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ePaper created 2014-04-29, 17:58:02 | version 1.30.00
DEUTSCHEEUROSHOPANNUALREPORT2013/GROUPMANAGEMENTREPORT 118 Basic information about the Group GROUP BUSINESS MODEL, TARGETS AND STRATEGY Deutsche EuroShop AG is the only public company in Germany to invest solely in shopping centers in prime locations. On 31 December 2013, the Company held investments in 19 shopping centers in Ger- many, Austria, Poland and Hungary. The Group generates its reported revenue from rental income on the floor space that it leases in the shopping centers. Due to its lean personnel structure, Deutsche EuroShop Group is cen- trally organised. The parent company, Deutsche EuroShop AG, is responsible for corporate strategy, portfolio and risk management, financing and communication. The Company’s registered office is in Hamburg. Deutsche EuroShop is a public company under German law. The individual shopping cent- ers are managed as separate companies and, depending on the share of nominal capital owned, are either fully consolidated or accounted for using the equity method. More information on indirect or direct investments is provided in the notes to the consolidated financial statements. TARGETS AND STRATEGY The management focuses on investments in high-quality shopping centers in city centers and established locations offering stable long- term value growth. Another key investment target is the generation of high surplus liquidity from long-term leases in shopping centers, which is paid out to shareholders in the form of an annual dividend. In order to achieve these targets, the Company invests its capital in shopping centers in different European regions in accordance with the principle of risk diversification. Germany is the main focus for investment. Indexed and turnover-linked commercial rent ensure that we achieve our high earnings targets. The Company may invest up to 10% of equity in joint ventures in shop- ping center projects in the early stages of development. New investments should be financed from a balanced range of sources, and external financing may not exceed 55% of long-term Group liabilities. As a general rule, long-term interest rates are fixed when loans are taken out or renewed. The aim is to keep duration (i.e. average fixed interest rate period) at over five years. HIGH-YIELD, STABLE PORTFOLIO Deutsche EuroShop has a balanced and diversified portfolio of Ger- man and European shopping centers. The management focuses on investments in prime locations in cities with a catchment of at least 300,000 in order to maintain a high level of investment security. SEIZING OPPORTUNITIES AND MAXIMISING VALUE In line with our buy&hold strategy, the management is increasingly concentrating on shopping center quality and returns rather than rapid portfolio growth. The management constantly monitors the market and takes opportunities to buy when they arise. Rapid deci- sion-making processes and considerable flexibility regarding poten- tial investments and financing structures allows Deutsche EuroShop to react to all competitive situations. At the same time, the Group’s management is committed to optimising the value of the existing port- folio of properties. TAILORED RENT STRUCTURE One key component of the rental model is a tailored rent structure. While city center property owners often focus on obtaining the highest possible rental rates for their properties – creating a monolithic retail offering – Deutsche EuroShop’s management uses a calculation com- bining a range of factors to create an attractive sector mix and opti- mise long-term rental income. Rental partners pay sector-specific and turnover-linked rent. When the economy is weak, Deutsche EuroShop’s revenue is protected from falling below a lower threshold (based on the consumer price index). SHOPPING EXPERIENCE CONCEPT Deutsche EuroShop has outsourced center management to an expe- rienced external partner: ECE Projektmanagement GmbH&Co. KG (ECE), based in Hamburg. ECE has been designing, planning, building, renting and managing shopping centers since 1965. The company is currently the European market leader, with 189 shopping centers under management. Deutsche EuroShop views professional center management as the key to successful shopping centers. In addition to guaranteeing standard opening hours and a friendly, bright, safe and clean environment, the center management can employ unusual dis- plays, promotions and exhibitions to make shopping an experience. Between 500,000 and 600,000 shoppers come to the 19 DES centers every day, where they are impressed not only by the range of sectors represented, but also by promotional activities including car, talent and fashion shows and a wide range of activities for children. As a result, the shopping centers become market places where there is always something new on offer.