Parque Arauco Reports First Quarter 2008 Results

SANTIAGO, Chile--(BUSINESS WIRE)--Parque Arauco S.A. (Santiago Stock Exchange: Parauco; Bloomberg: PARAUCO:CI), One of Latin America’s leading shopping center developers and operators, based on gross leasable area (GLA), today reported financial results for the first quarter ended March 31, 2008. The following financial and operating information, unless otherwise indicated, was prepared and presented in accordance with Chilean GAAP. Additionally, the Company utilizes the equity method of accounting, and its financial statements and operating information consolidate the numbers for Parque Arauco and its majority owned subsidiaries, and refer to Parauco’s stake (or participation) in its joint ventures and developments. For a more detailed review of the results filed with the SVS (Chilean Securities and Exchange Commission), please visit the investor section of Parque Arauco’s website www.parquearauco.cl.

First Quarter Results

Net revenues rose 12% to Ch$12,270 million from Ch$10,951 million in Q107 reflecting growth in sales from the completion of renovations and expanded selling areas in both Chilean malls Parque Arauco Kennedy and Arauco Maipú, and the consolidated results from Mall Plaza el Roble as of December 2007. Despite a traditionally slower first quarter in Chile and increases in consumer interest rates, Chilean mall revenues increased 14.6%. And, while revenues increased in local currency by almost 18.3% at Megaplaza Norte in Peru, when translated to Chilean pesos for consolidation purposes, the contribution was negative due to the utilization of the US Dollar end of period rate for conversion purposes prior to translating to Chilean pesos.

Net operating income (“NOI”) increased by 5.6% to Ch$5,738 million from Ch$5,432 million in the previous year’s quarter. Operating costs increased to Ch$5,207 million from Ch$4,060 million and was principally driven by the consolidation of Mall Plaza El Roble, an increase in energy cost experienced by the industry, which is expected to be largely passed through to tenants in Chilean malls and increased depreciation charges as a result of a higher asset base. SG & A fell by 9.3% to Ch$1,324 million as a result of increasing efficiencies and a change in accounting for certain marketing expenses.

EBITDA for the quarter increased 8.9% to Ch$7,216 million from Ch$6,624 million. Adjusted FFO (“Funds from Operations”), defined as net income plus depreciation, monetary correction and exchange rate differences increased by 6% to Ch$6,471 million from Ch$6,101 million.

The Company’s profit on investments in related companies increased by 23.8% to Ch$1,414 million driven by strong profitability at Alto Palermo (Argentina) as well as Inmobiliaria Mall Viña del Mar.

Net income decreased to Ch$3,249 million from Ch$4,620 million in Q107 primarily due to the impact of non-operating results such as a reduction in financial income as the Company drew down on cash to finance acquisitions and Greenfield developments, a price level adjustment expense of Ch$737 million related to higher inflation in Chile as compared to the previous year’s quarter, and a non-cash loss based on exchange rate translation primarily derived by converting Peruvian Sole-based debt at Megaplaza el Norte. The weaker end of year period US Dollar rate utilized to convert Sol denominated debt as compared to the previous year’s quarter, and the relative strength of the Chilean Peso as compared to the US Dollar for the period when consolidated in Chilean Pesos resulted in a negative non cash impact. Net Income before monetary correction and exchange rate differences totaled Ch$ 4,706, an increase of 2% as compared to Q107.

Total GLA was 584 thousand square meters excluding the Plaza Estación Mall announced on January 2, 2008 as the Company is in final stages of due diligence on the transaction. Including Plaza Estación Mall, the GLA reaches 608 thousand square meters. Owned GLA was 320 thousand square meters excluding Plaza Estación.

“During the last six months, Parque Arauco has set in motion unprecedented growth with the investment in two new Greenfield projects and two existing malls. We have diversified our product offering and geographic reach within Chile in addition to our earlier international investments in Argentina, Peru and Colombia. We will serve almost every demographic segment in Chile with malls such as our higher-end flagship, Parque Arauco Kennedy, and premium outlet center in Quilicura, to the lower to mid-range Paseo de la Estación and our planned neighborhood malls. Additionally, with the highly successful placement of bonds and a syndicated loan totaling UF 6 million (approximately US$280 million) in the first quarter, we now have approximately 90% of our required financing in place to execute our previously announced US$1 billion project pipeline through 2009,” said Andrés Olivos, chief executive officer of Parque Arauco, S.A.

Operating Highlights

Total sales at consolidated Chilean shopping centers increased 14.6% to Ch$10,608 million from the previous year supported by occupancy rates of between 98 to100% for all properties except the newly acquired Mall Plaza El Roble with an occupancy rate of 95%. Total visitors grew 16% to 27.4 million (excluding Mall Plaza El Roble).

During the quarter the Company announced the acquisition of 83% for US$61 million of Paseo de la Estación Mall (MPE), Chile’s most trafficked shopping center with over 70 million visitors a year, and two new developments. With over 25 thousand square meters of GLA, MPE is undergoing an expansion plan to increase total GLA to 54 thousand square meters by the end of the third quarter of 2008. Parque Arauco is finalizing due diligence on the acquisition and expects to be able to consolidate results beginning in May 2008.

The Company announced two new developments: Paseo del Pacifico Mall and the Premium Outlet Center Quilicura. Paseo del Pacifico Mall is a mixed-use development to include a shopping mall, hotel and casino. The non-retail assets will be managed by third party operators. The development is expected to be operational by the end of the fourth quarter 2009. Parque Arauco will retain 51% of the approximate US$44 million existing development project with GLA of 31 thousand square meters.

Shortly after the end of the quarter, the Company announced the construction of a first-of-its-kind Premium Outlet Center in Quilicura, close to Santiago.. With a total investment of approximately US$18 million and participation of 70% by Parque Arauco, the outlet center is expected to be operational by the end of the first quarter 2009.

International Activity

The operations of MegaPlaza Norte in Peru reported a net operating income increase of 22.4% to US$2.2 million on an 18.3% increase in retail sales. The occupancy rate remained near capacity at 99.9% and the number of visitors grew by 16% to almost 9 million in the quarter.

Current initiatives in Peru include:

• The expansion of MegaPlaza Norte, increasing rentable area by approximately 8,000 m² to 71,409 m².
• The development of three new shopping centers.

Argentina continues to experience strong growth in the commercial shopping center segment supporting robust bottom line expansion. Net income increased by 21% as compared to Q107. Parque Arauco owns a 29.6% share (31.6% on a fully diluted basis) of Alto Palermo, S.A. (APSA) in Argentina.

Outlook

In mid-2007 the Company announced an aggressive expansion plan for investments through 2009 in new domestic and international projects valued at approximately US$1 billion. At the end of March 2008 approximately 70% of the targeted projects had already been approved or in the execution phase. These developments are expected to double total GLA reaching almost 1.2 million square meters.

Based on the current market outlook and the Company’s acquisition and development plans, the consolidated EBITDA for the Company is expected to grow by 30-40% in 2008.

About Parque Arauco

Parque Arauco, based in Chile, is one of Latin America’s largest developers and operators, in terms of GLA, of retail real estate in Latin America. Over the last 25 years, Parque Arauco has developed, operated and managed shopping centers throughout Chile. It has a 31.6% ownership interest in Argentina’s Alto Palermo, S.A., (APSA) which is traded on the Buenos Aires Stock Exchange and the Nasdaq. APSA is the owner and operator of 10 shopping centers. Parque Arauco also has a 45% interest in Peru’s Inmuebles Panamericana, S.A., owner and operator of one of Lima’s largest shopping centers.

This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of Parque Arauco. These are merely projections and, as such, are based exclusively on the expectations of management concerning the future of the business and its continued access to capital to fund the Company’s business plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the economies in which we work and the industry, among other factors; therefore, they are subject to change without prior notice.

Parque Arauco, S.A.
Consolidated Income Statement
Chilean Gaap
(Ch$ millions)		Quarter Ended
		March 31,
		2008		2007		% Change
Net Revenues		12,270		10,951		12.0%
Cost of Sales		(5,207)		(4,060)		28.3%
Gross Margin		7,063		6,891		2.5%
Selling, General and Administrative Expenses		(1,324)		(1,460)		-9.3%
NET OPERATING INCOME		5,738		5,432		5.6%
EBITDA		7,216		6,624		8.9%
Financial Income		429		1,034		-58.5%
Profit on Investment in Related Companies		1,414		1,143		23.8%
Other non-operating Income		183		126		44.5%
Amortization of Goodwill		(59)		(80)		-26.5%
Financial Expenses		(1,997)		(1,848)		8.0%
Other non-operating Expenses		(398)		(157)		152.9%
Price-level Restatement		(737)		(263)		180.5%
Exchange Differentials		(1,008)		(26)		3838.0%
NON OPERATING INCOME		(2,172)		(70)		2992.5%
Profit before Income Tax & Extraordinary Items		3,566		5,361		-33.5%
Income Tax		(389)		(525)		-25.9%
Profit (Loss) before Minority Interest		3,177		4,836		-34.3%
Minority Interest		67		(222)		-130.2%
Net Profit (Loss)		3,244		4,614		-29.7%
Amortization of Negative Goodwill		5		5		-0.1%
NET INCOME		3,249		4,620		-29.7%
Shares Outstanding (million shares)		607.25		607.25
EPS		5.4		7.6
Consolidated Balance Sheet
		Quarter Ended
(Ch$ millions)		March 31,
		2008		2007		% Change
Assets:
Cash and Cash Equivalent		23,682		23,433		1.1%
Accounts Receivables		8,118		7,024		15.6%
Other Current Assets		78,348		53,797		45.6%
Total Current Assets		110,148		84,253		30.7%
Net Property, Plant and Equipment		286,406		218,354		31.2%
Investments in Related Companies		63,087		77,066		-18.1%
Other Assets		7,834		12,503		-37.3%
Total Assets		467,476		392,177		19.2%
Liabilities & Stockholder's Equity:
Short Term Debt		47,665		10,119		371.0%
Other Current Liabilities		10,237		5,966		71.6%
Total Current Liabilities		57,902		16,085		260.0%
Long Term Debt		182,491		132,057		38.2%
Other Long Term Liabilities		18,267		15,749		16.0%
Total Long Term Liabilities		200,758		147,807		35.8%
Minority Interest		5,813		5,748		n/a
Stockholder's Equity		203,002		222,537		-8.8%
Capital		139,833		140,745		-0.6%
Reserves and Others		57,364		67,330		-14.8%
Retained Earnings		5,805		14,462		-59.9%
Total Liabilities & Stockholder's Equity		467,476		392,177		19.2%