OVG projectontwikkeling
S U STA I N A B L E G R OW T H Annual Report 2006
SUSTAINABLE GROWTH
Annual Report 2006 Postbus 3413, 3001 KK, Rotterdam Telefoon 010 90 87 77 010 90 87 99 Fax E mail info@ovg.nl Internet www.ovg.nl
Annual report | 006
“The earth belongs to the living. No man may oblige the lands he owns or occupies or those that succeed him in that occupation to debts greater than those that may be paid during his own lifetime. Because if he could, the world would belong to the dead and not to the living.� - Thomas Jefferson
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Annual report | 2006
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Contents 1
Profile
7
2
Major developments in 2006
9
3
Key statistics
11
4
Clients & Projects
13
5
Executive Board
25
6
Mission and strategy 6.1 Mission 6.2 Market trends 6.3 Strategy 6.4 Human resource management 6.5 Social Responsibility
27 27 31 39 41 43
7
Executive Management Report
48
8
Financial report 2006 8.1 Consolidated balance sheet (after appropriation of result) 8.2 Consolidated income statement 8.3 Consolidated cash flow statement 8.4 Notes to the consolidated financial statements 8.5 Notes to the consolidated balance sheet 8.6 Notes to the consolidated income statement 8.7 Company balance sheet (after appropriation of result) 8.8 Company income statement 8.9 Notes to the company balance sheet
53 53 54 55 57 62 67 69 70 70
9
Supplementary information 9.1 Statutory rules concerning appropriation of result 9.2 Statutory provisions 9.3 Auditors’ report
75 75 75 75
Auditors’ report Colophon
76 78
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01
Profile
OVG Projecten B.V. (hereafter referred to as OVG) is one of the leading real estate developers in the Netherlands. Visionary, ambitious and client-driven, our approach to the development process goes well beyond the obvious. OVG helps to shape the future of our clients and the environment in which they operate. We formulate comprehensive real estate strategies that facilitate our clients, with integrated solutions that meet current and foreseeable needs. By striking a proper balance between business demands and environmental sustainability, OVG also helps to safeguard the environment for future generations. We develop sustainable projects that enhance the location and allow our clients to prosper. By acting in accordance with our vision, OVG offers clients refreshing perspectives that bridge their present and future real estate needs. We are always a step ahead of the competition in implementing tomorrow’s solutions today. We work in close cooperation with governmental, corporate, environmental and cultural organizations. OVG bridges the traditional gap between developers and the environment in which they operate. Together with governmental authorities, we remove bottlenecks and contribute towards a sustainable economy. Landmark projects We have already demonstrated the strength of our client approach in the development of the acclaimed Rotterdam Maastoren. OVG was also called in when a coalition of cultural institutes and local governmental organizations needed a partner with the know-how to redevelop Las Palmas, a landmark building at Kop van Zuid in Rotterdam. The result: a contemporary building, that will house both the renowned Dutch Photo Museum, a variety of galleries and several commercial organizations. Our solution reflects and reinforces the proud industrial heritage of the location, while simultaneously enhancing its recreational, cultural and economic value.
“When we design offices, we design a life support system for people who work, not a work support system for people who don’t have a life” William McDonough
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Objectives and ambitions At OVG, customer satisfaction has top priority. Still, our strong focus on client-wishes is only one of the pillars on which we’ve built our success. Our environmental awareness, our ability to improve on pre-existing conditions, and our ingenuity to set new standards were also indispensable. Together, these factors enable us to create sustainable solutions that offer our clients unlimited possibilities for expansion and maximize the location’s potential. In the past year OVG has reinforced its reputation as an innovative developer. In 2007, we fully expect to continue on this path by capitalizing on new opportunities - both in the Netherlands and abroad. Global partner OVG strives to evolve into a global provider for corporate real estate solutions. This goal will be achieved by staying true to our client driven approach and extrapolating our unique solutions to the requirements of multinational companies. By continually strengthening and broadening our international network, OVG seeks to sustain its healthy growth rate and further increase profitability. In 2007, we expect to expand our portfolio of prominent partnerships and initiate long-term relationships with additional leading organizations. Independent and transparent OVG is a privately owned company and not listed on any stock exchange. Because of this status, we are not required to publicize the annual report including the director’s report. We choose to do so however, because we value transparency and welcome comparisons between ourselves and other leading developers. We also wish to highlight our ongoing projects progress and the continuing development of our organization.
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Major developments in 2006
02
Autonomous revenue increased to € 183.435.527. In 2005 the autonomous revenue was € 111.365.599. Earnings before tax increased from € 14.769.136 in 2005 to € 26.776.257 in 2006. Net earnings increased from € 10.341.136 to € 20.244.935. Staff has increased from 27 to 40 employees (as of December 31, 2006). Creation of an in-house training program: OVG Excellence. Positive developments in European and global markets; indications of a recovering Dutch office market. Favorable economic developments have triggered corporate investment in ‘fit for purpose’ office demands. Continued low occupancy rates for old office buildings. It is increasingly difficult to find new tenants for these buildings, primarily due to the focus on high quality surroundings. The Randstad, especially the cities of Amsterdam, Utrecht, The Hague and Rotterdam, remains the most vibrant office environment.
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04
Clients & Projects
ABB
Hapag Lloyd
AKD Prinsen Van Wijmen
KPN
ARCADIS
Lidl
Baas Groep
LogicaCMG
Ballast Nedam
Ontwikkelingsbedrijf Rotterdam
BAM/BAM Utiliteitsbouw
Nederlands Fotomuseum
BDO
OW Bunker
Beeldfabriek
RGD
Boele en van Eesteren
Royal Haskoning
BP Nederland
Samskip
Centric
Sound of Data
Deloitte
Stichting Ouderenhuisvesting Rotterdam
Dienst Sociale Zaken en Werkgelegenheid
Sylis
Direct Wonen
Unit4Agresso
Eastman Chemicals
UWV
Gemeente Rotterdam
Vrije Ruimte
Gouden Gids
VVAA
Hamburg S端d
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De Rotterdam Vertical City designed by Rem Koolhaas Rotterdam Wilhelminapier
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De Maastoren Highest building in The Netherlands Rotterdam Kop van Zuid
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De Lotus High quality area development Rotterdam Alexander
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De Haagsche Zwaan Landmark building and gateway to The Hague
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KPN gebouw Transparant building a symbol for KPN Amsterdam Telepoort
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From left to right: Bas van Holten, Coen van Oostrom, Erik van de Graaf and Willem Middelburg. 24 | OVG Projectontwikkeling
Executive Board
05
The overall management of OVG is entrusted to its Executive Board. The Board operates under the chairmanship of the Chief Executive Officer. The members of the Board have collective powers and responsibilities. They are jointly accountable for the management of OVG projectontwikkeling, formulating and implementing corporate strategies and policies and, ultimately, for achieving the desired results.
COEN VAN OOSTROM Chief Executive Officer and chairman of the board
ERIK VAN DE GRAAF Vice president Real estate development and construction
Responsibilities and core tasks • Chairman of the management board • Strategy • Property outsourcing • Corporate communication and branding • Corporate stewardship
Responsibilities and core tasks • Project development • Selecting and coordinating (sub)contractors • Overseeing construction
WILLEM MIDDELBURG Chief Financial Officer
BAS VAN HOLTEN Vice president Acquisitions
Responsibilities and core tasks • Finance • Control and accounting • Information technology • Business processes • Human resources management • Facility management
Responsibilities and core tasks • Project and property acquisition • Leasing • Investments • Sales
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As announced in the annual report 2005, debates over a change in structure of the company to a more holding and operarating structure were already started in 2005. For reporting and tax reasons such a structure is preferable, but it also gives the company a good legal structure to grow.
HNOG Beheer BV
CPG van Oostrom Beheer BV
8%
84,5%
Evan de Graaf Beheer BV
7,5%
OVG Projecten BV
OVG Projectontwikkeling BV
OVG Projecten XXIV BV (will be OVG Building Sites)
OVG Projecten II BV OVG Projecten III BV etc.
OVG Projecten XVI BV (will be OVG Property Management BV)
100%
50%
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Exploitatiemaatschappij BV Marconistraat 2
Businesspark Gouda BV
Mission and strategy
06
6.1 MISSION Our mission is as easily summarized as it is ambitious: OVG strives to excel in the development of corporate real estate and to continuously exceed client-expectations. We seek to reinforce and capitalize upon our leading position by focusing on our core values: Company Excellence We strive to be the best in everything we do. Ecstatic Customers We only succeed when our customers are more than satisfied. Everyone an Entrepreneur We always think a step ahead for our clients and their environment Sustainability We dare to shape strategies with sustainable real estate developments. Honesty Trust is the backbone of our customer focus.
“We have a simple philosophy. Make sure the client’s expectations are met financially, recognize that any project is successful through a team of people, and treat those people with respect.” Danny Meyer
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Our primary objective for 2007 is to sustain growth, both in terms of turnover and profitability. By stimulating our staff to excel and advancing the process of professionalization, we fully expect to meet or exceed short term targets and long term goals. Customer focus and environmental responsibility remain our key strengths. Redefining the boundaries In 2007, we set out to redefine the boundaries between office buildings and their surroundings, opting for harmonious designs that seamlessly integrate client wishes and offer a multidimensional architectural experience. In short, OVG offers integrated solutions for a multitude of corporate challenges. Solutions that have a positive environmental impact. Solutions that will benefit both current and future generations. And solutions that are perfectly attuned to our clients’ ambitions. Alert and responsive Clients profit from an alert decision making process. OVG strives to optimize development by minimizing the time needed to transform real estate wishes into working solutions. In order to facilitate this process, we pursue comprehensive partnerships with complementary organizations and fully integrate the development chain. Because market demands change frequently, we closely monitor domestic and international markets. This enables OVG to anticipate changing customer demands and quickly incorporate new concepts into our overall philosophy. OVG recognizes four distinct trends that require strategic choices: • • • •
Globalization Environmental awareness Desire for aesthetics Property outsourcing
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6.2 MARKET TRENDS 6.2.1 Globalization of the marketplace As the process of globalization continues, international companies are increasingly entering into partnerships with service providers that exemplify best practices on a global scale. OVG is one such partner. We strongly feel that the process of globalization is irreversible and, provided that participants act responsibly, will benefit individuals, corporations and (ultimately) national and international economies. As it is, globalization is one of the driving forces behind the world’s economy and will radically change the way organizations do business in the years to come. Internationalization leads to increased competition, but it also means that new markets are developed. In order to survive in a highly competitive, international environment, companies must maximize their efforts. New players, new rules and new market demands promote transparency and require organizations to be innovative and efficient. These qualities are among OVG’s core strengths. They are the driving force behind our revolutionary business model that has been highly successful in the domestic market, and will prove similarly successful abroad. International network OVG intends to capitalize on international opportunities by adding new services to our portfolio that cater specifically to the demands of multinational companies. In recent years, OVG has established a wide, international network that can swiftly and adequately be mobilized and encompasses leading organizations in a number of countries. Counteracting disadvantages Whilst globalization offers many opportunities, we fully realize that there is also a downside: initially, not all economies will benefit at the same rate. In order to counteract these difficulties, OVG stimulates a steady growth of the economy, wherever and whenever we can. We subscribe to the notion that taking responsibility for one’s own actions is an essential aspect of global corporate citizenship.
“Globalization presumes sustained economic growth. Otherwise, the process loses its economic benefits and political support.” Paul A. Samuelson
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6.2.2 Environmental awareness: people, planet and profit Global warming is likely to be the biggest threat mankind has ever faced. Higher temperatures may have devastating effects: extended droughts, melting icecaps, massive floods, an increase in diseases and the potential loss of entire ecosystems. Although there are no simple solutions, we do know that CO2, produced mainly by power plants and vehicles, is largely responsible for the global heating process. The atmosphere’s concentration of carbon dioxide (CO2) has increased by over 30% during the last 250 years. And this increase is largely due to human activity. 1 On a more positive note, we do know how to reduce emissions: technology and political determination can still stem the tide. OVG is an environmentally responsible company. Global warming is not an abstract threat - it’s a threatening reality. At OVG, we take our responsibility as a corporate citizen seriously. We feel a strong accountability towards future generations and we do everything we can to spread awareness and minimize detrimental effects to the environment. We aspire to help global citizens to realize their full economic potential, whilst still meeting and exceeding the ecological demands of both current and future generations. In addition, OVG actively promotes alternative energy sources and contributes to a variety of initiatives that target the reduction of CO2 rich emissions. Our contribution During the development of our own projects, determining the environmental impact is an integral part of our methodology. OVG opts for solutions that minimize these effects and aims for sustainable envi-ronmental and social benefits. By investing in a responsible, environmentally sound and social manner, we achieve the best possible outcome for our partners, our stakeholders, our business, and society at large. OVG believes that it is possible to make a profit whilst still conserving the planet we all inhabit.
“We generate our own environment. We get exactly what we deserve. How can we resent the life we’ve created for ourselves? Who’s to blame, who’s to credit, but us? Who can change it anytime we wish, but us?” Richard Bach 1
(source: Robert Socolow, Roberta Hotinski, Jeffery B. Greenblatt, and Stephen Pacala, Environment Volume 46, Number 10, pages 8 -19). | 33
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6.2.3 Aesthetic experience We live in an age in which the visual language has become increasingly more important. Largely dictated by the fashion and advertising industries, corporate identity is invariably translated into an aesthetic experience. Even established company logos are now subject to change and efficient branding is all about redefining identities. While the real estate market may at first glance seem immune to these trends, the opposite is true: modern office buildings are designed according to specific client demands and perfectly reflect the company’s identity. Will buildings be the cultural icons of tomorrow? As companies strive to maximize their visibility and presence, they have come to realize the potential for translating their brand identity into their office location and façade. OVG has risen to the challenge of creating real estate that is both aesthetically pleasing and functional, and always reinforces the identity of our clients. Individual designs By fueling the public desire for visually appealing commercial architecture, OVG will be able to continue developing projects that help our clients distinguish themselves and set them apart from competitors. In the coming years, we will team up with frontrunners in innovative developments of visual presentations, such as Philips and Apple. Visual innovations aside, we will also continue to work with the most renowned architects in the world, ensuring that the overall building quality is guaranteed. By combining fresh, innovative ideas with sound architecture, OVG will continue to create landmark projects that will be admired by generations to come.
“Fashion is in the sky, in the street, fashion has to do with ideas, the way we live, what is happening.” Coco Chanel
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6.2.4 Property Outsourcing
05
More and more organizations are focusing on their core-business and outsource peripheral activities. In addition to this ongoing process, a second trend needs to be recognized. In many countries, especially in Western Europe, governments have followed in the footsteps of their commercial counterparts. They, too, have begun to outsource non-core activities. This process of privatization offers ambitious, internationally oriented real estate developers new opportunities, since developing real estate is often a prime candidate for outsourcing. Managing large real estate portfolios requires a combination of highly specialist skills. Skills that OVG has developed and fully intends to make available to multinationals and governments alike. By acquiring ground positions and redeveloping them in accordance with governmental guidelines, we will be able to economically reactivate entire regions and contribute directly to the wellbeing of its inhabitants. Capitalizing In 2007, OVG intends to capitalize upon these developments. Our ultimate goal is to become the preferred partner of governments and international companies alike. We can attain this goal by staying abreast of market demands, analyzing laws and regulations, and keeping a close eye on specific customer demands. The international trend toward privatization requires partnerships and service providers that have intimate knowledge of local rules and regulations. OVG is that partner.
“The broad conclusion from tons of academic research is that (the) private sector does things better than government. In a lot of these cases privatization is the only thing to do because (large state projects) require a lot of capital and government entities usually have limited access to capital.� Sam Peltzman
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6.3 STRATEGY
05
Our primary objective within the domestic market is to strengthen our organic growth. This strategic course, on which we embarked in 2005, had yielded robust financial results. OVG further improved its margins and obtained attractive ground positions through acquisitions. Our focus on gradual growth has also allowed us to make excellent progress on an international scale. Since 2005, OVG has focused on penetrating new European markets. Our client-driven approach has been well received and will be enhanced even further in years to come. OVG strives to evolve into a global partner for international companies by continually investing in customer relations. In the coming years we will assign a dedicated account manager to all of our international clients. These account managers will map out specific client needs and keep close track of local opportunities and developments. Changing laws and regulations, as well as shifts in political focus, have an immediate impact on the real estate market. OVG seeks to positively influence the decision making process, striving for an optimal balance between our clients wishes, socio-economic and environmental considerations. Our employees are actively encouraged to broaden their horizons and formulate ideas that help OVG become an even better corporate citizen. This conscientious and consistent approach helps us to safeguard our organizational integrity. Exploring new markets OVG is one of the leading developers of commercial real estate and has rapidly evolved into a major competitor within the field of retail development. In 2007, we will reinforce our reputation as a client-driven, responsible developer. We will not only acquire additional ground positions; we will also mark our position as an innovative developer of infrastructural projects. This relatively new market offers immense opportunities that we intend to take advantage of by teaming up with governmental organizations. Participation in Public Private Partnerships enables OVG to contribute directly to the realization of substantial infrastructural projects, strengthening both our brand name and our overall strategic position.
“A satisfied customer is the best business strategy of all.� Michael Leboeuf
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05
6.4 HUMAN RESOURCE MANAGEMENT Redefining the standard in property development requires an innovative vision of the entire development chain. It even calls for a new kind of professional: people who combine indepth knowledge with contemporary entrepreneurial and interpersonal skills. This is why OVG actively stimulates its staff to continually update their knowledge and hone the soft skills that are necessary to maximize their value for our clients. We have developed a thorough training program that allows our employees to improve and fully achieve their potential: the OVG Excellence program. Headed by a qualified HRM manager, both external experts and experienced OVG staff members work together to provide our employees with the opportunity to enhance their skills. The OVG Excellence program covers specialized real estate issues and interpersonal skills issues. These are visualized in the OVG Excellence program house. Since implementing this program and professionalizing our HRM policies, OVG can guarantee that all necessary competencies are accounted for. In addition, our improved HRM procedures ensure that when we expand our staff, we attract promising young potentials and highly skilled professionals.
Human Project management
Construction
Design
Urban Planning
Finance
Acquisition
Leasing
Sales
OVG General
“Start with good people, lay out the rules, communicate with your employees, motivate them and reward them.If you do all those things effectively, you can’t miss.” Lee Lacocca
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6.5 SOCIAL RESPONSIBILITY
05
OVG always opts for a proactive approach. Even with regard to social issues, leaning back and waiting for problems to solve themselves goes against our grain. We wish to be involved, and to contribute directly to the advancement of society. Indeed, we feel that our social responsibility starts at our doorstep. We have formulated three distinctive fields in which we wish to act, and in which we fully expect to achieve positive results. Climate Change One of the biggest threats that mankind faces is global warming. While temperatures are reaching record highs, oil reserves are dwindling and the demand for oil is on the rise. This situation has resulted in soaring oil prices and a search for environmental unfriendly developments of energy supplies. These developments harm the most vulnerable members of our global society: the poor. In order to counteract this process, immediate action is required. If we do not take decisive action now, the world’s CO2 levels will reach critical heights and permanently alter the climate. Fortunately, there are a variety of ways to mitigate this threat. OVG became part of the solution by developing ‘green’ business parks, which reduce the emission of CO2. Moreover, we collaborate with a variety of NGO’s that promote CO2 neutrality, and we support organizations that work on developing a permanent solution to the problem of global warming. As a company, OVG strives to be CO2 neutral by the end of 2007.
“Great companies look at where they do business and think not only that it’s necessary to do business, but it’s also necessary to be a good corporate citizen and support where they live.” Steve Davis
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Poverty and War OVG is associated with The Millennium Promise, lead by Jeffrey Sachs, which strives to end extreme poverty by 2025. In order to reach this ambitious goal, The Millennium Promise focuses on uniting individuals, governments, corporations and NGO’s that can jointly address both the causes and the symptoms of poverty. The Millennium Promise is characterized by a result-driven, bottom-up approach, that reflects OVG’s own vision and truly facilitates those people that need help most.
05
Through the Millennium Villages project, impoverished villages are given the means to transform themselves and meet the Millennium Development Goals by 2015. The project is highly pragmatic, providing the local community with proven, powerful and practical technologies. In cooperation with The Millennium Promise, OVG (and partners) has adopted a village in Africa and, in close cooperation with local organizations, the UN and The Millennium Promise, invests in health, food production, education, access to clean water, and essential infrastructural programs. This particular project has reversed the process of impoverishment and the local community is now set on a path that will allow them to become a selfsustaining economy. OVG also actively participates in the War Child program. Sadly, more and more children become traumatized by the devastating effects of war. At this moment, War Child Netherlands is active in 12 countries that are home to young victims of war. OVG is an active fundraiser for the War Child foundation. Cultural Enrichment Modern society is composed of an amalgam of cultures. Individualism is the norm however, and people often regard members of different cultures with a certain suspicion. It often seems that instead of emphasizing unifying factors and celebrating crosscultural achievements, society focuses solely on negative aspects. OVG takes a different approach and strives to coalesce different cultures into a harmonious society. In our opinion, art is an instrument that can harmonize people and unite cultures. In line with our own entrepreneurial and spirited way of thinking, OVG is main sponsor of the Princes Christina Concourse. This Concourse promotes classical music and jazz among young people in the Netherlands through a variety of projects and events. The foundation is best known for organizing an annual competition that provides young and talented musicians with a unique platform and a large audience. Selected talents are rewarded with a wide range of educational prizes, including professional coaching and the opportunity to enter a conservatory school of music. The Concourse maintains close relations with primary and secondary schools and reaches almost a million youngsters each year.
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OVG Veerhaven Concert At OVG, we care about our cultural heritage and actively promote classical music. Many people feel that they have to conquer a barrier before they are able to truly enjoy classical music. OVG helps by organizing the OVG Veerhaven Concert, held annually in the Rotterdam harbor. This unique open air concert boasts an impressive line-up and attracts prominent media coverage. Admittance is free of charge.
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Las Palmas OVG supports artistic endeavors in many ways. Sometimes by supporting talented musicians or by organizing inspirational events. Sometimes by developing property that houses museums, theaters, galleries, and cultural organizations. The Las Palmas building, home to the Dutch Photo museum, of which we are a founding member, is a large scale example of this approach. But we also support projects on a much smaller scale, such as the Hofplein Theater, that caters to the local community and incorporates a program for children who want to become professional actors.
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Executive Management Report
2006 was an excellent year for OVG. We achieved substantial organic growth and margins improved, resulting in better earnings and confirming the profitability of our diversified product portfolio. We reinforced our leading position in the office market by staying true to our client driven approach, and acquiring strategic ground positions. Our mission to redefine the real estate market received critical acclaim and was widely applauded by larger developers. Positive media coverage aside, we were especially gratified to be awarded the FD PropertyNL Award for best developer 2006 in the Netherlands. Being awarded this prestigious prize by an independent commission speaks volumes about our innovative qualities and client-driven approach. Our current portfolio is filled with exciting projects for a wide range of clients. Our selling points were also recognized when we signed a partnership with Bouwfonds MAB for the development of The Rotterdam in Rotterdam. This truly unique building of approximately 160.000 m2 gfa is designed by renowned architect Rem Koolhaas of the Office for Metropolitan Architecture (OMA). This bureau translated specific requirements into a distinguished architectural concept, aptly named “The Vertical City�. This project provides both public functions, such as a hotel and sporting facilities, housing opportunities, as well as office space: a city in and of itself. Project developer Bouwfonds MAB has been seeking ways to realize this project since 1998, but due to unfavorable market conditions they were only recently able to initiate the development phase. OVG decided in consensus with the municipality of Rotterdam to combine forces with Bouwfonds. Only a few months after this agreement came into effect, OVG and Bouwfonds managed to obtain a heads of agreement which has secured the development of this building. The Rotterdam is destined to become a national landmark building and OVG is proud to be a part of this project. The successful approach of OVG is also quantifiable in our client portfolio. OVG often develops multiple office locations for a single client, which enables us to make a lasting contribution to the overall ambiance of the larger cities in the Netherlands. This strategy will be extrapolated where our international expansion is concerned. In the city of Rotterdam, our developments grew with 67.172 m2 gfa which is 51% growth compared to 2005. In The Hague growth was at 26.362 m2 gfa, which is a growth of 276%. With the development of The Haagsche Zwaan, both technically and architecturally an astonishing building, and two additional developments in Rijswijk, OVG has solidly positioned itself in this city area. By providing a housing solution for Gouden Gids B.V. in the Jupiter Building (10.734 m2 gfa) and KPN (22.000 m2 gfa) OVG has also entered the Amsterdam market. We expect to expand our position in Amsterdam as soon as early 2007.
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06
07
The distinction between a good developer and one that strives for operational excellence becomes visible when a project is completed. At OVG, we not only recognize this distinction, but we act accordingly: we see it as our mission to perfect each aspect of the buildings we develop and complete our projects on time and within budget. The head office of VVAA (19,000 m2 gfa) in Utrecht was completed on time and without noteworthy delivery issues. The same applies to the office of Baas (7,000 m2 gfa) and Ballast Nedam (4,000 m2 gfa) in Rotterdam. When OVG entered into the market of retail development, we immediately made headlines with our plan to develop the Mega Mall in cooperation with Mc Mahon Development Group. Retail development offers great opportunities for our organization. Opportunities that will bear fruit in years to come. We are already collaborating with TCN Property Projects on the redevelopment of Goudse Poort in the municipality of Gouda. This project entails the development of a comprehensive retail and office location. In addition, we have submitted a proposal to develop a retail complex in Berkel en Rodenrijs. In order to satisfy and exceed our client’s needs for high quality office locations, OVG acquired a strategic location in the vicinity of Rotterdam (Vlaardingen). In the coming years, we will strive to acquire more strategic locations in the Randstad. These will provide us with the opportunity to realize business parks that match our standards: environmentally friendly, harmoniously balanced, and of the highest architectural quality. As a socially responsible company OVG is pleased to report significant progress in the perception of and approach to Public Private Partnerships (PPPs). We believe that the public sector will profit greatly from a collaborative partner such as OVG. Fortunately, this belief is shared by the public sector itself, and a renewed interest in PPPs, especially in cost-intensive sectors, such as infrastructure and real estate developments can be noted. In 2006, OVG was actively seeking out PPP-contracts, and we entered two European tenders for the Ministry of Defense and the Rijksgebouwendienst, albeit without direct positive results. Because we have absolute faith in the validity of our approach, OVG will continue to bid for PPP’s, especially where large, infrastructural projects are concerned. We also believe that the PPP partnership model will encourage sectorwide transparency. The only shortcoming we see, is that the current method of government tenders requires painstaking preparation and attention. This can effectively discourage suitable companies from bidding, and hence undermine the much sought after goals of efficiency and transparency.
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developments by type for 2006
completed developments by type in total
Industrial Offices
Industrial Offices Residential Retail
10%
2%
4%
25%
69%
90%
Rental agreements per region in total
Rental agreements per region for 2006
Amsterdam Den Haag Rotterdam Utrecht Other
Amsterdam Den Haag Rotterdam Other
5%
11% 8%
30%
6%
54%
11%
5%
70%
Signed rental agreements in GFA *
Completed Real Estate in GFA *
rented prognosis
completed expected
160000
250000
140000 200000
120000 100000
150000
80000 100000
60000
x 1000m2
40000
50000
20000
0 2003
2004
Note: * Gross floor area 50 | OVG Projectontwikkeling
2005
2006
2007
2008
0
2003
2004
2005
2006
2007
The redevelopment of Las Palmas is our crown-achievement of the past year. We are so pleased with the end result that we are relocating to the top floor of this landmark building in Kop van Zuid, Rotterdam.
06
The Las Palmas building was originally commissioned by the Holland Amerika Lijn (HAL), and has served a variety of purposes over the years. This iconic building is currently being redeveloped as a new cultural and commercial center. In order to accommodate our own housing needs, OVG is developing a unique penthouse office in this complex. After the renovation, Las Palmas will provide up to 22,000 m2 gfa of multifunctional office space. The penthouse will be 2,000 m2 gfa. For this project, OVG has teamed up with the prominent architect agency Benthem & Crouwel. They designed a redevelopment plan that reflects Las Palmas’ industrial heritage, whilst the new penthouse symbolizes the maritime character of Kop van Zuid in Rotterdam. The penthouse itself is an iconic feature that seemingly hovers over the supporting structure and has all the qualities to become a landmark in itself. Already 90% of the building is rented out to a variety of creative companies, including a restaurant runned by Herman Den Blijker. Because of the wide variety of challenging and amazing projects that we have lined up, we enter 2007 optimistically. Of course, we owe our success to the unrelenting efforts and dedication of our staff and employees. The quality of our personnel is the reason that OVG has booked solid results in the past year. That is why we wish to express our thanks to all our employees: your entrepreneurialism, client-focus and creativity are the basis for our continuing success as a company. And on behalf of the Board of Management, I would like to thank all of our customers, employees and stakeholders for your ongoing support.
Sincerely,
Rotterdam, March 23, 2007
Drs. C. P. G. van Oostrom (CEO)
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Annual report | 2006
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8.4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Activities OVG Projecten B.V. having its legal seat in Rotterdam, is engaged in development of real estate, mainly in the commercial market. In this respect OVG Projectontwikkeling B.V. represents the service organization for the projects of OVG Projecten B.V.. Group Structure Financial information relating to subsidiaries within the Group is included in the consolidated financial statements. The consolidated financial statements have been prepared in accordance with the accounting principles regarding valuation and profit recognition of OVG Projecten B.V.. In 2005, due to a difference of ownership of OVG projectontwikkeling B.V. and OVG projecten B.V., a combined annual report was published. The combined 2005 financial statements of OVG projectontwikkeling B.V. are used as comparatives to the 2006 financial statements. The financial information relating to OVG Projecten B.V. is included in the consolidated financial statements. Financial information relating to the group companies is included in the consolidated financial statements; the assets and liabilities and the results of these companies are fully consolidated, intercompany relationships and transactions are eliminated. Minority interests in equity and results of group companies are separately disclosed in the consolidated financial statements. The results of subsidiaries acquired during the year are consolidated from the date of acquisition. At acquisition the assets, provisions and liabilities are valued at fair values. Goodwill paid is capitalized. The results of subsidiaries sold during the year are consolidated until the moment of leaving the group.
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Consolidation principles The consolidated financial statements include the accounts of OVG Projecten B.V. and all entities in which a direct controlling interest exists. All intercompany balances and transactions have been eliminated in the consolidated financial statements. The consolidated companies in the report are:
Entities
% Shareholders 84,5%
OVG Projecten B.V.
Established in
Shareholder
Rotterdam
C.P.G. van Oostrom Beheer B.V.
7,5%
E. van de Graaf Beheer B.V.
8%
HNOG Beheer B.V.
OVG Projectontwikkeling B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten II B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten III B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten IV B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten V B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten VI B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten VII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten VIII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten IX B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten X B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XI B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XIII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XIV B.V.
100%
Rotterdam
OVG Projecten B.V.
Laan op Zuid B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XVI B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XVII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XVIII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XIX B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXI B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXII B.V.
100%
Rotterdam
OVG Projecten B.V.
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Entities
% Shareholders
Established in
Shareholder
OVG Projecten XXIII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXIV B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXV B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXVI B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXVII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXVIII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXIX B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Lansingerpoort B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXI B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXIII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXIV B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXV B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXVI B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXVII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXVIII B.V.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XXXIX B.V. i.o.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XL B.V. i.o.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XLI B.V. i.o.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XLII B.V. i.o.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XLIII B.V. i.o.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XLIV B.V. i.o.
100%
Rotterdam
OVG Projecten B.V.
OVG Projecten XLV B.V. i.o.
100%
Rotterdam
OVG Projecten B.V.
BAM-Huis Den Haag Beheer B.V.
70%
Rotterdam
OVG Projecten XXI B.V.
BAM-Huis Den Haag C.V.
1%
Rotterdam
BAM-Huis Den Haag Beheer B.V.
Exploitatiemaatschappij Marconistraat 2 B.V.
100%
Rotterdam
OVG Projecten XVI B.V.
Companies mentioned below are not consolidated in the report, because OVG Projecten B.V. does not hold more than half of the voting capital and does not have a decisive influence on these companies. Businesspark Gouda B.V.
50%
Rotterdam
OVG Projecten XVI B.V.
Schiepoort V.O.F.
50%
Amstelveen
OVG Projecten II B.V. | 59
Annual report | 2006
GENERAL ACCOUNTING PRINCIPLES FOR THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS The financial statements are prepared in accordance with generally accepted accounting principles in the Netherlands and Article 402, Book 2 of the Netherlands Civil Code. Valuation of assets and liabilities and determination of the result takes place under the historical cost convention. Unless presented otherwise at the relevant principle for the specific balance sheet item, assets and liabilities are presented at face value. Income and expenses are accounted for on accrual basis. Profit is only included when realized on the balance sheet date. Losses originating before the end of the financial year are taken into account if they have become known before preparation of the financial statements. PRINCIPLES OF VALUATION OF ASSETS AND LIABILITIES Tangible fixed assets Tangible fixed assets are presented at cost less accumulated depreciation and, if applicable, less impairments in value. Depreciation is based on the estimated useful life and calculated as a fixed percentage of cost, taking into account any residual value. Depreciation is provided from the date an asset comes into use. Financial fixed assets The participations are valued at net asset value and if applicable less impairments in value. With the valuation of participations any impairment in value is taken into account. The loans to participations are valued at face value after deduction of any provisions. Inventories & projects The inventories consist of land and buildings acquired for future development activities. The land and buildings are valued at acquisition price or lower net realizable value. Projects are carried at direct costs. Direct costs include all development costs incurred relating to the project site, including interest and overhead. All projects for which construction has not yet commenced and which have not been sold or without 70% or more, signed rental agreements are fully provided for. Profit markup is capitalised in the case that a project is sold and is calculated linearly over the period between the start and the end of the construction. Receivables Receivables are included at face value, less any provision for doubtful accounts. These provisions are determined by individual assessment of the receivables. Provisions For amounts of taxation payable in the future, due to differences between the valuation principles in the annual report and the valuation for taxation purposes of the appropriate balance sheet items, a provision has been formed for the aggregate of these differences multiplied by the future tax rate. The provision for warranties is recorded on behalf of the estimated costs expected to arise from the current warranties on account of projects delivered. Warranty claims are deducted from this provision. The provision for rental guarantees for completed projects is recorded on behalf of the estimated costs expected to arise from the current rental guarantees. 60 | OVG Projectontwikkeling
Principles for the determination of the results All initial start-up costs for potential projects are expensed. All projects for wich construction has not yet commenced and which have not been sold or without 70% or more, signed rental agreements are fully provided for. Rental guarantees are expensed as part of the estimated profit upon completion. Revenue from projects is recognized as actual costs plus mark-up. The mark-up is monthly recognized by the formula: calculated profit end of work minus profit already accounted for divided by the number of months to the end of the project. Profit mark-up commences in the case that the project is sold at the start of the construction period. Losses are recognized in the year in which they become foreseeable. Corporate income tax Corporate income tax is calculated at the applicable rate on the profits for the financial year, taking into account permanent differences between profit calculated according to the profit and loss account and profit calculated for taxation purposes. Other income and expenses All costs which can not directly be allocated to a project are expensed. Tax liabilities OVG Projecten B.V. is the head of a fiscal unity for the value added tax and the corporate income tax and for that reason it is, jointly and severally liable for the tax liabilities of the whole fiscal unity. Tax liabilities of the subsidiary companies are presented as group companies in the balance sheet. Principles for preparation of the consolidated cash flow statement The cash flow statement is prepared according to the indirect method. The funds in the cash flow statement consist of cash, cash equivalents and bank facilities. Corporate income taxes, issurance of share capital, interest received and dividends received are presented under the cash flow from operating activities. Interest paid and dividends paid are presented under the cash flow from financing activities.
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Supplementary information
09
9.1 STATUTORY RULES CONCERNING APPROPRIATION OF RESULT Article 18, paragraph 1 of the statutory rules states that the profit is at the disposal of the shareholders meeting, who can decide to the partial or complete addition of the profit to the other reserves. Article 18, paragraph 2a of the statutory rules states that the profit can only be distributed to the shareholders and other entitled when equity exceeds the issued share capital and the legal reserves. 9.2 APPROPRIATION OF RESULTS FOR THE FINANCIAL YEAR 2006 Awaiting the decision of the shareholders, the result for the year 2006 of € 20.244.935 is added to the other reserves. 9.3 AUDITORS’ REPORT The auditors’ report is stated on page 76
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Colophon
Production/senior editor Financial report, Willem Middelburg Public Affairs and Communication, Amy Oerlemans Photography Marcel van Kerckhoven Various stock photography Design SPRESSO design studio Text Tekstenzo.com Additional copies of this report are available upon written request by email: ao@ovg.nl by mail: OVG projectontwikkeling P.O. Box 23413, 3001 KK Rotterdam
Š 2007 OVG Projectontwikkeling BV All rights reserved. Reproduction in whole or in part is prohibited without the prior written consent of the copyright owner. The information presented in this document does not form part of any quotation or contract, is believed to be accurate and reliable and may be changed without notice. No liability will be accepted by the publisher for any consequence of its use. Publication thereof does not convey nor imply any license under patent- or other industrial or intellectual property rights. Date of release April 2007 Printed in The Netherlands
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OVG projectontwikkeling
S U STA I N A B L E G R OW T H Annual Report 2006
SUSTAINABLE GROWTH
Annual Report 2006 Postbus 3413, 3001 KK, Rotterdam Telefoon 010 90 87 77 Fax 010 90 87 99 E mail info@ovg.nl Internet www.ovg.nl