Lean back and take a long, calm look at things: A fresh perspective can open up a whole new point of view. Or spark constructive ideas that set things in motion.
A prime waterfront location, the Strandkai in Hamburg, is the site of Unilever’s new headquarters constructed by HOCHTIEF Projektentwicklung. This office building’s green elements include a highly energy-efficient lighting system and the use of geothermal energy. The Unilever building is likely to receive the gold certificate for sustainable building awarded by Hamburg’s Hafencity urban development zone.
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Formed as of January 1, 2008, the HOCHTIEF Real Estate division combines our real estate and real estate portfolio activities. It comprises the companies HOCHTIEF Projekt- entwicklung, aurelis Real Estate and HOCHTIEF Property Management. The division’s capabilities are focused on the entire real estate life cycle, from development and con- struction to marketing and management. This integrated approach allows us to create lasting synergies.
HOCHTIEF Projektentwicklung
HOCHTIEF Projektentwicklung was able to underscore its leading position in the market for premium real estate which is still in demand. In Germany as well as in Central and Eastern Europe, construction began on 13 new proj- ects with about 226,000 square meters of gross floor space. At December 31, 2008, 30 projects with an invest- ment volume of EUR 1.28 billion and a total rentable space of 507,300 square meters were under construction. Of these, 87 percent were leased at the reporting date and 49 percent had already been sold to final investors prior to completion. Another increasingly important issue in this and in other areas is sustainability: Tenants and investors are interested above all in properties whose energy effi- ciency makes them cost-effective in the long term. One such property is the “smarthouse” in Munich. In January 2009, the planning for our office property was honored with the first-ever German sustainable building certificate in gold by the German Sustainable Building Council. One of the priorities in the reporting year was expansion of the care segment. 2008 saw the start of construction on several care projects in Germany. Our real estate develop- ment subsidiary launched a long-term collaboration with partner BeneVit, an operator of care facilities driven by in- novative residential and support concepts.
HOCHTIEF Projektentwicklung expanded internationally too. At the beginning of 2008, it established its seventh
foreign subsidiary, HOCHTIEF Development Russland, based in St. Petersburg.
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The Lindley Carrée development is currently under con- struction in Hamburg. Some 38 percent of the 24,500- square-meter office complex (gross floor space) in Ham- burg’s City Süd is already leased to neue leben Lebens - versicherung AG. The office building is being developed on ecological lines and thus meets the requirements of the internationally recognized certificate for sustainable build- ing “Leadership in Energy and Environmental Design” (LEED).
In Düsseldorf, HOCHTIEF Projektentwicklung is building the Four Elements office building. Over 70 percent of the 14,700-square-meter property (gross floor space) has been pre-leased; the tenants include a law firm. The final investor is Rheinische Versorgungskassen.
In Munich, construction began in 2008 on the Altezza, an office property with a total of 22,000 square meters of gross floor space. The property was purchased in 2007 by ING Real Estate for an office property fund. More than 50 per- cent of the property has been pre-leased to BT Germany. In addition, a lease agreement was signed with Deutsche Apotheker- und Ärztebank at the end of the year. The proj- ect is therefore already sold and 77 percent pre-leased prior to completion.
In Essen, building work began in 2008 on the Rüttenschei der Tor, an office development with almost 9,800 square meters of gross floor space. Even before the start of construction, 62 percent of the office space had been leased to renowned law firms.
We also notched up international success in this segment: HOCHTIEF Development Schweiz, formed in 2007, is real- izing its first project with the Portikon in Zurich: The seven- story office and business building comprises 19,500 square meters of gross floor space. Thirty-eight percent of the space is already leased to Baxter Healthcare SA.
In Warsaw, HOCHTIEF Development Poland signed that country’s biggest single lease agreement to date: Pekao S.A., part of the UniCredit Group and the country’s largest private bank, is moving its corporate headquarters to the 39,000-square-meter Lipowy Office Park. In November, the project won an award for the best office development in 2008 from Construction & Investment Journal, the lead- ing real estate magazine in Central and Eastern Europe.
Retail segment
The KOMM shopping center, offering 15,700 square meters of retail, restaurant and service space, is being built in the center of Offenbach. Eleven thousand square meters, or 70 percent, of the space is already leased. The mall will be opened in fall 2009.
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HOCHTIEF Projektentwicklung sold the new city center planned for Kelkheim to a Danish investor group in fiscal 2008. The urban district development with marketplace, retail units, restaurants, city library, facilities for assisted living as well as a retirement and nursing home offers a total of 16,800 square meters of rentable space and is almost fully leased.
Development work is underway on the so-called Quartier 21 in Hamburg-Barmbek where a modern, multi-genera- tional district is taking shape over an area of 14 hectares. The Quartier 21 project company—a consortium including HOCHTIEF Projektentwicklung and a partner—has leased the first building with 2,800 square meters of rentable space to the Women’s Medical Center.
Care segment
A care home with some 90 beds based on the “Living and Nursing” concept was completed and handed over in Dort- mund in 2008. We are developing a further home with 80 places in Hagen. Together with the operator BeneVit, we are also building three nursing care facilities with a total of 215 places based on the “domestic community” model: Ground was broken in Schöllkrippen, Erlensee and Kippen- heim in 2008.
Residential segment
The Marco Polo Tower project company, a consortium of HOCHTIEF Projektentwicklung and a partner, is building an upscale residential tower on Strandkai (beach quay) in Hamburg’s Hafencity urban development zone. It will fea- ture up to 58 freehold apartments configured to the future owners’ individual wishes by renowned interior architects.
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The new Northern Europe spare parts logistics center of PSA Peugeot Citroën, which will be handed over to its user in spring 2009, is being built in the Niedersachsenpark. The site measures 83,000 square meters in total, with 45,000 square meters of rentable space for warehouses and administrative buildings.
Hotels segment
In the reporting year, HOCHTIEF Projektentwicklung sold the Adina Apartment Hotel in the Berlin-Mitte district to the Australian company Toga Hospitality before construction work had even begun. The boarding house, which will lease 139 furnished apartments, also offers conference rooms, a spa area and its own restaurant.
aurelis Real Estate*
The company aurelis Real Estate, in which HOCHTIEF Projektentwicklung has held a 50-percent stake since December 2007, enjoyed a successful 2008. 3URƂWDEOHUHDOHVWDWHVDOHV
In the reporting year, aurelis sold sites for proceeds of ap- proximately EUR 302 million. The successes included the sale of the roughly 600,000-square-meter Bahnstadt prop- erty in Heidelberg to Entwicklungsgesellschaft Heidelberg. The development property comprises the former goods and marshaling yard to the southwest of Heidelberg cen- tral train station. Around 140,000 square meters were also bought by the city of Heidelberg.
*Further information is available on the Internet at www.aurelis-real- estate.com.
In the Wuppertal district of Vohwinkel, aurelis sold a roughly 100,000-square-meter area of the former marshaling yard to the city of Wuppertal. A business park, Mittelstandspark VohRanG, is to be built on the land.
In Duisburg, our subsidiary sold an area of approximately 85,000 square meters at the former Hohenbudberg mar- shaling yard to Hafen Duisburg Rheinhausen GmbH. A lo- gistics center is to be developed on the site.
In Munich-Freimann, roughly 108,000 square meters of land were sold to a major corporation. In the district of Pasing, aurelis also sold around 50,000 square meters on Paul-Gerhardt-Allee for commercial use. Plus, as part of the Am Hirschgarten quarter in the Munich district of Neu- hausen-Nymphenburg, we sold around 18,000 square meters of residential lots to various property developers. aurelis develops the land together with local authorities and supports the process until development rights have been secured and the land is ready for construction. The company responds to urban development requirements and supports the trend toward living in the city with mod- ern urban districts, including the Europaviertel in Frankfurt, the Am Hirschgarten quarter in Munich and Le Quartier Central in Düsseldorf. Aspects of sustainable urban devel- opment are taken into account: Real estate revitalization, for example, helps reduce land consumption and integrate existing infrastructure.
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aurelis achieved total rental income of approximately EUR 99 million in 2008. Roughly 50 percent of this came from around eight million square meters of open space and the other half from some 1.4 million square meters of building space. This meant we were significantly ahead of target. Roughly 45 percent of aurelis’ total real estate is assigned to the rental portfolio. Overall, the company has around 4,500 lease agreements. Some 60 percent of the proper- ties are leased to small and medium-size enterprises, 30 percent to Deutsche Bahn AG and ten percent to various large corporations and public institutions—creating a broad spread of risk.
The rental successes in 2008 included the leasing of a roughly 8,500-square-meter warehouse to a forwarding company in the Bremen cargo transportation center. The lease has a term of ten years. In Wuppertal, 7,500 square meters of open space were leased for use as a material recycling facility. The term of the lease is similarly ten years. In the area of refurbishment, aurelis is currently active in Freiburg: Around ten million euros is being invested in the revitalization of the former customs office building at the north freight yard. Phase one with 5,900 square meters will be completed in the first quarter of 2009, and 78 percent of it has already been leased over periods of ten and 15 years. Leasing of phase two with a further 2,400 square meters begins in spring 2009.
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Launched with the formation of the HOCHTIEF Property Management company in 2007, the project to integrate the property management unit of Allianz Immobilien GmbH was successfully completed in the reporting year. One particu- larly important aspect was the full integration of all employ- ees in HOCHTIEF Property Management. All the regional units of the company now follow a uniform organizational structure. The core elements of this structure are the teams responsible for client portfolios in the regions. In addition, regional service functions were set up—for example, for leasing as well as project and construction management. In 2008, HOCHTIEF Property Management enhanced its service portfolio with an Asset Management Services unit. Here we assist our clients in identifying opportunities to in- crease the value of property portfolios and individual assets. To this end, we prepare asset analyses and asset strategies.
*Further information is available on the Internet at www.hochtief- propertymanagement.de.
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The setup within the division opens up major synergy op- portunities for HOCHTIEF Property Management. For ex- ample, the company manages a number of properties which were built by HOCHTIEF Projektentwicklung, including the Prisma office tower as well as parts of the OpernCarrée in Berlin and the WestendDuo in Frankfurt.
There are also synergies with aurelis Real Estate: In a com- petitive tendering process, HOCHTIEF Property Manage- ment won the contract to provide nationwide management of roughly 24 million square meters of land and almost two million square meters of building space belonging to the company. Starting in January 2009, the three-year contract covers commercial property management for around 4,500 leases with an annual volume of around EUR 100 million. Also included are coordination of facility management pro- viders as well as space and building management for over 2,000 buildings and structures. Therefore, in terms of space, HOCHTIEF has advanced to become Germany’s biggest independent property manager.
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In 2008, we took over the property management unit of RREEF in Germany with a total of 75 properties covering an area of some 500,000 square meters. Thirty-two em- ployees were also transferred to HOCHTIEF.
Staff was similarly transferred to HOCHTIEF under another contract: Forty-three staff of Deka Immobilien are now part of HOCHTIEF. Together with them, we will manage around 75 percent of Deka Immobilien’s real estate in Germany for an initial period of five years, assuming commercial and technical management for the properties of funds set up by Deka Immobilien Investment and Westinvest.
In the reporting year, the first step was taken toward devel- oping the shopping center segment. The scope of an exist- ing property management contract for Shaftesbury Asset Management was broadened: HOCHTIEF has also been responsible for center management for two shopping cen- ters in the Shaftesbury portfolio since 2009.
7KH+2&+7,()5HDO(VWDWHGLYLVLRQőVNH\ƂJXUHV New orders in the HOCHTIEF Real Estate division were 36 percent down on the previous year. At HOCHTIEF Projekt entwicklung, new orders were lower due to the company’s selectivity in taking on projects in 2008. As anticipated, HOCHTIEF Property Management also failed to match the high prior-year figure. In 2007, a substantial part of new orders was accounted for by the takeover of the property management activities of Allianz.
At more than EUR 800 million, work done was up by 56 percent to a very high level. At HOCHTIEF Projektentwick- lung, work done increased as a result of the many projects currently being carried out, while at HOCHTIEF Property Management, it grew as the company performed the man- agement contracts it received in 2007 and 2008. This high level of work done pushed the order backlog down to EUR 705.3 million in the year under review. On a similar scale to work done, external sales rose by EUR 310.7 million to EUR 791.1 million.
Operating earnings climbed 30 percent year on year to EUR 81.7 million, mainly because of the growth in earnings on HOCHTIEF Projektentwicklung’s international projects. 3URƂWEHIRUHWD[HV, on the other hand, was slightly down on the prior-year figure, as net investment and interest in- come fell by EUR 22.4 million. This was due to the higher volume of financing for the development projects currently in progress and because the financing used to acquire shares in aurelis at the end of 2007 was for the first time included for the full fiscal year.
Capital expenditure changed only slightly compared with the previous year and in 2008 consisted mostly of expendi- ture on financial assets for affiliated companies.
RONA—the Group’s main measure of value creation— failed to match the high prior-year figure of 12.7 percent due to the increase in net assets. This was due, in turn, to the interest in aurelis for the first time being included for the full fiscal year and to the larger volume of projects at HOCHTIEF Projektentwicklung.
On an annual average, the number of HPSOR\HHV was 419 up on the previous year, as HOCHTIEF Property Manage- ment took on staff assigned to specific contracts.
HOCHTIEF Real Estate outlook
The HOCHTIEF Real Estate division expects to continue operating successfully in 2009.
At HOCHTIEF Projektentwicklung, attention will focus on the following activities: Further selective business growth in Northern and Eastern Europe, project selection focused on high-profit projects, and marketing of projects currently being constructed. We will counter the current challenging market environment with a tight focus on very attractive project sites and high-quality, sustainable real estate. Besides its ongoing projects—including the Europaviertel in Frankfurt, the Am Hirschgarten quarter in Munich and Le Quartier Central in Düsseldorf—aurelis Real Estate will step up its activities in Duisburg and Nuremburg. A further pri- ority will be to expand activities related to the refurbish- ment of leased space and buildings.
HOCHTIEF Property Management is continuing to focus on expansion in Germany as well as Eastern Europe, par- ticularly through new outsourcing projects. The company is examining opportunities to extend its competencies into the shopping center and hotel property segments. In addi- tion, services such as leasing management and asset management services are to be expanded.
Given corresponding demand, there are plans to sell de- veloped properties to investors as in previous years. This said, the division is under no strong sales pressure in 2009 as a result of the high occupancy rate of 87 percent as well as the high pre-sales rate of 49 percent in the case of still incompleted projects attained by HOCHTIEF Projekt- entwicklung.
The impact of the financial crisis on demand for real estate is currently difficult to predict.
The division therefore plans to generate healthy profit be- fore taxes from ongoing business in 2009. This may, how- ever, be below the prior-year level.
HOCHTIEF Real Estate division
(EUR million) 2008 2007 New orders 618.2 965.0 Work done 813.9 521.0 Order backlog 705.3 1,042.0 Divisional sales 811.6 493.5 External sales 791.1 480.4
Operating earnings (EBITA) 81.7 63.0
Profit before taxes 54.2 58.6
Capital expenditure 11.1 12.6
RONA (%) 10.2 12.7
Net assets (December 31) 1,047.7 735.8 Employees (average over the year) 874 455
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