Today, in a meeting chaired by Gilberto Coffari, the Board of Directors of IGD – Immobiliare Grande Distribuzione SIIQ S.p.A. (“IGD” or the “Company”), a major player in Italy’s retail property market and listed on the STAR segment of the Italian Stock Exchange, examined and approved the draft separate and consolidated financial statements at 31 December 2016.

“All the key indicators allow me to say that 2016 was the best year in IGD’s history: recurring net income – FFO – rose 19% to almost €54 million thanks, in particular, to the solid trends in revenue and operating margins; the size of the portfolio, which benefitted from the last acquisition in Grosseto and higher valuations, now reaches almost € 2.2 billion. During the year significant work was done on the commercial side, on active asset management  – continuous steps were taken to update and remodel space – as well from a financial perspective: IGD obtained an “investment grade” rating from Moody’s and two bond issues were completed at unprecedented conditions. We laid the foundation, therefore, to further improve the results over the coming years, in line with the Business Plan’s targets for 2018”  stated Claudio Albertini, IGD – Immobiliare Grande Distribuzione SIIQ S.p.A.’s Chief Executive Officer.

POSITIVE OPERATING PERFORMANCES…

In 2016 the positive operating performance of the Italian shopping centers held well, with sales of retailers in malls rising 2.6 %, despite a slowdown in the last two quarters of the year and a slight drop in footfalls.

Footfalls rose significantly in Romania, (+2.5%) supported, in particular, by a richer commercial offering, better market conditions, as well as a decrease in the works underway to refurbish a few assets.

Pre-letting produced significant results: in Italy 206 leases, renewals and turnover, were signed with an average upside of +1.8%; in Romania 247 leases were renewed with an average upside of +1.1%. Occupancy improved in both Italy, where it rose against the 96.9% recorded in the prior year to 97.3% (average of malls and hyper), and Romania were the increase was even higher (96.1% versus 93.9%).

The IGD Group continued with its asset management activities in the year. The most important event for the IGD Group in this segment was most assuredly the opening in October of the new Maremà shopping center in Grosseto. The mall inside the center is comprised of 44 shops and 7 internal midsize stores which cover a gross leasable area (GLA) of more than 17,000 m² (inside the Center there is also a hypermarket which is not owned by the Group). Remodeling of the spaces in the Città delle Stelle center in Ascoli Piceno was also begun which resulted in the creation of a new midsize store and is paving the way for more intense refurbishment, as well as the relaunching of the mall. Centro Sarca in Milan benefitted from the effects of the restyling work terminated in 2015, reaching full occupancy and recording significant results in terms of both sales (+17.5%) and footfalls (+5.9%).

…AND EXCELLENT ECONOMIC AND FINANCIAL RESULTS (FFO +18.9%)

Total consolidated revenue amounted to around €138.8 million, up 8.0% against the same period of the prior year.

More in detail, rental income increased by 8.4% to €131.3 million explained by:

• for around €8.6 million, higher revenue not like-for-like;
• for around €1.9 million, like-for-like growth (+1.7%) in Italy. Malls were up (+2.7%) and hypermarkets were in line;
• for around €0.3 million, higher revenue like-for-like in Romania (+3.1%);
• a decrease in revenue (-€0.7 million) linked to the sale of the City Center property on via Rizzoli at the end of May 2015 and other minor changes.

Growth was also recorded in revenue from services (+8.7%) which amounted to €5.5 million. The Porta a Mare project generated revenue from trading of €2 million which was lower than 2015 during which 7 residential units and appurtenances were sold versus 6 in 2016.

Core business Ebitda amounted to €94.9 million, up 11.6% against 31 December 2015. The core business Ebitda Margin rose 2 basis points to 69.3%. The freehold Ebitda margin came to 78.7%, an increase against the prior year.

Financial expense rose (+6.6%) to €42 million. The figure includes around €2.1 million in non-recurring costs relating to the early repayment of the CMBS (expiring in 2018) completed in November.
Financial expense was impacted by the increase in net debt, as well as the bond issue made in May, which was partially offset by the savings linked to the advance repayment of the CMBS and other mortgages. The downward path of the average cost of debt was confirmed (3.3% vs 3.67% in 2015).

The Group’s portion of net profit amounted to €68.3 million, a marked increase against the €45.6 million posted in the same period 2015 (+49.7%).

Funds from Operations (FFO) rose 18.9% against 31 December 2015 to €53.9 million. The growth targets (+15/16%) were largely exceeded.   

SOLID BALANCE SHEET

The EPRA NNNAV reached €1,044.9 million or €1.29 per share, an increase of +3.2% against the €1.25 p.s. posted in 2015.

The market value of the IGD Group’s real estate portfolio reached €2,177.8 million, an increase of 4.6% with respect to 31 December 2015: the main change is explained by the acquisition of the Maremà mall in Grosseto.

In Italy like-for-like hypermarkets rose 2% (+€12.5 million) and the gross initial yield came to 6.17%; malls posted an increase of 1.47% (+€4 million) and a gross initial yield of 6.23%.

The market value of the Romanian portfolio at 31 December 2016 was €164.9 million, down with respect to the €170.6 million recorded at 31/12/2015, with a gross initial yield to 6.51%

The IGD Group’s net debt amounted to -€1,055.4 million at 31 December 2016, an increase against December 2015 (-€984.8 million) explained, as mentioned above, by the investments and acquisitions made in the year.

The financial ratios, like the gearing ratio (0.97x) and loan to value (48.3%), were in line with Business Plan guidance and confirm the solidity of the Group’s financial structure.

FINANCIAL TRANSACTIONS WITH UNPRECEDENTED RESULTS  

Among the many financial transactions completed in the year of particular note is the Baa3 rating, with a stable outlook, that IGD’s debt obtained from Moody’s in May, which was subsequently confirmed in December. This rating represents an important recognition of the work done by the Group over the last few years to improve the financial-economic indicators and also opened a new market for the Company, namely the one comprised of institutional investors who can invest exclusively in “investment grade” debt.

The Group decided to take advantage of the low interest rate environment, guaranteed by the European Central Bank’s activities, in order to:

• Lower the average cost of debt
• Extend the maturity of its medium/long term debt
• Increase the portion of debt raised on capital markets with respect to bank debt

In May, therefore, IGD was able to proceed with the issue of a €300 million 5-year bond at 2.5%. The bond loan was placed with European institutional investors in just one day and the demand was two times higher than the offer which testifies to the Group’s good creditworthiness. This first transaction was followed in December by a second bond issue.  More in detail, the private placement of a €100 million 7-year bond with a gross annual coupon of 2.25% was successfully completed on the US market. The transaction settled in January. The bonds were placed entirely with Pricoa Capital Group, part of the US group Prudential Financial Inc.

Lastly, the €135 million CMBS was repaid in advance (in November) which, with a cost of 5.2% per annum, was the Group’s most costly loan. This made it possible to increase significantly the value of unencumbered properties which amounted to around €1,407 million.

PROJECTS AND NEW OPENINGS

After the inauguration of the Maremà shopping center in Grosseto, of which IGD acquired the mall, the investment pipeline is proceeding as expected.

The extension of the ESP center in Ravenna (an additional 19,000 m²) is continuing and is expected to be inaugurated by the end of 1H2017: the considerable interest of retailers was confirmed with the pre-letting at 85%.  Occupancy is expected to reach 100% by the opening.

Work also continued on the Officine Storiche section of Porta a Mare in Livorno and the retail portion is expected to open in the second half of 2018. Considerable interest has already been received. The extension and restyling of the exterior of the Gran Rondò mall in Crema was also begun (creation of midsize exterior space of 2,850 m², already pre-let) and is expected to be completed by 1H 2018. Work also started on the reduction of the size of the hypermarket in the Città delle Stelle center in Ascoli which will result in the creation of a new common area inside the mall (the project is expected to be completed by year-end 2017).

OUTLOOK 2017

The Company expects to continue along its growth path with higher revenue driven by the like-for-like perimeter, the full year contribution of the acquisitions and openings (Maremà) made in 2016, as well as the ESP extension in Ravenna.

The benefit of the steps taken to reduce the cost of debt, which is expected to fall below 3%, will become even more evident.

Consequently the Company estimates growth in FFO in a range of between +18% to +19%.

DIVIDEND

During the Annual General Meeting, IGD’s Board of Directors will propose that the shareholders, meeting in ordinary session, approve a dividend of €0.045 per share, an increase of 12.5% with respect to 2015.

The dividend yield, based on the stock price recorded at year-end 2016, comes to 6.2% and it was confirmed also compared to the price recorded at 27 February

THE SEVENTH CORPORATE SUSTAINABILITY REPORT APPROVED

For the first time, the Board of Directors approved the Corporate Sustainability Report together with the Annual Report. This change is testimony to the Board’s full commitment to integrating the economic-financial agenda with the socio-environmental one.

Four themes were confirmed as the foundation of the Group’s commitment:

• Innovation: continuous updating of the structures (restyling and refurbishment), constant change in the tenant and merchandising mix (26 new brands introduced) and great focus on the innovative solutions offered in the malls, including as part of a multichannel approach (O2O, online to offline)
• Community: the shopping center as both a place for shopping and a meeting place which impacts the local area (more than 14 thousand job opportunities created), as well as a continuous and updated roster of events; the corporate welfare plan for employees was approved
• Environment: from 2011 through today energy consumption has fallen 13% thanks to targeted investments and more efficient management, linked also to UNI EN ISO 14001 environmental certification (roll out calling for the certification of 90% of the Italian malls by 2018); furthermore, beginning this year the electricity purchased by all the shopping centers in Italy will come solely from renewable sources
• Legality: Legality Rating of three stars received from the Italian Competition Authority (“AGCM”), the maximum score awarded for this type of rating

OTHER RESOLUTIONS

Calling of the Annual General Meeting in ordinary and extraordinary session

IGD’s Board of Directors also resolved to convene the Company’s Annual General Meeting in ordinary and extraordinary session on 12 April 2017, at 10:00 a.m., at the Company’s headquarters in Bologna, in first call and, if necessary, in second call on 13 April 2017, same time and place, to resolve on the following agenda:

Ordinary session

1. Separate financial statements at 31.12.2016; Directors’ report on operations; External auditors’ report; Report of the Board of Statutory Auditors; Presentation of the consolidated financial statements at 31.12.2016; Allocation of the net earnings for the year and distribution of the dividend to Shareholders; related and consequent resolutions
2. Report on compensation in accordance with Art. 123-ter,paragraph 6,of Legislative Decree n. 58/98; related and consequent resolutions
3. Authorization to buy and sell treasury shares; related and consequent resolutions

Extraordinary session

1. Proposal to amend articles 4 and 6 of the corporate by-laws; related and consequent resolutions;

As mentioned above, IGD’s Board of Directors will propose that the shareholders, meeting in ordinary session, approve a dividend of €0.045 per share which equates to a dividend yield, based on the stock price recorded at year-end, of 6.2 %.

The dividend will be payable as from 24 May 2017, with shares going ex-div on 22 May 2017. Pursuant to Art. 83-terdeciesof Legislative Decree n.58 of 24 February 1998 n. 58, the shareholders of IGD at the record date (23 May 2017) will be entitled to receive the dividend.

The shareholders, meeting in ordinary session, will first be called upon to approve both the financial statements at 31 December 2016 and distribution of the dividend.

Assessment of independent status

IGD’s Board of Directors verified – pursuant to Art. 148, paragraph 3, of Legislative Decree n. 58/1998, of the Corporate Governance Code promoted by the Italian Stock Exchange and Art. 37 of Consob Regulation n. 16191 of 29 October 2007 – that all the independent directors (Elisabetta Gualandri, Milva Carletti, Rossella Saoncella, Andrea Parenti, Livia Salvini, Matthew D. Lenz, Luca Dondi dall’Orologio) still qualified as independent.

Approval of the Report on Corporate Governance and Ownership Structure and the Compensation Report

The Board of Directors approved the 2016 Report on Corporate Governance and Ownership Structure, which forms an integral part of the annual report, as well as the Compensation Report, the first section of which, pursuant to Art. 123-ter, par. 6 of Legislative Decree. 58/98, will be voted on by shareholders during the next Shareholders’ Meeting held in ordinary session.

Approval of the Authorization to buy and sell treasury shares

The Shareholders will also be called upon to resolve on the authorization to purchase and dispose of treasury shares, after revoking the prior authorization granted by the shareholders on 14 April 2016, as follows:

• Motivation: to carry out (i) trading and hedging transactions and (ii) invest liquidity and allow for the use of the treasury shares in transactions pertaining to operating activities and business projects consistent with the Company’s strategic guidelines, in relation to which it is beneficial to trade, swap, contribute, or otherwise dispose of the shares;
• Maximum number of treasury shares which may be purchased: the purchases may be made on one or more occasions up to the maximum allowed under the law;
• Expiration of the shareholders’ authorization: the authorization to purchase treasury shares is requested for a period of eighteen months as from the date of shareholders’ authorization; there is no time limit on the authorization to dispose of the shares;
• Methods and purchase price of the treasury shares: the purchases shall be made in accordance with Art. 132 of Legislative Decree 58/1998, Art. 144-bis of the Regulations for Issuers and all other applicable laws and regulations, as well as the accepted market practices recognized by Consob and must be purchased at prices satisfying the provisions of Art. 5(1) of European Commission Regulation EC 596/2014 of 16 April 2014, Art. 3 delegated Regulation (UE) 1052/2016 or any other applicable provisions in effect at the time of the transaction

In extraordinary session, the Shareholders will be called to resolve on the:

Proposal to amend articles 4 and 6 of the corporate by-laws

With regard to the amendment of art. 4 of the company by-laws, the Board of Directors – with a view to complying with the instructions received from a municipal administration when authorization to carry out retail activities in the IGD’s freehold centers was requested – resolved to propose to the shareholders, meeting in extraordinary session, that a clarification should be included in the company purpose in order to clarify that the “management of companies and public concerns” also includes “retail activities”.

In addition to the above, the Board of Directors resolved to propose an amendment to art. 6 of the company by-laws to the shareholders, meeting in extraordinary session, in order to grant, pursuant to art. 2443 of the Italian Civil Code and after revoking the authorization granted by the Board of Directors on 19 April 2012 which will expire on 19 April 2017, the power to increase share capital, on one or more occasions, against payment and in divisible form, by up to a maximum of 10% of the company’s pre-existing share capital, for a period of up to five years as from the date of the shareholders’ resolution and, at any rate, by 12 April 2022, reserved for parties to be identified by the Board of Directors – including Italian or foreign qualified and/or industrial and/or financial investors or shareholders of the Company – excluding pre-emption rights pursuant to Art. 2441, fourth paragraph, second sentence, of the Italian Civil Code, provided that the issue price corresponds to the shares’ market value and this is confirmed in a report prepared specifically by the external auditors.

This document is available on IGD’s website, https://www.gruppoigd.it/Governance, as well as at the Company’s registered offices, at Borsa Italiana S.p.A. and the authorized storage mechanism provided through www.emarketstorage.com.