pirelli real estate h1 2009
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MILAN - JULY 29th, 2009
Abstract from Pirelli Group H1-’09 Financial Results
(*) Related to revenues on controlled initiatives
Consolidated Profit and Loss
A + B
Revenuesof which services 94.7 47.7 115.0of which other revenues 21.1 6.1 77.8
EBIT before restructuring costs (2.0) (2.2) 20.3Income from Equity Participations (20.9) (12.5) 17.4EBIT inl. Inc. From Equity Part. Before Restructuring costs, writedowns/revaluations (22.9) (14.7) 37.7Restructuring Costs (11.5) 0.0 (16.2)Real Estate writedowns/revaluations (4.8) 0.0 (0.8)EBIT inl. Inc.From Equity Part. After Restructuring costs, writedowns/revaluations (39.3) (14.7) 20.7Interest Income from Participations 13.7 8.5 13.6EBIT incl. Income from Equity Part. & Interest Income from Part. (25.6) (6.2) 34.3Financial Charges (14.7) (8.3) (20.9)Profit Before taxes (40.3) (14.5) 13.4Income Taxes (2.4) (2.1) (6.4)Net Income before discontinued operations (42.7) (16.6) 7.0Discontinued Operations 0.0 0.0 4.4Net Income (42.7) (16.6) 11.4Minority Interests 0.4 0.8 (2.4)Net Income after minority interests (42.3) (15.8) 9.0
(9.2) (6.2) 51.3
1H’09 1Q’09 1H’08
A
B
1
€/mln
115.8 53.8 192.8
Writedowns and Revaluations
Italy
20.5
1.8(18.7)
Based on independent appraisals, on a like for like basis, market value of real estate participated assets were written down by 2.3%
In Italy the writedowns were -1.7%
In Germany we had writedowns of ca. -2.8% (of which 257 €/mln with a pro quota Pirelli Re economic impact of 28.1 €/mln) and in Poland of -6%
With the application of the announced hold strategy, a large part of the German residential portfolio and the trophy assets in Italy of the Retail and Entertainment funds, have been accounted according to IAS 40 with a revaluation in the Book Value
45.5
(50.3)
(4.8)
Total Pirelli RE
WritedownsRevaluations
Germany &Poland
(6.6)
(31.6)
25.0
Of which Highstreet (28.1)
2
€/mln
Update on Headcount and on Cost savings
Reduction from 2,956 in 2007 to 1,267 as of June. New targets confirmed
29 € mln savings as of 2009 (of which approx. 50% related to headcount). Year end target improved compared to the 50 €mln forecast
Headcountreduction
Cost Savings
2008 A 1H’09 2009 E
1,4731,267
890(*)
220 NPL
1,110
Headcountcost
Otherfixedcosts
Total Savings
June 2009
15 €/mln
14 €mln 29
€/mln
55/60 €/mln
ExpectedSavings12/2009
(*) Not Including possible outsourcing for 160 FTE
3
(€/mln)
Details on Service Platform & on Vehicles /Funds
(*) Includes the result from participated companies, success fees, promote and a capital gain from quota disposals(**) EBIT is referred to operating income results including income from equity participations, before restructuring costs,
writedowns / revaluations, but including interest income from equity participations
4
Consolidated Revenues 47.7 115.0Other Revenues (*) 2.0 0.0 17.6
1.6
Total Revenues 96.7 47.7 132.6 -17.0 Berenice Fee-15.4
EBIT (**) (3.2) (1.3)
Vehicles & funds (19.8) (13.4) 36.2-of which Real Estate (22.8) (16.6) 24.5-of which NPLs 3.0 3.2 11.8
Interests Income from Participations 13.7 8.4 13.6
EBIT(**) (6.0) (4.9) 49.7
TOTAL Pirelli RE (9.2) (6.2) 51.3
Service Platform & Holding
Vehicles & Funds
1H’09 1Q’09 1H’08
1.6
1H’09 1Q’09 1H’08
94.7
(€/mln)
Net of one-off
Economic Results – Italy
Net of one-offConsolidated Revenues 50.1 26.2 59.5
Other Revenues (*) 0.0 0.0 17.016.9
Total Revenues 50.1 26.2 76.5-17.0 Berenice Fee-0.1
EBIT (**) 6.7 4.9
Vehicles & funds (14.6) (10.7) 4.3
Interests Income from Participations 4.3 2.5 5.0
EBIT(**) (10.3) (8.2) 9.3
TOTAL ITALY (3.6) (3.3) 26.2
Service Platform
Vehicles & Funds
1H’09 1Q’09 1H’08
16.9
1H’09 1Q’09 1H’08
(*) Includes the result from participated companies, success fees, promote and a capital gain from quota disposals
5
(**) EBIT is referred to operating income results including income from equity participations, before restructuring costs, writedowns / revaluations, but including interest income from equity participations
(€/mln)
(**)
Consolidated Revenues 28.5 13.5 30.2Other Revenues (*) 0.0 0.0 0.4
Total Revenues 28.5 13.5 30.6
EBIT (**) 2.7 1.4
Vehicles & funds (8.8) (6.1) 2.0
Interests Income from Participations 7.9 3.7 4.1
EBIT(**) (0.9) (2.4) 6.1
TOTAL GERMANY 1.8 (1.0) 3.8
Service Platform
Vehicles & Funds
1H’09 1Q’09 1H’08
(2.3)
1H’09 1Q’09 1H’08
Economic Results – Germany
6
(*) Includes the result from participated companies, success fees, promote and a capital gain from quota disposals(**) EBIT is referred to operating income results including income from equity participations, before restructuring costs,
writedowns / revaluations, but including interest income from equity participations
(€/mln)
(**)
Economic Results – Poland
Consolidated Revenues 3.1 2.1 4.5
Total Revenues 3.1 2.1 4.5
EBIT (**) (0.1) 0.4
Vehicles & funds 0.6 0.2 18.2
Interests Income from Participations 1.1 0.5 0.5
EBIT(**) 1.7 0.7 18.7 (***)
TOTAL POLAND 1.6 1.0 19.2
Service Platform
Vehicles & Funds
1H’09 1Q’09 1H’08
0.6
1H’09 1Q’09 1H’08
(***) Includes result from disposal of one asset
7
(*) Includes the result from participated companies, success fees, promote and a capital gain from quota disposals(**) EBIT is referred to operating income results including income from equity participations, before restructuring costs,
writedowns / revaluations, but including interest income from equity participations
(€/mln)
Economic Results – NPLs
(**)
Consolidated Revenues 8.7 3.6 18.0Other Revenues (*) 2.0 0.0 0.0
Total Revenues 10.7 3.6 18.0
EBIT (**) (2.4) (2.9)
Vehicles & funds 3.0 3.2 11.8
Interests Income from Participations 0.4 1.7 4.1
EBIT(**) 3.4 4.9 15.8
TOTAL NPLs 1.0 2.0 18.2
Service Platform
Vehicles & Funds
1H’09 1Q’09 1H’08
2.3
1H’09 1Q’09 1H’08
8
(*) Includes the result from participated companies, success fees, promote and a capital gain from quota disposals(**) EBIT is referred to operating income results including income from equity participations, before restructuring costs,
writedowns / revaluations, but including interest income from equity participations
(€/mln)
Evolution of Real Estate sales and NPL recoveries
1H’09 1H’08
527.6
351.9
1H’09 1H’08
207.7116.6
527.6
1H’09 1H’08
207.7
54.367.4
527.6
1H’09 1H’08
207.7
235.0
175.8
Margin on sales is approx. 15% as of June 2009
Confirmed 1 €/bln of real estate sales by year end, including the preliminary contracts, offers received and undergoing negotiations
9
€/mln
100% Pro quota 100% Pro quota
REAL ESTATE SALES NPL RECOVERIES
NAV 12/2008
Net Asset Value as of June 2009
10
3.311.4
Real Estate NAV at 100% (€/bn) Real Estate NAV Pro quota (€/bn)
As of June 2009, unrealized capital gain (Market Value – Book Value) is approximately 200 €/mln with Real Estate NAV (Market Value – Bank Debt) of approximately 1.2 €/bln.
3.73.9
3.1
Book ValueBook Value Mkt Value Net Debt NAV
Participated AUM RE
1.1 SHL
2.7
Mkt Value Net Debt NAV 06/2009
0.4 SHL
10.3
1.24.4
0.8
1.2
0.8
Unrealized Capital Gain 0.2
14.713.9
Pirelli Group 1H’09 Key Messages
Pirelli Tyre Results
Pirelli Real Estate Results
Appendix
Pirelli Group Financial Review
Pirelli Eco Technology Results
11
Agenda
Asset allocation by Products / Countries (Market Value)
o/w Real Estate
Real Estate 15.1
NPL 1.7 NPL 1.9
Real Estate 15.4
Poland 1%
Germany 49%Germany 49% Italy 50% Italy 50%
Of which participated 14.7Of which participated 15.0
Market Value June 2009: 16.8 € bln Market Value Dec. 2008: 17.3 € bln
12
o/w Real Estate
Poland 1%
(€/mln)
(€/000)
Jun-09
AUM participated Real Estate – 100%
PRE Quota Passing Rent Passing Yield Vacancy Book Value Market Value Net Financial Position Of which Net Debt
Commercial Core Italy 90,758 5.7% 9.7% 1,592,340 1,722,030 1,132,574 1,098,676Tecla Fondo Uffici 45.0% 40,499 5.6% 8.6% 725,280 725,280 502,923 502,923Fondo Cloe 18.6% 26,959 6.9% 11.2% 390,224 500,800 226,804 226,804Fondo Retail & Entertainm 31.6% 23,300 4.9% 13.1% 476,837 495,950 402,847 368,949
Commercial Yieding Italy 178,676 7.0% 6.2% 2,549,786 2,733,885 1,432,114 1,367,749Fiprs 22.0% 21,249 8.2% 0 259,309 303,300 206,973 193,823Tiglio 1 12.9% 13,978 6.9% 37.8% 201,999 219,300 121,554 121,554Raissa 35.0% 23,917 6.8% 0 351,830 359,810 194,115 164,441Olinda Fondo Shop 11.8% 38,389 6.6% 3.1% 578,870 638,990 293,363 293,363Dolcetto Tre S.r.l. 33.0% 1,426 10.4% 0.0% 13,675 20,180 9,171 9,171Progetto Perugia 100.0% 1,587 4.8% 1.7% 33,138 33,700 -Armilla 2.3% 16,790 7.5% 0.0% 224,970 238,700 133,985 133,985Spazio Industriale Fondo (Portafoglio) 22.1% 42,330 7.2% 1.9% 585,119 608,020 313,127 313,127Fo. Hospitality & Leisure 35.0% 9,012 8.3% 0.0% 108,653 114,620 100,646 79,105Italia Turismo 16.3% 9,998 5.2% 0.0% 192,223 197,265 59,179 59,179TOTAL Italy 269,433 6.5% 6.9% 4,142,126 4,455,915 2,564,688 2,466,426
Commercial Core Germany 118,690 6.2% 0.0% 1,925,333 1,936,809 1,336,148 1,223,491
Mistral 35.0% 9,500 6.3% 0.0% 151,479 161,110 114,542 99,655Highstreet 12.1% 109,190 6.2% 0.0% 1,773,854 1,775,699 1,221,606 1,123,836
Commercial Germany 169,316 7.0% 1.3% 2,414,096 2,421,800 2,639,774 2,499,478
Highstreet 12.1% 162,144 7.1% 1.0% 2,280,869.838 2,286,490 2,524,164 2,398,205Mistral 35.0% 7,172 5.4% 10.8% 133,226.194 135,310 115,609 101,273
Residential Yielding Germany 190,624 6.9% 6.0% 2,768,410 2,833,865 2,615,151 2,262,949DGAG 40.0% 70,429 7.5% 3.6% 934,494.972 979,237 843,268 730,428BIB 40.0% 102,152 6.6% 7.1% 1,557,380.44 1,565,198 1,534,587 1,335,138Small Deal 49.9% 18,044 6.5% 9.1% 276,535.011 289,430 237,296 197,382
TOTAL Germany 478,631 6.7% 4.0% 7,107,839 7,192,474 6,591,073 5,985,918
INCOME PORTFOLIO 748,064 6.6% 5.0% 11,249,965 11,648,389 9,155,761 8,452,344
Residential Small Office House Office ITA 21,056 n.m. n.m. 1,057,852 1,212,107 899,508 745,660
Development ITA 2,401 1,328,085 1,418,230 1,108,793 928,253
Development Germany 8,121 163,753 187,570 138,197 138,197
Development Poland 176 140,785 182,415 122,173 62,567
OTHER PORTFOLIO 31,755 2,690,475 3,000,322 2,268,671 1,874,678
GRAND TOTAL 779,819 13,940,440 14,648,711 11,424,433 10,327,021
13
AUM participated Real Estate – pro-quota(€/000)
Passing Rent pro-quota Passing Yield Vacancy Book Value pro-quota Market Value pro-quota Net Financial Position Of which Net DebtProquota
Commercial Core Italy 30,602 5.6% 9.4% 549,638 576,245 410,169 389,407Tecla Fondo Uffici 18,225 5.6% 8.6% 326,376 326,376 233,452 233,452Fondo Cloe 5,014 6.9% 11.2% 72,582 93,149 42,185 42,185Fondo Retail & Entertainm 7,363 4.9% 13.1% 150,680 156,720 134,532 113,771
Commercial Yieding Italy 35,969 7.0% 4.0% 516,166 548,963 300,978 277,894Fiprs 4,675 8.2% 0 57,048 66,726 55,566 50,408Tiglio 1 1,802 6.9% 37.8% 26,038 28,268 15,959 15,959Raissa 8,371 6.8% 0 123,140 125,934 67,940 57,554Olinda Fondo Shop 4,530 6.6% 0.9% 68,307 75,401 34,681 34,681Dolcetto Tre S.r.l. 471 10.4% 0.0% 4,513 6,659 3,027 3,027Progetto Perugia 1,587 4.8% 1.7% 33,138 33,700Armilla 386 7.5% 0.0% 5,174 5,490 3,028 3,028Spazio Industriale Fondo (Portafoglio) 9,363 7.2% 1.9% 129,428 134,494 69,278 69,278Fo. Hospitality & Leisure 3,154 8.3% 0.0% 38,028 40,117 35,226 27,687Italia Turismo 1,631 5.2% 0.0% 31,352 32,174 16,272 16,272TOTAL Italy 66,571 6.2% 5.5% 1,065,804 1,125,208 711,146 667,301
Commercial Core Germany 16,434 6.2% 0.0% 266,008 269,515 253,886 214,814
Mistral 3,240 6.3% 0.0% 51,666 54,951 39,121 24,762Highstreet 13,194 6.2% 0.0% 214,342 214,565 214,765 190,051
Commercial Germany 21,468 6.5% 1.5% 328,069 329,480 320,878 274,703
Highstreet 19,592 7.1% 1.0% 275,607 276,286 276,688 244,848Mistral 1,875 3.6% 10.8% 52,462 53,194 44,191 29,855
Residential Yielding Germany 78,044 7.0% 6.1% 1,119,503 1,145,958 1,056,785 904,411
DGAG 28,172 7.5% 3.6% 373,798 391,695 337,307 280,284BIB 40,861 6.6% 7.1% 622,952 626,079 613,835 535,524Small Deal 9,012 7.3% 9.1% 122,753 128,184 105,643 88,603TOTAL Germany 115,946 6.8% 5.2% 1,713,579 1,744,953 1,631,549 1,393,928
INCOME PORTFOLIO 182,517 6.6% 5.3% 2,779,383 2,870,161 2,342,695 2,061,229
Residential Small Office House Office ITA 6,857 n.m n.m 356,642 414,423 294,010 242,384
Development ITA 600 428,885 456,670 368,967 297,137
Development Germany 3,592 70,313 81,154 59,106 59,106
Development Poland 60 54,058 69,136 48,968 25,017
OTHER PORTFOLIO 11,109 909,897 1,021,382 771,051 623,644
GRAND TOTAL 193,626 3,689,280 3,891,543 3,113,746 2,684,873
Jun-09
14
Net invested Capital
Italy0.8
Germany0.3
Real EstateInvestment
0.8
Services0.3
InvestmentItaly0.6
InvestmentGermany 0.2
1.2
1.1 1.1
Net Invested Capital of 1.2 € bln, of which:
Approx. 0.8 € bln in Real Estate and for 0.3 € bln in the service platform
Total Net Invested Capital in Italy – NPLs included – is approx. 75% of the total
Market ValueParticipated Real Estate Asset
under Management
Services Ita 0.2
Services Ger 0.1
Total NIC NIC excluding NPL
NPL 0.1
Germany& Poland 7.6 Italy 7.1
€/bln
15
Consolidated Balance Sheet
(*) Capital Increase of 399,3 €/mln gross of closing costs
16
Fixed Assets 583.0 589.1 795.3- of which participations 406.7 405.7 608.5- of which goodwill 137.0 137.8 141.7
Net Working Capital 122.4 133.1 183.1
Net Invested Capital 705.3 722.2 978.4
Net Equity 308.2 707.5 366.4 657.1- of which Group Net Equity 302.3 361.7 650.1
Funds 59.8 66.3 50.8
Net Financial Position 337.3 289.5 270.5- of which shareholders' Loans (491.1) (572.3) (539.2)
Total Sources 705.3 722.2 978.4
NFP excluding shareholders' Loans 828.5 429.2 861.8 809.8NIC excluding shareholders' Loans 1,196.4 1,294.5 1,517.6
Gearing 2.69 0.61 2.35 1.23
1H’09 2009 Post cap. increase
2008 actual 1H’08
€/mln
Consolidated Net Cash Flow
17
€/mln
Ebit before restructuring costs (2.0) 20.3Depreciation 3.6 4.3Change in investments (37.5) 9.3
Change in other fixed assets (0.7) (15.0)
Change in NWC, Funds and other 15.7 (22.7)
Free Chas Flow (20.8) (3.8)
Impact from Facility Mgm disposal 0.0 102.4Restructuring costs ( provisioned in 2008) (23.6) (7.8)Interest Income /expenses and Taxes (3.4) 13.5Cash Flow before dividends (47.8) 104.3Dividend paid 0.0 (85.1)
Net Cash Flow (47.8) 19.2Capital Increase 0.0 0.0Treasury shares purchase/sales 0.0 0.0
Net Cash Flow (47.8) 19.2
1H’081H’09
Financial situation Vehicles and participated Funds
18
100%13.0
Euro / bn3.7
0.50.5
2.7
SPVs DEBT Pro-Quota PRE
Shareholders’Loans
NPL RE Assets
2.685 133248
771
High Street 1,533415
2009 2010 2011 Ahed
MA
TUR
ITY
RE Assets
Ero B o M??
Euro / mln
Banks Debt characteristics:
Average maturities closed to 3.2 years
Average Spread (*): 178 bps (pro-quota PRE 154 bps)
81% hedged against interests rate change
Average leverage (LTV): Real Estate 69% of which Italy 59% and Germany 80%
Pro quota recourse debt approximately 46.5 mln/€
(*) Excluding NPL e subsidies.
(€/mln)
NFP evolution excluding shareholders’ loans
861.8
828.5
(89.2)
16.0
23.6
NFP December
2008
PFN Dicembre 2008Equityinjectionsto vehicles
Layoff
NPL ( 20% sales of C.S
and refinincing.to
Calyon)
NFP June 2009
429.2
NFP June 2009 (Post Cap.
increase) (*)
27.5
Investments
(11.2)
Working Capital & Others
898.4
PFN Mach2009
(*) Capital Increase of 399.3 € mln gross of closing costs
19
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