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ANNUAL REPORT 2014 61ANNUAL REPORT 2014 Deutsche EuroShop MANAGEMENT REPORT EPRA net asset value further increased Net asset value (NAV) amounted to €1,789.4 million or €33.17 per share as at 31 Decem- ber 2014, compared with €1,650.4 million or €30.59 per share in 2013. Net asset value per share was therefore 8.4% higher year-on-year. € thousand 31.12. 2014 31.12. 2013 Equity 1,524,342 1,428,949 Deferred taxes 227,455 198,491 Negative swap values 48,194 30,760 resulting deferred taxes -10,602 -7,762 EPRA NAV 1,789,389 1,650,438 EPRA NAV per share € 33.17 €30.59 EPRA also recommends that an EPRA NN- NAV (triple NAV) be calculated, which should roughly correspond to the liquidation value of the company. This adjusts the EPRA NAV to take account of hidden liabilities or undis- closed reserves resulting from the market val- uation of bank loans and overdrafts, as well as deferred taxes. As at 31 December 2014, EPRA NNNAV amounted to €1,432.0 mil- lion, compared with €1,377.7 million in 2013. EPRA NNNAV per share was therefore €26.54 (2013: €25.54), which corresponds to an in- crease of 3.9%. € thousand 31.12. 2014 31.12. 2013 EPRA NAV 1,789,389 1,650,438 Negative swap values -48,194 -30,760 Negative present value of bank loans and overdrafts -114,837 -62,862 Total deferred taxes -194,385 -179,080 EPRA NNNAV 1,431,973 1,377,736 EPRA NNNAV per share €26.54 €25.54 Overall comment by the Executive Board on the economic situation The past financial year confirmed that Deutsche EuroShop Group has a successful business model. We have again managed to meet our original expectations. Report on events after the balance sheet date No further significant events occurred between the balance sheet date and the date of prepara- tion of the consolidated financial statements. Outlook In 2015, positive stimuli for growth are expect- ed to come from real increases in employee in- come and strong exports. Although economic imbalances are expected to persist within the eurozone, the economic review produced by the federal government predicts a positive scenario for Germany in 2015. Gross domes- tic product (GDP) is forecast to grow by 1.5%. The unemployment rate is set to remain at the current level, while inflation will be low. The German Retail Federation (HDE) predicts that retail sales will advance by 1.5%. The structural problems of individual countries in the eurozone and the Greek debt crisis will continue to hold our attention in 2015. The uncertainty surrounding whether Greece will leave the eurozone has meant that market participants are still nervous as the consequences are not foreseeable from today’s point of view. In our estimate, the risk for the overall economy remains high. Consequently, global demand for capital investments that retain their value remains strong, particularly in financially solid coun- tries such as Germany. With interest rates low, life insurance companies in particular are still seeking real estate investment opportunities that will meet the long-term expectations of policyholders. This is keeping demand for real estate at record levels, in contrast to a merely limited supply side. Retail property in particu- lar remains attractive to many institutional in- vestors, leading to very high transaction prices and correspondingly low anticipated returns for core properties. We monitor developments on the real estate market closely. As in the past, we will only make new investments if the re- turn that is achievable over the long term bears a reasonable relation to the investment risks. Revenue to rise only slightly in 2015 and 2016 In light of the low inflation rate, we only ex- pect revenue to rise up to 1.5% to between €201 and €204 million for 2015. This also applies to 2016 when revenue is projected to increase again slightly to between €203 and €206 million. Stable to slightly higher results in the next two years Earnings before interest and taxes (EBIT) amounted to €177.5 million in 2014. Ac- cording to our forecast, EBIT will come in only slightly higher than the previous year’s level at between €177 million and €180 million. EBIT should increase then to between €179 million and €182 million in 2016 (+1.1%). Outlook good for our shopping centers We predict that our shopping centers will continue to perform well. The occupancy rate across all our shopping centers is currently ex- pected to remain at around 99%. At the end of 2014, the occupancy rate for all types of space was 98.9%, on a par with 2013 (98.6%). The remaining vacancies consisted largely of office and storage space. The occupancy rate for retail space stood steady at 99.5%. Outstanding rents and necessary valua- tion allowances remain stable at a low level. We see no sign of a significant change in this satisfactory situation at the present time. Agreed transactions are the foundation for revenue and earnings planning The Deutsche EuroShop Group’s revenue and earnings planning for 2015 and 2016 does not include the purchase or sale of any proper- ties. The results of the annual valuation of our shopping centers and exchange rate factors are not included in our planning since they are not foreseeable. Forecasts about the future revenue and earnings situation of our Group are based on the following factors: a) the development of revenue and earnings in the existing shopping centers b) the assumption that there will be no sub- stantial reduction in revenue in the retail sector that would cause a large number of retailers to no longer be able to meet their obligations under existing leases. Earnings before tax (EBT) excluding measure- ment gains/losses amounted to €125.0 mil- lion during the year under review. We expect to achieve EBT of between €126 million and €129 million in 2015 (+2.0%) and €130 to €133 million in 2016 (+3.1%). FFO up slightly Funds from operations (FFO) amounted to €2.23 per share in the year under review. We expect this figure to be between €2.24 and €2.28 in 2015 (+1.3%) and between €2.30 and €2.34 in 2016 (+2.7%). Dividend policy We intend to maintain our long-term, relia- ble dividend policy and anticipate that we will be able to pay dividends at €1.35 per share in the 2015 financial year and €1.40 in the 2016 financial year to our shareholders. EPRA NET ASSET VALUE PER SHARE € 2010 20142011 2012 2013 26.36 33.17 27.64 28.53 30.59 Rathaus-Center, Dessau Equity 1,524,3421,428,949 Deferred taxes 227,455198,491 Negative swap values 48,19430,760 EPRA NAV 1,789,3891,650,438 EPRA NAV 1,789,3891,650,438 EPRA NNNAV 1,431,9731,377,736 20102014201120122013