TIDMGWI
RNS Number : 0525H
Globalworth Real Estate Inv Ltd
08 March 2018
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this information is considered to be in the public
domain.
8 March 2018
Globalworth Real Estate Investments Limited
("Globalworth" or the "Company")
Audited Results for the year ended 31 December 2017
Further to its Business Update on 28 February 2018, Globalworth
is pleased to release its Annual Report and Audited Consolidated
Financial Results for the year ended 31 December 2017.
Dimitris Raptis, Deputy Chief Executive Officer and Chief
Investment Officer of Globalworth, commented: "These results
highlight the significant progress achieved by Globalworth in 2017
across the business, with the strengthened capital structure
placing us in a strong position going into 2018. Our two markets,
Romania and Poland, continue to offer above-average economic growth
prospects and we see a strong backdrop of tenant demand. By
targeting the right sectors in the right markets, we believe we are
well positioned to capitalise on the dynamic structural trends we
are witnessing today. We are focused on our objective of
establishing Globalworth as the region's leading office landlord
and to build on our ambition of being the partner of choice for the
wide variety of high-quality tenants in the region."
Operational Highlights
-- Completion of our strategic investment in Griffin Premium
RE.. N.V. ("GPRE") in December 2017, resulting in a shareholding of
71.66%, at a price reflecting a discount of 20% to its last
reported EPRA NAV per share. GPRE has now been fully consolidated
into Globalworth's financial statements for the year ended 31
December 2017. As announced on 28 February 2018, GPRE is being
rebranded Globalworth Poland.
-- As at 31 December 2017, Globalworth's combined real estate
portfolio([1]) was valued at EUR1,815.4 million
(31 December 2016: EUR977.5 million), comprising EUR1,135.3
million in Romania and EUR680.1 million in Poland via GPRE. Total
annualised contracted rental income for the combined portfolio
stood at EUR115.9 million (31 December 2016: EUR49.5 million),
including pre-leases on developments, an increase of 134% compared
to 31 December 2016.
-- Occupancy of the commercial standing portfolio was 93.3%
(95.4% including tenant expansion options) at 31 December 2017,
compared to 83.1% at 31 December 2016. Like-for-like occupancy of
the Romanian portfolio improved by 10.2% in 2017.
-- In 2017, the Company successfully negotiated the take-up or
extension of 57.4k sqm of commercial space in its Romanian
portfolio, resulting in 747.9k sqm of commercial space let or
pre-let in Romania and Poland as at 31 December 2017, with a
weighted average lease length of 5.7 years. The Company has a
diversified tenant base with some 440 national and multinational
corporates from 28 countries and 37 different sectors /
industries.
-- During 2017, the Company more than doubled its commercial
standing GLA to 748.1k sqm (2016: 370.0k sqm), including the
addition of 242.6k sqm through GPRE in Poland and the delivery of
51.0k sqm of developments. A further two development projects,
comprising 70.5k sqm, remain under construction in Romania.
Together with the further pipeline of investments, and additional
projects in the planning stages, the Company will continue to grow
the standing portfolio, whilst further reinforcing its quality.
-- The Company's portfolio now includes 18 properties certified
with LEED Gold / BREEAM Very Good or higher certifications,
including Globalworth Tower which was the first property in
South-Eastern Europe (SEE) to be awarded LEED Platinum
certification.
Financial Highlights
-- Successful closing of a EUR340 million equity placing on 8
December 2017 with solid support from both existing and new
shareholders, increasing the free float of the Company's shares.
Combined with Globalworth's debut EUR550 million Eurobond in June
2017, the Company raised EUR890 million from the capital markets in
2017.
-- EPRA NAV of EUR1,171.5 million (31 December 2016: EUR783.8
million), an increase of 49.5% over end 2016. EPRA NAV per share of
EUR8.84 per share (31 December 2016: EUR8.57 per share), an
increase of 3.2% over end 2016, and of 6.5% over 30 June 2017
(EUR8.30 per share) following completion of the GPRE
transaction.
-- Net operating income (NOI) of EUR51.1 million (2016: EUR43.6
million), an increase of 17.3% over 2016 mainly as a result from
new lease agreements signed, the addition of further properties, as
well as a limited contribution from our strategic investment in
GPRE since it closed in December 2017;
-- Normalised EBITDA([2]) from ongoing operating activities of
EUR41.2 million (2016: EUR36.3 million), with an increase
of 13.5% over 2016;
-- EPRA earnings of EUR16.8 million (2016: EUR8.6 million), an
increase of 95.6% over 2016. EPRA earnings per share amounted to
18.17 cents (2016: 13.34 cents), an increase of 36.2% over
2016.
-- Earnings before tax of EUR26.2 million (2016: EUR12.2
million), an increase of 114.6% over 2016. This increase was
supported by the growth in operational results (NOI) and the
contribution of the c.EUR28.9 million (unrealised) gain recorded on
the acquisition of the 71.66% shareholding in GPRE and two other
property acquisitions in Romania. However, it also reflects the
significant costs associated with the increased investment and
refinancing activities during 2017, including the full amortisation
of unamortised debt issue costs of c.EUR16.1 million. Earnings per
share amounted to 26.40 cents (2016: 17.57 cents), an increase of
50.3% over 2016;
-- Net LTV of 34.3% (31 December 2016: 20.7%), and Gross LTV of
49.5% (31 December 2016: 43.4%). Cash and cash equivalents of
EUR273.3 million at 31 December 2017.
-- The weighted average interest rate on debt financing at group
level was 2.62% as at 31 December 2017 (31 December 2016:
5.25%).
-- The Company paid its maiden dividend in 2017, with a payment
of 22 cents per share in July 2017, followed by a second dividend
of 22 cents per share paid in January 2018 (resulting in a dividend
of 44 cents per share for 2017). Consistent with the target of a
sustainable and growing dividend, paid on a semi-annual basis, the
Company has indicated a prospective H1-18 dividend of not less than
EUR0.27 per share (or not less than EUR0.54 per share
annualised).
Availability of Annual Report and notice of AGM
The Company's 2017 Annual Report and Financial Statements is now
available on the Company's website
http://www.globalworth.com/investor-relations/financial-reports-and-presentation
and will shortly be posted to shareholders.
The Annual General Meeting of the Company will be held on 18
June 2018 at 10.00 am British Summer Time at Ground Floor, Dorey
Court, Admiral Park, St Peter Port, Guernsey. The notice of this
year's AGM will be included in a separate circular to shareholders,
will be issued to shareholders and notified via RNS at least 10
clear days before the meeting, and will also in due course be
available on the Company's website in accordance with AIM Rule
20.
For further information visit www.globalworth.com or
contact:
Enquiries
Andrew Cox Tel: +44 20 3026 4027
Head of Investor Relations & Corporate Development
Jefferies (Joint Broker)
Tel: +44 20 7029 8000
Stuart Klein
Panmure Gordon (Nominated Adviser and Joint Broker) Tel: +44 20 7886 2500
Andrew Potts
Milbourne (Public Relations) Tel: +44 7903 802545
Tim Draper
About Globalworth / Note to Editors:
Globalworth is an AIM-listed real estate company active in
Central and Eastern Europe. It has become the leading office
investor in the Romanian real estate market and now has established
a significant platform in Poland, through a 72% shareholding in
Griffin Premium R.E.. N.V. (GPRE), a pure-play Polish real estate
platform listed on the Warsaw Stock Exchange. Globalworth acquires,
develops and directly manages high-quality office and
logistics/light-industrial real estate assets in prime locations,
through which it benefits from a strong rental income profile from
high quality tenants from around the globe. Managed by
approximately 110 professionals across Romania and Poland, the
combined value of its portfolio is EUR1.8 billion, of which over
90% is in income-producing assets, predominately in the office
sector, and leased to some 440 national and multinational
corporates from 28 countries and 37 different sectors. In Romania,
Globalworth is present in Bucharest, Timisoara and Pitesti, whilst
assets in Poland span Warsaw, Wroclaw, Lodz, Krakow, Gdansk and
Katowice. For more information, please refer to
http://www.globalworth.com/.
IMPORTANT NOTICE: This announcement has been prepared for the
purposes of complying with the applicable laws and regulations of
the United Kingdom and the information disclosed may not be the
same as that which would have been disclosed if this announcement
had been prepared in accordance with the laws and regulations of
any jurisdiction outside of the United Kingdom. This announcement
may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements may
be identified by the use of forward-looking terminology, including
the terms "targets", "believes", "estimates", "plans", "projects",
"anticipates", "expects", "intends", "may", "will" or "should" or,
in each case, their negative or other variations or comparable
terminology, or by discussions of strategy, plans, objectives,
goals, future events or intentions. These forward looking
statements include all matters that are not historical facts and
involve predictions. Forward-looking statements may and often do
differ materially from actual results. Any forward-looking
statements reflect the Company's current view with respect to
future events and are subject to risks relating to future events
and other risks, uncertainties and assumptions relating to the
Company's business, results of operations, financial position,
liquidity, prospects, growth or strategies and the industry in
which it operates. Forward-looking statements speak only as of the
date they are made and cannot be relied upon as a guide to future
performance. Save as required by law or regulation, the Company
disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements in this
announcement that may occur due to any change in its expectations
or to reflect events or circumstances after the date of this
announcement.
STRATEGIC REVIEW
CHIEF EXECUTIVE'S REVIEW
2017 was a truly transformational year for our Company, as
demonstrated by a number of significant landmark achievements in
investment and capital markets
Our leading portfolio in Romania continued to strengthen and is
now complemented by our strategic expansion in Poland, providing us
with exposure to a portfolio in excess of EUR1.8 billion and
approximately 791k sqm of leasable area, in the two largest markets
in the CEE region. Beyond this, we have an exciting pipeline of new
investment and development opportunities.
Highlights of the year
Strategically, 2017 was marked by our expansion into Poland, via
the acquisition of a 71.7% shareholding in GPRE, a Polish real
estate platform with a portfolio valued at 31 December 2017 at
EUR680.1 million, and which we are now taking steps to rebrand as
Globalworth Poland. We are delighted to be working with such a
strong team, and to have achieved immediate, local critical mass in
this market. This is an important step to us becoming the leading
landlord in Central and Eastern Europe, with a dominant presence in
two of the most significant markets, Poland and Romania.
Besides our geographic expansion, we are pleased to report on
the good ongoing progress in Romania. Our portfolio has been
complemented, amongst others, by the first of three buildings
comprising Globalworth Campus and we were delighted to welcome
Amazon as our largest tenant, which we see as testament to the
quality of our product. Overall, the commercial occupancy of our
portfolio at year end stood at 93.3%, and against a backdrop of
ongoing healthy tenant demand, we are taking steps to initiate our
next phase of developments, delivering more than 100k sqm of prime
office space in Bucharest and Warsaw, as well as more than 150k sqm
of light-industrial / logistics space in Timisoara.
Over the course of 2017 Globalworth has raised EUR890 million of
capital from both the equity and debt capital markets, which
included the listing of our debut Eurobond on the Bucharest and
Dublin exchanges.
Market conditions
We are strategically positioned to benefit from geographic
exposure to the two most significant economies in Central and
Eastern Europe, Poland and Romania, which are both enjoying
economic growth far ahead of the wider European region. 2017 real
GDP growth in both Romanian and Poland is forecast to have
significantly outperformed the European Union average, and is
estimated to continue to do so over the next two years. In
addition, both principal focus markets exhibit similar
characteristics, benefiting from low public debt to GDP ratios,
increasing disposable incomes and private consumption, low levels
of unemployment rates and healthy inflation rates.
This strong economic backdrop is supportive for the real estate
markets, alongside the structural expansion of many multi-national
tenants which continue to be attracted to the region by a young,
educated and ambitious labour force, as they expand their
operations in the region. This is a key driver of demand for the
office and industrial real estate sectors on which we focus. In
turn investor interest has been increasing. In our view however
there is still room for further yield contraction, supported by
continued economic expansion and while property yields remain
higher than those of more mature real estate markets.
Portfolio
In 2017, Globalworth invested approximately EUR694.4 million,
primarily through the expansion into Poland, but also further
acquisitions in Romania and our ongoing development progress to
bring to market high quality new space. Our focus on buying well
and unlocking value was evident at the compelling valuation we
acquired the controlling interest in GPRE, at 20% below the
reported EPRA NAV per share at 30 September 2017, and by far better
than the level we could replicate in the direct market, not least
given the inherent potential within the operating platform
established. We also completed three developments over the period,
and remain on-site on a further two. Today our footprint is 791.0k
sqm, of which 548.4k sqm is high quality office space (including
the proportion of office in mixed-use properties), and a total
combined portfolio size in excess of EUR1.8 billion.
By value, this is 85.7% higher than the comparable period last
year, principally due to the investments in Poland. In Romania, our
leasing team recorded excellent progress with the lease-up of 57.4k
sqm over the year in Romania and, combined with acquisitions, our
contracted rent roll has increased by EUR21.9 million, up 45.1%,
and now combined with Poland stands at EUR115.9 million.
Our commercial occupancy rate at December 2017 was 93.3% (2016:
83.1%). Reflecting the strong progress we have made to date, but
also in light of the further opportunities ahead, in December 2017
we communicated our intentions to make further acquisitions and
initiate the next phase of developments, in both Romania and
Poland.
Financial performance
We are pleased with the ongoing progress in our financial
performance, as we lay down strong foundations for the future
through growth in contracted rent and enhancements to our debt
structure. It is also important to note the significance of our
Polish investment which, in accordance with accounting rules, we
now consolidate 100% of the activities of GPRE, offset by a
minority interest for the 28.3% we do not own. From December 2017,
this is fully consolidated on Globalworth's balance sheet, albeit
that the earnings and cash flow statements only recognise the
impact from 6 December 2017. The attractive acquisition price paid
by Globalworth for the 71.7% shareholding, which reflected a
discount to the underlying net asset value resulted in a one-off
bargain purchase gain of EUR25.7 million recognised in our 2017
profit. Notwithstanding this, our key financial metrics are as
follows.
-- Total revenue generated by our portfolio increased to EUR77.9
million, 14.1% higher than the previous year.
-- Normalised EBITDA increased to EUR41.2 million (EUR36.3 million in 2016).
-- EPRA NAV rose by 49.5% to EUR1.17 billion (EUR783.8 million
in 2016, which on a per share basis is EUR8.84 (EUR8.57 in 2016).
Shareholders' Equity rose to EUR1.1 billion (EUR0.7 billion in
2016).
-- Net LTV was 34.3% (20.7% in 2016).
Capital structure
Globalworth raised EUR890.0 million of capital in 2017, which is
testimony to the compelling investment proposition the Company
offers. We were delighted to list our inaugural Eurobond on the
Bucharest and Irish stock exchanges in June 2017, having raised
EUR550.0 million of new debt, with an investment rating of BB+ from
S&P and Ba2 from Moody's, the performance of which has been
noteworthy since launch. In December 2017, following a successful
investor engagement program, we raised EUR340 million through a
non-pre-emptive equity placing. In addition to receiving good
support from our existing shareholders, we were delighted to
welcome a number of new shareholders to Globalworth and also to see
improved liquidity in our shares in recent months. The investors in
both the debt and equity issues we conducted, which included the
European Bank of Reconstruction and Development (EBRD), were of
notable quality. This new capital has enabled us to unlock new
investment opportunities, and will continue to do so, as well as
reduce our overall cost of capital and diversify our sources of
that capital.
Dividend
In July 2017, Globalworth paid its first interim dividend of
EUR0.22 per share, with a second interim dividend for 2017 paid in
January 2018. Reflecting the ongoing growth in underlying
operations and in particular the growth in future contracted rent
roll, the Company has been pleased to provide guidance for 2018,
with the intention of paying an interim dividend in August 2018 of
no less than EUR0.27 per share and a second interim dividend in
January 2019 of no less than EUR0.27 per share, or in aggregate no
less than EUR0.54 per share in respect of the 2018 financial
year.
Environmental, corporate and social responsibility
At Globalworth, we are serious proponents of the importance and
benefits of maintaining high environmental and sustainable
standards and acting with the highest standards or ethical
behaviour. We pride ourselves on delivering best-in-class real
estate to our tenants. Today, we are pleased to announce that in
Romania 10 of our 12 standing offices are green certified with LEED
Gold or BREEAM Very Good or higher accreditation. Overall in our
portfolio we have 18 properties which are green certified,
representing over 55% of our standing portfolio value, and we will
be adding new properties to our environmentally friendly portfolio
in the next 12 months. As a Company, we are also proud to be able
to give back to the community and once again in 2017 we were
pleased to have been able to actively support existing and new
worthy causes.
Team
I would once again like to thank the team at Globalworth for
their dedication, expertise and enthusiasm, without which our
continued growth would not be possible. As our staff of 75
professionals continue to grow, and now following our close
collaboration with the GPRE team in Poland, we will focus on
attracting, developing and supporting talent in an efficient and
open environment that will support our business needs into the
future.
Priorities for 2018 and beyond
Our strategy adopts a total return philosophy for our
shareholders, targeting the delivery of a sustainable and
progressive dividend, as well as net asset value growth. We seek to
do this through well-executed acquisitions, value creating
developments and ongoing asset and property management to maintain
the highest quality portfolio. We are pleased with how our strategy
has evolved alongside our growth and the dynamic market conditions.
We focus on being innovative, for example we have been proactively
exploring the trends in co-working and flexible office space and
the next generation of tenant needs.
We have started 2018 with confidence, knowing our business is
well positioned and recognising that the market opportunity,
notwithstanding global uncertainties, continues to offer a good
backdrop for growth. Our priorities are to expand our footprint
through value-enhancing acquisitions and developments, further
improve our occupancy rate while enhancing our tenant experience
and satisfaction, whilst maintaining capital discipline and a
prudent capital structure as we seek to maximise returns for our
shareholders.
We are committed to our goal of being the leading office
investor in the CEE region through our investments in Romania and
Poland, and to be the partner of choice for the wide variety of
high-quality tenants active or seeking to become established in the
region.
Ioannis Papalekas
Chief Executive Officer
7 March 2018
MANAGEMENT REVIEW
Expansion in Poland and focusing on the two largest markets in
CEE, while benefiting from a strong balance sheet, is the next step
in the evolution of Globalworth
2017 was a very busy year for Globalworth, with our efforts
focused on reinforcing our position as the dominant office investor
in Romania, expanding our footprint in Poland, and further
strengthening the fundamentals of our business.
Over the course of the year, Globalworth successfully completed
several newsworthy transactions including two sizeable capital
market issues, raising EUR890.0 million in total, the acquisition
of a majority stake in the Warsaw-listed GPRE, and the subsequent
acquisition of a portfolio of class "A" properties in Poland.
In Romania, we continued to strengthen our presence in our
primary operating market through selective acquisitions, making
progress with our development program, and actively managing our
portfolio. In addition, we took further steps to optimise the way
in which the Company operates, a process which will intensify as we
increasingly collaborate with the team at GPRE.
Expansion in Poland
As part of its ongoing effort to become a reference provider of
high quality office space in the CEE region, Globalworth launched a
public tender offer in October 2017 for the acquisition of a
minimum of 50.01% and up to 67.90% of the issued share capital of
GPRE.
GPRE is a pure-play Polish real estate platform which, at the
time of the offer, owned a portfolio of high quality office and
mixed-use investments located in Warsaw and five other key regional
cities in Poland. Its portfolio comprised six office and three
mixed-use (office and retail) investments, offering 171k sqm of GLA
with an aggregate value of EUR509.2 million (as at 30 September
2017). GPRE had also secured an attractive investment pipeline,
including a forward funding agreement for a class "A" office in
Wroclaw/ Poland (under construction) and a 25% interest in three
class "A" offices in Warsaw (at various stages of development), for
which GPRE has an option to acquire the remaining 75% stake on
completion.
Through GPRE, the Company also contracted to acquire a further
three high quality office properties in Wroclaw, Gdansk and
Katowice from Echo Polska Properties ("EPP") for an aggregate
purchase price of EUR160 million. The acquisition of the EPP
portfolio was, amongst other things, conditional on Globalworth
completing the GPRE transaction.
Globalworth successfully acquired an initial 67.9% stake in GPRE
at the end of November, and an additional 3.8% in December, raising
its total stake in GPRE to 71.7%. In total, the Company invested
EUR145.7 million for the acquisition of 111.9 million shares in
GPRE, at a 20% discount to its EPRA NAV per share as at 30
September 2017.
At 31 December 2017, GPRE held a portfolio of standing
properties with 242.6k sqm of GLA, valued at EUR680.1 million.
Investments in Romania
In 2017, Globalworth continued to acquire and develop high
quality real estate properties in Romania while maintaining its
commitment to owning a modern and environmentally friendly
portfolio.
During the year we completed the acquisition of two standing
properties, which not only meet our standalone investment criteria
but are also of strategic importance to the Company.
Through the acquisition of Green Court Building "C", Globalworth
added the third and last class "A" office building within the
award-winning Green Court development in the New CBD of Bucharest,
thus controlling 100% of the 54.3k sqm of the complex.
Elsewhere, through the acquisition of the Dacia Warehouse
(Groupe Renault) and the subsequent partnership with the Elgan
Group for the development of Groupe Renault's new headquarters in
Bucharest, Globalworth has formed a strong and long-term
partnership with one of Romania's largest corporates.
Globalworth's very active development programme continued in
2017, with our main targets being delivering Tower I of the
Globalworth Campus project in Bucharest to market and, within our
TAP park, completing the expansion of Valeo Lighting's
light-industrial facility and a new, light-industrial facility
leased to Litens. We are very pleased to have met these targets and
to have added 51.0k sqm of GLA of new high quality office and
light-industrial space to our portfolio, which was developed by the
Company.
Since we acquired TAP in July 2014, we have progressively
developed the park by adding four new light-industrial / logistics
facilities with a total of c.76.0k sqm of GLA, increasing its total
size to c.103.4k sqm. Encouraged by tenant interest for high
quality space in the area, we have acquired an additional 30
hectares of land that we will be looking to develop in the
future.
In addition, we currently have 70.5k sqm of office space under
construction in two projects which we expect to complete in Q1-2018
and Q1-2019 respectively.
As part of our ongoing efforts to maintain and improve the
marketability of the Globalworth portfolio, we have continued to
implement our renovation and maintenance programme at selected
standing properties. Over the course of the year, improvement works
were carried out at six standing properties, with works on a
further two scheduled to start in 2018. We are pleased to observe
that the results of our efforts have been visible at properties
such as Globalworth Plaza and City Offices, where occupancy
improved materially in 2017 and where we are in active discussions
with a number of tenants for the take-up of remaining available
space.
We delivered our projects, including renovations and
maintenance, to plan in 2017. We were able to respect scheduled
delivery dates and budgets and we remain on track for projects
still under construction.
Completing our real estate activities on time and within budget
is a vital part of our business, and our ability to do so reflects
on the capabilities of our internal project management team, in
conjunction with those of our partners, and has been key to our
successful track record to-date.
Optimising Capital Efficiency
Efficiently managing our combination of equity and debt
financing is pivotal to achieving a balance that allows for the
rapid growth of the Company, enhances medium-term shareholder
returns, and controls the inherent risk associated with third-party
debt.
Over the course of the year we completed two sizeable debt and
equity transactions, raising in total c.EUR890 million. This
allowed us to simplify our capital structure and de-risk our
balance sheet, while providing us with funds to facilitate further
investment in our development projects and new pipeline
opportunities, and thus the growth of the Company.
Debt Transactions
In June 2017, Globalworth successfully completed a EUR550
million Eurobond raise with a fixed interest rate of 2.875%.
Through this transaction, Globalworth refinanced all but one of its
existing facilities at improved terms, reducing the weighted
average interest rate on debt financing at group level from 5.25%
at 31 December 2016 to 2.62% at 31 December 2017.
We were delighted by the very positive response that this
transaction received from both national and international
investors, resulting in the offering being more than two times
oversubscribed and, considering that this was the first time we had
issued such an instrument, representing a great achievement for the
Company.
Following our investment in GPRE, our consolidated weighted
average interest rate on debt financing has further reduced to
2.62%, with our consolidated gross LTV remaining at moderate level
of 49.5% (Net LTV of 34.3%).
Additionally, in 2017 Globalworth set up a EUR30 million
revolver facility secured against one of its properties, which
to-date has not been used.
Equity Transactions
In December 2017, we completed a EUR340 million new equity
capital raise at a share price of EUR8.75 per share, subscribed to
by both existing and new investors.
The transaction follows on from the successful EUR200 million
equity capital raise undertaken in December 2016, which resulted in
Growthpoint Properties, South Africa's leading REIT, becoming the
largest shareholder in the Company.
Active Asset Management to maintain a high occupancy rate and
high quality long-term leases
The ability to achieve high occupancy rates remains one of the
Company's key strengths. In 2017, we once again performed strongly
in the Romanian market, successfully negotiating the take-up or
extension of 57.4k sqm of commercial GLA, increasing our overall
total since 2014 to c.295.5k sqm. This confirmed the Company's
position as one of the most successful investors and developers in
the Romanian real estate market and the wider CEE region.
New commercial leases signed in 2017 included some of Romania's
best-known national and multinational corporates, such as Amazon,
Stefanini, Wipro and Microsoft and were signed at a WALL of c.8.0
years, in line with the Company's strategy of agreeing long-term
lease contracts.
We are pleased to see demand for office space increasing as the
performance of existing tenants continues to improve and new
corporates enter or expand in the market. This was reflected in
last year's take-up, with the majority of our new leases being
agreed with tenants taking space in our properties for the first
time, demonstrating the quality of our portfolio and the capability
of our leasing team. In addition, a number of new leases include
expansion options, an indication of the positive market environment
in Romania and of the intention of these corporates to grow their
businesses.
Our expansion in Poland through GPRE has further enhanced our
tenant base by adding new corporates to our list of partners. This
list now includes corporates who are already tenants of ours in
Romania, an important feature for the overall effective asset
management of the portfolio.
At 31 December 2017, the average occupancy rate of the standing
commercial portfolio was c.93.3% (95.4% including tenant options).
Overall, at year end we had 747.9k sqm of commercial space let or
pre-let at a WALL of c.5.7 years.
The portfolio is occupied by a diversified, high quality mix of
tenants, comprising some 440 national and multinational corporates
from more than 28 different countries.
Investment in environmentally friendly properties
Globalworth maintained its commitment to having a modern
portfolio of high quality and environmentally friendly real estate
properties, with the Company adding 3 green certified properties in
Romania and 7 in Poland through its investment in GPRE in 2017. In
Q1-2018 one additional property was green certified in Poland.
We our particularly proud that our landmark class "A"
Globalworth Tower office in Bucharest was officially awarded the
Green certification of LEED Platinum, becoming the first building
in Romania and the broader SEE region to have received the highest
available Green accreditation.
Currently, 18 standing properties have received green
accreditations of BREEAM Very Good / LEED Gold or higher. Green
certified properties accounted for 57.3% of our standing portfolio
value and we are currently assessing the green certification
potential of our larger, non-certified office and mixed-use
properties, targeting certification levels similar to the ones
already obtained. We have already begun the green certification or
re-certification process for 8 of our properties and are confident
that we will adding them to our green certified portfolio in the
coming few months.
High quality team of professionals and improved
infrastructure
Over a relatively short period of time, Globalworth has
established a portfolio with current standing GLA of 791.0k sqm and
has further developments in progress in Romania and Poland.
Having the right team of professionals to properly manage our
existing properties, as well as to facilitate growth, is key to the
success of our business. In 2017, we continued to invest for the
future through selected hires in our core and support teams, as
well as in technology which will allow us to operate more
efficiently and effectively.
At year end 2017, the Globalworth team comprised 75
professionals, the majority being located in Bucharest. Our local
presence in our core Romanian market has allowed us to build a
broad network of relationships over the years with owners,
occupiers, property specialists and community representatives, as
well as domestic and international investors and capital
providers.
Similar to Globalworth, GPRE has a team of 32 high quality
professionals in Poland, which we will seek to help complement in
the future as operations grow there.
We believe that forming strong relationships with our partners
and having a thorough local knowledge of the market gives us an
advantage in identifying and investing in opportunities as and when
they become available, either publicly or off-market. In addition,
it allows us to identify and respond quickly to our partners' needs
and closely monitor any changes in trends or the overall market,
which are key components for the future of our business.
Next Steps
Management will continue to work intensively to source new
opportunities and facilitate further growth for the Company in both
Romania and Poland, aiming to fulfil our strategic goal of becoming
the reference office investor and landlord in the CEE region.
We also aim to streamline our operations in and between the two
countries in which we operate in order to improve the way we do
business.
We look forward to an exciting year in 2018.
Dimitris Raptis
Deputy Chief Executive Officer, Chief Investment Officer
7 March 2018
CASE STUDY
Globalworth Shareholders & Investor Engagement
As Globalworth continues building scale at both the portfolio
and balance sheet level, the increasing international awareness of
the Company's commercial activities and with a growing
institutional investor base, investor relations and managing the
Company's external perception have become an important focus. In
this respect, Globalworth was pleased to strengthen its capability
with the appointment of a Director of Marketing and Communications
and a Head of Investor Relations & Corporate Development in
2017.
Globalworth is now actively enhancing its investor engagement
program and will seek to be present at more capital markets
industry conferences, engage in more investor outreach, both abroad
and through welcoming investors to visit its properties in Romania
and Poland. During Q4-2017 alone, in excess of 75 investor meetings
were held. The Company believes that through these steps, market
knowledge and awareness of the Globalworth proposition will
continue to grow further, which in turn is beneficial for the
Company's share price rating and market liquidity.
Our initiatives have been reflected in the strong share price
appreciation in 2017 and the ongoing improvement in market
liquidity.
Equity Fundraising
In December 2017, following the successful completion of its
strategic investment in GPRE, which was funded from existing cash
resources, Globalworth issued further equity via a non-pre-emptive
placing of 38.9 million new ordinary shares at a price of EUR8.75
per share. The placement raised EUR340.0 million of gross proceeds,
which was in excess of the Company's target and oversubscribed at
this level.
The net proceeds of the Placing are to be used to fund further
attractive investment opportunities in both Poland (through GPRE)
and Romania, as well as for general corporate purposes, and will
also assist Globalworth in managing its gearing strategy to a
target loan to value ratio of 35.0%.
The placing attracted a wide range of new and existing
institutional investors, which increased the Company's free float
and is expected to broaden the liquidity of Globalworth shares
ahead of the planned move to the Main Market of the London Stock
Exchange in 2018.
INVESTMENT REVIEW
Expanding our footprint to deliver high quality space, to
satisfy strong tenant demand in the region.
2017 was a milestone year for Globalworth, investing for the
first time in two countries, Romania and Poland, the two largest
markets in the CEE region. We realised a number of asset purchases,
completed a corporate transaction and made further progress with
our development and modernisation programmes. In total, Globalworth
invested over EUR694.4 million in 2017, the largest deployment of
capital since its inception.
New Investments
The majority of the new investments made in 2017 were in Poland,
where the Company acquired 71.7% of the Warsaw-listed GPRE for
EUR145.7 million, valuing the targeted company at EUR539.9 million
(100% of firm value). At the time of the investment, GPRE held a
portfolio of nine real estate investments (with 15 properties)
valued at EUR509.2 million and following Globalworth's investment,
acquired a portfolio of 3 high quality investments (with 5
properties) in Wroclaw, Gdansk and Katowice for a total of
c.EUR160.0 million.
Globalworth, through GPRE, owns a portfolio of 12 investments in
Poland, nine of which are offices and three are mixed-use, with
total GLA of 242.6k sqm.
The Company invested a further EUR92.6 million in Romania, where
it completed the acquisition of two standing properties, entered
into a joint-venture with the Elgan Group for the development of
Groupe Renault's new headquarters in Bucharest, currently under
construction, and acquired 30 hectares of light-industrial /
logistics land in Timisoara (TAP II).
New standing properties included:
-- Building "C" of the award winning Green Court class "A"
office complex developed by Skanska in Bucharest.
-- The modern warehouse ("Dacia Warehouse") facility in Pitesti,
100% long-term leased to Dacia, Romania's largest corporate.
New Deliveries
-- TAP - Valeo: in March 2017, we delivered a new built-to-suit
light-industrial facility leased to Valeo Lighting. This new 14.0k
sqm facility increases Valeo's presence in Timisoara Airport Park
("TAP") to 41.5k sqm and marks the second time the tenant has
expanded in the park since its arrival in 2011, a testament to the
quality of the project and the service offered by Globalworth.
-- TAP - Litens: in October 2017, we delivered the second
facility under development in our TAP complex. This 8.1k sqm
facility, 100% leased to Litens Automotive, is the fifth and newest
facility in the park which now offers total GLA of 103.4k sqm.
-- Globalworth Campus Tower I: in September 2017, we were
particularly pleased to have delivered the first of three new
office buildings at our Globalworth Campus project. Tower I, was
completed in 24 months following the commencement of works, offers
total GLA of 29.0k sqm and 273 parking spaces.
Under Development
Over the course of the year, Globalworth made further progress
with the development/construction of four other buildings in
Bucharest.
At Globalworth Campus project, construction of Tower II is at an
advanced stage and is expected to be completed in Q1-2018. Similar
to Tower I, on completion the property will extend over 12 floors
above ground and two underground levels, offering GLA of 28.2k sqm
and 180 parking spaces. The delivery of Tower II will mark the
completion of Phase A of the project, which comprises Towers I and
II with total GLA of 57.2k sqm and 453 parking spaces. In addition,
further progress has been made with the development of Phase II of
the Globalworth Campus project, with works expected to start in
H1-2018.
At the end of 2017, the Company's Renault Bucharest Connected
("RBC") project was under construction. On completion, RBC will
house Groupe Renault's new Headquarters in Romania as well as a
dedicated design centre for the development of future models of
cars, with 42.3k sqm of GLA and 1,000 parking spaces. The project
is progressing in line with its envisaged timeline, with all
preparatory activities completed and construction having reached
the third floor. RBC is expected to be delivered in Q1-2019.
In Poland, Globalworth, through GPRE, has one investment in
Wroclaw under a forward purchase agreement and two others in Warsaw
under right of first offer in which it owns a minority stake (25%).
These investments are currently under different phases of
construction, with the investment in Wroclaw currently 97.7%
pre-let (100.0% including Master Lease) and expected to be
completed in Q2-2018, while the ones in Warsaw are expected to be
delivered between Q3-2018 and Q4-2019.
New Investments Developments - Delivered Developments - Under Construction Portfolio Improvements
GPRE (71.7%) TAP - Valeo GW Campus Tower II & III Globalworth Plaza
EPP (through GPRE) TAP - Litens RBC City Offices
Green Court "C" GW Campus Tower I Other maintenance
Dacia Warehouse
RBC(1)
TAP II(1)
------------------ ------------------------ --------------------------------- ----------------------
EUR642.6m EUR20.3m EUR23.6m EUR7.9m
------------------ ------------------------ --------------------------------- ----------------------
(1) Land for future development
Renovation and Maintenance Programme of Standing Properties
The Company's ongoing efforts to offer best-in-class real estate
space to its business partners continued in 2017, with further
implementation of its renovation and maintenance programme at
selected standing properties in the portfolio. Over the course of
the year, Globalworth carried out improvement works on 6 standing
properties. Works on a further 2 are scheduled to start in
2018.
In total, EUR7.9 million was invested in renovation and
maintenance, principally at Globalworth Plaza (office), City
Offices (office), and the cluster of properties formed by BOB
(office), BOC (office) and Upground Towers (residential), all
situated in the same block. Works involved primarily the upgrade of
both indoor and outdoor common areas.
The benefits of our renovation and maintenance programme,
combined with our ongoing leasing efforts, were evidenced at two
properties in particular, Globalworth Plaza and City Offices, where
occupancy improved significantly in 2017 over the previous
year.
-- Globalworth Plaza works performed in 2017 included the
renovation and modernisation of the lobby and upgrade of the
building's façade, with future works to include the installation of
external video walls and other general upgrades.
-- City Offices works included various repairs and upgrades to
the common areas of both the commercial building and the
multi-level parking. Additional works planned for 2018, which
include the implementation of a new ticketing system in the
multi-level car park, are expected to further improve the
property's marketability and revenue streams.
Our renovation and maintenance programme will continue in 2018
as the Company works to maintain the high-standards set for its
real estate portfolio.
2018 Investments
In 2018 Globalworth, successfully completed the acquisition of
the two land plots located in the Gara Herastrau/Barbu Vacarescu
corridor of Bucharest's new CBD, that it had previously announced
for a total consideration of EUR15.5 million. The first land plot
is located between the Globalworth Plaza and Green Court "B" office
properties owned by the Company, and is the last remaining street
facing land plot on Gara Herastrau street. The second land plot
adjacent to Globalworth's Green Court complex. The combined lands
are anticipated to allow for the development of c.40.0k sqm of
commercial (predominantly office) space.
LEASING REVIEW
Driving sustainable income growth through leasing
Effective asset management of our portfolio is core to
Globalworth's strategy, ensuring the sustainability of our cash
flows and performance of our properties. Over the past four years,
Globalworth has secured c.295.5k sqm of new leases and
extensions.
Globalworth's strong leasing performance continued through 2017,
with the Company successfully negotiating contracts with more than
41 different national and multinational corporates, resulting in a
total take-up or extension of 57.4k sqm of commercial space within
its Romanian portfolio.
The success of last year's leasing performance, combined with
the addition of five new commercial properties through
acquisition/delivery which were in varying phases of lease-up,
resulted in an overall occupancy rate for our Romanian standing
commercial portfolio of 90.8% as of 31 December 2017.
Occupancy rate on a like-for-like basis improved by 10.2% to
91.6% at the end of 2017, enhanced through new leases signed with
tenants including Wipro, Microsoft and Global Compass. The most
notable change in occupancy rate was at Globalworth Plaza, where
occupancy at year-end reached 81.5% (29.7% on 31 December 16),
representing an increase of more than two and a half times compared
to the previous year. Other notable improvements in occupancy were
achieved in our flagship Globalworth Tower and City Offices
properties, which as of year-end 2017 were at 98.9% (up from 83.2%
as at 31 December 2016) and 49.4% (up from 21.8% as of 31 December
2016) respectively.
The delivery of our developments is key to growing our portfolio
and rental income. Having completed Tower I at our Globalworth
Campus project in Bucharest, we are delighted to have been able to
partner with Amazon, who will become the largest tenant in the
property, as well as to continue our long-standing relationship
with Honeywell. Having further expanded its operations in
Bucharest, Honeywell will be the second largest multinational
tenant in this property (agreement signed in 2018).
Occupancy in Tower I stood at 46.8% (73.6% including tenant
options) on 31 December 2017 and has increased to 54.5% (88.9%
including tenant options) in 2018. The Company is also pleased to
announce the first pre-lettings of nearly 7.9k sqm to Stefanini and
PC4Cards in Tower II (expected delivery Q1-2018) at Globalworth
Campus, which is now 28.0% pre-let.
Partnership with such large corporates is a testament both to
the quality of this project and to Globalworth's standing and
reputation as the leading office investor and developer in the
local market.
New contracts signed in Romania in 2017 included well-known
national and multinational corporates such as Amazon (Globalworth
Campus) for 13.5k sqm, Stefanini (Globalworth Campus) for 6.6k sqm,
Wipro (Globalworth Tower) for 3.9k sqm, Microsoft (Globalworth
Plaza) for 3.6k sqm, Global Compass (City Offices) for 3.3k sqm,
RCS-RDS (City Offices) for 2.6k sqm and Coface (Globalworth Plaza)
for 2.4k sqm, as well as Amoma, Zara/Inditex Group, Printec,
PC4Cards, Cegedim, ACNielsen and others. Since the beginning of
2014, the Company has successfully negotiated the take-up of
approximately 295.5k (311.4k including tenant options) sqm of
commercial GLA within its buildings.
The Company following its expansion in Poland through GPRE, has
enhanced its tenant base by adding new corporates to its list of
partners, as well as corporates who already have presence in its
Romanian portfolio, which is considered important for the overall
effective asset management of the portfolio. Overall, in Romania
and Poland the portfolio is leased to approximately 440 national
and multinational corporates from 28 countries and 37 different
sectors / industries, with a remaining WALL on the
commercial-leased space of approximately 5.7 years as 31 December
2017.
Globalworth's occupancy rate for its commercial standing
portfolio at the end of 2017 was 93.3% (95.4% including
options).
FINANCIAL REVIEW
Impressive growth in results and NAV
2017 was another very successful year for Globalworth in terms
of growth in revenues and profitability.
Highlights
-- Continued the growth in revenues and NOI by 14.1%, and 17.3%,
respectively, resulting mainly from new lease agreements signed,
the addition of five leased properties to the standing commercial
portfolio in Romania during 2017, as well the positive results of
our Polish operations since the acquisition of a 71.7% shareholding
in GPRE;
-- Further growth in normalised EBITDA by 13.5%, compared to 2016;
-- EPRA Earnings for 2017 increased by EUR8.2 million compared
to 2016, and IFRS Earnings per share for 2017 amounted to 26.40
cents, as compared to 17.57 cents in 2016;
-- Dividends declared and paid for the first time in 2017 of 22
cents per share (44 cents per share annualised);
-- Overall increase in the OMV of the assets portfolio by EUR837.9 million;
-- EPRA NAV as at 31 December 2017 increased by 49.5% from 31
December 2016 (3.2% increase in EPRA NAV per share); and
-- Significant level of cash and cash equivalents of EUR273.3
million at 31 December 2017, EUR52 million higher than at 31
December 2016.
Revenues and Profitability
-- Total revenue reached EUR77.9 million in 2017 (14.1% or
EUR9.6 million higher than in 2016);
-- NOI also increased in 2017, following closely the increase in
total revenues and reaching a total of EUR51.1 million (2016:
EUR43.6 million), representing an increase of 17.3% or EUR7.5
million compared to 2016;
-- EBITDA(1) amounted to EUR31.5 million (2016: EUR43.8
million), however, the decrease compared to 2016 is due to the
higher level of acquisition costs and non-recurring expense items
in 2017;
-- Normalised EBITDA(2) amounted to EUR41.2 million (2016:
EUR36.3 million) and followed the growth trend in revenues and NOI
in 2017 with an increase of 13.5% over 2016;
-- EPRA earnings amounted to EUR16.8 million in 2017 (2016:
EUR8.6 million), representing an increase of EUR8.2 million or
95.6% over 2016;
-- Increased finance costs during 2017 by 19.4% resulted from
the full amortisation of unamortised debt issue costs of c.EUR16.1
million, following the successful refinancing of the Company's debt
with the issuance of the EUR550 million Eurobond in June 2017 at a
coupon of 2.875%; and
-- Earnings before tax of EUR26.2 million increased by 115% as
compared to 2016 (EUR12.2 million), despite the significant costs
associated with the increased investment and refinancing activities
during 2017, mainly as a result of the increase in operational
results (NOI) and the contribution of the c.EUR25.7 million
(unrealised) gain recorded on the acquisition of the 71.7%
shareholding in the GPRE Group, Poland.
1 Earnings attributable to equity holders of the Company before
finance cost, tax, depreciation, amortisation of other non-current
assets and purchase gain on acquisition of subsidiaries.
2 EBITDA less: fair value gain on investment property (2017:
EUR6.7 million; 2016: EUR6.7 million), non-recurring income (2017:
nil; 2016: EUR3.4 million); plus: acquisition costs (2017: EUR10.0
million; 2016: EUR0.1 million); plus: non-recurring administration
and other expense items (2017: EUR6.4 million; 2016: EUR2.5
million).
Portfolio Valuation, Shareholders Equity, Total Assets and
NAV
-- The outstanding level of investment activity during 2017
(c.EUR328.8 million invested on new acquisitions and advances made
for further acquisitions, including the 71.7% shareholding in GPRE,
and c.EUR69.4 million on properties under development) led to an
82.7% increase in the value of our investment property portfolio at
31 December 2017, which reached EUR1.8 billion (31 December 2016:
0.98 billion);
-- Total assets at 31 December 2017 exceeded EUR2.1 billion and
increased by 75.4% from 31 December 2016; and
-- EPRA NAV at 31 December 2017 (EUR1.17 billion) increased by
49.5% from 31 December 2016 (EUR783.8 million), while EPRA NAV per
share increased by 3.2% to EUR8.84 per share (31 December 2016:
EUR8.57 per share) and 6.5% over H2-2017 following completion of
the GPRE transaction (30 June 2017: EUR8.30 per share).
Cash Flows
-- Cash generated from successful equity and debt financing
during 2017 of EUR897.8 million in total, while EUR430.2 million
was used on the repayment of more expensive senior and corporate
level debt facilities;
-- Cash used in investments made during 2017 of EUR388.0 million
in total, including the acquisition of two standing properties and
the completion or further advancing of the construction of
properties under development in Romania, the acquisition of the
71.7% shareholding in GPRE in Poland, and the acquisition by GPRE
of three additional standing properties towards the end of December
2017;
-- Dividends paid during 2017 in respect of the six-month period
ended 30 June 2017 of EUR19.9 million; and
-- Cash and cash equivalents at 31 December 2017 (EUR273.3
million) increased by EUR52 million compared to 31 December 2016
(EUR221.3 million).
CASE STUDY
EUR550 million Eurobond pricing
In June 2017, Globalworth successfully completed a EUR550.0
million Eurobond raise with a fixed interest rate of 2.875%.
This was the Company's inaugural issue of such an instrument and
we were delighted by the very positive response it received from
national and international investors.
As part of the marketing effort, management met with many fixed
income investors in eight European countries, which included
Romania, France, Germany and the UK, to establish a strong and
diverse investor base for this milestone transaction.
The issue was more than two times oversubscribed, resulting in
the Company increasing the size of the transaction by EUR50 million
and a tightening of the interest rate on the coupon.
The Eurobond carried a rating of BB+/Stable by Standard &
Poor's and Ba2/Stable by Moody's in recognition of the outlook for
growth, diversity and capital raising potential (targets
materialised in Q4-2017).
The instrument has a term of five years, expiring in June 2022,
and is traded on both the Irish and Bucharest stock exchanges.
FINANCING AND LIQUIDITY REVIEW
Robust liquidity and capital base
Financing Achievements During 2017
2017 has been a cornerstone in the Group's financing activity,
marked by the successful issuance in June 2017 of a EUR550 million
Eurobond at a coupon of 2.875% and its listing on the Irish and
Bucharest Stock Exchanges, as well as the successful EUR340 million
equity raise in December 2017.
The most significant achievements in this area during 2017 were
as follows:
Debt Financing/Refinancing:
The total debt portfolio of the Group at 31 December 2017
incorporates the senior debt of GPRE Group and ranges between short
and medium to long-term debt, denominated mostly in EUR, with
insignificant facilities denominated in Romanian Leu ('RON') and
Polish Zloty ('PLN').
-- In June 2017, the Group issued a EUR550 million Eurobond. The
five-year euro-denominated Bond matures on 20 June 2022 and carries
a fixed interest rate of 2.875 per cent. A significant proportion
of the net proceeds of the Eurobond were utilised in the repayment
of existing secured lending, contributing to the very significant
decrease in the weighted average interest rate on debt financing to
2.62% at 31 December 2017 from 5.25% at the end of 2016; and
-- In November 2017 the Group signed a EUR30 million revolving,
long-term facility with Erste Group Bank AG, secured on the TAP
property. The full amount of this facility was undrawn at 31
December 2017.
The majority of the Group's debt (EUR550 million Eurobond) is
unsecured, while the remaining of the Group's debt is secured with
real estate mortgages, pledges on shares, receivables and loan
subordination agreements in favour of the financing parties.
Equity Raising and Payment of Dividends:
In December 2017 we successfully raised EUR340 million,
diversifying further our equity investor base.
In July 2017 the Group had its first interim dividend payment of
22 cents per share (c.EUR19.9 million) in respect of the six-month
period ended 30 June 2017, while another interim dividend of 22
cents per share (c.EUR29.1 million) was paid in January 2018 in
respect of the six-month period ended 31 December 2017.
Servicing of Debt During 2017
In 2017 we have repaid in total c.EUR24 million loan capital
(excluding the refinancing of existing facilities using the
proceeds of the Eurobond), and c.EUR13.4 million of accrued
interest on the Group's drawn debt facilities.
Liquidity
The Group seeks to maintain, at all times, sufficient liquidity
to enable it to finance its ongoing, planned property investments
and completion of properties under development, while maintaining
flexibility to capture quickly attractive new investment
opportunities.
As outlined above, in December 2017 EUR340 million additional
equity was raised, contributing to the significant increase in
available cash resources at year end to EUR273.3 million, while
additional available liquidity from undrawn loan facilities at 31
December 2017 amounted to EUR32.7 million.
Debt Structure as at 31 December 2017
Loans and borrowings maturity and short-term / long-term debt
structure mix
The Group has credit facilities and Eurobond with different
maturities, out of which 98% are due in the long term, while only a
very small portion of 2% mature in the short term, as presented in
the graph below (compared to 93% and 7%, respectively, at 31
December 2016).
At 31 December 2017, the weighted average remaining duration of
the Group's debt is 5.4 years (2016: 4.2 years).
Debt Covenants and Securities
The Group's financial indebtedness is arranged with standard
terms and financial covenants, the most notable being:
-- the debt service cover ratio ('DSCR') / interest cover ratio
('ICR'), with values ranging from 100% to 300% (be it either
historic or projected);
-- the Gross LTV ratio, with contractual values ranging from 60%
to 83% (versus the significantly lower overall Gross LTV ratio of
the Group at 31 December 2017 of 49.5%; Net LTV at 31 December 2017
of 34.3%);
-- the loan to cost ratio ('LTC') with a maximum value of 75%; and
-- the secured leveraged ratio of 30%;
with no breaches of the aforementioned values occurring for the
year ended 31 December 2017.
The Group's credit facilities concluded with local banks in
Romania and Poland are secured with real estate mortgages, pledges
on shares, receivables and loan subordination agreements in favour
of the financing banks.
Further details on the Group's debt financing facilities are
provided in note 15 of the consolidated financial statements.
Debt Denomination Currency and Interest Rate Risk
Our long-term loan facilities are almost entirely
Euro-denominated, the Group's loans are denominated in Euro, with
insignificant portions denominated in RON and PLN, and either bear
interest based on three-months Euribor plus a margin, or bear a
fixed interest rate. This ensures a natural hedging linked to the
Euro, original currency denomination of the most significant part
of our liquid assets (cash and cash equivalents and rental
receivables) and reporting currency for the fair market value of
our investment property. This is depicted by the low level of
overall net foreign exchange loss reported each year.
The weighted average interest rate on debt financing as at 31
December 2017 amounted to 2.62% versus 5.25% at 31 December 2016.
As outlined above, the significant decrease is mainly due to the
refinancing of all but one of the Group's secured facilities using
the proceeds of the Eurobond.
In addition, as a result of the fixed coupon Eurobond, the most
significant portion of the Group's indebtedness has a fixed
interest rate or it is hedged against interest rates fluctuations,
which minimises any interest rate risks for the Group.
CORPORATE SOCIAL RESPONSIBILITY
Respecting our social and environmental objectives
At Globalworth we believe that it is our duty to manage
responsibly the social, environmental and economic impact of the
way we do business and to contribute to the community in which we
live and work.
Our objectives
-- Create value for shareholders by acting consistently in an
ethical and socially responsible manner.
-- Positively impact and improve the future prospects of our local community.
-- Create an environment in which people want to work and be associated with.
FOCUS AREA 2017 INITIATIVES BENEFICIARIES
-------------- ----------------------------------------------------------------- ------------------------------------------------------------
SOCIAL
* Supported our selected charitable causes, * Hospice Casa Speran ei (Hospice of Hope), Save the
contributing in excess of EUR500k over the year. Children, and United Way were the main causes
supported by Globalworth in 2017.
* Continued encouraging our staff to divert part of
their social contributions to charitable causes. * More than 10 other foundations and NGO's received our
support.
* Staff actively contributed personal time to
charitable initiatives. * Globalworth day camp grew bigger, with 450 children
hosted at Aduna ii Cop ceni (Hospice of Hope).
* Enhanced the range of 'good cause' events which
Globalworth hosted or participated in. * Christmas Charity Days at Globalworth hosted more
than 1,200 children over a four day period during the
festive season.
* Over 100 scholarships awarded to children.
ENVIRONMENTAL
* Maintained our commitment to owning an * Local communities benefiting from reduced carbon
environmentally friendly real estate portfolio, emissions.
adding 11 green certified properties in Romania and
Poland.
* Tenants benefiting from lower energy costs,
positively impacting their profitability.
* Properties added to our environmentally friendly
portfolio included:
* People working or visiting our buildings benefiting
from improved "living" conditions.
* BREEAM: Very Good or Excellent: 7 properties.
* Our partners benefiting by assisting us in developing
* LEED Gold or Platinum: 4 properties. and maintaining our green buildings.
* Invested in the development of platform that will * Our investors benefiting through the creation of long
allow us to better measure and monitor the term sustainable value in our portfolio.
performance of our properties.
* Focused on energy efficient and sustainable solutions
for our development projects which we seek to
formally green certify following their completion.
-------------- ----------------------------------------------------------------- ------------------------------------------------------------
PORTFOLIO REVIEW
Best-in-class real estate portfolio
A high quality portfolio with properties positioned in prime
locations within their respective sub-markets in Romania and
Poland, with a total consolidated appraised value of EUR1.8
billion.
Globalworth's real estate portfolio continued to grow in 2017,
with the Company maintaining its strong momentum in Romania while
investing for the first time outside its primary operating market
and into Poland.
As at 31 December 2017, the Company's combined portfolio
comprised 29 investments with a total of 47 properties in Romania
and Poland, two of the largest real estate markets in the CEE
region respectively, with an appraised value of EUR1.8 billion, an
increase of 85.7% compared to 2016.
Asset Focus
Globalworth's primary focus is to invest in standing or
development office properties, which are subsequently actively
managed by the Company. Such properties accounted for c.70.7% of
our combined portfolio value as of year-end 2017.
In addition, through its investment in GPRE, the Company now
controls three high-street mixed-use properties in Poland, which
account for c.17.0% of our combined portfolio value. These
multi-functional, high quality properties are centrally located
within their respective submarkets and combine high street retail
and class "A" office space.
Over the course of the year, Globalworth further increased its
exposure to Romania's light-industrial / logistics sector,
encouraged by the strong demand for high quality space in the
sector and the opportunity of providing a holistic real estate
solution for our corporate partners. The success of our TAP
light-industrial park in Timisoara, which was further developed in
2017 following the completion of two new facilities, and the
addition of the Dacia Warehouse resulted in the Company's
light-industrial / logistics portfolio rising to an appraised value
of EUR103.4m as of 31 December 2017. In addition, recognising the
overall demand for high quality light-industrial / logistics space
in Timisoara and the attractiveness of TAP's location, we have
acquired 30 hectares of land (valued at EUR7.4m) close to the park
which we aim to develop in the short / medium term.
The remainder of our portfolio is located in Bucharest / Romania
and includes 346 residential units which form part of the Upground
complex, other auxiliary premises and two land plots held for
future development, accounting for 6.2% of our combined portfolio
value.
Geographic Focus
Our real estate portfolio in Romania grew during the year,
mainly through the addition of 5 standing properties, further
progress in our development projects and the acquisition of 30
hectares of industrial land for future development. As a result,
our Romanian combined portfolio reached EUR1,135.3 million as at 31
December 2017, accounting for 62.5% of Globalworth's total
portfolio.
In December 2017, the Company acquired a controlling stake in
GPRE, following which its exposure to the Polish market consisted
primarily of a portfolio of 20 standing properties with an
appraised value of EUR680.1 million (as of 31 December 2017).
Real estate investments in Poland, as at 31 December 2017,
accounted for c.37.5% of our total combined portfolio value. Given
that the properties are located in six different cities, exposure
to a single city / market does not exceed c.10.0% of the total
consolidated portfolio value of the Company. Wroclaw (two
investments) and Warsaw (five investments) account for 10.0% and
9.4% of combined portfolio value, offering total GLA of 106.3k
sqm.
The greatest concentration of our portfolio remains in the new
Central Business District (CBD) of Bucharest (Romania) where we
have 10 standing properties and a development project, accounting
for 69.6% of the combined value of our Romanian portfolio and
representing 259.7k sqm of standing commercial GLA and 346
residential units as of 31 December 2017.
The new CBD is in the northern part of Bucharest, clustered
around the Dimitrie Pompeiu, Calea Floreasca and Barbu Vacarescu
Boulevards, and has seen the highest level of office investment in
recent years as a result of its excellent accessibility and
infrastructure (metro, tram, bus, road), its proximity to the Henri
Coanda International Airport, and the availability of sizeable land
plots.
Key investments in the new CBD include the Class "A" flagship
office Globalworth Tower (54.7k sqm), the Green Court complex
(54.3k sqm), the Class "A" BOC office property (57.0k sqm) and,
finally, our Globalworth Campus project from which Tower I (29.0k
sqm) was delivered in 2017.
The remainder of our Romanian portfolio is spread across the
capital and in two of the country's prime logistics hubs, Timisoara
and Pitesti, which account for 20.6%, 5.5% and 4.2%, respectively,
of our combined portfolio value.
Standing Properties
Globalworth's portfolio of standing properties almost tripled in
number in 2017, with the addition of 22 properties through
acquisition and 3 properties which were under construction at the
beginning of the year and were subsequently delivered to the
market. As of year-end there were 39 standing properties in Romania
19 and Poland 20.
Our standing portfolio, as of 31 December 2017, comprised 25
Class "A" offices and three mixed-use investments (with 7
properties in total) in central locations in Bucharest (Romania)
and 6 major office markets/cities of Poland. In addition, we own a
light industrial park with 5 facilities in Timisoara (Romania), a
modern warehouse in Pitesti (Romania), and part of a residential
complex in Bucharest (Romania).
Globalworth's total standing GLA at the end of 2017 had almost
doubled to c.791.0k sqm, of which c.748.1k sqm was commercial
space, while the appraised value of our standing properties rose to
c.EUR1.7 billion (as at 31 December 2017), representing a c.1.9x
increase on the previous year.
Most notable additions to our portfolio this year include Tower
I of our Globalworth Campus development project in Bucharest, Hala
Koszyki in Warsaw and the A4 Business Park in Katowice.
The Globalworth Campus project is a large-scale development
situated in the new CBD of Bucharest, which on completion will
offer three Class "A" office towers, retail spaces and other
supporting amenities including a conference centre. Tower I (left
tower), part of Phase A, was delivered in September 2017, offering
29.0k sqm over 12 floors and two underground levels. The property,
which is currently in its lease-up phase, as of end-of January 2018
was already 54.5% leased (88.9% incl. options) to high quality
tenants such as Amazon and Honeywell. Occupancy for the property as
of 31 December 2017 was 46.8% (73.6% incl. options)
Hala Koszyki, is a multi-tenanted mixed-use revitalisation /
development project in Warsaw, completed in 2016, combining
commercial and entertainment features with three modern class "A"
office properties (and a smaller secondary office). The project's
centrepiece is the former 'Koszyki' market hall, commonly known as
the 'People's bazaar' built between 1906 and 1908, which has been
renovated and complements the three recently completed modern
office buildings, offering 22.2k sqm of high quality commercial
space. The property is pre-certified with BREEAM 'Very Good' green
certification and is 100% leased to tenants such as Mindspace. In
Q1-2018 the retail component of Hala Koszyki received BREEAM 'Very
Good' certification, and we are currently in the process of
certifying the office component.
The A4 Business Park is a modern, multi-tenanted class "A"
office park in the southern part of Katowice (Poland). The park
comprises three properties, delivered between 2014 and 2016,
offering total GLA of 30.6k sqm. A4 is 100% leased to tenants
including the well-known international corporates IBM, Rockwell
Automation and PKP Cargo.
All our properties are modern and have been completed or
refurbished since 2011, with c.66.7% of our GLA and c.66.5% of our
standing combined portfolio value having been delivered within the
past 7 years. It is worth noting 37 of our properties have been
delivered or significantly refurbished in the past 5 years, and
following the delivery of our development projects (Globalworth
Campus - Towers II and III, Renault Bucharest Connected) and other
future completions, the proportion of modern office stock in our
portfolio will further increase in the next two years.
The number of 'green' properties owned by the Company has also
increased since the beginning of 2017, with the most notable
addition being our landmark class "A" Globalworth Tower office in
Bucharest, which was officially awarded the Green certification of
LEED Platinum, becoming the first building in Romania and the
broader SEE region to have received the highest available Green
accreditation. In addition, Globalworth Plaza in Bucharest received
BREEAM Excellent certification in 2017, while 8 of the properties
added in our portfolio through acquisition are green certified with
BREEAM Very Good or higher and LEED Gold accreditations, including
Green Court "C" (Bucharest), Green Horizon (Lodz), Westgate
(Wroclaw), Tryton (Gdansk) and the A4 Business Park (Katowice).
Our portfolio now includes 18 green accredited properties,
accounting for 57.3% of the standing consolidated portfolio value.
We have commenced the process for certifying or re-certifying 8 of
our properties and in addition we are assessing the green
certification potential of our larger, non-certified office and
mixed-use properties, targeting green accreditations of BREEAM Very
Good / LEED Gold or higher, thus aiming to further increase the
number of green certified properties in our portfolio over the next
12 months.
Occupancy of our standing commercial portfolio as of 31 December
2017 had significantly improved to 93.3%, representing a 12.2%
increase compared to the same period last year (83.1% as of 31
December 2016) or a 10.2% increase on a like-for-like basis. In
total we have c.697.8k sqm of commercial GLA leased to c.440
tenants, the majority of which is tenanted to national and
multinational corporates which are well-known within their
respective markets. This high level of occupancy is underpinned by
the fact that 32 (of 38) of our commercial properties had an
occupancy rate in excess of 95%, and we are in active discussions
with a number of tenants for the remaining vacant space in our
portfolio.
In addition to our commercial portfolio, Globalworth owns 346
apartments in Upground Towers, a modern two-tower residential
complex centrally situated in the new CBD of Bucharest, with a
total of 571 apartments. The property benefits from fine views of
the nearby Tei lake and adjacent to our BOB, BOC and Globalworth
Campus investments and in close proximity to 6 other offices in our
portfolio, thus allowing us to leverage its use and provide a
complete package to our many international tenants looking for
turnkey solutions when relocating their operations to the area.
Globalworth's exposure to the residential sector further
decreased in 2017 and accounted for c.4.3% of our combined
portfolio value at year end (from 9.5% in 2016), mainly as a result
of the new additions in our portfolio and the sale of 75
residential units during the year. At 31 December 2017, 195
apartments in Upground Towers were leased, generating c.EUR1.5
million of annual rental income.
Commercial Standing Properties 31 Dec. 16 31 Dec. 17
------------------------------- ---------- ----------
Number of Investments 11 24
Number of Properties 13 38
GLA (sqm) 370,033 748,143
"As Is" Valuation (EURm) 788.6 1,632.6
Occupancy 83.1% 93.3%
Contracted Rent (EURm) 46.9 107.6
WALL (years) 6.4 5.3
------------------------------- ---------- ----------
Total Standing Properties 31 Dec. 16 31 Dec. 17
-------------------------- ---------- ----------
Number of Investments 12 25
Number of Properties 14 39
GLA (sqm) 419,986 790,967
"As Is" Valuation (EURm) 881.5 1,710.3
Contracted Rent (EURm) 48.5 109.1
-------------------------- ---------- ----------
Developments
Globalworth continued with its active development programme in
Romania in 2017, delivering to market Tower I of the class "A"
Globalworth Campus development and two light-industrial facilities
in TAP, with total of 51.0k sqm of commercial GLA. As at the end of
the year, we had 2 other properties in Bucharest under construction
which, upon completion, will further increase our footprint of high
quality office standing GLA by 70.5k sqm.
Tower II (right tower) of the Globalworth Campus development
project is in progress, with structural works and the façade almost
completed. The majority of the remaining works involves the
interior areas of the building. On completion, Tower II will offer
GLA of 28.2k sqm and 180 parking spaces, with 12 floors above
ground and two underground levels. The building is expected to be
completed at the end of Q1-2018 and its delivery will mark the
completion of Phase I of the project, comprising Towers I and
II.
In addition, construction of Phase II of the Globalworth Campus
development is expected to commence in H1 2018 and will include a
class "A" office building, conference facilities and other
auxiliary areas. During 2017, the Company improved the design of
Phase II and we are currently undertaking the tender process for
the appointment of the general contractor responsible for its
development. Phase II is expected to be completed within 22 months
from commencement and, on completion, will contribute additional
GLA of approximately 34.8k sqm and 506 parking spaces.
At the end of 2017, Globalworth's development project known as
Renault Bucharest Connected ('RBC') was under construction. RBC,
which is jointly owned by the Company and the Elgan Group, will
house Groupe Renault's new headquarters in Romania as well a
dedicated design centre for the development of future models of
cars. On completion, RBC will offer 42.3k of GLA and 1,000 parking
spaces. The project is progressing in line with its envisaged
timeline, with all preparatory activities completed and
construction having reached the third floor. The development is
expected to be delivered in Q1-2019.
Globalworth according with the terms of its agreement with the
Elgan Group will be funding 100% of the development cost and upon
completion of construction will have a right of first offer for the
acquisition of its non-controlling stake in the project.
The Company has adopted several environmentally friendly
principles for its development projects and, as such, anticipates
these projects to be awarded Green certification following their
completion.
Elsewhere, following the delivery of two new light-industrial
facilities at TAP in 2017, the size of the park has reached 103.4k
sqm of GLA, with the potential for further development which would
increase GLA to 131.9k sqm if the extension options currently
available to its existing tenants are taken up.
The "As Is" value of the Development Projects as of 31 December
2017 was approximately EUR79.4 million. On completion, the projects
are expected to deliver approximately 133.8k sqm of new office and
light-industrial space, with an appraised value of c.EUR202.1
million
Land for Future Development
Globalworth owns land plots in two prime locations in Bucharest
(Herastrau Lake and the historical CBD), covering a total surface
of 9.8k sqm, in which office or mixed-use properties can be
developed. We have prioritised the land in the historical CBD for
future development, and we anticipate constructing a mix-use
property of c.27.0k sqm space, subject to relevant approvals.
In 2017 the Company acquired 30 hectares of land near the TAP
light-industrial park in Timisoara. This land can be developed in
phases delivering c.139.8k sqm of new high-quality light-industrial
/ logistics space in the area.
We are currently performing planning and/or permitting
activities for Globalworth's land bank in order to be able to
develop it in the future. The total appraised value of our land for
future development as of 31 December 2017 was c.EUR25.7
million.
Overview of Selected Current and Future Developments
Globalworth Land
Development Campus Renault TAP in
------------------------------
Bucharest Extension Bucharest TAP II
Tower Tower
Asset II III Connected Timisoara CBD Timisoara
-------------------------- --------------- ------------- ------------ ----------- ----------- -----------
Under Future Under Future Future Future
Status construction development construction development development development
-------------------------- --------------- ------------- ------------ ----------- ----------- -----------
Expected Delivery Q1-2018E 2020E Q1-2019E 2020E 2018-2020E
134k
sqm in
28.2 27.0
GLA (sqm) k 34.8 k 42.3 k 28.5 k k phases
Capex to 31 Dec
17 (EURm) 16.9 6.6 18.4 0.8 7.0 4.7
As Is Value (EURm) 37.6 16.7 24.4 0.7 12.6 7.4
Estimated Capex
(EURm) 15.8 45.0 39.8 7.4 35.0 56.4
Completion Value
(EURm) 51.2 66.6 74.0 10.3 12.6 -
Est. Yield on Development
Cost 12.2% 9.5% 11.5% 13.8% 10.0%
-------------------------- ------------------------------ ------------ ----------- ----------- -----------
* Renault Bucharest Connected (reflected with 100% ownership).
* Estimated capex based on contracted and company estimates.
Forward Purchase and Right of First Offer Portfolio
Globalworth, through GPRE, has a portfolio of three investments
in Poland which are at different phases of construction and which
it has either prefunded or in which it owns a minority stake (25%),
with the right to acquire the remaining interest once certain
conditions have been satisfied.
Forward Purchase
-- West Link is a class "A" office project located in west part
of Wroclaw next to the West Gate office building owned by the
Company. The property, which is expected to be completed in
Q2-2018, will offer on completion c.14.4k sqm of GLA over six
floors above ground and 266 parking spaces. West Link, on
acquisition, will be fully occupied, and is currently 97.7% pre-let
mainly to Nokia, with a 5-year master lease on available
spaces.
Right of First Offer (25% current ownership)
-- Beethovena Business Park is a class "A" office project
located in Warsaw comprising two, five-floor offices, which on
completion will offer total GLA of 34.2k sqm. Beethovena I and II
are of similar size and are expected to be delivered in Q3-2019 and
Q4-2019 respectively
-- Browary J is a class "A" office project located in Warsaw
comprising a stepped shaped "main" building extending over 11
floors and the lower 7th floor wing. The project is expected to be
delivered in Q4-2018 and, on completion, will offer 15.0k sqm of
GLA, of which c.45% has been pre-leased to a blue-chip tenant.
Browary J will be part of Browary Warszawskie (Warsaw Brewery) a
mixed-use (office, residential and retail) development in the Wola
district which has become one of the most dynamic commercial and
residential areas of Warsaw
Remaining
Amount Value
(EUR) on
As Is
Estimated to be Value Completion
invested (31 (31
Completion Amount for Dec Dec
GLA Invested
Location Date (EUR) 100% 2017) 2017)
----------------------- --------- ----------- -------------- --------- ------ ----------
Beethovena I Warsaw Q3-2019 17,845 2.9 16.5 6.9 42.1
Beethovena II Warsaw Q4-2019 16,380 2.8 14.4 3.9 36.9
Browary J Warsaw Q4-2018 14,979 4.2 19.4 14.0 54.3
----------------------- --------- ----------- ------ ------ --------- ------ ----------
Total ROFO
----------------------- --------- ----------- ------ ------ --------- ------ ----------
West Link Wroclaw Q2-2018 14,362 18.0 - 36.4 36.4
----------------------- --------- ----------- ------ ------ --------- ------ ----------
Total ROFO and Forward
purchase 63,566 27.9 50.3 61.2 169.7
----------------------------------------------- ------ ------ --------- ------ ----------
* For the ROFO properties 50% LTV is assumed.
* West Link "As Is" value, represents the estimated completion value of the property.
GOVERNANCE
INTRODUCTION TO GOVERNANCE
Letter from the Chairman
Our growing momentum in the CEE office sector is very evident
following the significant progress in 2017 in enlarging our
geographic footprint, portfolio size and our capital base.
Alongside this, our commitment towards strong governance and
corporate sustainability and responsibility remains an overriding
priority.
Highlights
-- Strong supportive relationships with shareholders and bond
holders of the Company, evidenced by our success in capital
markets
-- 5 new Non-Executive Directors joined the Board which now comprises 13 members
-- Active involvement by the Board in overseeing governance with
19 meetings held during the year
-- Continuous focus on high environmental standards with 11 new
green certified offices added to our portfolio
-- Outstanding health and safety record
Dear shareholders
I am pleased to introduce this Corporate Governance report, in
which we demonstrate our high standards of corporate governance as
we strive to voluntarily meet the higher standards of the UK
Corporate Governance Code. 2017 has been a significant year for
Globalworth on a variety of fronts, and one which we are confident
we can further capitalise on in the years ahead. The Board is
grateful to all the Company's stakeholders for their ongoing
commitment and support.
I am delighted with the ongoing progress that the Company
continues to make, further extending the impressive track record
since IPO in 2013 and in-line with our strategy and business model.
While 2017 will be marked by the Company's expansion into Poland
which starts an exciting new chapter, the ongoing underlying
progress in Romania was also pleasing, with growth in occupancy
alongside the delivery of new developments and acquisitions. The
Company successfully marked its debut in the debt capital markets
with a EUR550m Eurobond in June which was more than 2x
oversubscribed, and demonstrated the Company's ability to tap into
the attractive lending conditions available to it. As evidence to
our scale, this represented the largest corporate bond issue in the
history of the Bucharest stock exchange. Following this progress,
it was satisfying to see the Company completed in December a EUR340
million new equity capital raise, above target and oversubscribed
at a price of EUR8.75 per share, receiving good support from our
existing shareholders and, importantly, from new shareholders to
Globalworth.
It is with great satisfaction that we have seen the considerable
progress achieved in 2017 reflected in the strong total return to
shareholders through a combination of share price performance and
dividend. An owner of our shares throughout 2017 will have enjoyed
a total return of 37%. The Company's improved traction in the
capital markets has also been seen by improved trading volumes of
our shares on the London Stock Exchange in recent months, with
average daily volume exceeding EUR400k/day in Q4 2017, compared to
c.EUR75k/day in Q4 2016. Responding to feedback from our investors,
the Company has expanded its investor relations and engagement
program, reflecting our commitment to build our brand and market
awareness in international capital markets further. This places us
in a good position, as announced during the year, to progress our
intention to obtain a Premium Listing on the London Stock
Exchange's Main Market during the coming year.
Sustainability/Social Responsibility
All at Globalworth are committed to following strict business
ethics and in corporate social responsibility. We are proud to
place significant importance on this, but firmly believe that this
sustains long-term value for the Company, our shareholders, the
community and environment.
Reflecting the importance not only for the environment, but also
as a key priority for many prospective tenants, we continue to
target buildings offering strong green credentials, or scope where
environmental performance can be improved. Today, we have a
portfolio of 25 office properties in Romania and Poland, of which
17 have received green accreditation of BREEAM Very Good / LEED
Gold or higher. This was also recognised in the award of the Best
Leading Green Build Development & Developer for Globalworth
Tower at the CIJ Awards Romania. In addition, in Q1-2018 the retail
component of our Hala Koszyki investment in Poland was green
certified.
Giving back to the Community is a key principle in our
operations, both as a Company and through our employees in a
personal capacity. Over the years, Globalworth has supported
numerous local communities, charities and hospitals both indirectly
and directly. Examples have included our efforts with children and
those in need of palliative care, but also in education.
Health & Safety
Health and safety is of paramount importance to us, with tens of
thousands of people working at or visiting our properties each day
and across our development sites. With c.791.0k sqm of standing GLA
in our property portfolio and an additional 70.5k sqm under
construction at the end of 2017, and we work hard together with our
partners to maintain an outstanding record in this area. Across our
portfolio, we conduct health and safety training for our tenants
and undertake regular scenario exercises in order to secure the
safety of employees and visitors in the event of an emergency. On
our construction sites we monitor our contractors closely to ensure
that proper safety measures are being applied to the workforce and,
in the case of visitors, that the proper health and safety training
is being performed.
The Board
The close relationship and open communication between the
Non-Executive and Executive Directors is integral to our governance
process, allowing the smooth operation of the Board, and ensuring
ongoing guidance for the Company. This is evident through the 19
times the Board convened in 2017, and I would like to thank all
members of the Board for their ongoing support. We were pleased to
welcome five new additions to our Board of Directors over the
course of the year, which now comprises 13 members. Norbert Sasse,
George Muchanya, Peter Fechter, Richard van Vliet joined in
February 2017 following the enhancements to governance announced at
the end of 2016, and in December 2017 we were pleased to be joined
by Bruce Buck. Together these additional members continue to
enhance the expertise and depth of knowledge from which the Company
benefits.
Geoff Miller
Chairman
7 March 2018
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Note EUR'000 EUR'000
---------------------------------------- ---- -------- --------
Revenue 7 77,866 68,231
Operating expenses 8 (26,772) (24,678)
Net operating income 51,094 43,553
---------------------------------------- ---- -------- --------
Administrative expenses 9 (10,231) (7,707)
Acquisition costs 26 (10,809) (105)
Fair value movement 3 6,727 6,710
Bargain purchase gain on acquisition of
subsidiaries 26 28,897 -
Gain on sale of subsidiary - 272
Share-based payment expense 24 (143) (14)
Depreciation on other long-term assets (150) (183)
Other expenses 31 (4,091) (1,857)
Other income 5 3,111
Foreign exchange loss (317) (119)
---------------------------------------- ---- -------- --------
9,888 108
---------------------------------------- ---- -------- --------
Profit before net financing cost 60,982 43,661
---------------------------------------- ---- -------- --------
Net financing cost
- Finance cost 10 (38,465) (32,222)
- Finance income 1,447 749
---------------------------------------- ---- -------- --------
(37,018) (31,473)
---------------------------------------- ---- -------- --------
Share of profit of joint venture 28 2,188 -
---------------------------------------- ---- -------- --------
Profit before tax 26,152 12,188
---------------------------------------- ---- -------- --------
Income tax expense 11 (2,405) (873)
---------------------------------------- ---- -------- --------
Profit for the year 23,747 11,315
---------------------------------------- ---- -------- --------
Other comprehensive income - -
---------------------------------------- ---- -------- --------
Profit attributable to: 23,747 11,315
---------------------------------------- ---- -------- --------
- Equity holders of the Company 24,426 11,315
---------------------------------------- ---- -------- --------
- Non-controlling interest (679) -
---------------------------------------- ---- -------- --------
Cents Cents
------------------------ ----- -----
Earnings per share
- Basic 12 26.40 17.57
- Diluted 12 26.04 17.56
EPRA earnings per share
- Basic 12 18.17 13.34
- Diluted 12 17.92 13.33
------------------------ ----- -----
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
2017 2016
Note EUR'000 EUR'000
----------------------------------------- ---- --------- ---------
ASSETS
Non-current assets
Investment property 3 1,792,414 980,892
Goodwill 27 12,349 12,349
Advances for investment property 5 3,355 2,454
Investments in joint-ventures 28 21,939 -
Other long-term assets 689 722
Other receivables 19 416 1,183
Prepayments 1,578 1,022
Available for sale financial assets 17 5,897 -
Long-term restricted cash 20 2,958 -
----------------------------------------- ---- --------- ---------
1,841,595 998,622
----------------------------------------- ---- --------- ---------
Current assets
Debentures 18 18,389 -
Available for sale financial assets 17 4,346 -
Trade and other receivables 19 22,419 10,807
Guarantees retained by tenants 304 277
Income tax receivable 295 411
Prepayments 325 348
Cash and cash equivalents 20 273,272 221,337
----------------------------------------- ---- --------- ---------
319,350 233,180
----------------------------------------- ---- --------- ---------
Total assets 2,160,945 1,231,802
----------------------------------------- ---- --------- ---------
EQUITY AND LIABILITIES
Total equity
Issued share capital 22 894,509 538,114
Treasury shares 24 (270) -
Unissued share capital 23 - 8,584
Share-based payment reserve 24 2,240 2,139
Retained earnings 172,405 166,557
----------------------------------------- ---- --------- ---------
Equity attributable to equity holders of
the Company 1,068,884 715,394
Non-controlling interest 67,572 -
----------------------------------------- ---- --------- ---------
Total equity 1,136,456 715,394
----------------------------------------- ---- --------- ---------
Non-current liabilities
Interest-bearing loans and borrowings 15 834,044 375,570
Deferred tax liability 11 99,574 70,575
Guarantees retained from contractors 2,616 33
Deposits from tenants 8,931 2,261
Trade and other payables 16 1,509 2,188
----------------------------------------- ---- --------- ---------
946,674 450,627
----------------------------------------- ---- --------- ---------
Current liabilities
Interest-bearing loans and borrowings 15 36,360 38,665
Guarantees retained from contractors 1,057 2,394
Trade and other payables 16 35,635 20,726
Other current financial liabilities 21 2,638 3,574
Finance lease liabilities - 4
Deposits from tenants 1,256 374
Income tax payable 869 44
----------------------------------------- ---- --------- ---------
77,815 65,781
----------------------------------------- ---- --------- ---------
Total equity and liabilities 2,160,945 1,231,802
----------------------------------------- ---- --------- ---------
Cents Cents
NAV per share 13 809 791
Diluted NAV per share 13 807 782
EPRA NAV per share 13 884 857
----------------------------------------- ---- --------- ---------
The financial statements were approved by the Board of Directors
on 7 March 2018 and were signed on its behalf by:
Richard van Vliet
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
Equity attributable to equity
holders of the Company
---------------------------------------------------------------
Issued Unissued Share-based Non-
share Treasury share payment Retained controlling Total
capital shares capital reserve earnings Total interests equity
Note EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------- ---- -------- -------- -------- ----------- --------- --------- ------------ ---------
As at 31 December
2015 341,784 - - 2,655 155,242 499,681 - 499,681
---------------------- ---- -------- -------- -------- ----------- --------- --------- ------------ ---------
Shares issued for
cash 200,000 - - - - 200,000 - 200,000
Transaction costs
on issue of shares (22,191) - - - - (22,191) - (22,191)
Transaction costs
on issue of shares
settled in shares 8,584 - - - - 8,584 - 8,584
Transaction costs
on issue of shares
to be settled in
shares - - 8,584 - - 8,584 - 8,584
Fair value of option
warrants issued
for executive share
scheme - - - 14 - 14 - 14
Shares granted
to Executive
Directors
and other senior
management employees - - - 3,407 - 3,407 - 3,407
Shares issued to
the Executive
Directors
and other senior
management employees 3,937 - - (3,937) - - - -
Shares issued for
settlement of
interest-bearing
liability 6,000 - - - - 6,000 - 6,000
Profit for the
year - - - - 11,315 11,315 - 11,315
---------------------- ---- -------- -------- -------- ----------- --------- --------- ------------ ---------
As at 31 December
2016 538,114 - 8,584 2,139 166,557 715,394 - 715,394
---------------------- ---- -------- -------- -------- ----------- --------- --------- ------------ ---------
Shares issued for
cash 22 340,000 - - - - 340,000 - 340,000
Transaction costs
on issue of shares 22 (2,271) - - - - (2,271) - (2,271)
Transaction costs
on issue of shares
settled in shares 22 8,584 - (8,584) - - - - -
Fair value of option
warrants issued
for executive share
scheme 24 - - - 17 - 17 - 17
Shares issued under
Executive share
option plan 24.1 8,950 - - (175) - 8,775 - 8,775
Shares issued to
the Executive
Directors
and other senior
management employees 24.2 1,132 - - (1,132) - - - -
Interim dividend
payment during
the year 22.2 - - - - (19,933) (19,933) - (19,933)
Acquisition of
own shares 24.3 - (428) - - - (428) - (428)
Shares granted
under the
subsidiaries'
employees share
award plan 24.3 - - - 126 - 126 - 126
Shares granted
to Executive
Directors
and other senior
management employees 24.2 - - - 1,423 - 1,423 - 1,423
Shares vested under
the subsidiaries'
employees share
award plan 24.3 - 158 - (158) - - - -
Acquired through
business acquisition 26 - - - - - - 77,306 77,306
Acquisition of
minority interest 29 - - - - 1,355 1,355 (9,055) (7,700)
Profit for the
year - - - - 24,426 24,426 (679) 23,747
---------------------- ---- -------- -------- -------- ----------- --------- --------- ------------ ---------
As at 31 December
2017 894,509 (270) - 2,240 172,405 1,068,884 67,572 1,136,456
---------------------- ---- -------- -------- -------- ----------- --------- --------- ------------ ---------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
Note EUR'000 EUR'000
------------------------------------------------ ---- --------- ---------
Profit before tax 26,152 12,188
Adjustments to reconcile profit before
tax to net cash flows
Fair value movement on investment property 3 (6,727) (6,710)
Bargain purchase gain on acquisition
of subsidiaries 26 (28,897) -
Loss on sale of investment property 3,807 1,421
Gain on sale of subsidiaries - (272)
Share-based payment expense 24 143 14
Depreciation on other long-term assets 150 183
Net movement in provision for doubtful
debts 129 (98)
Foreign exchange loss 317 119
Share of profit of joint ventures 28 (2,188) -
Net financing costs 37,018 31,473
------------------------------------------------ ---- --------- ---------
Operating profit before changes in working
capital 29,904 38,318
(Increase)/decrease in trade and other
receivables (3,027) 4,174
Increase/(decrease) in trade and other
payables (3,010) 1,364
Interest paid (13,352) (23,171)
Interest received 170 22
Income tax paid (614) (795)
------------------------------------------------ ---- --------- ---------
Cash flows from operating activities 10,071 19,912
------------------------------------------------ ---- --------- ---------
Investing activities
Expenditure on investment property under
development (50,076) (51,688)
Payment for acquisition of subsidiaries
less cash acquired 26 (317,653) (1,894)
Proceeds from sale of subsidiary less
cash disposed - 11,000
Payments for the acquisition of non-controlling
interests 29 (7,700) -
Proceeds from sale of investment property 10,392 3,327
Investment in available for sale financial
assets 17 (3,464) -
Investment in and loans to joint ventures 18 (19,360) -
Acquisition of other long-term assets (117) (244)
------------------------------------------------ ---- --------- ---------
Cash flows used in investing activities (387,978) (39,499)
------------------------------------------------ ---- --------- ---------
Financing activities
Proceeds from share issuance 22 348,775 200,000
Payment of transaction costs on issue
of shares (3,896) (1,099)
Purchase of own shares 24.3 (428) -
Proceeds from interest-bearing loans
and borrowings(1) 548,989 222,703
Repayment of interest-bearing loans
and borrowings (430,213) (203,017)
Payment of interim dividend 22.2 (19,933) -
Payment of loan arrangement fees and
other financing costs (15,702) (11,670)
Change in restricted cash reserve 2,971 -
------------------------------------------------ ---- --------- ---------
Cash flows from financing activities 430,563 206,917
------------------------------------------------ ---- --------- ---------
Net increase in cash and cash equivalents 52,656 187,330
------------------------------------------------ ---- --------- ---------
Cash and cash equivalents at the beginning
of the year 20 218,366 31,036
------------------------------------------------ ---- --------- ---------
Cash and cash equivalents at the end
of the year(1) 20 271,022 218,366
------------------------------------------------ ---- --------- ---------
1 Net of the EUR2.3 million (2016: EUR2.9 million) cash reserve, see note 20.
The aforementioned references to the Financial Statements above
are in relation to the notes that are contained in Section I: Basis
of Preparation within the 2017 Annual Report, which can be found at
http://www.globalworth.com/investor-relations/financial-reports-and-presentation
from page 116. In addition, the Annual Report provides further
information about the activities of Globalworth and also a glossary
of terms.
[1] Combined real estate portfolio is defined as the aggregation
of all assets in the Company's portfolio, including consolidation
of 100% of GPRE and 100% of the investment referred to as Renault
Bucharest Connected.
[2] Normalised EBITDA is defined as earnings attributable to
equity holders of the Company before finance cost, tax,
depreciation, amortisation of other non-current assets, purchase
gain on acquisition of subsidiaries, fair value movement, and other
non-operational and/or non-recurring income and expense items.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGUAAWUPRPWM
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