Pirelli & C. Real Estate

The consolidated economic and financial results are presented in the following table:

(in millions of euro)

 

2008

2007

net of DGAG's

temporary consolidation³

2007

Pro-rata aggregate revenues ¹

775.6

949.0

1,043.7

Consolidated revenues ¹

365.1

334.1

428.8

Operating profit (loss) before restructuring expenses property writedowns/revaluations

(17.7)

12.0

33.4

Earnings (losses) from investments before property writedowns/revaluations

(42.0)

71.6

71.6

Operating profit (loss) including earnings (losses) from investments before restructuring expenses and property writedowns/revaluations

(59.7)

83.6

105.0

Restructuring expenses

(44.2)

-

-

Property writedowns/revaluations ²

(135.8)

67.5

67.5

Operating profit including earnings from investments

(239.7)

151.1

172.5

Income (loss) from continuing operations

(267.6)

119.9

111.4

Discontinued operations

74.6

49.5

49.5

Income (loss)

(193.0)

169.4

160.9

Minority interest

(2.0)

(6.7)

(9.7)

Income (loss) attributable to the equity holders of the company

(195.0)

162.7

151.2

Equity

366.4

720.1

of which attributable to the equity holders of the company

361.7

715.7

Net financial (liquidity)/debt position

289.5

289.7

Shareholder loans

572.3

526.4

Net financial (liquidity)/debt position before shareholder loans

861.8

816.1

Gearing ratio *

2.35

1.13

1 Pro-rata aggregate revenues express the total business volumes of the Group, calculated as the sum of consolidated revenues and the share of the revenues of the associates, joint ventures and funds in which the Group has holdings.

2 Of which Euros -9,3 million is included in the operating profit (loss). Adding that amount to the Operating profit (loss) before restructuring expenses and property writedowns/revaluations (-Euros 17.7 million), gives the Operating loss (-Euros 27 million).

3 The DGAG Group, purchased at the beginning of 2007, was consolidated line-by-line until control ceased following its partial sale to third-party counterparts gradually over the course of the year.

* The gearing ratio corresponds to the ratio between the net financial position excluding shareholder loans and equity.

Pirelli Real Estate’s mission is to be the real estate sector’s front runner through innovation, sustainable quality and continuing development of its capabilities, creating value for the company, the environment and the community.

The strategic objectives of this mission can be summarized as follows:

  • to innovate real estate products and services through a quality response that meets the needs of end users and investors and the general public;
  • to become a hub aggregating the management of real estate assets through its specialist know-how and expertise;
  • to create a higher culture by contributing to the structural evolution of the real estate sector.

Operating in Italy, Germany and Poland, Pirelli Real Estate is one of the most important players in the European real estate sector.

The company has been listed on the Milan Stock Exchange since 2002.

Pirelli Real Estate is a real estate fund & asset management company which buys, increases in value and manages real estate assets with a high-quality profile, through partnerships with leading international investors, in which it holds minority stakes.

The organization structure is based on geographical areas (Italy, Germany and Poland) and business units specialized by type of product. The company is able to combine knowledge of the geographical markets with specialist know-how in the different segments.

Over the course of the years, Pirelli Real Estate has developed a tried and proven business model with a team of professionals to serve investors and users of commercial and residential properties, actively managing the real estate portfolios and co-investing together with leading institutional investors.

Pirelli Real Estate has recently revised and improved the components of this model in order to meet the challenges of the changed market scenario through the following:

  • streamlined and efficient organization, which relies on the sound operating experience of a high-profile management team and on the absorption of its costs with recurring revenues and less frequent portfolio turnover;
  • focus on the management of the assets in portfolio with the aim of maximizing their value;
  • as for Italy, the integration of asset management and specialist services (agency and property) functional to increasing the portfolio value in Pirelli RE SGR.

As far as real estate properties are concerned, the market was penalized by a year of serious international crisis. Price reductions, slowdowns in concluding transactions and difficulties in accessing credit hurt all the companies in the sector. In order to contrast the changed scenario, at the end of the prior year Pirelli RE announced a cost-cutting and reorganization plan focusing on the two macro-territorial areas of Italy and Germany/Poland, which are less exposed to the volatility of the real estate market. The plan aims to relaunch activities and capitalize on the quality of the assets in portfolio.

Assets under management have a market value of Euros 17.3 billion at the end of 2008, composed of Euros 15.4 billion of properties (Euros 12.6 billion at December 31, 2007) and Euros 1.9 billion of non-performing loans (NPL) (Euros 2.4 billion at December 31, 2007).

Total rents equal Euros 669.2 million (Euros 535.8 million in 2007), of which Pirelli RE’s pro-rata share is Euros 164.9 million compared to Euros 158.3 million in 2007.

Sales of properties in 2008 total Euros 864.9 million (Euros 1,804.9 million in 2007), of which Pirelli RE’s pro-rata share is equal to Euros 361.8 million (Euros 526.8 million in 2007). The sales margin is 19 percent (in 2007, it was 22 percent).