annual report 31 Mar 2006 - SEB Asset Management

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Income components of Fund return in % * Properties Germany Abroad Abroad Abroad Total Germany Abroad Abroad Abroad Total Direct Equity total Direct Equity total acquisitions interests acquisitions interests Gross income 1) 6.5 7.5 6.6 7.4 7.0 5.7 7.8 8.9 8.0 7.0 Management costs 1) – 0.9 – 2.0 – 0.4 – 1.8 – 1.4 – 1.1 – 1.9 – 1.5 – 1.8 – 1.5 Net income 1) 5.6 5.5 6.2 5.6 5.6 4.6 5.9 7.4 6.2 5.5 Changes in value 1) – 0.5 0.4 4.3 0.9 0.2 – 1.0 2.3 2.4 2.3 0.9 Foreign income taxes 1) – – 0.5 – 0.5 – 0.5 – 0.2 0.0 – 0.6 – 1.1 – 0.7 – 0.4 Foreign deferred taxes 1) – 0.0 0.0 0.0 0.0 0.0 – 0.5 – 0.5 – 0.5 – 0.3 Income before borrowing costs 1) 5.1 5.4 10.0 6.0 5.6 3.6 7.1 8.2 7.3 5.7 Income after borrowing costs 2) 5.1 6.3 14.1 7.4 6.0 3.6 9.0 11.2 9.5 6.1 Exchange rate differences 2) – – 0.1 0.4 0.0 0.0 0.0 – 0.3 – 0.4 – 0.3 – 0.1 Total income in Fund currency 2) 5) 5.1 6.2 14.5 7.4 6.0 3.6 8.7 10.8 9.2 6.0 Liquidity 3) 6) 2.8 1.9 Total Fund income before Fund costs 4) 4.7 4.6 Total Fund income after Fund costs (BVI method) 4.3 4.3 1) Based on average property assets 2) Based on average property assets financed by equity 3) Based on average liquid assets 4) Based on average Fund assets 5) Generated with an average share of Fund assets financed by equity and invested in property during financial year 2004 / 2005 of 60.08%, and with an average share of Fund assets financed by equity and invested in property during financial year 2005/2006 of 65.85% 6) Generated with an average liquidity ratio during financial year 2004/2005 of 39.92%, and with an average liquidity ratio of 34.15% of the Fund assets during financial year 2005/2006 * This table was not included in the audit or the Auditors’ Report. In the twelve-month reporting period, the properties generated a gross rental return of 7.0%, matching the result for the previous year. This return was driven primarily by direct investments and foreign equity interests. Particularly in the USA, gross rental returns improved over the past twelve months from 9.3% to 9.6%, thanks to rental agreements concluded against a backdrop of positive market developments. Purchases also boosted the gross rental return from foreign equity interests, which improved over the past twelve months from 6.6% to 8.9%. The burgeoning recovery of the real estate markets in France, the Netherlands and Spain brought about a slight rise in gross rental returns in those countries. In Germany 14 SEB ImmoInvest Financial year from 1 Apr. 2004 to 31 Mar. 2005 Financial year from 1 Apr. 2005 to 31 Mar. 2006 and Belgium, it would seem that the negative trend is at an end, although this continued to impact gross rental returns during the financial year in the form of vacancies and renewals at current market rates. Management costs reduced gross rental returns at the portfolio level by – 1.5% during the period under review. In this context, the comparatively high management costs of – 5.0% in the USA are standard for the rental market there, with its substantial contributions towards fit-out costs. Because rent accounts for a higher portion of expenses, more costs are borne in return by the owner.
Foreign income taxes and provisions for deferred taxes reduced the net rental return by 0.7 percentage points in the period under review. Strategic external financing and forward exchange transactions used to hedge the property assets increased the total property return so that income from properties contributes 6.1% of the Fund return after borrowing costs. External financing is currently used exclusively for foreign properties. The average external debt ratio varies across country portfolios from 19.7% (Italy) up to 59.0% (USA). The Changes in value item includes both changes in value according to the expert opinions and other changes in value, such as provisions for planned maintenance work. During the period under review, the return from changes in value was a positive 0.9 percentage points. Changes in value according to the expert opinions made a negative contribution of around EUR – 3.3 million for the entire portfolio, or – 0.1%. In several countries, positive changes in value according to expert opinions were recorded. This results first and foremost from positive cyclical developments on foreign real estate markets. In the USA the distinctly positive change in value is due primarily to two aspects: the strong investment demand for well-leased core properties is increasing the return of the latter. At the same time, the extremely positive trend on the letting markets in New York and San Francisco has caused the market value of the properties to rise. In France as well, high demand was observable on the investment markets, which positively affected the return generated by the properties. Moreover, rental successes in the Chatillon and Place Ronde properties in La Défense leveraged the potential for increased returns. The increased returns realised in the Netherlands were also driven by the positive development. Germany, on the other hand, continued to see substantial falls in value totalling around EUR –35.4 million. While some properties in Germany posted increases in value according to expert opinions in the amount of EUR 0.96 million, in the case of 55 properties falls in value amounted to EUR – 36.4 million. In the German submarkets rents did not bottom out until 2005/ 2006, leading to renewals at lower rents. While this also has an impact on the value of the property, it also affords the opportunity of leveraging under-rented potential at a later date. The office rental market in Belgium is also affected by the ongoing tight market conditions. The increased construction activity of recent years has made letting possible only in the case of large incentives for tenants and correspondingly low rent levels, particularly in Brussels. With persistent vacancies and successful lease extensions at current market levels, this market development in Belgium led to drops in value of roughly EUR – 4.97 million or – 6.4% of the Belgian subportfolio. However, the negative contribution to the property return resulting from this decrease in value is relatively small because the Belgian subportfolio only makes up a small proportion of total average property assets. Other negative changes in value resulted particularly from the provisions that were recognised for pending alterations in Vienna, Rennweg and renovation measures in the USA. Detailed information on these measures can be found under “Update on construction and modernisation work on portfolio properties”. Other positive changes in value were achieved in Germany in particular. They are the result of the successful completion of construction and modernisation work. The completion of the Maritim Hotel in Berlin in particular made a clearly positive contribution. Annual Report as of 31 March 2006 15
Page 1 and 2: SEB ImmoInvest Annual Report as of
Page 3 and 4: Annual Report as of 31 March 2006 2
Page 5 and 6: The SEB ImmoInvest Open-Ended Real
Page 7 and 8: Opportunities and Risks of Open-End
Page 9 and 10: Real Estate Markets The world's rea
Page 11 and 12: Investments in shopping centres and
Page 13 and 14: Loans and currency hedging Loans ar
Page 15: The liquidity portfolio comprises b
Page 19 and 20: Real Estate Portfolio During the pe
Page 21 and 22: The Via Laurentina 449 property in
Page 23 and 24: Overview: Letting and Remaining Lea
Page 25 and 26: Changes to the Portfolio A total of
Page 27 and 28: Netherlands, Amsterdam, Mercurius &
Page 29 and 30: Germany, Mannheim, Dudenstrasse 46
Page 31 and 32: Outlook Open-ended real estate fund
Page 33 and 34: Realised profits on the liquidity p
Page 35 and 36: Disclosures on the Statement of Ass
Page 37 and 38: VI. Provisions Provisions refer pri
Page 39 and 40: Riga Tallinn Warsaw Prague Bratisla
Page 41 and 42: Area 2) in m 2 Features Property da
Page 47 and 48: Acquisition date Year built/ renova
Page 49 and 50: Interior wall covering Floor coveri
Page 51 and 52: Post code Germany City Street Letti
Page 53 and 54: Post code City Street Letting rate
Page 55 and 56: Statement of Income and Expenditure
Page 57 and 58: Remuneration of the Fund management
Page 59 and 60: Tax Information for Investors The d
Page 61 and 62: of an exemption instruction they wi
Page 63 and 64: ensure administrative efficiency. T
Page 65 and 66: Attestation report on the review of
Page 67:
Investment Company: SEB Immobilien-
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