Board of Management’s commentary

Consumer spending across our four markets has continued to be very robust during the first half of 2023 despite rising living costs, high inflation and increasing interest rates. The portfolio saw strong retail sales growth of 9.2% compared to H1 2022, while footfall increased 6% over the same period. All retail segments showed positive sales growth with the outstanding performers being F&B (23.0%), sport (14.8%), home goods (12.7%) and health & beauty (11.1%). The important fashion and shoe sector also reported a solid 5.6% growth. Our 24 shopping centres continue to benefit from their carefully selected retail mix including groceries and necessity based retail, together with a broad range of services to meet the everyday needs of their communities.

Rental growth for the 12 months to 30 June 2023 was 8.2% due mainly to significantly higher rental indexation. 98% of H1 rents have already been collected, indicating that there has been a full pass through of indexation to our tenants who are generally trading well from an affordable rental base and a low OCR, which still averages only 9.5%. Our leasing teams continue to report healthy levels of tenant demand for our shopping centres, negotiating 235 lease renewals and relettings during the 12-month period ended 30 June 2023, providing an overall rental uplift of 6.7%. H1 alone saw an uplift of 7.1% from 112 lease transactions.

Our 30 June valuations decreased by 0.2% since the properties were last valued six months previously. Despite significantly higher net operating income, this relatively small decrease in value was due to a weaker Swedish krona and to the adoption by the valuers of higher initial or exit yields and higher discount rates with the overall EPRA net initial yield increasing from 5.5% to 5.7%. Higher yields are a reflection of an investment market with relatively low transactional volumes and characterised by cautious investors, pricing uncertainty, increasing interest rates and rising borrowing costs.

In what is a challenging financing environment, we were pleased to announce the completion of our 2023 refinancing programme already in June following the refinancing of the SEK 675 million (circa €57 million) loan on Bergvik shopping centre, Sweden. This new facility with Nordea Bank qualifies as a green loan and is structured as an additional line to the existing loan with Nordea signed in March 2023. These loans amounting to SEK 1.875 million (circa €160 million) have been extended to mature in July 2027 and will be hedged for at least 70%.

The average interest rate as per 30 June 2023 increased to 2.9% from 2.4% at 31 December 2022, as a result of the steady and significant increase in both the Stibor and Euribor rates, which impacted the unhedged part of the loan portfolio. The Company therefore expects its interest expenses to increase during the year but to remain at acceptable levels, with an average overall interest rate for the portfolio slightly above 3%, providing there is no change to current market circumstances.

Assuming no major deterioration in the macro-economic environment, in particular further spikes in interest rates, we confirm the guidance provided with the publication of the 2022 annual results in March 2023 and expect the direct investment result for the year 2023 to be between €2.25 and €2.35 per share.

Operational & financial review

Retail sales

During H1 2023, our four markets continued to see strong retail sales growth which overall was 9.2% higher than H1 2022 and 11.7% above pre-pandemic H1 2019.

All our 24 shopping centres contributed to the sales growth which was positive across all retail sectors with particularly strong performances from health & beauty (11.1%), home goods (12.7%) and sport (14.8%). The outstanding performer was again F&B (23%), building on the resurgence we reported in

Q1 and with a broad range of new brands, concepts and formats establishing in our centres. Footfall also continued its upward trend and was 6% higher than in H1 2022.

Like-for-like retail sales by country*

*Excluding extensions/redevelopments.

Rental growth

Like-for-like (same floor area) rental growth for the twelve months ended 30 June 2023 was 8.2%, mainly resulting from rental indexation.

Rental growth

Like-for-like rental growth is calculated based on 12-month data and excludes the impact of acquisitions, disposals and development projects to provide an accurate figure for comparison. It includes the impact of indexation, turnover rent, vacancies and leasing activity.

Renewals and relettings

Strong leasing activity has continued over the last 12 months with 235 leases renewed or relet, achieving an overall uplift of 6.7%. 173 of these transactions were lease renewals signed with existing tenants, achieving a 6.3% rental uplift. The remaining 62 lease contracts were signed with new retailers establishing in our shopping centres, improving the tenant mix, and producing a higher rental uplift of 7.9%, confirming the strong demand from new brands to open in our centres. H1 alone saw an uplift of 7.1% from 112 lease transactions.