Rodamco Europe Group Office Rodamco Europe in France Rodamco Europe in the Czech Republic Hofplein 20 52-60 avenue des Champs-Elysées Panorama Centrum %krétova 490/12 NL-3032 AC Rotterdam F-75008 Paris CZ-12000 Prague 2 PO Box 1233 France Czech Republic NL-3000 BE Rotterdam tel +33 (0)153 230 600 tel +420 221 442 221 The Netherlands www.rodamco.com www.rodamco.com tel +31 (0)10 217 6400 www.rodamco.com Rodamco Europe in Spain Rodamco Europe in Poland Calle José Abascal, 56 Pl. Piłsudskiego 3 Rodamco Europe in 4ª Planta Metropolitan building the Netherlands & Belgium E-28003 Madrid 00-078 Warsaw Jollemanhof 8 Spain Poland NL-1019 GW Amsterdam tel +34 (0)917 006 500 T: +48 (0)22 346 36 00 PO Box 506 www.rodamco.com www.rodamco.com NL-1000 Amsterdam The Netherlands Rodamco Europe in Austria tel +31 (0)20 312 0120 & Central Europe www.rodamco.com Dr.-Adolf-Schärf-Platz 4/4/3 A-1220 Vienna Rodamco Europe in Austria the Nordic Countries tel +43 (0)1 202 32 00 110 Attundafältet 6 www.rodamco.com europe rodamco Täby Centrum PO Box 1333 SE-18313 Täby Sweden tel +46 (0) 8586 230 00 www.rodamco.com annual report 2006 report annual RETURN ON RETAIL rodamco europe annual report 2006 86259_JV_P001mP089.qxd 23-03-2007 14:55 Pagina 1 Rodamco Europe’s mission is to generate consistent growth in shareholder value. Our mission is driven by a clear strategy – Return on Retail. We are owners and operators of quality retail properties, especially shopping centers and high-street shops. Our retail properties are in dominant locations in more than 20 major cities in 13 European countries, with expansion into Russia planned. mission We have local knowledge and expertise in our chosen markets. Our balance sheet is strong. Through our One Company, One Aspiration corporate culture, 626 professionals around Europe share best practices, working to achieve synergies and managing risk. 86259_JV_P001mP089.qxd 23-03-2007 14:55 Pagina 2 return on retail Profile 04 About Rodamco Europe, our mission and vision and how we work To our shareholders 05 Message from the Chief Executive Officer Highlights in 2006 06 Main results and events from the reporting year Top 25 shopping centers 08 A comparison of our top shopping centers around Europe Top 10 pipeline projects 10 An overview of the major shopping centers we have in the pipeline Investor relations 11 All about Rodamco Europe as investment Key figures 12 Rodamco Europe’s performance over the past five years Report of the supervisory board 14 Supervisory activities and recommendations to our shareholders return on strategy Report of the management board 21 A detailed review of activities and markets in 2006, c0ntents with strategic targets to 2011 Outlook 2007 37 Expectations for 2007 Financial analysis 38 Detailed analysis of financial results in 2006 Risk management 44 How we manage and mitigate risk Human resources 51 Our people across Europe return on management Rodamco Europe’s home regions 54 A review of activities in Rodamco Europe’s five home regions – performance, results and focus for 2007 Netherlands & Belgium 56 Nordic countries – Sweden, Denmark & Finland 60 France 64 Spain 68 Central Europe – Austria, Czech Republic, Germany, Hungary, Poland, Russia, the Slovak Republic and Ukraine 72 return on governance Corporate governance 80 Structure and compliance with laws, codes and regulations Remuneration report 83 Rodamco Europe’s policy and actual remuneration return on performance Financial statements 90 Full financial report on the year under review, including Auditor’s report The portfolio 149 Rodamco Europe’s complete property portfolio Glossary 159 Explanations of sector-related terminology 86259_JV_P001mP089.qxd 23-03-2007 14:55 Pagina 3 return on retail return 86259_JV_P001mP089.qxd 23-03-2007 14:55 Pagina 4 The home regions Our total portfolio of top shop- ping centers and high-street shops is spread over five home regions: the Netherlands & Belgium; the Nordic countries, including Sweden, Denmark and Finland; France; Spain; and Central Europe with Austria, Czech Republic, Germany, Hungary, Poland, Russia, the Slovak Republic, and Ukraine. PROFILE With a portfolio of €10.6 billion in five home regions, Rodamco corporate culture is based on four core values: exchanging knowledge, Europe is the largest owner-manager of retail properties in Europe. being predictable, teamwork and continuous improvement. In 2006, we Our retail properties – quality shopping centers and high-street shops adopted a sustainability program based on our values and Code of in dominant locations in major cities with strong trade areas – repre- Conduct. The aim is full commitment by the organization to this program sent 94% (including offices integrated in our shopping centers in aimed at sustainable business growth, while taking and promoting Sweden) of the total portfolio. Local Rodamco Europe teams are dedi- social and environmental responsibility for our activities. cated to managing our portfolios in the home regions. This enables us to stay close to our markets, identify opportunities and respond our legal & fiscal status proactively to trends in the retail sector. Rodamco Europe N.V. is an investment company with variable capital and qualifies as a Fiscal Investment Institution (FBI) under Dutch law; our mission & vision this is the equivalent of a real estate investment trust or REIT. No cor- Rodamco Europe’s mission is to generate consistent growth in share- porate income tax is due in the Netherlands when specific conditions holder value. Our vision is to achieve this mission through continual are met. In France, we have elected for REIT (SIIC) status for our full growth of a prime portfolio of quality retail assets around Europe. French portfolio. Income and capital gains from the portfolio are Pipeline and entry into new markets is vital. We manage our portfolio exempt from tax in France. For full details of both FBI and SIIC status, and properties locally to grow like-for-like rental income and thus add please consult our website. to their value, ensuring they remain the most desirable locations for our retail clients – the tenants. These components form the basis of monitoring rodamco europe our Return on Retail strategy. On March 2, 2006, Rodamco Europe was promoted to the Euronext AEX Index, the benchmark group of top 25 most actively traded shares our people & culture in the Netherlands. We are also included in the Euronext Top 100 and Knowledge and best practice exchange are key to a successful and the MSCI World Index. Standard & Poor’s rates us as ‘single A with healthy organization. At Rodamco Europe, 626 professionals in asset stable outlook’. selection, retail management, finance & control and related disciplines are dedicated to growing our business profitably. We aim to be a For more on our corporate activities, our home regions, finance, preferred employer by offering professionals opportunities to develop corporate governance and investor relations, please visit our website: and enhance their skills in an organization focused on excellence. Our www.rodamco.com. 4 rodamco europe annual report 2006 86259_JV_P001mP089.qxd 23-03-2007 14:55 Pagina 5 TO OUR SHAREHOLDERS For our shareholders, 2006 has been a year of good returns, primarily This conviction is reflected in the medium-term targets we have set as a result of keen investor interest in our sector. Return to sharehold- for the next five years. Also included in those targets are the opportu- ers over 2006 increased by 49.3% and the share price passed the nities presented by an expected change in regulations on the Dutch €100 mark. We are proposing a final cash dividend of €2.34 in addi- real estate investment trust (FBI) status. New rules would allow us to tion to the interim cash dividend of €1.37 paid in October. Over 2006, shift into development for our own portfolio. Once these rules this represents a total cash dividend of €3.71 (2005: €3.42) and a change, we will integrate development into our business model and dividend yield of 3.7% (2005: 4.9%). strongly embed these skills into the organization. This will enable us to grow very gradually into a front-to-end player as developer, owner While we are gratified by this growth in return to shareholders, it is due and operator of our shopping centers. Finally, we have also set clear in part to market conditions that also affect our own growth. There is growth targets for our Central European region and new markets, such huge investor appetite for the property sector in general, and for the as Russia. retail sector in particular. Market conditions are tight. We are competing for quality assets with commercial and private investors looking for the We are not only investors in bricks and mortar. As managers of our high total returns that retail property generates over time. This is driving assets, we work closely with retail clients, our tenants, and their yield compression. Given our long-term strategic commitment to the customers to get the best out of each and every Rodamco Europe retail sector, we must maintain our stringent quality-price criteria. We shopping center. We are also fully aware of the role our shopping take the view that none of our stakeholders will benefit from relaxation centers often play in local communities. It is this awareness that has of those criteria in the longer term. As a result, in 2006 we have divested led us to commit to a clear sustainability program in the belief that €266 million (sale price) in lesser-quality offices and retail at top prices, what is good for our shopping centers, their tenants and their local improving both the overall quality of our portfolio and the financial communities is good for Rodamco Europe.