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Article Excerpt
CHRISTOPHE KULLMANN, CHAIRMAN OF THE MANAGEMENT BOARD, FONCIERE DES REGIONS: (Interpreted) Good morning. I propose that we get started so good morning also to those people who are following us via the conference call.
And during this presentation, we will be talking about the results for FDR, Fonciere des Regions, as they were for '08 and we'll rapidly see -- take a quick look at the 2008 indicators, a few words about what Fonciere des Regions is. We'll focus on real estate markets in 2008 and also on the outlook for 2009 for these markets but also more specifically concerning Fonciere des Regions' results.
Then we'll look at the results, that's the object of this exercise, but we'll also spend a bit of time about the future and our objectives, through the action plan that we call FDR 2010, which is supposed to include the adaptation of FDR to this worldwide crisis that we're all going through.
So first of all the key indicators. A few words there just to remind you that these key indicators in the real estate industry are satisfactory. We've got rental income on a like-for-like basis, up nearly 4%; occupancy rates that are very high in our star products, that's offices around 89% -- 90%.
Now these rents are also resting on leases that are firm leases. Average lease length is over six years. That gives a great stability to our future cash flows because at the same time our debt is also long debt and therefore well secured.
Now another important element in real estate indicators for '08 is the result of the sell-offs because we did sell off EUR1.3 billion of disposals there, with an average price up 8% on the appraisal value and that has also secured long-term cash flow. And the success of this arbitrage plan has given us a measured drop in appraisal values of around 5%. And we'll come back on that a little bit later on.
Indicators -- steady cash flow, current cash flow is up 2.3% to 7.6%. And we now have full year integration of Beni Stabili. That was the acquisition that we made. We had announced that was going to dilute our cash flow by 10% but that was well compensated for by the improvement in cash flow from other activities.
We also proposed to the annual shareholders meeting a stable dividend compared to last year at EUR5.3.
Our LTV is stable compared to historic levels, always between 55% and 60%. And at the end of '08, it was at 58.8%, the loan to value ratio.
Net asset value is down due to the fall in appraisal values but that's still at EUR96.9. Nonetheless, significantly higher than 2006, even if it's down on 2007.
Now who are we? Well just to remind you who we are, Fonciere des Regions, we have several partners but we are essentially in offices; two-thirds of our office assets are in France and in Italy. We rest on major tenants linked to outsourcing operations that we've done since the creation of Fonciere des Regions.
Now to manage these real estate assets, we have specialized asset management teams in each territory, each market, with teams in all of our major areas which (inaudible) a critical mass of EUR16.7 billion of assets under management. That's 10.4% (sic - see presentation) Group share, in other words after minority interests. We have strong financial partners both in equity and in debt.
We have a business model which we can call unique because I want to remind you that the development of Fonciere des Regions, our growth, our strong growth since 2001, means that today we are one of the biggest real estate asset management companies in terms of asset management. We've always had a strong link between equity and debt, raised throughout our structural operation. These are, for example, acquisition of portfolios or merger with other real estate management companies.
Now it's these operations that explain the original profile of generation of cash flow and with high yields, over 8% on offices in France, also over 8% in logistics. Rents that remain in line with the market, in spite of the strong indexation effect, which was integrated since 2001 on our assets. High and stable occupancy rates, as we've already said. Very low level of unpaid rent, that's one very specific characteristic of FDR and the nature of our tenants. Long leases as we said and values moderate per square meter.
We've decided since the middle of 2007 to change this strategy, this development strategy, in order to build in the change in the environment. And I think this strategy since the middle of 2007, we've adapted asset management to ensure the solidity of cash flow in order to secure the value of our portfolio.
We've also adapted management of our financing in a context of liquidity crisis that got more and more severe over 2008. Now to do this, what we did is revise upwards our asset disposal and throughout the end of '07 and throughout '08, we reduced the pipeline of risky developments and new investments, and we secured our financing.
Now I am going to give the floor to Olivier Esteve, CEO of Offices, to talk about our real estate market.
OLIVIER ESTEVE, CEO, OFFICES, FONCIERE DES REGIONS: (Interpreted) Thank you Christophe. So good morning everybody. I am going to talk about our real estate market and also I'll be presenting our activity in 2008.
Now what are the anticipations, and I'll move onto slide 12, can we make for 2010? Well especially for the greater Paris area. Well, take-up should be down in line with what we saw in 2008 but nonetheless, should remain sustained by major demand due to reorganization or re-groupment of companies, mergers of companies, and also sustained by the depth of the greater Paris area market.
This should be visible on the best quality assets, the one that are best adapted to demand, and those also that have the best positioning, with a focus in particular on public transport. That's a point that's used -- examined closely by users.
Vacancy rates should be going up in this context and rents should be down. We believe that that will be either or on values or in support measures and mainly impact prime rents.
Concerning the investment market, what we can say there is there's nothing new on the credit front and the banking fronts. Investment markets will continue to be impacted by the credit crunch. But nonetheless, the players who appeared in 2008 or came back in '08, especially those using their own equity, should be animating this market a bit. And there's a certain number of people that we're meeting who believe that real estate is becoming a relevant asset class in the current economic crisis.
The regional market, well the regional markets I should say because there are as many markets as there are locations, but a few common characteristics here. One is that there's less volatility in the regions. In '09 we should still be seeing this damper phenomenon and amplitudes of cycle that are much less marked. We're not seeing any general drop in rent but certain corrections in certain markets.
And for investment, well there what we can...
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