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Results of operations

Revenues in the German retail trade (excluding the vehicle trade) rose by a nominal 2.6% over the reporting year, while the revenues of the tenants in our German shopping centers rose by 4.4%. This result can be attributed to two locations in particular. The completion of the expansion of the Altmarkt-Galerie Dresden at the end of March 2011 resulted in an increase in retail sales of around 42% (on a like-for-like basis +6.1%). The growth in revenue of our tenants in the A10 Center Wildau resulting from the opening of the Triangel at the beginning of April 2011 was around 22% (like-for-like -0.9%). However, there was a slight decline in revenues of 0.7% at the other shopping centers. The reasons for this were clearly the negative sales trends in clothing and at the department stores. At our foreign properties, on the other hand, retail sales increased by 1.4%.

Consolidated revenue up 32%

Group revenue increased by 32%, from € 144.2 million to € 190.0 million, during financial year 2011. The first-time full consolidation of the Main-Taunus-Zentrum, the Phoenix-Center and the Billstedt- Center (latter two both in Hamburg) and the first-time consolidation of the Allee-Center Magdeburg made significant contributions to revenue growth. Rental income from the Altmarkt-Galerie and, after the expanded space was opened, from the A10 Center also rose considerably.

At ten properties, the rise in revenue was primarily due to index-related rental increases, while three properties experienced slight declines in revenue. Overall, total revenue rose by 1.2% on a like-for-like basis over the reporting year.

Revenue

€ thousand	2011	2010	Change	in %
* proportionally consolidated
Main-Taunus-Zentrum, Sulzbach	24,671	10,230	14,441	141.2 %
A10 Center, Wildau	18,347	12,899	5,448	42.2 %
Rhein-Neckar-Zentrum, Viernheim	17,400	17,137	263	1.5 %
Altmarkt-Galerie, Dresden*	13,781	7,827	5,954	76.1 %
Phoenix-Center, Hamburg	11,810	5,928	5,882	99.2 %
Billstedt-Center, Hamburg	10,822	0	10,822
Allee-Center, Hamm	9,925	9,763	162	1.7 %
Stadt-Galerie, Passau	9,017	8,823	194	2.2 %
City-Arkaden, Wuppertal	8,865	8,788	77	0.9 %
Forum, Wetzlar	8,727	8,583	144	1.7 %
City-Galerie, Wolfsburg	8,671	8,588	83	1.0 %
City-Point, Kassel	8,110	7,998	112	1.4 %
Rathaus-Center, Dessau	8,015	8,080	-65	-0.8 %
Stadt-Galerie, Hameln	6,679	6,687	-8	-0.1 %
Allee-Center, Magdeburg*	1,993	0	1,993
Total Germany	166,833	121,330	45,502	37.7 %
Galeria Baltycka, Danzig	13,728	13,411	317	2.4 %
City Arkaden, Klagenfurt*	5,478	5,409	69	1.3 %
Árkád, Pécs*	3,603	3,651	-48	-1.3 %
Sonstige	333	388	-55	-14.1 %
Total abroad	23,142	22,859	283	1.2 %
Overall total	189,975	144,189	45,786	31.9 %

Vacancy rate remains stable at under 1%

As in previous years, the vacancy rate of retail spaces remained stable at under 1%. At € 0.4 million (2010: € 0.6 million) or 0.2% (2009: 0.4%), the need for write-downs for rent losses remained at a very low level.

Increase in property operating and administrative costs

Property operating costs were € 1.2 million higher than the previous year at € 8.5 million (2010: € 7.3 million) and property administrative costs were up by € 1.9 million to € 9.8 million (2010: € 7.9 million). The increases are mainly the result of additions to the group of consolidated companies (€+1.6 million), the acquisition of the Billstedt- Center and the Allee-Center Magdeburg (+€ 1.3 million) and increased costs relating to the expanded centers in Dresden and Wildau (€+0.9 million). On the other hand, we were able to reduce these costs in other centers by around € 0.7 compared with the previous year. Overall, the cost ratio came in at 9.7% of revenue (2010: 10.5%).

Other operating income and expenses

Other operating income amounted to € 1.0 million, slightly above the previous year’s level (€ 0.9 million), while other operating expenses rose significantly by € 1.1 million to € 7.0 (2010: € 5.9 million). This increase is largely the result of higher ancillary financing costs for loans taken out or extended and higher realised exchange rate losses relating to foreign properties.

Net finance costs rise in line with expectations

Net finance costs increased by € 18.9 million to € 79.1 million (2010: € 60.2 million). This was the result of additional interest expense incurred in connection with the first-time consolidation of the Main- Taunus-Zentrum and the Phoenix-Center, the financing of the acquisition of the Billstedt-Center and the Allee-Center Magdeburg and the expansion measures in Dresden and Wildau (+€ 13.6 million). In the other direction we achieved interest savings of € 1.9 million by refinancing and repaying existing loans, which resulted in a net increase in interest expense of € 11.7 million.

In addition, the profit share of third-party shareholders rose by € 7.8 million to € 15.7 million as a result of the expanded group of consolidated companies. In contrast, the profit from investments accounted for using the equity method improved by € 0.9 million, while income from investments and interest income were € 0.3 million below the previous year’s level.

Measurement gains / losses higher than in the prior year

Measurement gains rose by € 8.7 million from € 33.1 million in the previous year to € 41.8 million. Remeasurement of the portfolio properties led to gains of € 51.6 million. On average the portfolio properties increased in value by 1.9% and, with two exceptions (which showed depreciations of 2.3% and 7.4%), market values were between +0.2% and +8.4% higher than the previous year.

The initial and subsequent valuations of the Billstedt-Center and the Allee-Center Magdeburg generated measurement gains of € 11.1 million, while ancillary acquisition costs for the Billstedt-Center amounted to € 8.4 million.

In addition, the acquisition of additional shareholdings in the Stadt- Galerie Hameln and the City-Galerie Wolfsburg led to a measurement loss of € 0.5 million. The purchase price of the shareholdings in the City-Galerie Wolfsburg exceeded the redemption entitlements of the former limited partners recognised in the accounts at the time of transfer.

The share of measurement gains attributable to third-party shareholders rose in the reporting year to € 11.9 million (2010: € 3.0 million).

Significant change in tax position

The tax burden in the year under review amounted to € 35.0 million, down by € 69.8 million on the previous year. The correction to tax expense in the previous year amounted to € 89.6 million, of which € 87.5 million was for deferred trade tax and € 2.1 million for backpayments of trade tax for 2010 and previous years. The reporting year’s tax expense is composed of € 31.6 million in deferred income tax and income tax payments on current profit of € 3.4 million (domestic: € 2.8 million, foreign: € 0.6 million).

Significant increase in consolidated profit

Earnings before interest and taxes (EBIT) climbed 34% from € 124.0 million to € 165.7 million in the year under review. At € 128.4 million, pre-tax profit (EBT) was 32% up on the previous year (€ 97.0 million). Consolidated profit amounted to € 93.4 million, following a loss in the previous year of € 7.8 million.

Operations and measurement gains driving earnings per share

Earnings per share (consolidated net profit per share) amounted to € 1.81 in the reporting year, compared with a loss of € 0.17 in the previous year. Of this amount, € 1.19 was attributable to operations (2010: € 0.98) and € 0.62 to measurement gains / losses (2010: € 0.54). Earnings per share in the 2010 financial year were also impacted by non-recurring tax expense for the financial years up to 2009 amounting to € 1.70 per share.

in € per share	2011	2010
* European Public Real Estate Association
Consolidated net profit	1.81	-0.17
Valuation in accordance with IAS 40	-0.81	-0.73
Deferred taxes	0.19	0.18
Tax expense previous years	0.00	1.70
EPRA* Earnings	1.19	0.98
Weighted no. of shares in thousands	51,631	45,545

Funds from operations (FFO) up by over a third

Funds from operations (FFO) are used to finance our ongoing investments in portfolio properties, scheduled repayments on our long-term bank loans and the distribution of dividends. During the year under review, FFO of € 83.1 million was generated, a rise of +35% over the previous year (2010: € 61.5 million). The FFO per share rose by 19% from € 1.35 to € 1.61.

€ thousand	2011	2010
Consolidated profit	93,396	-7,814
Measurement gains / losses on companies accounted for using - the equity method	-94	122
- IAS 40 / IFRS 3	-41,811	-33,129
Deferred taxes	31,606	1 02,358
FFO	83,097	61,538
FFO per share	1.61 €	1.35 €
Weighted no. of shares in thousands	51,631	45,545

Dividend proposal: € 1.10 per share

The successful financial year allows us to maintain our dividend policy, which is geared towards continuity. The Executive Board and Supervisory Board will therefore propose to the shareholders at the Annual General Meeting in Hamburg on 21 June 2012 that an unchanged dividend of € 1.10 per share be distributed for the financial year 2011.

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