REG - Globalworth Real Est - Half-year Report
20/09/2022 07:00
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RNS Number : 9263Z Globalworth Real Estate Inv Ltd 20 September 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
20 September 2022
Globalworth Real Estate Investments Limited
("Globalworth" or the "Company")
Interim Results for the six months ended 30 June 2022
Globalworth, the leading office investor in Central and Eastern Europe,
announces the release of its Interim Report and Unaudited Consolidated
Financial Results for the six-month period ended 30 June 2022 (the "Interim
Report").
The Interim Report is also available on Globalworth's website at:
https://www.globalworth.com/investor-relations/reports-presentations/
(https://www.globalworth.com/investor-relations/reports-presentations/)
For further information visit www.globalworth.com (http://www.globalworth.com)
or contact:
Enquiries
Stamatis Sapkas
Tel: +40 732 800 000
Chief Financial Officer
Panmure Gordon (Nominated Adviser and
Broker)
Tel: +44 20 7886 2500
Alina Vaskina
About Globalworth / Note to Editors:
Globalworth is a listed real estate company active in Central and Eastern
Europe, quoted on the AIM-segment of the London Stock Exchange. It has become
the pre-eminent office investor in the CEE real estate market through its
market-leading positions both in Poland and Romania. Globalworth acquires,
develops and directly manages high-quality office and industrial real estate
assets in prime locations, generating rental income from high quality tenants
from around the globe. Managed by over 240 professionals across Cyprus,
Guernsey, Poland and Romania, a combined value of its portfolio is €3.2
billion, as at 30 June 2022. Approximately 96.3% of the portfolio is in
income-producing assets, predominately in the office sector, and leased to a
diversified array of over 660 national and multinational corporates. In Poland
Globalworth is present in Warsaw, Wroclaw, Lodz, Krakow, Gdansk and Katowice,
while in Romania its assets span Bucharest, Timisoara, Constanta, Pitesti,
Arad and Oradea.
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.
GLOBALWORTH REAL ESTATE INVESTMENTS LIMITED
INTERIM REPORT AND UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
30 JUNE 2022
FINANCIAL HIGHLIGHTS: H1-2022
Combined portfolio open market value Shareholders' equity EPRA NRV per share
€3.2bn €1.7bn €8.72
+1.7(%) on YE-21 +0.2(%) on YE-21 +0.7(%) on YE-21
IFRS Earnings before tax Adjusted normalised EBITDA Net Operating Income
€45.7m €63.4m €69.9m
+€18.9 in H1-21 -2.1(%) on H1-21 -3.2(%) on H1-21
IFRS Earnings per share EPRA Earnings per share Dividends paid in H1-22
15 cents 16 cents 13 cents
+6 cents in H1-21 +18.1(%) on H1-21 -13.0(%) on H1-21
CHIEF EXECUTIVE'S REVIEW
Dear Stakeholders,
2022 started with an optimism that, following two years surrounded by the
COVID-19 pandemic, the world was ready to start returning to normality. But as
Europe and the CEE began moving on from the pandemic, the war in Ukraine
impacted the international business environment, which brought about supply
chain disruptions, higher inflation and interest rates, and increased
volatility, impacting the economic and business environment negatively,
resulting in a more uncertain outlook.
The economic outlook in our region was revised as a result, with the EU
Commission now expecting slower growth due to the increasing uncertainty.
Still, it does not foresee any signs of a recession in the Eurozone.
Globalworth's performance across the business was resilient, despite the
global challenges, as we continued implementing our "local landlord" approach
in managing our business.
Our initiatives included investments in existing and new high-quality
properties, managing our portfolio to preserve and improve our operational
performance, and maintaining an efficient and flexible capital structure,
resulting in a robust overall performance. All this whilst simultaneously
providing a safe and healthy environment for our people, tenants and
communities to work, visit and be part of.
At this point, I would like to thank all our team members for their positive
attitude, commitment, and efficiency, as well as our shareholders, partners
and communities for their support in achieving our results.
Investment in Our Portfolio
Our portfolio is predominantly comprised of Class "A" offices. In the last 12
months, however, following the delivery of our Class "A" Globalworth Square
office and in response to market demand, we have focused our development
programme on high-quality logistics facilities in Romania and the
redevelopment of two mixed-use properties in Poland.
As a result, in H1-2022, we finalised the construction of four logistics
facilities in our portfolio with a total of 61.7k sqm of GLA. These facilities
all represent subsequent phases in existing successful projects of
Globalworth.
During the year so far, we also formed a new strategic partnership with a very
experienced local developer to invest in the "small business units" segment in
logistics and warehouse facilities in Romania. As part of this partnership in
which we own a majority (75%) stake, we acquired our first small business
units project (standing) in the North-Western part of Bucharest, and we are
developing a second project (in phases) in the North-Eastern part of the
capital. In addition, we have another industrial project under construction in
Bucharest and expected to be delivered this year.
We also focused on actively improving our existing properties. Of the three
mixed-use properties we own in Poland, two are currently under refurbishment
to improve their Class-A office space and their retail and commercial
offerings in line with current market trends. For the remainder of our
standing properties, we keep investing in maintaining and, where required,
improving their quality.
As a result, the values of our like-for-like standing commercial, and total
combined, portfolio increased by 0.8% to €2.8 billion, and 1.7% to €3.2
billion, respectively.
Our Leasing and Occupancy
Our ability to lease spaces in our portfolio is key to the success of our
business. I am pleased to see that in the first half of 2022, we successfully
negotiated the take-up or extension of 106.1k sqm of commercial spaces at an
average WALL of 5.0 years despite the continued challenging market conditions.
It is also important to note that, although most of our tenants are large
multinationals or national corporates, their operations within our portfolio
had no material exposure to either Ukraine or Russia. Thus our business has
not been directly affected by the war. That said, no business is immune to the
war's impact and the overall weakening macroeconomic prospects.
The average standing occupancy of our combined commercial portfolio was 88.1%
(88.4% including tenant options) on 30 June 2022, marginally lower compared to
year-end 2021 (88.5% or 88.7% including tenant options). Lower occupancy was
driven by the four newly completed industrial facilities, two of which are in
the lease-up phase. We are encouraged by the fact that like-for-like occupancy
marginally increased by 0.9% despite the challenging market conditions and the
fact that WARTA Tower is now effectively vacant.
In Poland and Romania, increased construction costs and reduced development
activity due to the COVID-19 pandemic have limited new supply in these
markets. This means that the supply of high-quality offices in central
locations in the coming years will be lower than the average levels recorded
in the past, which may result in higher tenant demand for such properties.
In addition, the gap between A-grade properties with strong ESG credentials
and B-grade properties has been widening both from an investment and a leasing
perspective, which should benefit our portfolio of high-quality properties in
the future.
Headline rental levels have remained stable, and the combination of lower
supply and higher inflation should be a strong mitigant against the negative
effects of a potential slowdown in tenant demand due to the weakening economic
conditions.
The total annualised contracted rent increased by 2.5% to €188.4 million
compared to year-end 2021, with like-for-like annualised commercial contracted
rents in our standing commercial portfolio increasing by 2.1% to €178.1
million at the end of the first half of 2022.
Our Financial Results
Gross rent remained effectively unchanged compared to the first half of last
year, as the positive impact from standing properties added to the portfolio
during the year, the addition of Globalworth Square in June 2021(lease-up
phase) and the higher occupancy, were offset by Warta Tower which is now
effectively empty.
In addition, an increase in the cost of non-recoverable service charges and
property operating costs covered by the Group as part of our ESG spaces used
in response to the Ukrainian Refugee Crises, resulted in the Net Operating
Income decreasing by 3.2% compared to H1-2021.
However, our adjusted normalised EBITDA decreased by 2.1% to €63.4 million
due to the positive impact of savings in recurring administrative and other
expenses.
Our Net profit significantly improved to €32.6 million (H1-2021: €12.5
million) due to fair value gain on investment property and an increase in the
share of profit of equity-accounted investments in joint ventures.
Dividend
During the year, we paid the second interim dividend of €0.13 per share for
the 2021 financial year, and on 31 August 2022, we announced the first interim
dividend for 2022 of €0.14 per share. Both dividends represented at least
90% of the EPRA Earnings for their respective six months periods, as
stipulated by our articles of incorporation.
Balance Sheet
Liquidity has always been a key area of focus for us, and I am pleased that we
proceeded with the repayment of the remaining €323 million of our inaugural
€550 million bond that was due to mature in June 2022, thus resulting in the
Globalworth having no material debt maturing until March 2025. We also entered
into a 6-year term loan agreement for €85 million with the International
Finance Corporation ("IFC"), which is a member of the World Bank.
In addition, in this period, there were several projects which have either
recently completed or are still underway (including the refurbishment of two
mixed-use properties in Poland), and where the total value uplift is yet to be
seen; as such, our LTV increased from 40.1% to 41.0%.
On 30 June 2022, EPRA Net Reinstatement Value (NRV) at the end of the period
was €1.9 billion, or €8.72 per share, representing a marginal increase
(+0.6% per share) from €8.66 on 31 December 2021, mainly due to dividends
paid and lower operating performance offsetting the positive impact from
significantly lower non-recurring costs in H1-22 and positive revaluation
gains.
In addition, S&P and Fitch reaffirmed their investment grade ratings
following their 2021 year-end review of Globalworth, with Moody's maintaining
and stabilising their rating outlook of the Company in Q4 2021.
Environmental and social
We maintained our A-rating by MSCI and a low-risk rating by Sustainalytics. We
issued our fourth Sustainable Development Report and second Green Bond Report
during the period.
We continued investing in our green portfolio and, during the first six months
of 2022, we certified or recertified 23 properties. At the end of June 2022,
we had 57 green-certified properties valued at €2.8 billion.
In addition, we have been conducting an internal analysis/review of our
portfolio to understand better our carbon footprint and ways of improving it.
Management change
In May 2022, Mr S. Sapkas, who has been with the Group since 2013, took on the
role of Group Chief Financial Officer, following the decision of Mr A.
Papadopoulos to step down. I wish Stamatis every success in his new role
within Globalworth.
Outlook
The current challenging global macroeconomic conditions are expected to
continue over the near to mid-term, resulting in an uncertain outlook. As a
result, our primary focus continues to be maintaining a solid and resilient
operating performance and a prudent financial position with moderate leverage
and high levels of liquidity.
Hope for peace!
Dimitris Raptis
Chief Executive Officer
19 September 2022
MANAGEMENT REVIEW
REAL ESTATE INVESTMENT ACTIVITY
· Focused on high-quality logistics / light-industrial facilities
in Romania and the refurbishment / repositioning of two mixed-use properties
in Poland.
· Romania:
− Completed the development of four high-quality logistics
facilities, adding 61.7k sqm of spaces to our portfolio.
− Acquired our first small business units' logistics facility in
Bucharest Greater Area with an area of 7.1k sqm.
− Two high-quality logistics facilities under construction
expected to add 56.0k sqm of GLA on completion
· Poland:
− Refurbishment / repositioning of the Renoma and Supersam
mixed-use properties in progress, where we are aiming at increasing their
class "A" office space and improving their retail/commercial offering.
· Continued (and continuing) to monitor market trends for the
acquisition or development of high-quality office and industrial properties in
the future.
New Acquisitions
In April 2022, we formed a new strategic partnership with CATTED focusing on
the "small business units" segment in logistics and warehouse facilities in
Romania. As part of this partnership in which we own a majority (75%) stake,
we acquired our first small business units project in the North-Western part
of Bucharest, close to our Chitila Logistics Hub. The project, developed by
CATTED, has been rebranded to "Business Park Chitila" and comprises 13 small
units, offering 7.1k sqm of GLA and was 98.0% occupied on 30 June 2022.
We also acquired a 45k sqm land plot in the North-Eastern part of Bucharest
(Stefanesti) where, together with CATTED, we are currently constructing
"Business Park Stefanesti", also focused on small business units.
In addition, and to facilitate further the success and the development of the
future phases of the Constanta Business Park project, we acquired a 34.5k sqm
plot to secure a future railroad connection for the entire park.
Review of Developments
In H1-2022, we continued with our active development programme focusing on
high-quality logistics / light-industrial facilities in Romania and the
refurbishment/repositioning of two mixed-use properties in Poland. At the
beginning of the year, we had four logistics facilities under construction,
all of which were delivered in the first half, while the
refurbishment/repositioning works of two (of the three) mixed-use properties
continued throughout the period. In addition, we commenced the construction of
two other new industrial facilities, which we expect to have completed by the
end of the year.
New Deliveries
In the first half of 2022, we delivered four new logistics facilities offering
61.7k sqm of GLA. All facilities represented subsequent phases of development
in existing established projects which we directly own or through JV
partnerships.
At the end of June 2022, the four facilities were 61.8% contracted by
multinational or large national tenants like HAVI Logistics, Caroli, Linde,
and Agricover. They had a total annualised contracted rent of €2.2 million
at an average WALL of 8.4 years. Total annualised rent could increase to
€3.3 million at full occupancy.
Developments - Delivered
Pitesti Industrial Park Chitila Logistics Hub Constanta Business Park Timisoara Industrial Park II
(Phase II) (Phase B)*) * (Phase B)* (Phase B)
Location Pitesti Bucharest Constanta Timisoara
GLA (k sqm) 6.7 16.4 19.6 19.0
Occupancy (%) 100.0% 90.7%** 78.5% 6.1%
Development Cost (€ m) 5.9 12.1 9.4 8.3
GAV (€ m) 7.8 11.0 19 10.8
Contracted Rent (€ m) 0.6 0.8 0.8 0.1
100% Rent (€ m) 0.6 0.9 1.0 0.9
Estimated Yield on Development Cost 9.6% 7.2% 10.1% 11.0%
(*) Joint Venture in which Globalworth owns 50%; figures shown on 100% basis.
(**) Difference up to 100% occupancy is covered by tenant option to expand
Current Developments & Refurbishment / Repositioning Projects
In the first half of 2022, we commenced the development of the third and last
phase of our Chitila Logistics Hub (Northwest of Bucharest) and our first
development of a small business units facility in the North Eastern part of
Bucharest, expecting that these facilities will, on completion, further
increase our footprint by 56.0k sqm of high-quality GLA.
The Chitila Logistics Hub, following the completion of all its phases (last
under construction), will offer in total 77.8k sqm of high-quality last-mile
logistics spaces close to Bucharest ring road, providing easy access to the
capital. The first phase was delivered in Q3-2020 and is 100.0% occupied, with
phase two delivered in Q1-2022 and 90.7% occupied.
Business Park Stefanesti, located in the North-Eastern part of Bucharest,
offers easy access to the Bucharest Ring Road and allows for a quick
connection to the centre of Bucharest via the A2 motorway. The location is
considered very advantageous for housing small business units. The project
comprises three buildings to be delivered in phases with a total of 18.0k sqm
GLA, offering up to 24 units for rent, ranging from 500 to 1,500 sqm. As of 30
June 2022, the first building was already partially pre-let to Delivery
Solutions SRL.
Following the review back in 2020 of our portfolio and in response to market
conditions, we commenced refurbishment/repositioning of two of our three
mixed-use properties in Poland. Aiming to increase their class "A" office
space and improve their retail/commercial offering, work started in our Renoma
landmark property in Wroclaw in H2-2020 and in our centrally located Supersam
property in Katowice in H2-2021.
· In Renoma, the refurbishment will increase the offer of Class "A"
office space on the higher floors. It will also reposition the property's
retail offer towards a more attractive food court and a selected fashion mix
on the ground floor and convenience facilities, including a supermarket, gym
and drugstore located on the -1 level.
· In Supersam, we are redeveloping the entire level 1 into an
office function. On level -1, we are repositioning selected retail modules
into high-quality retail & commercial spaces with food and entertainment.
Works are expected to be completed in Renoma in H1-2023 and in Supersam in
H2-2022.
Developments - In progress
Chitila Logistics Hub (Phase C)* Business Park Stefanesti**
Location Bucharest Bucharest
Status Under construction Under construction
Expected Delivery 2022 2023
GLA (k sqm) 38.0 18.0
CAPEX to 30 Jun 22 (€ m) 16.4 1.7
GAV (€ m) 17.0 3.9
Estimated CAPEX to Go (€ m) 2.1 10.6
ERV (€ m) 1.7 1.3
Estimated Yield on Development Cost 9.1% 10.2%
(*) Joint Venture in which Globalworth owns 50%; figures shown on 100% basis.
(*) Joint Venture in which Globalworth owns 75%; figures shown on 100% basis.
Properties Under Refurbishment / Repositioning
Renoma Supersam
Location Wroclaw Katowice
Status Refurbishment / Repositioning Refurbishment / Repositioning
Expected Delivery H1-2023 H2-2022
GLA - on Completion (k sqm) 48.2 26.6
CAPEX to 30 Jun 22 (€ m) 9.8 2.0
GAV (€ m) 111.5 48.1
Estimated CAPEX to Go (€ m)* 14.8 3.6
ERV (€ m) 9.4 4.2
Estimated Yield on Completion of Project** 9.1% 11.2%
* Estimated CAPEX to Go partially excludes tenant contributions which are
subject to tenant negotiation and may impact the final yield on Completion of
the Project.
** Estimated Rental Value increase versus current Contracted rent + ERV on
vacant spaces divided by total Development Capex.
Future Developments
We own, directly or through JV partnerships, other land plots in prime
locations in Bucharest, regional cities in Romania and Poland, covering a
total land surface of 1.3 million sqm (comprising 2.8% of the Group's combined
GAV), for future developments of office, industrial or mixed-use properties.
When fully developed, these land plots have the potential to add a total of a
further 786.1k sqm of high-quality GLA to our standing portfolio footprint.
These projects, which are classified as for "Future Development", continue to
be reviewed by the Group, albeit periodically, with the pace at which they
will be developed being subject to tenant demand and general market
conditions.
Future Developments
Podium Green Court D Globalworth West Constanta Business Park (Phased)* Timisoara Industrial Park I and II (Phased) Luterana
Park III
Location Krakow Bucharest Bucharest Constanta Timisoara Bucharest
Status Constr. Postponed Constr. Postponed Constr. Postponed Planned Planned Planned
GLA (k sqm) 17.7 17.2 33.4 526.2 165.2 26.4
CAPEX to 30 Jun 22 (€ m) 8.5 2.5 5.2 12.3 6.4 7.4
GAV (€ m) 9.6 9.1 7.9 36.3 11.0 14.3
Estimated CAPEX to Go (€ m)** 29.7 23.9 38.5 243.6 63.5 39.7
ERV (€ m) 3.1 3.3 5.1 27.8 6.7 5.8
Estimated Yield on Development Cost 8.1% 12.6% 11.5% 10.8% 9.6% 12.3%
(*) 50:50 Joint Venture; figures shown on 100% basis.
(**) Initial preliminary development budgets on future projects to be revised
prior to the permitting.
ASSET MANAGEMENT REVIEW
· 106.1k sqm of commercial space taken-up or extended at an average
WALL of 5.0 years despite continued challenging market conditions.
· New take-up accounted for the majority of our leasing activity,
maintaining our overall WALL which is effectively unchanged at 4.6 years.
− New leases (including expansions) accounted for 61.4% of our
leasing activity at a WALL of 6.1 years, with renewals signed at a WALL of 4.2
years.
· Total annualised contracted rent increased by 2.5% to €188.4
million compared to year end 2021.
· Total combined portfolio value increased by 1.7% to €3.2
billion, mainly due to new acquisitions and net positive impact from our
developments (delivered, in progress or under refurbishment).
− Like-for-like appraised value of standing commercial properties
marginally increased to €2.8 billion (0.8% higher compared to 31 December
2021).
Leasing Review
New Leases
Our principal focus continued to be the prolongation of leases with existing
tenants in our portfolio and the take-up of available spaces in standing
properties and developments.
In the first six months of 2022, the Group successfully negotiated the take-up
(including expansions) or extension of 106.1k sqm of commercial spaces in
Poland (34.9% of transacted GLA) and Romania (65.1% of transacted GLA), with
an average WALL of 5.0 years. Between 1 January and 30 June 2022, the majority
of our leasing activity involved new take-up of available spaces, with such
leases accounting for 61.4% of our total leasing activity and were signed at a
WALL of 6.1 years, while renewals accounted for 38.6% signed at a WALL of 4.2
years.
The leasing market remains challenging, and as the CEE was beginning to move
on from the COVID-19 pandemic, the war in Ukraine impacted the international
economic and business environment, resulting in a more uncertain outlook. As
such, signing new leases, typically for large multinational and national
corporates, is taking longer in the current market environment as potential
tenants continue to assess their future occupational plans and adapt to this
new environment.
In total, we signed new leases for 65.2k sqm of GLA, with the majority
involving spaces (+75%) leased to new tenants, and the remaining areas were
taken up by existing tenants which were expanding their operations.
New leases (new tenants) were signed with 39 tenants for 51.1k sqm of GLA at a
WALL of 6.6 years. The majority were for office spaces, accounting for 54.4%,
with the remainder involving industrial (41.2%) and retail/other commercial
spaces. Also, in response to the Ukrainian refugee crisis in this period, we
offered 14.5k sqm (2.9k sqm already returned to us) of GLA in our properties
in Poland and Romania to local authorities and organisations, which we include
in our performance. The largest new leases in this period were with OVT
Logisticzentrum (4.1k sqm) in Timisoara Industrial Park II, Max Bet (4.1k sqm)
in City Offices in Bucharest and Relive Bike (3.6k sqm) in Constanta Business
Park.
In addition, 30 tenants signed new leases, expanding their operations by 14.1k
sqm at an average WALL of 4.8 years.
We renewed leases for a total of 41.0k sqm of GLA with 50 of our tenants at a
WALL of 4.2 years. The most notable extensions involve Carrefour (5.3k sqm) in
the Green Court Complex, Delivery Solutions (4.3k sqm) in Globalworth Square
and Elvada Company (2.3k sqm) in Constanta Business Park, while c.62.5% of the
renewals by GLA signed were for leases that were expiring in 2023 or later.
Summary Leasing Activity for Combined Portfolio in H1-2022
GLA (k sqm) No. of Tenants* WALL (yrs)
New Leases (incl. expansions) 65.2 68 6.1
Renewals / Extensions 41.0 50 4.2
Total 106.1 109 5.0
*Number of individual tenants
Rental Levels
Headline market rental levels have remained relatively stable in our
portfolio, despite the uncertainty in the market and the cautious approach of
tenants, reflecting the quality of our properties, our active asset management
initiatives, and our approach to sustainable development. In addition, we have
started to see a widening gap between A-grade properties with strong ESG
credentials and B-grade properties from a leasing perspective (and investment
perspective), which should benefit our portfolio of high-quality properties in
the future.
Our leases typically adjust annually in the first quarter of the year and, in
the first half, eligible leases were indexed at an average of 3.5%. However,
this positive impact is not fully reflected in our averages, as the rates at
which leases were renewed or new leases signed were at their respective
headline rates.
At the end of June 2022, our average headline rent in our standing properties
for office, retail/commercial and industrial spaces were €14.1/sqm/month
(€14.0 at YE-2021), €14.4/sqm/month (€13.9 at YE-2021) and
€4.0/sqm/month (€3.8 at YE-2021) respectively.
It must be noted, though, that in both Poland and Romania, increased
construction costs and reduced development activity due to the COVID-19
pandemic has limited new supply in these markets. As such, the supply of
high-quality offices in central locations in the coming years is expected to
be lower compared to the past, which may result in higher tenant demand for
such properties, including ours.
Office leases signed in the first half were at an average rent of
€14.1/sqm/month, industrial spaces at €3.6/sqm/month, and retail spaces at
€14.8/sqm/month. The overall commercial GLA take-up during the first six
months of 2022 was at an average rent of €11.2/sqm/month.
Contracted Rents (on annualised basis)
Total annualised contracted rent across our portfolio in Poland and Romania
increased by 2.5% to €188.4 million compared to year-end 2021, driven by
active asset management, indexation, a new acquisition and lease-up in our
development projects.
Total annualised contracted rents in our standing commercial portfolio were
€180.8 million on 30 June 2022, up by 3.6% compared to 31 December 2021,
increasing to €181.7 million when including rental income generated by
renting 169 residential units and other auxiliary spaces in Upground, the
residential complex in Bucharest which we partially own.
Like-for-like annualised commercial contracted rents in our standing
commercial portfolio also increased by 2.1% to €178.1 million at the end of
the first half of 2022 compared to 31 December 2021, mainly as an effect of
rent indexation.
Annualised Contracted Rent Evolution H1-2022 (€m)
Poland Romania Group
Rent from Standing Commercial Properties ("SCP") 31 Dec 2021 87.9 86.6 174.5
Less: Space Returned (4.1) (1.4) (5.5)
Plus: Rent Indexation 2.2 2.2 4.4
Plus/Less: Lease Renewals (net impact) & Other (0.0) (0.0) (0.1)
Plus: New Take-up 2.3 2.4 4.8
Total L-f-L Rent from SCP 30 Jun 2022 88.3 89.8 178.1
Plus: Standing Commercial Properties Acquired During the Period - 0.5 0.5
Plus: Developments Completed During the Period - 2.2 2.2
Total Rent from Standing Commercial Properties 88.3 92.5 180.8
Plus: Residential Rent - 0.9 0.9
Total Rent from Standing Properties 88.3 93.3 181.7
Plus: Active and Pre-lets of Space on Projects Under Development / 6.5 0.2 6.7
Refurbishment
Total Contracted Rent as at 30 Jun 2022 94.9 93.5 188.4
Combined Annualised Commercial Portfolio Contracted Rent Profile as at 30 June
2022
Poland Romania Group
Contracted Rent (€ m) 94.9 92.7 187.5
Tenant origin - %
Multinational 72.3% 87.9% 80.0%
National 26.6% 10.7% 18.8%
State Owned 1.1% 1.4% 1.2%
Note: Commercial Contracted Rent excludes c.€0.9 million from residential
spaces as at 30 June 2022
Annualised Contracted Rent by Period of Commencement Date as at 30 Jun 2022
(€m)
Active Leases H2-2022 H1-2023 H2-2023 >2023 Total
Standing Properties 174.6 6.2 0.9 - - 181.7
Developments 5.9 0.8 - - - 6.7
Total 180.6 6.9 0.9 - - 188.4
Annualised Commercial Portfolio Lease Expiration Profile as at 30 Jun 2022
(€m)
Year H2-2022 2023 2024 2025 2026 2027 2028 2029 2030 >2030
Total 11.1 18.5 28.5 17.6 20.1 25.6 14.1 12.4 26.5 13.1
% of total 5.9% 9.9% 15.2% 9.4% 10.7% 13.7% 7.5% 6.6% 14.1% 7.0%
The Group's rent roll across its combined portfolio is well diversified, with
the largest tenant accounting for 5.2% of contracted rents, while the top
three tenants account for 10.8% and the top 10 account for 25.9%.
Cost of Renting Spaces
The headline (base) rent presents the reference point, which is typically
communicated in the real estate market when a new lease is signed. However,
renting spaces typically involves certain costs, such as rent-free periods,
fitouts for the space leased, and brokerage fees, which the landlord incurs.
These incentives can vary significantly between leases and depend on market
conditions, type of lease (new take-up or lease extension), space leased
(office, industrial, other), contract duration and other factors.
In calculating our effective rent, we account for the costs incurred over the
lease's lifetime, which we deduct from the headline (base) rent, thus allowing
us to assess the profitability of a rental agreement. To analyse the effective
rent more accurately in this period, we excluded ESG leases offered as
assistance to support Ukrainian Refugees initiatives in Poland and Romania.
Overall, in the first half of 2022, we successfully negotiated the take-up
(including expansions) or extension of 91.3k sqm of commercial spaces in our
portfolio (excluding ESG leases). The weighted average effective rent for
these new leases was €8.4/sqm/month with a WALL of 5.3 years. Industrial
leases completed in the period, which accounted for 27.3% of the total leasing
activity, resulted in lower average headline and effective rent.
The difference between headline (base) and effective rents in the first half
of 2022 was, on average, 24.8%, which is lower than for FY2021 (average of
29.2%) but reflects the fact that market conditions continued to be
challenging.
In total, new leases signed in the first six months of the year will generate
a future rental income of €67.0 million (including auxiliary spaces), with
leases from office properties accounting for 77.9% of future rental income
Weighted Average Effective Rent (€ / sqm / m) - H2-2022
Poland Romania Group
Headline Commercial Rent 16.0 8.6 11.2
Less: Rent Free Concessions (2.1) (0.9) (1.3)
Less: Tenant Fitouts (1.6) (1.1) (1.3)
Less: Broker Fees (0.4) (0.1) (0.2)
Effective Commercial Rent 12.0 6.5 8.4
WALL (in years) 5.0 5.6 5.3
Note: Certain casting differences in subtotals / totals are due to figures
presented in 1 decimal place
Collections Review
The ability to collect - cash in - contracted rents is a key determinant for
the success of a real estate company.
Our rate of collections of rents invoiced and due in the first half of 2022
remained high at 99% (over 99% for 2021FY), due to the long-term partnerships
we have established and maintained with high-quality national and
multinational tenants since the inception of the Group, which have helped us
minimise the impact on rent collections in this period of higher economic
uncertainty and ensure sustainable cash flow generation.
(1)Information as at 19 September 2022.
Portfolio Valuation
In line with our practice of biannual valuations, our entire portfolio in
Poland and Romania was revalued as at 30 June 2022.
The valuations were performed by CBRE and Knight Frank for our properties in
Poland, with Colliers and Cushman and Wakefield valuing our properties in
Romania (more information is available under note 4 of the unaudited interim
condensed consolidated financial statements as of and for the period ended 30
June 2022).
Assigning the appraisal of our portfolio to four independent and experienced
service providers makes the process of determining the value properties
transparent and impartial. Through our oversight, we ensure that a consistent
methodology, reporting, and timeframe are respected.
Our portfolio since the inception of the Group has been growing due to new
additions, through the acquisition or development of high-quality properties
in Poland and Romania, our asset management initiatives, and the performance
of the real estate markets in which we operate.
Overall, our total combined portfolio value increased from €0.1 billion in
2013 to €3.0 billion in 2019. It remained effectively unchanged in 2020 due
to the impact of the COVID-19 pandemic, which was reflected in our year-end
valuations. It then marginally increased at year-end 2021 to €3.1 billion
(+3.9% compared to the end of 2020) and had reached €3.2 billion by the end
of June 2022 (+1.7% compared to the end of 2021).
Portfolio growth in the first half of 2022 is mainly attributed to the
delivery of four high-quality logistics / light-industrial properties in
Romania, the acquisition of a "small business units" facility and the net
positive impact from our developments (in progress or under refurbishment).
The like-for-like appraised value of our standing commercial properties was
€2.8 billion at the end of the period, 0.8% higher compared to 31 December
2021.
In valuing our properties, the key market indicators used by the four
independent appraisers, although they vary, consider factors such as the
commercial profile of the property, its location and the country in which it
is situated. These factors have remained consistent with year-end 2021, with
ERVs remaining stable and yields remaining stable or marginally softening,
while discount rates have adjusted to reflect inflationary pressure coming
from energy prices.
Combined Portfolio Value Evolution 30 Jun 2022 (€m)
Poland Romania Group
Total Portfolio Value at 31 Dec 2021 1,612.8 1,539.5 3,152.3
Less: Properties Held in Joint Venture (*) - (86.7) (86.7)
Total Investment Properties at 31 Dec 2021 1,612.8 1,452.8 3,065.6
Plus: Transactions - (0.2) (0.2)
o/w New Acquisitions - 7.2 7.2
o/w Disposals - (7.4) (7.4)
Plus: Capital Expenditure 5.3 3.7 9.0
o/w Developments 5.3 3.7 9.0
o/w Standing Properties - - -
o/w Future Developments - - -
Plus: Net Revaluations Adjustments 10.3 17.2 27.5
o/w Developments (1.7) 4.3 2.5
o/w Standing Properties 12.0 8.2 20.2
o/w Lands, Future Developments & Acquisitions - 4.7 4.7
Total Investment Properties at 30 Jun 2022 1,628.3 1,473.5 3,101.8
Plus: Properties Held in Joint Venture (*) - 104.2 104.2
o/w Capital Expenditure & Acquisitions - 12.3 12.3
o/w Net Revaluation Adjustments - 5.3 5.3
Total Portfolio Value at 30 Jun 2022 1,628.3 1,577.7 3,206.1
(*) Properties held through joint ventures are shown at 100%, Globalworth owns
50% stake in the respective joint ventures
Note: Certain casting differences in subtotals / totals are due to figures
presented in 1 decimal place
STANDING PORTFOLIO REVIEW
· Standing portfolio footprint increased by 64.2k sqm to 1,366.5k
sqm of GLA, mainly attributed to the delivery of four new high-quality
logistics properties and the acquisition of our first small business units
facility in Romania.
· Total combined standing GLA of 1.4 million sqm, with total
standing portfolio value at €2.9 billion.
· Average standing occupancy of our combined commercial portfolio
of 88.1% (88.4% including tenant options), marginally lower vs. year-end 2021
(88.5% or 88.7% including tenant options), due to net impact of five standing
properties added to our portfolio.
− Like-for-like occupancy marginally increased by 0.9% despite the
challenging market conditions and WARTA Tower now being effectively vacant.
· Total contracted rent of €181.7 million in our standing
properties (over 85% coming from standing office properties).
· Standing WALL remaining high at 4.5 years (versus 4.6 years at
year-end 2021).
· All our properties in Poland are now internally managed,
resulting in 89.4% of our combined standing commercial portfolio by value
(96.8% of office and mixed-use standing properties) being internally managed
by the Group.
Standing Portfolio Evolution
Our combined portfolio of standing properties grew in 2022 with the addition
of five logistics facilities in Romania. Two facilities were added in
Bucharest, including our first small business units facility acquired in
April, and three in regional cities of Romania (Pitesti, Constanta and
Timisoara), with a total GLA of 68.8k sqm.
Overall, our standing portfolio is predominantly focused on 30 Class "A"
offices (50 properties in total) and a mixed-use investment (with five
properties in total) in central locations in Bucharest (Romania), Warsaw
(Poland) and five of the largest office markets/cities of Poland (Krakow,
Wroclaw, Katowice, Gdansk and Lodz), which account for 90.3% of our standing
portfolio by value.
In addition, in Romania, we fully own two logistics / light-industrial parks
with six facilities in Timisoara, one industrial park in Pitesti (2
facilities), two modern warehouses in Arad and Oradea, and, since earlier this
year, we now own the majority stake in a small business units facility in
Bucharest. We also have 50% ownership through a joint venture of two other
logistics/business parks (with four standing facilities) in Bucharest and
Constanta. We also own part of a residential complex in Bucharest.
As of 30 June 2022, our combined standing portfolio comprised 40 investments
(39 on 31 December 2021) with 71 buildings (66 on 31 December 2021) in Poland
and Romania.
During the period, our standing commercial portfolio's total GLA increased by
68.9k sqm or 5.4% to reach 1,340.8k sqm at the end of June. This increase in
the size of our portfolio was attributable to the delivery of 61.7k sqm in
four high-quality logistics facilities, the acquisition of a 7.1k sqm small
business units facility all in Romania, and the remeasurement of certain areas
in our portfolio.
Overall, our standing portfolio (commercial and other) increased in GLA by
4.9% to 1,366.5k sqm due to the sale of residential units in our Upground
Residential project.
The appraised value of our combined standing portfolio as of 30 June 2022 was
€2.9 billion (+98% in commercial properties). This overall increase is
mainly attributable to the addition of new properties through acquisition and
completion plus a relatively small revaluations uplift of properties held
throughout the period (like-for-like), partly offset by the sale of certain
units in our Upground residential complex. The value of like-for-like
properties increased by 0.7% as of 30 June 2022 compared to 31 December 2021
(additional information can be found in the "Asset Management Review").
Globalworth Combined Portfolio: Key Metrics
Total Standing Properties 30 Dec. 2020 31 Dec. 2021 30 Jun. 2022
Number of Investments 37 39 40
Number of Assets 64 66 71
GLA (k sqm) 1,271.3 1,302.3 1,366.5
GAV (€ m) 2,805.5 2,866.3 2,928.7
Contracted Rent (€ m) 178.7 175.4 181.7
Of which Commercial Properties 30 Dec. 2020 31 Dec. 2021 30 Jun. 2022
Number of Investments 36 38 39
Number of Assets 63 65 70
GLA (k sqm) 1,238.9 1,272.0 1,340.8
GAV (€ m) 2,745.9 2,810.3 2,880.5
Occupancy (%) 90.9% (91.7%*) 88.5% (88.7%*) 88.1% (88.4%*)
Contracted Rent (€ m) 177.7 174.5 180.8
Potential rent at 100% occupancy (€ m) 199.2 201.2 207.8
WALL (years) 4.5 4.7 4.5
(*) Including tenant options
Evolution of Combined Standing Portfolio over 2022
31 Dec. 2021 LfL Change* New Acq. New Deliv. Sales 30 Jun. 2022
(& Other Adj**)
GLA (k sqm) 1,302.3 - 7.1 61.7 (4.5) 1,366.5
GAV (€ m) 2,866.3 21.0 7.3 41.5 (7.4) 2,928.7
(*) Like-for-Like change represents the changes in GLA or GAV of standing
properties owned by the Group at 31 December 2021 and 30 June 2022.
(**) Includes impact in areas (sqm) from the remeasurement of certain
properties and other GAV adjustments (redevelopment capex, reclassification).
Standing Portfolio Occupancy
Our standing commercial portfolio's average occupancy as of 30 June 2022 was
88.1% (88.4% including tenant options), representing a 0.4% decrease over the
past six months (88.5% as of 31 December 2021 / 88.7% including tenant
options).
Standing occupancy has been affected by the addition of five industrial
properties (four deliveries and one acquisition) with an average occupancy of
65.5%, lower than the Group average, resulting in a lower average standing
commercial occupancy rate across our portfolio.
On a like-for-like basis, occupancy slightly increased by 0.9% to 89.3% at the
end of the first half of 2022 but is virtually unchanged if we exclude the
effect of ESG leases. We see this relative stagnation as a changing point
under normalising market conditions. Therefore, we remain confident that we
will be able to lease the available spaces in our portfolio in the future as
business conditions return to a more balanced state.
Across the portfolio, at the end of the first half of 2022, we had 1,226.2k
sqm of commercial GLA leased to more than 660 tenants at an average WALL of
4.6 years, the majority of which is let to national and multinational
corporates that are well-known within their respective markets.
Occupied GLA in our standing portfolio accounted for 96.4% of the total GLA
leased at a WALL of 4.5 years. In addition, we had 42.1k sqm leased in the two
mixed-use properties, which are currently under refurbishment/repositioning
and 2.6k sqm in our first small business units development project, which are
not included in our standing portfolio metrics.
Occupancy Evolution H1-2022 (GLA 'k sqm) - Commercial Portfolio
Poland Occupancy Romania Occupancy Group Occupancy
Rate (%) Rate (%) Rate (%)
Standing Available GLA - 31 Dec. 21 542.1 729.9 1,272.0
Acquired GLA - 7.1 7.1
New Built GLA - 61.7 61.7
Remeasurements, reclassifications (0.0) 0.2 0.1
Standing Available GLA - 30 Jun. 22 542.1 798.8 1,340.8
Occupied Standing GLA - 31 Dec. 21 464.1 85.6% 662.1 90.7% 1,126.2 88.5%
Acquired/Developed Occupied GLA - 45.0 45.0
Expiries & Breaks (25.4) (12.9) (38.3)
Renewals* 16.0 21.8 37.8
New Take-up 16.1 31.9 48.0
Other Adj. (relocations, remeasurements, etc) 0.5 (0.0) 0.5
Occupied Standing GLA - 30 Jun. 22 455.3 84.0% 726.1 90.9% 1,181.4 88.1%
* Renewals are neutral to the occupancy calculation.
Standing Properties Operation and Upgrade Programme
Offering best-in-class real estate space to our business partners is a key
component of our strategy at Globalworth.
We believe that through a "hands-on" approach with continuous active
management and investment in our portfolio, we can preserve and enhance the
value of our properties, generate long-term income, and offer best-in-class
real estate space to our business partners.
To be able to provide spaces for our current and future business partners'
requirements, we keep (re)investing in our properties, maintain and, where
required, improve the quality of our buildings and our services.
We are pleased that all our properties in Poland are now internally managed by
the Group, with the latest addition being the Green Horizon class "A" office
in Lodz. In Romania, we manage all but one of our offices in-house. Overall,
we internally manage 962.6k sqm of high-quality office and mixed-use space
with an appraised value of €2.6 billion. Of our total standing commercial
portfolio, internally managed properties account for 89.4% by value (96.8% of
office and mixed-use standing properties) as of 30 June 2022.
Our Upgrade Programme has resumed at a more normalised pace since last year,
following its scaling back for part of 2020 due to COVID-19. As a result of
our ongoing in-house initiatives and property additions, we hold a modern
portfolio with 52 of our standing commercial properties, accounting for 73.3%
by GLA and 74.9% by commercial portfolio value, which have been delivered or
significantly refurbished in or after 2014. In the first half of 2022, we
invested €9.4 million in select improvement initiatives in our standing
portfolio.
In Q3-2022, we chose Honeywell Forge to help us lower maintenance costs and
reduce energy consumption in our portfolio.
SUSTAINABLE DEVELOPMENT UPDATE / OTHER INITIATIVES
· 23 properties were certified or recertified with BREEAM Very Good
or higher certifications to our portfolio in H1-2022
· Newly certified and recertified properties included Globalworth
Square (Bucharest), CB Lubicz and Quattro Business Park (Krakow), Skylight and
Lumen (Warsaw)
· Overall, 57 green certified properties in our portfolio valued at
€2.8 billion
· Issued the fourth sustainable development report for the Group
for FY 2021
· Globalworth maintained its low-risk rating by Sustainalytics and
A by MSCI
· c.€270k donated to over 15 initiatives in Romania and Poland.
Green Buildings
Consistent with our commitment to energy-efficient properties, we certified or
recertified 23 properties in our portfolio with BREEAM Very Good or higher
certifications.
Three properties in Romania were environmentally certified for the first time
in 2022, with Globalworth Square (Bucharest) receiving the highest BREEAM
certification (Outstanding) and two industrial properties in Timisoara
certified with BREEAM Very Good. Also, we renewed the expired certification
for CB Lubicz (Krakow) in the first part of the year.
In addition, 18 other properties had their certifications updated in this
period, and we are pleased that we were able to improve the level of
certification, from LEED Gold to LEED Platinum, for the entire Green Court
Complex and our City Offices property in Bucharest.
Overall, as of 30 June 2022, our combined standing portfolio comprised 55
green-certified properties, accounting for 92.8% of our standing commercial
portfolio by value. BREEAM-accredited properties account for 80.4% of our
green-certified standing portfolio by value, with the remaining properties
being holders of other certifications (LEED Gold or Platinum, Edge).
In addition, the Renoma and Supersam mixed-use properties in Poland, which are
currently under refurbishment/repositioning, have maintained their BREEAM
Excellent accreditations, as the works performed are in accordance with a
strict set of guidelines which do not impact their green certification status.
At Globalworth, we are aiming for 100% of our portfolio to be
green-accredited. We are currently in the process of certifying or
recertifying 16 other properties in our portfolio, principally targeting
BREEAM certifications.
Furthermore, as part of our overall green initiatives, we kept securing 100%
of the energy used in our Polish properties from renewable sources and 97% for
our Romanian properties. This represents a significant increase from 2020 and
2019, where 56% and 40% (respectively) of the energy used in our portfolio was
generated from renewable sources.
In addition, in Q3-2022, we received a WELL Health-Safety Rating in 17
properties in Poland, including Warsaw Trade Tower, Skylight & Lumen and
Spektrum Tower Class "A" offices in Warsaw, and all three of our mixed-use
projects (Hala Koszyki in Warsaw, Supersam in Katowice or Renoma in Wrocław).
The WELL Health-Safety Rating is an evidence-based, third-party verified
rating for all new and existing building and space types focusing on
operational policies, maintenance protocols, stakeholder engagement and
emergency plans to address a post-COVID-19 environment now and into the
future.
Receipt of the WELL rating for our Polish properties follows that of Romania
when in December 2021, we successfully received a WELL Health-Safety Rating
for 15 (of the 16) office buildings in Bucharest. Overall, 93.1% by value of
our office and mixed-use portfolio (including Renoma and Supersam) is rated
for a WELL Health-Safety. This is further evidence of the quality of our
portfolio, which is recognised as among the safest in the world in terms of
sanitation and providing a friendly and healthy work environment.
Social Initiatives
In the first half of 2022, Globalworth and the Globalworth Foundation
continued with their very active social programme, contributing €270k to
over 15 initiatives in Romania and Poland.
Initiatives to which we contributed included:
· 2031 NOW_our cities in 10 years an international competition
dedicated to students in architecture, city planning and design from Poland
and Romania // organised with the prestigious magazine Igloo
· Virtual Sports Fitness - over 400 children and young people
with intellectual disabilities were able to benefit from the digital solution
for Virtual Sports Fitness implemented with funding from the Globalworth
Foundation
· The first school robotics hackathon in Bucharest - 200 students
from 11 educational institutions competed in Globalworth Green Urban
Robohackathon
· The Butterfly Trail in Văcărești Natural Park - a new way to
explore the Văcărești Natural Park.
Reporting
As part of our effort to improve disclosure in relation to our sustainable
development strategy, initiatives and performance, we published Globalworth's
"2021 Sustainable Development Report".
This is the third report published by the Group and has been prepared in
accordance with the GRI Standards: Core option and with the European Public
Real Estate Association's Sustainability Best Practice Reporting
Recommendations (EPRA sBPR).
In addition, in July and in line with our commitment as part of the issue of
our inaugural €400 million Green Bond financing, we issued our second "Green
Bond Report" which has received independent limited assurance from EY on the
allocations of the net proceeds.
PORTFOLIO SNAPSHOT
Our real estate investments are in Poland and Romania, the two largest markets
in the CEE. As at 30 June 2022, our portfolio was spread across 12 cities,
with Poland accounting for 50.8% by value and Romania 49.2%.
Combined Portfolio Snapshot (as at 30 June 2022)
Poland Romania Combined Portfolio
Standing Investments((1)) 19 21 40
GAV((2)) / Standing GAV (€m) €1,628m / €1,459m €1,578m / €1,470m €3,206m / €2,929m
Occupancy 84.0% 90.9% 88.1%
(91.3% incl. tenant options) (88.4% incl. tenant options)
WALL((3)) 3.8 years 5.3 years 4.6 years
Standing GLA (k sqm)((4)) 542.1k sqm 824.4k sqm 1,366.5k sqm
Contracted Rent (€m)((5)) €94.9m €93.5m €188.4m
GAV Split by Asset Usage
Office 82.7% 76.2% 79.5%
Mixed-Use 17.3% 0.0% 8.8%
Industrial 0.0% 15.7% 7.7%
Others 0.0% 8.1% 4.0%
GAV Split by City
Bucharest 0.0% 84.7% 41.7%
Timisoara 0.0% 6.2% 3.1%
Pitesti 0.0% 3.8% 1.9%
Constanta 0.0% 3.9% 1.9%
Arad 0.0% 1.1% 0.5%
Oradea 0.0% 0.4% 0.2%
Warsaw 44.2% 0.0% 22.5%
Krakow 21.1% 0.0% 10.7%
Wroclaw 16.0% 0.0% 8.1%
Katowice 10.9% 0.0% 5.5%
Lodz 4.2% 0.0% 2.1%
Gdansk 3.5% 0.0% 1.8%
GAV as % of Total 50.8% 49.2% 100.0%
1. Standing Investments representing income producing properties. One
investment can comprise multiple buildings. e.g. Green Court Complex comprises
three buildings or one investment
2. Includes all property assets, land and development projects valued at 30
June 2022
3. Includes pre-let commercial standing and development/re-development assets.
WALL of standing commercial properties in Romania, Poland and the Combined
portfolio are 5.3 years, 3.8 years and 4.5 years, respectively.
4. Including 25.7k sqm of residential assets in Romania
5. Total rent comprises commercial (€180.8 million) and residential (€0.9
million in Romania) standing properties, rent in assets under redevelopment
(€6.5 million in Poland) and development pre-lets (€0.2 million in
Romania).
CAPITAL MARKETS UPDATE
· The first half was characterised by higher volatility in the
economic and business environment negatively impacting capital markets.
· Globalworth's share price in this period trading consistently
below its last reported 31 December 2021 EPRA NRV, but outperforming the FTSE
EPRA Developed Europe and the FTSE EPRA Global indices.
· GWI 18/25 and 20/26 bonds yield at 7.9% and 8.6% at 30 June 2022
respectively Vs 0.9% and 1.1% at 30 June 2021.
· Remaining €323 million of principal amount of inaugural GWI
17/22 bond repaid on maturity in June 2022.
· S&P and Fitch re-affirmed the investment grade rating
following their 2021 year-end review of Globalworth, with Moody's maintaining
and stabilising their rating outlook of Globalworth in Q4 2021.
Equity Capital Markets and Shareholder Structure Update
The first half of 2022 was characterised by increased inflation, central bank
tightening, supply chain disruption, the war in the Ukraine and the continuing
impact of COVID-19 (albeit smaller compared to the past), all of which we
expect to continue in 2022, maintaining the higher volatility in the capital
markets.
Direct real estate valuations have not seen material changes in H1-22,
however, equity investors have been reassessing their risk premiums in this
period due to the higher volatility in the market. The higher risk premiums
have resulted in higher discount rates, implying lower equity valuations.
As of 30 June 2022, FTSE EPRA Developed Europe and the FTSE EPRA Global
indices recorded a negative performance of 29.7% and 19.5%, respectively, for
the six months starting on 1 January 2022. Globalworth has in comparison
outperformed these indices as its negative performance was 8.8%, however this
can be attributed to the limited free float of the Group.
Globalworth's share price in this period has been trading consistently below
its last reported 31 December 2021 EPRA NRV level of €8.66 / share, reaching
its lowest closing price on 21 June at €5.25 per share and its highest price
on 12 January at €6.68 per share.
Zakiono Enterprises Ltd, which is jointly and equally owned by CPI Property
Group S.A. ("CPI") and Aroundtown SA ("Aroundtown"), holds 60.6% of the share
capital of the Group, followed by Growthpoint Properties Ltd with 29.4%.
Globalworth Shareholding
30 June 21 30 June 22
CPI Property Group Together: Zakiono Enterprises 29.5% 60.6%
Aroundtown 22.0%
Growthpoint Properties 29.5% 29.4%
Oak Hill Advisors 5.3% 5.3%
EBRD 5.0% -
Other 8.7% 4.7%
Basic Data on Globalworth Shares
(Information as at 30 June 2022)
Number of Shares 221.6m plus 0.8m shares held in treasury
Share Capital €1.7bn
WKN / ISIN GG 00B979FD04
Symbol GWI
Free Float 9.9%
Exchange London AIM
Globalworth Share Performance
H1-2022 H1-2021
Market Capitalisation (€ million) - 30 June 1,188 1,528
30-June Closing Price (€) 5.36 6.91
52-week high (€) 6.68 7.48
52-week low (€) 5.25 5.70
Dividend paid per share 0.13 0.15
Bonds Update
We finance ourselves through a combination of equity and debt, and we compete
with a large number of other real estate companies for investor trust to
support our initiatives.
At the beginning of the year, we had three Eurobonds outstanding for a total
of €1.3 billion with weighted average maturity of 3.0 years.
In June our inaugural GWI 17/22 bond was maturing, and we are pleased to have
completed the repayment of the remaining principal of €323.1 million, which
was the outstanding balance of the 17/22 notes following the partial tender
and settlement of €226.9 million 17/22 notes in July 2020.
We currently have two Eurobonds outstanding, issued in March 2018 and July
2020 (inaugural green bond) and expiring in 2025 and 2026, respectively, with
a weighted average cost of 3.0%, and, together with the €85.0 million
unsecured facility raise in June 2022 from the IFC, these provide us with a
simplified capital structure and improve the efficiency of our capital
allocation.
In addition, in order to be able to issue Eurobonds in an efficient and quick
way, potentially benefiting from favourable market opportunities, in 2018 we
established a Euro Medium Term Notes (EMTN) programme allowing the Group to
issue up to €1.5 billion of bonds. Currently, the Group has raised €950
million as part of its EMTN programme, allowing a further €550 million of
bonds to be issued in the future.
Globalworth is rated by all three major agencies, with each of S&P, Fitch
and Moody's maintaining their investment credit rating following their review
of the Group, and despite the volatile and challenging market environment,
which is testament to the nature and quality of our portfolio, the resilience
of our cash flows, and the measures we have taken to protect the business and
its assets in this period.
In 2022, our bonds performance has been impacted by the higher volatility in
the market and rising interest rates. On average, our 18/25 and 20/26 bonds
traded at 2.9% and 4.0%, respectively, during the period. However, yield to
maturity has been increasing as the year progressed, closing at 7.9% and 8.9%
on 30 June 2022.
Rating
S&P Fitch Moodys
Rating BBB- BBB- Baa3
Outlook Stable Stable Stable
Basic Data on the Globalworth Bonds
GWI bond 17/22 GWI bond 18/25 GWI bond 20/26
ISIN XS1577957837 XS1799975922 XS2208868914
SEDOL BD8Q3P6 BD9MPV -
Segment Euronext Dublin, BVB Euronext Dublin, BVB Euronext Dublin
Minimum investment amount €100,000 €100,000 and €1,000 thereafter €100,000 and €1,000 thereafter
Coupon 2.875% 3.000% 2.950%
Issuance volume €550 million €550 million €400 million
Outstanding 30 Jun. 2022 - €550 million €400 million
Maturity 20 June 2022 29 March 2025 29 July 2026
(€323 million paid on maturity)
Performance of the Globalworth Bonds
H1-2022 H1-2021
GWI bond 17/22
30 June closing price - 102.76
Yield to maturity at 30 June - 0.02%
GWI bond 18/25
30 June closing price 88.29 107.72
Yield to maturity at 30 June 7.92% 0.89%
GWI bond 20/26
30 June closing price 80.54 108.46
Yield to maturity at 30 June 8.85% 1.14%
FINANCIAL REVIEW
1. Introduction and Highlights
Our performance in the first half of 2022 was resilient, despite the global
challenges, as we continued implementing our "local landlord" approach in
managing our business.
To help explain our performance, we use a number of measures typically
observed in our sector. These include quoting several measures on a
consolidated basis (including our joint ventures), as it best describes how we
manage our portfolio and overall business, like-for-like measures and measures
prescribed by EPRA.
The measures defined by EPRA are designed to enhance transparency and
comparability across the European real estate sector.
Revenues NOI1
€116.5 €69.9m
7.8% on H1-21 -3.2% on H1-21
IFRS Earnings per share2 Combined Portfolio Value (OMV)1
15 cents €3.2bn
-9 cents in H1-21 +2% on 31 Dec. 2021
EPRA NRV1,3 EPRA NRV per share1,3
€1,930.7m €8.72
0.7% on 31 Dec. 2021 0.7% on 31 Dec. 2021
Adjusted normalised EBITDA1,4 EPRA Earnings per share1,2
€63.2m 16 cents
-2.1% on H1-21 18.1% on H1-21
LTV1,5 Dividends paid in H1- 22 per share
41.0% 13 cents
40.1% at 31 Dec. 2021 -13.0% on H1-21
1. See Glossary (pages 68-72) for definitions.
2. See note 12 of the unaudited condensed consolidated financial statements
for calculation.
3. See note 19 of the unaudited condensed consolidated financial statements
for calculation.
4. See page 22 for further details.
5. See note 21 of the unaudited condensed consolidated financial statements
for calculation.
2. Revenues and Profitability
Consolidated revenue in the first half of 2022 was €116.5 million, up by
7.8% from the prior year.
Gross Rental income continued to grow, reaching €90.2 million for H1-2021,
higher by €3.1 million compared H1-2021, decreasing to €75.2 million when
accounting for costs associated with the renting of spaces in our portfolio,
and which are amortised during the life of the lease.
(Net) Rental Income remained effectively unchanged compared to the same period
in 2021 as:
· the additional rental income of €3.1 million from properties added
to our portfolio, including developments delivered over the past 12 months (GW
Square and PIP Caroli in Romania - €1.9 million), acquisitions completed in
2021 and partially accounted for in H1-2021 (Industrial Park West Arad and
Industrial Park West Oradea, in Romania - €1.9 million), and additional rent
from properties under refurbishment in Poland (Renoma and Supersam - €0.7
million), and
· the additional rental income of €0.5 million from like-for-like
standing properties in Romania,
were offset by:
· lower rental income of €1.1 million from like-for-like standing
properties in Poland (excluding properties held for sale), and
· lower net rental income from properties held for sale in Poland
€2.7 million (56% decrease), as TUIR Warta, the principal tenant in Warta
Tower vacated its premises at the end of 2021 with the space remaining
partially vacant in 2022.
The overall €8.4 million increase in our consolidated revenue was due to an
€11.1 million or 38.5% increase in service charge income from standing
properties (37.2% increase in Poland and 40.3% in Romania) as a result of an
average increase in service charge rate per square metre of 27% across our
standing portfolio, increase in like-for-like occupied occupancy and increase
in the size of our portfolio, partially offset by a €2.6 million or 66.5%
reduction in fit-out service income which is mainly dependent on new fit-out
contracts for new tenants.
· Overall our revenues remained relatively evenly split between our two
markets of operation, with Poland accounting for 52% (54% in H1-2021) and
Romania 48% (46% in H1-2021).
Net Operating Income ("NOI"), after taking into account property and fitout
costs, was €69.9 million, lower by 3.2% compared to H1- 2021. Overall
operating expenses in our portfolio increased by €13.4 million to €44.7
million of which c.90% were reinvoiced to tenants as the vast majority of our
leases are triple-net. The portion of our operating expenses not reinvoiced
typically involved spaces available to be leased and resulted in net operating
costs being higher by €2.1 million across the Group.
· NOI was split 51% Poland / 49% Romania, compared to 56% Poland / 44%
Romania in H1-2021.
Adjusted normalised EBITDA(2) (including share of minority interests) was
€63.4 million, lower by 2.1% compared to H1-2021 (€64.8 million), as the
decrease in NOI was partially offset by lower administrative and other
expenses.
Net finance costs were €26.4 million for the period, lower by 1.2% (or
€0.3 million lower) compared H1-2021 (€26.7 million), due to:
· higher finance income (by €0.3 million) from interest charged to
our joint venture partner for shareholder loans given to the joint venture;
and
· lower finance expenses (by 0.1% or €0.02 million) as a result of a
reduction in the negative interest charged on Euro and Polish Zloty deposits
and current accounts balances which were offset by higher interest expenses
from current and new financing facilities.
Joint ventures generated net gains in H1-2022 and our share of these amounted
to €2.0 million compared to net losses of €1.3 million for H1-2021. This
positive result is mainly due to our share of the net valuation gains of
€3.4 million (net of the related deferred tax effect) compared to net
valuation losses of €2.7 million (net of the related deferred tax effect) in
H1-2021.
Earnings before tax were €45.7 million for H1-2022 (€18.9 million in
H1-2021), mainly due to €7.0 million revaluation gains recorded for the
period compared to revaluation losses of €14.7 million in H1-2021.
· €13.4 million revaluation gain from the industrial segment
offsetting €4.3 million and €2.1 million revaluation losses from the
office and mixed-used segments respectively.
EPRA earnings for the first six months of 2022 were €34.3 million (or 16
cents per share), up by 18.2% from the prior year due to improved operating
results as administrative costs were lower and lower income tax expenses
(excluding deferred tax expense on investment property) compared to the same
period in 2021.
IFRS earnings, similar to earnings before tax, improved to 15 cents per share
compared to 6 cents per share in H1-2021. Total IFRS earnings were higher by
166.7% to €32.6 million compared to H1-2021.
(2)Earnings before finance cost, tax, depreciation, amortisation of other
non-current assets (H1-2022: €70.3 million positive; H1-2021: €47.1
million positive), plus: net fair value loss on investment property and
financial instruments (H1-2022: €7.1 million gain; H1-2021: €15.0 million
loss), less: other income (H1-2022: €0.3 million; H1-2021: €0.5 million);
plus: acquisition costs (H1-2022: €0.07 million negative; H1-2021: €0.0
million); plus: non-recurring administration and other expense items (H1-2022:
€0.4million; H1-2021: €3.2 million).
cents/share
IFRS Earnings 15
Add/(subtract):
Fair value loss on properties (3)
Deferred Tax 4
EPRA Earnings 16
3. Balance Sheet
The two largest assets in our balance sheet are real estate and cash which
account for c.98% of our total assets on the balance sheet as at 30 June 2022.
Overall, the combined market value of the portfolio increased by €54 million
to €3,206 million (31 Dec. 21: €3,151 million), comprising of €3,102
million included in our investment property and €104 million representing
the 100% value of the properties owned by the two joint ventures in which we
own a 50% stake.
The balance sheet value of our investment property (freehold and properties
held for sale) was €3,102 million as at 30 June 2022, €36.7 million higher
compared to year-end 2021. This increase is mainly due to the acquisition of
our first small business units project in the North-Western of Bucharest
(€5.5 million), the purchase of land for future development (€1.8
million), CAPEX invested in our portfolio (€18.7 million), net additional
lease incentives (€10.7 million) and fair value gains on freehold properties
(€7.0 million), which were offset by the disposal of residential units (€
7.4 million).
In the first half we proceeded with the repayment of the remaining €323
million of our inaugural €550 million which principally contributed in in
lowering our cash position to €184.7 million at 30 June 2022 (€418.7
million at 31 Dec. 21).
Total assets at the end of the period were €3,452 million, lower by 5%
compared to 31 December 2021 (€3,627 million).
EPRA NRV was €1,930.7 million as at 30 June 2022, marginally higher by 0.7%
compared to 31 December 2021 (€1,917.5 million). As a result, EPRA NRV per
share also increased to €8.72 per share (31 December 2021: €8.66 per
share).
Increase in EPRA NRV over the first six-months of the year were largely due to
the €7.0 million positive effect of fair value gains on the portfolio and
EPRA earnings of €34.3 million from the performance of the group, offset by
€28.8 million of dividends paid in March 2022 to shareholders in respect of
the six months ended 31 December 2021.
€m
EPRA NAV 31 Dec 2021 1,917.5
EPRA Earnings 34.3
Fair value loss on properties 7.0
Non-EPRA Earnings (1.7)
Dividends (28.8)
Others 3.1
EPRA NAV 30 June 2022 1,930.7
( )
4. Dividends
Globalworth distributes bi-annually at least 90% of its EPRA Earning to its
shareholders. As a result, in March 2022, it paid an interim dividend of 13
cents per share (€28.8 million) in respect of the six-month period ended 31
December 2021. In addition, on 31 August 2022, Globalworth declared its first
interim dividend in respect of the six-month period ended 30 June 2022 of 14
cents per share (€31.0 million).
The results for the period are set out in the consolidated statement of
comprehensive income on page 29.
5. Financing & Liquidity Review
The international business and the economic environments have continued to be
impacted by the ongoing uncertainty caused by the COVID-19 pandemic and also
by the war in Ukraine. This has brought about supply chain disruptions, higher
inflation and interest rates, and increased volatility, resulting in a more
uncertain outlook. Throughout this period, and with these issues in mind, our
main focus has been to continue implementing our "local landlord" approach in
managing our business.
Our initiatives have included investments in existing and new high-quality
properties, managing our portfolio to preserve and improve our operational
performance, and maintaining an efficient and flexible capital structure, all
of which have resulted in a robust overall performance.
Debt Summary
The total debt of the Group at 30 June 2022 was €1.5 billion (31 Dec. 2021:
€1.6 billion) comprising of medium to long-term debt, denominated entirely
in Euro currency. The majority of the debt is in two bonds totalling €1.0
billion, with bank loans of €0.5 billion.
In the first half, we proceeded with the repayment from our own resources of
the remaining €323 million of our inaugural €550 million bond that was due
to mature in June 2022, thus resulting in Globalworth having no material debt
maturing until March 2025. In addition, during the period, we repaid the
coupon on the 2022 Bond, entered into a 6-year term loan agreement for €85
million with IFC, and drew down on part of the RCF available to us until April
2024.
The Group continuously strives to maintain a low weighted average interest
rate cost, which as at 30 June 2022 was 2.55% (2.73% at 31 Dec 2021), while
the average maturity period improved to 3.8 years (3.5 years at 31 December
2021), as depicted in the chart below.
In this higher inflationary and interest rate environment, it is important to
note that at the end of the period, Globalworth had c.85% of its debt
facilities at fixed interest rate cost (81%) or floating interest rates which
are though hedged (4%).
Weighted average interest rate versus debt duration to maturity
Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 Jun 22
Weighted average interest rate 2.83% 2.52% 2.73% 2.73% 2.73% 2.55%
Weighted average duration to maturity 4.3 4.2 4.5 4.0 3.5 3.8
Servicing of Debt During 2022
In the first half of 2022, we repaid €1.4 million in bank debt principal
amounts, the entire remaining balance of the 2022 Eurobond (€323.1 million)
and €29.3 million of accrued interest on the Group's outstanding debt
facilities.
Maturity by year of the principal balance outstanding at 30 June 2022 (€
million)
2022 2023 2024 2025 2026 2027 2028 2029
1.4 2.9 95.8 662.3 402.6 2.6 87.6 137.9
Liquidity & Loan to value ratio (LTV")
Managing our resources has been a key area of focus for the Group, especially
since the COVID-19 pandemic outbreak, and this careful management has carried
on throughout this period of higher volatility and uncertainty.
As at 30 June 2022, the Group had cash and cash equivalents of €184.7
million (31 December 2021: €418.7 million) of which an amount of €6.8
million was restricted due to various conditions imposed by the financing
Banks. In addition, the Group had available liquidity from committed undrawn
loan facilities of €155 million.
The Group's loan to value ratio at 30 June 2022 was 41.0%, compared to 40.1%
at 31 December 2021. This is consistent with the Group's strategy to manage
its long-term target LTV of around or below 40%.
Debt Structure as at 30 June 2022
Debt Structure - Secured vs. Unsecured Debt
The majority of the Group's debt at 30 June 2022 is unsecured: 75.3% (31
December 2021: 77.9%), with the remainder secured with real estate mortgages,
pledges on shares, receivables and loan subordination agreements in favour of
the financing parties.
Debt Denomination Currency and Interest Rate Risk
Our loan facilities are entirely Euro denominated and bear interest based
either on one month, three months or six months Euribor plus a margin (19.4%
of the outstanding balance compared to 8.5% at 31 December 2021), or at a
fixed interest rate (80.6% of the outstanding balance compared to 91.5% at 31
December 2021).
The high degree of fixed interest rate debt ensures a natural hedging to the
Euro, the currency in which the most significant part of our liquid assets
(cash and cash equivalents and rental receivables) is originally denominated
and the currency for the fair market value of our investment property. Based
on the Group's debt balances at 30 June 2022, an increase of 100 basis points
in the EURIBOR will result in an increase of interest expense of €2.9
million per annum.
Debt Covenants
As of 30 June 2022, the Group is in compliance with all of its debt covenants.
The Group's financial indebtedness is arranged with standard terms and
financial covenants, the most notable as at 30 June 2022 being the following:
Unsecured Eurobonds, Revolving Credit Facility and IFC loan
· the Consolidated Coverage Ratio, with minimum value of 200% (150%
applicable for the Revolving Credit Facility and IFC loan);
· the Consolidated Leverage Ratio, with maximum value of 60%;
· the Consolidated Secured Leverage Ratio with a maximum value of
30%; and
· the Total Unencumbered Assets Ratio, with minimum value of 125%
(additional covenant applicable for the Revolving Credit Facility and IFC
loan).
Secured Bank Loans
· the debt service cover ratio ('DSCR') / interest cover ratio
('ICR'), with values ranging from 120% to 350% (be it either historic or
projected); and
· the LTV ratio, with contractual values ranging from 60% to 83%.
6. Principal Risks and Uncertainties
The key risks which may have a material impact on the Group's performance,
together with the corresponding mitigating actions, are presented on pages 100
to 104 of the Annual Report for the year ended 31 December 2021, which is
available at www.globalworth.com (http://www.globalworth.com) .
These risks comprise the following:
· Market conditions and the economic environment, particularly in
Romania and Poland;
· Changes in the political or regulatory framework in Romania,
Poland or the European Union;
· Execution of investment strategy;
· Risk of negative changes in the valuation of the portfolio;
· Inability to lease space;
· Counterparty credit risk;
· Sustainable portfolio risk and Response to Climate Change;
· Lack of available financing and refinancing;
· Risk of breach of loan covenants;
· Risk of changes in Interest and Foreign Exchange Rates; and
· Compliance with fire, structural, health and safety, or other
regulations.
There has been no significant change in these risks during the six-month
period ended 30 June 2022, and these risks are expected to continue to remain
relevant during the second half of 2022.
7. Going Concern
The Directors have considered the Company's ability to continue to operate as
a going concern based on the Management's cash flow projections for the 15
months subsequent to the date of approval of the unaudited interim condensed
consolidated financial statements. The Directors believe that the Company
would have sufficient cash resources to meet its obligations as they fall due
and continue to adopt the going concern basis in preparing the unaudited
interim condensed consolidated financial statements as of and for the six
months ended 30 June 2022.
GLOBALWORTH REAL ESTATE INVESTMENTS LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2022
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2022
30 June 30 June
2022 2021
Note €'000 €'000
Revenue 7 116,551 108,110
Operating expenses 8 (46,696) (35,957)
Net operating income 69,855 72,153
Administrative expenses 9 (6,484) (9,323)
Acquisition costs (7) -
Fair value gain/(loss) on investment property 3 7,019 (14,703)
Share-based payment expense 20 - (432)
Depreciation and amortisation expense (309) (259)
Other expenses (720) (795)
Other income 295 476
Foreign exchange gain/(loss) 307 (50)
Gain/loss from fair value of financial instruments at fair value through 14 73 (243)
profit or loss
Profit before net financing cost 70,029 46,824
Finance cost 10 (27,547) (27,523)
Finance income 1,179 839
Share of profit/(loss) of equity-accounted investments in joint ventures 22 2,012 (1,273)
Profit before tax 45,673 18,867
Income tax expense 11 (12,245) (6,333)
Profit for the period 33,428 12,534
Items that will not be reclassified to profit or loss
Gain on equity instruments designated at fair value through other
comprehensive income
36 -
Other comprehensive income for the period, net of tax 36 -
Total comprehensive income for the period 33,464 12,534
Profit attributable to: 33,428 12,534
- ordinary equity holders of the Company 32,606 12,534
- non-controlling interests 822 -
Total comprehensive income attributable to: 33,464 12,534
- ordinary equity holders of the Company 32,642 12,534
- non-controlling interests 822 -
Cents Cents
Earnings per share
- Basic 12 15 6
- Diluted 12 15 6
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Note 30 June 2022 31 December
2021
Unaudited Audited
€'000 €'000
ASSETS
Investment property 3 3,005,689 2,966,080
Goodwill 12,349 12,349
Advances for investment property 5 3,483 3,436
Investments in joint ventures 22 66,155 48,908
Equity investments 12,628 12,109
Other long-term assets 1,927 2,083
Prepayments 460 338
Deferred tax asset 11 17 151
Non-current assets 3,102,708 3,045,454
Financial assets at fair value through profit or loss 14 7,397 7,324
Trade and other receivables 15 17,951 16,208
Contract assets 6,138 6,106
Guarantees retained by tenants 47 885
Income tax receivable 1,769 117
Prepayments 4,591 2,104
Cash and cash equivalents 16 184,709 418,748
222,602 451,492
Investment property held for sale 126,926 130,537
Total Current assets 349,528 582,029
Total assets 3,452,236 3,627,483
EQUITY AND LIABILITIES
Issued share capital 1,704,476 1,704,476
Treasury shares 20.2 (4,889) (4,917)
Share-based payment reserve 20 156 156
Retained earnings 42,749 38,914
Equity attributable to ordinary equity holders of the Company 1,742,492 1,738,629
Non-controlling interests 827 -
Total equity 1,743,319 1,738,629
Interest-bearing loans and borrowings 13 1,431,659 1,285,641
Deferred tax liability 11 163,731 150,713
Lease liabilities 3.2 17,834 18,762
Guarantees retained from contractors 1,628 2,661
Deposits from tenants 4,050 3,844
Trade and other payables 956 956
Non-current liabilities 1,619,858 1,462,577
Interest-bearing loans and borrowings 13 18,623 348,279
Guarantees retained from contractors 3,737 3,361
Trade and other payables 32,306 39,788
Contract liability 1,729 1,940
Other current financial liabilities 47 261
Current portion of lease liabilities 1,426 1,303
Deposits from tenants 16,603 16,068
Income tax payable 702 550
75,173 411,550
Liabilities directly associated with the assets held for sale 13,886 14,727
Total current liabilities 89,059 426,277
Total equity and liabilities 3,452,236 3,627,483
The financial statements were approved by the Board of Directors on 19
September 2022 and were signed on its behalf by:
Andreas Tautscher,
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2022
Issued share capital Treasury shares Share-based payment reserve Fair value reserve of financial assets at FVOCI Retained earnings Total Non- controlling interests Total Equity
Note €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
As at 1 January 2021 1,704,374 (12,977) 6,184 - 57,783 1,755,364 - 1,755,364
Shares issued to the Executive Directors and other senior management employees - 339 (339) - - - - -
Interim dividends - 72 - - (66,358) (66,286) - (66,286)
Share based payment expense under the subsidiaries' employees share award plan - - 532 - - 532 - 532
Shares vested under the subsidiaries' employees share award plan - 1,253 (1,253) - - - - -
Share issued for cash under Executive share option plan 102 - (2) - - 100 - 100
Cash-based portion of deferred annual bonus plan converted to deferred shares - - (79) - - (79) - (79)
settlement
Share issued for long term plan termination and employee incentive plan - 1,476 33 - - 1,509 - 1,509
Shares vested under the deferred annual bonus incentive plan - 4,920 (4,920) - - - - -
Total comprehensive income for the year - - - - 47,489 47,489 - 47,489
As at 31 December 2021 1,704,476 (4,917) 156 - 38,914 1,738,629 - 1,738,629
Interim dividends 18 - 28 - - (28,807) (28,779) - (28,779)
Shares issued in a newly acquired subsidiary - - - - - - 5 5
Gain on equity instruments designated at FV through OCI - - - 36 - 36 - 36
Settlement of fair value reserve of equity instruments designated at FVOCI in - - - (36) 36 - - -
cash
Total comprehensive income for the year - - - - 32,606 32,606 822 33,428
As at 30 June 2022 1,704,476 (4,889) 156 - 42,749 1,742,492 827 1,743,319
Issued share capital Treasury shares Share-based payment reserve Fair value reserve of financial assets at FVOCI Retained earnings Total Non- controlling interests Total Equity
Note €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
As at 1 January 2021 1,704,374 (12,977) 6,184 - 57,783 1,755,364 - 1,755,364
Shares issued to the Executive Directors and other senior management employees - 180 (180) - - - - (28,779)
Interim dividends - 9 2 - (33,130) (33,119) - 5
Share based payment expense under the subsidiaries' employees share award plan - - 432 - - 432 - 36
Shares vested under the subsidiaries' employees share award plan - 823 (823) - - - - -
Deferred annual bonus plan settled in cash - - (79) - - (79) - 33,428
As at 30 June 2021 1,704,374 (9,592) 3,557 - 37,187 1,742,492 - 1,735,526
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2022
30 June 30 June
Note 2022 2021
€'000 €'000
Profit/(loss) before tax 45,673 18,867
Adjustments to reconcile profit before tax to net cash flows
Fair value (gain)/loss on investment property 3.3 (7,019) 14,703
Loss on sale of investment property 654 162
Share-based payment expense 20 - 432
Depreciation and amortisation expense 309 259
Net increase in allowance for doubtful debts 17.2 9 563
Foreign exchange (gain)/loss (307) 50
(Gain)/loss from fair valuation of financial instrument 14 (73) 243
Share of (profit)/loss of equity-accounted joint ventures 22 (2,012) 1,273
Net financing costs 26,368 26,685
Operating profit before changes in working capital 63,602 63,237
(Increase)/decrease in trade and other receivables (4,888) (4,560)
Decrease in trade and other payables (2,699) (9,309)
Interest paid (29,286) (29,436)
Interest received 207 178
Income tax paid (974) (1,315)
Interest received from joint ventures 250 -
Cash flows from operating activities 26,212 18,795
Investing activities
Expenditure on investment property completed and under development or (33,642) (25,715)
refurbishment
Payment for land acquisitions (1,732) -
Proceeds from sale of land 501 -
Payment for acquisition of investment property (5,584) (18,011)
Proceeds from sale of investment property 6,331 524
Investment in financial assets at fair value through profit or loss 14 - (143)
Proceeds from sale of financial assets through profit and loss - 85
Payments for equity investments (483) (220)
Investment in and loans given to joint ventures 22 (17,173) (5,770)
Proceeds from joint ventures for loans given 22 2,377 -
Payment for purchase of other long-term assets (156) (68)
Cash flows used in investing activities (49,561) (49,318)
Financing activities
Proceeds for issuance of new shares in subsidiary from non-controlling 5 -
interest
Proceeds from interest-bearing loans and borrowings 13 146,825 -
Payments of interest-bearing loans and borrowings 13 (324,545) (1,398)
Payment of interim dividend to equity holders of the Company 18 (28,779) (33,130)
Payment for lease liability obligations 3.2 (1,630) (1,463)
Payment of bank loan arrangement fees and other financing costs (2,152) (1,208)
Cash flows from financing activities (210,276) (37,199)
Net increase in cash and cash equivalents (233,625) (67,722)
Effect of exchange rate fluctuations on cash and bank deposits held (414) (186)
Cash and cash equivalents at the beginning of the period 16 418,748 527,801
Cash and cash equivalents at the end of the period 16 184,709 459,893
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SECTION I: BASIS OF PREPARATION
1 Basis of Preparation
Corporate Information
Globalworth Real Estate Investments Limited ('the Company' or 'Globalworth')
is a company with liability limited by shares and incorporated in Guernsey on
14 February 2013, with registered number 56250. The registered office of the
Company is at Anson Court, La Route des Camps, St Martin, Guernsey GY4 6AD.
Globalworth, being a real estate Company, has had its ordinary shares admitted
to trading on AIM (Alternative Investment Market of the London Stock Exchange)
under the ticker "GWI" since 2013.
The Company's Eurobonds have been admitted to trading on the official List of
the Irish Stock Exchange in June 2017, March 2018 and July 2020, respectively.
In addition, the Company's Eurobond maturing in March 2025 has been admitted
to trading on the Bucharest Stock Exchange in May 2018. The Group's principal
activities and nature of its operations are set out in the strategic report
section of the 2021 Annual Report.
Directors
The Directors of the Company are:
· Dimitris Raptis, Executive, Chief Executive Officer, Member of
the Investment and Remuneration Committees
· Martin Bartyzal, Independent Non-Executive, Chair of the Board,
Member of the Remuneration Committee, Audit and Risk Committee
· Norbert Sasse, Non-Executive, Member of the Investment Committee
· George Muchanya, Non-Executive, Member of the Nomination
Committee
· Richard van Vliet, Independent Non-Executive, Member of the
Audit, Risk and Remuneration Committees
· Andreas Tautscher, Senior Independent Non-Executive, Chair the
Audit and Risk Committee, Member of Nomination Committee
· David Maimon, Independent Non-Executive, Chair of the Audit and
Risk Committee, Member of the Investment Committee
· Piotr Olendski, Independent Non-Executive, Chair on the
Remuneration Committee
· Daniel Malkin, Independent Non-Executive, Chair of the Nomination
Committee, Member of the Audit and Risk Committees
· Favieli Stelian, Independent Non-Executive, Chair of the
Investment Committee, Member of the Remuneration Committee
Basis of Preparation and Compliance
The condensed consolidated financial statements of the Group (or 'financial
statements' or 'consolidated financial statements') as of and for the
six-month period ended 30 June 2022 have been prepared in accordance with
International Accounting Standard (IAS) 34 "Interim Financial Reporting".
These consolidated financial statements are prepared in Euro ("EUR" or "€"),
rounded to the nearest thousand, being the functional currency and
presentation currency of the Company. These financial statements have been
prepared on a historical cost basis, except for investment property, financial
assets at fair value through profit or loss and financial assets at fair value
through other comprehensive income which are measured at fair value.
These financial statements are prepared on a going concern basis. The
Directors believe that it is appropriate to adopt the going concern basis in
preparing the financial statements. The Directors based their assessment on
the Group's detailed cash flow projections for the period up to 31 December
2023. These projections take into account the very significant available cash
resources of the Group (as at 30 June 2022 these amounted to €185 million -
note 16), the latest contracted rental income, anticipated additional rental
income from new possible lease agreements during the period covered by the
projections, modification of existing lease contracts as well as repayment of
contracted debt financing, CAPEX, and other commitments. The projections show
that, in the period up to 31 December 2023, the Company anticipates having
sufficient liquid resources to continue to fund ongoing operations and asset
development without the need to raise any additional debt or equity financing,
or the need to reschedule existing debt facilities or other commitments.
Accounting policies
These consolidated financial statements apply the same accounting policies,
presentation and methods of calculation as those followed in the preparation
of the Group's consolidated financial statements for the year ended 31
December 2021, which were prepared in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union ('EU') and the
Companies (Guernsey) Law 2008, as amended. The consolidated financial
statements included in this Interim Report should be read in conjunction with
the consolidated financial statements for the year ended 31 December 2021. On
1 January 2022, the Group adopted certain new accounting policies where
necessary to comply with amendments to IFRS, refer to note 26 for more
details.
Basis of Consolidation
These condensed consolidated financial statements comprise the financial
statements of the Company and its subsidiaries ('the Group') as of and for the
period ended 30 June. Subsidiaries are fully consolidated (refer to note 23)
from the date of acquisition, being the date on which the Group obtains
control, and continues to be consolidated until the date when such control
ceases. The financial statements of the subsidiaries are prepared for the
period from the date of obtaining control to 30 June, using consistent
accounting policies. All intra-group balances, transactions and unrealised
gains and losses resulting from intra-group transactions are eliminated in
full.
Foreign Currency transactions and balances
Foreign currency transactions during the period are initially recorded in the
functional currency at the exchange rates approximating those ruling on the
date of the transaction. Monetary assets and liabilities denominated in
foreign currencies other than functional currency of the Company and its
subsidiaries are retranslated at the rates of exchange prevailing on the
statement of financial position date. Gains and losses on translation are
taken to profit and loss. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates
as at the dates of the initial transactions. Non-monetary items measured at
fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined.
2 Critical Accounting Judgements, Estimates and Assumptions
The preparation of consolidated financial statements in conformity with IFRS
requires management to make certain judgements, estimates and assumptions that
affect reported amounts of revenue, expenses, assets and liabilities, and the
accompanying disclosures and the disclosures of contingent liabilities.
Selection of Functional Currency
The Company and its subsidiaries used their judgment, based on the criteria
outlined in IAS 21 "The Effects of Changes in Foreign Exchanges Rates", and
determined that the functional currency of all the entities is the EUR. In
determining the functional currency consideration is given to the denomination
of the major cash flows of the entity e.g., revenues and financing.
As a consequence, the Company uses EURO (€) as the functional currency,
rather than the local currency Romanian Lei (RON) for the subsidiaries
incorporated in Romania, Polish Zloty (PLN) for the subsidiaries in Poland and
Pounds Sterling (GBP) for the Company and the subsidiary incorporated in
Guernsey.
Further additional critical accounting judgements, estimates and assumptions
are disclosed in the following notes to the financial statements.
· Investment Property, see note 3 and Fair value measurement and
related estimates and judgements, see note 4;
· Commitments (operating leases commitments - Group as lessor), see
note 6;
· Taxation, see note 11;
· Financial assets at fair value through profit or loss, see note 14;
· Trade and other receivables, see note 15;
· Share-based payment reserve, see note 20;
· Investment in Joint Ventures, see note 22; and
· Investment in Subsidiaries, see note 23.
SECTION II: INVESTMENT PROPERTY
This section focuses on the assets on the balance sheet of the Group which
form the core of the Group's business activities. This includes investment
property (both 100% owned by the Group and by the Joint Ventures), related
disclosures on fair valuation inputs, commitments for future property
developments and investment property-leasehold and related lease liability
recognised for the right of perpetual usufruct of the land.
Further information about the property portfolio is described in the
Management Review section of the Interim Report.
3 Investment Property
Investment property - freehold
Completed investment property Investment property under refurbishment Investment property under development Land for further development Sub-total Investment property leasehold- Right of usufruct of the land TOTAL
Note €'000 €'000 €'000 €'000 €'000 €'000 €'000
2,778,320 103,130 59,750 40,450 2,981,650 3,013,014
1 January 2021 31,364
Asset acquisition 18,011 - - - 18,011 18,011
Subsequent expenditure 20,790 7,381 25,279 1,299 54,749 54,749
Net lease incentive movement 18,384 (97) 1,015 - 19,302 19,302
Capitalised borrowing costs - 53 486 - 539 539
Transfer to completed investment property 63,600 - (63,600) - - -
Transfer to investment property under development - - 2,500 (2,500) - -
Transfer to investment property under refurbishment (47,520) 47,520 - -
Disposal during the year (3,260) - - - (3,260) (3,260)
Transfer to held for sale (120,690) - - - (120,690) (9,847) (130,537)
Fair value gain /(loss) on investment property (9,375) (1,986) 5,420 51 (5,890) 152 (5,738)
156,001 30,850 39,300 21,669
31 December 2021 2,718,260 2,944,411 2,966,080
Asset acquisition 5,584 - - - 5,584 5,584
Land acquired during the period - - - 1,785 1,785 1,785
Subsequent expenditure 9,118 5,174 3,874 313 18,479 18,559
Net lease incentive movement 10,123 336 80 - 10,539 10,539
Other operating lease commitment - - - - - -
Capitalised borrowing costs - 119 37 - 156 156
Disposal during the year (7,873) - - - (7,873) (7,873)
Transfer to held for sale - - - - -
Fair value gain /(loss) on investment property 6,907 (2,079) 1,209 5,302 11,339 (400) 10,939
2,742,119 159,551 36,050 46,700 21,269
30 June 2022 2,984,420 3,005,689
3.1 Investment Property - Freehold
Judgements
Classification of Investment Property
Investment property comprises completed property, property under construction
or refurbishment and land bank for further development which are not occupied
substantially for use by, or in the operations of, the Group, nor for sale in
the ordinary course of business, but are held primarily to earn rental income
and for capital appreciation. The Group considers that, when the property is
in a condition which will allow the generation of cash flows from its rental,
the property is no longer a property under development or refurbishment but an
investment property. If the property is kept for sale in the ordinary course
of the business, then it is classified as inventory property.
Asset acquisition
On 22 March 2022, the Group acquired through its subsidiary North Logistics
Hub SRL a land located in the north-east periphery of Bucharest, Romania for
an amount of €1.8 million, namely Business Park Stefanesti, for the
development of an industrial park.
On 20 April 2022, the Group acquired through its subsidiary Logistics Hub
Chitila SRL one industrial investment property located in the north-west
periphery of Bucharest, Romania for an amount of €5.6 million, namely
Business Park Chitila The project will generate €0.5 million in rental
income, annually.
Disposal of Investment Property not in the Ordinary Course of Business
The Group enters into contracts with customers to sell properties that are
complete. The sale of completed property is generally expected to be the only
performance obligation and the Group has determined that it will be satisfied
at the point in time when control transfers. For unconditional exchange of
contracts, this is generally expected to be when legal title transfers to the
customer. For conditional exchanges, this is expected to be when all
significant conditions are satisfied. The recognition and measurement
requirements in IFRS 15 are applicable for determining the timing of
derecognition and the measurement of consideration (including applying the
requirements for variable consideration) when determining any gains or losses
on disposal of non-financial assets when that disposal is not in the ordinary
course of business.
Other Disclosures Related to Investment Property
Interest-bearing loans and borrowings are secured on investment property
freehold, see note 13 for details. Further information about individual
properties is disclosed in the asset management review section in the Interim
Report.
3.2 Investment property - Leasehold
Right of Perpetual Usufruct of the Land (the "RPU") or "right-of-use assets"
Under IFRS 16, right-of-use assets that meet the definition of investment
property are required to be presented in the statement of financial position
as investment property. The Group has the right of perpetual usufruct of the
land (the RPU) contracts for the property portfolio in Poland which meet the
definition of investment property under IFRS 16. Therefore, the Group has
presented its 'Right-of-use assets' in the statement of financial position
under the line item "Investment property". The corresponding lease liabilities
are presented under the line item 'Lease liabilities' as non-current and the
related short-term portion are presented in the line item "Current portion of
lease liability".
Note 31 December 2021 CAPEX Fair value loss Movement during the period 30 June 2022
Completed Investment property 3.1 120,690 309 (3,599) (3.290) 117,400
Investment property - leasehold 3.2 9,847 - (321) (321) 9,526
Investment property held for sale 130,537 309 (3,920) (3,611) 126,926
Lease liabilities 3.2 9,141 - - (506) 8,635
Deferred tax liability 11.1 5,586 - - (335) 5,251
Liabilities directly associated with the assets held for sale 14,727 - - (841) 13,886
Net assets held for sale 115,810 - - - 113,040
3.3 Investment property - Fair value gain/(loss)
30-Jun-22 30-Jun-21
Note €'000 €'000
Fair value gain /(loss) on investment property 7,019 (14,703)
- Related to investment property -freehold 3.1 10,939 (14,703)
- Related to investment property -held for sale 3.2 (3,920) -
4 Fair Value Measurement and Related Estimates and Judgements
Investment Property Measured at Fair Value
The Group's investment property portfolio for Romania was valued by Colliers
Valuation and Advisory SRL and Cushman & Wakefield LLP and for Poland by
Knight Frank Sp. z o.o. and CBRE Sp. z o.o. All independent professionally
qualified valuers hold a recognised relevant professional qualification and
have recent experience in the locations and segments of the investment
properties valued using recognised valuation techniques.
Our Property Valuation Approach and Process
The Group's investment department includes a team that reviews twice in a
financial year the valuations performed by the independent valuers for
financial reporting purposes. For each independent valuation performed, the
investment team along with the finance team:
· verifies all major inputs to the independent valuation report;
· assesses property valuation movements when compared to the initial
valuation report at acquisition or latest period end valuation report; and
· holds discussions with the independent valuer.
The fair value hierarchy levels are specified in accordance with IFRS 13 Fair
Value Measurement. Some of the inputs to the valuations are defined as
"unobservable" by IFRS 13 and these are analysed in the tables below. Any
change in valuation technique or fair value hierarchy (between level 1, level
2 and level 3) is analysed at each reporting date or as of the date of the
event or variation in the circumstances that caused the change. As of 30 June
2022 (2021: same) the values of all investment properties were classified as
level 3 fair value hierarchy under IFRS 13 and there were no transfers from or
to level 3 from level 1 and level 2.
Valuation Techniques, Key Inputs and Underlying Management's Estimations and
Assumptions
Property valuations are inherently subjective as they are made on the basis of
assumptions made by the valuer. Valuation techniques comprise the discounted
cash flows, the sales comparison approach and the residual value method.
Key information about fair value measurements, valuation technique and
significant unobservable inputs (Level 3) used in arriving at the fair value
under IFRS 13 are disclosed below:
Carrying value
Class of property 30 June 2022 31 December 2021 Valuation Country Input 30 June 31 December
Technique 2022 2021
€'000 €'000
Completed Investment 1,459,220 1,447,220 DCF Poland Rent per sqm €11.5-€26 €11.5-€24
Property
Completed
Held for sale (117,400) (120,690)
Discount rate 4.16%-12.31% 4.53%-11.56%
Exit yield 5.25%-7.50% 5.25%-7.50%
1,370,700 1,336,200 DCF Romania Rent per sqm €2.00-€35.00 €2.91- €35.00
Discount rate 7.75%-9.20% 7.50%-8.75%
Exit yield 6.25%-7.75% 6.25%-8.00%
Sub-total 2,712,520 2,662,730
48,200 55,531 SC Romania Sales value (sqm) €1,878 €1,848
2,760,720 2,718,261
Investment 9,550 9,550 RM Poland Rent per sqm €13.50 €13.50
property
under development
Discount rate 6.76%-7.53% 6.76%-7.53%
Exit yield 6.50% 6.50%
Capex (€m) €26.64 €27.98
20,900 21,300 RM Romania Rent per sqm €5.75-€15.00 €3.75 - €15.00
Discount rate 7.75%-9.00% 7.75%-9.00%
Exit yield 6.25%-7.75% 6.75%-7.75%
Capex (€m) €83.32 €43.42
Investment property under refurbishment 159,550 156,000 RM Poland Rent per sqm €13.25 -€14.25 €13.25 -€14.00
Discount rate 6.69%-7.77% 6.77%-7.82%
Exit yield 6.89%-7.63% 6.87%-7.62%
Capex (€m) €22.18 €30.24
Land bank - 9,500 15,200 SC Romania Sales value (sqm) €25.00-€2,941 €25.00-€2,627
for further development
Rent per sqm €2.75-€17.5 €2.75-€17.00
24,200 24,100 RM Romania Exit yield 6.75%-8.25% 6.85%-8.25%
TOTAL 2,984,420 2,944,411
DCF: Discounted Cash Flows, DC: Direct Capitalisation, SC: Sales Comparison,
RM: Residual Method
Sensitivity Analysis on significant estimates used in the valuation
The assumptions on which the property valuations have been based include, but
are not limited to, rent per sqm (per month), discount rate, exit yield, cost
to complete, comparable market transactions for land bank for further
development, tenant profile for the rented properties, and the present
condition of the properties. These assumptions are market standard and in line
with the International Valuation Standards ('IVS'). Generally, a change in the
assumption made for the rent per sqm (per month) is accompanied by a similar
change in the rent growth per annum and discount rate (and exit yield) and an
opposite change in the other inputs.
A quantitative sensitivity analysis, in isolation, of the most sensitive
inputs used in the independent valuations performed, as of the statement of
financial position date, are set out below:
€0.5 change in rental value per month, per sqm1 25 bps change in market yield 5% change in Capex €50 change in sales prices per sqm2 2.5% change in vacancy in Perpetuity3
Investment property Year Country Increase Decrease Increase Decrease Increase Decrease Increase Decrease Increase Decrease
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Completed 2022 Poland (40,170) 72,910
40,120 - - - - -
(66,900)
2022 Romania (32,400) 36,900 1,500 (16,000) 12,900
(1,500)
32,200 (34,300) - -
2021 Poland
(40,120) 72,480
40,140 - - - -
(66,510)
2021 Romania
(33,800) 36,200
1,800 (1,700) (15,200) 12,500
33,800 - -
(33,300)
Under 2022 Poland (1,450) 1,810 (1,320)
1,320
1,450 - -
(1,670)
development 2022 Romania (3,300) 3,500 (2,600) -
2,800
3,400 - -
(3,100)
2021 Poland
(1,450) 1,810 (1,320) 1,320
1,450 - -
(1,670)
2021 Romania
(2,300) 1,400 (800) 1,000
2,400 - - -
(1,300)
Under 2022 Poland (5,390) 6,990 (330) - - -
320
5,400
(6,490)
refurbishment 2021 Poland (590) - - -
590
5,400 (5,390) (6,490) 6,990
Further 2022 Poland - - - - - - - - -
development 2022 Romania (2,100) 2,300 (2,400) 1,300 -
2,600 (1,300)
2,100
(2,100)
2021 Poland - - - - - - - - - -
2021 Romania 2,200 - -
(2,000) 2,200 (2,300) 2,500 1,400 (1,500)
(1,900)
1. The quantitative sensitivity analysis was computed as €0.25 change
in rental value per month, per sqm for four industrial properties (2021: four
industrial properties at €0.25 change in rental value per month, per sqm).
2. The quantitative sensitivity analysis was computed as €1.5 change
in sales price per sqm for industrial properties portfolio.
3. The vacancy in perpetuity sensitivity analysis is not followed for
the Polish properties portfolio as this factor is considered in the valuation
methodology as part of yields and not a variable in isolation.
4.1 Investment properties owned by Joint Ventures
Completed investment property Investment property under development Land for further development TOTAL
Note €'000 €'000 €'000 €'000
1 January 2021 28,800 - 25,400 51,200
Land acquired during the period - - 130 130
Subsequent expenditure 11,742 10,196 864 22,802
Net lease incentive movement 789 - - 789
Capitalised borrowing costs 202 87 - 289
Transfer to investment property 1,200 - (1,200) -
Transfer to investment property under development 2,804 (2,804) -
Fair value gain/(loss) on investment property (2,333) 613 13,210 11,490
31 December 2021 37,400 13,700 35,600 86,700
Land acquired during the period 8 - 802 810
Subsequent expenditure 833 11,368 80 12,281
Net lease incentive movement 50 - - 50
Capitalised borrowing costs 92 242 - 334
Transfer to completed investment property 11,900 (11,900)
Fair value gain/(loss) on investment property 22.3 317 3,590 165 4,072
30 June 2022 22.3 50,600 17,000 36,647 104,247
Sensitivity analysis on significant estimates used in the valuation of
investment properties owned by the joint venture
As disclosed in note 22, the Group also has investments in two joint ventures
where investment properties were valued at fair value under the similar Group
accounting policies by Colliers Valuation and Advisory SRL, an independent
qualified professional valuer.
The table below describes key information about the fair value measurements,
valuation technique and significant unobservable inputs (Level 3) used in
arriving at the fair value under IFRS 13.
Carrying value Range
Class of Joint Venture property 30 June 2022 31 December 2021 Valuation technique Country Input 30 June 31 December 2021
2022
€'000 €'000
Completed Investment 50,600 37,700 DCF Romania Rent per sqm €3.12-€9.00 €2.00-€8.50
property Discount rate 8.25%-8.75% 8.50%
Exit yield 7.00%-7.25% 7.25%-7.50%
Investment property under development 17,000 13,700 RM Romania Discount rate
8.50% 8.50%
Exit yield
7.00% 7.25%-7.50%
Capex (€m)
€2.00 €14.69
Land bank - for further development 36,647 35,600 SC Romania Sales value sqm €29.00-€70.00 €29.00-€70.00
TOTAL 104,247 86,700
DCF: Discounted Cash Flows, DC: Direct Capitalisation, SC: Sales Comparison,
RM: Residual Method
A quantitative sensitivity analysis (for properties owned by joint ventures),
in isolation, of the most sensitive inputs used in the independent valuations
performed, as of the statement of financial position date, are set out below:
Joint Ventures €0.25 change in rental value per month, per sqm 25 bps change in market yield 5% change in capex €1.5 change in sales prices per sqm 2.5% change in vacancy in perpetuity
Investment Increase Decrease Increase Decrease Increase Decrease Increase Decrease Increase Decrease
Property Year Country €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
- Completed 2022 Romania 1,200 (1,100) (700) 900 - - - - (500) 600
2021 Romania 700 (800) (600) 600 - - - - (500) 500
- Under 2022 Romania 1,200 (1,300) (500) 500 (100) 100 - - - -
development 2021 Romania 1,600 (1,800) (800) 600 (800) 600 - - - -
- Further 2022 Romania - - - - - - 1,353 (1,447) - -
development 2021 Romania - - - - - - 1,400 (1,200) - -
5 Advances for investment Property
30 June 31 December 2021
2022
€'000 €'000
Advances for land and other property acquisitions 2,000 2,000
Advances to contractors for investment properties under development 1,483 1,436
3,483 3,436
6 Commitments
Commitments for Investment Property
As at 30 June 2022 the Group had agreed construction contracts with third
parties and is consequently committed to future capital expenditure in respect
of completed investment property of €8.3 million (2021: €20 million),
investment property under development of €9.6 million (2021: €3.5 million)
and had committed with tenants to incur incentives (such as fit-out works,
leasing fees and other lease incentives) of €12.7 million (2021: €13.8
million).
The Group's Joint Ventures were committed to the construction of investment
property for the amount of €9.7 million at 30 June 2022 (2021: €6.3
million).
Judgements Made for Properties Under Operating Leases, being the lessor
The Group has determined, based on an evaluation of the terms and conditions
of the arrangements, that it retains all the significant risks and rewards of
ownership of the investment properties leased to third parties and, therefore,
being the lessor accounts for these leases as operating leases.
The duration of these leases is one year or more (2021: one year or more) and
rentals are subject to annual upward revisions based on the consumer price
index. The future aggregate minimum rentals receivable under non-cancellable
operating leases for investment properties - freehold are as follows:
30 June 31 December
2022 2021
€'000 €'000
Not later than 1 year 171,080 155,902
Later than 1 year and not later than 5 years 441,635 389,289
Later than 5 years 156,312 152,647
769,027 697,838
SECTION III: FINANCIAL RESULTS
This section quantifies the financial impact of the operations for the period;
further analysis on operations is presented in the Financial Review section of
the Interim Report. This section includes the results and performance of the
Group, including earnings per share and EPRA Earnings. This section also
includes details about the Group's tax position in the period and deferred tax
assets and liabilities held at the period end.
7 Revenue
Revenue from asset management fees, marketing and other income are recognised
at the time the service is provided.
30 June 30 June 2021
2022 €'000
€'000
Rental income 75,214 75,378
Revenue from contracts with customers
Service charge income 39,888 28,795
Fit-out services income 1,301 3,884
Asset management fees 31 24
Marketing and other income 117 29
41,337 32,732
116,551 108,110
The total contingent rents and surrender premia recognised as rental income
during the period amount to €0.9 million (30 June 2021: €0.8 million) and
€nil (30 June 2021: €0.4 million), respectively.
8 Operating Expenses
30 June 2022 30 June
€'000 2021
€'000
Property management, utilities and insurance 44,739 31,304
Property maintenance costs and other non-recoverable costs 825 791
Property expenses arising from investment property that generate rental income 45,564 32,095
Property expenses arising from investment property that did not generate 11 10
rental income
Fit-out services costs 1,121 3,852
46,696 35,957
9 Administrative expenses
30 June 2022 30 June
€'000 2021
€'000
Directors' emoluments 463 579
Salary and remuneration costs 3.783 4,141
Accounting, secretarial and administration costs 240 404
Legal and other advisory services 592 829
Audit and non-audit services 182 54
Corporate social responsibility 256 546
Travel and accommodation 78 74
Marketing and advertising services 414 237
Post, telecommunication, and office supplies 252 232
Stock exchange expenses 224 294
Exceptional and non-recurring expenses - 1,933
6.484 9,323
During the period ended 30 June 2021, exceptional and non-recurring expenses
include mainly professional advisory fees in connection with the cash offer
for Globalworth shares, made by CPI Property Group S.A. and Aroundtown SA
through Zakiono Enterprises Limited in May 2021.
10 Finance Cost
30 June 2022 30 June
Note €'000 2021
€'000
Interest on secured loans 3,410 3,548
Interest on unsecured credit facilities 116 -
Interest on fixed rate bonds 18,230 18,161
Debt cost amortisation and other finance costs 10.1 4,368 4,178
Interest on lease liabilities 3.2 909 905
Bank charges 514 731
Gross finance cost 27,547 27,523
Less borrowing costs capitalised on investment property 156 479
27,703 28,002
The average capitalisation rate used to determine the borrowings eligible for
capitalisation was 3.33% (30 June 2021: 3.33%).
10.1 Debt cost amortisation and other finance costs
30 June 2022 30 June 2021
€'000 €'000
Debt issue cost amortisation - secured bank loans 298 256
Debt issue cost amortisation - unsecured facility 744 738
Debt issue cost amortisation - fixed rate bonds 3,326 3,184
4,368 4,178
11 Taxation
30 June 2022 30 June 2021
€'000 €'000
Current income tax expense (572) 814
- Related to current period 777 793
- Related to prior period (1,349) 21
Deferred income tax expense 12,817 5,519
12,245 6,333
Current income tax expense
The Corporate income tax rate "CIT" applicable to the Company in Guernsey is
nil. The subsidiaries in Romania, Poland and Cyprus are subject to tax on
local sources of income. The taxable income arising in each jurisdiction is
subject to the following standard corporate income tax rates: Romania at 16%,
Cyprus at 12.5% and Poland at 19% (however for small entities with revenue up
to €2 million in the given tax year and entities starting a new business for
their first tax year of operation, under certain conditions, are charged a
reduced rate of 9%).
The Group's subsidiaries in Poland are subject to the minimum tax, which is
applied to income from ownership of certain high-value fixed assets having an
initial value of the asset exceeding PLN 10 million at a rate of 0.035% per
month. From 2019, the taxpayer has a right to apply for the refund of
previously paid minimum tax which was not deducted from the advance corporate
income tax. This minimum tax can be set-off against CIT if CIT is higher. The
tax is applied only to leased buildings while no tax applies on vacant
buildings or on vacant space in partially occupied buildings. Due to the
COVID-19 pandemic, the minimum tax scheme was suspended since 1 March 2020
(until such a future date when the authorities would resume its effect) and
the Group's subsidiaries are subject to corporate income tax.
The Group's subsidiaries registered in Cyprus need to comply with the National
tax regulations; however, the Group does not expect to generate significant
taxable income, other than dividend and interest income, these being the most
significant future sources of income of the Group subsidiaries registered in
Cyprus. Dividend income is tax exempt under certain conditions and interest
income, however, is subject to corporate income tax at the rate of 12.5% in
Cyprus.
Judgements and Assumptions Used in the Computation of Current Income Tax
Liability
There are uncertainties in Romania and Poland where the Group has significant
operations and this is due to the interpretation of complex tax regulations,
changes in tax laws, and the amount and timing of future taxable income.
Differences arising between the actual results and the assumptions made, or
future changes to such assumptions, could necessitate future adjustments to
tax income and expense already recorded. Such differences of interpretation
may arise on a wide variety of issues depending on the conditions prevailing
in the respective company's domicile. In Romania and Poland, the tax position
is open to further verification for five years and no subsidiary in Romania
has had a corporate income tax audit in the last five years while in Poland
some entities are currently under tax audit with respect to the corporate
income tax settlement for the fiscal year 2017.
Deferred tax (asset)/liabilities
30 June 31 December 2021
2022 €'000
€'000
Deferred tax asset (17) (151)
Deferred tax liabilities - classified to held for sale (5,251) (5,586)
Deferred tax liabilities 163,714 150,562
168,982 156,299
Deferred income tax expense Consolidated statement of financial position Consolidated statement of comprehensive income
30 June 31 December 2021 30 June 30 June
2022 2022 2021
Net Deferred Tax €'000 €'000 €'000 €'000
Acquired through asset acquisition - - - -
Valuation of investment property at fair value 190,868 181,542 9,326 374
Deductible temporary differences (1,773) (2,587) 814 1,266
Interest expense and foreign exchange loss on intra-group loans (17,590) (19,609) 2,019 4,063
Discounting of tenant deposits and long-term deferred costs 65 72 (7) 12
Share issue cost recognised in equity (7) (7) - -
Valuation of financial instruments at fair value 191 139 52 5
Recognised unused tax losses (2,789) (3,402) 613 (201)
168,965 156,148 12,817 5,519
Unused assessed tax losses
As at 30 June 2022, the Group has unused assessed tax losses carried forward
of €60.5 million (2021: €54.3 million) in Romania and €22.4 million
(2021: €20.8 million) in Poland that are available for offsetting against
future taxable profits of the entity which has the tax losses. The tax losses
in Romania and Poland can be carried forward over seven and five consecutive
tax years from the year of origination, respectively. In Poland, in any
particular tax year, the taxpayer may not deduct more than 50% of the loss
incurred in the year for which it was reported. Additionally, starting from
2020, the taxpayer may utilise one-time tax losses generated after 31 December
2018 in the amount of being the greater of PLN 5 million or 50% of tax loss of
any given fiscal year in the following five fiscal years.
As of the statement of financial position date the Group had recognised
deferred tax assets of €2.8 million (2021: €3.4 million) in Romania and
Poland for which deferred tax asset recognition criteria were met under IAS
12, out of the total available deferred tax assets of €13.9 million (31
December 2021: €11.7 million), calculated at the corporate income tax rates
of 16% in Romania and 19% (9% for small entities) in Poland, respectively.
Expiry year 2022 2023 2024 2025 2026 2027 2028 2029 Total
Total available deferred tax assets (€m) 1.5 2.2 4.5 0.8 2.2 1.0 0.7 1.0 13.9
From the above total available deferred tax assets, of €11.1 million (31
December 2021: €8.3 million) was not recognised (Romania and Poland) in the
income statement of the Group as the amount could not be utilised from the
future taxable income as per the criteria under IAS 12.
Temporary non-deductible interest expenses and net foreign exchange
Furthermore, in addition to the above, there are also temporary non-deductible
interest expenses and net foreign exchange losses of €256.3 million, €37.0
million in Romania and €219.3 million in Poland (31 December 2021:
€258.4million, €51.2 million in Romania and €207.2 million in Poland)
related to intercompany and bank loans. Such amounts can be carried forward
indefinitely and each year an amount up to 30% of tax EBITDA (but not less
than PLN 3 million in Poland) would become tax deductible for each respective
subsidiary, for which €17.2 million (€0.7 million in Romania and €16.5
million in Poland) deferred tax asset was recorded (31 December 2021: €19.7
million, €1.3 million in Romania and €18.4 million in Poland).
In Romania such temporary non-deductible interest expenses can be carried
forward indefinitely until it is tax deductible as per EBITDA threshold.
However, in Poland interest expense which was already paid prior to financial
position date (and corresponding net foreign exchange loss on such interest
expense) can only be utilised over five consecutive tax years from the year of
origination and unpaid interest expense (and corresponding net foreign
exchange loss on such interest expense) is available for utilisation
indefinitely.
Judgements, Estimates and Assumptions Used for Assessed Tax Losses and Related
Deferred Tax Assets
At each statement of financial position date, the Group assesses whether the
realisation of future tax benefits is sufficiently probable to recognise
deferred tax assets. This assessment requires the exercise of judgement on the
part of management with respect to, among other things, benefits that could be
realised from available tax strategies and future taxable income, as well as
other positive and negative factors. The recorded amount of total deferred tax
assets could be reduced if estimates of projected future taxable income, or if
changes in current tax regulations are enacted that impose restrictions on the
timing or extent of the Group's ability to utilise future tax benefits.
12 Earnings Per Share
The following table reflects the data used in the calculation of basic and
diluted earnings per share per IFRS and EPRA guidelines:
Number of shares issued % Of the Weighted average
Date Event Note ('000) period ('000)
1 Jan 2021 At the beginning of the year 220,297 220,297
Jan - June Effect of shares vested and exercised under
2021 Employees share-based payment plans 426 65 278
30 June 2021 Shares in issue at period-end (basic) 220,723 220,575
Dilutive shares:
Jan- March - at the beginning of the year 895 100 895
2021 - vested and exercised under employees share-based plans (421) 65 (274)
30 June 2021 Shares in issue at period-end (diluted) 221,197 221,196
1 Jan 2022 At the beginning of the year 221,373 221,373
30 June 2022 Shares in issue at year-end (basic) 221,373 221,373
Jan- Jun 2022 Effect of dilutive shares 20 97 54 52
30 June 2022 Shares in issue at period-end (diluted) 221,470 221,425
Unvested share option warrants of €2.85 million were not included in basic
or diluted number of shares being unvested and anti-dilutive on issue date
(refer to note 20.1 for further information)
30 June 30 June
2022 2021
€'000 €'000
Profit attributable to equity holders of the Company for the basic and diluted 32,606 12,534
earnings per share
IFRS earnings per share Cents Cents
- Basic 15 6
- Diluted 15 6
EPRA Earnings Per Share
The following table reflects the reconciliation between IFRS earnings as per
the statement of comprehensive income and EPRA earnings (non-IFRS measure):
Note 30 June 2022 30 June 2021
€'000 €'000
Earnings attributable to equity holders of the Company (IFRS) 32,606 12,534
Changes in fair value of financial instruments and associated close-out costs (283) (325)
Fair value gain/(loss) on investment property 3 (7,019) 14,703
Losses on disposal of investment properties 585 162
Changes in value of financial assets at fair value through profit or loss 13 (73) 243
Acquisition costs on share deals 7 -
Deferred tax charge in respect of above adjustments 9,378 379
Non-controlling interests share of the above adjustments 821 -
Adjustments in respect of joint ventures (1,694) 1,337
EPRA earnings attributable to equity holders of the Company 34,329 29,033
EPRA earnings per share Cents Cents
- Basic 16 13
- Diluted 16 13
SECTION IV: FINANCIAL ASSETS AND LIABILITIES
This section focuses on financial instruments, together with the working
capital position of the Group and financial risk management of the risks that
the Group is exposed to at period end.
13 Interest-Bearing Loans and Borrowings
This note describes information on the material contractual terms of the
Group's interest-bearing loans and borrowings. For more information about the
Group's exposure to market risk, currency risk and liquidity risks, see note
17.
30 June 31 December 2021
2022 €'000
€'000
Current
Secured loans and accrued interest 3,458 3,521
Unsecured loans and accrued interest 15,165 344,758
Sub-total 18,623 348,279
Non-current
Secured loans 357,034 356,416
Unsecured fixed rate Bonds and unsecured credit facilities 1,074,625 929,225
Sub-total 1,431,659 1,285,641
TOTAL 1,450,282 1,633,920
13.1 Key terms and conditions of outstanding debt
30 June 2022 31 December 2021
Face value Carrying Face value Carrying
value value
Facility Currency Nominal interest rate Maturity date €'000 €'000 €'000 €'000
Loan 16 EUR EURIBOR 1 month + margin May 2025 12,802 14,099 13,485 13,482
Loan 25 EUR Fixed rate Bond June 2022 - - 328,066 327,225
Loan 37 EUR Fixed rate Bond March 2025 554,203 549,408 562,522 556,920
Loan 381 EUR Fixed rate & Floating rate EURIBOR 3 months + margin May 2025 100,105 99,628 100,110 99,556
Loan 41 EUR EURIBOR 3 month + margin March 2029 85,309 84,662 85,313 84,613
Loan 43 EUR EURIBOR 3 month + margin December 2024 35,228 35,114 36,032 35,902
Loan 44/45 EUR Fixed rate February 2027 62,293 62,028 62,295 62,000
Loan 46 EUR Fixed rate November 2029 65,043 64,419 65,045 64,384
Loan 47 EUR EURIBOR 3 month + margin April 2024 60,029 59,060 - -
Loan 48 EUR Fixed rate Bond July 2026 410,862 397,247 405,011 389,838
Loan 49 EUR Fixed rate March 2029 440 440 - -
Loan 50 EUR Fixed rate March 2029 1,401 1,401 - -
Loan 51 EUR EURIBOR 6 month + margin March 2028 85,071 84,075 - -
Total 1,472,786 1,450,282 1,657,879 1,633,920
1 Loan 38 was drawn down in two tranches - 95% of the facility carries a fixed
interest rate and 5% carries a floating EURIBOR 3-month rate.
Unsecured corporate Bonds
The five-year Euro-denominated Bond (Loan 25) matured on 20 June 2022 and it
was fully repaid by the Group together with the carrying interest.
In March 2018, the Group issued a €550 million unsecured Eurobond (Loan 37)
and it carries a fixed interest rate of 3.0%.
In July 2020 the Company successfully completed under its €1.5 billion Euro
Medium Term Notes Programme the issuance of €400 million new Notes, due in
2026.
Financial covenants for unsecured corporate Bonds
Financial covenants on unsecured fixed rate bonds are calculated on a
semi-annual basis at 30 June and 31 December each year and include the
Consolidated Coverage Ratio, with minimum value of 200%, the Consolidated
Leverage Ratio, with maximum value of 60%, and the Consolidated Secured
Leverage Ratio with a maximum value of 30%.
Unsecured Revolving Credit Facility
On 16 June 2022, the amount €60 million was drawn down in order to
strengthen the liquidity of the Group, for an initial period of 1 month that
was further extended. Therefore, as at 30 June 2022, the amount of €155
million was available for utilisation form the RCF and will continue to be
available until the end of March 2024, with maturity at the end of April 2024.
The RCF terms have been structured to, generally, align with the Company's
existing Euro Medium Term Note (EMTN) programme for fixed rate Bonds (except
for Consolidated Coverage Ratio, with minimum value of 150%). In addition to
the financial covenants applicable for unsecured fixed rate bonds, the RCF
facility contains a supplementary financial covenant of the Total Unencumbered
Assets Ratio with minimum value of 125%.
Unsecured International Finance Corporation ("IFC") Loan
At the end of May 2022, the Group entered into a six-year term unsecured loan
agreement for €85 million with IFC. On 14 June 2022, the full amount was
drawn down. The IFC loan terms have been aligned with the Company's Revolving
Credit Facility terms including financial covenants.
13.2 Secured facilities
Financial covenants
Financial covenants on secured loans are calculated based on the individual
financial statements of the respective subsidiaries and subject to the
following ratios:
· gross loan-to-value ratio ("LTV") with maximum values ranging from
60%-83% (2021: 60%-83%). LTV is calculated as the loan value divided by the
market value of the relevant property (for a calculation date);
· the debt service cover ratio ("DSCR") minimum values of 120% (2021:
120%). DSCR is calculated for each respective credit facility separately at a
pre-determined date under each facility, on the preceding 12-months historical
ratio or projected future 12-months period ratio; and
· minimum interest cover ratio ("ICR"), historic with minimum values
from 350% and projected with minimum values from 250% (2021: 250%), which was
applicable to two properties as at 30 June 2022 (31 December 2021: same).
Historic ICR is calculated, as Actual Net Rental Income as a percentage of the
Actual Interest Costs for the twelve preceding months period from the
calculation date. Projected ICR is calculated as Projected Net Rental Income
as a percentage of the Projected Interest Costs for the twelve months period
commencing immediately after the date of the calculation.
Secured bank loans are secured by investment properties which were recognised
in the statement of financial position at fair value of €808.4 million at 30
June 2022 (2021: €800.4 million) and also carry pledges on rent and other
receivable balances of €3.7 million (2021: €3.2 million), VAT receivable
balances of €1.0 million (2021: €0.9 million) and a movable charge on the
respective bank accounts (refer to note 16).
The Group is in compliance with all financial covenants and there were no
payment defaults during the period ended 30 June 2022 (2021: same). As of 30
June 2022, the Group had undrawn borrowing facilities of €155 million (2021:
€215 million).
13.3 Loan from non-controlling interest holders to a subsidiary
In March 2022 and April 2022, North Logistics Hub SRL and Logistics Hub
Chitila SRL, two newly incorporated subsidiaries, received a loan from
minority shareholders for an amount of €0.4 million and €1.4 million
respectively, representing 25% of CAPEX investment in the projects which were
financed through shareholders loans both from the Group and minority
shareholder in proportion to the equity interest in the Company. The loans are
unsecured and carry a fixed interest of 4%.
14 Financial assets at fair value through profit or loss
Interest rate Maturity date 31 December 2021 Additions Disposal Valuation gain 30 June 2022
Project name
€'000 €'000 €'000 €'000 €'000
My Place I fixed September 2022 4,103 - - 73 4,176
My Place II fixed 3,221 - - - 3,221
March 2023
TOTAL 7,324 - - 73 7,397
Right of First Offer Agreements ('ROFO' bonds)
The fair value of the financial assets (ROFO bonds) is individually determined
by taking into account a number of factors. The significant key factors are
fair value of underlying investment properties, outstanding cost to complete
the construction and leasing progress. Any significant change in inputs may
result in significant change in the fair value of ROFO. For example, as at 30
June 2022 a 5% change in outstanding cost to complete or the fair value of
underlying investment property would have increased or decreased the ROFO fair
value by €0.5 million (2021: €0.9 million and €1 million), respectively.
The maturity dates presented in the table above are stated in the agreements,
however, the planned repayment dates of debentures would take place upon
completion of each ROFO project. The fair value of debentures is calculated
based on percentage of completion of each ROFO projects and developer margin
of the project which is calculated as a difference between each ROFO Project
value upon completion and the project's construction budget. As at 30 June
2022, a gain of €0.07 million (2021: loss of €0.24 million) from the fair
valuation of the above financial instruments was recognised in the statement
of comprehensive income, categorised Level 3 within the fair value hierarchy.
The Group is committed to invest in each of the ROFO Assets at least 25% of
the funds required by each of the ROFO SPVs (less the external construction
bank financing at a loan to construction ratio of 60%) to complete the
development of each respective ROFO Asset. As of 30 June 2022, the cumulative
investment made by the Group under the ROFO Agreement amounts to €16.6
million (2021: €16.6 million). In September 2022 ROFO bonds and loans
related to My Place I are expected to be repaid in the amount of €4 million.
15 Trade and Other receivables
30 June 31 December
2022 2021
€'000 €'000
Rent and service charges receivable 15,556 11,049
VAT and other taxes receivable 1,975 4,236
Advances to suppliers for services 183 219
Sundry debtors 237 704
17,951 16,208
Rent and Service Charges receivable
Rent and service charges receivable are presented in the above table net of an
allowance for bad or doubtful debts of €5.5 million (2021: €5.8 million).
Rent and service charges receivable are non-interest-bearing and are typically
due within 30-90 days (see more information on credit risk and currency
profile in note 17.2). For the terms and conditions for related party
receivables, see note 25.
16 Cash and Cash Equivalents
30 June 2022 31 December 2021
€'000 €'000
Cash at bank and in hand 163,179 188,005
Short-term deposits 21,530 230,743
Cash and cash equivalents at period end 184,709 418,748
Cash at bank and in hand includes restricted cash balances of €6.8 million
(2021: €7.5 million) and short-term deposits include restricted deposits of
€0.3 million (2021: €0.2 million). The restricted cash balance can be used
to repay the outstanding debts and repayment of deposits to tenants. The cash
balance of €0.10 million (2021: €0.08 million) held by the Globalworth
Foundations (Fundatia Globalworth in Romania and Fundacja Globalworth in
Poland) is restricted only for charity purposes.
Short-term deposits are made for varying periods depending on the immediate
cash requirements of the Group and earn interest at rates on Euro deposits
ranging from minus 0.60% to positive 0.01% (2021: minus 0.60% to positive
0.01%) per annum, for RON deposits from 0.68% to 3.75% (2021: 0.10% to 1.75%)
per annum and for PLN deposits from minus 0.24% to nil (2021: minus 0.24% to
nil) per annum. For RON deposits highest interest rate was earned on overnight
deposits.
17 Financial Risk Management - Objective and Policies
The Group is exposed to the following risks from its use of financial
instruments:
· Market risk (including currency risk, interest rate risk);
· Credit risk; and
· Liquidity risk.
17.1 Market Risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices.
The Group's market risks arise from open positions in: (a) foreign currencies;
and (b) interest-bearing assets and liabilities, to the extent that these are
exposed to general and specific market movements.
17.1 a) Foreign currency risk
The Group has entities registered in several EU countries, with the majority
of the operating transactions arising from its activities in Romania and
Poland.
Therefore, the Group is exposed to foreign exchange risk, primarily with
respect to the Romanian Lei (RON) and Polish Zloty (PLN). Foreign exchange
risk arises in respect of those recognised monetary financial assets and
liabilities that are not in the functional currency of the Group.
The Group's exposure to foreign currency risk was as follows (based on nominal
amounts):
30 June 2022 31 December 2021
Denominated in Denominated in
Amounts in €'000 equivalent value RON PLN GBP USD RON PLN GBP USD
ASSETS
Cash and cash equivalents 25,778 20,605 4 16 12,607 15,047 37 30
Trade and other receivables 11,601 5,063 - - 9,391 6,269 - -
Contract assets 3,433 2,706 - - 4,352 1,601 - -
Income tax receivable 33 1,538 - - 33 74 - -
Total 40,845 29,912 4 16 26,383 22,991 37 30
LIABILITIES
Trade and other payables 14,670 11,036 - - 15,490 10,063 - -
Lease liability - 27,895 - - - 29,206 - -
Income tax payable 204 310 - - 361 191 - -
Guarantees from subcontractors 1,020 2,047 - - 1,807 1,808 - -
Deposits from tenants 3,394 6,901 - 5 3,503 6,713 - 5
Total 19,288 48,189 - 5 21,161 47,981 - -
Net exposure 21,557 (18,277) 4 11 5,222 (24,990) 37 25
Foreign Currency Sensitivity Analysis
As of the statement of financial position date, the Group is mainly exposed to
foreign exchange risk in respect of the exchange rate fluctuations of the RON
and PLN. The following table details the Group's sensitivity (impact on income
statement before tax and equity) to a 5% devaluation in RON, PLN and GBP
exchange rates against the Euro, on the basis that all other variables remain
constant.
The 5% sensitivity rate represents management's assessment of the reasonably
possible change in foreign exchange rates. The sensitivity analysis includes
only outstanding foreign currency denominated monetary items and adjusts their
translation at the reporting date for a 5% appreciation in the Euro against
other currencies.
30 June 2022 31 December 2021
Profit or (loss) Equity Profit or (loss) Equity
All amounts in €'000
RON (1,078) 1,078 (261) (261)
PLN 914 914 1,192 1,192
USD (1) (1) (1) (1)
GBP (0) (0) (2) (2)
A 5% devaluation of the Euro against the above currencies would have had an
equal but opposite impact on the above currencies to the amounts shown above,
on the basis that all other variables remain constant.
17.1 b) Interest Rate Risk
Interest rate price risk is the risk that the value of a financial instrument
will fluctuate due to changes in market interest rates relative to the
interest rate that applies to the financial instrument. Interest rate cash
flows risk is the risk that the interest cost will fluctuate over time.
The Group's interest rate risk principally arises from interest-bearing loans
and borrowings. As at 30 June 2022, the total outstanding balance of
interest-bearing loans and borrowing 80.6% (2021: 91.5%) carry fixed rate
interest, as a consequence, the Group is exposed to fair value interest rate
risk, which has been disclosed under IFRS. As of 30 June 2022, the fair value
of such fixed rate debt was lower by €118.3 million (31 December 2021:
higher with €78 million) than the carrying value as disclosed in note 17.2
in the fair value hierarchy table.
Furthermore, as at 30 June 2022, from the total outstanding interest-bearing
loans and borrowing balance 19.4% (2021: 8.5%) carry variable interest rate,
which range from EURIBOR 1-month to EURIBOR 6-month rates, see note 13 for
details on each individual loan. These loans expose the Group to cash flow
interest rate risk and in order to minimise this risk, the Group hedged 21.8%
(31 December 2021: 40.3%) of such variable interest rate exposure with
fixed-variable interest rate swap instrument and interest rate cap instruments
with strike price range from minimum 3% to 4%.
Based on the Group's debt balances at 30 June 2022, an increase or decrease of
100 basis points in the EURIBOR will result in an increase or decrease (net of
tax) of interest expense by €2.9 million per annum (2021: €1.4 million per
annum), with a corresponding impact on equity for the same amount,
respectively.
17.2 Credit Risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group's
policy is to trade with recognised and creditworthy third parties. The Group's
exposure is continuously monitored and spread amongst approved counterparties.
The Group's maximum exposure to credit risk, by class of financial asset, is
equal to their carrying values at the statement of financial position date.
30 June 2022 31 December 2021
Note €'000 €'000
Financial assets measured at fair value through profit or loss 14 7,397 7,324
Equity investments 12,628 12,109
Loan receivable from joint venture 22 47,226 31,991
Trade receivables - net of provision 15 15,556 11,049
Contract assets 6,138 6,106
Other receivables 15 237 704
Guarantees retained by tenants 47 885
VAT and other taxes receivable 15 1,975 4,236
Income tax receivable 1,769 117
Cash and cash equivalents 16 184,709 418,748
277,682 493,269
Financial assets at fair value through profit or loss and other comprehensive
income
The Group places funds in financial instruments issued by reputable real
estate companies with high credit worthiness.
Contract assets and Trade Receivables
A trade receivable is recognised if an amount of consideration that is
unconditional is due from the customer (only the passage of time is required
before payment of the consideration is due).
There is no significant concentration of credit risk with respect to contract
assets and trade receivables, as the Group has a large number of tenants, most
of which are part of multinational groups, internationally dispersed, as
disclosed in the Interim Report. For related parties, including the joint
ventures, it is assessed that there is no significant risk of non-recovery.
Estimates and assumptions used for impairment of trade receivables and
contract assets
The Group's trade receivables do not contain any financing component and
mainly represent lease receivables. Therefore, the Group applied the
simplified approach under IFRS 9 and measured the loss allowance based on a
provision matrix that is based on historical collection and default experience
adjusted for forward looking factors in order to estimate the provision on
initial recognition and throughout the life of the receivables at an amount
equal to lifetime ECL (Expected Credit Losses). The assessment is performed on
a six-month basis and any change in original allowance will be recorded as
gain or loss in the income statement.
The movements in the provision for impairment of receivables during the
respective periods were as follows:
30 June 31 December 2021
2022 €'000
€'000
Opening balance 5,776 4,976
Provision for specific doubtful debts 130 1,432
Reversal of provision for doubtful debts (191) (298)
Utilised (256) (188)
Foreign currency translation income 14 (146)
Closing balance 5,473 5,776
The analysis by credit quality of financial assets, cumulated for rent,
service charge and property management, is as follows:
30 June 2022 (€'000) Neither past due nor impaired due but not impaired
<90 days <120 days <365 days >365 days TOTAL
Trade and other receivables - gross 10,612 3,881 152 1,565 4,819 21,029
Less: Specific provision - 44 50 199 4,819 5,112
Less: Expected credit loss 4 198 7 152 - 361
Carrying amount 10,612 3,639 95 1,214 - 15,559
Expected credit loss rate 0.0% 5.4% 7.4% 12.5% -
31 December 2021 (€'000) Neither past due nor impaired due but not impaired
<90 days <120 days <365 days >365 days TOTAL
Trade and other receivables - gross 6,827 2,481 214 2,469 4,474 16,825
Less: Specific provision - 103 62 707 4,474 5,346
Less: Expected credit loss 4 198 7 221 - 430
Carrying amount 6,823 2,540 145 1,541 - 11,049
Expected credit loss rate 0.1% 7.8% 4.8% 14.3% -
The customer balances which were overdue but not provisioned are due to the
fact that the related customers committed and started to pay the outstanding
balances subsequent to the period end. Further deposits payable to tenants may
be withheld by the Group in part or in whole if receivables due from the
tenant are not settled or in case of other breaches of contractual terms.
VAT and other taxes receivable
This balance relates to corporate income tax paid in advance, VAT and other
taxes receivable from the tax authorities in Romania and Poland. The balances
are not considered to be subject to significant credit risk as all the amounts
receivable from Government authorities are secured under sovereign warranty.
Cash and cash equivalents
The credit risk on cash and cash equivalents is very small, since the cash and
cash equivalents are held at reputable banks in different countries. The most
significant part of the cash and cash equivalents balance is kept at the
company level with international banks having credit rating profile (assigned
by S&P, Moody's or Fitch) in upper medium grade range (i.e. A+ to A- for
long-term and P-2, F1, F2 for short-term) for 73% (2021: 65%) of the cash and
cash equivalents balance of the Group, in lower medium grade range (BBBs) for
27% (2021: 35%) of the cash and cash equivalents balance of the Group and
insignificant amounts (2021: same) in non-investment grade. Surplus funds from
operating activities are deposited only for short-term period, which are
highly liquid with reputable institutions.
Loans receivable from joint ventures
The outstanding loan balance is neither past due nor impaired. Loans
receivable from joint ventures are considered to be low credit risk where they
have a low risk of default and the issuer has a strong capacity to meet its
contractual cash flow obligations.
Financial instruments for which Fair values are disclosed
Set out below is a comparison by class of the carrying amounts and fair values
of the Group's financial instruments, other than those with carrying amounts
that are reasonable approximations of their fair values.
Fair value hierarchy
Carrying amount Level 1 Level 2 Level 3 Total
Year €000 €000 €000 €000 €000
Interest-bearing loans and borrowings 2022 1,450,282 813,345 - 518,692 1,332,037
(Note 13)
2021 1,633,920 1,330,142 - 381,567 1,711,709
Other current financial liabilities 2022 47 - 47 - 47
2021 261 - 261 - 261
Financial asset at fair value through profit or loss 2022 7,397 - - 7,397 7,397
2021 7,324 - - 7,324 7,324
Lease liabilities (note 3) 2022 19,260 - - 19,260 19,260
2021 20,065 - - 20,065 20,065
The fair value of financial liabilities is included at the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. When determining the fair
values of interest- bearing loans and borrowings and lease liabilities the
Group used the DCF method with inputs such as discount rate that reflects the
issuer's borrowing rate as at the statement financial position date.
Specifically, for the Eurobonds, their fair value is calculated on the basis
of their quoted market price. The own non-performance risk at the statement of
financial position date was assessed to be insignificant.
17.3 Liquidity Risk
The Group's policy on liquidity is to maintain sufficient liquid resources to
meet its obligations as they fall due. Ultimate responsibility for liquidity
risk management rests with management. The Group manages liquidity risk by
maintaining adequate cash reserves and planning and close monitoring of cash
flows. The Group expects to meet its financial liabilities through the various
available liquidity sources, including a secure rental income profile, further
equity raises and in the medium term, debt refinancing. The table below
summarises the maturity profile of the Group's financial liabilities based on
contractual undiscounted payments.
The below table presents the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to pay and
includes both interest and principal cash flows. As the amount of contractual
undiscounted cash flows related to bank borrowings is based on variable rather
than fixed interest rates, the amount disclosed is determined by reference to
the conditions existing at the year end, that is, the actual spot interest
rates effective at the end of the year are used for determining the related
undiscounted cash flows.
Contractual payment term Difference from carrying amount
All amounts in €'000 <3 months 3 months- 1 year 1-5 years >5 years Total Carrying amount
30 June 2022
Interest-bearing loans and borrowings 18,821 351,149 1,220,530 211,470 1,801,970 (351,688) 1,450,282
Lease liability - 1,908 8,585 110,899 121,392 (102,132) 19,260
Trade payables and guarantee retained from
contracts (excluding advances from customers) 14,637 16,421 2,246 253 33,558 (671) 32,887
Other payables 17 - - - 17 - 17
Deposits from tenants 16,461 1,070 2,785 940 21,256 (603) 20,653
Income tax payable 702 - - - 702 - 702
Total 50,638 370,548 1,234,146 323,562 1,978,895 (455,094) 1,523,801
Contractual payment term Difference from carrying amount
All amounts in €'000 <3 months 3 months- 1 year 1-5 years >5 years Total Carrying amount
31 December 2021
Interest-bearing loans and borrowings 18,821 351,149 1,220,530 211,470 1,801,970 (168,050) 1,633,920
Lease liability - 1,855 8,737 114,604 125,196 (105,131) 20,065
Trade payables and guarantee retained from
contracts (excluding advances from customers) 18,863 17,601 3,696 0 39,990 1,292 41,282
Other payables 17 - - - 17 - 17
Provision for tenant lease incentives - - - - 0 - -
Deposits from tenants 15,917 168 3,212 1,182 20,479 (567) 19,912
Income tax payable 550 - - - 550 - 550
Total 53,998 370,773 1,236,175 327,256 1,988,202 (272,456) 1,715,746
Other current financial liabilities
Other current financial liabilities represented the mark-to-market value of
CAP instruments for covering the increase of 3-month EURIBOR above strikes of
3 and 4% interest rate capes, obtained from the counterparty financial
institution and were valued at €0.05 million at 30 June 2022 (2021: €0.3
million). The fair value of derivative was developed in accordance with the
requirements of IFRS 13. The swap agreement under which the Group was entitled
to receive a floating rate of 1-month EURIBOR and was required to pay a fixed
rate of interest of 3.62% p.a. matured in June 2022.
A financial income of €0.3 million (30 June 2021: €0.3 million),
representing the fair value movement during the period, was recognised in the
income statement for the period ended 30 June 2022.
The Group assessed that the fair values of other financial assets and
financial liabilities, such as trade and other receivables, guarantees
retained by tenants, cash and cash equivalents, income tax receivable and
payables, trade and other payables, guarantees retained from contractors and
deposits from tenants, approximate their carrying amounts largely due to
short-term maturities and low transaction costs of these instruments as of the
statement of financial position date.
SECTION V: SHARE CAPITAL AND RESERVES
The disclosures in this section focus on dividend distributions, the share
schemes in operation and the associated share-based payment charge to profit
or loss. Other mandatory disclosures, such as details of capital management,
are also disclosed in this section.
18 Dividends
30 June 31 December
2022 2021
€'000 €'000
Declared and paid during the period
Interim cash dividend: €0.13 per share 28,807 66,358
On 10 March 2022, the Board of Directors of the Company approved the payment
of an interim dividend in respect of the six-month financial period ended 31
December 2021 of €0.13 per ordinary share, which was paid on 01 April 2022
to the eligible shareholders.
19 Financial Position Key Performance Measures
The net assets value ("NAV"), EPRA Net Reinstatement Value ("EPRA NRV") and
the numbers of shares used for the calculation of each key performance measure
on the financial position of the Group and the reconciliation between IFRS and
EPRA measures are shown below.
30 June 31 December 2021
2022 €'000
Note €'000
Net assets attributable to equity holders of the Company 1,742,492 1,738,629
Number of ordinary shares used for the calculation of: Number ('000) Number ('000)
- NAV per share 12 221,373 221,373
- Diluted NAV and EPRA NRV per share 12 221,470 221,373
€ €
NAV per share 7.87 7.85
Diluted NAV per share 7.87 7.85
30 June 31 December 2021
EPRA NRV Per Share 2022 €'000
Note €'000
Net assets attributable to equity holders of the Company 1,742,492 1,738,629
Exclude:
Deferred tax liability on investment property 11 190,868 181,542
Fair value of interest rate swap instrument 17 (48) 236
Goodwill as a result of deferred tax (5,697) (5,697)
Adjustment in respect of the joint venture and non-controlling interests for
above items
3,134 2,753
EPRA NRV attributable to equity holders of the Company 1,930,749 1,917,463
€ €
EPRA NRV per share 8.72 8.66
20 Share-Based Payment Reserve
30 June 2022 31 December
2021
Share-based payments reserve Note €'000 €'000
Executive share option plan reserve 20.1 156 156
30 June 30 June
2022 2021
Share-based payments expense Note €'000 €'000
Total expense during the period - 432
20.1 Executive Share Option Plan
Under the plan, the Directors of the Group were awarded share option warrants
as remuneration for services performed. The share options granted to the
Directors of the Group are equity settled.
In 2013, the Group granted warrants to the Founder (at 30 June 2021 the
unvested warrants were held by Zakiono Enterprises Limited) and the Directors
which entitle each holder to subscribe for ordinary shares in the Company at
an exercise price of €5.00 per share if the market price of an ordinary
share, on a weighted average basis over 60 consecutive days, exceeds a
specific target price and the holder is employed on such date. The contractual
term of each warrant granted is 10 years. There are no cash settlement
alternatives, and the Group does not have the intention to offer cash
settlement for these warrants.
As of 30 June 2022, under the share option warrants scheme Zakiono Enterprises
Limited had the right to subscribe in two tranches of 2.83 million ordinary
shares in total (1.415 million for each tranche) at an exercise price of
€5.00 per share if the market price of an ordinary share, on a weighted
average basis over 60 consecutive days, exceeds €10.00 per share and
€12.50 per share for each tranche respectively. As defined per IAS 33
"Earnings per share" ordinary shares to be issued for each unvested share
option warrants were not included in basic or diluted number of shares as
disclosed in note 12.
The fair value of the warrants was estimated at the grant date (i.e. July
2013) at €0.073 per share. There have been no cancellations or modifications
to any of the plans during the period ended 30 June 2022.
The following table analyses the total cost of the executive share option plan
(Warrants), together with the number of options outstanding:
30 June 2022 31 December 2021
Cost Number Cost Number
€'000 ('000) €'000 ('000)
Closing balance 156 2,830 156 2,830
Weighted average remaining contractual life (years) 1.08 1.58
There were no warrants vested and exercisable at 30 June 2022 (31 December
2021: same)
20.2 Treasury shares
30 June 2022 31 December 2021
Amount Number Amount Number
€'000 ('000) €'000 ('000)
Opening balance (4,917) (1,053) (12,977) (2,109)
Shares for Executive Directors and other senior management employees - - 339 43
Shares for subsidiaries' employee share award plan - - 1,253 172
Shares for long-term incentive plan 1,476 130
Shares vested under the deferred annual bonus incentive plan - - 4,920 711
Dividend on treasury shares held by a subsidiary 28 - 72 -
Closing balance (4,889) (1,053) (4,917) (1,053)
21 Capital Management
The Company has no legal capital regulatory requirement. The Group's policy is
to maintain a strong equity capital base so as to maintain investor, creditor
and market confidence and to sustain the continuous development of its
business. The Board considers from time to time whether it may be appropriate
to raise new capital by a further issue of shares. The Group monitors capital
primarily using an LTV ratio and manages its gearing strategy to a long-term
target LTV of less than 40%.
The LTV is calculated as the amount of outstanding debt (Group's debt balance
plus 50% of joint ventures' debt balance), less cash and cash equivalents
(Group cash balance plus 50% of joint ventures' cash balance), divided by the
open market value of its investment property portfolio (Group's investment
property- freehold portfolio plus 50% of joint ventures' investment property -
freehold value) as certified by external valuers. The future share capital
raise or debit issuance are influenced, in addition to other factors, by the
prevailing LTV ratio.
30 June 31 December 2021
Note 2022 €'000
€'000
Interest-bearing loans and borrowings (face value) 13 1,472,786 1,657,879
Less:
Cash and cash equivalents 16 184,709 418,748
Group Interest-bearing loans and borrowings (net of cash) 1,288,077 1,239,131
Add: 7,658 7,342
50% Share of Joint Ventures interest-bearing loans and borrowings
50% Share of Joint Ventures cash and cash equivalents (2,227) (846)
Combined Interest-bearing loans and borrowings (net of cash) 1,293,509 1,245,628
Group open market value as of financial position date 3,101,820 3,065,101
Add:
50% Share of Joint Ventures open market value as of financial position date 22 52,124 43,350
Open market value as of financial position date 3,153,944 3,108,451
Loan-to-value ratio ("LTV") 41.0% 40.1%
Since the carrying value of lease liability closely matches with fair value of
the investment property - leasehold under the applicable accounting policy as
per IFRS 16 therefore both lease asset and liability, related to the right of
perpetual usufruct of the lands, are excluded from the above calculation for
the current and prior periods.
SECTION VI: INVESTMENT IN SUBSIDIARIES, JOINT VENTURES AND RELATED DISCLOSURE
This section includes details about Globalworth's subsidiaries, if any new
business and /or new properties acquired, investment in joint ventures and
related impact on the statement of comprehensive income and cash flows.
22 Investment in Joint ventures
30 June 31 December
Investments Note 2022 2021
€'000 €'000
Opening balance 16,917 11,907
Share of profit during the period 2,012 5,010
Sub-total 18,929 16,917
Loans receivable from joint ventures
Opening balance 31,991 16,451
Loan provided to the joint ventures 17,173 23,354
Loan repayments from the joint ventures (2,377) (8,111)
Interest repayment from the joint ventures (250) (536)
Interest income on the loans to joint ventures 689 833
Sub-total 47,226 31,991
TOTAL 66,155 48,908
22.1 Investments in the Joint Ventures
In April 2019, the Group's subsidiary, Globalworth Holdings Cyprus Limited,
entered into a joint venture agreement with Bucharest Logistic Park SRL,
through which it acquired a 50% shareholding interest (€0.09 million
investment) in Global Logistics Chitila SRL ("Chitila Logistics Hub"), an
unlisted company in Romania, owning land for further development, at
acquisition date, in Chitila, Romania. As at 30 June 2022 and 31 December
2021, the investment properties were classified under the industrial segment
for the Group.
In June 2019, the Group's subsidiary, Globalworth Holdings Cyprus Limited,
entered into a joint venture agreement with Mr. Sorin Preda through which it
acquired a 50% shareholding interest (€6.36 million investment) in Black Sea
Vision SRL ("Constanta Business Park"), an unlisted company in Romania, owning
land for further development, at acquisition date, in Constanta, Romania. As
at 30 June 2022 and 31 December 2021, the investment properties were
classified as industrial segment for the Group.
Judgements and assumptions used for Joint Ventures
Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control. The
considerations made in determining significant influence or joint control are
similar to those necessary to determine control over subsidiaries. Following
such assessment, the Group's investment was classified as a joint venture.
Until the disposal date, the carrying amount of the investment in the joint
venture was recorded at cost plus the change in the Group's share of net
assets of the joint venture until the disposal date.
As at 30 June 2022, the Group determined that there is no objective evidence
that the investments in the joint venture are impaired. The financial
statements of the joint ventures are prepared for the same reporting period as
the Group. The joint ventures had no other contingent liabilities or
commitments as at 30 June 2022 (2021: €nil), except construction commitments
disclosed in note 6.
22.2 Summarised Statements of Financial Position of the Joint Ventures as at reporting date
The summarised statements of financial position of the joint ventures are
disclosed below, which represents the assets and liabilities recognised in the
financial statements of each joint venture without adjusting of the balance
payable to or receivable from the Group. Transactions and balances receivable
or payable between the Group and the individual joint ventures are disclosed
in note 25.
30 June 30 June 30 June 31 December 2021 31 December 2021 31 December 2021
2022 2022 2022
€'000 €'000 €'000 €'000 €'000 €'000
Constanta Business Park Chitila Logistics Hub Combined Constanta Business Chitila Combined
Park Logistics
Hub
Completed investment property 24,800 25,800 50,600 12,900 14,000 26,900
Investment property under development/ 36,647 17,000 53,647 42,600 17,200 59,800
Land bank - for further development
Other non-current assets 12 137 149 438 1,577 2,015
Total non-current assets 61,459 42,937 104,396 55,938 32,777 88,715
Other current assets 424 1,297 1,721 431 2,029 2,460
Cash and cash equivalents 1,459 2,994 4,453 1,364 327 1,691
Total assets 63,342 47,228 110,570 57,733 35,133 92,866
Loans payable to the Group 13,303 33,921 47,224 8,835 23,156 31,991
Bank loans (at amortised cost) 7,671 7,613 14,484 7,827 6,857 14,684
Loan from Joint venture partner 573 3,142 3,715 150 2,796 2,946
Deferred tax liability 6,001 188 6,189 5,505 - 5,505
Other non-current liabilities 157 46 203 157 12 169
Total non-current liabilities 27,705 44,910 72,615 22,474 32,821 55,295
Loan from Joint venture partner - 28 28 15 290 305
Other current liabilities 145 2,165 2,310 2,473 3,168 5,641
Current portion of bank loans 31 - 31 - - -
Total liabilities 27,882 47,103 74,985 24,962 36,279 61,241
Net assets 35,460 125 35,585 32,771 (1,146) 31,625
The Group has signed loan facilities amounting to €59.2 million (2021:
€54.1 million) with Chitila Logistics Hub and Constanta Business Park joint
ventures to fund the development costs of the projects, out of which €13.3
million was available for future drawdown as of 30 June 2022 (2021: €23
million). Further details about the fair valuation of investment property
owned by the Joint Ventures are disclosed in note 4.1.
22.3 Summarised Statements of Financial Performance of the Joint Ventures
The table below includes individual and combined income statements of the
joint venture extracted from the individual financial statements of each joint
venture without adjusting for the transactions with the Group.
30 June 30 June 30 June 30 June 30 June 30 June 2021
2022 2022 2022 2021 2021
€'000 €'000 €'000 €'000 €'000 €'000
Constanta Business Park Chitila Logistics Combined Constanta Business Chitila Logistics Combined
Hub Park Hub
Revenue 610 1,198 1,808 428 343 771
Operating expenses (208) (446) (654) (187) (234) (421)
Administrative expenses (28) (42) (70) (33) (22) (55)
Fair value gain/(loss) on investment property 2,932 1,140 4,072 508 (3,675) (3,167)
Foreign exchange loss - (42) (42) (5) (13) (18)
Profit/(loss) before net financing cost 3,306 1,808 5,114 711 (3,601) (2,890)
Finance expense (124) (355) (479) (217) (249) (466)
Finance income 4 6 10 1 1 2
Income tax (expense)/income (497) (188) (685) (48) 541 493
Total comprehensive income for the period 2,689 1,271 3,960 447 (3,308) (2,861)
Income tax expense mainly represents deferred tax (expense)/income on the
valuation of investment property.
22.4 Share of profit/(loss) of equity-accounted investments in joint ventures
The following table presents a reconciliation between the profit/(loss) for
the period ended 30 June 2022 and 30 June 2021 recorded in the individual
financial statements of the joint ventures with the Share of profit recognised
in the Group's financial statements under the equity method.
30 June 2022 30 June 2022 30 June 2022 30 June 2021 30 June 2021 30 June 2021
€'000 €'000 €'000 €'000 €'000 €'000
Constanta Business Park Chitila Logistics Hub Constanta Business Park Chitila Logistics Hub
Combined Combined
Profit/(loss) for the period 2,689 1,271 3,960 447 (3,308) (2,861)
Group 50% share of profit/(loss) for the period 1,345 636 1,981 224 (1,654) (1,430)
Adjustments for transactions with the Group 56 (25) 31 114 43 157
Share of profit/ (loss) of equity-accounted investments in joint ventures 1,401 611 2,012 338 (1,611) (1,273)
23 Investment in Subsidiaries
Details on all direct and indirect subsidiaries of the Company, over which the
Group has control and consolidated as of 30 June 2022 and 31 December 2021,
are disclosed in the table below. The Group did not have any restrictions
(statutory, contractual or regulatory) on its ability to transfer cash or
other assets (or settle liabilities) between the entities within the Group.
As of 30 June 2022, the Group consolidated the following subsidiaries, being
holding companies as principal activities.
30 June 2022 31 December 2021 Place of incorporation
Subsidiary Note Shareholding interest (%) Shareholding interest (%)
Globalworth Investment Advisers Limited 100 100 Guernsey,
Channel Islands
Globalworth Holdings Cyprus Limited
Zaggatti Holdings Limited
Tisarra Holdings Limited
Ramoro Limited
Vaniasa Holdings Limited
Serana Holdings Limited
Kusanda Holdings Limited
Kifeni Investments Limited
Casalia Holdings Limited
Pieranu Enterprises Limited
Dunvant Holding Limited
Oystermouth Holding Limited
Minory Investments Limited
Globalworth Tech Limited 100 100 Cyprus
IB 14 Fundusz Inwestycyjny Zamkniety Aktywow Niepublicznych
Lima Sp. z o.o.
As of 30 June 2022, the Group consolidated the following subsidiaries, which
own real estate assets in Romania and Poland, being asset holding companies as
their principal activities, except for Globalworth Building Management SRL,
GPRE Property Management Sp. z o.o. and GPRE Management Sp. z o.o. with
building management activities in Romania and Poland, and Fundatia Globalworth
in Romania and Fundacja Globalworth in Poland, non-profit organisations with
corporate social responsibility activities.
30 June 2022 Shareholding interest (%) 31 December 2021 Shareholding interest (%) Place of incorporation
Subsidiary
Note
Aserat Properties SRL 100 100 Romania
BOB Development SRL
BOC Real Property SRL
Corinthian Five SRL
Corinthian Tower SRL
Corinthian Twin Tower SRL
Elgan Automotive SRL
Elgan Offices SRL
Globalworth Asset Managers SRL
Globalworth Building Management SRL
Globalworth Expo SRL
SPC Beta Property Development Company SRL
SPC Epsilon Property Development Company SRL
SPC Gamma Property Development Company SRL
Netron Investment SRL
SEE Exclusive Development SRL
Tower Center International SRL
Upground Estates SRL
Fundatia Globalworth
Industrial Park West SRL
Nord 50 Herastrau Premium SRL
Otopeni Logistics Hub SRL 23.3 100 n/a Romania
West Logistics Hub SRL 23.3 100 n/a Romania
North Logistics Hub SRL 23.3 75 n/a Romania
Logistics Hub Chitila SRL 23.3 75 n/a Romania
DH Supersam Katowice Sp. z o.o. 100 100 Poland
Hala Koszyki Sp. z o.o.
Dolfia Sp. z o.o.
Ebgaron Sp. z o.o.
Bakalion Sp. z o.o.
Centren Sp. z o.o.
Tryton Business Park Sp. z o.o.
GPRE Property Management Sp. z o.o.
GPRE Management Sp. z o.o.
A4 Business Park Sp. z o.o.
West Link Sp. z o.o.
Lamantia Sp. z o.o.
Dom Handlowy Renoma Sp. z o.o.
Nordic Park Offices Sp. z o.o.
Warta Tower Sp. z o.o.
Quattro Business Park Sp. z o.o.
West Gate Sp. z o.o.
Gold Project Sp. z o.o.
Spektrum Tower Sp. z o.o.
Warsaw Trade Tower 2 Sp. z o.o.
Rondo Business Park Sp. z o.o.
Artigo Sp. z o.o.
Ingadi Sp. z o.o.
Imbali Sp. z o.o.
Kusini Sp. z o.o.
Podium Park Sp. z o.o.
Fundacja Globalworth
23.1 Subsidiaries under liquidation process
Following companies are dormant and have applied for the voluntary liquation
during 2020: Casalia Holdings Limited, Dunvant Holding Limited, Oystermouth
Holding Limited, Pieranu Enterprises Limited, Ramoro Limited and Vaniasa
Holdings Limited.
23.2 Mergers during the period
Kinolta Investments Limited was merged in Globalworth Holdings Cyprus Limited,
a company registered in Cyprus, on 11 January 2022.
23.3 New Subsidiaries
On 27 January 2022, two new subsidiaries, named Otopeni Logistics Hub SRL and West Logistics Hub SRL respectively, were set up for future projects.
On 3 March 2022 and 4 April 2022, two new subsidiaries, named North Logistics Hub SRL and Logistic Hub Chitila SRL respectively, were set up for future projects in partnership with Catted Industrial SRL being a minority interest shareholder representing 25% equity shareholding in the subsidiaries.
SECTION VII: OTHER DISCLOSURES
This section includes segmental disclosures highlighting the core areas of
Globalworth's operations in the Office, Mixed-use, residential, and other
(industrial and corporate segments). There were no significant transactions
between segments except for management services provided by the offices
segment to the residential, mixed-use and other (industrial) segments. This
section also includes the transactions with related parties, new standards and
amendments, contingencies that existed at the period end and details on
significant events which occurred subsequent to the period end.
24 Segmental Information
The Group earns revenue and holds non-current assets (investment properties)
in Romania and Poland, the geographical area of its operations. For investment
property, discrete financial information is provided on a property-by-property
basis (including those under construction or refurbishment) to members of
executive management, which collectively comprise the Executive Directors of
the Group. The information provided is Net Operating Income ('NOI' i.e. gross
rental income less property expenses) and valuation gains/losses from property
valuation at each semi-annual basis. The individual properties are aggregated
into Office, Mixed-use, Industrial and Residential segments. Industrial
property segment and head office segments are presented on collective basis as
Others in the table below since their individual assets, revenue and absolute
profit (or loss) are below 10% of all combined total asset, total revenue and
total absolute profit (or loss) of all segments. All other segments disclosed
separately as these meets quantitative threshold of IFRS 8.
Consequently, the Group is considered to have four reportable operating
segments: the Offices segment (acquires, develops, leases and manages offices
and spaces), the Residential segment (builds, acquires, develops and leases
apartments), Mixed-use and the Other segment (acquires, develops, leases and
manages industrial spaces and corporate office). Share-based payments expense
is not allocated to individual segments as underlying instruments are managed
at Group basis. Segment assets and liabilities reported to executive
management on a segmental basis are set out below:
30 June 2022
Office Mixed-use Residential Other Inter- segment eliminations Total
€'000 €'000 €'000 €'000 €'000 €'000
Rental income - Total 64,042 5,686 798 4,911 (223) 75,214
Romania 30,878 - 798 4,911 (141) 36,446
Poland 33,164 5,686 - - (82) 38,768
Revenue from contract with customers - Total 34,382 3,700 411 4,368 (1,524) 41,337
Romania 14,569 - 411 4,368 (315) 19,033
Poland 19,813 3,700 - - (1,209) 22,304
Revenue-total 98,424 9,386 1,209 9,279 (1,747) 116,551
Operating expenses (37,539) (4,652) (489) (4,443) 427 (46,696)
Segment NOI 60,885 4,734 720 4,836 (1,320) 69,855
NOI - Romania 28,886 - 720 4,836 (402) 34,040
NOI - Poland 31,999 4,734 - - (918) 35,815
Administrative expenses (4,347) (85) (25) (2,027) - (6,484)
Acquisition costs - - - (7) - (7)
Fair value (loss)/gain on investment property (4,311) (2,104) 45 13,389 - 7,019
Depreciation and amortisation expense (285) - (10) (14) - (309)
Other expenses (98) 38 * (660) - - (720)
Other income 290 19 1 2 (17) 295
Foreign exchange (loss)/gain 208 102 2 (5) - 307
Finance cost (4,509) (139) (3) (22,896) - (27,547)
Finance income 465 - 16 698 - 1,179
Segment result 48,298 2,565 86 (6,024) (1,337) 43,588
Gain from fair value of financial instruments 73 - - - - 73
Share of (loss)/profit of equity-accounted investments in joint ventures - - - 2,012 - 2,012
Profit/(loss) before tax 48,371 2,565 86 (4,012) (1,337) 45,673
* Other expenses include a loss on sale of non-core investment property
(residential apartments) of €654 thousand (30 June 2021: €162 thousand).
30 June 2021
Office Mixed-use Residential Other Inter-segment eliminations Total
€'000 €'000 €'000 €'000 €'000 €'000
Rental income - Total 65,374 5,168 786 4,273 (223) 75,378
Romania 28,491 - 786 4,273 (141) 33,409
Poland 36,883 5,168 - - (82) 41,969
Revenue from contract with customers - Total 28,231 2,571 253 3,035 (1,358) 32,732
Romania 13,459 - 253 3,035 (256) 16,491
Poland 14,772 2,571 - - (1,102) 16,241
Revenue-total 93,605 7,739 1,039 7,308 (1,581) 108,110
Operating expenses (29,740) (3,276) (419) (2,947) 425 (35,957)
Segment NOI 63,865 4,463 620 4,361 (1,156) 72,153
NOI - Romania 27,152 - 620 4,361 (350) 31,783
NOI - Poland 36,713 4,463 - - (806) 40,370
Administrative expenses (5,790) (336) (107) (3,702) 612 (9,323)
Acquisition costs - - - - - -
Fair value (loss)/gain on investment property (11,475) (6,181) (576) 3,529 - (14,703)
Depreciation on other long-term assets (213) - (27) (19) - (259)
Other expenses (649) 18 * (164) - - (795)
Other income 220 15 - 255 (14) 476
Foreign exchange (loss)/gain 39 (48) (13) (28) - (50)
Finance cost (4,635) (250) (1) (22,637) - (27,523)
Finance income 488 - 9 342 - 839
Segment result 41,850 (2,319) (259) (17,899) (558) 20,815
Share-based payment expense - - - (432) - (432)
Gain from fair value of financial instruments (243) - - - - (243)
Share of (loss)/profit of equity-accounted investments in joint ventures - - - (1,273) - (1,273)
Profit/(loss) before tax 41,607 (2,319) (259) (19,604) (558) 18,867
Revenues are derived from a large number of tenants and no tenant contributes
more than 10% of the Group's rental revenues for the period ended 30 June 2022
(30 June 2021: €nil).
30 June 2022
Office Mixed-use Residential Other Inter segment eliminations Total
Segments €'000 €'000 €'000 €'000 €'000 €'000
Segment non-current assets 2,467,119 290,736 58,163 191,094 (1,424) 3,005,689
Romania 1,224,500 - 58,163 191,094 (257) 1,473,500
Poland 1,242,619 290,736 - - (1,167) 1,532,189
Total assets 3,892,626 298,655 61,447 201,252 (1,744) 3,452,236
Total liabilities 557,278 22,955 4,215 1,110,793 (210) 1,695,031
Additions to non-current assets
- Romania 5,732 - 66 11,510 - 17,308
- Poland 13,575 5,660 - - - 19,235
31 December 2021
Office Mixed-use Residential Other Inter segment eliminations Total
Segments €'000 €'000 €'000 €'000 €'000 €'000
Segment non-current assets 2,448,634 287,342 65,494 166,142 (1,532) 2,966,080
Romania 1,220,900 - 65,494 166,142 (205) 1,452,331
Poland 1,227,734 287,342 - - (1,327) 1,513,749
Total assets 3,092,367 294,007 68,863 174,203 (1,957) 3,627,483
Total liabilities 554,962 21,752 4,881 1,292,863 (331) 1,874,127
Additions to non-current assets
- Romania 29,775 - 482 28,379 - 58,636
- Poland 25,397 8,568 - - - 33,965
None of the Group's non-current assets are located in Guernsey except for
goodwill (there are no employment benefit plan assets, deferred tax assets or
rights arising under insurance contracts) recognised on business combination.
25 Transactions with Related Parties
The Group's related parties are Joint ventures, the Company's Executive and
Non-Executive Directors, key other Executives, as well as all the companies
controlled by them or under their joint control, or under significant
influence. The related party transactions are set out in the table below:
Income statement Statement of financial position
Income/(expense) Amounts owing (to)/from
Nature of transaction/balances 30 June 2022 30 June 2021 30 June 2022 31 December 2021
Name Amounts €'000 €'000 €'000 €'000
Global Logistics Chitila SRL (50% Joint Venture) Shareholder loan receivable - - 33,921 23,156
Trade and other receivables - - 12 11
Finance income 476 122 - -
Office rent 6 6 - -
Asset management fees 20 9 - -
Black Sea Vision SRL Shareholder loan receivable - - 13,303 8,835
(50% Joint Venture)
Trade and other receivables - - 7 12
Finance income 212 213 - -
Office rent 6 6 - -
Asset management fees 11 9 - -
Mr. Dimitris Raptis (Chief Executive Officer) Rent revenue 1 1
0.7 0
26 New and Amended Standards
Starting from 1 January 2022 the Group adopted the following amended standards
and interpretations. The new amendments had no significant impact on the
Group's financial position and performance.
Narrow scope amendments and new Standards Effective Date (EU endorsement)
Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Jan-22
Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets;
and Annual Improvements 2018-2020
For other standards issued but not yet effective and not early adopted by the
Group, the management believes that there will be no significant impact on the
Group's consolidated financial statements.
Narrow scope amendments and new Standards Effective Date (EU endorsement)
IFRS 17 Insurance Contracts Jan-23
Amendments to IAS 1 Presentation of Financial Statements: Classification of Jan-23
Liabilities as Current or Non-current
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Jan-23
Statement 2: Disclosure of Accounting policies
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Jan-23
Errors: Definition of Accounting Estimates
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Jan-23
Liabilities arising from a Single Transaction
Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and Jan-23
IFRS 9 - Comparative Information
Amendment in IFRS 10 Consolidated Financial Statements and IAS 28 Investments Deferred
in Associates and Joint Ventures: Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
27 Contingencies
Taxation
All amounts due to State authorities for taxes have been paid or accrued at
the balance sheet date. The tax system in Romania and Poland undergoes a
consolidation process and is being harmonised with the European legislation.
Different interpretations may exist at the level of the tax authorities in
relation to the tax legislation that may result in additional taxes and
penalties payable. Where the State authorities have findings from reviews
relating to breaches of tax laws, and related regulations these may result in
confiscation of the amounts in case; additional tax liabilities being payable;
fines and penalties (that are applied on the total outstanding amount). As a
result, the fiscal penalties resulting from breaches of the legal provisions
may result in a significant amount payable to the State. The Group believes
that it has paid in due time and in full all applicable taxes, penalties and
penalty interest to the extent applicable.
Transfer Pricing
According to the applicable relevant tax legislation in Romania and Poland,
the tax assessment of related party transactions is based on the concept of
market value for the respective transfers. Following this concept, the
transfer prices should be
adjusted so that they reflect the market prices that would have been set
between unrelated companies acting independently (i.e. based on the "arm's
length principle"). It is likely that transfer pricing reviews will be
undertaken in the future in order to assess whether the transfer pricing
policy observes the "arm's length principle" and therefore no distortion
exists that may affect the taxable base of the taxpayer in Romania and Poland.
Legal Proceedings
In recent years the Romanian State Authorities initiated reviews of real
estate restitution processes and in some cases commenced legal procedures
where it has considered that the restitution was not performed in accordance
with the applicable legislation. The Group is involved in one such case, which
is currently at a very early stage and may take a very long time to be
concluded, and management believes that the risk of any significant loss
occurring in future is remote.
28 Subsequent events
On 31 August 2022, the Company announced that its Board of Directors had
approved the payment of an interim dividend in respect of the six-month
financial period ended 30 June 2022 of €0.14 per ordinary share, which will
be paid on 30 September 2022 to shareholders on the register as at close of
business on 9 September 2022 with a corresponding ex-dividend date of 8
September 2022.
ADDITIONAL INFORMATION
EPRA NAV Metrics
EPRA NRV EPRA NRV EPRA NTA EPRA NTA EPRA NDV EPRA NDV
30-Jun-22 31-Dec-21 30-Jun-22 31-Dec-21 30-Jun-22 31-Dec-21
€'000 €'000 €'000 €'000 €'000 €'000
Net assets attributable to equity holders of the parent 1,742,492 1,738,629 1,742,492 1,738,629 1,742,492 1,738,629
Include / exclude
I) Hybrid instruments − − − − − −
Diluted NAV 1,742,492 1,738,629 1,742,492 1,738,629 1,742,492 1,738,629
Include:
II. a) Revaluation of IP (if IAS 40 cost option is used) − − − − − −
II. b) Revaluation of IPUC (if IAS 40 cost option is used) − − − − − −
II. c) Revaluation of other non-current investments − − − − − −
III.) Revaluation of tenant leases held as finance leases − − − − − −
IV.) Revaluation of trading properties − − − − − −
Diluted NAV at fair value 1,742,492 1,738,629 1,742,492 1,738,629 1,742,492 1,738,629
Exclude:
V) Deferred tax in relation to fair value gains of IP 190,868 181,542 95,434 90,771 n/a n/a
VI) Fair value of financial instruments (48) 236 (48) 236 (48) 236
VII) Goodwill as a result of deferred tax (5,697) (5,697) (5,697) (5,697) (5,697) (5,697)
VIII. a) Goodwill as per the IFRS balance sheet n/a n/a (6,652) (6,652) (6,652) (6,652)
VIII. b) Intangibles as per the IFRS balance sheet n/a n/a (41) (73) (41) (73)
IX) Adjustment in respect of joint venture and NCI share for above items 3,134 2,753 3,134 2,753 n/a n/a
Include:
IX) Fair value of fixed interest rate debt n/a n/a n/a n/a 118,246 (77,789)
X) Revaluation of intangibles to fair value n/a n/a n/a n/a n/a n/a
XI) Real estate transfer tax / acquisition costs − − − − n/a n/a
NAV 1,930,749 1,917,463 1,828,622 1,819,967 1,848,300 1,648,654
Fully diluted number of shares 221,470 221,373 221,470 221,373 221,470 221,373
NAV per share (EUR) 8.72 8.66 8.26 8.22 8.35 7.45
GLOSSARY
Asset or Property
Represent the individual land plot or building under development or standing
building which forms part or the entirety of an investment.
Bargain Purchase Gain
Any excess between the fair value of net assets acquired and consideration
paid, in accordance with IFRS 3 "Business Combination".
BREEAM
Building Research Establishment Assessment Method, which assesses the
sustainability of the buildings against a range of criteria.
CAPEX
Represents the estimated Capital Expenditure to be incurred for the completion
of the development projects.
Capitalisation Rates
Based on actual location, size and quality of the properties and taking into
account market data at the valuation date.
CBD
Central Business District
CEE
Central and Eastern Europe
CIT
Corporate income tax
Commercial Properties
Comprises the office, light-industrial and retail properties or areas of the
portfolio.
Combined Portfolio
Includes the Group's property investments consolidated on the balance sheet
under Investment Property- Freehold as at 30 June 2022, plus those properties
held as Joint Ventures (currently the lands relating to Chitila Logistics Hub
and Constanta Business Park projects) presented at 100%.
Completed Investment Property
Completed developments consist of those properties that are in a condition
which will allow the generation of cash flows from its rental.
Completion Dates
The date when the properties under development will be completed and ready to
generate rental income after obtaining all necessary permits and approvals.
Contracted Rent
The annualised headline rent as at 30 June 2021 that is contracted on leases
(including pre-leases) before any customary tenant incentive packages.
Debt Service Cover Ratio ("DSCR")
It is calculated as net operating income for the year as defined in specific
loan agreements with the respective lenders, divided by the principal plus
interest due over the same year or period.
Discount Rates
The discount rate is the interest rate used to discount a stream of future
cash flows to their present value.
Discounted Cash Flow Analysis ("DCF")
Valuation method that implies income projections of the property for a
discrete period of time, usually between 5-10 years. The DCF method involves
the projection of a series of periodic cash flows either to an operating
property or a development property. Discounted cash flow projections based on
significant unobservable inputs taking into account the costs to complete and
completion date.
Earnings Per Share ("EPS")
Profit after tax divided by the basic/diluted weighted average number of
shares in issue during the year or period.
Adjusted EBITDA (normalised)
Earnings 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.
EDGE
Excellence in Design for Greater Efficiencies ("EDGE"). An innovation of the
International Finance Corporation ("IFC"), member of the World Bank Group,
EDGE is a green building standard and a certification system for more than 160
countries.
EPRA
The European Public Real Estate Association is a non-profit association
representing Europe's publicly listed property companies.
EPRA Earnings
Profit after tax attributable to the equity holders of the Company, excluding
investment property revaluation, gains, losses on investment property
disposals and related tax adjustment for losses on disposals, bargain purchase
gain on acquisition of subsidiaries, acquisition costs, changes in the fair
value of financial instruments and associated close-out costs and the related
deferred tax impact of adjustments made to profit after tax.
EPRA Earnings Per Share
EPRA Earnings divided by the basic or diluted number of shares outstanding at
the year or period end.
EPRA Net Assets Value ("EPRA NAV")
Net assets per the statement of financial position, excluding the
mark-to-market on effective cash flow hedges and related debt adjustments and
deferred taxation on revaluations excluding goodwill. This metric was used at
year or period ends up to 31 December 2021.
EPRA Net Reinstatement Value ("EPRA NRV")
The objective of the EPRA Net Reinstatement Value measure is to highlight the
value of net assets on a long-term basis. Assets and liabilities that are not
expected to crystallise in normal circumstances such as the fair value
movements on financial derivatives and deferred taxes on property valuation
surpluses are therefore excluded. Since the aim of the metric is to also
reflect what would be needed to recreate the company through the investment
markets based on its current capital and financing structure, related costs
such as real estate transfer taxes are included, as applicable. This metric is
used by the Group from 2021 onwards as an equivalent to the previously used
EPRA NAV metric.
EPRA Net Tangible Assets ("EPRA NTA")
The underlying assumption behind the EPRA Net Tangible Assets calculation
assumes entities buy and sell assets, thereby crystallising certain levels of
deferred tax liability.
EPRA Net Disposal Value ("EPRA NDV")
The EPRA Net Disposal Value provides the reader with a scenario where deferred
tax, financial instruments, and certain other adjustments are calculated as to
the full extent of their liability, including tax exposure not reflected in
the Balance Sheet, net of any resulting tax. This measure should not be viewed
as a "liquidation NAV" because, in many cases, fair values do not represent
liquidation values.
EPRA NAV, EPRA NRV, EPRA NTA, EPRA NDV Per Share
EPRA NAV, or EPRA NRV, or EPRA NTA, or EPRA NDV divided by the diluted number
of shares outstanding at the year or period end.
Estimated Rental Value ("ERV")
ERV is the external valuers' opinion as to the open market rent which, on the
date of valuations, could reasonably be expected to be obtained on a new
letting or rent review of a property.
Estimated Vacancy Rates
Represent vacancy rates computed based on current and expected future market
conditions after expiry of any current lease.
EURIBOR
The Euro Interbank Offered Rate: the interest rate charged by one bank to
another for lending money, often used as a reference rate in bank facilities.
Financial Year
Period from 1 January to 31 December.
FFO
Free funds from operations, estimated as the EPRA Earnings for the relevant
period.
GLA
Gross leasable area.
IFRS
International Financial Reporting Standards as adopted by the European Union.
Interest Cover Ratio ("ICR")
Calculated as net operating income divided by the debt service / interest.
Investment
Represent a location in which the Company owns / has interests in.
Land Bank for Further Development
Land bought for further development but for which the Group did not obtain all
the legal documentations and authorisation permits in order to start the
development process.
LEED
Leadership in Energy & Environmental Design, a green building
certification programme that recognises best-in-class building strategies and
practices.
Loan-to-Cost Ratio ("LTC")
Calculated by dividing the value of loan drawdowns by the total project cost.
Loan to Value ("LTV")
Calculated as the total outstanding debt excluding amortised cost, less cash
and cash equivalents as of financial position date, divided by the appraised
value of owned assets as of the financial position date. both outstanding debt
and the
appraised value of owned assets includes our share of these figures for joint
ventures, which are accounted for in the consolidated financial statements
under the equity method.
Maintenance Costs
Including necessary investments to maintain functionality of the property for
its expected useful life.
Master Lease
Master lease includes various rental guarantees, which range between 3 and 5
years, covering certain vacant spaces in certain properties owned in Poland.
MSCI
MSCI is an international finance company headquartered in New York City and
listed on New York Stock Exchange and serves as a global provider of equity,
fixed income, hedge fund stock market indexes, multi-asset portfolio analysis
tools and ESG products. An MSCI ESG Rating is designed to measure a company's
resilience to long-term, industry material environmental, social and
governance (ESG) risks.
NBP
National bank of Poland.
Net Assets Value ("NAV")
Equity attributable to shareholders of the Company and/or net assets value.
Net Asset Value ("NAV") Per Share
Equity attributable to owners of the Company divided by the number of Ordinary
shares in issue at the period end.
Net Operating Income ("NOI")
Net operating income (being the gross operating income less operating expenses
that are not paid by or rechargeable to tenants, excluding funding costs,
depreciation and capital expenditure).
Occupancy Rate
The estimated let sqm (GLA) as a percentage of the total estimated total sqm
(GLA) of the portfolio, excluding development properties and in certain cases
(where applicable) spaces subject to asset management (where they have been
taken back for refurbishment and are not available to let as of the financial
position date).
Passing Rent
It is the gross rent, less any ground rent payable under the head leases.
Open Market Value ("OMV" or "GAV")
Open market value means the fair value of the Group's investment properties
and the joint ventures (where the Group owns 50%) determined by Colliers
Valuation and Advisory SRL ("Colliers"), Cushman & Wakefield LLP
(C&W), Knight Frank Sp. z o.o. ("Knight Frank") and CBRE Sp. z
o.o.("CBRE") independent professionally qualified valuers who hold a
recognised relevant professional qualification and have recent experience in
the locations and segments of the investment properties valued, using
recognised valuation techniques.
Property Under Development
Properties that are in development process that do not meet all the
requirements to be transferred to completed investment property.
Residual Value Method
Valuation method that estimated the difference between the market value of the
building upon completion that can be built on the plot of land and all the
building's construction costs, as well as the developer's profit. This method
relies on the contribution concept by estimating from the future income of the
building, the amount that can be distributed to the land.
ROBOR
Romanian Interbank Offer Rate.
Sales Comparison Approach
Valuation method that compares the subject property with quoted prices of
similar properties in the same or similar location.
SPA
Share sale purchase agreement.
SQM
Square metres.
The Company or the Group
Globalworth Real Estate Investments Limited and its subsidiaries.
The Investment Adviser
Globalworth Investment Advisers Limited, a wholly owned holding subsidiary
incorporated in Guernsey.
Total Unencumbered Assets Ratio
Calculated as the Unsecured Consolidated Total Assets divided by Unsecured
Consolidated Total Indebtedness.
Unsecured Consolidated Total Assets
Means such amount of Consolidated Total Assets that is not subject to any
Security granted by any subsidiary of the Group.
WALL
Represents the remaining weighted average lease length of the contracted
leases as of the financial position date, until the lease contracts full
expiration.
Weighted Average Interest Rate
The average of the interest rate charged on the Group's loans, weighted by the
relative outstanding balance of each loan at the year or period end.
WIBOR
Warsaw Interbank Offered Rate.
COMPANY DIRECTORY
Registered Office
Anson Court
La Route des Camps
St Martin
Guernsey
GY4 6AD
Nominated Adviser and Joint Broker
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
United Kingdom
Investment Adviser*
Globalworth Investment Advisers Limited
Anson Court
La Route des Camps
St Martin
Guernsey
GY4 6AD
Auditors
Ernst & Young Cyprus Limited
Jean Nouvel Tower
6 Stasinos Avenue
1511 Nicosia
Cyprus
* Wholly owned subsidiary of the Company.
Administrator
IQ EQ (Guernsey) Limited
Anson Court
La Route Des Camps
St Martin
Guernsey
GY4 6AD
Company Secretary
Nicola Marrin
Anson Court
La Route Des Camps
St Martin
Guernsey
GY4 6AD
Joint Broker
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
United Kingdom
Registrar
Link Market Services (Guernsey) Limited
Mont Crevalt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH
Globalworth Real Estate Investments Limited
Anson Court,
La Route des Camps, St Martin,
Guernsey, GY4 6AD
Email: enquiries@globalworth.com (mailto:enquiries@globalworth.com)
www.globalworth.com (http://www.globalworth.com)
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