SHOW and ROOM 18 FEELESTATE.DE SHOW & ROOM ANNUAL REPORT 2018 Kennzahlen DEUTSCHE EUROSHOP OVERVIEW in € millions 2018 2017 Difference Revenue 225.0 218.5 3% EBIT 199.1 192.4 4% Net finance costs -41.3 -35.1 -18% Measurement gains / losses -55.7 8.6 EBT 102.1 165.8 -38% Consolidated profit 79.4 134.3 -41% FFO per share in € 2.43 2.54 -4% Earnings per share in € * 1.29 2.31 -44% EPRA Earnings per share in € * 2.39 2.42 -1% Equity ** 2.573.4 2.574.9 0% Liabilities 2.036.8 2.052.1 -1% Total assets 4.610.2 4.627.0 0% Equity ratio in % ** 55.8 55.6 LTV-ratio in % 31.8 32.4 Cash and cash equivalents 116.3 106.6 9% Net asset value (EPRA) 2.667.5 2.668.4 0% Net asset value per share in € (EPRA) 43.17 43.19 0% Dividend per share in € 1.50*** 1.45 3% * undiluted ** incl. non controlling interests *** proposal FFO in € million Result Goal Goal 153 150.4 151 150 148 REVENUE EBIT EBT * FFO per share in € million in € million in € million in € Result Goal Goal Result Goal Goal Result Goal Goal Result Goal Goal 225.0 222 – 226 222 – 226 199.1 194 – 198 194 – 198 160.9 159 – 162 161 – 164 2.43 2.40 – 2.44 2.43 – 2.47 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 * excluding measurement gains / losses EDITORIAL EUROSHOP DEUTSCHE / Annual Report also to offer visitors a contemporary, interest- ing and pleasant shopping environment. Initial DEAR READERS, customer surveys reveal that in this respect Deutsche EuroShop closed financial year we are successfully meeting the tastes and 2018 with sound operating results and even needs of our center guests. / exceeded its own forecasts, despite the We are also pressing ahead with digitalisa- 2018 ambivalent nature of the market environ- tion – we recently provided our Main-Taunus- ment for bricks and mortar retail. Although Zentrum and Altmarkt-Galerie Dresden with consumption continued to be buoyed by the a digital twin, a “digital mall”. This means that growing economy, the dynamic growth of our customers already have online access to online retail continued to pose a challenge around half a million products, which are for some retailers. searchable, comparable across shops and A look at the stock market also reveals reservable without obligation with just a a nuanced picture. Last year the price of few clicks. This provides a true omnichannel our share fell – despite our good operating experience for a steadily growing number results – to clearly below its intrinsic value. of products and brands. Much is still in the Shopping center shares across the globe are development stage. One particularly inter- following this trend, which is mainly attribut- esting idea is to deliver the products that are able to the transformation process under way available in the shops of our centers in the in the retail sector. best locations directly from there. As many of In view of these developments, it is par- our customers live in the immediate vicinity of ticularly worthwhile examining our shopping our centers, this gives us the opportunity of center portfolio in detail. Our current annual offering them an optimal service at any time report provides you with many interesting – whether offline, online or mixture of both. insights into our business and how we oper- I hope you enjoy reading our report and ate it. We show you how our centers can thank you for the trust you place in us. continue to position themselves as vibrant marketplaces in the future and how they can be optimally integrated into the omnichannel shopping world. Best regards In keeping with the motto “show & room” we present our centers as shopping destina- tions that remain just as attractive as ever and adapted continuously to the wishes of customers. We offer a lively platform and lots of space to successful shop concepts and Wilhelm Wellner events where they can showcase themselves CEO live and try out new things. This makes our centers interesting places in which custom- ers can discover and marvel, experience and dream, and feel and enjoy their surroundings. To keep it that way, we are making extensive investments over the next few years in our “At your service” and “Mall beautification” pro- grammes. This enables us to not only keep our 001 centers state of the art in technical terms, but SHOW and ROOM N O UCTI D O 098 126 INTR / INVESTOR GROUP 001 RELATIONS MANAGEMENT INTRODUCTION ur goals REPORT O 098 The shopping center share / U2 Overview 106 Annual general meeting 001 Editorial 107 Conferences and roadshows 002 Our values / our goals 108 Marketing 004 Interview with the 112 Corporate governance Our values Executive Board 120 EPRA reporting 010 Report of the Supervisory Board 189 SERVICE 190 Glossary 193 Legal / Disclaimer 194 Financial calendar 2019 195 Multi-year overview 016 044 155 SHOPPING CENTER CONSOLIDATED 024 Omnichannel-trends 044 Center overview FINANCIAL 028 What I bought myself in 2018 062 Our portfolio STATEMENTS 030 E-Commerce 072 Activities in the centers 034 GO and buy somewhere else! 074 Environment 038 Forsa survey 082 Practical example: tenant 040 Consumption forecast for 2019 086 Book recommendation Shoplifter! 090 New services 094 The factor behind success: The shop 097 Digital malls OUR VALUES OUR GOALS We are the only public company in Germany that invests solely in shop- Deutsche EuroShop does not seek short-term success, but rather the ping centers in prime locations. We invest only in carefully chosen stable increase in the value of our portfolio. Our objective is to generate properties. High quality standards and a high degree of flexibility are a sustainably high surplus liquidity from the longterm leasing of our just as important to us as sustained earnings growth from index- and shopping centers to distribute an attractive dividend to our share- turnover-linked rental c ontracts. In addition, we boast a higher than holders every year. In order to achieve this, we shall acquire further average occupancy rate of around 99% and professional center man- prime properties and hence establish ourselves as one of the largest 002 agement – these are the pillars of our success. companies in Europe focusing on retail properties. 21 SHOPPING CENTERS IN 5 COUNTRIES EUROSHOP DEUTSCHE / Annual Report POLAND 1 CENTER / 2018 GERMANY 17 CENTERS CZECH REPUBLIC 1 CENTER AUSTRIA 1 CENTER HUNGARY 1 CENTER VISITORS IN 2018 178.3IN MILLION RETAIL2,703 SHOPS OCCUPANCY99% RATE 003 YEARS Ø WEIGHTED MATURITY OF RENTAL5.1 CONTRACTS SHOW and ROOM Interview with the Executive Board N O UCTI D O / INTR INTERVIEW “OUR Interview with the Executive Board SHOPPING CENTERS OFFER A SPECIAL SHOPPING EXPERIENCE.” Retail finds itself in a phase of structural upheaval – once again. In addition, 2018 was dominated by subjects such as trade wars, customs disputes and Brexit which were not conducive to global economic growth. In an interview with the Executive Board, we talk to Wilhelm Wellner and Olaf Borkers about how Deutsche EuroShop 004 is operating in this environment. DEUTSCHE EUROSHOP DEUTSCHE / Annual Report / 2018 OLAF BORKERS WILHELM WELLNER “OUR SALES REVENUES ROSE BY Mr. Borkers, Mr. Wellner, can you please THREE PERCENT.” outline the most significant results of the OLAF BORKERS past financial year? Olaf Borkers: Operationally, we again enjoyed Wilhelm Wellner: The positive factors driv- to purchase and the resulting rise in returns success in 2018 and we are happy with the ing this growth included expansion of the on purchase for shopping centers in Germany. results. Our sales revenues rose by three per- portfolio carried out in the last few years, Together with higher investments in the cent to 225.0 million euros, and earnings the continued stability of occupancy rates modernisation and positioning of the existing before interest and tax stood at 199.1 mil- and operating expense ratios as well as low portfolio, this led to a slight average fall in lion euros which represents a year-on-year interest expenses. property values and a measurement loss of increase of 3.5 percent. In terms of pre-tax When we evaluate the portfolio, we see the -58.3 million euros. earnings and excluding measurement gains first small dip since 2009 after many years of or losses, we saw a significant increase appreciable rises in shopping center prices. of 5 percent to 160.9 million euros. Our The highly competitive environment in bricks FFO figure also increased by 1.5 percent to and mortar retail, the growth of e-commerce 150.4 million euros which represents a good and with it the modified expectations for rent 005 performance. rises were reflected in investors’ reluctance SHOW and ROOM N O UCTI D O / INTR WILHELM WELLNER Interview with the Executive Board OLAF BORKERS The overall picture, however, is gratifying. Our What are the success factors underlying Which centers have given you more pleas- operating earnings, EPRA earnings, posted Deutsche EuroShop’s future business ure: those in Germany or the ones abroad? positive growth, climbing by 4.3 percent to model? What makes your shopping 147.4 million euros, and the EPRA Net Asset centers so attractive to retailers and their Wilhelm Wellner: You should look at the Value remained almost unchanged from last customers? portfolio as a whole because every center year’s level at 43.17 euros per share. is subject to its own local market influences Wilhelm Wellner: The most important suc- and cycles. But if you force me to name some Congratulations, you have thus surpassed cess factors for a shopping center are and highlights, they would be as follows: The City- your own 2018 forecasts – were you too remain its location, first-class shopping and a Arkaden in Wuppertal and the Olympia Center pessimistic? high quality mall experience.