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4 ANNUAL REPORT 2014Deutsche EuroShop INTERVIEW Lending rates continue to plummet. Could Deutsche EuroShop benefit from this? Olaf Borkers: We have already been bene- fiting from this in terms of refinancing in recent years. Over the last five years, the averageinterestratewehavetopayhasfallen byaround130basispoints;atyear-end2014 it stood at 3.76%. This means the weight- ed residual interest lock-in has remained almost unchanged at around six-and-a-half years. We are currently negotiating new loan refinancing agreements for those matur- ing in 2015 and 2016. The old interest rate for the loans concerned is approximately 5% – we are a long way off this at the cur- rent time. Fortunately, this will result in a significant reduction in interest expense. Mr Wellner, you are new to the Board of Deutsche EuroShop and will take over the helm in July 2015. Where do you think the opportunities and chal- lenges will lie in your new role? Wilhelm Wellner: I have now worked in the shopping center sector for ten years and it con- tinues to fascinate me. At ECE, where I was em- ployed from 2003 to 2012, I got to know the business from the inside out, especially from the perspective of developers and service pro- viders. This is vital, since – as the saying goes – “retail is detail”. Now I can use the experience I have gained on the owner and proprietor side for the benefit of the investor Deutsche EuroShop. I perceive this as an opportunity of my new role. A challenge is and remains the market for shopping centers, where the prices being paid by buyers are currently at a his- torically high level. How do you plan to tackle this chal- lenge? What are you planning for the future of Deutsche Euro- Shop? » Our success is based on a long-term approach, combined with a clear focus on high-quality shopping centers in premium locations. Time to buy Interview with the Executive Board For the first time in its history, Deutsche EuroShop has three members on its Executive Board.The Executive Board is growing because the company is growing. Is that the right interpretation? Claus-Matthias Böge: This is only a temporary arrangement. When I leave the company at the end of June 2015, we will return to the accus- tomed setup of two Executive Board members. When you look back over the things you’ve achieved in the past 13 years or more, what are you most proud of? Claus-Matthias Böge: When I joined the Executive Board of Deutsche EuroShop, a lot of things were new – and not just to me. Back in 2001, real estate companies in Germany were somewhat of an anomaly. I was interested in combining the multiple facets of the capital market with the shopping center business, where I had made my career up to that point. The fact that, under my leadership, the rather small and totally unknown DES evolved into a medium-sized MDAX company is something I’m of course pleased about, but not neces- sarily proud of. What makes me proud is that this was accomplished working with a team that has spent more than ten years build- ing up this company. We were also lucky in that no one could have predicted how highly reliable div- idends would be valued on the stock exchange. What was the secret of your success? Shareholders are no doubt extremely grateful for everything you’ve done for Deutsche EuroShop. Let’s turn our attention now to financial year 2014 and the growth we mentioned at the outset. Mr Borkers, how did the shopping centers and our company perform in 2014? Olaf Borkers: The short answer is: as planned. If I may go into a bit more detail, allow me to provide a brief comparison of actual and tar- get figures: We budgeted revenue – that is, rental income – of €198 million to €201 million. At year-end, we had posted revenue of €200.8 million, up almost 7% on the prior year. Earnings before interest and taxes (EBIT) were forecast at between €174 million and €177 million. Ultimately, they slightly exceed- ed this forecast range with €177.5 million. This is also a year-over-year increase of 7%. When it comes to earnings be- fore tax (EBT) excluding valuation gains/losses (incl. at-equity invest- ments), we had planned for between €120 million and €123 million. We succeeded in topping this slightly with €125 million. The same applies to funds from operations, which came in at €2.23 per share, versus the budged range of €2.14 to €2.18. The result: we met the fore- cast published in our last an- nual report in full, and Mr Böge can say he is leaving the company with a record result. Claus-Matthias Böge: The secret of our success shouldn’t come as a surprise to anyone: adopt- ing a long-term approach with a clear strategy focussing on high-quality shopping centers in prime locations. And we always kept our feet on the ground, even if this was sometimes difficult because we didn’t always just receive a pat on the back in return. What would you have done differently, given what you know today? Claus-Matthias Böge: With regard to our ex- isting business model, actually very little. It would have been nice if REIT legislation had already existed in Germany when DES was founded. Then we wouldn’t have had to deal with some of the tax issues we were faced with. I would also have appreciated it if IFRS regulations had been less complex. Sometimes I had the feeling that I had been pushed to the limits of my understanding – in terms of both form and content. And I was aggravated by the many formalisms. My overriding objective has always been to provide shareholders with ad- equate and pertinent information to enable them to understand how much cash was re- ally generated and will be generated in future. Thankfully, we managed to create this transpar- ency in spite of IFRS. What are your plans after you leave Deutsche Euro- Shop? You will have more time for shopping... Claus-Matthias Böge: I don’t have any concrete plans yet, just lots of ideas. I’m looking forward to perhaps starting out each day with a new plan. I rarely get bored. And when I do, I’m even able to enjoy it. It’s possible I won’t stay in Hamburg forever. But I probably won’t need more time for shopping. Deutsche EuroShop reported another very successful financial year. Claus-Matthias Böge has nonetheless decided not to renew his contract and will be leaving the company in mid- 2015. We take a look with him back at the early days of Deutsche EuroShop. Meanwhile, Olaf Borkers gives us a run-down of the key figures for the financial year just closed. We go on to ask new Executive Board member Wilhelm Wellner what his plans are for the future of the company. Wilhelm Wellner COO Mr Wellner is a trained banker who earned a degree in business management from the University of Erlangen- Nuremberg and a Master of Arts (economics) degree from Wayne State University Detroit. He started his professional career at Siemens AG in 1996 as a specialist for international project and export finance. In 1999 Mr Wellner took a position as a senior officer in the area of corporate finance at Deutsche Lufthansa AG, where he was responsible for a variety of capital market transactions and supervised numerous M&A projects. In 2003 Mr Wellner switched to ECE Projektmanagement G.m.b.H. & Co. KG in Hamburg, Europe’s market leader in the area of inner-city shopping centers. As the international holding company’s Chief Financial Officer, he helped shape the expansion of this shopping center developer and was appointed Chief Investment Officer of the ECE Group in 2009. From 2012 to 2014 Mr Wellner served as Chief Financial Officer of the finance, human resources, legal affairs and organisation departments at Railpool GmbH, a Munich-based leasing com- pany for rail vehicles. Mr Wellner joined the Executive Board of Deutsche EuroShop AG at the start of 2015. He is married and has two children. C Claus-Matthias Böge CEO After successfully qualifying as a bank clerk and completing a business administration degree, Mr Böge began his professional career in 1987 at the Dusseldorf-based Privatbankhaus Trinkaus&Burkhardt in Mergers & Acquisitions. His work, for which he was made a Prokurist (authorised signatory) in 1989, focused on advising small and medium-sized companies on buying and selling companies and equity interests. In 1990, Mr Böge was appointed to the management of KST Stahltechnik GmbH, a subsidiary of the Austrian industrial plant con- struction group VA Technologie AG, where he was responsible for the financial control, personnel, legal, tax and administration departments. In autumn 1993, Mr Böge moved to ECE Projektmanagement G.m.b.H.&Co. KG in Hamburg, the European market leader for the development, realisation, leasing and longterm management of shopping centers. It was here that he first became fascinated with the world of shopping centers. In addition to a series of management positions at subsidiaries in the ECE group, his work focused on concept planning, financing and ongoing profi tability optimisation of property investments. Mr Böge joined the Executive Board of Deutsche EuroShop AG in October 2001. He is married and has two children. C