Management Report > Results

RESULTS

Gross revenues and net operating income

Rental income increased significantly in 2008 compared to 2007, rising 42 % to € 175.3 m. The rise was mainly attributable to Vivico being recognised for the first time; this accounted for about 22 % of the rental income in 2008 and also resulted in the contribution from the Germany segment increasing from 36 % in 2007 to 52 % in 2008. If Vivico is not taken into account, the increase in rental income amounts to 10 %.

Income from sale of properties held for sale of € 88.3 m was achieved in 2008 in connection with the planned sale of Vivico properties held as current assets. This revenue is shown against the expenditure item ‘Disposal of properties held for sale’ of € 69.5 m, producing total profit from these sales of around € 18.7 m. As a result, an average sales price of around 27 % above the book value was achieved.

The item ‘Revenues from construction contracts’ amounting to € 3.7 m relates to revenue from the German subsidiary Omnicon, a company specialising in the management of construction projects acquired in mid-2008. This revenue item is shown against the expenditure item ‘Expenses for construction contracts’ in the amount of € 2.7 m.

The item ‘Other revenues’ relates to revenues of € 1.3 m from the operation on own account of a hotel in Ljubljana until 31 March 2008. From the second quarter of 2008, this property has again been generating rental income as opposed to direct revenue from the hotel business.

The item ‘Other expenses directly related to the properties’ saw a rise well above average to € 28.8 m. This development is mainly due to non-capitalised expenditure in connection with the development projects of Vivico in Germany. In addition, increased maintenance costs were incurred for certain income-producing properties in Germany in 2008.

As a result of these developments, net operating income (NOI) rose by 47 % to € 160.2 m compared to € 108.7 m in 2007.

Income from sales of properties: Investment properties

The result from the sale of properties held as fixed assets doubled in comparison with the previous year, from € 5.7 m to € 11.7 m. Around € 7 m of this figure can be attributed to the sale of the Renaissance Tower in Warsaw in the first quarter of 2008. A further € 5.5 m of the result (with the greater part in the second half of the year) comes from sales of properties in Germany. The main sales included the Mövenpick Hotel in Frankfurt as well as mostly vacant properties in Berlin and Basle (note: for organisational reasons, our properties in Basle are included in the Germany segment). In Austria, the sale of investment properties yielded a negative result of € – 0,8 m.

Rental income by sector

Rental income by region

Administrative expenses

The significant increase in indirect expenditure (i.e. any administrative expenditure not directly attributable to properties) from € 27.9 m to € 52.2 m is mainly due to the increase in the number of employees as a result of the influx of staff from Vivico (who account for around 51 % of total administrative expenditure). Indirect expenditure is to be considered jointly with the offsetting item ‘Own work capitalised’ in the amount of € 5.3 m which neutralises the share of Vivico’s internal expenditure directly attributable to individual development projects and which therefore can be capitalised.

In direct comparison (i.e. without taking into account the new expenditure in connection with Vivico), indirect expenditure has dropped by about 8 % compared with 2007. This is due to a series of cost-cutting measures initiated during the course of 2008. The omission of variable performance-related salary components had a particular impact on staff expenses.

Earnings before taxes and depreciation (EBITDA)

The net result of these developments was an increase in earnings before taxes and depreciation (EBITDA) of 52 %: the value rose from € 90.7 m the previous year to € 137.8 m. The first quarter contributed € 39.5 m to these earnings, the second quarter € 22.6 m, the third quarter € 29.9 m and the fourth quarter € 45.8 m. The fluctuations between the quarters are primarily due to the uneven distribution of profits made from sales.

When broken down into segments, the consolidation of Vivico more than doubled the EBITDA attributed to Germany. However, Austria (+ 6 %) and Eastern and South East Europe (+19 %) also contributed to the increase in EBITDA in 2008.

EBITDA - Distribution by regional segment

Depreciation and revaluation result

The CA Immo Group was faced with a significant drop in property values in all segments, especially at the end of 2008 (for an explanation of the factors responsible for this, see also the Property Valuation chapter). In the income statement, this took the form of unscheduled depreciation of € –107.5 m in respect of property assets under development, property assets for own use and inventory intended for trading and revaluation losses of € –178.1 m in respect of property assets let.

Allocation to the individual regions and balance sheet items is shown in the table on the next page:

Decrease in value and revaluations

Region	Book Value (€ m)	Depreciation/ revaluation
	31.12.2008	€ m	in %
A Income-producing	747.9	– 64.6	– 8.0 %
A Own use	11.5	– 0.7	– 5.9 %
A Development	40.6	– 16.0	– 28.2 %
A Total	800.1	– 81.3	– 9.2 %
G Income-producing	1,184.5	– 66.8	– 5.3 %
G Own use	7.9	– 0.7	– 8.6 %
G Inventory for trading	167.1	– 9.4	– 5.3 %
G Development	876.9	– 35.1	– 3.8 %
G Total	2,236.5	– 112.1	– 4.8 %
Eastern and South East Europe, income-producing	588.2	– 46.7	– 7.4 %
Eastern and South East Europe, Inventory for trading	1.2	– 5.1	– 80.3 %
Eastern and South East Europe, development	162.2	– 40.5	– 20.0 %
Eastern and South East Europe, total	751.7	– 92.2	– 10.9 %
Total	3,788.3	– 285.6	– 7.0 %
of which revaluation of property assets let		– 178.1	– 6.6 %
of which decrease in value on property assets for own use as well as property assets under development and properties held for sale (trading)		– 107.5	– 7.8 %

Operating result (EBIT)

The drop in the operating result (EBIT) from € 151.5 m in 2007 to € –152.6 m in 2008 is primarily a reflection of depreciation and revaluation losses.

Financial results

The financial results reached € –142.8 m in 2008 compared with € –45.3 m in 2007. The increase in financing costs from € –57.4 m to € –105.1 m accounted for most of this development. This is primarily the result of the increase in the volume of financing due to the Vivico acquisition.

The second significant factor was the result from derivative transactions of € –15.9 m. This item only reflects the valuation of SWAP contracts which are used to hedge against the risk of interest rate changes. As a precautionary measure, the policy of CA Immo is always to hedge the relevant rate of interest for the long term when entering into a loan agreement. In most cases, this takes the form of interest rate SWAP contracts. Apart from transactions purely intended to hedge against the risk of interest rate changes, the CA Immo Group is not involved in any derivative transactions.

In accordance with the provisions of IAS 39, changes in the value of contracts that can be defined as cash flow hedges (the majority of the SWAPs used by CA Immo fall under this category) are shown as changes in shareholders equity while changes in the value of contracts classified as fair-value SWAPs are directly depicted as expenditure or income in the income statement. The reference value for interest rate SWAPs is the Euribor. In the second half of 2008, there was a significant drop in the Euribor (see section ‘Economic environment’) as a result of which the net-present values of the SWAP contracts turned negative. Most of these related to valuation losses which had no effect on cash.

Besides interest income of € 19.7 m, the result of financial investments amounting to € 4.4 m includes losses from securities of € 15.2 m (of which € 9.8 m are realised losses and € 5.4 m are valuation losses) from investments in near-money market funds in which some of the liquid assets of CA Immo had been invested. Because of the banking crisis and increasing yields, the return on these funds was not in line with expectations and their valuation came under pressure amid the unrest on the financial markets.

Expenses from financial assets (€ –7.8 m) and the investment result from associated companies (€ –15.1 m) derive from property depreciation in companies in which the CA Immo Group is only a minority shareholder (and which are therefore non-fully consolidated), and from the depreciation of investments made in the form of loans or down payments to non-fully consolidated companies; the biggest single factor was the value adjustment for the 25 % share (held through the CA Immo New Europe property fund) in the project company running the St. Petersburg (Pulkovo) Airport project.

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Net income before taxes

As a result of the above-mentioned developments, the total net income before taxes (EBT) 2008 was € –295.4 m compared with € 106.2 m in 2007. As shown in the table below, the change is almost entirely attributable to non-cash-effective factors:

Net income before taxes

	€ m
EBT 2007	106.2
Rental Income	52.0
Property Expenses	– 18.6
Indirect costs net of capitalized services	– 19.0
Other operating income	8.6
Other	– 0.6
Result from financial investments	– 14.9
Interest result	– 36.6
Result from the sale of properties 1)	24.7
Cash effective	– 4.4
Revaluations/Impairments	– 351.2
FX gains/losses	– 8.2
Result from derivatives	– 14.6
Result from financial assets	– 7.8
Result from associates	– 15.5
Other	0.1
Non-Cash effective	– 397.2
EBT 2008	– 295.4

^[1] including sale of properties held for sale

Cash flow

Since the main negative factors which led to the drop in consolidated net income described above were non-cash-related, and due to the strong operational business performance as well as revenue from the sale of inventory intended for trading, the cash flow from business activities in 2008 which amounted to € 169.7 m was more than double the value for 2007.

The cash flow from investment activities was € –127.8 m, of which € –625.3 m related to the direct or indirect (companies, down payments, financial assets) acquisition of property assets. The main single item was the payment of the second half of the purchase price for the acquisition of Vivico amounting to around € 0.5 bn which was made at the start of 2008. Other significant factors influencing the cash flow from investment activities were the net capital inflow from the sale of properties (€ 157.9 m) and the sale of short-term securities from current assets of € 414.2 m, primarily to finance the acquisition of Vivico.

In 2008, the cash flow from financing activities amounted to € 89.1 m. Aside from new loans taken out in connection with investments in development projects, this includes in particular the financing of the Vivico acquisition and refinancing for this carried out during the business year. This financing is shown against interest payments made of € 102.5 m.

Cashflow Statement: Short Version

€ m	2008	2007	Change
Cash flow from
- business activities	169.7	84.0	102 %
- investment activities	– 127.8	– 936.9	– 86 %
- financing activities	89.1	897.5	– 90 %
Change in cash and cash equivalents	130.9	44.6	193 %
Cash and cash equivalents
- Start of business year	192.5	148.3	30 %
- Changes in the value of foreign currency	– 2.0	– 0.5
- End of business year	321.4	192.5	67 %

Funds from operations

The funds from operations (FFO) before taxes amounted to € 30.3 m in 2008, below the value of € 41.0 m in the previous year.

Funds from Operations (FFO)

€ m	31.12.2008	31.12.2007
Net income before taxes before minorities	– 295.4	106.2
Depreciation	112.3	4.6
Revaluation gains/losses	178.1	– 65.4
Foreign currency gains/losses	3.5	– 4.8
corr. at equity income	16.5	0.4
Valuation of financial instruments	15.3	0.0
Funds from operations before taxes	30.3	41.0
Taxes paid	– 11.5	– 3.2
Funds from operations after taxes	18.8	37.8

Balance sheet

Balance sheet: Assets

There was a significant increase in the balance sheet total from € 3.8 bn to € 4.4 bn in 2008. This development is primarily due to the acquisition of Vivico which was only recognised indirectly in the balance sheet for 31 December 2007 with the payment of the first half of the purchase price amounting to € 0.5 bn (under the item ‘Prepayments on investments in properties’). Since the start of 2008, Vivico has been fully consolidated in the consolidated financial statements of the CA Immo Group. The most visible effect of this was the recognition of Vivico’s property assets, which led to an increase in property assets under development in particular. The consolidation of Vivico also resulted in the creation of the balance sheet item ‘Properties held for sale’.

The reduction in the item ‘Securities’ from € 375.6 m at the beginning of the year to € 11.3 m and the simultaneous increase in ‘Cash and cash equivalents’ from € 192.5 m to € 321.4 m reflect – besides the employment of funds for acquisitions and loan repayments – the regrouping carried out during the first nine months of 2008 of securities investments held mainly in the form of near-money market funds to time deposits. At the end of 2008, the remaining investment still being held in a near-money market fund was dissolved so that on the one hand the monies invested were shifted to time deposits while on the other, shares in an ABS fund which had until then been held in the near-money market fund are now held directly and so represent the sole remaining security item.

Balance sheet: Liabilities

At the balance sheet date the share capital of the company was unchanged to the previous year and amounted to € 634.4 m and was made up by 87.3 million bearer shares. Almost 90 % of the shares are free-float, the remaining 10 % as well as four registered share (that each entitle the holder to nominate a supervisory board member) are held by Bank Austria. As at December 31 2008 there was authorized capital in the amount of € 317.2 m which can be exercised until August 8 2012 against contribution in cash or in kind as well as unexercised conditional capital in the amount of € 317.2 m.

In 2008, shareholders’ equity (including minority interests) fell from € 2,265.5 m to € 1,854.7 m, mainly on account of negative consolidated net income. The main factors included the following:

- A drop in minority interests due to the losses attributable proportionately to the minority shareholders of CA Immo International and the minority shareholders of its subsidiary CA Immo New Europe property fund.

- A drop in the hedging reserve included in the shareholders’ equity of € 20.7 m as at 31 December 2007 to € –52.1 m as at 31 December 2008. As outlined above, changes in the value of interest rate SWAPs classified as cash flow hedges are stated directly in the equity capital. The steep decline in the general interest rate level during the second half of 2008 turned the hedging reserve negative (as at 30 June 2008 this item was still € +46.6 m).

- An increase in our share in the fully consolidated subsidiary CA Immo International from 54 % as at 31 December 2007 to just below 62 % as at 31 December 2008. The increase in this stake led to a reduction of € 50.5 m in the minority interests as well as an increase of € 21.9 m in capital reserves as the shares were purchased at prices significantly below the book value. In overall terms, therefore, this had a direct positive effect on net asset value for the shareholders of CA Immobilien Anlagen AG.

- The buy-back of own shares which resulted in a reduction in capital reserves of € 11.9 m. All in all, as the shares were repurchased at prices significantly below their book value, and the reduction in the number of outstanding shares was greater than the reduction in the shareholders’ equity, the effect on the book value per share was positive. The board received the authorization for the share buy-back in the 21st AGM on 13 May 2008. The authorization is valid for a buy back of up to 2.7 m shares (equivalent to about 3.09 % of the share capital) over the Vienna Stock Exchange. As of the balance sheet date CA Immo had acquired a total of 1,494,076 shares (1.7 % of the share capital) over the stock exchange at an average price of € 9.18.

The equity ratio as at 31 December 2008 was 42 % (59 % on 31 December 2007). This drop is the result of both the increase in the balance sheet total due to the Vivico acquisition and the reduction in the shareholders’ equity presented above.

Consolidated balance sheet Short version

	2008		2007		Change
	in € m	in  %	in € m	in  %	in  %
Property assets	3,619.9	82	2,535.3	66	43
Down payments on properties	20.5	0	0.0	0	n.m.
Down payments on property investments	0.2	0	545.2	14	0
Intangible assets	53.4	1	34.0	1	57
Financial and other assets	81.3	2	92.4	2	– 12
Deferred tax assets	55.6	1	0.8	0	> 100
Long-term assets	3,830.9	87	3,207.8	84	19
Receivables	63.0	1	47.6	1	32
Inventory intended for trading	168.4	4	0.0	0
Cash equivalents and securities	332.6	8	568.1	15	– 41
Short-term assets	563.9	13	615.6	16	– 8
Total assets	4,394.8	100	3,823.4	100	15
Shareholders’ equity	1,854.7	42	2,265.5	59	– 18
Shareholders’ equity as % of balance sheet total	42 %		59 %
Liabilities from bonds	194.9	4	194.4	5	0
Long-term financial liabilities	1,640.0	37	962.2	25	70
Short-term financial liabilities	88.9	2	251.1	7	– 65
Other liabilities	410.7	9	57.4	2	> 100
Deferred tax liabilities	205.7	5	92.9	2	> 100
Total liabilities	4,394.8	100	3,823.4	100	15

Fixed interest rates and maturing of financial liabilities are always aligned in the investment portfolio with terms that are typical for property investments.

After taking account of the interest rate hedges in each case, the average interest on loans (including the bond) at the end of the business year 2008 was 5.32 % (4.98 % in 2007). Around 98 % of all loans were taken out in Euro. Given the long-term nature of financing, and for reasons of prudence, the basic policy of CA Immo when concluding a loan agreement is to hedge the relevant interest level for the long term. In most cases, this is achieved by means of interest rate SWAP contracts. As at 31 December 2008, the interest rates on 73 % of the financial liabilities were fixed by means of SWAP contracts, 13 % were fixed-rate loans and 14 % were floating-rate loans.

Key financing figures

€ m	2008	2007
Shareholders’ equity	1,854.7	2,265.5
Short-term financial liabilities	88.9	251.1
Long-term financial liabilities (including bond)	1,834.9	1,156.6
Cash and cash equivalents	– 332.6	– 568.1
Net debt	1,591.1	839.6
Gearing	86 %	37 %
EBITDA/net interest (factor)	1.4	1.8

Net asset value

Owing to the annual loss and the other factors described above, the NAV (shareholders’ equity excluding minority interests) fell by –16%, from € 1,922.9 m as at 31 December 2007 to € 1,623.0 m as at 31 December 2008. The NAV per share fell by –14% to € 18.92 as at 31 December 2008 compared with € 22.04 as at 31 December 2007. The smaller drop in the NAV per share is due to the reduced number of outstanding shares resulting from the buy-back of own shares carried out in 2008.

The computation of the NNNAV based on NAV in accordance with the Best Practice Policy Recommendations of the European Public Real Estate Association (EPRA) is shown in the table below. The significant factor here is the consideration of the effect of discounting on deferred taxes as well as value adjustments for development projects amounting to € 82,6 m. The latter are linked to a series of projects in Germany for which the value according to valuation reports exceeds the values shown in the balance sheet at acquisition cost, thus giving rise to undisclosed reserves (negative differences from report values have already been taken into account in the balance sheet).

As at 31 December 2008, therefore, the NNNAV stood at € 1,758.4 m or € 20.5/share (9 % less than in 2007)

Asset value (NAV and NNNAV as defined by EPRA)

€ m	31.12.2008	31.12.2007
Equity (NAV)	1,623.0	1,922.9
NAV/share in €	18.92	22.04
Computation of NNNAV
Exercise of options	0,0	0.0
NAV after exercise of options	1,623.0	1,922.9
Value adjustment for projects based on IFRS fair-value method	82.6	10.3
Value adjustment for tenant leases held as finance leases	0.0	0.0
Value adjustment for properties held as current assets	0.0	0.0
Value adjustment for financial instruments	52.1	– 20.6
Deferred taxes	96.8	58.0
NAV after adjustments	1.854.5	1,970.7
Value adjustment for financial instruments	– 52.1	20.6
Value adjustment for liabilities	18.0	4.4
Deferred taxes	– 62.0	– 31.4
EPRA NNNAV	1,758.4	1,964.4
EPRA NNNAV per share in €	20.5	22.51
Change of NNNAV against previous year	– 8.9 %	6,10 %
Price (31.12)/NNNAV per share -1 in €	– 79.5	– 31.92
Number of outstanding shares	85,764,524	87,258,600

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