Pirelli & C.

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Performance of the divisions

Pirelli Real Estate carries on its business through a structure organized into geographical areas. The business performance in these areas is described in this section, divided into income provided by the services platform and income deriving from investing activities.

Italy real estate

At December 31, 2009, operating income including net income from equity investments before restructuring expenses and property value adjustments and including interest income from financial receivables with associates, joint ventures and others was a positive 28.7 million euro, a sharp improvement compared with the negative amount of 7.6 million euro at December 31, 2008.

On a like-for-like basis, net of the income of 11.7 million deriving from the sale of 10% of Pirelli RE SGR and of the negative impact of 3.3 million of hedging instruments, net income at December 31, 2009 would have been positive of 20.3 million euro compared with the negative net income of 11.9 million euro of the previous period, net of the one-off income of 17.0 million relating to the compensation received for the replacement of Pirelli & C. Real Estate SGR S.p.A. in the management of the Berenice Fund, of the negative impact of 6.6 million euro of derivative hedging instruments and of the pro-rata loss of 6.0 million euro on the equity investment in the commercial joint venture Rinascente-Upim.

The operating income is made up of 32.0 million euro of net income from the services platform (20.3 million euro on a like-for-like basis), a significant improvement compared with the positive figure of 11.3 million of the previous period (a negative 5.7 million euro on a like-for-like basis) and of -3.3 million euro of net income from investing activities (at break-even on a like-for-like basis), an improvement compared with the negative figure of 18.8 million of the previous period (a negative 6.2 million euro on a like-for-like basis).

At December 31, 2009 sales of properties amounted to 613.5 million euro compared with 570.5 million euro at December 2008. Total rents were 292.5 million euro (336.9 million euro in the same period of 2008). Total gains realized at December 31, 2009 amounted to 66.7 million euro (104.3 million euro at December 31, 2008), while pro-rata gains were 27 million euro (40.8 million euro at December 31, 2008).

Germany real estate

At December 31, 2009, operating income including net income from equity investments before restructuring expenses and property value adjustments and including interest income from financial receivables with associates, joint ventures and others was a negative 1.4 million euro, a considerable improvement over the negative figure of 24.3 million euro at December 31, 2008.

On a like-for-like basis, excluding the negative impact of 5.1 million of derivative hedging instruments, operating income would have been a positive 3.7 million euro compared with a negative figure of 16.5 million euro for the previous period.

Operating income is made up of 1.3 million euro of net income from the services platform, an improvement compared with the negative figure of 9.7 million of the previous period and of -2.8 million euro (a positive 2.3 million euro on a like-for-like basis) of net income from investing activities, an improvement compared with the negative figure of 14.5 million of the previous period (a negative 6.8 million euro on a like-for-like basis).

At December 31, 2009 sales of properties amounted to 380.1 million euro compared with 184.5 million euro at December 2008. Total rents were 487.6 million euro (331.9 million euro in the same period of 2008). Total gains realized at December 31, 2009 amounted to 68.3 million euro (28.8 million euro at December 31, 2008), while pro-rata gains were 19.1 million euro (10.8 million euro in 2008).

Poland real estate

At December 31, 2009, operating income including net income from equity investments before restructuring expenses and property value adjustments and including interest income from financial receivables with associates, joint ventures and others was a positive 0.1 million euro compared with 19.8 million euro at December 31, 2008.

On a like-for-like basis, excluding the one-off income of 15.0 million attributable to a single asset sold in Poland and the negative impact of 0.3 million of derivative hedging instruments, net income at December 31, 2008 would have been a positive 5.1 million euro.

The operating income is made up of negative net income of 1.1 million euro from the services platform, an improvement compared with the negative figure of 2.0 million of the previous period, and of positive net income of 1.2 million euro from investing activities, compared with the 21.8 million of the previous period (a positive 7.1 million euro if we exclude the impacts mentioned above).

At December 31, 2009 sales of properties amounted to 37.8 million euro compared with 109.9 million euro at December 2008. Total rents were 0.4 million euro compared with 0.5 million euro of the same period of 2008. Total gains realized at December 31, 2009 amounted to 8 million euro (34.2 million euro at December 31, 2008), while pro-rata gains were 3.5 million euro (24.8 million euro in 2008).

Non-performing loans

At December 31, 2009, operating income including net income from equity investments before restructuring expenses and property value adjustments and including interest income from financial receivables with associates, joint ventures and others was a negative 13.5 million euro compared with the positive amount of 8.0 million euro at December 31, 2008.

On a like-for-like basis, net of the income of 1.8 million deriving from the sale of 20% of Pirelli RE Credit Servicing S.p.A., of the negative impact of 30.4 million euro of impairment of non-performing loans following the redefinition of certain business plans and of the negative impact of 2.1 million of derivative hedging instruments, operating income at December 31, 2009 would have been 17.2 million euro compared with positive income of 21.9 million euro of the previous period if we exclude the negative impact of 11.2 million euro of impairment of non-performing loans and the negative impact of 2.7 million euro of derivative hedging instruments.

The operating income is made up of negative net income of 4.0 million euro from the services platform (negative of 5.8 million euro net of the income of 1.8 million euro as above) compared with the positive figure of 3.7 million of the previous period, and of negative net income of 9.5 million euro from investing activities (a positive 23.0 million euro on a like-for-like basis) compared with the positive figure of 4.3 million of the previous period (18.2 million euro on a like-for-like basis).