 a.b. Maturity profile 50 92 150 55 99 Average swap % 3,04% 2,91% 2,98% 2,52% 2,88% Interest % maturing swaps 3,54% 3,47% 3,14% 3,66% 50 92 150 55 99 20 40 60 80 100 120 140 160 Swap maturity calender

Strategic financing aims well on track: focus on flexibility and 2015-2016 refinancing

• Decrease dependency of only
• ne source of funding

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Funding diversification 2014-2016 Debt maturity Refinancing risk Covenants

• Extend and maintain average

debt maturity to over 3 years

• No more than 25% of loans

maturing in any single year

• Aim to maintain LTV below 50%,

peak-to-trough between 40-50%, with covenant at 60-65%

• Maintain ICR > 2.0

Move to unsecured financing

• Anticipate move to unsecured in

refinancing 2015 – 2016 maturities

Reduce cost of debt

• Decrease overall cost of debt
• Introduction of €100 mln institutional facility
• Launch of €60 mln Belgian Bonds
• Banking exposure significantly reduced
• Room for refinancing with other instruments
• NL debt maturity extended to 4,7 yrs
• NSI maturity extended to 4 yrs
• Introduction of 3/5/7 year tranches
• Maturity extended
• Corporate LTV covenant @60%
• Pricing grid incentivises lower LTV
• Current LTV below 50%
• ICR > 2, current 2,6

Trigger mechanism: switch to unsecured if during 2 testing periods:

• LTV below 45%
• ICR > 2.5
• Revaluation > 0
• New facility @2% average margin (-40bp)
• Cost of debt to reduce
• to 4.4% at signing facility
• To 4% begin 2016

Financial highlights

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x€1,000 FY 2014 FY 2013 HY2 2014 HY1 2014

Gross rental income 133,599 144,564 66,596 67,003 Service costs not recharged to tenants

• 5,828
• 4,723
• 2,902
• 2,926

Operating costs

• 18,611
• 18,050
• 9,388
• 9,223

Net rental income 109,160 121,791 54,306 54,854 Administrative costs

• 7,711
• 6,458
• 3,934
• 3,777

Financing income 176 477 53 123 Financing costs

• 42,391
• 58,042
• 21,063
• 21,328

Direct investment result before tax 59,234 57,768 29,362 29,872 Corporate income tax

• 111
• 121
• 44
• 67

Direct result att. to minorities

• 10,672
• 11,375
• 5,356
• 5,316

Direct investment result 48,451 46,272 23,962 24,489 Indirect investment result

• 185,994
• 180,347
• 92,507
• 93,487

Total result

• 137,543
• 134,075
• 68,545
• 68,998
• Half of GRI reduction is due to asset sales
• Half of autonomous GRI reduction is related to
• nly 3 properties (mainly retail)
• Service Costs include 500 k in previous year´s

corrections

• Related to dispersed m2 vacancy
• Operational costs increase in maintenance and

letting costs/fees

• Net margin @ 81,4%
• Admin costs include ca. 700k exceptionals

related to VEB case, AIFMD/GVV and fiscal restructuring

• Financing costs reduced by 30% due to

recapitalization and overall reduction of finance costs

• Minorities do not yet include effects of capital

increase in the Belgium subsidiary

• NSI stake in IOW per 31/12/14= 50,2%
• Indirect investment result affected by
• Lower revaluations than 2013, but still

substantial @183 mln (192 mln)

• Negative revaluation @ -2,5 mln (+25mln) of

financial instruments due interest yield shifts

Balance sheet highlights

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x€1,000 31/12/14 30/6/2014 31/12/13

Real estate investments 1,645,271 1,722,744 1,808,768 Total shareholders equity 788,302 847,790 932,915 Shareholders equity of NSI 632.112 719,272 801,159 Debt to credit institutions (excl. derivatives) 815,483 823,139 821,854 Average cost of debt (%) 4.6 4.7 4.8 Net loan to value (%) 48.9 47.9 45.4 Average debt maturity (years) 2.0 2.3 2.2 Fixed interest debt (%) 89,7 88,8 82.4 Interest coverage ratio 2.6 2.6 2.1 NAV (€/share) 4.41 5.02 5.59 EPRA NAV (€/share) 4.69 5.31 5.85

• Real estate investments reduced by
• Negative revaluation @-183 mln
• Sales of assets @ -16.2 mln
• Investments in assets @ 25.7 mln
• Acquisitions @ 33.0 mln
• Overall equity reduced by negative total result

after taxes

• Debt to credit institutions sligthly reduced due to

retained earnings and stock dividend paid out (Belgium)

• Average cost of debt consistently reduced

throughout the year

• Loan to value influenced by revaluations and

equity issue (26 mln) in Belgium

• Average debt maturity to increase to 4yr
• Interest fixation is relatively high due to large

past debt repayments and Belgium bond issuance per April 2014

• ICR stable @ 2,6
• NAV influenced by revaluations
• EPRA NAV contains correction for financial

instruments

OPERATIONAL

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Assets sold

18 Action Properties sqm Sqm leased Financial Occupancy %

Sale of non-core: Offices Uraniumweg 23, Amersfoort * Hettenheuvelweg 12, Amsterdam * Hettenheuvelweg 14, Amsterdam * Paasheuvelweg 15, Amsterdam * Rivium Boulevard 82-100, Capelle a/d IJssel * Keulenstraat 6, Deventer * Snipperlingsdijk, Deventer * Hanzeweg 5, Gouda * Adelbert van Scharnlaan 170-180, Maastricht * Touwslagerstraat 17, Ridderkerk * Volmerlaan 7, Rijswijk * Van Houten Industriepark 23, Weesp * Zaagmolenlaan 12, Woerden * Engelandlaan 270-340, Zoetermeer * 6,658 2,347 2,367 1,929 1,875 3,571 1,208 5,855 3,937 1,711 5,499 1,309 1,662 2,681 546 851 285 1,579 350 956 273 136 1,315 0% 0% 24% 53% 34% 44% 32% 0% 31% 0% 0% 24% 9% 53% Kobaltweg, Utrecht 10,009 737

12%

Total offices 52,619 Sale of non-core Industrial Tijnmuiden, Amsterdam 1,883 Beemsterweg, Almere 10,926 Dukaat, Deurne 2,722 Total Industrial 15,531 Residential Zevenkampsering, Rotterdam 48 units Total non-core 68,150 Sale of value add: Offices Max Euwelaan, Rotterdam 1,100 Luchthavenweg, Eindhoven 1,972 Bovendonk, Roosendaal* 3,361 Villawal, Nieuwegein* 5,783 Total Value add 12,216 *) Transfer in 2015

Non core + value add

• ffices

> 10% office sold Industrial > 12.5% sold

50 100 150 200 250

2013 2014 2014 Offices Retail LSR Industrial

€ 193.4 € 177.9

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Revaluations Dutch portfolio

Pessimistic market sentiment remained main driver in valuations; impacting market yields

Exceptionals (€21.2 mio):

• Book loss non-core portfolio (€8.1 mio)
• ‘t Loon (€ 13,1 mio)

€ 156.7

13,6 7,5 41,6 19,2 10 20 30 40 50 60

2014 H2 2014 Retail LSR Market rents retail 27% Market rents LRS 85% Yield shift LSR 14% Keizerslanden €2.0 mio ` ‘t Loon € 12.7 mio Other Yield shift retail 46% rent reduction € 2.7 home furniture store

65%

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Revaluations Dutch portfolio- retail

9.3 mio

54,9 20 40 60 80 100 120 140

2014 H1 2014 H2 2014

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Revaluations Dutch portfolio- office

Book loss non core € 8.1 mio Market rents 10% Yield shift 60%

NSI new leases Effective rent NSI portfolio Effective rent Appraisers Market rent > € 120 € 134 € 115 Transactions NSI Lone Star/ CBRE Chalet/ Kildare JLL-ranking 49.8% 54.1% 47.3% Value per sqm € 998 € 1266 €1085 Under/ over rent 6.5% 18.9% Vacancy 31% 27% 32%

€ 122.5

Market evidence:

€ 63.0 € 59.5

Operational performance

71.5%

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Occupancy GRI Leases started/ renewed Rent

New leases/ portfolio

€ 54.7 mio 19,913 sqm 53,277 sqm € 128 / € 134

Take up

take up/ supply ratio

24,000 sqm 13.3%

• Offices NL
• Retail

72.1% € 57.9 mio 37,750 sqm 57,509 sqm € 106 / € 144 35,000 sqm 19.0% 88.4% € 26.7 mio 16,155 sqm 47,715` sqm € 169 / € 182 10,000 sqm 87.8% € 32.2 mio 7,500 sqm 35,916 sqm €142 / € 183 7,000 sqm 2014 2013 2014 2013 56.6% € 5.4 mio € 188 / € 160 5,000 sqm 26%

• HNK

50.7% € 1.5 mio 30 % 2014 2013 Significant transactions 2014 RGD 6,000 sqm Sita 2,8000 sqm Murata 2,000 Oxyma 1,700 sqm Hogeschool 1,000 sqm Primark 6,700 sqm Dirk 1,500 sqm Qpark 6,500 sqm 2,000 sqm

Offices: HNK roll out according to plan

23 sqm Occupancy HNK Rotterdam 18,000 60% HNK Amsterdam 10,000 82% HNK Utrecht 3,000 71% HNK The Hague 15,000 39% HNK Hoofddorp 3,500 71% HNK Groningen 3,500 62% HNK Apeldoorn 14,000 39% HNK Utrecht 9,000 0% HNK Ede 10,000 0% HNK Den Bosch 7,500 50% 93,500 57%

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• Like for like growth 33.7%, 13.7% Q4 vs Q3
• Take up/ supply ratio two times market average (26%)
• Leases signed at €188 per sqm in 2014
• Demand driven development:
• HNK’s under construction all partially pre-let
• Success rate in converting interest into contract 3 times higher than in

traditional portfolio

• 44% of the new letting transactions in the office portfolio relate to HNK
• The gross rental income from HNK amounted to €5.4 million in 2014
• Track record

HNK is stacking up

Office - HNK

(€ million) 2013 2014 YTD 2016 target Investment 3.7 5.1 11.6 31.0 GRI 1.5 5.4 6.5 # HNK’s 3 4 7 20 % portfolio (sqm) 3% 12% 25%

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Retail focus - market view

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Convenience Experience

• Changing consumer behavior

− ‘multi-channel’ & ‘omni-channel’

• Off-line and online retail intermingle in an enhanced consumer

focus/targeting

• Locations – the gap is widening

− Internet in combination with long-lasting sales declines increased market vacancy − Search for relevance and distinctiveness − Retailers need to restructure location and branding strategies

• Experience versus convenience

− Retail market is tending to two extremes:

• Entertainment, hospitality & fun for a full day out > experience
• Efficient and functional > convenience

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• The ‘convenience’ centre

− Tenant base perfectly fits the ‘convenience’ consumer

• strong mix of food, personal care and other daily goods
• Complete range of product offering for daily needs
• Mix of local entrepeneurs/ national brands (55%/45%)
• NSI’s capabilities: strongly geared towards ‘convenience’ shopping centers’

− Require active management − Adding value through services and facilities: − Local entrepreneurs require support beyond the physical store

• Focus on convenience means:

− Full focus on local neighbourhood retail centres

• Result in shift in portfolio segmentation
• Redefine non core:

» Large Scale retail » Shared ownership

• Asset rotation function of redefined segmentation
• Requires the next step in active management and adding value
• Consumer focus
• On-line strategy defined in 2014 > Start Q1 2015

NSI’s Retail positioning - Convenience

Redefined 2016 targets Retail

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8% 6% 50% 49% 46% 42% 43% 46%

1-1-2014 1-1-2015 Target 2016

8% 8% 19% 50% 36% 30% 42% 44% 70%

1-1-2014 1-1-2015 Target 2016

CONCLUSION

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• Economic environment is expected to improve
• Letting market will remain challenging: NSI has right strategy in place to respond to changing dynamics
• Executing our asset rotation strategy

− Continued focus on selling non strategic assets − Convenience focus will determine asset rotation activities in retail portfolio

• Operational

− HNK roll out − Active management retail ‘convenience’ to the next level: pilot online

• Financing

− Complete documentation − Lower interest costs to 4.4% when facility effectuates; Q2 2015

Conclusion